Inotek Pharmaceuticals Corporation (NASDAQ: ITEK), is a clinical-stage biopharmaceutical company focused on discovery, development and commercialization of therapies for ocular diseases. The Company’s lead product candidate, trabodenoson, is a first-in-class selective adenosine mimetic currently in Phase 3 development.
Inotek recently announced financial results and business progress for the fiscal year ended December 31, 2016, along with operational highlights for the company. Net loss was $42.9 million for the year ended December 31, 2016, compared to $68.0 million for the year ended December 31, 2015, which included $42.8 million in non-cash expenses.
The management confirmed that they intend to discuss full MATrX-1 data set with the US Food and Drug Administration in the first half of 2017 to determine next steps for the clinical development of the monotherapy program.
It was further confirmed that a Phase 2 fixed-dose combination study of trabodenoson with latanoprost, addressing a considerably larger market opportunity than monotherapy, is fully enrolled now and the company expect to report top-line data in mid-2017. Based on the results of this trial, it will then determine next steps for the clinical development of this combination therapy.
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Notwithstanding these positive developments, the company continues to remain exposed to risk associated with pre-development phase. In fact, it already experienced a setback in the recent past. Trabodenoson did not achieve statistically significant results in their monotherapy trial in January 2017. The reason for failure is being contributed to a few outliers at certain clinical trial sites & upon news of this failed trial; the stock prices declined over 70%. Therefore, future trials could also produce negative results, and the company may receive unfavorable news from the FDA, which could significantly constrain its business risk profile.
About the Company:
Inotek Pharmaceuticals is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of therapies for glaucoma and other eye diseases. The Company’s lead product candidate, trabodenoson, is a first-in-class selective adenosine mimetic currently in Phase 3 development. Trabodenoson was developed in Inotek’s laboratories and is designed to restore the eye’s natural pressure control mechanism. Additionally, the Company is evaluating the potential for selective adenosine mimetics to address optic neuropathies and other degenerative retinal diseases.
Inotek’s value drivers:
Glaucoma overview & potential market size: Glaucoma is a disease of the eye in which damage to the optic nerve leads to progressive, irreversible vision loss. Its characteristics can include structural evidence of optic nerve damage, vision loss and consistently elevated IOP.
According to IMS Health, sales of glaucoma drugs in 2013 were approximately $2.0 billion in the United States and $5.6 billion worldwide and 31.2 million prescriptions were written for glaucoma medications in the United States. According to IMS Health, approximately two-thirds of these prescriptions were for generic drugs, including latanoprost and timolol, which are the top two selling drugs for the treatment of glaucoma. Due to the lack of innovation in medications for glaucoma, most of the drugs used to treat glaucoma are generic drugs. IMS Health projects U.S. sales of glaucoma drugs to be $3.1 billion in 2018, an increase of approximately 54% over 2013 sales.
The ITEK management believe that trabodenoson’s IOP-lowering results, complementary mechanism of action, dosing and safety profile make it well suited for use in an FDC with a PGA, which could be a convenient option for patients currently using two or more glaucoma drugs to lower IOP.
Recent Trabodenoson Development Program Highlights:
- In January 2017, Inotek announced top-line results of MATrX-1, a Phase 3 randomized, double-masked, placebo-controlled trial of trabodenoson for the treatment of primary open-angle glaucoma or ocular hypertension. The trial did not achieve its primary endpoint, which was superiority in reduction of IOP compared with placebo at every single one of the 12 time points.
- In July 2016, Inotek initiated a Phase 2 dose-ranging trial of a fixed-dose combination of trabodenoson and latanoprost in patients with ocular hypertension or primary open-angle glaucoma. Top-line results from this study are expected in mid-2017.
- In July 2016, Inotek announced the issuance of a U.S. composition of matter patent for the combination of trabodenoson with a prostaglandin analog for the treatment of IOP in patients with glaucoma.
Upcoming Events:
- Report top-line Phase 2 fixed-dose combination dose-ranging trial data in mid-2017.
- Complete analysis of MATrX-1 study results and determine next steps.
Key risk factors and potential stock drivers:
The company’s prospects are dependent on successful completion of clinical development and regulatory approval, for its product candidates, including trabodenoson monotherapy and trabodenoson with latanoprost as a fixed-dose combination, or FDC. Therefore, it is exposed to numerous risks and uncertainties associated with product development.
The movements in stock price of a product development stage company like Inotek, is highly volatile & speculative because it entails substantial upfront expenditures and significant risk that a product candidate will fail to gain regulatory approval or become commercially viable.
The company is expected to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have, had and will continue to have a material adverse effect on its stockholders’ deficit, financial position, cash flows and working capital.
The company would need to obtain additional financing to fund operations and, any inability to obtain such financing; it may be unable to complete the development and commercialization of its primary product candidates.
Inotek’s operations have consumed substantial amounts of cash since inception & additional capital, which it might need to operate or expand business, may not be available. Therefore, it may not have sufficient cash to service its debt in a timely manner.
Earnings Review:
Inotek has not generated any revenue from product sales since inception and does not expect to generate any revenue from the sale of products soon. Its ability to generate revenues will depend on the successful development, regulatory approval and commercialization of trabodenoson and any other future product candidates.
Profitability:
- Loss from operations was $41.9 million for the year ended December 31, 2016, compared to $20.4 million for the year ended December 31, 2015.
- Net loss was $42.9 million for the year ended December 31, 2016, compared to $68.0 million for the year ended December 31, 2015, which included $42.8 million in non-cash expenses associated with marking the 2020 Convertible Notes derivative liability to market value at the time of the note conversions.
Cash Flow & Balance Sheet:
Inotek has a history of losses and management anticipates that it will continue to incur net losses for the foreseeable future. Its net losses were $42.9 million; $68.0 million and $9.5 million for the years ended December 31, 2016, 2015 and 2014, respectively.
As of December 31, 2016, it had an accumulated deficit of $238.9 million with approximately 27.0 million shares of common stock outstanding at December 31, 2016.
In August 2016, Inotek closed an underwritten public offering of $52.0 million aggregate principal amount of 5.75% Convertible Senior Notes due 2021 and received net proceeds of approximately $48.7 million after deducting underwriting discounts and offering-related costs.
As of December 31, 2016, it had $126.5 million of cash and cash equivalents and short-term investments. This is estimated to be sufficient to sustain operations into 2019.
Stock Performance:
On Friday, March 31, 2017, Inotek shares declined by -6.9% to $2.0 on an average volume of 1.4 million shares exchanging hands. Market capitalization is $50.2 million. The current RSI is 60.47
In the past 52 weeks, shares of Inotek have traded as low as $1.5 and as high as $10.90.
At $2.0, shares of Inotek are trading above its 50-day moving average (MA) at $1.67 and below its 200-day MA at $5.69.
The present support and resistance levels for the stock are at $1.90 & $2.10 respectively.
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