This biotech company is not yet making any money, so its shares are speculative, but have an above-average potential for growth—and perhaps, a takeover.
Ocular Therapeutix, Inc. (OCUL)
From Top Stocks under $10
Ocular Therapeutix, Inc. (OCUL) is a pre-revenue biotech company. This generally brings greater volatility and helps explain OCUL’s 50% drop after its pink eye drug didn’t reach the endpoint in its late trial.
The stock came under additional pressure from a complete response letter (CRL) received from the FDA regarding a stage 2 drug called Dextenza. It’s not that there was anything wrong with Dextenza—used for treatment of ocular pain after ophthalmic surgery—but the letter cited manufacturing limitations after a facility inspection.
That news says nothing about the actual drug, its efficacy or its safety.
More importantly, the company addressed FDA concerns and anticipates a quick approval process and move to commercialization.
Currently, Ocular is trading below $7 and Wall Street is bullish, with an average analyst price target of $30! The range of estimates is wide, with Morgan Stanley at $16 on the low side and Cowen at $60 on the high side.
What makes Ocular Therapeutix so compelling?
It has a line-up of (two) late-stage drugs, including OTX-TP, which just moved to stage 3 trial and is used for treating glaucoma and ocular hypertension. The company is also working on a delivery plug that can get to the back of the eye—for retina procedures—and release drops for a desired duration. This minimizes injections and follow-up doctor visits. This is quite technical and difficult to understand so I reached out to an ophthalmologist friend of mine (retina specialist) who confirmed that this could be a game-changer once proven.
The management team is composed of innovative doctors with a history of founding companies with patented therapies and then selling them.
OCUL gained recognition from a major player, Regeneron (REGN), that signed an exclusive agreement to develop a sustained-release version of EYELEA, for the treatment of a form of macular degeneration and other retinal disorders.
It’s great to get your foot in the door with a player like REGN, because, if Ocular is successful, REGN has the ability to scoop up OCUL (market cap of $165 million) relatively easily. Especially as Ocular has a billion dollars of short-term liquidity on its balance sheet.
Meanwhile, profit-taking has set in, and that along with general biotech stock weakness today has OCUL back under $7.00.
We’ll start with a small position, buying on the pull back today and then add more on non-fundamental thesis oriented market swings. The wait may be volatile, but the catalysts and upside are just too good to ignore.
Mandeep Rai, Top Stocks under $10, www.moneyandmarkets.com/services/trading-services/top- stocks-under-10, issues@e.moneyandmarkets.com; 1-800- 291-8545, published by Money and Markets, a Division of Weiss Research, Inc., October 14, 2016