Investors with a high tolerance for risk might want to take a look at the speculative ASX stock in this article.
After all, the team at Bell Potter believes that it could deliver big returns for investors over the next 12 months if everything goes to plan.
Which speculative ASX stock?
The stock in question is Opthea Ltd (ASX: OPT).
It is a biopharmaceutical company developing novel therapies that aim to address the unmet needs in the treatment of highly prevalent and progressive retinal diseases. This includes wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME).
Opthea's lead product candidate is sozinibercept. It is being evaluated in two fully enrolled pivotal Phase 3 clinical trials (COAST, NCT04757636, and ShORe, NCT04757610) for use in combination with standard-of-care anti-VEGF-A therapies. The trial aims to improve the overall efficacy and deliver superior vision gains compared to standard-of-care anti-VEGF-A agents alone.
What is the broker saying?
Bell Potter notes that the company has released an investor presentation with some new data. This includes an update on its phase three trial, which Bell Potter was pleased with. It said:
We take further confidence from the Ph3 patient populations being broadly similar to those included in the previous Ph2b trial. There was only one formal change to entry criteria in the Ph3 trials (the exclusion of RAP patients), with other differences in baseline characteristics being relatively small increases in the proportion of better responding occult patients (+10%) and PCV patients (+6-8%), which provide greater conviction that the ongoing Ph3 trials will replicate the positive BCVA outcomes seen in the Ph2b.
This is good news for shareholders because if the company is successful with its trials, it could open the door to significant revenues. It explains:
Over a million older Americans currently live with wet AMD, and a further ~200k are diagnosed each year as the population ages. The use of injectable drugs to treat wet AMD has become very well established over the last ~15 years, with the market now >US$5b in the US alone (combining Lucentis/Eylea/Vabysmo sales). The opportunity for sozinibercept is undoubtedly a lucrative one, with genuine blockbuster potential even if only a fraction of the current market is captured.
Big return potential
Bell Potter has reaffirmed its speculative buy rating and $1.30 price target on the ASX stock.
Based on its current share price of 75 cents, this implies potential upside of 73% for investors over the next 12 months.
Commenting on its bullish view of the stock, the broker concludes:
We continue to view the stock as having a favourable risk-reward profile, with substantial upside opportunity in the event of successful Ph3 results. There has been intense pharma competition in recent quarters among the incumbent anti-VEGF-A competitors (Regeneron, Roche, biosimilars), which in our view heightens the strategic appeal of sozinibercept to these parties as a means of diversifying and expanding their blockbuster ophthalmic franchises.
