Otonomy Receives FDA Approval of Otiprio for Swimmer’s Ear

For biopharmaceutical companies, one significant highlight is when its product receives a US Food and Drug Administration (FDA) approval. It proves that all the time and money put into the trials were worth it.

Otonomy (NASDAQ:OTIC) is one such company, who announced on Friday (March 2), that the FDA approved its first product, called Otiprio, for acute otitis externa (AOE)—also known as swimmer’s ear.

AOE is a common infection on the outer ear canal, often caused by water remaining in a patient’s ear after swimming. The release estimates that roughly four million cases of AOE are diagnosed each year in the US. This product is the first single-dose antibacterial approved by the FDA for treating AOE and can be administered by healthcare professionals.

David A. Weber, president and CEO of Otonomy, said in the release the approval is a significant milestone for the OTIPRIO program because it expands the product’s “commercial potential” to help treat the number of AOE cases per year in the US.

“This indication also provides an entry point for OTIPRIO use in the office setting where the single-dose treatment can be administered by a physician or healthcare professional and then billed using an existing J Code,” Weber added.

That said, even though this is Otonomy’s first product approved, the company announced in November 2017 that it has discontinued commercial support of OTIPRIO and is looking to sell the asset.

At the time, Otonomy didn’t specify the overall process for divesting OTIPRIO, although the company reiterated the product would continue to be available for purchase by customers.

With the company looking to sell its OTIPRIO asset, Otonomy’s focus has now been shifted to a number of things, including: completing the Phase 2 trial of OTIVIDEX in pediatric patients. Otonomy estimates that a selection of candidate for clinical development is expected to take place in the second half of 2018.

Otonomy is also developing the OTO-313, which is an improved formulation of gacyclidine for treating tinnitus.  According to a corporate update, Otonomy expects that it will initiate a Phase 1/2 clinical trial for OTO-313 in tinnitus patients in the first half of 2019.

Investor Takeaway

Since the FDA approval, shares of Otonomy haven’t reacted one way or the other, although they have has increased 10.78 percent in the last three months to $5.66 as of market close on Monday (March 5). Analysts have given the company two buy ratings and two holds with an average price target of $9.75.

SunTrust analyst Edward Nash, reiterated his buy rating with a price target of $15.00. “While this adds to the strength of the Otiprio franchise as a whole, we do not project this to add meaningful revenue for Otonomy as the company is no longer actively marketing Otiprio,” said Nash. “Our main focus is on a corporate update after the company meets with the FDA to finalize design of the planned Phase III for Meniere’s disease.”

Share price movement isn’t the only thing investors should consider, however: 2018 could prove to be a successful year for the company if it’s able to sell Otiprio as an asset and complete the remaining clinical requirements for OTIVIDEX.  

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This article was updated on March 7, 2018

Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.