Biotech Downgraded to Neutral After Second FDA CRL for Reproxalap in Dry Eye Disease
Research Report

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Disclosures for H.C. Wainwright & Co., Aldeyra Therapeutics, March 18, 2026

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On March 18, 2026, Matthew Caufield and Andrew S. Fein of H.C. Wainwright & Co. downgraded Aldeyra Therapeutics Inc. (ALDX:NASDAQ) to Neutral with a reduced price target of US$2.00, implying approximately 61% upside from the March 17, 2026, closing price of US$1.24, following the company's receipt of a second Complete Response Letter (CRL) from the FDA for its Reproxalap NDA in dry eye disease (DED).

FDA CRL and Regulatory Background

The FDA issued the CRL for Reproxalap, a novel RASP modulator being developed for the topical treatment of the signs and symptoms of DED. This latest setback follows two prior developments: first, the PDUFA date was extended 90 days from December 16, 2025 to March 16, 2026, after the FDA requested submission of a Clinical Study Report (CSR) from a previous DED field trial that had failed to meet its primary endpoint of symptom improvement relative to vehicle control; and second, the company had already received an earlier CRL in April 2025, in which the FDA requested an additional clinical trial demonstrating Reproxalap's efficacy in treating DED symptoms.

The analysts had believed that a dry eye chamber trial — which successfully achieved its primary endpoint of reducing ocular discomfort relative to vehicle — had adequately addressed the FDA's concerns regarding symptom benefit. However, the new CRL cited a lack of substantial evidence from adequate and well-controlled investigations and noted that the totality of evidence from completed clinical trials does not support the effectiveness of Reproxalap. The agency specifically highlighted the inconsistency of results across studies, raising "serious concerns about the reliability and meaningfulness of the positive findings." The FDA did not make a direct recommendation for additional trials, but suggested exploring the reasons for failure in certain studies and identifying populations or conditions in which Reproxalap may be effective.

Rating and Estimate Changes

In response to the CRL, the analysts reduced their probability of success (POS) for Reproxalap from 75% to 40%, downgraded their rating from Buy to Neutral, and cut their price target from US$10.00 to US$2.00 per share.

The revised price target is based on an equally weighted composite of two methodologies: a P/E multiple analysis yielding US$2.32 per share (using a 25x multiple on taxed and diluted 2032 EPS of US$0.19, discounted to December 2026 at 13%), and a DCF analysis yielding US$1.59 per share (using a 13% discount rate and 1% terminal growth rate over 2026–2032).

Next Steps and Catalysts

The most immediate anticipated action is Aldeyra's request for a Type A meeting with the FDA, which, once requested, is targeted to occur within 30 days. The analysts expect this meeting to take place in mid- to late April 2026.

Following that feedback, the company is expected to provide guidance on potential additional near-term DED trials, with trial design and endpoint selection informed by agency input.

AbbVie Option Agreement

The analysts highlighted ongoing uncertainty surrounding the outstanding option agreement with AbbVie (ABBV; NYSE) for the potential co-exclusive license to develop, manufacture, and commercialize Reproxalap in the US. The analysts believe it remains in AbbVie's strategic interest to execute the option, particularly given that an FDA-approved Reproxalap could help AbbVie address its Restasis franchise, which faces ongoing generic competition in DED.

However, the analysts noted they expect AbbVie to act on the agreement only following FDA approval of Reproxalap, as approval would remove the regulatory overhang. The option agreement would expire 10 days after Reproxalap receives approval.

Financial Position and Projections

As of December 31, 2025, Aldeyra reported cash and equivalents of US$70.0 million, which the company expects to support operations into 2028. The analysts project no product revenue in the first half of 2026, with US$5.0 million in Q3 2026 and US$17.6 million in Q4 2026, totaling US$22.6 million for the full year.

Revenue is forecast to grow to US$36.3 million in 2027 and US$74.1 million in 2028. EPS is estimated at (US$0.44) for 2026, improving to (US$0.27) in 2027 and turning positive at US$0.09 in 2028.

Pipeline

Beyond Reproxalap, Aldeyra maintains a broader pipeline. ADX-2191 (methotrexate, IVT) is in Phase 3 trial progress for Primary Vitreoretinal Lymphoma, with Phase 2/3 initiation expected in the first half of 2026 for Retinitis Pigmentosa. ADX-248 (RASP) has Phase 2 trial initiation expected in the first half of 2026 for Atopic Dermatitis, and preclinical progress with IND submission targeted for 2026 in Obesity/Hypertriglyceridemia. ADX-246 (RASP) is in preclinical progress, targeting IND submission in 2026 for Dry AMD and geographic atrophy.

Risks

Key risks to the analysts' investment thesis and price target include failure of developmental candidates to achieve peak commercial revenue estimates due to market size, penetration rates, or pricing; failure to secure adequate capital to fund operations; and failure of continued program development and commercialization.