Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Avanir Pharmaceuticals . The up-and-coming pharmaceutical company has one major revenue-producing drug on the market, but it's working on making its list of approved drugs longer. Let's take an early look at what's been happening with Avanir Pharmaceuticals over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Avanir Pharmaceuticals

Analyst EPS Estimate

($0.08)

Year-Ago EPS

($0.12)

Revenue Estimate

$16.4 million

Change from Year-Ago Revenue

129%

Earnings Beats in Past 4 Quarters

1


Source: Yahoo! Finance.

Will Avanir Pharmaceuticals look healthier this quarter?
Modeling Avanir's results hasn't seemed all that challenging for analysts, who have kept their estimates on the drug company fairly constant. With losses seen continuing through fiscal 2014, Wall Street isn't too optimistic about Avanir's near-term prospects, but investors are more bullish, as the stock has climbed 20% since early November.

Avanir has a single drug, Nuedexta, which treats a condition called pseudobulbar affect. The company has seen increasing sales of the drug over the past two years, having had substantial success in tapping health-care institutions as buyers.

The big potential for Nuedexta, though, will come if it can expand the use of the drug to cover a broader range of indications, which could include multiple sclerosis and other conditions with a wider patient base. The company submitted an application to the European Medicines Agency nearly a year and a half ago but has been waiting on a decision ever since.

Meanwhile, Avanir also gets royalty income from GlaxoSmithKline from its Abreva over-the-counter cold sore treatment, as well from licensing its anthrax-related technology to Emergent BioSolutions to produce anthrax vaccine. That's not a substantial source of revenue at this point, but it produces valuable cash to help offset Avanir's burn rate.

Avanir investors will need to look beyond the numbers to focus on any status update the company gives on Nuedexta as well as the rest of its pipeline. With promising Alzheimer's treatments showing some promising early trial results, the company could look to partner up with Merck , Pfizer , or other drug giants with Alzheimer's development programs of their own. Good news could well send the stock soaring.

Will Avanir get gobbled up?
One exit strategy for small companies like Avanir is to find bigger players to buy them outright. Merck, for instance, has been buying up promising pipelines in order to build up its own stable of potential blockbuster drugs. Find out more about whether Merck will get past its patent cliff by reading our premium report on the stock, in which senior biotech analyst Brian Orelli, Ph.D., walks you through both the opportunities and threats facing Merck. Claim your copy now by clicking here.

Click here to add Avanir Pharmaceuticals to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

The article Avanir Pharmaceuticals Earnings: An Early Look originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Emergent BioSolutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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