Ocular Therapeutix, Inc. is a biopharmaceutical company developing innovative eye treatment therapies. OCUL already offers a commercial product called Dextenza for post-surgical ocular inflammation and pain and ocular itching due to allergic conjunctivitis.
The drug is a market success with a net product revenue of $57.9 million in 2023. OCUL’s pipeline includes Axpaxli, an axitinib intravitreal implant in phase 3 trials for wet age-related macular degeneration (wet AMD) and phase 1/2 trials for diabetic retinopathy, which I consider its main value driver.
Axpaxli potentially unlocks a decabillion-dollar total addressable market (TAM) if successfully developed and commercialized.
Betting on Axpaxli: Business Overview
Ocular Therapeutix, founded in 2006 and based in Bedford, Massachusetts, develops novel therapies for eye conditions using its proprietary drug delivery platform, Elutyx. This technology utilizes bioresorbable hydrogel-based materials to provide sustained and targeted release of therapeutic drugs.
Other promising candidates in OCUL’s pipeline include OTX-DED for episodic dry eye disease and OTX-CSI for chronic dry eye disease, both progressing through clinical trials.
OCUL’s leading product, Dextenza, treats post-surgical ocular inflammation and pain, as well as ocular itching due to allergic conjunctivitis. As of 2023, around 400,000 eyes had been treated with Dextenza, generating a net product revenue of $57.9 million.
Axpaxli, an axitinib intravitreal implant, is in phase 3 clinical trials for wet AMD therapy, with the first subject screened in Q1 2024. Axpaxli is also being tested for diabetic retinopathy in phase 1/2 trials, with 9-month Helios phase 1 trial data expected in Q2 2024.
Axitinib, a tyrosine kinase inhibitor, targets vascular endothelial growth factor receptors (VEGFRs) related to new blood vessel formation. The intravitreal implant delivers the drug over an extended period, reducing the need for frequent injections, a significant advantage over current treatments.
Another drug candidate, Paxtrava (OTX-TIC), a travoprost intracameral implant, is in phase 2 trials for glaucoma and ocular hypertension. This implant delivers travoprost directly into the eye’s anterior chamber, providing continuous drug delivery to reduce intraocular pressure and prevent optic nerve damage.
OCUL’s OTX-DED, a dexamethasone intracanalicular insert, is undergoing phase 2 trials for episodic dry eye disease, expected to be completed by H1 2024.
Dexamethasone, an anti-inflammatory and immunosuppressive agent, reduces inflammation, swelling, and pain. The intracanalicular insert delivers the drug into the lacrimal canaliculi, potentially offering a promising treatment for dry eye disease.
Lastly, OTX-CSI, a cyclosporine intracanalicular insert indicated for dry eye disease, is also in phase 2 trials expected to be completed by H1 2024. Cyclosporine is an immunosuppressive drug used to reduce inflammation and increase tear production.
Global Expansion and Pipeline Progress
OCUL partners with AffaMed Therapeutics to develop and distribute Dextenza and Paxtrava in Greater China, South Korea, and Asian markets. On February 19, 2024, the Singapore Health Sciences Authority (HSA) accepted Dextenza for its New Drug Application (NDA). AffaMed also initiated a registrational trial in Mainland China to evaluate Dextenza versus placebo, with topline data expected in Q3 2024.
These milestones represent significant progress in expanding the reach of Dextenza in Asian markets and underscore the potential of the partnership with AffaMed.
Furthermore, Axpaxli is a key component of OCUL’s pipeline due to the SOL-1 and HELIOS trials. OCUL disclosed that the SOL-1 trial should finish enrollment by Q1 2025 and that the FDA is receptive to this trial, as evidenced by the Special Protocol Assessment designation. If successful, OCUL could submit the NDA for Axpaxli indicated for Wet AMD in 2026, tapping into a substantial market projected to generate $10.4 billion in 2024.
Valuation Analysis
OCUL trades at a market cap of $882.9 million, approaching a billion-dollar valuation, reflecting its consistently growing revenues. According to Seeking Alpha, the company is projected to generate $78.8 million in sales by 2025. This implies a forward price-to-sales (P/S) ratio of 11.2, higher than the sector’s median forward P/S multiple of 3.63.
However, OCUL’s premium is justified by its potential with Axpaxli, which has shown promising early clinical trial data and could revolutionize treatment for Wet AMD with a 92% reduction in treatment frequency.
Moreover, OCUL holds $482.9 million in cash against long-term debt of $66.5 million. With an estimated quarterly cash burn of $34.2 million, OCUL has a healthy 3.5-year cash runway. If Dextenza’s sales continue increasing, the cash runway might improve further, reducing the risk of dilution.
Investment Caveats: Risk Analysis
The investment thesis for OCUL rests on the successful development and commercialization of Axpaxli. The FDA approval process is complex, and any setbacks could significantly impact the stock’s valuation. Additionally, Axpaxli’s market success depends on factors beyond its intrinsic properties, such as OCUL’s marketing strategies and healthcare provider engagement.
These risks are inherent but manageable given Axpaxli’s potential.
Outlook for OCUL
OCUL is transitioning from a clinical to a commercial stage, with Dextenza as its main revenue source. However, Axpaxli represents the company’s primary value driver. If Axpaxli receives FDA approval for Wet AMD, it could become a best-in-class drug in a multi-billion-dollar market.
Early trial results are promising, and the company’s financial position is strong, with negligible dilution risk. Therefore, OCUL is a compelling investment prospect at these current levels for investors betting on Axpaxli’s success.
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