Aerie Pharmaceuticals (NASDAQ: AERI) is on a winning streak.
This month, the stock is up 31%—nearly 13% year-to-date—and has roared past its December 2017 high. After breaking above its 52-week high late last week, the company’s market cap rose to well over $2 billion.
AERI is an ophthalmic pharmaceutical company that is focused on the discovery, development, and commercialization of therapies for the treatment of glaucoma and other eye diseases.
According to the company, glaucoma is a $3 billion market in the U.S., and its new drug could prove to be a valuable adjunct therapy in the treatment of the disease.
The company’s first drug, Rhopressa, was approved in December 2017, and so far has had a very positive launch. The approval arrived two months ahead of schedule, and was approved for the reduction of elevated intraocular pressure in patients with open-angle glaucoma.
According to the company’s last earnings presentation, weekly Rhopressa prescriptions—at least for the first 7 weeks the medication has been on the market—have experienced a steady uptick, with 1,189 prescriptions already written.
— bart grenier (@GrenierBart) June 22, 2018
Rhopressa was classified as a new class of drug, giving it a first-to-market advantage ahead of any other drugs that may enter the same classification.
“Rhopressa has been classified as a new drug class. It’s called ophthalmic rho-kinase inhibitors. Now this is important as it facilities the addition to formularies. So it’s not like considered a prostaglandin or any known class, this gives us a totally different class of compound in which we’re the sole product in that class,” from the company’s latest earnings call.
The company is also evaluating a second drug, Roclatan, a once-daily, quadruple-action fixed-dose combination of Rhopressa and Xalatan. Aerie initiated a phase III trial in the third quarter of 2017 as it prepared for regulatory submission in Europe, and it’s expected that the company will file a new drug application for the product later this year.
Down the pipeline, the company is further developing its retina program candidates, including AR-13503—a rho-kinase and protein kinase C inhibitor implant—and AR-1105, a dexamethasone steroid implant.
The average analyst price target for AERI is $81.75 in the next 12 months, or 21% higher than today’s price on the promise of Rhopressa and the other treatments in Aerie’s pipeline.
But the most pressing concern for investors is the company’s path to profitability.
Right now, analysts expect that AERI is near breakeven, with the final loss in 2019 before turning a profit of $35.7 million in 2020. To meet this expectation, the company would need to have an average annual growth rate of nearly 68%. If this projection turns out to be too optimistic and the company doesn’t reach profitability until later than expected, the stock may be hit hard.
But, a high growth rate isn’t unusual in this industry, especially when a company has a hot new drug on the market – which AERI does. The company could very well have a massive 2018 with Rhopressa hitting the market and potentially Roclatan launching as well.
AERI looks like a great short-term trade with a quick profit for 2018, though it remains to be seen how the company will fare in 2019 and beyond.