This Biotech Just Lost A Quarter Of Its Value; Why Its Future Is Cloudy

Aerie Pharmaceuticals (AERI) missed the mark in a dry-eye disease test, leading AERI stock to plummet to a 10-month low Thursday.


But analysts remained bullish on Aerie’s chances in dry-eye disease. At various times in the test, the drug led to statistically significant improvements in ocular discomfort and tear production. However, it missed those goals 24 days into treatment — the pre-specified goal of the test.

The results led Aerie to reclassify the study, called Comet-1, as a Phase 2b test. This means Aerie will still have to run two Phase 3 studies to gain approval. Now, the company expects to ask for Food and Drug Administration approval in the first half of 2024, Needham analyst Serge Belanger said.

“The outcome of the Comet-1 trial may be seen as a failure given the miss on the home-run scenario but in the end it delivered important dosing, safety and (effectiveness) data the support program advancement and will also aid in the design of the Phase 3 trials,” he said in a note to clients.

Still, in morning trading on the stock market today, AERI stock toppled 28.9% near 11.20.

AERI Stock Crashes On Testing Flop

Aerie studied three dosing regimens in a total of 369 patients. The next step will be Phase 3 studies of the highest dose, which proved the most effective.

Patients experienced statistically significant improvements in ocular discomfort and eye dryness after 84 days of treatment, and similar improvements in other symptoms at days 14, 28 and 84 into their treatment regimens, Aerie said in a news release.

Symptoms began improving after two weeks and improvement continued through 84 days.

Needham’s Belanger kept his buy rating and 24 price target on AERI stock.

Glaucoma Drugs Remain In Focus

The dive in AERI stock is “unwarranted as we do not believe investors and Street models (including ours) had incorporated the dry eye opportunity before today,” Mizuho Securities analyst Difei Yang said in a report to clients.

Yang refrained from incorporating the dry-eye opportunity into her AERI stock model. Aerie’s drug appears safe, but the opportunity remains cloudy after the study missed its primary goals. Still, she reiterated her buy rating and 28 price target on AERI stock.

In the meantime, Needham’s Belanger expects investors to focus on the potential for a European partner for its glaucoma drugs, Rhopressa and Rocklatan.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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