Biotech Values

[drbio45]

Cowen, Ohr Pharmaceutical Equity Research Initiating Coverage

LINK TO FULL REPORT & DISCLOSURES

https://cowen.bluematrix.com/sellside/EmailDocViewer?encrypt=95f9f06d-c9a7-4b4f-9868-e2399d7e86e2&mime=pdf&co=cowen&id=[e-mail]&source=mail

Pharmaceuticals/Specialty
Ohr Pharmaceutical
Equity Research
Initiating Coverage
March 2, 2015
Price: $7.69 (02/27/2015)
Price Target: $25.00

OUTPERFORM (1)
Initiation: OHR-102 Success In Wet AMD Likely To Create Tremendous Value

Tyler Van Buren, M.Sc.
646.562.1338
[e-mail]

Ken Cacciatore
646.562.1305
[e-mail]

Sal Rais, M.D.
646.562.1420
[e-mail]




The Cowen Insight
We are initiating on Ohr with an Outperform and $25 PT. Our rating is predicated on the potential for OHR-102 to be successfully developed in wet AMD. If it has a competitive efficacy profile and is ultimately approved, our consultants suggest that the vast majority of treated wet AMD patients will be on OHR-102 therapy as it has a superior product profile relative to other development candidates.
OHR-102 Could Become The First Eye Drop For The Treatment Of Wet AMD
The Company’s lead program is OHR-102, which is a first-in-class anti-angiogenic compound that inhibits growth factors VEGF, PDGF, and bFGF, and is being developed as a combination therapy with anti-VEGFs for wet AMD. OHR-102 is currently in a Phase II clinical development program, which has already reported positive interim visual acuity data, and final data is expected to readout by mid-to-late March. If the final data are positive – which we and our consultants believe has a good probability of occurring – Ohr plans to move OHR-102 into Phase III clinical trials in Q2:2015. Ultimately, our consultants suggest that the vast majority of treated AMD patients will want better visual acuity and therefore go on PDGF treatment.
Consultants Believe Early Visual Acuity Data Are “Surprising” And “Intriguing”
The ongoing Phase II IMPACT study has enrolled 142 patients and is designed to measure the impact of twice-daily OHR-102 on visual acuity in combination with PRN Lucentis injections versus placebo drops plus PRN Lucentis. At interim (n=62), the mean change in visual acuity at the end of 9 months for OHR-102 eye drops plus Lucentis PRN was +10.4 letters versus +6.3 letters for placebo plus Lucentis PRN – a mean +4.1 letter improvement in visual acuity (p=0.18). Additionally, 48.3% of OHR-102-treated patients showed BCVA gains of >3 lines (Phase III primary endpoint confirmed with the FDA) compared with 21.2% in the placebo arm, which was statistically significant (p=0.025). This result simply needs to be repeated to be successful. Overall, our consultants suggest that the visual acuity results “look very much like Ophthotech's” and “the curves and outcomes look remarkably similar.”
A Risk/Reward Play Skewed Towards The Upside

We assume a potential US OHR-102 approval and launch in early 2019 with a peak penetration of treated wet AMD patients eligible for anti-PDGF treatment just above 35% by year 7, which assumes other PDGF competition. This results in a peak US sales potential of $1B+. Ex-US, we assume an early 2020 launch and an ultimate peak penetration of 25% by year 6-7 factoring in other PDGF competition. This results in a peak Ex-US sales potential of $750MM+. Providing a necessary high discount rate given the still early stage of development to these estimates yields an equity value of $800MM+ or $25 per fully-diluted share, which is the basis of our price target. If the final Phase II data are successful, our discount rate would correspondingly decrease resulting in a higher equity value. Worth noting, our valuation does not give any credit to OHR-102’s follow-on indications of RVO, PVR, and DME, or the Alcon-partnered sustained-release programs.
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Please see addendum of this report for important disclosures.