Goldman Sachs Buy recommendation Target price $5.20

• wAMD is the leading cause of vision loss. OPT is a clinical-stage biotech focused on retinal eye disease. The company is evaluating the efficacy and safety of OPT-302, a VEGF-C/D inhibitor, in the treatment of wet Age-related Macular Degeneration (wAMD) and Diabetic Macular Edema (DME), markets in which the existing standard of care generated revenues of >US$11bn in 2019. In Aug-19, OPT reported positive Ph2b data in wAMD and we believe the extent of benefit demonstrated improves the risk-reward for further trials. Further sub-group analysis presented at the American Academy of Ophthalmology further improved the likelihood of regulatory approval in our view. We expect progression into Ph3 in 4Q20.

• OPT-302 has multi-billion dollar potential. We forecast non-risk-adjusted peak sales for OPT-302 of US$5.3bn by FY28E, of which US$3.6bn relates to wAMD. Using a similar deal structure to the one struck by Ophthotech for ex-US distribution rights with Novartis (US$200m up-front, >US$800m in milestones and a royalty % in the 'mid-thirties' %), our forecasts imply a non-risk-adjusted valuation of A$11.1 (that equates to a market cap of US$2.0bn, all else equal). Risk-adjusting for development (55% in wAMD; 20% in DME) and commercial (50%) hurdles implies a valuation of A$4.6 (market cap US$830m). We incorporate an M&A valuation of A$6.5 (30% weighting), to derive a 12-month target price of A$5.2 (+108% upside).

• Negligible impact from Covid-19. Whilst some clinical-stage biotechs have reported challenges around managing trials through the Covid-19 pandemic, OPT was able to complete its patient dosing and all follow-up visits for its Ph2a trial evaluating OPT-302 for the treatment of DME by the end of March. The cleaning/processing of data and monitoring of clinical trial site activities were conducted remotely and read out on schedule (early-June). Furthermore, OPT has experienced minimal impact to its planning of the Ph3 for its lead indication wAMD, and the regulatory schedule has not been altered thus far. The manufacturing sites are still operating and progressing as planned. Overall, as OPT-302 is unlikely to receive regulatory approval before 2023, we expect no material impact to any of the company's previous regulatory/commercial timelines as a result of Covid-19.