Aerie Pharmaceuticals (AERI) has a new bull. Esther Rajavelu of Oppenheimer initiates coverage of the biotech with an Outperform rating and a $64 price target. (To watch Rajavelu’s track record, click here)
Rajavelu has three key reasons to be bullish:
- The company launched Rhopressa, which is a Rho kinase (ROCK) inhibitor that reduces intra-ocular pressure (IOP) in patients who suffer from glaucoma and ocular hypertension.
- The company is nearing potential approval (FY19) for Rocklatan, which is a fixed-dose combination of Rhopressa and latanoprost.
- Rajavelu believes the company is well positioned for revenue growth over the next several years, which could affect the stock’s growth in a positive way.
“Early Rhopressa launch trends make us comfortable with AERI’s commercial infrastructure, and we believe the company could address several unmet needs with both Rocklatan and Rhopressa on market. We also like its leverageable infrastructure, strong balance sheet, and potential upside from an early-stage pipeline focused on diseases of the retina,” Rajavelu said.
Furthermore, the analyst notes the stock is attractive because AERI’s portfolio offers a novel mechanism with incremental efficacy when combined with current standards of care. She also remarks that the drug would launch in a market that already has a high level of disease awareness, with favorable demographic trends, and a well-established treatment regimen.
“We believe, based on the combination of these factors, that AERI’s products could experience strong uptake in the near term. We estimate an addressable US market potential of $2.6B-$4.6B,” Rajavelu predicts.
The analyst surmises the company’s current U.S. sales and marketing representatives team consists of around 100 employees and notes the existing crew could be leveraged for both Rhopressa and Rocklatan, providing opportunities for margin improvement over time. She also notes the potential for manufacturing efficiencies from recent capital expenditure investments. Rajavelu estimates the net price of one bottle in the U.S. to cost about $100 and expects growth even after the launch.
Though Rajavelu looks upon the stock with positivity and excitement about its success, she doesn’t want to be naïve: “With a near-term PDUFA in March 2019, Rocklatan is the key driver for our valuation and outlook. While confident in the product’s US approval, we note any potential delay in regulatory decision and commercial launch would affect our valuation meaningfully.”
Though the analyst seems like AERI’s biggest bull, her price target is conservative in comparison to the Street. With an average price target of $82.29, analysts are predicting massive upside potential of 84% for the stock. In total, Micron stock has received 7 Buy ratings in the last three months, with no Sell or Hold ratings. (See AERI’s price targets and analyst ratings on TipRanks)