Shares of Ocular Therapeutix (OCUL 12.98%) have more than tripled investors' money over the past year as the company's long-lasting eye treatments took big steps forward. Despite the big gains it's already produced, this soaring biotech stock hasn't reached a peak yet.
Like most smart investment decisions, there's more than one good reason to buy Ocular Therapeutix at the moment. Here are the three most important ones to consider right now.
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1. It is developing blindness-preventing blockbusters
Age-related macular degeneration (AMD) is the leading cause of blindness among adults, and intraocular injections of antibodies that prevent the disorder from progressing are a big business.
Eylea is a popular antibody injection from Regeneron Pharmaceuticals (REGN -0.84%) that inhibits vascular endothelial growth factor (VEGF) in order to prevent AMD from robbing patients of their vision. Worldwide Eylea sales reached $7.9 billion last year, and the monthly injection will probably rake in $9 billion for Regeneron and its partners in 2021.
Last spring, Regeneron agreed to collaborate on the development of a version of Eylea engineered to last longer, with help from Ocular Therapeutix's proprietary technology. It will be a long time before we know if this collaboration with Regeneron can produce a successful product, but Ocular's adaptation of a much smaller VEGF inhibitor from Pfizer (PFE 0.55%) has already produced compelling clinical trial results.
Small-molecule drugs like Pfizer's Inlyta are rarely injected because they're small enough to get absorbed into the bloodstream through the stomach and small intestines. Generally, small-molecule drugs flush out faster than big proteins, and as a result require frequent administration. Ocular Therapeutix flipped the script with a candidate called OTX-TKI by packing axitinib, Inlyta's active ingredient, into a polyethylene glycol-based fiber that slowly degrades after it's injected into an AMD patient's eye.
It's so early in the development of OTX-TKI that Ocular Therapeutix is still trying to find the right dosage. So far, a majority of patients reached the six-month check-in without needing rescue medication to prevent their retinas from swelling up again. At the latest update, investors cheered because the first two volunteers enrolled in the highest-dosage group were doing well at their three-month and six-month check-ins.
2. Ocular's hydrogel is wonderfully innocuous
Once injected, a dose of OTX-TKI looks like a tiny gummy worm that slowly melts into the eye's jelly-filled center. Human proof-of-concept trial data so far, though, suggests it does the job safely and it doesn't leave a trace.
Up to now, 16 people have at least three months of follow-up observation data, and so far, none have reported a serious eye-related side effect. Even at the highest dosage, investigators haven't found any signs of Inlyta's active ingredient leaking from the participant's eyes and into regular circulation.
3. Ocular Therapeutix is a commercial-stage biotech
Biotechs as small as Ocular Therapeutix usually don't have any products to sell, but this isn't the case with Ocular. In 2018, the Food and Drug Administration approved the company's lead product, Dextenza. This is a tiny tear-duct insert that slowly releases the decades-old steroid dexamethasone.
In 2019, the FDA expanded Dextenza's label to include long-term relief from post-surgical inflammation, and the company is already selling more than 5,000 per month. Sales of Dextenza will probably pass $50 million this year, but there's a lot of room to grow. In the U.S., Medicare pays for about 2 million cataract operations annually, and adding Dextenza to the bill could become standard practice.
Last December, Ocular Therapeutix submitted an application that could expand Dextenza's addressable patient population to include around 3 million Americans with chronic eye inflammation caused by allergies or allergic conjunctivitis. The FDA is expected to issue a decision in October, and a thumbs-up seems likely. During the study supporting the application, average itch scores plunged significantly among patients randomized to receive Dextenza, compared to the placebo group.
Image source: Getty Images.
Buy it while it's cheap
Despite its share price running up more than 270% over the past year, Ocular Therapeutix boasts a relatively modest $1.5 billion market cap at recent prices. Potential sales of Dextenza in its currently approved indications are growing at a pace that could make this stock a winner over the long run.
However, once you factor in potential sales of Dextenza to a larger population of people with allergic conjunctivitis, this stock appears severely overlooked. It's a little early to be certain about Ocular Therapeutix's future in the highly competitive AMD space, but results from OTX-TKI are as positive as they could possibly be at this point on its development timeline.
Simple solutions to drug development tend to get a lot less attention than start-ups on the cutting edge of biomedical innovation. Sooner or later, though, the market will come to its senses and drive shares of Ocular Therapeutix through the roof. Best to add some shares to your portfolio now, before the wider investing community catches on.
