Opthea (ASX OPT, NDQ OPT) is an Australian-based, dual-listed biomedical research firm developing a drug to improve vision outcomes in age-related macula degeneration (AMD). The drug, sozinibercept, may augment existing therapies for AMD by being administered in combination with these existing therapies (preventing need for extra. injections).

The Medical Condition:

• The macula is a very small area on retina of the eye which allows us to see focused vision; we use the macula when looking at any "point" - reading, watching television, cooking.
• Age-related, "wet" macula degeneration (AMD) is a cause of vision impairment for 3 million patients across the US and EU with 200,000 newly-diagnosed patients each year. This is estimated as a $15bn pa market.
• Other important causes of macula degeneration include diabetes (DMD); this is a separate disease process representing additional potential clinical applications / patient populations
• AMD is currently treated with molecules designed to interrupt the development of new blood vessels and fluid within the macula. All current drugs for AMD interrupt vascular endothelial growth factor-A (VEGF-A), with very good but incomplete effects (45% do not respond significantly to anti-VEGF-A therapy, 25% continue to worsen)
• Anti-VEGF-A drugs currently include lucentis, vabysmo, avastin, eylea.
• Other drugs to augment anti-VEGF-A drugs are in development; these may improve the durability of effect of the VEGF-A inhibitors rather than improving the size of outcomes
• Currently, VEGF-B, -C, and -D are not targeted and allow ongoing macula degeneration in up to 25% of patients

The Drug

• Sozinibercept is a molecule targeting VEGF-C and VEGF-D pathways
• Administered by injection into the eye (as are existing anti-VEGF-A medications)
• It is designed to improve the visual outcomes of patients already receiving anti-VEGF-A therapy
• If given in combination with ANY VEGF-A inhibitor, it may inhibit 2/3 of VEGF signalling pathways. If combined specifically with EYLEA, it may inhibit all 3 potential VEGF signalling pathways.

Research Programme

• Phase 3 Research
• OPT has completed recruitment of 2x Phase-3 trials (COAST, ShORe) in AMD, with results due in early- and mid-CY25 respectively
• These appear to be high-quality studies
• Ready to commence Phase 3 trial in Diabetic macula degeneration (DMD)
• Phase 2b Research Results
• Giving sozinibercept in addition to anti-VEGF-A therapy improves vision outcomes in ALL patients
• Best responders are in those with the most common lesion types (occult or minimally-classic, 75% of all wet AMD patients)
• Increases the total number of patients achieving a clinically-significant vision improvement of 10-15 letters on best-corrected visual acuity (BCVA)
• Early data shows no increase in adverse effects or safety implications

Comparable Firms

• Regeneron is the best model for Opthea, assuming successful launch of sozinibercept
• Regeneron owns/controls marketing for Eylea in the US and receives 50% of profits from ROW marketing by Bayer
• Eylea / Eylea HD US sales are $9.3bn (40% of Regeneron group sales, excluding ROW marketing)
• Current share price = $US 1,196
• EPS $11.56
• PE 31.6
• Net profit margin = 40.3%

Commercialization Potential

• Total Addressable Market ~ $15bn (3 million current US/EU patients, 200,000 new diagnoses per year)
• Sozinibercept is the first and only drug to demonstrate additional improvement in vision outcomes in addition to current standard-of-care (SOC) therapy
• Current cost of SOC in Australia
• Eylea is approx $1200 per prescription (roughly 3-10 per patient per year)
• Ranibizumab approx $1165 per prescription (3-10 per patient per year)
• These are ongoing treatments; no cure currently exists
• Currently 55,000 patients are receiving anti-VEGF-A therapy in Australia
• Sozinibercept may be appropriate for the 45% of patients who did not respond to anti-VEGF-A alone (25,000 patients)
• Sozinibercept may be appropriate for up to half of the patients who do initially respond (12,500)

Valuation

• Assuming similar revenue at $1,200 / prescription x 3-6 per year
• $202,500,000 pa revenue in Australia alone
• ?implies $2bn pa revenue in US
• $1.32bn pa profit (US/Au)
• EPS ~ $2.45
• At a P/E ~30, full commercialization in US / Au implies a price target of $35 - 75
• This is clearly an extremely unreliable forecast based on loose assumptions
• Successful phase 3 trials
• Does not incorporate costs of further FDA approvals and marketing investments
• Ability for OPT to achieve operating margins for sozinibercept similar to that of rivals producing anti-VEGF-A medications
• Cash flow or financing implications of further development and approvals
• No attempt to analyse outstanding shares across both ASX and NASDAQ to generate a differential EPS
• Management successfully pivoting from R&D to production and marketing