Analysts Weigh In on Aerie Pharmaceuticals Inc (AERI) as Rhopressa Misses Primary Endpoint

Aerie Pharmaceuticals Inc (NASDAQ:AERI) shares plunged nearly 64% today after the company reported disappointing efficacy results from its first Phase 3 trial for Rhopressa, the company’s lead glaucoma candidate. The trial did not did not meet its primary efficacy endpoint of demonstrating non-inferiority of IOP lowering relative to twice daily Timolol. The results left Wall Street analysts rushing to decrease their ratings and price targets.

In a research report published Friday, Canaccord Genuity analyst Corey Davis downgraded shares of Aerie Pharmaceuticals from Buy to Hold, and reduced the price target to $12 (from $40), which represents a potential downside of 7% from where the stock is currently trading.

Davis wrote, “Although there are signs the wreckage is salvageable, we are taking it out of our model. Since it’s clear Rhopressa lowers IOP, we’re leaving Roclatan in our model; but the changes drop our discounted P/E target price analysis to $12. The path forward from here is murky, but the next step is to see if the sister study ROCKET 2 will show anything more encouraging in Q3.”

“In the meantime, Aerie needs to decide whether to: 1) start a ROCKET 4 study; 2) modify some endpoints in ROCKET 2 before finalizing the statistical analysis plan and locking the database; and 3) start the Roclatan Phase 3 program. Although we hate the idea of downgrading at the bottom, we don’t see a meaningful rebound until the results of ROCKET 2 support the idea of a possible path to approval.”, the analyst added.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Corey Davis has a total average return of 24.9% and a 68.8% success rate. Davis is ranked #128 out of 3579 analysts.

Cantor’s healthcare analyst Caroline Corner took the same route, downgrading AERI’s shares to Hold and reducing the price target to $12.00 (from $40).

Corner commented: “We think there is significant risk to the compounds not moving forward. However, catalysts for AERI shares include progress with FDA and the Rocket 2 data release expected in 3Q:15, so we are taking a wait-and-see approach. Our price target of $12 is based on applying a 9.0x EV/revenue multiple to our estimated 2020 revenues of $163.1M, previously $399.1, discounted at 30% for five years.”

Furthermore, “Given that Rhopressa did show IOP lowering, the company plans to review Rocket 2 results and commence a Phase 3 Roclatan trial by the end of 2015. We think the combination of Rhopressa and latanoprost could show superiority to the components, although we think demonstrating this at higher pressures could be problematic.”

Analyst Difei Yang of Brean Capital has high hopes for Aerie, reiterating a Buy recommendation on the stock, while reducing the price target to $24 (from $46), which represents a potential upside of 87% from where the stock is currently trading.

Yang sounds more optimistic about Aerie’s long-term potential, stating, “We believe the correction is overdone for several reasons: 1) while non-inferiority was not proven, Rhopressa clearly demonstrated efficacy. We view the negative results on Rocket 1 as more of a speed bump than a road block; 2) there may be an opportunity for the company to change primary end point on Rocket 2 prior to unblinding the data based on learning from Rocket 1, thus increasing the probability of success; 3) development and registration pathway for Roclatan is not tied to the success of Rhopressa, although we adjusted the success rate of positive Phase III trials to 50% from 80% to account for higher risks; and 4) the market share is unlikely being impacted even if the labeling may be more restrictive as we believe the unmet medical needs lie in the needs for medications with new mechanism of actions.”


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