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Hawk’s Nest

Bullish Positioning Continues for Small-Cap Bio Focused on Ocular Therapies

by | Nov 11, 2021

Aldeyra Therapeutics (ALDX) trading 20X average calls on 11/10 after buyers of 4,500 January $10 calls for $2.30, adjusting some December calls out where 12,000 sit in open interest. ALDX has seen buyers recently in the November $10 calls over 3000X while the December $12.50/$20 call spread in open interest over 6000X. Shares traded up to $15 in April after data but have faded back to a big volume node at $8 and forming a multi-month base. A breakout move above $9.75 has a low-volume gap to fill back to $11. The $545M company trades 2.4X book. ALDX is a biotech focused on immune-mediated ocular diseases. Their lead product is reproxalap, a treatment of dry eye diseases and allergic conjunctivitis. They are also developing ADX-2191, a dihydrofolate reductase inhibitor which is in phase 3 for the prevention of proliferative vitreoretinopathy, and phase II clinical trial for the treatment of primary vitreoretinal lymphoma. The company expects Phase 3 TRANQUILITY and TRANQUILITY-2 results in dry eye disease in Q4 while ADX-629 Phase 2 clinical testing results in asthma, psoriasis, and COVID-19 expected in Q4 2021 or Q1 2022. ALDX sees a massive opportunity for reproxalap with an $18B TAM in the US as strong potential adoption as rapid onset and ocular redness control differentiates reproxalap. Analysts have an average target for shares of $25.50 with a Street High $32. Citi with a $25 PT and comfortable raising the probability of success to 95% for allergic conjunctivitis and to 85% for dry eye after the company delivered on a bull case for reproxalap in allergic conjunctivitis. Jones Trading with a $20 PT as they think Reproxalap is a differentiated drug in the large dry eye and allergic conjunctivitis indications, and the peak opportunity is not fully priced into shares. Short interest is 8.12%. Hedge fund ownership rose 26%. Perceptive Advisors adding 1.2M shares and now holding 9.9M.