Ocular Therapeutix: Good Potential, However Not That Good An Execution

Light beam is shining through retina and lens on eyesight exam

Zorica Nastasic

Final 12 months, I wrote about Ocular Therapeutix (NASDAQ:OCUL) that it was doing good drugs, however confronted excessive competitors. At the moment, the corporate had two authorised merchandise, DEXTENZA, a dexamethasone ophthalmic insert for ocular irritation and ache following ophthalmic surgical procedure, and ReSure Sealant, an ophthalmic system designed to stop wound leaks in corneal incisions following cataract surgical procedure; and a section 1 stage candidate for moist AMD. Latest gross sales decline of DEXTENZA, adopted by slashing of income steerage, has borne out my feedback. The inventory is down 83% since I wrote that article in April final 12 months, once I was touring within the Himalayas, the mountains completely to myself as a result of covid-induced lockdown. Anyway.

In my April article, I mentioned the section 1 knowledge from OTX-TKI (this makes use of 600µg of the tyrosine kinase inhibitor axitinib,) in neovascular or moist AMD. I concluded that:

…whereas the earliest sign of efficacy was noticed within the combo remedy cohort 3b, the important thing USP of the therapy, remedy sturdiness, was noticed for 10 months within the 400 μg Cohort 2. The therapy was additionally well-tolerated.

I additionally famous the next about future trials:

It reveals {that a} vital proportion of sufferers didn’t want rescue medicines at durations for much longer than these obtained with presently accessible anti-VEGF injection therapies. It is a very small trial, and these outcomes should be replicated in bigger US-based trials, nevertheless, if they’re, certainly, replicated, OTX-TKI will likely be a big addition to the therapy of those retinal ailments.

Since then, in the previous couple of quarters, DEXTENZA and Ocular have constantly missed income estimates regardless of a label enlargement for DEXTENZA in allergic itching of the attention, which could possibly be a $250mn income generator for Ocular. There’s additionally been new knowledge from the OTX-TKI program, which I’ll talk about.

Ocular’s hydrogel drug supply platform creates sustained-release formulations of beforehand authorised therapies. Medication will be launched for days or months, as wanted. The product is biocompatible and preservative free. It is usually biodegradable and dissolves after the drug is delivered. The hydrogel is a biodegradable polyethylene glycol (PEG’) community and can be utilized to entice and ship each small molecules and enormous proteins in varied dosages. The corporate has quite a few patents protecting the expertise.

The expertise is flexible, and has examined varied authorised and helpful merchandise over time, generally with success, generally failure. It makes use of a miniscule insert into the attention, and has been capable of present for much longer length of therapy impact. Nevertheless, efficacy of the platform is unpredictably tied in to the efficacy of the drug it makes use of. For instance, a section three trial of travoprost in glaucoma failed in 2019. Now, travoprost is a prostaglandin that was broadly used to deal with intraocular strain or IOP in open-angle glaucoma – see right here for a dialogue. Nevertheless, generally travoprost monotherapy could not work, and a mix remedy with different brokers like timolol could also be prescribed. Because it says right here:

Nevertheless, if therapy with monotherapy fails to scale back or keep IOP below management, a hard and fast mixture will be an alternative choice to hold day by day single-drop remedy.four Combining medicine which have completely different modes of motion ought to present an extra IOP decreasing impact.

Now, within the Ocular Therapeutix trial referred to above, travoprost was used as a single agent and didn’t adequately decrease IOP. Though the trial didn’t even use an lively comparator, it failed to indicate larger discount in IOP over placebo. Earlier, it didn’t beat timolol lively comparator as properly. Extra critically, “OTX-TP’s impact appeared to wane over time, elevating questions in regards to the firm’s sustained supply strategy,” and this was a long term downside than a single trial.

A few years after the above incidents, one other asset, OTX-CSI, which was utilizing cyclosporin on the identical expertise to deal with dry eye, additionally failed a section 2 trial. They’ve one other product, OTX-DED, utilizing dexamethasone, presently in section 2 focusing on dry eye illness. Final 12 months, a section 2 research of OTX-DED in 166 sufferers produced what the corporate mentioned have been optimistic outcomes.

The corporate simply a few months in the past launched topline knowledge from a section 1 trial of OTX-TKI in moist AMD, focusing on a protracted appearing sustenance of over 6 months. Nevertheless, the trial was in solely 21 sufferers. Furthermore, sustained length of therapy impact for the attention is a aim of many bio packages, together with of blockbuster Eylea. I’ve additionally coated a number of gene therapies for a similar indication which are focusing on, in principle, onetime therapy choices. So the competitors is stiff.

Nevertheless, the trial, which in contrast OTX-TKI plus a 2mg dose of Eylea at one month, versus 2mg Eylea dosed each eight weeks, the present normal routine, confirmed quite a few non-inferiorities and no less than some suspect superiority over eylea. Whereas BCVA or finest corrected visible acuity regarded comparable, on two different measures – central subfield thickness and length – OTX-TKI appears to have bettered eylea. Particularly in length, the implant noticed a 100% rescue-free affected person set at three months, dropping all the way down to 73% at 6 months, which compares favorably to excessive dose eylea.

Financials

OCUL has a market cap of $201mn and a money reserve of $121mn. In comparison with $2.7M of internet revenue within the prior 12 months interval, the corporate reported a internet lack of $24.2M for the final quarter. Citing staffing challenges at therapy services, the corporate additionally issued decrease than anticipated steerage, slashing steerage to $48M to $52M, in comparison with prior outlook of $55M to $60M. Noticeably, DEXTENZA’s approval in a brand new indication has not visibly impacted income development. The truth is, whole income declined 1.5% y/y to $11.97mn. DEXTENZA noticed gross sales of $11.91M, down -1.97% Y/Y.

Bottomline

OCUL’s lead and most vital candidate proper now could be OTX-TKI, which accomplished a profitable section 1 trial however will solely start a section 2/three trial in moist AMD in Q3 2023. Whereas moist AMD is a big market and an extended length therapy possibility is a serious unmet want, many firms are approaching this downside with various levels of success. Probably the most theoretically promising of those approaches is the one time gene remedy strategy, nevertheless, in observe, these are but to indicate substantive success. So there is a area for OCUL’s hydrogel platform.

In the meantime, the corporate is faring poorly in gross sales generated from current merchandise. There’s been a minimize in income steerage, which isn’t a great signal for an organization. At the moment, the inventory is buying and selling at 52-week lows. Given their enterprise worth of $139mn, the market is placing a really low worth to the corporate proper now. This will look undervalued if the moist AMD program is profitable, however that’s no less than 2 years away from as we speak.

Provided that, I’ll simply proceed to look at this inventory.

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