The Opthea Ltd (ASX: OPT) share price bounced up 5% then crashed this morning after the biotech company announced plans for a listing in the United States. At the time of writing, Opthea shares had dropped back down to $2.52 after opening trade this morning at $2.64. Opthea plans an initial public offering (IPO) of American depositary shares (ADSs) in the United States. This means Opthea ordinary shares would remain listed on the ASX with a concurrent listing of ADSs on the Nasdaq.
What does Opthea do?
Opthea is a biotechnology company that develops treatments for retinal eye diseases. The company’s product development programs focus on developing its OPT-302 therapy to treat wet age-related macular degeneration (Wet AMD) and diabetic macular edema.
OPT-302 is a soluble molecule that blocks the activity of two proteins which cause blood vessels to grow and leak, contributing to retinal diseases. A study of the OPT-302 therapy in wet AMD patients found participants who received it demonstrated superior vision gains. Phase 3 trials of OPT-302 are on track to be initiated in early 2021.
Why the US listing?
Opthea says the potential US listing was intended to support its product development activities. This includes Phase 3 trials of OPT-302 for the treatment of wet AMD. The company said that no final decision had been made on the listing, and the price and timing of the offering had yet to be determined. Listing on the Nasdaq would provide Opthea with access to a much larger capital market. While Australia has a mature investment market, it represents just a small fraction of the global equity market.
How did the Opthea share price perform in FY20?
The Opthea share price has gained 110% from its March low but remains below highs recorded last year. Opthea’s share price boost saw it join the S&P/ASX 300 Index (ASX: XKO) in the most recent quarterly rebalance. Despite this, the company is not yet profitable, reporting a $7.6 million loss for 1HFY20.
This was a decrease on the prior corresponding period, mainly due to a reduction in research and development spending thanks to the completion of the Phase 2b trial of OPt-302 in wet AMD. As at 31 December 2019 Opthea had a cash position of $75 million, having raised some $48 million in a capital raising late last year.
What next for the Opthea share price?
Current treatments for wet AMD and and diabetic macular degeneration generated revenues of more than US$10 billion in 2019. Despite this, many patients respond sub-optimally meaning large commercial opportunity remains for therapies that can address unmet medical needs. With the benefit of funds from last year’s capital raise, Opthea is fully funded to progress Phase 3 preparatory activities.
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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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