June 19, 2020 - 12:46pm EST by
2020 2021
Price: 4.66 EPS 0 0
Shares Out. (in M): 30 P/E 0 0
Market Cap (in $M): 140 P/FCF 0 0
Net Debt (in $M): -46 EBIT 0 0
TEV (in $M): 93 TEV/EBIT 0 0

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Aldeyra Therapeutics  (ALDX) Long




Fully diluted shares


Market capitalization


Net cash


Total enterprise value


After a long period of stagnant development for the treatment of Dry Eye Disease (DED), Aldeyra is poised to stand out from a field of recent late stage entrants while providing an attractive valuation. ALDX has run multiple successful clinical trials for their DED candidate, Reproxalap, however the previous FDA requirements in dry eye have made approvals elusive.


A significant regulatory development in the company’s favor has recently occurred, though it has gone unappreciated by investors. On June 4th, the company announced the FDA simplified the “sign” endpoint allowing RASP reduction as an appropriate biomarker or “sign”. This biomarker inclusion should result in a clear and achievable pathway to clinical success for Aldeyra.  


Beyond DED, ALDX has a collection of worthy shots on goal including Reproxalap in a Phase 3 trial for Allergic Conjunctivitis, ADX-1612 in Covid-19, and ADX-629 (an oral systemic version of Reproxalap which completed phase 1 safety studies this year) in Psoriasis and Atopic Dermatitis. ALDX has a market cap of $135M, net cash at Q1 2020 of $46M for an enterprise value of $88M.


Dry Eye Disease background and competitive landscape 

DED is a large market is a large market with 20M diagnosed patients in the US (34M estimated total). The root cause is typically undetermined, though symptoms are universal and characterized by ocular pain, dryness and a gritty sensation.  Ophthalmologists we have spoken to concur dry eye is notoriously difficult to treat given the lack of efficacious therapies, the long duration of treatment before the therapies work, and their side effect profile. 


Typically, patients first try OTC drops like Allergan’s Refresh, though the relief they provide is extremely temporary since they only remain on the surface of the eye for a couple of minutes. There are currently two FDA approved therapies, Restasis and Xiidra.  Priced around the $500/month range, the market is a large prize in the context of 20M potential patients.  The approved products are mediocre and have a slow onset where patients need to use the therapy for weeks or months to have any impact. There are also adverse events including dysgeusia  (loss of taste) and burning or irritation upon administration of the drops.  Consequently, discontinuation of both Restasis and Xiidra by patients is high and satisfaction is low. 


Allergan’s Restasis (cyclosporine ) 

  • Restasis did $1.4B in peak sales in 2017 sales; $1.1B in 2019

  • Restasis is now off patent with generic competition coming imminently

  • The franchise was so important to Allergan, management attempted extreme measures including a licensing scheme with the Saint Regis Mohawk Tribe of Native Americans to circumvent US Patent law. The US Supreme Court rejected their legal argument in 2019.  (U.S. Supreme Court rejects Allergan)

  • Restasis has a long onset of action taking up to 6 months before patients achieve any DED relief

  • Discontinuation is common due to the burning sensation of applying the drops

  • Restasis showed efficacy only in “signs” in the clinic but failed in helping patient symptoms, which is the more important outcome for patients.


Novartis’s Xiidra (lifitegrast) 

  • Novartis recently validated the size of the dry eye market by acquiring Xiidra from Takeda in May 2019 for $3.4B plus $1.9B in potential milestones.  Xiidra had sold $400M in 2018 sales after its approval in July of 2016. 

  • Xiidra initially received a CRL in October 2015

  • Xiidra takes weeks for patients to feel improvement

  • Like Restasis, Xiidra is ironically unpleasant to apply.  Patients report eye irritation, discomfort, blurred vision and dysgeusia.


Late stage clinical competitors

  • Kala Pharmaceutical’s (KALA) Eysuvis (KPI-121) now has an October 30th PDFUFA on its second submission after an August 2019 CRL.  Eysuvis is a generic ocular steroid drop (loteprednol etabonate) with proprietary nanoparticle coating using their Ampplify technology. Steroid drops are already used somewhat in the treatment of dry eye, however there are significant caveats.  They can only be used for a short course.  Topical steroids cause glaucoma and cataracts over time, a much more significant problem than dry eye. Consequently, ophthalmologists tend to be very conservative with respect to steroid use in dry eye. The same risks will apply to Eyesuvis. It is only seeking a label for short term treatment of acute dry eye flare ups. 

  • Oyster Point’s (OYST) OC-01 just reported its successful Phase 3 Onset 2 trail in May and plans to submit an NDA in the second half of 2020.  OC-01 is a nasal spray version of varenicline, the API in smoking cessation therapeutic Chantix. The mechanism of action is designed to re-establish tear film homeostasis by activating the trigeminal parasympathetic pathway and stimulating the glands and cells responsible for natural tear film production.  In laymen’s terms, it makes you tear which alleviates dry eye.  OC-01 showed stat sig efficacy in symptoms at both week 2 and 4 with the only notable side effect of sneezing upon administration.  OYST is an interesting investment as well. 

  • Eyegate’s (EYEG) Ocular Bandage Gel (OBG) is specially formulated, crosslinked version of hyaluronic acid. It is like an improved version of a OTC drops as their formulation stays on the surface of the eye for hours rather than minutes.  


KALA and OYST have market caps of $830M and $900M respectively, highlighting the relative undervaluation of ALDX, though we could make the case that all of them are undervalued. 



Aldeyra was founded to exploit RASP (Reactive Aldehyde Species) inhibition as a novel anti-inflammatory target.  Reproxalap topical eye drops is the most clinically advanced and meaning program, however, since anti-inflammatories have broad therapeutic applications, there are a number of potential indications to investigate.  


Reproxalap has hit its Ocular Dryness Score endpoint (“symptoms”) in the induction-maintenance dosing arm of its Phase 3 as well as the induction-maintenance dosing arm of its Phase 2 formulation study.  Onset of relief is quick and persistent:


The “sign” endpoint of fluorescein staining that has been used to date in Reproxalap’s trials have been more mixed.  The initial clinical plan was to run a Renew Part 2 Induction-Maintenance Phase 3 trial similar to Part 1 with a shorter time endpoint for staining.  However, new guidance from the FDA allowing for RASP reduction as “sign” endpoint means the originally planned part 2 of the Phase 3 will be changed.  


Relative to the adverse event profile of Xiidra mentioned above, Reproxalap is very clean and has few side effects.  ALDX ran a head-to-head study against Xiidra showing a superiority in various patient experience categories.