Updating My Aerie Pharmaceuticals Short


  • Aerie Pharmaceuticals was one of my two favorite shorts as recently as August 2018.
  • Since then, earnings data and developments have largely played out according to my thesis, and the stock is down as a result.
  • In this article, I  review the new data and update my trading position accordingly.

In June of this year, I explained why I was short Aerie Pharmaceuticals (NASDAQ:AERI), which at the time was trading around $70 per share, and in August, I compared my short of Radius Health (RDUS) to the situation developing at AERI. Indeed, given the lessons learned from my RDUS short, I deemed AERI one of my two “favorite” shorts at that time. (Note that Total Pharma Tracker subscribers had early access to both articles.)

Today, as shown in the chart below, AERI is trading just above $40, so I would like to re-visit the original thesis in light of recent developments and then re-evaluate my short position.

Financial Results

The biggest development since August has been the third-quarter earnings release, including the associated conference call and 10-Q.

From them we learned that AERI had quarterly net sales of just over $7.3 million, with SG&A expenses of almost $40 million and a net loss of over $85 million. The net sales number kept the company on target for its guidance of $20-30 million in sales for calendar year 2018, which implies anywhere from $11 million to $21 million in sales for the fourth quarter (we’ll discuss this below).

Note that SG&A expenses are expected to be relatively constant going forward, so we can expect about $40-45 million in such expenses quarterly. Here’s an exchange from the conference call explaining this:

Elliot Wilbur

Okay, fair enough. And then just one final question for Rich. Looking at your SG&A levels, it’s been relatively steady the last couple of quarters. As we think about maybe some of the initial, Rhopressa launch costs tapering off, obviously you have more associated with Rocklatan in early 2019. So, maybe any reason to think that there would be sort of a kind of a large incremental one time step-up from, from current levels or is this kind of

Disclosure: I am/we are short 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 actively trade around core positions

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