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What Awaits Radius Health (RDUS) this Earnings Season?

Radius Health, Inc.RDUS is scheduled to report second-quarter 2016 results on Aug 4. Last quarter, the company recorded a negative earnings surprise of 13.25%. Let's see how things are shaping up for the company this quarter.

Factors Influencing This Quarter

Radius Health focuses on the development of therapeutics for the treatment of osteoporosis, oncology and endocrine diseases. Being a development-stage company with no approved products in its portfolio yet, it does not generate any revenue from product sales.

In this scenario, investors are expected to focus on pipeline updates by the company.

Radius Health's efforts on developing its pipeline have been impressive. The company's lead candidate, abaloparatide subcutaneous (abaloparatide-SC), is being developed for reducing the risk of fractures in postmenopausal osteoporosis. The candidate is currently under review in both the U.S. and the EU. It expects an opinion from the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) for its application in late 2016 or in 2017.

We expect the company to shed further light on the regulatory front during its second-quarter conference call.

A potential approval would allow Radius Health to record its first commercial sales. The company is looking for a partner to commercialize abaloparatide. Meanwhile, the company continues to prepare for its U.S. launch, which includes hiring key experienced leaders for sales, marketing and managed care groups. Consequently, operating expenses are expected to increase as the company has been expanding its headcount in anticipation of a potential launch in the near future.

Moreover, Radius Health is developing abaloparatide-transdermal (abaloparatide-TD) patch for potential use as a treatment for osteoporosis. Other candidates in its pipeline include RAD1901 (in hormone-driven and/or hormone-resistant breast cancer, and vasomotor symptoms in postmenopausal women) and RAD140 (multiple indications including cancer). Research and development expenses are expected to increase due to pipeline development activities.

Earlier this year, the company collaborated with Novartis AG NVS to evaluate the safety and efficacy of RAD1901 in combination with the latter's LEE011.

The company expects its cash balance to be sufficient to fund development plans, commercial scale-up and other operational activities through 2018.

Surprise History

Radius Health has a disappointing track record so far. The company has missed estimates in all of the four trailing quarters with a negative average surprise of 15.62%.

RADIUS HEALTH Price and EPS Surprise

RADIUS HEALTH Price and EPS Surprise | RADIUS HEALTH Quote

What Our Model Indicates

Our proven model does not conclusively show that Radius Health 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) for this to happen. Unfortunately, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%, since both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at a loss of 98 cents.

Zacks Rank: Radius Health carries a Zacks Rank #3. Although this increases the predictive power of ESP, the company's 0.00% ESP makes surprise prediction difficult.

Conversely, we caution against stocks with Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

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

Ironwood Pharmaceuticals IRWD has an Earnings ESP of +13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

Impax Laboratories IPXL has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

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NOVARTIS AG-ADR (NVS): Free Stock Analysis Report

IRONWOOD PHARMA (IRWD): Free Stock Analysis Report

RADIUS HEALTH (RDUS): Free Stock Analysis Report

IMPAX LABORATRS (IPXL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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