Opthotech signed the ex-US licensing deal with Novartis 9 months after commencing Phase 3 trials and over 2 years before trial completion. (Opthea is now 4 months into Phase 3).
At the time of signing of the deal, Opthotech had approximately A$375 cash on hand and had completed its last raising just three months before executing the licence deal.
Although just A$268m cash was received upfront, another A$174m was payable prior to Phase 3 trial results, based on enrolment milestones. So that was A$442m Ophthotech locked in, irrespective of trial results.
If Phase 3 was successful, there was another $402m potentially payable, based on market application milestones, and another A$536m on offer in sales milestones. And then there were royalties.
This, of course, excluded US rights, which were more valuable again. For Lucentis, in 2019 ex-US sales represented just over half of global sales. For Eylea, just over a third of global sales were ex-US.
So, Ophthotech locked in A$442m, at a time when it still had A$375m cash on hand, enough, you would think, to complete the Phase 3 trials.
If Phase 3 had been successful, Ophthotech would have already pocketed A$442m and had the chance to earn another ~A$938m in milestones + royalties on sales. While still retaining lucrative US rights….
In the case of Phase 3 failing, as eventuated, Ophthotech still had ~ A$400m cash left to find a way forward. Without that to fall back on, it would have been all over.
Turned out that Ophthotech made a smart choice to derisk….
OPT Price at posting:
$1.30 Sentiment: Hold Disclosure: Held
