Aerie Looks Modestly Undervalued Despite High Cash Burn


  • Aerie has 2 marketed products and decent pipeline after a recent acquisition.
  • Aerie unfortunately still has extremely high cash burn for a company of its size.
  • Despite this, Aerie shares appear to be somewhat undervalued at present even after accounting for the almost certain dilution that will be needed to raise cash.

Aerie Pharmaceuticals (NASDAQ:AERI) is a stock I’ve owned for a while, and lately I wanted to revisit my prior analysis to see if it was worth buying more to average down my cost basis after a substantial share price decline from higher levels in 2018 and 2019. Although it’s a fairly close call, I do think Aerie offers some potential upside for long-term investors from its current levels.

Aerie’s 2 Marketed Products Should Start to Show Substantially Increasing Sales in the Coming Years

Aerie has 2 marketed products, Rhopressa and Rocklatan. Rhopressa was first to hit the market, launching in April 2018. Rhopressa is a once-daily eye drop for the treatment of open angle glaucoma. Rhopressa is a Rho kinase inhibitor which works to lower intraocular pressure by directly impacting outflow through the trabecular meshwork, rather than targeting aqueous humor outflow like the prior standard of care class of drugs, prostaglandins. Rhopressa’s launch represents the first new class of drugs approved to treat glaucoma in years. Rhopressa appears to have a better safety profile and more universal efficacy versus prostaglandins as well as reducing the required number of daily drops for 2 to just 1.

Rocklatan is a very similar product to Rhopressa — in fact, Rocklatan is actually just a combination of Rhopressa and one of the prostaglandin drugs, latanoprost. Rocklatan in particular, though, appears to compare favorably with prior standard of care therapies like latanoprost.

Figure 1: Efficacy Comparison for Rhopressa and Rocklatan (source: corporate presentation)

Rocklatan was launched in May 2019, and sales have continued to grow since release for both drugs, albeit at a slower pace than originally projected.

Figure 2: Rhopressa and Rocklatan Sales Charts (source corporate presentation)

As you can see from Figure 2, it appeared Aerie’s drugs might be picking up some momentum earlier

Disclosure: I am/we are long AERI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I’m not a registered investment advisor. Despite that I strive to provide the most accurate information, I neither guarantee the accuracy nor the timeliness. Past performance does NOT guarantee future results. I reserve the right to make any investment decision for myself without notification. The thesis that I presented may change anytime due to the changing nature of information itself. Investment in stocks and options can result in a loss of capital. The information presented should NOT be construed as a recommendation to buy or sell any form of security. My articles are best utilized as educational and informational materials to assist investors in your own due diligence process. You are expected to perform your own due diligence and take responsibility for your actions. You should also consult with your own financial advisor for specific guidance as financial circumstances are individualized.

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