ALDX - Aldeyra's Stellar Allergic Conjunctivitis Results To Raise Reproxalap Monetization Value

2023-06-16 10:55:29 ET

Summary

• Aldeyra Therapeutics reported positive results from a Phase III study of Reproxalap, an eye drop drug for allergic conjunctivitis and dry eye disease that provides immediate relief to patients.
• The trial results showed statistically significant improvements in allergic conjunctivitis and complements existing NDA for dry eye disease.
• With probable approval likely for both dry eye disease and allergic conjunctivitis, Reproxalap will be the subject of great pharma interest.
• Aldeyra's CEO, Todd Brady, has expressed interest in partnering on Reproxalap for dry eye disease, with a potential transaction possible by Q3 2023. These results just improved his hand immensely.

Aldeyra ( ALDX ) reported the latest in a string of highly positive statistically significant data for Reproxalap, its most advanced large market indication eye drop drug. The Phase III study in allergic conjunctivitis, the second successful Phase III clinical trial undertaken in this indication, sets up Reproxalap for an NDA submission and probable approval. Furthermore, these impressive results complement and will add value to its dry eye disease ("DED") asset that is currently before the FDA for approval.

The RASP Platform - Reactive Aldehyde Species

The primary platform underlying Aldeyra's pipeline is related to molecules called Reactive Aldehyde Species ( OTCPK:RASP ). In simple terms, RASP are reactive molecules in the body that sometimes bind to cellular biomolecules and disrupt their function. An over-abundance of RASP in the body can activate pro-inflammatory mediators that may result in damaging inflammation. RASPs are formed by a variety of biological processes, including lipid peroxidation , alcohol oxidation , polyamine and glucose metabolism . Aldeyra's primary drug candidate, Reproxalap, binds to RASP to neutralize these molecules and thereby reduce damaging inflammation. Aldeyra is apparently the only company targeting these molecules at this time. Readers can find more information on RASP and the company in my initial article written in June 2021 .

Reproxalap for Dry Eye Disease is Awaiting FDA Approval

The FDA has already accepted an NDA for Reproxalap for Dry Eye Disease ("DED") with a PDUFA date of November 23, 2023. Aldeyra has set a goal of a partnership or an outright sale of this indication. The stellar data from the AC Phase III study, that I will discuss below, provides a material boost to this effort. Reproxalap has distinct advantages over other DED drugs on the market that I discussed in great detail in an Aug ust 2022 article . The most important advantage, in my view, is that unlike other DED treatments on the market that take weeks or months to show an effect, Reproxalap provides relief immediately. Subsequent to that article, a 12-month safety study surprisingly showed a statistically significant increase in visual acuity in patients using Reproxalap for DED becoming the first DED study to do so.

Allergic Conjunctivitis

Allergic Conjunctivitis ("AC") is the inflammation of the tissue that covers the inside of eyelids called the conjunctiva and also affects the white part of the eyeball, resulting in red and itchy eyes that are often caused by pollen and other irritants. Reproxalap takes a novel approach to inflammation by targeting Reactive Aldehydes Species or RASP. RASP are molecules that are generally toxic and facilitate inflammation. Reproxalap is designed to bind to RASP and neutralize it. Without any intervention, RASP can activate pro-inflammatory mediators associated with many inflammatory diseases. Aldeyra is the only public company targeting RASP to modulate inflammation.

The Trial Design and Data

Aldeyra announced the allergic conjunctivitis results on June 15, 2023, and held an analyst call to share the results. The following slides are extracted from this presentation.

The AC trial was undertaken in a controlled allergen chamber on 131 patients that included a crossover arm where placebo patients crossed over to treatment and vice versa. According to Aldeyra, this study represents the largest allergen chamber study ever performed. The following slide provides more details to the trial design.

The results were stellar. For those who are unfamiliar with p values , a value of .05 or less is considered statistically significant, and these values were exponentially lower. There were no safety concerns or significant adverse effects. Reproxalap met both its primary and all its secondary endpoints with p values that leave little doubt that there is a strong therapeutic effect from the drug:

On the call, Aldeyra pointed out that there is a large overlap of patients that suffer from both AC and DED. The following chart illustrates the point.

The company's CEO, Todd Brady, has been clear that his preference is to partner on Reproxalap for DED without dismissing the possibility that the company may take the drug to the market on its own. This Q&A from the 4th quarter 2022 earnings call held on March 9, 2023, directly addressed partnering thoughts for DED, months before the positive data from this AC trial became available (bold type emphasis added):

Yigal Nochomovitz Citigroup) : Todd, with respect to the PDUFA for Reproxalap for dry eye, obviously, that's filed. Could you comment to an extent on the partnering discussions now that there is a clear target date for FDA approval?

And then related to that, obviously, you have the second Phase 3 for AC coming up. I think in the past you've indicated that it may not necessarily -- be necessary to file there, given the extensive overlap between the AC and dry eye patient populations. I'm just wondering how are you thinking about that? Is it potentially a situation where the partners may want to see that data and then make a determination as to whether it'd be necessary to file in that second indication? Thank you.

Todd Brady: Thanks, Yigal. Happy to comment on partnering discussions and happy to comment on allergic conjunctivitis. As you know, the Reproxalap NDA for dry eye disease has been accepted and thus, to some extent, regulatory risk has been removed at least as it relates to the FDA's review of that FDA. As we've said before, we believe the NDA submission is the most comprehensive ever for a dry eye disease drug with three different signs and a variety of clinical trials that feature acute and chronic administration up to 12 weeks for efficacy and now 12 months for a safety.

All in all, the data continue to suggest that Reproxalap is the only drug in development that can work quickly. And I think that's a major commercial differentiator. Also, as I announced in my prepared comments, Reproxalap appears to be the only topically administered drug ever to demonstrate an improvement in chronic visual acuity, something that normally doesn't happen as we age, over 12 months.

Therefore, I would think that there are many potential partners that are interested in Reproxalap. I can tell you that our partnering conversations are robust and, as I mentioned in my prepared comments, involved multiple parties across a wide array of terms . I do expect that partners would want to be involved with Reproxalap prior to label negotiations, which, in our case, I would expect to occur in the September to October timeframe.

Regarding allergic conjunctivitis, we continue to see that indication as a major differentiator for any dry eye disease drug. As you mentioned, there's a considerable overlap between dry eye disease and allergic conjunctivitis. And it's difficult for many healthcare providers to distinguish between those two diseases. Thus, a compound or drug that can treat both of them simultaneously should be of considerable value.

Our main goal, at this point, Yigal, is to demonstrate the activity of Reproxalap in allergic conjunctivitis. We have two published papers, one of Phase 2 trial, one of Phase 3 trial, demonstrating activity of Reproxalap in patients with allergic conjunctivitis across two different clinical trial models. The INVIGORATE II trial, which is our second allergen chamber trial, will be announced, as I mentioned in my prepared comments this morning, in the first half of this year.

And I think pending the results of those trials, pending the partnership discussions with Reproxalap, that we can then make a decision about the -- a need to submit a new drug application for Reproxalap in allergic conjunctivitis.

The excellent AC results provide CEO Brady with substantially more firepower to execute a lucrative dry eye disease, and logic dictates that the rights to Reproxalap for allergic conjunctivitis will be included in any transaction given the overlap of these two indications. Reproxalap has many advantages over current DED eye drops on the market, the most commercially important being that it would be the only DED eye drop that provides immediate relief and, unlike corticosteroid drops, can be used long term.

Long List of 2023 Catalysts

This article is focused on the monetization of Reproxalap that I expect to see consummated by the third quarter of 2023. However, the RASP platform has potential to treat millions of patients who suffer from numerous immune related diseases. A lucrative transaction for Reproxalap should put a sharper Wall Street focus on the potential value of the RASP platform . It should be also noted to investors that there are several other upcoming 2023 catalysts, including an FDA decision on ADX-2191 for Primary Vitreoretinal Lymphoma (a non-RASP drug) expected later this month. These catalysts are listed in the following slide:

Risks

The data for Reproxalap has been very compelling. However, there is always the risk of failure to gain FDA approval or the risks of unanticipated delays. There is also the risk that Aldeyra fails to reach a suitable agreement to partner on Reproxalap and decides to go it alone, which would require substantial resources for success.

Valuation

At a recent price of $10.74, Aldeyra has a market cap of about $633,000,000 and last reported a cash and short term investment position of about $165,000,000 with no long term debt. In a benchmark transaction for dry eye in 2019, Novartis agreed to acquire Xiidra , a leading dry eye prescription drug, from Takeda Pharmaceutical in a deal worth up to $5.3 billion . While Xiidra was an established drug at the time with 400 related employees, this transaction illustrates Aldeyra's enviable position and seemingly undervalued share price. Interestingly and I suppose strategically, Aldeyra completed a Phase II study in January 2022 that compared Reproxalap with Xiidra for DED. The results were favorable to Reproxalap and can be found here .

In this writer's view, Aldeyra still has substantial upside from current levels and is a strong buy with multiple 2023 catalysts ahead of it that could set the stage for a revaluation of the company. Their RASP platform is unique and could represent a new paradigm in safe and effective control of damaging inflammation that is present across numerous chronic diseases. A monetization event of the DED and AC Reproxalap assets should put the spotlight on this platform and leave many investors wondering how they missed this opportunity.

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