aldeyra therapeutics
NOTE: I will not purchase this type of stock again - it was grandfathered into the portfolio – though it has been lucrative.
Company Description
Aldeyra Therapeutics is a clinical-stage biopharmaceutical company focused on immune-mediated diseases. Its lead drug candidate, Reproxalap, targets acute eye irritation and redness associated with dry eye disease, a common condition that affects millions of patients.
What makes Reproxalap potentially important is its rapid onset of action: clinical data suggest that it can relieve irritation within minutes, whereas currently available prescription therapies can take several weeks to provide relief.
Discussion
Reproxalap has now been tested in three randomized, controlled “dry-eye chamber” studies. Each of the first two studies demonstrated highly statistically significant improvement versus placebo (p=0.002). The FDA rejected the first NDA submission because only one successful study had been completed at the time. The second submission was rejected because of baseline imbalances between treatment and control groups, even though results were again significant.
By the time of the second rejection, the company’s third pivotal study was nearly complete. Given the prior results, we judged the probability of a third success to be high, and that the market reaction (a sharp sell-off) was an overreaction.
In May, Aldeyra reported that the third study again showed a significant treatment effects, with balanced pre-trial baselines and only mild side effects. The company resubmitted its New Drug Application in June, and the FDA has accepted the filing. The stock price has rebounded very nicely.
A decision by the FDA on the latest NDA is expected mid-December.
While the data are encouraging, FDA approval is never guaranteed. A third rejection could lead to a substantial decline in share price. For that reason, we continue to evaluate whether to realize gains before the December decision or hold through the FDA ruling.
Additional Information
Aldeyra has an agreement with AbbVie under which AbbVie will pay ALDX $100M if the drug is approved, and can elect to acquire commercialization rights for another $100M. If AbbVie exercises this option, Aldeyra would also receive 40% of future North American profits. Analyst estimates for ALDX’s fair value under this scenario range from $15–$20 per share.
ALDX has conducted both dry-eye chamber and real-world field studies. Its most recent NDA submission relied exclusively on the chamber study data. Following the previous rejection, the FDA issued a Complete Response Letter and met with ALDX’s management. In that meeting and letter, the FDA clarified that only the two successful chamber studies were required for resubmission.
This is fortunate because while ALDX has conducted two field trials, only one showed statistical significance. Note that the average difference between the treatment and control were quite large, but the variation in the outcomes was also quite large, so that the difference did not achieve significance. It is not clear whether this will affect the final approval.
This is probably the last time that Reproxalop will be submitted for approval. While ALDX does have several other promising drugs in its pipeline, if the FDA rejects is this time the stock price is likely to collapse again.