EyeGate Pharmaceuticals Inc (NASDAQ: EYEG) is screaming for the top in the market this morning, trading on early gains of more than 100%. The gains come after the company announced an acquisition that will change the game for the company.
Here’s what’s going on:
Skip to What You Want to Read
- EyeGate Pharmaceuticals Announces Transformative Acquisition
- Management Commentary
- Why Investors Are So Excited
- What Analysts Think About EYEG Stock
- Risks to Consider Before Buying EYEG Stock
- Final Thoughts
Eyegate Pharmaceuticals Announces Transformative Acquisition
In the press release, EyeGate Pharmaceuticals announced that it has acquired Panoptes Pharma. Panoptes is a privately-held clinical-stage biotech company. The company is focused on the development of novel proprietary small molecules for the treatment of severe eye diseases with a high unmet medical need.
In the release, EYEG said that the acquisition will transform its pipeline with the addition of PP-001. This is a next-generation, non-steroidal, immuno-modulatory, small molecule inhibitor of Dihydroorotate Dehydrogenase with potential best-in-class picomolar potency.
The company went on to explain that the treatment was rationally designed to overcome the off-target side effects and safety issues associated with DHODH inhibitors.
At the moment, there are two clinical-stage formulations of PP-001. These include PaniJect, an intravitreal injection for inflammatory diseases of the eye, and a clinical stage intravenous formulation of the treatment for neurological and autoimmune indications.
According to the terms of the acquisition, Panoptes will become a wholly owned subsidiary of EYEG. In exchange, EYEG will pay $4 million in cash and preferred stock at closing. Moreover, the company will pay an additional $1.5 million in preferred stock after 18 months and an additional payment of $4.75 million contingent upon the enrollment and randomization of the first patient into the first Phase III pivotal study of any Panoptes ophthalmic product with the FDA and an approval of a NDA by the FDA with respect to any Panoptes ophthalmic product.
In a statement, Stephen From, CEO at EyeGate Pharmaceuticals, had the following to offer:
The acquisition of Panoptes propels the EyeGate pipeline forward to include a de-risked clinical-stage candidate with broad potential across a diverse range of ocular, autoimmune and neurological indications.
While DHODH inhibitors have been successfully developed for a range of autoimmune conditions, their utility has been limited due to tolerability and safety concerns. We believe PP-001, with potential best-in-class specificity and potency, has overcome these limitations to deliver this validated mechanism in inflammatory diseases of the eye as well as diseases beyond the ophthalmic space. With promising clinical safety and efficacy data in hand, and ophthalmic formulations to target indications with a medical need on the ocular surface and the back-of-the-eye, we are poised to begin a robust clinical program for PP-001.
In addition to this transformative asset, we are also pleased to welcome Panoptes cofounders Dr. Franz Obermayr and Dr. Stefan Sperl to the EyeGate management team, whose proven track records and extensive experience executing on clinical development strategies will enable our rapid advancement into indications outside of ophthalmology. I am confident this strengthened team positions the new EyeGate to maximize the clinical potential of PP-001 as a best-in-class immunomodulator, while also complementing our existing pipeline of late-stage ocular assets which together have the potential to address significant unmet needs and large market opportunities.
The above statement was followed up by Dr. Franz Obermayr, co-founder and CEO at Panoptes, and EVP of clinical development at EYEG. Here’s what he had to offer:
This acquisition by EyeGate, a clinical-stage public company with an ophthalmology focus, is testament to the Panoptes team’s success in developing our novel and highly innovative products. I look forward to joining the EyeGate team to unlock the clinical potential of PP-001 across a diverse set of indications with high unmet medical need.
Why Investors Are So Excited
The news released by EyeGate Pharmaceuticals this morning proved to be overwhelmingly exciting. First and foremost, bringing PP-001 into the company’s pipeline expands the company’s opportunity to bring a product to market. Moreover, early studies of this therapy have produced overwhelmingly positive results.
Moreover, the company got a great deal here. Even if all milestones were hit and all amounts payable under the agreement were paid out, EYEG will pay under $20 million for the asset.
At the same time, the market surrounding the optical inflammatory diseases is worth tens of billions of dollars annually. Should the company tap into this market, it wouldn’t need the lion’s share, or even a large chunk of the market to be successful. In fact, a small sliver of this massive market would generate significant revenue for EyeGate Pharmaceuticals, making this acquisition an overwhelmingly valuable one.
What Analysts Think About EYEG Stock
According to TipRanks, there’s only one analyst on Wall Street that’s covering the stock. However, that one analyst has an overwhelmingly positive opinion.
At the moment, the stock is rated a buy, and has been given a price target of $10. That represents a more than 50% potential upside.
However, this analyst coverage undoubtedly happened before this morning’s news. So, upon re-review, I’d venture to be that the analyst would hold an even more positive opinion.
Risks to Consider Before Buying EYEG Stock
Any time you make an investment, whether it be in stock, or cash in your savings account, you’re making the decision to accept risk. An investment in EYEG stock is no different. Some of the most significant risks to consider before buying the stock include:
- Clinical Risk. EyeGat Pharmaceuticals is a clinical-stage biotech company. This means that in order to get its products to market, it has to successfully make it through clinical trials. Should one of these clinical trials fail, significant losses could be the result.
- Regulatory Risk. In order to earn money from the sale of its products, EYEG will have to receive regulatory approval. No matter how good the data looks, if the FDA or other regulatory agencies find holes in the data, they will reject applications for commercialization. Should this take place, the stock could see significant declines.
- Capital Risk. Finally, as a clinical-stage biotech company, EYEG doesn’t generate revenue through the sale of its products. As a result, the company must rely on the money it has in the bank. Should this not be enough, it may look to capital markets in order to raise funds through the sale of newly-issued stock. Should this take place, existing investors will have to deal with dilution.
All in all, the news issued by EyeGate Pharmaceuticals proved to be overwhelmingly positive. With this acquisition, the company is bringing new assets into its pipeline that have blockbuster potential, should they make it to commercialization.
At the same time, the company already has a robust clinical pipeline and could be moving toward commercialization relatively soon. All in all, there’s plenty of reasons to be excited about EYEG stock at the moment.