Radius Health, Inc.RDUS is scheduled to report third-quarter results on Nov 5 before the market opens.
Radius Health has a mixed track record, with the company posting an average negative surprise of 13.5% over the last four quarters. Let's see how things are shaping up for this announcement.
Factors Influencing This Quarter
Radius Health is a development-stage company working in the field of osteoporosis and other serious endocrine-mediated diseases. Since the company has no approved products in its portfolio, it has not yet generated any revenue from product sales.
In this scenario, investors are expected to keep an eye on its pipeline progress.
Radius' efforts at developing its pipeline are encouraging. Currently, the company is planning to file for approval of its lead candidate abaloparatide-SC (subcutaneous formulation) in the U.S. and the EU for the reduction of risk of fracture in postmenopausal women suffering from severe osteoporosis by 2015 end. Additionally, the company intends to initiate a study on the optimized abaloparatide-TD (a short-wear time transdermal patch) later this year.
Meanwhile, RAD1901 is being studied at high doses for the treatment of estrogen-receptor-positive breast cancer. The company intends to start a phase I study on the candidate in the EU (metastatic breast cancer) later this year. Additionally, a phase IIb study on low-dose RAD1901 as a selective estrogen receptor modulator (SERM) is also expected to be started for treatment of vasomotor symptoms shortly. We expect the company to provide an update on its pipeline on its third-quarter call.
The company may continue to face an increase in research and development expenses due to pipeline development. General and administrative expenses may also rise on account of legal fees and consulting support costs.
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) to be able to beat earnings. 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 -7.02% since the Most Accurate estimate stands at a loss of 61 cents, while the Zacks Consensus Estimate is a loss of 57 cents.
Zacks Rank: Radius Health carries a Zacks Rank #3. Though Radius Health's Zacks Rank #3 increases the predictive power of ESP, the company's negative Earnings ESP makes a surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #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 some 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.
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and carries a Zacks Rank #3. The company is scheduled to release third-quarter results on Nov 9.
Alnylam Pharmaceuticals, Inc. ALNY has an Earnings ESP of +2.13% and carries a Zacks Rank #3. The company is expected to release third-quarter results on Nov 4.
Sarepta Therapeutics, Inc. SRPT has an Earnings ESP of +10.08% and carries a Zacks Rank #3. The company is slated to release third-quarter results on Nov 5.