2023-04-28 17:58:49 ET
Summary
- Oncobiologics, born in pursuit of oncology biosimilars, dramatically shifted its outlook, appropriately rechristening itself as Outlook Pharmaceuticals.
- Outlook has set its sights full bore on treatment of retinal diseases.
- Wet AMD is a multi-blockbuster market in which an FDA-approved Avastin could score big.
- Meager liquidity poses a steep challenge for Outlook even if it gets FDA approval to market its Wet AMD therapy.
This is my first look at Outlook Pharmaceuticals (OTLK). It has exciting times ahead with its upcoming PDUFA set for 08/29/2023. In this article I briefly address its early path which helps to understand its current investment merits as reported in this article.
After its 2016 IPO Oncobiologics, sub nom Outlook, has narrowed its focus
Initial prospectuses of development stage biotechs are often interesting and instructive reads after they have been knocked around for a number of years. In Outlook's case, Oncobiologics' 05/2016 prospectus is replete with ambitions which have either dropped from sight or come to naught, including its name.
Its prospectus touted its BioSymphony Platform as giving it a critical edge in meeting technical challenges and regulatory dynamics of the complex biologics industry by:
- employing its entrepreneurial culture;
- developing high quality mAb biosimilars;
- on an accelerated timeline;
- in an efficient, cost-effective manner.
It had set its sights on becoming a leading biosimilar company. At the time it had the following pipeline of mAb biosimilars for which it had completed clone selection:
Citing an SNS report, it noted mAbs were the largest segment of the biologic market; worldwide sales of mAb biosimilars were expected to grow from approximately $1.4 billion in 2015 to $56.5 billion by 2030.
The prospectus described its most advanced product candidate, ONS-3010, an adalimumab (Humira) biosimilar targeting the tumor necrosis factor alpha, or TNF?, a potent inflammation mediator. It went on to note ONS-3010 demonstrated a lower rate of injection site reactions than Humira
In 12/2018 Oncobiologics changed its name to Outlook Therapeutics, Inc. and its ticker symbol to "OTLK". At the time it noted a dramatic strategic shift in its business. Its fiscal 2018 10-K ("2018 10-K) issued as Outlook Therapeutics described its revamped strategy.
It included a full scale pivot away from its previous broad effort as a biosimilar developer. Instead it opted to devote substantially all of its resources to develop LYTENAVA (ONS-5010, bevacizumab-vikg). Outlook decided to develop LYTENAVA, not as a treatment for cancer, but rather in treatment for retinal diseases as hereafter discussed.
Outlook's pivot to retinal diseases was a daring gambit
ONS-5010 was being developed by Oncobiologics as a biosimilar (ONS-1045) for the cancer drug Avastin (bevacizumab). Avastin was initially FDA approved in 2004. Its current FDA label is for use as an infused therapy in treatment of a variety of cancers.
It is a humanised monoclonal antibody (MAb) directed against vascular endothelial growth factor (VEGF). In addition to its role as a cancer fighter, Avastin has long been recognized and used to treat age-related macular degeneration [AMD].
An 05/2016 NIH news release titled, "Age-related macular degeneration before and after the era of anti-VEGF drugs" was important in this regard'. It described a trial in which:
...more than 1200 participants with neovascular AMD were randomly assigned to receive either Lucentis or Avastin for two years, through monthly or as-needed injections. During that time, t he two drugs were equally effective at preserving visual acuity . These results were later confirmed in five multicenter clinical trials around the world. (emphasis added)
Despite Avastin's widespread use in treatment of AMD, Avastin is not FDA approved for such use. Physicians prescribe it off-label. It is only available from compounding pharmacies.
Outlook's 2018 10-K explains that its trial results for ONS-1045 as an Avastin cancer biosimilar met the primary and secondary endpoints in a three-arm single-dose pharmacokinetic, or PK, Phase 1 clinical trial. It notes:
All of the PK endpoints met the bioequivalency criteria of the geometric mean ratios within 90% confidence interval of 80-125% when compared to both U.S.- and E.U.-sourced Avastin reference products.
Outlook evaluated the situation and made a bold decision; it shelved its ONC-1045 Avastin cancer biosimilar. In its place it decided to pursue bevacizumab as ONC-5010, later trade-named LYTENAVA. It dropped the biosimilar pathway electing to develop ONS-5010 as an innovative therapy in treatment of retinal diseases.
As matters stand on 04/27/23, Outlook's latest presentation accessed from its website is its 04/2023 "Corporate Presentation" (the " Presentation "). The Presentation eschews any mention of a pipeline. Instead it tells its story in the few words splayed across its Presentation slide 2:
Enhancing the standard of care for retinal disorders by working to achieve the first FDA approval for bevacizumab in ophthalmology
It is old trusty bevacizumab, now ONS-5010 rather than ONS-1045, with its fancy new trade-name LYTENAVA. That's it; that's the entire Outlook story.
Outlook's decision to put all of its eggs in the LYTENAVA basket could pay off big
The Presentation describes all the good things that may develop from Outlook's bold gambit. The good news would start with a favorable FDA decision on Outlook's pending PDUFA. Slide 5 of the Presentation describes the following bullish potential:
- FDA approval of LYTENAVA in treatment of wet AMD on or about its 08/29/2023 PDUFA date;
- providing an economically elegant anti-VEGF solution;
- eliminating risks associated with off-label repackaged bevacizumab, including potential impurities and particulates from compounders re-packaging processes;
- potential U.S. launch in Q4 2023, with 12-years US regulatory exclusivity expected upon approval.
Presentation slide 7 describes the enormity of the wet AMD market pegged at ~$9.5 billion in 2020 and expected to grow at a compounded average growth rate of 4.1% into 2030. Slide 8 below describes the rationale supporting LYTENAVA's potential of capturing significant, or possibly even majority share of this market:
As reflected by Presentation slide 20 below the anti-VEGF market is a crowded one, presenting a complex price matrix within which LYTENAVA will have to position itself. Outlook sees ample opportunity for it to position itself as a preferred option over compounders and less expensive than branded products Presentation slide 26 describes its appealing strategy:
The prize is sweet if Outlook can pull off a virtuosic performance. Before jumping in check out the discussion below.
Outlook's path forward is a minefield littered with risk
Outlook's path to riches is not going to be easy. Its nearest challenge is obtaining FDA approval on 08/29/2023. Its Presentation slide 33 lists it as having liquidity of $52.3 million as of 12/31/2022. It characterizes this as sufficient to support operations past anticipated FDA approval of ONS-5010 in the third quarter of calendar 2023 and into the fourth calendar quarter of 2023.
There is no wiggle room here. What happens if the FDA extends its PDUFA date by three months as quite common? What happens if the FDA issues a CRL? In either such event Outlook will have to scramble to raise additional funds. with its current share price on 04/27/2023 as I write at ~$1.06. Its likely go-to strategy of accessing its ATM spells enormous dilution.
If it has FDA delays of any sort its price will likely suffer severely making its dilution risk even greater. What about a white knight, with money to spend in return for a piece of the action? That is a possibility albeit a remote one. In my experience it is a pipe dream.
Let's say the happy day comes when Outlook gets its FDA approval. What then? Its slide 18 from its fiscal Q1, 2023 presentation dated 02/2023 describes the situation well:
I submit that these tasks will prove extremely challenging for Outlook if its share price is not able to sustain a significant post approval jump.
Conclusion
Outlook is an exciting stock with riveting potential. If it struggles very long in getting FDA approval, I expect it will be dead meat. If it succeeds in getting timely FDA approval, it has a chance that it may reward shareholders richly.
Seeking Alpha's Wall Street Analysts tab can certainly get one's juices flowing. It shows that seven Wall Street Analysts following the stock have an average price target of $6.61 for a sizzling +523.58% upside.
Recognizing a significant risk of total loss, I rate Outlook as a buy for those with a high risk tolerance who want to place a long shot bet on a situation with big potential.
For further details see:
Outlook Therapeutics: August PDUFA For Wet AMD Blockbuster