Ocera Therapeutics, Inc. (NASDAQ: OCRX), is a clinical stage biopharmaceutical company focused on acute and chronic orphan liver diseases. The company was founded by Wu Xiaoyun, John C. Kappes, and Eckard Weber on January 12, 1998 and is headquartered in Palo.
On March 8th 2017, OCRX announced that it would report additional encouraging data from its Phase 2b STOP-HE study of intravenous (IV) OCR-002 in hospitalized patients with Hepatic Encephalopathy (HE) at the Cowen and Company Annual Healthcare Conference. In January 2017, it already announced positive results from its Phase 1 study of orally administered OCR-002 in patients with chronic liver cirrhosis.
Currently, there are no drug treatments for HE that can be given intravenously to hospitalized patients with acute HE. OCR-002 is rapidly progressing to be an extremely promising ammonia scavenger therapy being explored for HE. Moreover, this formulation is being developed both as intravenous as well as oral therapy, and is targeting a market size of around $2.0 billion in USA.
Also, OCR-002 has been granted orphan drug designation and Fast Track status by the U.S. Food and Drug Administration. Which means, that it will enjoy 7 years of market exclusivity.
The company’s business risk profile is likely to derive significant strength from the favorable competitive landscape, expanding market size in HE segment, superior clinical profile of OCR-002, multiple modes of drug administration, and high probability of obtaining reimbursement. Moreover, Biotech as a sector is showing enormous strength in 2017 (unlike 2016) & is supported by a boost in overall M&A activities, the election outcome and expectations for significant tax & regulatory reform.
As a result of which, investors are really bullish about the potential growth for this orphan liver disease player.
Furthermore, on March 10th, OCRX also announced its Fourth Quarter and Full Year 2016 Financial Results. It reported a Net loss for the three and twelve months ended December 31, 2016 at $5.2 million and $26.9 million, respectively. As of December 31, 2016.It had cash, cash equivalents and investments of $28.4 million.
Management anticipates that it will have sufficient cash to fund operations into the second quarter of 2018 based on its current operating plan and re-prioritization of certain development activities. To continue its ongoing research and development operations beyond 2018, the company might need to raise incremental capital by way of equity or debt.
The company’s stock has unsurprisingly found enormous strength in the recent past. OCRX reported increase in the stock price backed by these announcements laying foundation for product viability and business growth.
Description & about the Company:
Ocera Therapeutics, Inc. is a clinical stage biopharmaceutical company focused on the development and commercialization of OCR-002 (ornithine phenylacetate) in both intravenous and oral formulations. OCR-002 is an ammonia scavenger and has been granted orphan drug designation and Fast Track status by the U.S. Food and Drug Administration (FDA) for the treatment of hyperammonemia and resultant hepatic encephalopathy in patients with acute liver failure and acute-on-chronic liver disease.
Major product pipeline & application:
Ocera’s drug candidate OCR-002 (ornithine phenylacetate) is designed to treat hyperammonemia (elevated ammonia in the blood) and associated hepatic encephalopathy, a complication of patients with liver cirrhosis or acute liver failure. When the liver is no longer able to remove toxic substances from the blood, there is an accumulation of such toxins, particularly ammonia. Ammonia accumulation in the blood impairs brain cell function, and can lead to a neuropsychiatric condition called hepatic encephalopathy, or HE.
Multi modal drug administration:
Source: Company presentation
Recent developments:
OCRX recently announced that it will report additional encouraging results from its Phase 2b STOP-HE study of intravenous (IV) OCR-002 in hospitalized patients with Hepatic Encephalopathy (HE) at the Cowen and Company 37th Annual Healthcare Conference.
As per management, further analysis of the data from its STOP-HE trial confirms that OCR-002 rapidly and safely lowered ammonia and, importantly, the ammonia reduction correlated statistically with clinical improvement. OCRX believe the most relevant efficacy considerations likely include earlier timing of drug administration, measuring efficacy sooner after drug administration, and administering the appropriate and tolerable dose regimen of OCR-002. The company look forward to discussing these data as well as Phase 3 development with FDA later this year.
2016 was a progressive year for the company, culminating with the timely completion of enrollment in the fourth quarter of STOP-HE, a landmark study evaluating intravenous OCR-002 (ornithine phenylacetate) in patients hospitalized with acute hepatic encephalopathy (HE). OCRX also advanced its oral program testing orally administered OCR-002 in patients with cirrhosis and developing a tablet formulation, which is poised for clinical evaluation in 2017.
In January 2017, OCRX reported positive results from its Phase 1 study of orally administered OCR-002 in patients with chronic liver cirrhosis. The study demonstrated robust bioavailability and promising pharmacokinetic and safety profiles in the intended use population.
Outlook & Anticipated 2017 Activity:
• Initiate Phase 2a multi-dose study of oral OCR-002 in cirrhotic patients in H1 2017
• Meet with the Food and Drug Administration in Q3 2017 regarding STOP-HE with goal of clarifying Phase 3 development plan
Key Stock Influences:
Some key influences that might govern future stock price performance include:
• Successful initiation of enrollment for Phase 3 clinical trials, completion of subject enrollment, and positive announcement related with these ongoing trials would lead future direction for OCRX. Any adversities related to these upcoming milestones might adversely impact the overall investor sentiments.
• Also, significant product concentration continues to impinge the business risk profile of OCRX. The company’s future prospects largely depend on the positive outcome of clinical and commercial success of OCR-002. This dependence on a single product exposes it to a high degree of product & business concentration risks.
• Also, meaningful commercialization of OCR-002 is substantially dependent on the level of competition that it might face from its rival Xifaxin. As per present data, OCR-002 is expected to be a relatively safer and stronger option to treat HE in an acute setting. However, degree of competition it is likely to face from other biotech firms is still a contingency.
• OCRX is still at a pre-commercialization stage and has not yet generated meaningful revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it. Therefore, any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor. Moreover, meaningful commercialization of OCR-002 is not likely to happen before 2020. Which is a significantly long time span from today.
Earnings Review:
Revenue for the three and twelve months ended December 31, 2016 was $512,000 and $609,000, respectively. Revenue for the three and twelve months ended December 31, 2015 was $24,000 and $133,000, respectively. Revenue in all periods consisted of royalty and licensing revenue generated from certain clinical-stage assets acquired in connection with the 2013 reverse merger between OCRX and Tranzyme, Inc.
Profitability:
Net loss for the three and twelve months ended December 31, 2016 was $5.2 million and $26.9 million, respectively. Net loss for the three and twelve months ended December 31, 2015 was $7.1 million and $26.5 million, respectively. Basic and diluted net loss per share for the three and twelve months ended December 31, 2016 was $0.22 and $1.22, respectively. Basic and diluted net loss per share for the three and twelve months ended December 31, 2015 was $0.34 and $1.32, respectively.
Cash Flow & Balance Sheet:
As of December 31, 2016, OCRX had cash, cash equivalents and investments of $28.4 million, compared with $43.3 million at December 31, 2015.
Net use of cash for 2016 was $22.1 million, which was consistent with OCRX’s most recent guidance of the low end of the range of $22.0 to $26.0 million. Net use of cash equals the difference of cash, cash equivalents and investments at December 31, 2016 and 2015, less cash provided by financing activities, consisting of net proceeds of $7.1 million generated by an “At-the-Market” equity program during 2016.
Management anticipates that they will have sufficient cash to fund operations into the second quarter of 2018 based on its current operating plan and re-prioritization of certain development activities.
Stock Performance
On Friday, March 10th, 2017, OCRX shares declined by 25.93% to $1.4 on an average volume of 4.76 million shares exchanging hands. Market capitalization is $55.67 million. The current RSI is 36.92.
In the past 52 weeks, shares of OCRX have traded as low as $0.52 and as high as $3.75.
At $0.110, shares of OCRX are trading above their 50-day moving average (MA) at $1.31 and below their 200-day MA at $2.13.
The present support and resistance levels for the stock are at $1.28 & $1.60 respectively.
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