Aldeyra Therapeutics Inc.'s (ALDX:NASDAQ) reproxalap ophthalmic solution is likely to get U.S. Food and Drug Administration (FDA) approval for dry eye disease, based on new TRANQUILITY-2 trial data, reported BTIG analyst Thomas Shrader in a June 8 research note.
"From an FDA perspective, reproxalap is very safe, passes the Schirmer test with high significance, and has a novel mechanism of action in a field with underserved patients," Shrader highlighted. "We think that will be enough for approval."
Also of note for investors, the biotech offers a potentially significant return from its current $3.50 share price, reflected in BTIG's $29 per share price target on it.
"We believe Aldeyra represents an attractive and derisked investment opportunity ahead of the company's first new drug application filings," Shrader wrote.
Massachusetts-based Aldeyra is developing reactive aldehyde species (RASP)-targeted therapies for immune-mediated diseases. Dry eye disease is one of its lead programs.
The TRANQUILITY-2, Phase 3 trial met, with high significance, one of the two primary endpoints. This was passing the Schirmer test, which determines if one's eyes produce enough tears to keep them moist. This study result bodes well for FDA approval of reproxalap, as only one endpoint needed to be met to file a new drug application for the product candidate.
A greenlight for reproxalap would be great news for Aldeyra as dry eye disease is a large, currently underserved market. An estimated 15-plus million people in the U.S. have been diagnosed with the disorder.
TRANQUILITY-2's second primary endpoint, improvement in ocular redness, was unexpectedly unmet as it had been achieved in the TRANQUILITY-1 and Phase 2 studies.
"The redness failure seen in the recent TRANQUILITY-2 readout was surprising as redness effects have been seen in the other trials, and improving redness seems very consistent with the drug's mechanism, scavenging the irritant that drives dry eye disease," wrote Shrader.
This efficacy shortfall cannot be overlooked, Shrader pointed out, as "redness is important, and the drug's effect on this [disease] sign is likely the key to commercial uptake."
The analyst added that reproxalap probably does reduce redness but may take longer than a day to do so. Proving this would require another trial with a different design, which is not part of the current development plan.
There is a chance, though, that reproxalap may demonstrate efficacy concerning redness in the chamber crossover trial now underway, in which that disease sign and the Schirmer test are the primary endpoints, Shrader noted. The results are due out in Q3/22.
Otherwise, "an understanding of how good the drug reproxalap is at controlling redness will come after launch," Shrader wrote.
Before Aldeyra submits a new drug application for reproxalap in dry eye disease, the company will meet with the FDA, presumably in Q3/22.
BTIG rates the biotech Buy.
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Disclosures for BTIG Research, Aldeyra Therapeutics, June 8, 2022
Analyst Certification: I, Thomas Shrader, hereby certify that the views about the companies and securities discussed in this report are accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. I, Sung Jun Hong, hereby certify that the views about the companies and securities discussed in this report are accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report.
BTIG LLC expects to receive or intends to seek compensation for investment banking services in the next 3 months from: Aldeyra Therapeutics (ALDX).
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