Gauging Osmotica Pharma’s Risk Factors Post Q2

Osmotica Pharmaceuticals (OSMT) is an integrated specialty pharmaceutical company. Its Upneeq is the only FDA-approved ophthalmic solution for treating acquired blepharoptosis in adults. Osmotica expects to complete the sale of its legacy business to Alora Pharmaceuticals in Q3.

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Let’s take a look at its recent Q2 performance and understand what has changed in its key risk factors that investors should know.

The company is focused on maximizing the market opportunity in eyecare. The CEO of Osmotica, Brian Markinson, said, “Looking ahead, we are expanding our reach and depth in eyecare and finalizing our plans to launch into the ocular aesthetics market. We are also building upon the early success of our pharmacy and adding direct purchase options for our eyecare partners.”

Osmotica’s second-quarter revenues, primarily from Upneeq sales and licensing, jumped to $11.5 million from $234,000 a year ago. Notably, Upneeq prescriptions almost doubled in Q2 as compared to Q1. Osmotica also received $10 million in milestone payment from Santen Pharmaceutical during this period.

Moreover, the company also submitted an amended protocol for a Phase 3 study of arbaclofen to the FDA.

With lower spending on arbaclofen ER and Upneeq, Osmotica’s R&D expenses dropped to $2.1 million from $3 million a year ago. SG&A expenses, however, jumped almost 50% year-over-year to $21 million due to the expansion of salesforce and higher marketing expenses, along with severance and other expenses.

These dynamics resulted in a net loss per share of $0.28 as compared to a net loss per share of $0.22 a year ago. (See Osmotica stock chart on TipRanks)

On August 17, RBC Capital analyst Daniel Busby reiterated a Buy rating on the stock with a price target of $7, implying 103.5% upside potential. Shares are down 44.3% over the past year.

Now, let’s look at what has changed in the company’s key risk factors.

According to the new Tipranks’ Risk Factors tool, Osmotica’s main risk categories are Finance & Corporate and Legal & Regulatory, which account for 41% and 20%, respectively, of the total 87 risks identified. Since June, the company has added two key risk factors.

Under the Debt & Financing category, Osmotica highlights that to maintain its operations it may need to raise additional capital and if the company is not able to do so then its operations may be curtailed. As Osmotica is divesting its legacy business, the focus now remains on Upneeq. This limits Osmotica’s cash flows in the short term and, thus, the need for additional funds to maintain its operations.

Under the Corporate Activity & Growth category, the company observes that if it fails to complete the divestiture of its legacy assets as per the initial terms, or on the expected timeline, then its business and financials may get negatively impacted.

The Finance & Corporate risk factor’s sector average is at 29%, compared to Osmotica’s 41%.