Split-adjusted, Ohr Pharma (OHRP) is up 61% since PropThink covered the small-cap drug developer in mid-March. Some investors remain skeptical of the company’s lead asset, Squalamine Eye Drops for wet age-related macular degeneration, as anti-angiogenic injections like Roche/Novartis’ (NVS) Lucentis and Regeneron’s (REGN) Eylea have proven the standard of care since their discovery. A healthy dose of skepticism is warranted given that large developers have bypassed entirely an eye drop formulation of anti-angiogenesis candidates and Squalamine has been around the block in drug development. Yet our article was geared towards a number of forthcoming events for Ohr that proved lucrative for traders who held through a period of stagnant news flow coming into the second quarter of the year. We concluded in March:
With an immense market for effective wet AMD treatments, particularly from disruptive technology like an eye drop, the risk/reward with OHRP appears favorable even as a short-term trade, as investors can take advantage of two potentially positive catalysts within the next few months, squalamine Phase II results aside.
Three of our predictions, around which we based this trade, materialized as predicted:
- We wrote that OHR-118, a candidate for the wasting disorder cancer cachexia, offered a free call option for OHRP holders. On March 21, Ohr reported underwhelming results from a Phase II trial of the drug; while -118 missed its primary end point of weight gain, at the completion of treatment patients achieved stabilization of body weight, body fat and muscle mass with a significant increase in appetite (p=.001). Patients reported enhanced quality of life (QOL), but no statistically significant differences from baseline were observed in body fat content, arm circumference, triceps fold measurement, nausea, or vomiting. Despite the failure, OHRP continued range-bound as investors remain focused exclusively on Squalamine Eye Drops. As we said, OHR-118 proved a risk-less option on Ohr Pharma.
- We wrote that expected option exercises before April 30th would support the company’s balance sheet. Sure enough, on April 22, Ohr announced that the exercise of its Series B warrants had brought in $5.05M in new capital. We had, however, expected more investors to execute on the prior deal. The company continues to operate on a tight budget, a central tenant of our interest in the small company, burning just $867K in the first six months of 2013, and Ohr believes that current cash should last through the release of full results from the Squalamine trial in mid-2014 and into early 2015. Recall that Ohr should release an interim readout form the ongoing trial before the end of this year.
- Finally, we suggested that an expected Nasdaq up-listing would put buyers in the name. On June 3, Ohr announced a 1 for 3 reverse stock split and listed on the Nasdaq Capital Market 10 days later on June 13. We wrote, “. . . in cases where a reverse split is conducted by a company to initially list on NASDAQ, investors usually welcome the action with a higher stock price, as opposed to companies that reverse split simply to maintain their NASDAQ listing.” Ohr closed its first day on the NASDAQ at $6.57, a 9% gain on its previous split-adjusted closing price, and has since climbed to $8, a 33% gain.
The thinly traded OHRP opened Monday morning at $8.00, a 61.6% gain on our (split-adjusted) ~$4.95 shares purchased in mid-March. Offering some validation of the approach to wet-AMD, Ohr added two new board members in May, and while we’re interested in the -118 results later this year, holding through the event takes a healthy appetite for risk given that OHRP’s $140M market capitalization hinges exclusively on Squalamine Eye Drops. Preclinical evidence that Squalamine makes it to the back of the eye exists, but this 120-patient proof of concept trial will be indicative of the product’s capabilities in humans. You can read more about the opportunity for an adjunctive wet-AMD treatment in our previous article.
