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Opko Warns of Cash Shortfall in ‘09; May Cut Pipeline, Take ‘Other Steps’ to Survive

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Opko Health is facing a cash shortfall and won’t be able to fund its operations for next year, including the continued development of its phase III siRNA drug for wet age-related macular degeneration, without obtaining additional financing within the first half of 2009, according to a company filing with the US Securities and Exchange Commission.
 
The company also said in the filing that “if we accelerate our product-development programs or initiate additional clinical trials, we will need additional funds earlier,” raising questions about the future of its other planned RNAi drug programs.
 
Opko’s lead drug candidate is the wet AMD therapy bevasiranib, an siRNA targeting vascular endothelial growth factor that the company acquired when it bought privately held Acuity Pharmaceuticals in early 2007 (see RNAi News, 3/29/2007). It is currently being tested in a phase III trial as a follow-up treatment to Genentech’s approved AMD drug Lucentis.
 
The company also has several early-stage preclinical drug candidates based on the gene-silencing technology including one targeting a subunit of the transcription factor hypoxia-inducible factor 1 called HIF1-alpha, which may be used to address pathogenic angiogenesis in the eye; and one targeting transforming growth factor beta receptor 2, which is associated with inflammation and fibrosis, Sam Reich, executive vice president of Opko’s ophthalmics division, told RNAi News this summer (see RNAi News, 6/5/2008). 
 
At the time, Reich declined to provide a development timeline for these molecules, but indicated that plans were underway for their advancement through Opko’s pipeline.
 
In last week’s SEC filing, however, Opko said that if it is unable to secure additional funding, it “may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs.”
Additionally, the company said it may have to “take other actions designed to reduce our cost of operations, all of which may not significantly extend the period of time that we will be able to continue operations without raising additional funding.”
 

“We may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs.”

Officials from Opko did not return a request for comment on possible fundraising initiatives. But in the SEC filing, the company said that it intends to “finance additional research and development projects, clinical trials, and our future operations with a combination of private placements; payments from potential strategic research and development, licensing, and/or marketing arrangements; the issuance of debt or equity securities; debt financing; and revenues from future product sales, if any.”
 
Still, “current economic conditions have been, and continue to be, volatile, and in recent months the volatility has reached unprecedented levels,” Opko warned. “The current disruptions in the US and global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets.”
 
Thus far, Opko has been primarily financed by the Frost Group, a private investment firm controlled by Opko Chairman and CEO Philip Frost. In August, the Frost Group committed $15 million to Opko in exchange for about 13.5 million shares of the company. Last December, the investment group paid $20 million for about 10.9 million shares of Opko.
 
In its SEC filing, Opko noted that it had also been given a $12 million line of credit by the Frost Group, although that credit had been fully used as of Sept. 30.
 
Third Quarter
 
In the third quarter, Opko reported a net loss of $8.3 million, or $0.04 per share, versus a profit of $1.5 million, or $0.01 per share, in the same period last year.
 
Revenues for the three months ended Sept. 30 were $4.1 million, compared with zero revenues in the year-ago period, and were primarily derived from the sale of products acquired when Opko bought ocular instrumentation maker Ophthalmic Technologies in April 2007.
 
Opko’s research and development costs in the quarter edged up to $4.9 million from $4.5 million, an increase mostly related to the continued development of bevasiranib. Selling, general, and administrative costs jumped $1 million to $3.7 million.
 
As of Sept. 30, Opko had cash and cash equivalents totaling approximately $14.6 million.
 
Vigorous Defense
 
In its filing with the SEC, Opko also provided an update on its ongoing litigation with rival ophthalmic technology firm Ophthalmic Imaging Systems.
 
As reported by RNAi News, earlier this year OIS sued its former president for allegedly breaching his fiduciary duty to the company by negotiating an employment deal with Opko. The suit adds that the executive disclosed confidential company information in the course of those negotiations regarding OIS’ one-time plan to acquire OTI.
 
The former president, Steven Verdooner, later joined Opko as executive vice president of instrumentation. His employment at Opko was terminated this January, but he was indemnified by the company as a former officer.
The suit also alleges that Opko and the Frost Group had conspired with the former OIS executive to interfere with OIS’ business activities (see RNAi News, 5/22/2008). 
 
According to Opko, last month OIS amended its legal complaint, which is seeking more than $7 million in damages, after the court dismissed some of the claims in its original suit. “Discovery is ongoing in this matter … [and] the company is vigorously defending itself,” Opko said in the SEC filing.

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