Outlook Therapeutics Inc (OTLK)

[thermo]

There are a few obvious choices with OTLK. Buy @ ~ $1.00 p.s. and:

1. Sell 2Q 2021. Clinical development companies generally trade up into release of important trial data if data is likely good. One has the option of taking the trade without any clinical data risk. My guess is stock will be at $1.50 - $2.00.

2. Hold through data release, long term. First data risk is lower than normal (I’d say 80% - 90% success likelihood. See * for why). Second, peak revenue estimate is impressive $500M - $1B. Third, gross margins are strong. Assume ASP of $300 per dose with direct costs of less than $50 => gross margins of ~75%. What does the market pay for $500M of peak revenue at 75% GM? Say 5x => yields $2.5B versus current market cap of $165M including the shares just issued. That’s 15x the current price**

* In this case there is less data risk than usual because Bevacizumab is very well understood. The OTLK pivotal trial is basically a replication of earlier Ranibizumab studies but this ONS-5010 as the treatment arm instead of Ranibizumab. The CATT trial showed that Bevacizumab efficacy is equivalent to Ranibizumab.

** I will caveat the 15x forecast by noting that small companies usually screw up. So, there will be other product development efforts and more share issuances. Those are wild cards.