Opthea confirmed on Monday that a second, late-stage trial of a treatment for a common eye disease had also failed and that it was in active talks with its funders. Last week, the failure of the first trial prompted Regal and other investors to slash the value of their holdings by two-thirds to 20¢.
“Understandably, this is an incredibly disappointing outcome, given the high degree of conviction we held in Opthea achieving commercial success and the meaningful size of the position held across the firm in anticipation of this,” King wrote in his letter to investors this week.
“The company’s management team were so confident of success they were able to attract some of the leading experts of the industry to join the company in the last twelve months,” he said, adding that earlier trial results had been “highly encouraging, producing statistically significant results above the standard of care, reinforcing our confidence”.
Last week, Regal disclosed that three ASX-listed funds – VGI Global Investments, Regal Asian Funds and Regal Investment Funds – held about $100 million of the firm’s overall investment in Opthea.
King said Regal’s investment team had started selling its stake in Opthea in December, but “clearly we didn’t reduce it nearly enough”.
“With the share price increasing 185 per cent from the placement price of 40¢ to $1.14 at the end of January, we should have been more aggressive,” he wrote.
‘Worst-case outcome’
Regal has backed Opthea since 2020, and now owns 30 per cent of the company. But it is not the only major investor on the register. Pengana Capital, run by Russel Pillemer, has frozen redemptions from its unlisted High Conviction Equities Fund, which owns Opthea shares.
The High Conviction Equities Fund, managed by portfolio managers James McDonald and Jeremy Bendeich, had 44.7 per cent of its portfolio invested in healthcare companies such as Opthea, Clarity Pharmaceuticals. OncoSil and Immutep. Other positions include Greatland Gold and IperionX.
Another ASX-listed fund, Hearts & Minds Investments, said it had 2.4 per cent of its fund invested in Opthea on Regal’s recommendation.
Brokers previously bullish on Opthea have also downgraded the stock aggressively. Bell Potter’s Thomas Wakim, who had recommended client buy shares and suggested the price would go to $1.30, this week put a 5¢ valuation on the company after the trials “emphatically failed”.
It was “an absolute worst-case outcome for this single-asset company, which lacks any viable future”, Wakim wrote in a note to his clients.
“The unequivocal failure … at the final stage of clinical development lays bare the binary risk of single-asset biotechnology companies.
“Success would have yielded a blockbuster medicine likely to generate hundreds of millions if not billions in potential sales, while failure leaves the board without any fallback option,” he said.
