Over the coming weeks we will be providing updates on many of the companies within our coverage universe. We recognize market sentiment, especially in the life sciences, continues to be very pessimistic, but we believe there are plenty of reasons for optimism within our universe.
Ocuphire (Nasdaq: OCUP) continues to be a real head-scratcher. The company’s lead asset Nyxol, has demonstrated consistent efficacy in mid/late stage studies across three indications, reversal of mydriasis (RM), presbyopia, and just last week, night vision disturbance (NVD). The most advanced of the Nyxol programs is RM, where the company has completed two successful Ph3 studies, and also a small pediatric study. There don’t appear to be any glaring vulnerabilities in the Ph3 RM data-set, making us quite confident that Nyxol should get FDA-approved for this indication, likely in 2023. In our opinion, investor apathy towards OCUP is likely more a reflection of the indications than the drug or the data it has generated. Although OCUP has market research indicating that Nyxol’s addressable markets range from the modest, $500mm/annually for RM, to the enormous, $10b/annually for presbyopia, there are little to no precedent drugs for these indications to validate their true size as Rx markets. OCUP has run numerous KOL events, where optometrists & ophthalmologists volunteer their enthusiasm for Nyxol, but it appears investors may need further proof, especially for OCUP’s first indication in RM.
OCUP may have to convince investors of RM, and maybe NVD, as Rx markets, but for presbyopia that job falls to ophthalmology giant Abbvie (Nasdaq: ABBV), who in 2021 got the first eye drops, Vuity, approved for presbyopia. Orasis Pharmaceuticals also recently announced the completion of a successful Ph3 program in presbyopia with their eye drops, CSF-1, and plans to submit an NDA later this year. Perhaps even more relevant for OCUP, development-stage peer, Visus Therapeutics, earlier this month announced a deal with Zhaoke Ophthalmology for the Chinese & South Korean rights to Visus’s Ph3 presbyopia drops. Visus received $15mm upfront from Zhaoke, (in addition to $115mm in earnable milestones and potential commercial royalties) something that should be reassuring to OCUP investors as the company contemplates how to extend its financial runway to fund its Ph3 presbyopia program. Regardless, by the time OCUP could potentially have Nyxol (and/or Nyxol + LDP) FDA approved for presbyopia, through the efforts of Abbvie and maybe Orasis or others, investors should have a much better picture of presbyopia as an Rx market.
Frankly, the best thing for OCUP might be to have the investor spotlight taken away from Nyxol, and placed on its other asset, APX3330. The company has completed the enrolment of 103 patients with diabetic retinopathy (DR) in a Ph2 RCT with APX3330 and expects topline data 2H22. Unlike the Nyxol indications, there shouldn’t be any debate whether DR, and the adjacent indication of diabetic macular edema (DME) that OCUP also plans to pursue with APX3330, are real Rx markets. DR/DME are proven multi-billion-dollar markets, currently served by blockbuster anti-VEGF intravitreal injection (eye injections) drugs Lucentis & Eylea, and would be completely disrupted by an oral therapy like APX3330. Although APX3330 has been extensively studied in oncology, this Ph2 DR study will be the first time it has been tested in ophthalmology, so other than an impeccable safety profile, investors don’t have any data to comfort them on the probability of APX3330’s success in DR. Then again, at a market cap of $35mm, it would likely only take a hint of efficacy in the Ph2 DR study to dramatically rerate OCUP equity.
To summarize, we think OCUP has a drug in Nyxol. A drug that has a high probability of FDA approval in 2023 for RM, and a good chance of success in Ph3 presbyopia readouts that same year. In our September 2021 update, we argued that Nyxol should provide a floor to OCUP’s valuation ($75mm at the time), and we feel even more strongly about that today at a $35mm cap. We believe OCUP investors are getting what is effectively a zero premium deep out of the money “call option” with the APX3330 Ph2 DR data readout later this year. Lastly, we recognize with a guided cash runway into 2Q23, that a financing overhang is likely also at play here. However, we believe Nyxol should have wide appeal to prospective partners and are optimistic OCUP could execute a similar deal to Visus, arguably even better given Nyxol’s broader clinical application, for rights in certain non-core geographies.