UBX vs. AERI: Which Eyecare Stock Has the Most Upside Potential?
Stock Analysis & Ideas

UBX vs. AERI: Which Eyecare Stock Has the Most Upside Potential?

Story Highlights

Two healthcare stocks are developing treatments for eye diseases: Aerie Pharma and Unity Biotechnology. AERI outperformed UBX over the past year. However, UBX is the one with the strongest upside potential.

Bearish sentiment continues to have a strong impact on the U.S. stock market, and the healthcare sector has suffered as well, with a year-to-date decline of more than 15%. Some healthcare stocks have performed well while others have not. However, underperforming healthcare stocks could provide interesting investment opportunities. Two stocks to consider in this regard are Unity Biotechnology (NASDAQ: UBX) and Aerie Pharma (NASDAQ: AERI). The former shows high upside potential, while the latter, barring an acquisition by Alcon (NYSE: ALC), isn’t as promising.

Unity Biotechnology (UBX)

Unity Biotechnology, based in South San Francisco, California, develops a product called UBX1325 for the treatment of age-related eye diseases such as diabetic macular oedema (DME).

DME is a condition in which small swellings (microaneurysms) jutting out of the walls of blood vessels cause fluid and blood to enter the retina, the central part of which becomes swollen (oedema), known as the macula.

The results of the second phase of a study called BEHOLD, in which DME patients received a single injection of UBX1325, were impressive in terms of improved visual acuity.

At both 12 and 18 weeks, the subjects maintained their improvements in BCVA and CST that were not only statistically significant but also clinically meaningful. The therapeutic benefit of UBX1325 in DME patients was compared to participants in the control group, while the safety profile of these subjects was favorable.

BCVA indicates the best possible vision that the patient can achieve when wearing glasses or contact lenses. CST refers to Central Subfield Thickness, which is an indicator of how thick the macula is. This measure is available directly from OCT imaging.

These results opened the possibility of avoiding the frequent injections that DME patients must take in hopes of preserving their eyesight.

In response to the company’s upbeat 12- and 18-week data, released on August 12, 2022, Citigroup (NYSE: C) analyst Yigal Nochomovitz raised his price target to $8 from a previous $5, coupled with a Buy rating. The analyst cited evidence that the treatment works as an anti-DME disease along with a relatively high probability of success.

The company is now studying the therapeutic effects of UBX1325 over an extended period of 24 weeks, and data should be available before the end of the year. There will likely be further phases of research, but the future looks very bright for the treatment.

To this end, the company may use cash and equivalents totaling almost $65 million, which is expected to be more than enough to continue research and development activities through March 31, 2023.

In August, the company was in the process of raising additional funds through the sale of common stock. With the next quarterly report, which is expected to be out before regular trading hours on November 9, it will become clear how much the company managed to rake in.

Is UBX a Good Stock to Buy, According to Analysts?

On Wall Street, Unity Biotechnology has a Strong Buy consensus rating based on four Buys, zero Holds, and zero Sells assigned over the past three months. At $8, the average UBX price target implies upside potential of 1,829%.

At writing, shares are trading at $0.41 for a market cap of approximately $56.8 million and has a 52-week range of $0.38 – $3.64. The stock is well below its long-term 200-day moving average of $0.89.

Aerie Pharma (AERI)

Aerie Pharmaceuticals, based in Durham, North Carolina, is a pharmaceutical company that develops and commercializes ophthalmic therapies for the treatment of U.S. patients with DME and other medical conditions.

From sales of its products, Aerie Pharmaceuticals generated revenue of $33.3 million, or a 22.4% year-over-year increase in the second quarter of 2022, surpassing the consensus by $710,000.

Also, Aerie Pharmaceuticals had a net loss of -$0.32, but it was better than the consensus of -$0.56.

On August 22, it was announced that Aerie Pharmaceuticals had entered into an acquisition agreement with Alcon, a Swiss world leader in eye care.

The Swiss healthcare company will acquire Aerie for approximately $770 million, or $15.25 per share.

In addition to a pipeline of multiple product candidates, Alcon will acquire Rocklatan and Rhopressa for the reduction of intraocular pressure frequently occurring in patients with open-angle glaucoma and in patients with ocular hypertension.

Open-angle glaucoma is a progressive medical condition and is common in people who become irreversibly blind. Ocular hypertension is when the pressure in the eye is abnormally high.

The transaction is expected to close before the end of this year but requires the approval of the two boards of shareholders, having already been approved by the directors of the two companies.

To fund the acquisition, Alcon said it intends to use debt. However, there is a possibility that rising borrowing costs could present daunting conditions to the deal.

If the transaction doesn’t go through, Aerie Pharmaceuticals will continue as a standalone company and remain on track to meet its goal of $130 million to $140 million in total net product sales from its glaucoma franchise in 2022 (an increase of 16% to 25% vs. the previous year).

Is AERI Stock a Buy, According to Analysts?

On Wall Street, Aerie Pharmaceuticals has a Hold consensus rating based on zero Buys, six Holds, and zero Sells assigned over the past three months. At $15.25, the average AERI price target implies upside potential of just 0.3%. However, these ratings are being influenced by the acquisition news.

At writing, AERI trades at $15.20 per share for a market cap of approximately $751 million and has a 52-week range of $4.81 – $15.37. Its long-term 200-day moving average of $8.79 is well below its current price.

Conclusion: UBX Stock Has More Upside Potential Than AERI

In the near term, the upside potential of Unity Biotechnology’s stock price looks a lot more attractive than that of Aerie Pharmaceuticals as a standalone company.

Unity Biotechnology’s lead product candidate for DME looks very promising, while the Aerie Pharma/Alcon deal could fail.


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