Why Aerie Pharmaceuticals Shares Are Rallying Another 11.9% Today

By Markets Fool.com

Image source: Getty Images.

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What happened

After reporting positive phase 3 trial results for its glaucoma drug Roclatan and upping the size of a planned equity offering to $75 million, shares inAerie Pharmaceuticals (NASDAQ: AERI)are climbing 11.9% at 3:30 p.m. EDT today.

So what

Investors were rewarded yesterday with positive phase 3 results for Roclatan, the company's next-generation therapy for reducing inintraocular eye pressure (IOP) in glaucoma patients.

Roclatan, a combination of Aerie Pharmaceuticals' Rhopressa and the widely used prostaglandin analogue (PGA) latanoprost, outperformed both of those drugs when they were used individually.

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The positive findings suggest that results from a second phase 3 trial for Roclatan will read out similarly when data is available early next year. If so, then Aerie Pharmaceuticals could be in position to have two drugs on the market in 2018 that target the $2.5 billion U.S. glaucoma market.

The other drug, Rhopressa, was filed for FDA approval earlier this month, and if it's approved, its once-daily dosing may allow it to carve out market share as an alternative to twice-daily beta blockers. In phase 3 trials, Rhopressa matched up similarly in efficacy to the beta blocker timolol.

Image source: Aerie Pharmaceuticals.

Now what

Developing and commercializing drugs isn't cheap, and with Aerie Pharmaceuticals having two drugs approaching the finish line, it's not surprising that they're tapping equity markets to bulk up its balance sheet.

The company initially announced a $50 million equity offering after the bell yesterday, but early this morning they increased the amount to $75 million. The up-sized offering is on top of a $50 million at-the-market offering that was also completed. Obviously, the rapid run-up in shares did little to curb investor appetite for this company's stock.

After the completion of these capital raises, Aerie Pharmaceuticals will add $125 million, minus fees, to its coffers and that should give it plenty of financial firepower to finish up preparations for a Rhopressa launch and to get Roclatan's application buttoned up by late next year.

Overall, the size of the glaucoma market makes this company intriguing, especially now that its pipeline is a little more secure. Therefore, risk-tolerant investors may want to add this stock to their watch lists and look for an entry point.

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Todd Campbell has no position in any stocks mentioned.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.Like this article? Follow him onTwitter where he goes by the handle@ebcapitalto see more articles like this.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.