Opthea (OPT: $1.25) has gained access of up to US$260 million ($371 million) to reach top-line results of two Phase III trials with its drug candidate OPT-302. The top-line results are now due in mid 2024. The funds will also be used for pre-commercialisation activities.
It's the largest capital raise for the sector (excluding raises conducted by CSL, Cochlear and ResMed), for non-asset purchases.
It's a novel funding mechanism for an Australian biotech. Of the total, US$90 million will be raised through a private placement (with commitments received) at a price of $1.15 per share (conducted through MST Financial). Up to US$170 million will be accessed not through an equity raise but through repayment of the funds from future sales. The financier, Launch Therapeutics, with receive up to four times the amount provided (US$680 million), which will be paid as a milestone payment following the first major market regulatory approval, and then as a percentage of net sales (7%) over six years. It is at-risk funding to Launch Therapeutics with Opthea requiring to gain approval and achieve commercial success for repayment of funds.
Opthea raised $181 million (US$128.5 million) in 2020 in conjunction with a Nasdaq listing. At the time the funds were to fund the development of OPT-302 to the achievement of top-line data in 2H 2023. However, recruitment into the Phase III studies have taken longer than expected, with top-line results now due in mid 2024. The cost of studies appears to be greater than earlier expected.
For a smaller company such as Opthea seeking a global Phase III program aiming to recruit around 2,000 patients, it's an appealing non-dilutive funding approach. Opthea's Phase III studies will involve around 360 sites. Baldwin said that Launch Therapeutics looks at around 300 such deals and proceeds with only two to three each year.
According to Opthea CEO Megan Baldwin, Launch Therapeutics conducted nine months due diligence on Opthea and its drug development program.
The funds accessed will give the company sufficient funding to the end of 2024. Funds will be used to build a US launch team. In the US, there are only around 1,500 specialist ophthalmologists who provide the injections for the treatment of age-related macular degeneration (AMD).
Other areas that the company could be working on at this point include: advancing clinical studies in diabetic macular edema, a co-formulation of OPT-302 with a VEGF-A inhibitor (branded or generic) such that only one injection is required per treatment and clinical studies around durability (less frequent dosing) of the combined therapy compared to a VEGF-A inhibitor alone.
Opthea expects to complete recruitment into the current Phase III studies in mid-2023. Current recruitment progress has not been released. The first patient was recruited in March 2021.
Baldwin said that the current funding structure does not prevent or obstruct Opthea from conducting a licensing deal for OPT-302. The company has doubled its staff over the last year to around 17 people.
Opthea is currently capitalised at $435 million (excluding the equity raise in progress).
Bioshares recommendation: Speculative Buy Class A
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