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Alcon to Buy Aerie Pharmaceuticals in $770M Deal

Both Ophthalmology Firms Count Deep Local Ties

Aerie Pharmaceuticals Inc.’s headquarters move from Irvine to North Carolina’s renowned Research Triangle Park in 2018 didn’t turn out as well as its executives hoped.

The eye drugmaker’s market cap (Nasdaq: AERI) dropped from almost $3 billion in 2018 to $240 million as most recently as June. After a test failed last year, several C-suite executives departed.

The latest change is Aerie’s $770 million sale to Alcon Inc. (NYSE: ALC), which was spun off by Swiss giant Novartis in 2019.

Alcon, which has a sizeable presence in Orange County, said the Aerie purchase complements its recent expansion into the ophthalmic pharmaceutical eyedrop space.

“Alcon is passionate about innovative treatments in eyecare, especially in core disorders such as glaucoma and dry eye, which have significant patient impact,” Alcon Chief Executive David Endicott said in a statement. “Aerie is a natural fit with on-market and pipeline products, and R&D capabilities that offer the infrastructure needed to expand our ophthalmic pharmaceutical presence.”

Duke Connection

Aerie’s technology originated at Procter & Gamble where the project stalled and it was gifted to Duke University, which forms part of the Research Triangle.

David Epstein, who was chairman of ophthalmology at Duke University in Durham, founded what became Aerie Pharmaceuticals.

The company, which originally had its headquarters in New Jersey before moving to Irvine, went public in 2013 at $10 a share. Its stock topped $70 in mid-2018.

At the time of the North Carolina move, Aerie was among Orange County’s dozen or so most valuable public companies, following FDA approval and the launch of Rhopressa, a once-daily eyedrop designed to reduce elevated intraocular pressure in patients with certain types of glaucoma or ocular hypertension.

It still maintains local operations; in 2021 Aerie inked a new six-year lease for its local base at the Irvine Concourse campus near John Wayne Airport for 27,000 square feet.

The local office of Aerie holds regulatory, commercial support and other administrative activities for the company.

Phase 2b Failure

The company’s stock last year took a hit after reporting a dry-eye drug candidate it has been testing, dubbed AR-15512, failed to meet its target outcome during a Phase 2b clinical study.

Longtime CEO and Chairman Vicente Anido, who had moved the company to North Carolina, was terminated. After the company hired Raj Kannan as CEO, its chief operating officer and its chief research and development officer also departed, and a new chief financial officer and chief medical officer were hired.

Analysts said they believed Aerie has long been exploring a sale since its key drug didn’t meet expectations last year.

Aerie is still projecting revenue of $130 million to $140 million this year, up 16% to 25% from 2021. Its sales are expected to climb another 31% to $180.1 million in 2023, according to analysts’ consensus.

Alcon’s purchase price of $15.25 per share was a 37% premium to Aerie’s closing price of $11.15 on Aug. 22. At press time, the shares were at $15.08, an indicator that investors believe the deal will be completed.

Lake Forest Hub

Whether Aerie will remain based in Durham is unclear. Alcon’s U.S. base of operations is in Fort Worth, Texas, and it also has large bases in Lake Forest and the Atlanta area.

The Irvine-area hub of Alcon is used to make a variety of implantables, consumables and other eyecare-related equipment. The company employs 1,100 locally, according to Business Journal research.

Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.
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