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Aegerion (AEGR): Can the Stock Surprise in Q1 Earnings?

Aegerion Pharmaceuticals, Inc. AEGR is expected to report first-quarter 2016 results on May 2.

The company has an impressive track record, having beaten estimates in each of the last four trailing quarters with a positive average surprise of 62%. Let’s see how things are shaping up for this announcement.

PCSK9  Inhibitors to Hurt Juxtapid Sales?

Although Juxtapid remains the growth driver at Aegerion, the company is facing a tough time in commercializing the drug in ex-U.S. markets. We note that Juxtapid is approved for the treatment of homozygous familial hypercholesterolemia (HoFH). It expects a tentative Japanese approval of the drug in the same indication by the fourth quarter of 2016.

The launch of PCSK9 inhibitors – Repatha and Praluent – in the U.S. has dampened Juxtapid sales and will continue to do so in the upcoming quarters. Aegerion expects total product sales in the range of $160–$190 million in 2016. While Juxtapid sales are projected in the range of $120–$140 million, Myalept sales will come in the $40–$50 million band. The company expects total operating expenses in the range of $145 million to $155 million.

On its fourth-quarter call, management stated that active Juxtapid patients were declining but at a slower pace than the fourth quarter. Although volume growth for new patients on Juxtapid has not stopped, it has slowed down significantly. Moreover, the company experienced delays in patient approvals for Juxtapid in the first quarter, which led to a switch to PCSK9 inhibitors.

The company also expects quantities and timing of orders for patient sales in ex-U.S. markets to remain choppy on a quarter-to-quarter basis. A significant order from the Brazilian Ministry of Health will likely be placed in the second quarter instead of the first quarter, as expected earlier.

The company also plans to submit a marketing authorization application in the EU for Myalept for the treatment of generalized lipodystrophy by 2016 end. Meanwhile, Aegerion is pursuing a label expansion for the drug for severe partial lipodystrophy patients, pending discussions with regulatory authorities in the U.S. and the EU. We expect the company to shed more light on its plans on maximize growth opportunities for Myalept.

Aegerion had earlier announced plans to trim its global workforce by approximately 25% by the end of second-quarter 2016. We note that workforce reduction is part of the company’s strategy of lowering operating expenses and improving its cash position.

What Our Model Indicates

Our proven does not model conclusively show that Aegerion is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are at a loss of 54 cents.

Zacks Rank: Though Aegerion’s Zacks Rank #1 increases the predictive power of the ESP, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.

Stocks That Warrant a Look

Here are a few health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Gilead Sciences GILD has an Earnings ESP of +1.65% and a Zacks Rank #1. The company is scheduled to report first-quarter results on Apr 28.

The Earnings ESP for Sanofi SNY is +4.17% and it carries a Zacks Rank #2. The company is scheduled to release first-quarter results on Apr 29.

Amgen Inc. AMGN has an Earnings ESP of +3.52% and a Zacks Rank #3. It is scheduled to report first-quarter results on Apr 28.

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