It's been tough sledding for Kala Pharmaceuticals (NASDAQ:KALA) shareholders. The company's share price has lost approximately 46% year-to-date due to the fact that its second Phase 3 trial in dry eye disease (DED) did not meet the symptom endpoint.
However, H.C. Wainwright analyst Ram Selvaraju believes that Kala's current valuation provides an intriguing entry point for investors ahead of what the analyst considers to be a risk-mitigated catalyst—the potential approval of INVELTYS for post-surgical ocular inflammation and pain. Since this candidate is based on a well-known, validated corticosteroid that has been used for many years in ocular applications, and given the fact that the NDA was filed via the 505(b)(2) regulatory pathway, Selvaraju has high confidence that INVELTYS should be approved by August 24 (the PDUFA date).
As such, Selvaraju launches coverage on KALA, awarding it a Buy rating with a $35 price target, which represents a 177% upside from current levels.
Selvaraju wrote, "The potential approval of INVELTYS in August would be a major milestone for Kala, as it would turn the company into a commercial-stage organization. Kala plans to launch INVELTYS in the U.S. in 2019 with its own sales and marketing team, which could initially consist of 75 individuals. The company would also partner with potential distributors in other global markets. We estimate that peak sales of INVELTYS post-cataract surgery procedures in the U.S. alone could approach $280 million in 2029."
"In our view, Kala constitutes an attractive opportunity in the ophthalmology space because of the late-stage status of INVELTYS and the potential for the company to build on the possible nearterm approval of this product by advancing its pipeline. We note that the DED and retinal disease arenas appear to be sparsely-populated and relatively inefficiently addressed with current therapy. Success on multiple fronts could make Kala attractive to more established companies in the ophthalmology domain, in our view," the analyst concluded.
Overall, Wall Street’s confidence backing this biotech player is strong, with TipRanks analytics showcasing KALA as a Strong Buy. Based on 5 analysts polled in the last 12 months, all 5 rate a Buy on the stock. The 12-month average price target stands at $33.80, marking a nearly 168% upside from where the stock is currently trading.