Why Aldeyra Therapeutics Could Have Exponential Upside

Aldeyra Therapeutics Inc. (NASDAQ: ALDX) is looking strong going into the second quarter of 2016. Not only does this company have a good cash position, but it also it has a strong pipeline as well. As a result, one key analyst has decided to weigh in on the firm and where it stands to go from here.

Janney Montgomery Scott reiterated a Buy rating and $25 fair value on expected utility for aldehyde trapping in topical and systemic indications.

The company reported 2015 year-end cash of $27.6 million. That, combined with the $3.6 million-potential-remaining credit facility, is expected to fund operations through 2017, not taking into account expenses for new studies.

Phase 2 data for uveitis is on track for the second quarter of 2016, and for Sjogren-Larsson (SLS) for second quarter or third quarter.
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Allergic conjunctivitis (AC) and uveitis are two different forms of ocular inflammation. Aldeyra’s proprietary aldehyde-trap NS2 has proven efficacious in conjunctivitis, and the company is waiting on the uveitis data to define a path forward in ophthalmology. In Janney’s view, positive data from the uveitis trial in the second quarter is important to bolster expectations for the broad applicability of NS2 for inflammation, as well as specifically in the eye.

In the report, Janney detailed:

Aldeyra reported a 64% year over year increase in operating expenses. The increased expenses are largely attributable to increased R&D from the 3 phase 2 trials. Once the systemic formulation of the drug is available, the company intends to expand into other inflammatory indications, which could potentially further add to the expenses. As mentioned above, we model significant new expenses for clinical development. Therefore, we model equity financings in the third quarter of 2016 and third quarter of 2017. These assumptions may be overly aggressive due to management comments that the company may partner the ocular indications. Our valuation also assumes retention of ownership for all 3 indications, AC, uveitis, and SLS, at this time.

Shares of Aldeyra closed Friday at $4.24, with a consensus analyst price target of $21.20 and a 52-week trading range of $3.39 to $11.79.