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Is ACADIA (ACAD) Likely to Beat Earnings Estimates in Q3?

Zacks Equity Research
Updated

We expect ACADIA Pharmaceuticals Inc. ACAD to beat expectations when it reports its third-quarter 2017 results expectedly on Nov 6. In the last reported quarter, ACADIA delivered a positive surprise of 22.54%. It has an average positive earnings surprise of 7.97% in the last four quarters.

ACADIA’s share price has increased 21.9% year to date compared with the industry’s gain of 3.9%.

Let’s see how things are shaping up for this announcement.

Factors at Play

ACADIA is focused on developing products for treating unmet medical needs in central nervous system (CNS) disorders. The growth of its first approved drug, Nuplazid, for treating hallucinations and delusions associated with Parkinson’s disease (“PD”) psychosis, has been impressive since its launch in April 2016.

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Sales of the drug almost doubled sequentially in the second quarter. It generated revenues of $45.8 million in the first half of 2017 and $17.3 million in 2016. The company expects the trend to continue this time around as well and in the remainder of 2017. Moreover, reimbursement and access trends for Nuplazid remained strong during the last quarter. The company had increased price at the start of the second quarter. Also, the drug witnessed strong demand from new as well as old patients in the second quarter. Continued positive demand trends despite the price increase should further boost sales.

The company is also on track with its multiyear plans of developing Nuplazid in indications beyond PD psychosis. The company is studying the drug in five clinical programs for Nuplazid - Alzheimer's disease agitation, Alzheimer’s disease (AD) psychosis, Schizophrenia inadequate response, Schizophrenia negative symptoms and major depressive disorders.

This month, the company initiated a phase III study to evaluate Nuplazid in treating hallucinations and delusions associated with dementia-related psychosis. The company also said that the FDA has granted Breakthrough Therapy Designation to the drug for this indication, which should speed up the development process.

We expect the company to provide further update on the progress of this study in its third-quarter earnings call.

The company expects research and operating expenses to increase in the third quarter due to higher clinical costs related to studies and to support its commercial activities for Nuplazid.

Why a Likely Positive Surprise?

Our proven model shows that ACADIA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (loss of 61 cents) and the Zacks Consensus Estimate (loss of 63 cents), stands at +3.2%. This is a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Acadia currently has a Zacks Rank #3. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.

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

ACADIA Pharmaceuticals Inc. Price and EPS Surprise

 

ACADIA Pharmaceuticals Inc. Price and EPS Surprise | ACADIA Pharmaceuticals Inc. Quote

Other Stocks That Warrant a Look

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

Clovis Oncology, Inc. CLVS is scheduled to release results on Nov 1 after market close. The company has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Myriad Genetics, Inc. MYGN has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is scheduled to release results on Nov 7.

Syndax Pharmaceuticals, Inc. SNDX has an Earnings ESP of +2.9% and a Zacks Rank #3. The company is expected to release results on Nov 9.

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