- The results failed with regards to their primary endpoint.
- The company will have to dilute shareholders once again.
- During the next offering investors are likely to see a lower entry point.
Ohr Pharmaceutical (NASDAQ:OHRP) has been engaged in the development of an eye drop to treat acute macular degeneration (AMD). While there are at least two effective treatment options on the market, Eylea and Lucentis, these drugs are administered via intravitrial injection, or injection into the eye. Understandably, if successful, an eye drop would be a preferential non-invasive option and would likely capture a significant portion of the $1 billion AMD market. The issue with creating an eye drop for AMD is that the active molecule has to be small enough to reach the back of the eye, and it also has to remain in the back of the eye for a sustained period of time for adequate efficacy.
Ohr Pharmaceutical has been testing Squalamine as a potential candidate for a replacement treatment to eliminate the need for injection, or as a partner treatment to accompany and reduce the number of necessary injections.
Preliminary results from an ongoing Phase II trial were made available yesterday before the market opened. While management titled the press release, "Ohr Pharmaceutical Announces Positive Interim Top-Line Clinical Results From Phase II Study of Squalamine Eye Drops in Patients With Wet AMD," buried in the final paragraph of the release was the following statement: "In the interim analysis, there were no significant differences in the frequency of Lucentis PRN injections, which was the primary endpoint of the study."
Contradictory? Well not exactly. While the anticipated results of the trial were not attained, patients in the treatment group experienced notable increases in visual activity which were not noted in the control group. Management hosted a conference call on the morning of the release during which they indicated that the results were better than what was anticipated, and that increased visual activity will now be the primary endpoint of future Squalamine trials.
While the noted increased visual activity is a great sign, considering the small sample size of the experiment, with a P-value of 0.18, the results are still considered statistically insignificant and the chances of attributing increased visual activity to Squalamine is considerably likely to remain a null hypothesis.
What if the full results from a larger sample size yield a statistically significant outcome? Well in that case investors can expect an additional 38-week trial with a revised primary endpoint. Between waiting for the conclusion of the current trial, FDA review, design of another trial, FDA approval of that trial, enrollment and then the 38 weeks of the trial for patients, investors are likely at least 5 years away from the slightest possibility of a marketable drug.
That brings us to Ohr's financial condition. Ohr has been issuing stock at the rate of Silicon Valley in the 90s. Looking at some of the share issuances, they have been largely unfavorably designed for the small shareholder. In the past four years, Ohr has held three secondary issuances of shares, most recently in April when the company sold 1.8 million shares for $10 a share in a private placement.
At the current point in time the company's cash balance is once again bottoming out. The company has been burning through cash at the rate of approximately $1 million per quarter. With $3.5 million in cash on the balance sheet at the beginning of the quarter, the recent acquisition of SKS Ocular for $3.5 million upfront leaves the company with only the cash from the offering. Of course, the company also issued another 1.2 million shares on the spot and offered another 1.5 million shares contingent on certain milestones to the owners of SKS.
In consideration of the fact that Ohr will have to continually dilute shareholders to fund operations, and considering the fact that Squalamine will not be marketable for at least 5 years in all probability, makes an investment in Ohr wholly unattractive. If you still are interested in the company, now is definitely not the time to buy shares. Well before the marketability of a treatment, Ohr will have to dilute shareholders once more. When that comes, the share price will once again drop, and you will have a more reasonable entry point.