Earnings Play-OCUL

3 Nov 2019

OCUL

OCUL has a pattern of descending triangles over the past 4-months (July-November 2019). The company launched its second commercial product Dextenza in the 2nd quarter where it gave away free samples. Its other product 'ReSure Sealent' has posted weak sales numbers (472K in 1Q19 and ~600K in 2Q19). Dextenza is priced at $850 and is essentially an alternative to prescription eye-drops indicated for the treatment of inflammation and pain post-ocular surgery. Analysts are expecting a decline in EPS compared to the same period in 2018. I think the high price tag (even with J-code) for Dextenza and the strategy of giving away free product will translate to weak sales figures and will send the share price lower. This has been the short-term reaction after 1Q19 and 2Q19 earnings. Although the share price recovered to a high of ~$5.32 this summer it's since decayed and is trading down -17% YTD. Short interest is at 15% which supports a bearish outlook. I think it will reach a ~$3.83 ahead of earnings and then subsequently decline to ~$2.46.