During the Cold War era there was a famous joke about a race between a US and a USSR runner in which the American crossed the finish line first. The headline in the Communist party newspaper 'Pravda' had read 'In an international race, the Soviet runner came in one of the top three and the American arrived one before last.' This joke demonstrates the art of data spinning that has become prevalent among those who show study results to potential investors. One such recent example is the way Aerie Pharmaceuticals (NASDAQ:AERI) have been presenting their new eye drop treatment for Glaucoma Rhopressa™ which is currently undergoing phase 3 clinical trials.
Glaucoma represents a group of eye diseases often marked by elevated intraocular pressure or IOP (too much fluid inside the eye) which, if left untreated, can lead to progressive loss of vision and eventually blindness. Intraocular pressure is created by fluid being produced in, and drained from, the eye in a controlled manner.
The front part of the eye is filled with a clear fluid called intraocular fluid or aqueous humor, made by the ciliary body. The fluid flows out through the pupil. It is then absorbed into the bloodstream through the eye's drainage system.
This drainage system is a meshwork of drainage canals around the outer edge of the iris. Proper drainage helps keep eye pressure at a normal level. The production, flow, and drainage of this fluid is an active continuous process that is needed for keeping the eyes healthy.
Since the IOP depends upon the amount of fluid in the eye, then if your eye's drainage system is working properly, fluid can drain out and prevent a buildup. Likewise, if your eye's fluid system is working properly, then the right amount of fluid will be produced for a healthy eye. Your IOP can vary at different times of the day, but it normally stays within a range that the eye can handle [Glaucoma research foundation].
When fluid is being produced faster than it is being cleared, pressure builds up. This pressure can begin to crush the sensitive optic nerve leading to a gradual loss of vision.
Aerie's Rhopressa™ is a novel treatment designed to correct this process. There are existing therapies that work on the same targets in the eye and they include the generic drugs Latanoprost, a prostanoid selective FP receptor agonist which reduces the IOP by increasing the outflow of aqueous humor. And Timolol maleate which is a beta1 and beta2 (non-selective) adrenergic receptor blocking agent. Timolol lowers the IOP by decreasing the formation of aqueous humor in the ciliary epithelium.
Aerie's Rhopressa™ targets the same pressure building mechanisms as these generics using a threefold mode of action.
The first is by inhibiting the activity of an enzyme called Rho Kinase or ROCK. Through ROCK inhibition, it increases fluid outflow through the trabecular meshwork, or TM, which accounts for approximately 80% of fluid drainage from the eye.
The second activity is by reducing the production of eye fluid by inhibiting a norepinephrine transporter (NET).
The third activity was only shown in animal studies where it reduced episcleral venous pressure, or EVP, which represents the pressure of the blood in the episcleral veins of the eye where eye fluid drains into the bloodstream.
After demonstrating the proper safety and efficacy in animal studies, Aerie showed very elegantly in a phase 2 study presented in May 2013 that Rhopressa™ (or AR-13324 at the time) can reduce IOP by about 6mmHg demonstrating the ability of the drug to bring IOP down from the dangerous level above 25mmHg down to a normal level under 20mmHg.
This success was followed by another phase 2b study in which Rhopressa™ was compared to the standard of care drug Latanoprost. The result of this study is summarized in the last sentence of the published abstract: "AR-13324 0.02% was less effective than latanoprost by approximately 1 mmHg in patients with unmedicated IOPs of 22 to 35 mmHg. The major safety finding was ocular hyperemia, which was more common for both concentrations of AR-13324 than for latanoprost."
Interestingly, in the following company press releases the results of this study have been described as follows: "In the Company's Phase 2b clinical trial, which was successfully completed in May 2013, RhopressaTM demonstrated a strong IOP-lowering effect, with mean IOP reductions of 5.7 and 6.2 mmHg on days 28 and 14, respectively." (AERI Q3 2014 PR)
So, although the Aerie drug performs across-the-board less well than the standard of care drug, the company chose to emphasize its activity. It must be noted that they are not hiding anything since these data appear in all of their publications as well as in the company presentation.
In the company presentation, they proceed to explain that the advantage of Rhopressa™ lies in the fact that it is equally effective in lowering pressure from patients with a small increase as it is in lowering pressure in patients with a high pressure whereas Latanoprost was better at the high pressures than in the low pressures. The only problem is that in both groups, Latanoprost is still better than Rhopressa. In the high pressure group, Rhopressa reduces by 5.7mmHg to Latanoprost's 6.8mmHg, and in the low pressure group Rhopressa reduces 5.8mmHg to Latanoprost's 5.9mmHg. In fact, this argument is like saying "I don't want to bet on the horse that finishes fast, I'll take the one who is consistently slow for the whole race."
Aerie's next claim to superiority is that 36 hours after the last dose, their IOP measures were a little better. Since the drug is prescribed for once daily use, I'm not sure how this difference will be seen in the clinic.
The company presentation and press releases have also blurred the line between results from animal studies regarding EVP and real clinical results seen in man. Although these animal models are validated tools for drug development, they are still not the same as a Human test and the distinctions should be made clear.
Regarding safety, Aerie claim a 'favorable tolerability profile', this is good, however, in the published study, some patients treated with Rhopressa suffered from ocular hyperemia. This is basically a fancy name for red eyes with an unexplained origin; however, it is a red flag which requires checking why it happens. And even if it doesn't do any more harm than having the patients' eyes turn red, I can hardly see it as a positive selling point.
One may ask, if lowering IOP by reducing the production together with increasing the drainage is such a good idea, why not put Latanoprost together with Timolol in the same bottle? Well, apparently the folks at Pfizer (NYSE:PFE) thought about it and they have developed XALACOM which contains Latanoprost and timolol ophthalmic solution, 50 µg/mL/5 mg/mL (as timolol maleate) (Product monograph). Interestingly, the product monograph reports a study comparing each of the drugs' activity to that of the combination. In this study, the mean difference between the combination and Latanoprost was 1.1 mmHg, and the difference between the combination and Timolol was between 1.9 and 2.9. So there is a difference of at least 1mmHg in the reduction activity of Timolol and Latanoprost with Timolol being slightly less effective.
Now back to Rhopressa, they have recently begun a large phase 3 effort in which they are comparing their drug to the standard of care. Oddly enough, between phase 2 and phase 3 the "standard comparator for glaucoma" changed from Latanoprost to Timolol. (clinicaltrials.gov)
This means that Aerie changed the competition between phase II and phase III and selected a weaker drug (as we see in the Pfizer study) as a control for Rhopressa. This may be a legitimate move to make in order to gain FDA approval but ultimately, they will still need to replace the stronger drug in the market in order to gain their projected market share.
In their company presentation, Aerie quote a projected market capture for both their newer drug Roclatan™ and Rhopressa™ together to be "Over 40% Market Share - Based on 200 U.S. Physician Responses to Survey." Since survey responses depend deeply on the questions being asked, I would take this with a grain of salt, especially in light of their minimal advantage if any over standard of care and their still unclear safety profile.
An announcement by Aerie about completing the enrollment for the ongoing ROCKET 1 phase 3 clinical trial for Rhopressa on Dec 2nd caused a surge of almost 10% in value. This increase reflects the idea that Rhopressa and Roclatan are poised to take 40% of a 2Bn$ US glaucoma market.
Aerie have not partnered their development with any Big Pharma company, therefore they will also need to manage production and marketing on their own while trying to penetrate a market controlled by generic drugs. Since their candidate does not present any advantage over the cheap generics, it is unclear how that will happen.
Taken together, these considerations lead us to believe that Aerie is highly overvalued at its present market cap.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.