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INVESTORS IN THIS MEDTECH STOCK COULD BREATHE EASY ON MONDAY MARCH 18
Here is my second biotech profile—I promised you three—and it’s OPTINOSE OPTN-NASD. It has a PDUFA date on March 16—only a few days from now—that could 10x its TAM—Total Addressable Market—for its sinusitis drug and delivery system. The stock is starting to price in a successful verdict.
So this is timely!
But first—My junior biotech pick from two Saturdays ago—Skye Bioscienes–SKYE-OTC—soared from $7.20 to $19 today, performing much better than I ever expected so quickly.
Skye is testing a weight-loss molecule from a cannabinoid, NOT a GLP-1 source; the difference being their CB-1 molecule will (hopefully) not reduce muscle as well as fat in weight loss.
The “tell” for this unknown OTC stock was respected sell side coverage from Piper Sandler with a $12 target, and a $50 million raise buy the top biotech funds in the US, including Baker Bros.
Two other factors helped propel this very illiquid stock:
- Biotech has woken up from its 2 year slumber in a bear market
- Viking Therapeutics (VKTX-NASD) reported great interim data on their GLP-1 target molecule in a test of 170 patients
As a last note on SKYE, know that very soon the funds who bought that $2.30 financing will register that stock to sell and they are in a 400% profit case here now.
Now, onto Optinose (OPTN – NASDAQ)—the only negative here is that its stock also jumped last week.
I have followed Optinose for three years. The stock had a tough year in 2023. For a second-year in a row, sales stagnated. In November last year, their PDUFA date for chronic rhinosinusitis (CS) got delayed by three months as the FDA asked for more data. It was the penalty box for the stock. That date is now just 11 days away!
Up until last week the chart had a long, tight base, trending up. Just waiting on news.
Source: Stockcharts.com
News is imminent–the new PDUFA date, is on March 16th, and that will dictate the stock from here.
Optinose is a single-drug company, called XHANCE, which is approved to treat nasal polyps.
It’s a good business, but growth has stalled.
Today, biologics like Dupixent, Nucala, Xolair are dominating more and more of the nasal polyp landscape. ENT’s–Ear Nose and Throat specialists–rave about the efficacy of how biologics “melt away” nasal polyps.
HOWEVER–those are delivered with a needle up your nose–not fun!
XHANCE is delivered as a nasal spray deeper than average into the nasal cavity–but it’s not a needle.
So many experts consider XHANCE a 2nd tier drug now. There is still room for the drug – it’s cheaper and some patients don’t like an injection (necessary for biologics). At times XHANCE is also used in combination with biologics for an extra kick.
Nevertheless, it’s a headwind to growth and you see it in the revenue and prescription numbers.
Source: Optinose Investor Presentation
Which is why Optinose has placed its bets on chronic rhinosinusitis (CS).
The results of their 2 Ph3 trials (ReOpen-1 and ReOpen-2) were solid. In Both CS symptoms (CSS) and in sinus inflammation (opacified volume or APOV), XHANCE showed significant improvement over the placebo.
Source: Optinose Investor Presentation
Source: Optinose Investor Presentation
Optinose expected an FDA decision on approval in mid-December last year.
That didn’t happen. Instead, the FDA came back asking for more data. The original PDUFA date was postponed to March 16th–which is a Saturday. (This is evidently normal but not usual.)
The FDA asked for was a subset analysis from the ReOpen-1 trial.
ReOpen-1 looked at patients both with and without nasal polyps. The trial excluded patients with larger polyps of grade 1 or more because it would skew the results – after all we already know the drug works on polyps but included patients with small polyps (grade 1 or less).
The second trial, ReOpen-2, only had patients without polyps.
Optinose likely thought that the second trial would be enough to assuage any questions about polyps vs no polyps. Nope. The FDA still wanted a closer look at the subgroup with no polyps.
Optinose gave us a summary of those results. When you subgroup the patients in the ReOpen-1 study to those with no polyps and those with small polyps, you get “nominally statistically significant reductions” in CSS for both groups. Which is great!
However, you do not get statistically significant reductions for the no polyp group when looking at APOV change.
That is not ideal. The thing is, the study was never geared to provide statistical significance to the subgroups.
It is a bit frustrating. The FDA is retroactively looking at something they didn’t really highlight as a requirement going into the study. And which was already answered by the second study. If you look at the results of ReOpen-2 they were as good or better than ReOpen-1.
Nevertheless, the FDA can do what they like.
Bottom line, there are three possibilities for March 16th:
- The drug is approved straight up for patients with CS.
- The drug is approved but only for patients with CS and small polyps.
- The FDA requests another study.
I think the most likely outcome is A. This is a forest through the tree’s situation. There is no good option for CS right now. XHANCE is a drug that shows efficacy in CS. It is widely used.
In terms of improving patient outcomes – an approval is almost certainly the best alternative. This approval is NOT for a new drug; it’s approval for an increased TAM on a current drug. To me, that makes this approval a good bet, and I am long 5000 shares.
But… well, it’s the FDA. You never know. Nothing is a sure thing.
One other important point–Optinose has enough debt that if this is NOT approved–the stock will get hurt. With stagnant sales, Optinose shareholders NEED this to create a new growth story.
This is not a risk-free trade at all. No FDA approval means negative action for the stock.
In that sense, OPTN is what I call a binary trade–it will go up or down 50% probably on Monday March 18th.
Investors will be able to breathe easy, or get punched in the nose.
