Aldeyra (ALDX) will be reporting results from their first Phase 3 study in allergic conjunctivitis (“AC”) sometime in early 2019 (we expect January). A positive readout in AC will validate ALDX’s candidate reproxalap for the second Phase 3 trial needed to gain approval in AC and position it well in the much larger dry eye indication. With over $95M in cash and a market cap of $270M, we think the risk to reward ratio makes sense at these levels.
Longer Active Alternative Is Needed to Current Treatment
Allergic conjunctivitis is one of the most common seasonal allergies with inflammation inside the eyelid, resulting in itching, irritation, redness and watery discharge. Currently, oral antihistamines such as Zyrtec, Allegra and Claritin are used as a first line treatment. These treatments are effective in the majority of patients immediately after exposure to allergens (substance that makes body’s immune system overreact and trigger allergic symptoms). Antihistamines are effective within 5 minutes of administration, but start to lose activity immediately after.
A longer active alternative is needed for AC patients who do not respond to antihistamines (~15% of patients). ALDX reproxalap has a more durable activity than antihistamines, providing release through 60 minutes, while antihistamines subside over 30 minutes.
Figure 1: Current antihistamines reach peak activity within 5 minutes of exposure to allergen and lose effectiveness within 30 minutes. ALDX reproxalap has a more durable activity that lasts through 60 minutes. 
Phase 2 Data Showed Durable Activity
0.5% ADX-102 (reproxalap) showed statistically significant reduction in itching versus vehicle at 10, 20 and 30 minutes post-challenge.
The Phase 2 trial primary endpoint was a 1-point difference between active and control arm. In the values observed in this trial, a 1-point difference represented a 38% improvement. ADX-102 showed 23%, 37%, 55%, and 65% at 10, 20, 30, and 60 minutes post-challenge in seasonal allergy patients. The data suggest that the 38% one-point equivalent threshold was met or exceeded 20 minutes post-challenge and later.
Phase 3 Powered for Primary Endpoint
The main difference between the Phase 2b and upcoming Phase 3 is the increased enrollment. Phase 2b had about 30 patients/arm whereas the ALLEVIATE Phase 3 study will enroll about 100 patients/arm. The primary endpoint remains reduction in patient-reported itching and management has stated that the trial is 90% powered to detect a difference in this primary endpoint.
What To Look For In Upcoming Data: 1-point difference between the active and control arm (~40% decline in itch score) at 10, 20, 30, 60 minutes.
Given the values shown in Phase 2b study, we think greater enrollment numbers will result in positive data readout for ALDX post 20 minute mark, and potentially even post-10 minute mark. Positive readout of the first Phase 3 study will position ALDX well heading into the second Phase 3 study, where allergen will be in the environment rather than directly administered in the eye like in the first Phase 3.
What AC Data Could Mean For DED
Dry eye disease is expected to be the largest indication for reproxalap. ALDX reported solid Phase 2 data in dry eye, which caused the stock to run to $14/share. With positive upcoming AC data, we think ALDX could retest the same levels. Why? The signs and symptoms of AC & DED are very similar. About 50% of patients with itch symptoms also have dryness and vice versa. Therefore, positive AC data could be an early indicator that reproxalap could work in the company’s Phase 3 DED data expected in 2020.
Upcoming Catalysts and Cash Balance Limit Downside
Aldeyra ended 2018 with a projected $95M in cash ($3.20/share). The company should be sufficiently financed to fund their upcoming Phase 3 trials in 2019. In addition to the AC data in early January, ALDX is expecting to release Phase 3 data for uveitis by the first half of 2019 and Sjorgen Larsson Syndrome (SLS) in 2019.
One or more of PropThink's contributors will go LONG ALDX within the next 24 hours
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