Ophthalmic drug development company Opthea (OPT) has released devastating data from its major, global Phase III study with its drug candidate, OPT-302, in the eye disease wet AMD.

Not only did its drug candidate in combination with the wet AMD drug Eylea not outperform Eylea alone, it underperformed the control arm on all measures. What remains confounding is not that the combination therapy with OPT-302 performed poorly, but that the control arm of Eylea alone in this study outperformed its own historical performance, by 54% and 73% respectively, in the two Phase III studies, in around 900 patients each, that were conducted to gain FDA approval for Eylea.

 

	Regeneron studies		Opthea studies
	VIEW1	VIEW2	COAST (SHORE t.b.d.)
Treatment	Eylea	Eylea	Eylea	OPT + Eylea
Patients	909	906	993	(993)
Visual acuity gains (letters improved)	7.9	8.9	13.7	13.5

 

In Regeneron's two Phase III studies with Eylea in patients with wet AMD, the best corrected visual acuity gain from baseline (BCVA) was just 7.9 letters in its first Phase III study and an 8.9 letter gain in the second study. These patients were treated every eight weeks—the same as in Opthea's study. But in the Opthea study, treatment with Eylea alone achieved a mean 13.7 letter gain!

The Regeneron studies compared Eylea given every eight weeks versus Lucentis given every four weeks, with Lucentis slightly outperforming Eylea with an 8.1 and 9.4 letter gain. However, Eylea offers the benefit of treatment half as frequently (every eight weeks). Regeneron gained approval for Eylea for treatment every eight weeks (after dosing monthly for the first three months).

How do Opthea's Phase II Results Compare?

The rationale for moving into the Phase III studies was the positive Phase IIb trial results with OPT-302 when delivered in combination with Lucentis over 24 weeks, treated every four weeks. Two doses of OPT-302 were explored, with the higher dose taken into the Phase III studies.

In that trial, OPT-302 plus Lucentis achieved a mean visual gain (BCVA) of 14.2 letters, versus 10.8 letters with Lucentis alone. The results of OPT-302 with Lucentis in the Phase IIb study and with Eylea in the Phase III study were very consistent, with a 14.2 and 13.5 mean letter gain respectively.

The potential fatal issue for OPT-302 is that Eylea substantially outperformed in previous Phase III studies, as indicated above. Opthea is still awaiting results from the SHORE Phase III study comparing OPT-302 plus Lucentis versus Lucentis alone. However, the relevance of that outcome is now questionable.

Potential Legal Issues with DFA Investors Resulting in Extended Trading Suspension

In August 2022, Opthea entered into a funding agreement with investment firm Carlyle and its life sciences franchise Abingworth for US$170 million of non-dilutive funding. This is now referred to as its DFA (Development Funding Agreement) investors.

The DFA investors stood to receive up to four times their outlay from future product sales. The DFA investors were granted "a security interest in all of its assets (other than intellectual property not related to OPT-302)," which presumably includes the outstanding cash in the bank that Opthea holds—currently US$114 million.

The DFA investors can terminate the agreement following a negative clinical trial result; however, it appears that would end their security over the assets. But if Opthea files for bankruptcy or causes a material breach in the contract, then it is required to pay the DFA investors multiples on the 'development costs' supplied to Opthea.

There are multiple other clauses in the contract. Opthea is currently in dialogue with the DFA investors. The outcome of those discussions provides sufficient uncertainties, resulting in the stock remaining in a trading halt until the company can provide further clarity to investors.

The company is also undecided as to whether the second Phase III study (SHORE) will be stopped and whether all activity with the first trial (COAST) will cease. It is worth noting that the DFA investors undertook extensive due diligence of the OPT-302 asset prior to providing the investment to Opthea.

Learnings for the Sector

Opthea's experience will likely pose questions for the biotech sector in Australia. The most obvious is whether Australian biotechs should be undertaking large Phase III studies involving 1,000 or more patients without the backing of a partner. Large studies had previously been conducted in Australia by Avexa (in HIV, which was unsuccessful), QRxPharma (in pain, which was unsuccessful), and by Pharmaxis (now Syntara) in cystic fibrosis. Pharmaxis finally achieved regulatory success but not wide commercial success, conducting three Phase III studies in 761 patients.

For investors, one of the learnings is to look for external validation through a licensing deal. Opthea was not able to secure a regional or global licensing deal, which was a concern leading into the Phase III readout (see edition 970 of Bioshares). Conversely, Neuren Pharmaceuticals partnered before Phase III, and Dimerix has secured two licensing deals so far. Botanix also successfully reached the market last year with its drug Sofdra for the treatment of excessive underarm sweating, without a partner. Its Phase III studies involved 701 subjects.

Where Australian biotechs have found the drug development pathway more manageable is in orphan diseases, with successes from Clinuvel Pharmaceuticals and Neuren Pharmaceuticals. Late last year, Mesoblast gained FDA approval for its stem cell therapy, following multiple attempts, for Ryoncil for the treatment of acute GvHD in children, following just one 54-patient pivotal study.

Currently, Dimerix is conducting a Phase III study in the kidney disease FSGS, where the patient numbers are expected to total 286. Positive results from that study should gain approval. Neuren is also seeking to start a Phase III study this year with its second drug compound, NNZ-2591, in the orphan indication Phelan-McDermid syndrome. Patient numbers for the single Phase III study should be around 200 only, with the treatment period expected to be just 13 weeks. Clinuvel is conducting two registration studies in Vitiligo, with 200 patients to be enrolled in each.

Implications for Sector

Since 2014, Opthea has raised $1.0 billion. It is estimated that more than half was raised from overseas funds, including US$170 million from its DFA investors and $180 million from its US IPO in 2020.

However, individuals and funds investing in drug development should be aware of the risks, not just the potential upside. Clinical studies such as Opthea's COAST study can fail, while other studies such as the Phase III studies by Clinuvel Pharmaceuticals, Neuren Pharmaceuticals (through its partner Acadia Pharmaceuticals), and Botanix Pharmaceuticals succeed and their respective products reach the market.

Investors also have the option to invest in different stages of the drug development process. More risk-averse investors should consider not holding the stock when it passes through well-highlighted, forthcoming clinical trial results.

 

 

Disclaimer:
Information contained in this newsletter is not a complete analysis of every material fact respecting any company, industry or security. The opinions and estimates herein expressed represent the current judgement of the publisher and are subject to change. Blake Industry and Market Analysis Pty Ltd (BIMA) and any of their associates, officers or staff may have interests in securities referred to herein (Corporations Law s.849). Details contained herein have been prepared for general circulation and do not have regard to any person’s or company’s investment objectives, financial situation and particular needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without consulting their investment adviser (Corporations Law s.851). The persons involved in or responsible for the preparation and publication of this report believe the information herein is accurate but no warranty of accuracy is given and persons seeking to rely on information provided herein should make their own independent enquiries. Details contained herein have been issued on the basis they are only for the particular person or company to whom they have been provided by Blake Industry and Market Analysis Pty Ltd. The Directors and/or associates declare interests in the following ASX Healthcare and Biotechnology sector securities: Analyst MP: 1AD, ACR, AVR, CGS, CUV, CYC, DXB, IMM, LBT, MX1, OPT, NEU, PAB, PXS,RNO,SOM. These interests can change at any time and are not additional recommendations. Holdings in stocks valued at less than $100 are not disclosed.