Aldeyra Therapeutics

Kurta Law is investigating brokers who recommended that their clients purchase shares of Aldeyra Therapeutics. This investment came with substantial risks that made it unsuitable for many investors. These risks appear in the prospectus, the SEC filing that companies use to disclose their business strategy and related risks prior to offering the securities for sale. Unsuitable investments violate FINRA Rule 2111 and Regulation Best Interest, and investors who incur losses may be able to recover via FINRA arbitration.

If your broker recommended that you invest in Aldeyra Therapeutics, you may have a claim against the firm through FINRA arbitration.  FINRA arbitration offers a quicker and cheaper remedy for investors than suing in civil court. Contact (877) 600-0098 or email info@kurtalawfirm.com to speak to a securities attorney for free today.

What is Aldeyra Therapeutics?

According to the prospectus, Aldeyra Therapeutics is a biotechnology company that focuses on the development of drugs that treat inflammatory disease related to a naturally occurring toxic chemical species called “free aldehydes.”

At the time of the prospectus, Aldeyra Therapeutics was working on developing NS2, a drug that was supposed to serve as an “aldehyde trap.” Investors should note that “aldehyde trapping” had not yet proven effective in humans at the time of the stock offering.

Investors should also know that Aldeyra Therapeutics registered as an emerging growth company, meaning that it can make limited disclosures in its prospectus. Less information generally means more risk.

Aldeyra Therapeutics Stock

Aldeyra Therapeutics (ALDX) investments involve a high degree of risk, according to the company’s prospectus. The company debuted at $8.00 per share and as of publishing the stocks traded for $2.91 per share. This massive drop in value was not surprising, given the risks clearly disclosed in the company’s prospectus.

Risks Associated Aldeyra Therapeutics Investments

Brokerage firms that approve an investment are required to understand the risks associated with an investment. Furthermore, brokers must accurately represent the risks associated with certain investments.

The prospectus states at the beginning of the “Risk Factors” section: “We have incurred significant operating losses since we were founded in 2004 and expect to incur significant losses for the next several years as we continue our clinical trial and development programs.”

The theory behind the development of NS2 was yet unproven. And before commercialization, Aldeyra Therapeutics would need to obtain necessary regulatory approvals. Compliance with regulations is time-consuming and could cut into the profitability of the drug overall.

At the time of the prospectus, NS2 had not entered into a clinical trial, nor could Aldeyra Therapeutics guarantee that it had the funds to complete the necessary trials. It had not proven its efficacy and there was no way of knowing if it ever would. Even if NS2 proved effective in clinical trials and cleared regulatory hurdles, there was no guarantee that Aldeyra Therapeutics would successfully bring the drug to market or that there would be significant sales.

Orphan Drug Designation

The prospectus specifically mentions Sjögren-Larsson Syndrome (SLS), which is a rare disease caused by mutations in an enzyme that metabolizes in fatty aldehydes, and acute anterior uveitis, which is an inflammatory eye disease.

Companies like Aldeyra Therapeutics may apply for orphan drug designation, which entitles the company to government assistance in order to bring a drug to market that treats a rare disease. Failure to obtain this designation would negatively affect the drug’s development.

Other Risks Associated with Commercialization:

The risks associated with this type of investment do not end in the laboratory. Besides the scientific proof that Aldeyra still required, the prospectus stated that it would have to overcome the following business hurdles to successfully commercialize.

• Securing substantial additional funding.
• Developing and maintaining successful strategic relationships.
• Building a strong intellectual property portfolio.
• Gaining broad market acceptance for product candidates.
• Building and maintaining appropriate clinical sales, distribution, and marketing capabilities through third parties.

Failure of any one of these goals could result in a total business failure and a complete loss for investors.

Aegis Underwriter

Aegis Capital Corp. served as the underwriter of Aldeyra Therapeutics. Investors should know about this broker’s potential conflicts of interest. An underwriter should keep potentially overly risky investments from trading on the public stock market. But because underwriters make money by bringing new stocks to market, they may be motivated to overlook certain risks.

What Can I Do If I Suffered Losses?

If you lost money on Aldeyra Therapeutics investments, consider reaching out to a Kurta Law securities attorney. Our securities attorneys have 5-star reviews on Google and a proven track record when it comes to securing fair settlements for our clients. Call (877) 600-0098 or email info@kurtalawfirm.com.