Shares in ASX eye diseases biotech Opthea Limited (ASX: OPT) remain frozen following a devastating update for investors.
Opthea ASX shares haven't traded in more than a week and remain suspended at 60 cents apiece.
The stock will not trade again until the company has made a further statement on its financial position, or until next Monday.
Opthea investors are digesting news released yesterday that the Phase 3 COAST clinical trial failed to meet its primary goal.
Let's take a look at the details.
Opthea ASX shares remain suspended
Opthea has revealed that its Phase 3 COAST clinical trial failed to meet its primary endpoint.
The study assessed the efficacy and safety of sozinibercept (OPT-302) combined with aflibercept to treat wet age-related macular degeneration (wet AMD).
The results showed no significant difference in visual acuity improvement compared to aflibercept monotherapy.
Secondary endpoints also showed no numerical difference, although the combination therapy was well tolerated.
The failure of the trial raises serious financial concerns for Opthea.
The company said it is currently reviewing its obligations under its Development Funding Agreement (DFA) with key investors.
The DFA may require repayments to investors ranging up to $680 million, potentially threatening Opthea's solvency.
Opthea had just $113.8 million in cash and cash equivalents as of 28 February.
The company is now in discussions with DFA investors to explore potential solutions.
In its statement, Opthea said:
In light of these matters, there remains material uncertainty as to Opthea's ability to continue as a going concern.
Opthea and its directors are currently relying on 'safe harbour' provisions within the Corporations Act.
Opthea said it is evaluating whether to discontinue the COAST trial and accelerate and unmask the ShORe trial.
The company said discussions with its DFA investors will help it determine the best course of action.
What's the market reaction?
The results have shocked the market.
Shares in Opthea's largest shareholder, Regal Investment Fund (ASX: RF1), fell 5.7% yesterday.
Regal holds a 30% stake in the ASX biotech.
In the Australian Financial Review (AFR), Regal CEO Brendan O'Connor said the share price drop was "more reflective of sentiment".
Regal Investment shares are rebounding on Tuesday, up 1% to $2.98 apiece.
As we reported last month, Canaccord Genuity had a buy rating on Opthea shares and was looking forward to the trial results.
In a note, the broker said:
OPT-302 is unique and differentiated, in our view, on safety and efficacy metrics, and we see the upside opportunity for peak sales of US$1b and upside to >$3/share, pending clinical, regulatory and commercial success.
At the time, Canaccord had a buy rating on the ASX small-cap healthcare share with a 12-month price target of $1.25.
Yesterday in the AFR, Canaccord Genuity's Elyse Shapiro said:
Investment in biotechnology companies is notoriously risky and binary … and that the negative read-through highlights the importance of taking a basket approach.
When will Opthea shares trade again?
Opthea has asked the ASX to keep its shares in voluntary suspension until it can make a further announcement, or until the commencement of trading next Monday, 31 March.
