Good News from Aerie Pharma; Aratana Therapeutics Should Cheer Investors

Aerie Pharmaceuticals Inc (NASDAQ: AERI) and Aratana Therapeutics Inc (NASDAQ: PETX) have come out with positive announcements that should cheer investors on Thursday.

Aerie Pharma reported the successful 12-month interim safety results of Rocket 2, Aerie's second Phase 3 registration trial for Rhopressa. Rhopressa is a once-daily eye drop being tested for its ability to lower intraocular pressure (IOP) in patients with glaucoma or ocular hypertension.

The longer-term Phase 3 Rhopressa update shows activity lasting 12 months even under the most conservative scenario imputed and makes Rhopressa approvable. Thus, the major overhang on the stock is addressed. No wonder, the stock climbed 19 percent to trade at $17.65 in the pre-market session on Thursday.

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RBC's Adnan Butt commented, "Durability has been a question, and although we expect bears to nit-pick, to us the durability question is now largely addressed and we view this as a positive read-through to both Rhopressa and Roclatan Phase 3 read-outs coming up in 2H:16."

What Does It Mean For The Company?

Aerie Pharma shares offer the potential for significant upside, as both products in development, Rhopressa and Roclatan, use a new mechanism of action for the treatment of glaucoma, a blockbuster potential market. Both drugs are in the late stage studies.

"We think these data make Rhopressa look approvable. Our high-level take is that Rhopressa as a standalone agent could post sales of a few hundred million, and should Roclatan Phase 3s succeed then AERI would have a $1B+ commercial franchise in its hands. As such, we consider the data significantly de-risking for Rhopressa and believe shares should move up to $20–25+ and then higher to $40–50+ with more data further de-risking the story," Butt noted.

Butt has an Outperform rating and $50 price target on Aerie Pharma's stock.

The company is expected to release Roclatan Phase 3 data (Mercury 1) in the third quarter of 2016 and Rhopressa Phase 3 data (Rocket 4) in the fourth quarter of 2016. Aerie will file the new drug application for Rhopressa in the third quarter of 2016. The company does not need to raise funds to see Rhopressa and Roclatan through to approval and launch, as it ended 2015 with cash of about $150 million.

Other Good News

In a separate development, Aratana Therapeutics said it has filed a Marketing Authorization Application with the European Medicines Agency (EMA) for Galliprant, which is intended to treat pain and inflammation in dogs with osteoarthritis. The EMA has started reviewing the submission and Aratana anticipates marketing authorization in 2017.

Shares of Aratana closed Wednesday's regular trading session at $3.36. The shares have dropped 40 percent this year.

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