Laidlaw maintains Buy on Aldeyra, sees upside despite FDA setback

On Friday, Aldeyra Therapeutics (NASDAQ:ALDX), a biotechnology company with a market capitalization of $107 million, received another Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) concerning the resubmission of its New Drug Application (NDA) for reproxalap in Dry Eye Disease (DED). Despite this regulatory hurdle, analysts at Laidlaw have reiterated their Buy rating and $11.00 price target for Aldeyra’s stock, representing significant upside potential from the current price of $1.79. InvestingPro data shows analyst targets ranging from $6 to $11, suggesting strong confidence in the company’s potential recovery.

The CRL, which is a communication from the FDA indicating that the review process for a new drug is not yet complete and the application cannot be approved in its current form, was described by Laidlaw analyst Yale Jen as a "scarcely seen event unlikely to repeat again." Aldeyra is currently conducting two symptom studies for reproxalap, with top-line results expected to be released within this quarter.

According to Jen, the previous clinical studies for reproxalap in DED have yielded multiple positive outcomes, leading to the expectation that the upcoming study results will likely be favorable as well. Furthermore, the analyst expressed belief that the recent option deal with AbbVie (NYSE:ABBV) has not been adversely affected by the FDA’s decision.

Aldeyra’s stock price saw a significant drop, closing down approximately 73% on Friday, with InvestingPro data showing a dramatic one-week decline of 78.71%. Despite this decline, Laidlaw views the current stock price as a compelling buying opportunity. The firm suggests that there is limited downside risk and potential for substantial upside, given the anticipated positive data from the ongoing studies and the overall clinical evidence supporting reproxalap’s efficacy in treating DED. InvestingPro analysis indicates the stock is currently in oversold territory, with a strong financial position reflected in its current ratio of 5.59, suggesting ample liquidity to weather near-term challenges.

In other recent news, Aldeyra Therapeutics has faced a significant regulatory hurdle as the FDA issued a Complete Response Letter regarding its New Drug Application for reproxalap, intended for dry eye disease treatment. The FDA’s concerns centered around the efficacy of reproxalap, citing potential methodological issues in the trial data, which necessitates additional studies to establish its effectiveness. This has prompted Aldeyra to plan a resubmission of the NDA by mid-2025, following the completion of ongoing clinical trials. Despite this setback, Aldeyra maintains a strong financial position with $101 million in cash and marketable securities as of the end of 2024. Analysts have mixed views on the company’s prospects, with Jefferies lowering the stock target to $6 while maintaining a Buy rating, and BTIG reiterating a Buy rating with an $11 target, citing the drug’s unique potential in its class. H.C. Wainwright also reaffirmed a Buy rating with a $10 target, emphasizing the drug’s novel mechanism of action. Aldeyra is actively conducting additional trials, with results expected in the second quarter of 2025, as the company aims to address the FDA’s concerns and secure approval for reproxalap.

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