The Opthea Ltd (ASX: OPT) share price has already surged over 20% higher in January to $3.60 as at the time of writing. Although the 52-week high of $4.15 the biotechnology company hit back in September still seems like a little way off yet, there are plenty of positive reasons to think the Opthea share price will push well beyond that mark in 2020.
A closer look at Opthea
Now is a particularly exciting time for Opthea’s long-term shareholders. Despite briefly pushing past $1.00 back in April of 2017, Opthea shares had been languishing, trading more or less sideways in a range of about $0.50 to $0.70 for the better part of the last decade. They were valued at just $0.82 as recently as the beginning of August, 2019.
But, as can be the case with young biotech companies like Opthea, fortunes can turn on a single trial result. At the beginning of August, Opthea announced positive results from its phase 2b clinical trial, indicating that its flagship OPT-302 could deliver statistically significant vision benefit as a combination therapy for patients suffering from wet age-related macular degeneration (wet AMD).
Wet AMD results in loss of vision due to the degeneration of the central portion of retina, in an area of the eye called the macula. The condition is caused by abnormal growth in blood vessels, which leak fluid and protein and can lead to rapid retinal degeneration. The condition is the leading cause of blindness in people over the age of 50 across the developed world, and reported cases are on the incline.
While there are currently existing treatments for wet AMD, they often do not result in significant benefits in vision. Opthea’s OPT-302 is designed to be used in conjunction with current medications in order to more completely halt the progression of the disease. Achieving a positive result in the clinical trial was a significant milestone for the company on the way to commercialising the OPT-302 treatment.
To get a sense of the size of the potential market for OPT-302, according to Opthea’s August 2019 media release, sales of currently available wet AMD medications Lucentis and Eylea generated sales of US$3.7 billion and US$6.2 billion, respectively, in 2018. The interesting thing about Opthea is that it isn’t attempting to seize market share away from more established rivals; instead, it works in tandem with their products to deliver a more effective overall treatment.
Since August, Opthea has presented the findings of its results at the Ophthalmology Innovation Summit in the US and had the clinical data published in Ophthalmology Retina, a leading ophthalmic journal. It also cashed in on its successful trial through a $50 million institutional placement. The company has also completed recruitment for a further clinical trial investigating the safety and efficacy of OPT-302 for the treatment of diabetic macular edema (DME). DME is a similar condition to wet AMD and affects people who suffer from Type 1 and Type 2 diabetes.
Although Opthea is starting to generate some positive momentum behind its share price, it’s worth remembering that it is still a risky and highly speculative investment. These clinical trial results are meaningful developments for a young biotechnology company, but Opthea is still yet to fully commercialise its treatment. It racked up losses of close to $21 million for FY19 and needs to sustain itself through financing activities like its recent private placement in order to stay afloat.
However, with all those nasty risk caveats out of the way, it presents a pretty tempting investment opportunity for those with the requisite risk appetite. But even if you aren’t prepared to take on that level of risk right now, Opthea is definitely worth putting on your watch lists in my opinion, alongside other emerging companies in the healthcare space like Medical Developments International Limited (ASX: MVP) and Paradigm Biopharmaceuticals Limited (ASX: PAR).
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Motley Fool contributor Rhys Brock owns shares of Medical Developments International Limited. The Motley Fool Australia owns shares of and has recommended Medical Developments International Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.