Mature Biotech Cooking Up Big Things Behind Closed Doors Print
By Rob Goldman   
Wednesday, 23 June 2010 07:59

It doesn’t happen often, but every once in a while one comes across a biotech company whose management team demonstrates not only that they are brilliant scientists but savvy and opportunistic businesspeople.

Ohr Pharmaceutical, Inc. is one of those rare finds for me.

What makes Ohr so attractive is that it’s like a ground floor opportunity, even though it is a later stage company.

Eighteen months ago, the world was in a financial crisis and virtually all firms hunkered down to wait out the storm. It was during this period that Ohr was launched, with the mandate of acquiring later stage undervalued pharmaceutical assets. Management succeeded in acquiring two lead compounds in Phase II development and other IP and products that had over $100M invested in R&D, for a bargain basement price.  So practically overnight, Ohr went from nothing to owning 2 lead compounds that were in late stage development representing a multi-billion dollar opportunity in areas where there are no approved therapies.


With the stock at current levels, it trades at a valuation that is more like an early stage biotech with one drug rather than a later stage biotech with 2 in late stage development. To date, management has focused on building the business and it looks like they are going to much more proactive about investor outreach and investor relations.

The two lead compounds are OHR/AVR118, a treatment for cancer cachexia and EVIZON™, a treatment for Wet-AMD. Cancer cachexia, often referred to as the wasting syndrome, is represented by a loss of weight, appetite, muscle atrophy, loss of lean body mass and general fatigue. The disease is most common in the later stages of cancer, accounting for upwards of 20% of all cancer deaths. To date existing therapies focus on treating the symptoms rather than the root cause. These therapies include steroids and other drugs to increase appetite, reverse weight loss and build muscle.

OHR/AVR118, a broad-spectrum immunomodulator, acts by modulating pro-inflammatory chemokine and cytokine synthesis as well as other factors. This is important because it is widely held that cytokines play a large role in the production of cachexia. A Phase IIb trial is ongoing at a leading hospital cancer center in Canada. It is expected that additional enrollment will occur during 3Q10, with the trial completion during 2H10 and the release of results in late 4Q10. In our view, these results should act as a major catalyst for the stock.

The major benefits here are it has shown to work in trials of patients with different cancers, has a great efficacy and safety profile, and has chemoprotective effects, which means patients have better tolerance to chemo treatments. The key here is that it treats the disease, not the symptoms.

With great trial results and no approved treatment, the door is wide open for Ohr.

The second main drug, EVIZON (Squalamine) is a treatment for the wet version of age-related macular degeneration.  Wet macular degeneration is the more severe type of AMD. Although it affects only 10 percent of those who have the condition, it accounts for 90 percent of the severe vision loss caused by macular degeneration. The National Eye Institute estimates that 1.75M patients have been diagnosed with Wet-AMD, with 200,000 new cases annually.

Across 5 Phase I and Phase II trials, with over 200 patients Ohr’s Wet-AMD treatment, EVIZON (Squalamine), produced enviable results and appears to have significant advantages over the current gold standard of care, Lucentis.  It has a better safety profile, is not injected directly into the eyeball and is the only drug that has shown in many trials that it can treat the other eye, or fellow eye, for which there is no treatment today.

Management projects that the market opportunity for Ohr is 40% of the overall Wet-AMD study eye maintenance market and 15% of Wet-AMD patients have a “fellow eye” treatable with Evizon. These opportunities represent a $2.2B combined market opportunity.

Going forward, management’s EVIZON focus is on the “fellow eye” indication. While clearly Ohr has safety, cost, and delivery method advantages over Lucentis, it is the fellow eye treatment where the Company will likely make its mark. Following a delivery reformulation, we expect a Phase IIb trial focusing on the “fellow eye”. In our opinion, it is nearly a slam dunk that positive full Phase IIb results will culminate in some sort of out-licensing or deal with a major pharmaceutical shop.

Ohr has great things going for it and we think the stock will rock from around $0.45 to $2.00 or more as the Street and big pharma finally learn what the company has cooking behind closed doors.

Think about it. One Phase II drug is targeting a $1.8B market that currently has no approved direct, long-standing therapy. The other drug will likely become the first approved fellow eye treatment. The acquisition deals and cursory view of management and the board and it is easy to see management is top-notch and of the scale of a $1B market cap company not sub-$100M.

There have been a bunch of deals that Ohr comps have executed that reflect hundreds of millions in investment and milestone payments by big pharma. The expected successes and few competing products even in clinical trials, make Ohr look like a slam dunk.

Rob Goldman has 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund. Goldman produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select product represents the Firm’s internally generated stock ideas while the Opportunity product represents sponsored research reports. This coverage tends to be dominated by early-stage health care, technology and energy sectors. Six month or three month subscriptions can be commissioned by publicly traded company management, investor relations or consulting firms, investment banks, or related parties. Full disclosures and report details are available at


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