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Aerie (AERI) Reports Narrower-Than-Expected Loss in Q2

Aerie Pharmaceuticals, Inc. AERI posted second-quarter 2017 loss of 82 cents per share (including stock-based compensation), narrower than the Zacks Consensus Estimate of a loss of 84 cents and the year-ago loss of 87 cents.

Being a development-stage company, Aerie has not generated any revenues from product sales yet.

We note that shares of Aerie have rallied 39.9% in the year so far outperforming the industry‘s 2.9% rally.

Quarter in Detail

In the reported quarter, research and development expenses declined 20.3% to $10.6 million as the company completed trials in the U.S. General and administrative expenses increased 82.7% to $17.1 million. The higher operating expenses in the quarter were attributed to expansion of the employee base to support operations and commercialization preparatory activities, including commercial manufacturing costs for Rhopressa.

Aerie Pharmaceuticals, Inc. Price, Consensus and EPS Surprise


Aerie Pharmaceuticals, Inc. Price, Consensus and EPS Surprise | Aerie Pharmaceuticals, Inc. Quote

Pipeline Updates

On Feb 28, the company resubmitted a new drug application (NDA) for lead candidate Rhopressa 0.02% and expects a review period of 12 months. We note that Aerie withdrew the Rhopressa NDA filed in September as a third party manufacturing facility in Tampa, FL was not ready for pre-approval inspection by the FDA. The company initiated preparations to bring a second contract manufacturer online in 2018.

Apart from Rhopressa, Aerie is evaluating Roclatan, a once-daily, quadruple-action fixed-dose combination of Rhopressa and Pfizer Inc.’s PFE Xalatan. The company reported positive top-line 90-day efficacy and safety data from the second phase III clinical trial, Mercury 2. Data from Mercury 1 is expected in third-quarter 2017. If Mercury 1 and Mercury 2 are successful, the NDA for Roclatan is expected to be filed in early 2018.

The company also expects to commence a trial, Mercury 3, in the third-quarter of 2017, in Europe to support filings there. The trial will be a non-inferiority trial comparing Roclatan to prescribed fixed dose combination of Ganfort (a combination of the bimatoprost along with timolol), marketed by Allergan plc AGN in Europe.

Meanwhile, the company recently inked acollaboration agreement with DSM with primary focus on the potential of Aerie compounds to treat retinal diseases.

Our Take

The narrower-than-expected loss in the second quarter was encouraging. We are encouraged by the company's efforts in developing its pipeline candidates. A potential approval of Rhopressa in early 2018 will significantly boost growth prospects.

Zacks Rank & Other Key Pick

Aerie currently carries a Zacks Rank #2 (Buy).

Another top-ranked stock in the healthcare sector is Gilead Sciences. Inc. GILD which currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gilead’s earnings per share estimates increased from $7.98 to $8.21 for 2017 and from $7.18 to $7.33 for 2018, over last sevendays following strong results in the second quarter. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 8.18%. The share price of the company has increased 18.9% year to date.

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