Gains in Glaucoma

10/12/2016 7:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Glaucoma is an eye disease in which pressure damages the optic nerve, potentially causing irreversible loss of vision, explains Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

Shares of Aerie Pharmaceuticals (AERI) surged over 60% on news that its glaucoma drug, Roclatan, performed well in the first 90 days of its 12-month Phase 3 “Mercury 1” trial.

Results from a second Phase 3 trial (Mercury 2, which began in March) are needed to support Roclatan’s efficacy.

The US market for drugs that lower intraocular eye pressure (IOP) is around $2.2 billion. If Roclatan works as well as trial results suggest, Aerie could capture a good portion of that market.

If all goes well, Aerie could have an application for FDA approval submitted within a year. Most analysts punched their price targets up to a range of $50–$55, implying 50% near-term upside remains if all goes well.

Despite all the bullishness, caveat emptor—clinical-stage biotech stocks are fickle beasts and will rise and fall based on both trial results and speculation. Expect the stock to jump (or fall) on each round of positive (or negative) results.

It’s obviously a speculation, but we’re not opposed to a small position here or on dips with a loose stop.

Glaukos (GKOS) is a small medical company that’s also taking dead aim at the huge glaucoma market.

Typical treatments (prescription eye drops, laser treatments, invasive surgery) aren’t bad, but all have drawbacks (including high failure rates).

Glaukos has a better way through its iStent, which is a minuscule (1 mm long, 0.33 mm wide) device that’s implanted in the eye’s drainage system, relieving IOP.

The FDA signed off on iStent a few years ago, and Glaukos has made steady progress since then, boosting coverage (92% of targeted patients are covered by Medicare or private insurance) and its sales force.

Growth has been excellent — revenue growth has actually accelerated recently and earnings have nosed into the black during the past two quarters.

If management executes on its plan, there’s no reason the top and bottom lines won’t continue to move nicely higher going forward. It’s a good story. You can buy some on dips with a loose stop in the low $30s.

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By Mike Cintolo, Editor of Cabot Top Ten Trader

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