OMGA - Omega Therapeutics: Starting 2024 With A Bang

2024-01-10 02:22:16 ET

Summary

• Omega Therapeutics is a biotech company specializing in gene expression modification for therapeutic purposes.
• Their initial human trial results show favorable tolerability and potential efficacy, leading to increased valuation and hype.
• The company's pipeline includes a focus on MYC gene expression adjustment in liver cancer and collaborations for obesity and other diseases.

Topline Summary

Omega Therapeutics ( OMGA ) is a biotech specializing in modifying expression of genes of interest for therapeutic benefit. Their very initial human trial readouts highlight favorable tolerability, with the faintest glimmer of efficacy. This, along with a recent big pharma partnership, give way to potential hype-driven increases in their valuation, but for me it's still too early to make a firm recommendation on buying, unless you're in the "very risk tolerant" crowd.

Pipeline Overview

OMGA is focusing their efforts on exploiting a platform termed OMEGA, which takes advantage of so-called insulated genomic domains to enable control of expression of target genes. In essence, these domains are thought to house most, if not all, of the governors of gene expression, and they provide a convenient target to manipulate how much protein gets made.

Using lipid nanoparticles, short sequences of messenger RNA targeted against unique locations within the insulated genomic domains of interest. In this way, OMGA hopes to develop a modular, effective tool for tuning the expression of different genomic targets of interest. Heady stuff that takes me back to the overwhelming molecular biology seminars of my training.

OTX-2002

The first and (currently) only agent from the OMEGA platform in human study is OTX-2002, which is targeted at adjusting expression of the MYC gene. This oncogene is overexpressed in a wide range of cancers , and it has proven undruggable by classical means, making it a tantalizing but essentially untouchable target in cancer medicine.

Overexpression is particularly frequent in patients who have viral or alcohol-related liver cancer (specifically hepatocellular carcinoma, HCC). The phase 1/2 MYCHELANGELO I study is ongoing to assess the safety and preliminary efficacy of OTX-2002 in this population of patients. It includes 2 arms, one where OTX-2002 is given as a monotherapy, and another where it is included in a combination approach with current standard of care options, which are stated as a tyrosine kinase inhibitor (ie, sorafenib or lenvatinib) or an immune checkpoint inhibitor. No word on whether the IMbrave 150 regimen is an option here, as that is the real standard of care as of right now for patient with advanced HCC.

Back in September , OMGA announced preliminary findings from MYCHELANGELO I, which included 8 patients who have received treatment to date. These patients received the first two lowest doses of OTX-2002, with apparent evidence of "on-target epigenetic changes and correlated rapid, robust and durable decreases in MYC mRNA expression levels." The company noted that the level of MYC expression decrease was consistent with what was observed in preclinical models, and in those prior studies this was sufficient to have an antitumor effect.

No dose-limiting toxicities were observed in these 8 patients, with infusion reactions being most common. Further data updates are expected in the first half of 2024.

Preclinical candidates

For me, the biggest news for OMGA that came most recently is the announced collaboration with Novo Nordisk intended to identify a novel agent that can help with obesity. This includes up to $532 million in total compensation, including upfront payment and milestones, in addition to tiered royalties on any net sales. No candidate has yet been identified for clinical development.

The other cancer-related entity being studied is another MYC-targeting mRNA molecule, OTX-2101. At the triple meeting last October , OMGA presented preclinical evidence of activity for this agent in models of non-small cell lung cancer, in addition to clinical evidence of the importance of MYC RNA levels in the time to disease progression with anti-PD-1 inhibitors or EGFR inhibitors.

The company is also working on epigenomic controllers targeted at liver fibrosis and other non-oncology diseases, which are also progressing toward human studies.

Financial Overview

Per their most recent quarterly filing , OMGA held $101.9 million in total current assets, including $81.8 million in cash and equivalents and $7.5 million in marketable securities. Their operating expenses were $23.7 million, and after collaboration revenue, interest, and other income, the net loss for the quarter was $22.2 million.

At this rate, OMGA has sufficient cash and assets on hand to fund operations through 2024, although this does not take into account the undisclosed amount brought in upfront from the Novo Nordisk collaboration.

Strengths and Risks

OMGA has 2 strengths as a very early clinical-stage biotech. First, their platform is very unique, highly selective (apparently), and very modular, as well. This means that if they can establish efficacy in the platform for any one target, then it raises the likelihood that OMEGA is a generally effective approach to management of gene-driven cancers and inflammatory diseases.

Second, their pipeline is diversified in different diseases, not relying only on cancer to keep searching for the best foot in the door. And that diversification is not coming at the expense of massively increased costs, thanks to their collaboration with Novo Nordisk. That kind of pedigree has a tendency to facilitate hype and increased valuation, making one potential case for a buy even at these levels today.

However, you cannot ignore the downside risks, either. With hype comes expectation, and we have not seen any of the evidence of clinical activity for OMEGA yet. In HCC, reducing MYC expression is what they're going for, and it's great that they've achieved that (assuming you trust their press release, which I have no reason not to at this time), but that doesn't move the needle on my expectations for seeing an actual benefit to patients. These biological studies that show "on-target" efficacy often fail to live up to actually helping patients out, so I have to remain skeptical until I see otherwise. And a phase 1 trial is not likely to give us a clear answer in this regard.

Also, despite the upfront cash from Novo (again, we don't know how much from the press release), OMGA is facing down needing to raise more funds probably by the end of 2024. I would expect them to try to time this with a data update on OTX-2002, which may undercut any further rally from positive news.

Bottom-Line Summary

Normally, one look at OMGA would tell me to go looking for better options, with a strong "do not buy" sentiment until we've seen a lot more. However, this is the kind of company generating the kinds of partnerships that drive more hype than some others out there. I've seen and written on various companies still in an early stage that are garnering valuations of $500 million or more, and OMGA sits at $250 million as I write this.

So, on a speculative basis, there is near-term upside for OMGA, especially if their data update in 1H 2024 shows a clear sign of efficacy somewhere. However, for the risk-averse (myself included), this is still too early days, even though their science is cool as hell and has a lot of potential. There's too much proving to be done, too much time to do it. I would watch this one and wait for a clearer time, even if it cost me some hype-driven gains.

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