Today’s announcement that Circadian (ASX : CIR) has “regained” the VEGFR-3 IP from Lilly is obviously a bit of word-smithing for the reality that Lilly has elected not to proceed with the program. Ok, I will let the spin go this time, mainly because I sort of believe it’s true.
Circadian’s biggest enemy is itself and its troubled identity. This is a company that should be an ophthalmology company and nothing else. It has executed well on the OPT-302 program (at least to date) and Megan Baldwin appears to be a credible CEO. I have previously expressed my opinion that CIR should be a “pure play” and not have all these bolt-on aspects that confound the story and makes understanding the true value proposition of the company a little bit messy. The Lilly relationship is a legacy relationship from the days of “Circadian” and so now as the company moves ahead to become “Opthea” or whatever brand it chooses to adopt (hopefully something that sounds a little less geriatric), it now benefits from a cleaner, tighter story.
From a fundamental “philosophy” perspective, having the same technology platform used in very different disease indications – and through a relationship where CIR has relatively little control (i.e. Lilly) – is a risk. This is because if there is a lack of efficacy in the cancer indication, or if (purely hypothetically) there were safety issues with the target, or the relationship with Lilly just drags on with very little productive output, all can undermine the value perception and “excitement” of the technology in the ophthalmology application. This risk is now gone, and it is a good thing. Moreover, I actually believe that VEGFR-3 is a good target in eye disease – as do several of CIR’s “big pharma” competitors – and therefore if CIR is going to get maximum value for its lead program at some point in the future, then not having any other carve-outs is going to be the best outcome for the company. I can promise you that if you are a big pharma transaction guy and you want to partner for OPT-302, you’re going to use the Lilly relationship as a way to pay less – or at least attempt to.
However, although CIR is free of the Lilly “cancer”, it still has another tumour that needs to be excised – and that is the board. This is a company that has had ample time – and consistent feedback from shareholders – that it needs to streamline the business, re-brand and re-position the company without all the detritus. Circadian really is a pretty decent proposition as far as ASX biotech goes, but by dragging its feet on the necessary structural and governance changes that need to take place, the board continues to deprive shareholders of the momentum that the company should be enjoying.
This is a company that should have double its current market cap and a simple, clear story for US institutional investors and pharma partners. Instead, like the wet AMD the company aspires to treat, the story has a blurred centre of “vision”, precisely where the message and value proposition needs to be clearest.
It’s a shame.