Buy Aldeyra Therapeutics For Consecutive Runups

May 06, 2023 1:23 AM ETAldeyra Therapeutics, Inc. (ALDX)1 Comment

3.16K Followers

Summary

They headlined 3 top-line results coming in Q2 2023.
An all-important PDUFA Date is on tap in June.
Further out, a second potential approval awaits in November.

Aldeyra Therapeutics (NASDAQ:ALDX) is a small (~$600 million market cap) biotechnology company devoted to focusing on immune-mediated diseases. It highlighted data readouts and regulatory action for its 3 most-advanced drug candidates (Figure 1) in the Q1 earnings report:

Top-Line Results from the Phase 2 Clinical Trial of ADX-2191 in Retinitis Pigmentosa Expected in the Second Quarter of 2023
Top-Line Results from the Phase 2 Clinical Trial of ADX-629 in Chronic Cough Expected in the Second Quarter of 2023
Top-Line Results from the Phase 3 INVIGORATE-2 Trial of Reproxalap in Allergic Conjunctivitis Expected in the Second Quarter of 2023
NDA Priority Review PDUFA Date for ADX-2191 for the Treatment of Primary Vitreoretinal ("PVR") Lymphoma is June 21, 2023
NDA PDUFA Date for Reproxalap for the Treatment of Dry Eye Disease is November 23, 2023

Eyenovia (EYEN) ($218 million cap, May 8 PDUFA date, +83% since March 22), ImmunityBio (IBRX) ($1.46 billion cap, May 23, 136% since April 6), and Lexicon Pharmaceuticals (LXRX) ($517 million cap, May 27, +31% since April 10) all had substantial gains (Figure 2), as nothing brings out investor excitement quite like the prospect of securing a first drug approval. Protalix BioTherapeutics (PLX) ($206 million cap, May 9, +73% since March 23), also had a substantial rally while gunning for its second. While none of these are guaranteed to win the FDA's nod, traders will likely be missing out by not jumping in before such price moves happen in advance of the decision.

Figure 1. Aldeyra Therapeutics Pipeline

Figure 2. Companies with PDUFA dates in May

As far as the chances of ADX-2191 approval, the Phase 3 GUARD Trial's primary end point was claimed to be achieved. ADX-2191's prevention of retinal detachment due to PVR the was statistically superior to historical control (HC; p = 0.024), but only numerically better than routine surgical care. The use of HCs for pivotal studies in rare disease where there are no approved therapies or standard of care is not uncommon. Approved drugs employing only HCs or external control groups include Sanofi's (SNY) MYOZYME, and Sarepta Therapeutics' (SRPT) EXONDYS.

Aldeyra is already classified a Strong Buy according to Seeking Alpha's Quant System. This is mostly driven by an A grade in Momentum. Their strong $165 million cash position is likely to last until late 2024, given Q1's $16.8 million operational burn, so it's unlikely to need immediate financing after PDUFA. However, failures on any of the catalysts might force management's hand.

To conclude, approval isn't required to make money from this stock, and traders unconvinced by the preceding information need not be deterred in buying ALDX, they only have to sell by June 20. Note that the days prior to PDUFA will be volatile and trading could be halted. It's even possible that "selling the news" could wipe out most if not all profit. Options are also viable; the ones beyond Q2, such September 15, are probably better suited to encompass the various clinical readouts. The in-the-money $5 call is well-priced, although contracts may be in short supply for most of the strikes. If able to sell in time, whatever the trading strategy or outcome of the event, rinse and repeat for the next catalyst.

This article was written by

Clinically Sound Investor

3.16K Followers

The Clinically Sound Investor is a pharmacist with a PharmD and a BA in psychology. He has worked across the spectrum from very small independent and hospital pharmacies to the some of the largest retail corporations and medical centers in the nation, as well as experience in specialty and mail order settings. Fascinated by watching the rise of Walmart and Apple after 2008, he now follows the advice "know thyself" and puts expertise of understaning scientific literature to research biotechnology stocks. His investments early on were driven by binary events such as FDA Advisory Committee meetings and PDUFA dates (approvals). Despite initial successes, there were too few of these events, so he expanded into predicting Phase II/III trial results. His writings should not be considered financial advice or the basis for investment decisions. While his interpretations of clinical trial results--which may be overlooked or even thoroughly misunderstood by Wall Street--could be helpful, they're only as good as the original reports they come from. Although written by scientists and doctors, there will always be a slant from the sponsoring company, or worse (like, say, missing data...).

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ALDX, SRPT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Summary

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