ARIAD (ARIA) To Report Q2 Earnings: Will The Stock Surprise?

ARIAD Pharmaceuticals, Inc. (NASDAQ:ARIA) is scheduled to report second-quarter 2016 results on Jul 28, before the opening bell. The company posted a positive earnings surprise of 3.45% in the first quarter. Let’s see how things are shaping up for the second quarter.

Focus on Iclusig’s Performance

Leukemia drug, Iclusig, is the company’s sole marketed product. ARIAD expects Iclusig product and royalty revenues of $170 million - $180 million in 2016. Sales should be driven by continued demand and new patient additions and launch in additional territories. Early in the second quarter, ARIAD divested its EU operations to Incyte Corporation (NASDAQ:INCY) and also out-licensed Iclusig for the region (EU countries plus others, including Russia, Turkey). As a result, ARIAD will be earning royalties on Iclusig sales in these regions.

Sequential growth in Iclusig sales should be driven by expanded footprint, both on the commercial and medical side in the U.S., as well as the conversion of PACE study patients to commercial drug.

ARIAD is currently working on expanding Iclusig’s label especially into earlier lines of treatment which will expand the market potential significantly.

In addition to being focused on Iclusig’s performance, investors will also be keen to know about the company’s launch plans for brigatinib - a rolling NDA submission for the candidate was initiated in the second quarter. Approval would allow the company to launch the experimental cancer treatment in the U.S. in 2017.

ARIAD is also working on achieving cost efficiencies and resource reallocation to areas of business that bring the most value. In late Mar 2016, the company announced a restructuring program under which 25% of its headquarter positions will be cut. The divestment of the EU operations is expected to cut 2017 operating costs by about $65 million.

Surprise History

ARIAD’s performance has been mostly disappointing with the company missing expectations in three of the last four quarters with an average negative surprise of -17.41%.

ARIAD PHARMA Price and EPS Surprise

ARIAD PHARMA Price and EPS Surprise | ARIAD PHARMA Quote

Earnings Whispers

Our proven model does not conclusively show that ARIAD 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) to be able to beat earnings. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +10.00%.

Zacks Rank #4: Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Other Stocks That Warrant a Look

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

The Earnings ESP for Amgen Inc. (NASDAQ:AMGN) is +1.10% and it carries a Zacks Rank #3. The company will release second-quarter results on Jul 27.

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) has an Earnings ESP of +4.00% and carries a Zacks Rank #3. It will be reporting second-quarter results on Aug 4.

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