ALDX - Aldeyra:Upcoming PDUFA Strong NDA Long Pipeline Decent Cash

2023-09-22 19:44:16 ET

Summary

• Aldeyra is a late-stage company developing therapies for immune-mediated diseases, with a focus on dry eye disease and allergic conjunctivitis.
• Their lead asset, reproxalap, is under NDA review for dry eye disease and has shown positive results in phase 3 trials.
• The company has a diverse pipeline of assets targeting various diseases, including atopic dermatitis, chronic cough, idiopathic nephrotic syndrome, Sjögren-Larsson Syndrome, and Proliferative Vitreoretinopathy.

Aldeyra ( ALDX ) is a late stage company developing therapies for immune-mediated diseases. Its lead asset is reproxalap under NDA review for dry eye disease with PDUFA date of Nov 23, 2023, and in late phase 3 for allergic conjunctivitis. ADX-629, a second asset, is in multiple phase 2 trials for various diseases - atopic dermatitis, chronic cough, idiopathic nephrotic syndrome, Sjögren-Larsson Syndrome and Moderate Alcoholic Hepatitis. One other candidate, ADX-2191, is an intravitreal injection in late stages for Proliferative Vitreoretinopathy. Thus, this is a late stage company, with solid trial data in general, which, last month suffered a major decline after receiving a CRL in a relatively minor indication. However, since this was its first regulatory review, the reaction is not unexpected, although possibly exaggerated.

Here, then, is the pipeline:

Reproxalap is the lead asset here. It is a RASP (reactive aldehyde species) modulator. RASP is a toxic organic molecule that causes inflammation. RASPs are formed within the body as a result of certain physiological mechanisms. Ordinarily, certain enzymes bind to and metabolize RASPs, but if something disrupts this mechanism, they are unable to do so. As such, RASPs are overexpressed in certain ocular and inflammatory diseases. Aldeyra’s assets bind to and neutralize RASPs, thereby producing an anti-inflammatory therapeutic effect.

Using our proprietary TotalPharmaTracker software, we found the following phase 3 trials for dry eye disease using reproxalap, run by ALDX.

Of these, the latest and most relevant trial is the Tranquility-2 trial, which published positive data last year. Using the software again, I was able to quickly extract the efficacy data, as follows:

Reproxalap was statistically superior to vehicle for each of the two prespecified primary endpoints, Schirmer test (p=0.0001) and ?10 mm Schirmer test responder proportions (p<0.0001) after a single day of dosing. (The Schirmer test, a measure of ocular tear production, is the dry eye disease objective sign most commonly utilized for drug approval.)

Aldeyra completed a total of five randomized clinical trials, each assessing patients across various standard metrics like ocular dryness symptom score, ocular redness, Schirmer test, and ?10 mm Schirmer test responder analysis. As the company notes about the NDA submission:

The submission could represent the most comprehensive NDA submission in dry eye disease to date and allows for the potential of reproxalap to be the first dry eye disease drug approved with symptoms and at least two labeled objective signs. The clinical package is expected to offer unparalleled breadth across acute trials over one to two days of dosing and chronic trials over 12 weeks of dosing, as well as a combination of challenge and field-based assessments.

According to company estimates and this study , dry eye disease occurs in 39 million or more adult Americans. Xiidra is approved for dry eye disease, but it is slow-acting, and takes much longer than reproxalap; which is also safer. In metrics like Ocular Discomfort, Blurry Vision and Dysgeusia (Taste Disturbance), reproxalap was found to be more tolerable than Xiidra. Moreover, reproxalap is also targeting allergic conjunctivitis, which has symptoms similar to dry eye disease, and ophthalmologists often find it difficult to distinguish between the two. Thus, if reproxalap is approved for both indications, they will find it much easier to prescribe it for either. Xiidra is only approved for DED, although it is being investigated for AC as well. Aldeyra thinks that the phase 3 INVIGORATE trials have met the efficacy requirements for this indication as well.

Note that in 2021, a phase 3 trial in DED failed to meet its primary endpoint, crashing the stock. The endpoint here was reduction in ocular redness. However, there was statistical significance in the secondary endpoint of the Schirmer test, which eventually became the primary endpoint for ALDX. Ocular redness endpoints had been met in earlier trials, and anyway the Schirmer test is an accepted endpoint for DED.

A second setback the company suffered was that ADX-2191, which had a June PDUFA targeting primary vitreoretinal lymphoma, was rejected by the FDA. The reason is interesting:

• weaknesses in its investigations into the treatment have led to the rejection.

• Citing prior discussions with the FDA, Aldeyra said it did not conduct any clinical trials to support its 505(b)(2) New Drug Application (NDA) for ADX-2191.

This is a 505(b)(2) submission, meaning its application usually depends on data from someone else’s investigation. The molecule was a methotrexate injection, and methotrexate is a well-known chemo molecule that has been around for 80 years. This rejection is really not a big deal in the overall scheme of things for ALDX, and the stock’s huge crash was an opportunity. It still is, because the stock hasn’t really recovered.

Some of the company’s other assets have also published positive data. ADX?629, for example, produced positive results in a phase 2 trial targeting chronic cough. “The placebo-controlled trial for 51 patients achieved statistical significance for the reduction in awake cough frequency, a key secondary endpoint, and 24-hour cough frequency, another secondary goal, the company said .”

Another phase 2 study of ADX-2191 targeting retinitis pigmentosa also “ showed the therapy led to significant improvement in retinal function.” Data showed that:

• Across both groups, statistical significance was achieved for improvement from baseline in best corrected visual acuity, low-light visual acuity, time to electroretinographic response to light, macular sensitivity to light, and dark-adapted peripheral sensitivity to light.

That immense pipeline of ALDX creates a catalyst rich environment. In H2 2023 alone, they are expecting phase 2 data topline from 3 programs, Atopic Dermatitis (Part 1), Idiopathic Nephrotic Syndrome (Part 1) and Sjögren-Larsson Syndrome.

Financials

ALDX has a market cap of $450mn and a cash balance of $165mn as of March 31. The company has not press released earnings for the previous quarter despite announcing an earnings date of Aug 11 (a 10-Q was released). Among other reasons, one speculation is that this could be due to a material event like a major buyout offer. In April, such a rumor came through from a Betaville “uncooked alert.” While nothing turned out from that rumor at that time, the upcoming PDUFA, strong pipeline, low stock price, and the lack of an earnings press release this quarter indicate something interesting is afoot.

Risks

The company previously failed one trial and received a CRL for another PDUFA. While past performance - or lack thereof - is no guarantee of future performance - or lack thereof - one is not too convinced of management's ability to execute if the company has 2 failures under its belt.

The presence of an approved drug for the lead indication is a problem, even if this drug is claimed to be better.

Bottomline

ALDX is an opportunity for all these reasons - good data, major catalyst ahead, decent cash balance, long tailed pipeline, and low price.

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