Why Safety Data Is Sending Aerie Pharmaceuticals Soaring Today

Positive interim safety data for its glaucoma drug Rhopressa suggest management is on pace to file for FDA approval later this year.

Todd Campbell
Todd Campbell
Feb 18, 2016 at 12:37PM
Health Care

Source: Aerie Pharmaceuticals

What: After reporting interim safety results for its promising glaucoma treatment, shares in Aerie Pharmaceuticals (NASDAQ:AERI) were surging 24% higher at 11:30 a.m. EST Thursday.

So what: Rhopressa, a once-daily eye drop to reduce intraocular eye pressure in glaucoma patients, is Aerie Pharmaceuticals' most advanced drug and the interim safety data released Thursday suggest that the company is on track to file for Rhopressa's approval in the third quarter of this year.

Currently, timolol is commonly used in first-line glaucoma therapy and because its dosed twice daily, previously reported comparable efficacy for Rhopressa versus timolol and a solid safety profile could position it as a better treatment option.

Rhopressa's safety data is also important because it hints at the potential safety of Aerie Pharmaceuticals next-generation glaucoma drug, Roclatan.

Roclatan is a combination of Rhopressa and another existing glaucoma drug, latanoprost, and results from those phase 3 studies are expected later this year. In phase 2 trials, Roclatan demonstrated superior efficacy to Rhopressa and latanoprost monotherapies.

Now what: Aerie Pharmaceuticals' management also reports that its cash burn was approximately $60 million last year and given that it has $150 million in cash on the books exiting December, it seems to me that there's plenty of money still kicking around to get Rhopressa to the goal line without diluting investors with a share offering this year.

Because the glaucoma market is valued at more than $2 billion annually and growing due to an aging population, this could be an attractive stock for risk tolerant investors to stash away. If final data on Rhopressa confirms prior results, then a third quarter filing for Rhopressa with the FDA could mean it hits the market in 2017. Further, if Roclatan's results are good, then Aerie Pharmaceuticals could have two glaucoma drugs on the market by 2018 and that could more than justify a higher valuation than its current $492 million market cap.