Will ACADIA (ACAD) Disappoint Investors In Q4 Earnings?

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is expected to release fourth-quarter 2017 results on Feb 27. In the last quarter, ACADIA delivered a positive surprise of 15.87%. The company delivered an average positive earnings surprise of 9.95% in the last four quarters.

ACADIA’s shares have tumbled 21.3% year to date compared with the industry’s decline of 2.5%.

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”). The growth of its first approved drug, Nuplazid (pimavanserin), for treating hallucinations and delusions associated with Parkinson’s disease (“PD”) psychosis, has been impressive since its launch in April 2016.

The drugs sales have been impressive and has helped the company to garner 32% revenues in the third quarter. The company expects the trend to continue this time around as well and in the fourth quarter of 2017. The number of patients receiving Nuplazid treatment continues to grow and banking on this trend, the company increased its 2017 guidance for Nuplazid net sales between $124 million and $127 million.

The company is also on track with its multi-year 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 psychosis, Schizophrenia inadequate response, Schizophrenia negative symptoms and major depressive disorders.

In October 2017, the company initiated a phase III HARMONY Study in dementia-related psychosis or DRP. The company also received Breakthrough Therapy Designation from the FDA for Nuplazid for the treatment of DRP. Following an End-of-Phase II meeting with the FDA, robust positive results from one phase III study, together with supported data from prior studies with Nuplazid could serve as the basis of a supplementary new drug application.

We expect the company to provide further update on the progress of this study during fourth-quarter earnings call.

The company expects research and operating expenses to be in the mid-$40 million range and SG&A to be in the high-$60 million to low-$70 million range due to higher clinical costs related to studies and to support its commercial activities for Nuplazid.

What Our Model Indicates

Our proven model does not conclusively show an earnings beat for ACADIA 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) — for this to happen. However, that is not the case here as you will see below.

Zacks ESP: ACADIA has an Earnings ESP of -3.75%. This is because the Most Accurate estimate stands at a loss of 60 cents, while the Zacks Consensus Estimate is pegged at a loss of 58 cents. 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 #4 (Sell). 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.

Stocks That Warrant a Look

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

Exelixis (NASDAQ:EXEL) is scheduled to release fourth quarter 2017 results on Feb 26 after the market closes. The company has an Earnings ESP of +8.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gemphire Therapeutics (NASDAQ:GEMP) is expected to release fourth quarter 2017 results on Mar 21. The company has an Earnings ESP of +6.62% and a Zacks Rank #2.

Atara Biotherapeutics (NASDAQ:ATRA) is expected to release fourth quarter 2017 results on Mar 8. The company has an Earnings ESP of +7.42% and a Zacks Rank #3.

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