Opthea Limited

OPT’s Share Trading at Higher Levels:Opthea Limited (ASX: OPT) is involved in developing and commercialising therapies, primarily for eye disease. Its lead asset ‘OPT-302’, is a soluble form of VEGFR-3 in clinical development as a novel therapy for wet Age-related Macular Degeneration (wet AMD) and diabetic macular edema (wet DME), which are the leading causes of blindness in the elderly and diabetic populations, respectively.

FY19 Key Highlights for the period ended June 30, 2019:During the year, majority of the expenditure of the group was on Research & Development (R&D) at $31,347,891 as compared to $24,891,534 in FY18. Costs associated with R&D were related to the Phase 2b and Phase 1b/2a clinical trials of OPT-302 for wet AMD and DME, and sourcing of standard of care anti-VEGF-A agents, used in the clinical studies. Other important expenses were related to patent costs, intellectual property costs, and administrative expenses that amounted to $161,148, $112,795 and $5,174,755 as compared to costs of $160,836, $97,466 and $4,655,305, respectively, in FY18.

During the period, the company received an R&D tax incentive payment of $12,017,247 as compared to $2,709,765 in the previous year. The consolidated net loss after income tax benefit of $14,636,973, was reported at $20,910,061 as compared to loss of $16,902,240 after an income tax benefit of $12,017,248 in FY18.

Cash and cash equivalents at the end of the period were reported at $21,534,919 as compared to $32,510,230 at the end of FY18.Receivables for the period were reported at $14,932,759, including expected refund of R&D tax incentives of $14,636,973. Net current asset surplus for the period was reported at $30,376,200 as compared to $37,349,456 in the previous period. Net tangible asset backing per share as on June 30, 2019 was reported at $0.12 as compared to $0.19 at the end of FY18.


FY19 Income Statement (Source: Company Reports)

What to Expect:Key objectives of the company for FY20 include, preparation and completion of the Phase 2b wet AMD clinical study report; publish the outcomes of the Phase 2b wet AMD trial in a peer reviewed journal; and develop plans to take OPT-302 for the treatment of wet AMD to the next stage of its clinical development.

Objectives for the Phase 2a DME trial include completion of patient enrolment in the US, Australia, Israel and Latvia; completion of the 3 month dosing regimen in patients, enrolled in the Phase 2a DME clinical trial and close-out activities for the trial to facilitate primary data analysis and reporting of outcomes; and reporting of the primary data analysis of the Phase 2a clinical trial in early 2020.

Stock Recommendation:OPT’s share generated a whopping YTD return of 528.07%. The stock is currently trading near to its 52-week high price of $4.150. Its gross margin for FY19 stood at 70.1%, mildly below the industry median of 71.4%. Its current ratio for FY19 stood at 5.66x, better than the industry median of 2.68x, which implies that the company is in a better position to address its short-term obligations.The company anticipates reporting outcomes from the Phase 2a clinical trial in DME in early 2020. In 2020, the company will also be publishing outcomes of the Phase 2b wet AMD trial. Hence, we suggest investors to keep an eye on the progress of the above planned developments.  Considering the above scenario along with the sharp movement in stock prices on YTD basis, we have a watch stance on the stock at the current market price of $3.530, down 1.397% on October 21, 2019 and suggest investors to wait for better entry levels.

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