ARIAD's (ARIA) Stock Up On Q2 Earnings & Revenue Beat

ARIAD Pharmaceuticals Inc.’s (NASDAQ:ARIA) shares were up 12.5% with the company swinging to a profit in the second quarter of 2016. ARIAD reported second quarter 2016 earnings of 57 cents per share, far better than the Zacks Consensus Estimate of a loss of 10 cents per share and the year-ago loss of 28 cents.

Second-quarter revenues shot up 133% from the year-ago quarter to $68.1 million, surpassing the Zacks Consensus Estimate of $ $64.5 million.

Iclusig Continues to Grow

Iclusig (ponatinib) generated sales of $65.3 million, including one-time revenue of approximately $25.5 million related to cumulative shipments of Iclusig in France. Increased share of voice, positive physician experience with Iclusig, and increasing prescriber confidence drove growth.

Iclusig sales in the U.S. grew 30.9% sequentially to $32.6 million. The company reported revenues of $32.7 million from the EU.

Research & development (R&D) expenses increased 10.6% from the year-ago period to $42.9 million. This was primarily due to increased costs related to brigatinib’s ALTA study, initiation of the ALTA first-line phase III study and continuing costs for the OPTIC and OPTIC-2L studies.

Selling, general & administrative (SG&A) expenses declined 29.6% year over year to $34.2 million reflecting lower professional fees related to the proxy contest in the second quarter of 2015, lower personnel expenses due to workforce reduction and the sale of the European operations to Incyte Corporation (NASDAQ:INCY) effective Jun 1, 2016.

Reiterates Outlook

ARIAD reiterated its outlook for 2016. The company expects global Iclusig net product and royalty revenues in the range of $170 million - $180 million.

R&D spend is expected in the range of $175 million - $180 million while SG&A spend is expected to be $120 million - $125 million.

The Incyte deal is expected to result in savings of approximately $65 million in 2017.

Our Take

ARIAD’s second-quarter results were strong with the company surpassing both earnings and revenue expectations. We are positive on the Incyte deal which will allow the company to focus on the U.S. market. It also provides the company with a non-dilutive source of funds.

Iclusig sales should be driven by field team expansion, label expansion, increasing clinical experience and patient retention programs. ARIAD has also started filing a rolling NDA for its most advanced pipeline candidate, brigatinib, and could well become a two product commercial company by early 2017. Longer-term growth could be driven by AP32788 and new opportunities including immuno-oncology.

ARIAD is a Zacks Rank #3 (Hold) stock. A couple of better-ranked stocks in the health care sector are Nektar Therapeutics (NASDAQ:NKTR) and Zoetis Inc. (NYSE:ZTS) . Both carry a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>