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We came across a bullish thesis on Aldeyra Therapeutics Inc (ALDX) on ValueInvestorsClub by MrStingy. In this article we will summarize the bulls' thesis on ALDX. Aldeyra Therapeutics shares were trading at $4.15 when this thesis was published, vs. closing price of $5.38 on Aug 29.
A biotechnologist in a white lab coat manipulating genes in a laboratory.
Aldeyra Therapeutics, a biotechnology company specializing in the development of innovative treatments for immune-mediated diseases, stands out in the industry for its focus on RASP (reactive aldehyde species) inhibition. RASP, known for its role in inflammatory processes, is a novel target in treating conditions like dry eye disease (DED) and other immune disorders. The company's lead product, reproxalap, is an eye drop formulation designed to inhibit RASP, positioning Aldeyra as a potential leader in the DED market, a condition affecting millions globally.
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Reproxalap's journey has been marked by significant milestones and challenges. Initially, the drug showed strong promise in clinical trials, particularly in its ability to rapidly alleviate symptoms of DED, a market currently dominated by drugs like Xiidra and Restasis. These existing treatments, however, have limitations, including delayed onset of action and irritation issues, making reproxalap’s near-instantaneous efficacy a compelling alternative.
Despite this promise, Aldeyra faced a setback in November 2023 when the FDA issued a complete response letter (CRL), effectively rejecting the company's application for reproxalap’s approval. The FDA required additional trials to demonstrate efficacy on DED symptoms, a hurdle that sent Aldeyra’s stock plummeting by 65%. However, the company has since regrouped, outlining a clear path forward that includes conducting a new Phase 3 trial designed to meet the FDA's criteria. This trial, set in a dry-eye inducing chamber, will focus on ocular discomfort, a key symptom recognized by the FDA. With a robust trial design and strong prior data, the company is optimistic about resubmitting its application later this year.
Adding to the appeal of Aldeyra’s stock is the strategic partnership with AbbVie. In December, post-CRL, AbbVie signed an option agreement with Aldeyra, potentially bringing in significant upfront payments and milestone bonuses upon reproxalap’s approval. This agreement alone, if executed, would cover more than 100% of Aldeyra’s current enterprise value, highlighting the drug’s undervaluation in the market.