Aldeyra Therapeutics IPO Looks Less Curative Than It Should

| About: Aldeyra Therapeutics, (ALDX)

Summary

ALDX is a clinical-stage biotechnology firm developing treatments for diseases related to free aldehydes..

ALDX plans to raise $25.0 million in its upcoming IPO, offering 2.3 million shares at an expected price range of $10-$12 per share..

We recommend investors avoid this IPO due to lack of near-term profitability, excessive underwriter compensation, and lack of major underwriters..

Aldeyra Therapeutics Inc. (NASDAQ:ALDX), a clinical-stage biotechnology firm developing treatments for diseases related to free aldehydes, plans to raise $25.0 million in its upcoming IPO.

The Burlington, Massachusetts-based firm will offer 2.3 million shares at an expected price range of $10-$12 per share. If the IPO can hit the midpoint of that range at $11 per share, ALDX will command a market value of $75 million.

ALDX filed on January 6, 2014.

Lead Underwriter: Aegis Capital Corp.

Overview of ALDX

ALDX is a clinical-stage biotech firm developing treatments related to free aldehydes, naturally occurring toxic chemicals. The firm's NS2 product candidate is designed to trap free aldehydes for disposal, aiming to treat diseases including Sjogren-Larsson Syndrome (SLS), discoid lupus, acute anterior uveitis, and ocular rosacea with meibomian gland dysfunction.

As most of these are rare diseases of the eyes and skin, ALDX intends to request orphan designation for its drugs. ALDX plans to fund numerous Phase II and Phase II/III trials for NS2 in 2014 with a portion of the proceeds from this offering.

Valuation

ALDX offers the following figures in its S-1 balance sheet for the year ended December 31, 2013:

Revenue: Unlisted

Net Income: $13,060,4772.00

Total Assets: $3,743,233.00

Total Liabilities: $5,647,261.00

Stockholders' Equity: ($40,221,326.00)

Better Funded Competitors

Numerous other firms, including pharmaceutical and biotech companies, specialty pharmaceutical firms, academic institutions, and government agencies, offer products that may compete with NS2. Many of those organizations have access to greater financial resources than ALDX.

Firms offering or developing potentially competing products include Allergan Inc. (NYSE:AGN), Galderma SA, Novartis International AG (NYSE:NVS), Amgen Inc. (NASDAQ:AMGN), Astion Pharma, Celgene Corporation (NASDAQ:CELG), Basilea Pharmaceutica, Johnson & Johnson (NYSE:JNJ), Bristol-Myers Squibb Co. (NYSE:BMY), and Pfizer Inc. (NYSE:PFE).

Management With Background in Liberal Arts, Medicine, and Pathology

President and CEO Todd C. Brady, M.D., Ph.D. has served in his current position since January 2012. He previously was a Principal with Domain Associates LLC. Dr. Brady has previously served in executive roles with firms, including Aderis Pharmaceuticals, Xanthus Life Sciences, and Phenome Sciences. He received a Ph.D. in pathology, an M.D. from Duke University, and an A.B. from Dartmouth College in Philosophy and Psychology.

Wary Conclusion For Investors

We plan to avoid this IPO.

ALDX is still a long way from gaining FDA approval for its products, and even if it does get the green light to commercialize NS2, the market will be relatively small.

ALDX is also overpaying its executives, having granted its CEO and COO total compensation of $3.7 million and $1.6 million, respectively, in 2013.

Finally, although the company has brainy leadership, we're less than impressed with this IPO's underwriting.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.