Wall Street Analyst Shares Insights on Ophthalmology

Adnan Butt, senior biotechnology analyst at RBC Capital Markets, says interest in ophthalmology is on the rise for products targeting both the posterior and anterior segments of the eye. The interest will only increase if recently launched products perform well. “A number of big biopharma companies had blockbuster drugs that have gone off patent or are going off patent, and they need to fill their arsenals with new drugs,” Butt told OIS.TV. “So that in general makes ophthalmology attractive to most investors. Second, it’s also been a very, very profitable, you know, for most companies that have gone into the space. So for instance, Eylea is now a $5 billion a year drug, and it’s four years into launch.” Watch the interview to hear more of Wall Street’s view of Ophthalmology.


Adnan Butt

Adnan Butt

Adnan is a senior biotechnology analyst at RBC Capital Markets. His current coverage universe and research interests encompass cardiology, infectious diseases, neuro-psychiatry, oncology, and ophthalmology, as well as other emerging areas and modalities.

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Tom Salemi: Hi, this is Tom Salemi at OIS TV. I’m here at OIS@ASRS and happy to be joined by Adnan Butt, Senior Biotech Analyst RIBC.

Adnan Butt: Tom, it’s my pleasure to be here.

TS: It’s great to have you here. I think you were at our OIS@ASRS, too, right?

AB: And AAO, yes.

TS: There’s too many initials going on. I have to slow the brain when I’m saying that. But I hope we have more because this has been another successful OIS. And you were just on the – or helped lead the combination therapy panel. Can you give us some takeaway thoughts from that discussion?

AB: Sure. It was a fantastic panel, a very nice summary of new developments that are taking place in the back of the eye arena. My view is that all the mechanisms and pathways mentioned were interesting, and they’re interesting because they’re taking us a step beyond what’s the current standard of care, which is anti VEGF. The Street is looking for new ways to treat these diseases, wet AMD, DME. And there is a few reasons for that. First, because obviously there is no cure, so you’re always looking for better outcomes for patients. But secondly, also because reimbursement has become a much bigger deal over the years, and you’re looking for therapies that kind of unhinge a vastness of the referenced products. So the current anti VEGFs, very good drugs, very solid drugs, but certainly looking for new pathways and new mechanisms that add on to it or provide alternatives that help physicians maybe extend the duration of benefit or basically improve vision.

TS: How does the Street view ophthalmology in general? Is it an area that is seen to be one of great potential that’s going to grow significantly larger? Is it going to be, continue to be sort of a middle of the pack sort of sector? I’m just curious as to how it’s viewed.

AB: My view is the interest has gone up over the past few years, both for front of the eye and back of the eye companies and products. And if these new drugs are successful, it should continue to go up. So there’s a few factors driving it. I’d say that the biggest high level factor is the fact that a number of big biopharma companies, pharma companies had blockbuster drugs that have gone off patent or are going off patent, and they need to fill their arsenals with new drugs. So that in general makes ophthalmology attractive to most investors. Second, it’s also been a very, very profitable, you know, for most companies that have gone into the space. So for instance, Eylea is now a $5 billion a year drug, and it’s four years into launch. So things can become big very quickly here. So I certainly see interest from the investor side, both for back of the eye and front of the eye companies.

TS: Do you see one part of the eye producing more advances in the coming years, back of the eye or front of the eye, or one area, one space that’s more attractive than another?

AB: I think both are interesting and relevant. That’s because both will be producing significant phase 3 readouts – also earlier stage readouts, but notably phase 3 readouts over the next year or two years or so. So both arenas should have sustained interest from the Street, both buy side and sell side, and corporate because of the meaningful data readouts that are expected.

TS: Well, we saw an unbelievable summer when it comes to FDA approval. I mean we actually had a hard time keeping up with the good news that was coming out. And that does not usually happen. Is this seen as just a nice streak for ophthalmology? And of course we’re talking about AMO, Raindrop, and many other approvals. And of course Shire got its approval for its dry eye. Or is this something that is something to build on, that we’re going to see – you anticipate seeing more good news coming ahead? And is this something again that’s going to help to propel ophthalmology a bit forward?

AB: Well, things do go up and down. We had a spate of bad clinical readouts not too long ago.

TS: Good point.

AB: So it was good to see FDA being more receptive. My impression of the space is that the FDA is more a partner than an adversary to these companies. The FDA has, for instance, approved drugs, let them come on to the clinic with less than perfect data. So the FDA certainly seems to want to look for new ways to treat these diseases, both front of the eye and back of the eye diseases. So my expectation is that this good news will continue as long as the companies keep posting good, if not perfect, clinical data.

TS: And what does this mean for financing going forward? We’ve kind of got a lukewarm IPO market, if that. I don’t know if it’s even lukewarm. Do you anticipate seeing things improve in the third quarter or any time soon?

AB: So the timing is hard to predict. I would say that for individual companies, they can still find a way out. So but generally, probably you’re waiting for until at least the elections are over to some kind of macro stability before you see the IPO window open wider. But there have been companies, including in the eye space that have been able to go out. So it’s a lot of factors that play into that, including how much insider support or VC support they get in the process of going public. That’s not the only exit, so M&A is another exit. So if there is good data, rest assured that all these big companies are constantly, constantly looking for new drugs that they can add on or combine with their existing drugs.

TS: And we of course had the acquisition of InFocus, which was another great story, great chapter for the MIGS story. So you’re right, there’s certainly a lot of interest in M&A. You mentioned the election. Is this election any more of a damper on financing or IPO that was in the past? There’s always uncertainty with elections. Always, any uncertainty kind of leads to people to hold back and not make big bets.

AB: Things have calmed down a bit. This one became a bit bigger deal because of all the pricing discussions that were taking place earlier in the year. So not directly pertinent to ophthalmology, but the high price of certain drugs put drug pricing into focus.

TS: Yeah.

AB: And keep in mind that government does do things. So for instance, there’s CMS pilot programs in terms of reimbursement that are being contemplated or will be going into effect, which may have an impact on back of the eye drugs at least. So people certainly, I think, are watching this election when it comes to drug pricing, reimbursement, more closely than prior elections.

TS: Interesting. And final question: looking ahead for the next 2 years, what sort of successes and milestones do you hope to see, either in the clinical front or elsewhere?

AB: Well, in the biotech arena, things are driven by data. So phase 3 data is what makes or breaks companies. And phase 2 data is not as important, but also very important. So over the next 18 months, there is a slew of front of the eye and back of the eye data that will be reading out, and I think if more of those studies are positive versus negative, or if some of those companies are really rewarded enough in the public markets, that that will keep and mass present them into the space, and then keep things moving forward.

TS: Terrific. Well, thanks for taking a few minutes today.

AB: My pleasure.