Opthea’s flagship clinical trial has failed, with the biotech’s solvency now on the line

Opthea’s flagship clinical trial has failed, arguably triggering payments to funders which could push the Regal-backed firm into insolvency.

Opthea was working on treatments for macular degeneration.

Biotechnology firm Opthea has warned investors its solvency is in question after the failure of a major clinical trial into its macular degeneration treatment, which arguably triggers repayments to its funders of more than $1bn.

Opthea, which is 30 per cent owned by Regal Funds Management, has been running two phase three clinical trials into its flagship compound sozinibercept, for the treatment of the eye disease, wet age-related macular degeneration.

The first of these trials to report, the Coast trial, evaluated the efficacy of the compound in combination with another drug, aflibercept, over the course of a year.

Opthea, which asked for trade in its shares to be suspended last week, said on Monday, “The trial did not meet its primary endpoint of mean change in best-corrected visual acuity from baseline to week 52’’.

“Following the receipt of these results, Opthea has undertaken a thorough review of the data to ensure both its accuracy and integrity,’’ the company said.

“No anomalies were identified through this process that would cause the board to adopt an alternative view on the data outlined above.’’

The failure of the Coast trial has thrown the very viability of the company into question, as it could trigger massive payments to the company’s funders, under a $US170m development funding agreement (DFA) which was struck with Carlyle in August 2022.

“In light of these updates, it is possible that under the DFA, Opthea could become required to pay amounts to the DFA investors that would have a material adverse impact on the solvency of the company,’’ Opthea said.

“As previously disclosed, certain instances and events may result upon the termination of the DFA, and upon such termination, Opthea will be obligated to pay the DFA investors up to four multiples of the amounts paid to the company under the DFA.’’

Termination could be triggered by a range of events, the company said, including the inability of Opthea to fund development costs, failure of the company to use reasonable efforts to commercialise the drug, Opthea’s insolvency, or disagreement with the DFA investors.

“Each termination trigger has a corresponding potential repayment amount of $0, $US229.5m, $US255m, $US467.5m or $US680m,’’ the company said.

“Opthea’s management and board of directors have been in active discussions with the DFA

investors, pursuant to and as required under the DFA, to explore possible options for Opthea in respect of its clinical trial program and with a view to identifying whether there is a pathway that represents the best outcome for the company and its shareholders.

“As such, it is possible that Opthea and the DFA investors reach a negotiated settlement that is different from the parties’ existing rights under the DFA.’’

Opthea said it was also not able to raise any further non-equity funding or dispose of any assets without the prior consent of the DFA investors, as they had security over its assets.

The company said it had not decided at this time whether to discontinue the Coast trial, or to accelerate and unmask the other trial, named Shore.

“Discussions continue with the DFA investors to determine the most appropriate course of action,’’ the company said.

Opthea had $US113.m in cash and cash equivalents at the end of February.

“In light of these matters, there remains material uncertainty as to Opthea’s ability to continue as a going concern,’’ the company said.

“As noted above, discussions with the DFA investors are ongoing and Opthea cannot be certain as to the outcome of those discussions or when that outcome may become known.’’

Opthea’s shares will remain suspended from trade on the ASX and the Nasdaq on Wall Street until the company can provide more clarity.

The stock last changed hands at 60c, down from a 12-month high of $1.16.

The company has previously estimated the market for treatments for age-related wet AMD was worth more than $US10bn per year.

Originally published as Opthea’s flagship clinical trial has failed, with the biotech’s solvency now on the line