Is Opthea a good investment?
In looking to spend one more month on the theme of earlier stage pharmaceuticals after covering LTR Pharma in September, this month I'm putting forward a business that is currently in the midst of phase 3 trials with the US Food and Drug Administration (FDA).
Much like LTR Pharma, this company brings the potential of shooting the lights out for those open to taking on the additional downside risks that are present in these types of businesses.
To be clear, these aren't the traditional high-quality compounders that take up large weightings in Medallion's Australian Equities Growth Fund, but we understand there are clients and readers who are outwardly looking for high growth prospects like these, and for those investors, we believe there is logic in being encouraged by the prospects for Melbourne-headquartered Opthea (OPT).
What is Opthea (OPT)?
Opthea specialises in developing innovative therapies for serious eye diseases, particularly those involving retinal disorders. The company is primarily focused on advancing its lead drug candidate, OPT-302 which is in Phase 3 clinical trials with the FDA.
The business is pre-revenue, but a large capital raise earlier this year has left the company sitting on a healthy US$207 million in cash as of September 2024.
These funds are expected to cover the company through to their phase 3 topline data readouts that are expected to be released mid-next year, at which point if it achieves the desired results it would likely raise again and continue driving the business towards the final stages of commercialisation.
Why invest in Opthea?
The current treatment for Wet Age-Related Macular Degeneration is anti-vascular endothelial growth factor (VEGF)-A monotherapy, which is injected into the eye to stabilise the retina, reduce swelling, and preserve vision in patients with retinal diseases. However:
- 45% of patients fail to respond or only partially respond to VEGF-A therapy
- >60% have persistent fluid after 2 years of treatment
- Up to 25% of patients suffer vision loss despite anti-VEGF-A treatment
- 58% of patients fail to achieve 20/40 vision and most patients cannot resume daily activities such as driving or reading
Opthea seeks to better treat wet AMD in combination with current therapies.
How is a key product is making a difference?
OPT-302 is a novel anti-VEGF-C/VEGF-D therapy. It is designed to treat wet age-related macular degeneration (wet AMD) and diabetic macular oedema (DME) by inhibiting VEGF-C and VEGF-D, which are involved in abnormal blood vessel growth and leakage in the retina.
OPT-302 targets and blocks specific growth factors that contribute to retinal diseases, potentially offering a complementary approach to existing therapies that target VEGF-A.
OPT-302 is undergoing clinical trials to evaluate its safety and efficacy in treating wet AMD and DME.
The trials are conducted in multiple phases to ensure thorough assessment of the drug's effectiveness and side effects. Topline data from both COAST and ShORe trials is expected in mid-2025.
What are Phase 2 trial results showing?
In February 2023, Opthea released results of their 2B trial which was carried out on 366 patients with Wet AMD, across 109 clinical sites in the USA, Europe and Israel.
The drug was administered in conjunction with the current standard of care (ranibizumab) and achieved the result of pre-specified primary efficacy and safety, providing a "statistically superior gain in visual acuity at 24 weeks, compared to ranibizumab alone".
While phase 3 will be carried out on a larger approximate 2000 patients, a strong result on 366 patients in phase 2 is still a good indication and provides us with healthy encouragement around the prospects of positive results from their phase 3 readout expected mid-next year.
Is there a market for it?
Even without going into the rapidly growing diabetic blindness market, which is earlier in the approvals process, Wet AMD is the leading cause of blindness in the aged population and impacts around 3.5 million people in the US and Europe, with around 200,000 new patients each year in the US alone.
This presents a multibillion-dollar commercial opportunity in a growing market with an established clinical base. Currently the global market for Wet AMD sits at over US$8 billion, with Opthea positioned to tap into the entire VEGF-A inhibitor market if it can reach commercialisation.
How is the share price responding?
The positive news continued to flow in September which has assisted the share price in maintaining its strong trajectory. On September 18, OPT announced the successful completion of its drug substance Process Performance Qualification (PPQ) campaign.
The success of the PPQ demonstrates that Opthea can manufacture their drug on a commercial scale, readying the business for launch, should approvals come through as hoped.
The CEO said: "The PPQ campaign is an important step towards de-risking the program and a potential biologics license application (BLA) filing of sozinibercept in wet AMD."
Additionally, OPT's rise in market cap has meant it is now included in the S&P ASX 300 index which not only helps to generate recognition of the stock, while also typically sees the stock being bought up by ETFs and funds with an ASX300 focus or mandate.
Again, this is definitely on the higher risk end of where we focus, but Opthea is certainly an exciting prospect.
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