ObsEva: Ignored, But Long-Term Prospects Exist On Recent Progress (NASDAQ:OBSV)

ObsEva SA (NASDAQ:OBSV) is a great long-term biotech to own. The reason why I state that is because despite having received regulatory approval in two territories for linzagolix (marketed as Yselty) for the treatment of women with uterine fibroids, the stock still trades at a very low share price. It received approval of this drug for the treatment of this patient population for the European Union and for the United Kingdom.

I believe there is long-term potential just based on these approvals. However, there is an ability to further expand the reach of Yselty to the United States. That’s because there is a PDUFA date set for September 13, 2022, and that is when the FDA will decide if this drug should be approved for the very same patient population for use in the United States. I believe that the FDA approval may carry more weight compared to the other two regulatory approvals.

Not only that, but the biotech won’t have to attempt to sell the drug on its own. Instead, it has already been able to establish two partners for specific territories. It established a partnership for Theramex to sell the drug outside of the U.S., Canada, and Asia. The other partnership that was established was with Syneos Health to sell the drug within the United States upon regulatory approval. It is developing Yselty (linzagolix) for another large market indication which is endometriosis as well. With a few regulatory approvals for Yselty, plus another possible one on the way in Q3 of 2022, these are the reasons why I believe that ObsEva is a great long-term biotech to look into.

Two Regulatory Approvals With A Third One Being Possible

As I noted directly above, ObsEva received regulatory approvals of Yselty for the treatment of women with uterine fibroids in two territories. Uterine fibroids are benign tumors that end up forming in the uterus (womb) of a woman. When I state the term “benign,” that means non-cancerous. The thing is that a majority of the time there are no symptoms. However, in certain cases, they can cause severe pain for the patient. There are several symptoms that uterine fibroids can cause, which are:

• Heavy Menstrual bleeding
• Prolonged periods
• Pelvic pain
• Cramping
• Urge to urinate

One immediate item to point out is that Yselty was explored in uterine fibroid patients with heavy menstrual bleeding. Thus, heavy menstrual bleeding (HMB) is one of the symptoms involved with this disease. Some ways to treat this disease are surgeries and medications. Surgeries may involve attempting to go in and remove the uterine fibroids if successful. The other option involves medications. There are two types of medications:

• SERMs (Selective estrogen receptor modulators) – work by changing estrogen levels in the body and holds the ability to shrink fibroids without causing menopause symptoms
• GnRH agonist – GnRH is a type of hormone that a person’s body makes naturally. These agonist drugs act as a counter to the production of the GnRH hormone. Thus, in turn it is able to shrink fibroids and sometimes can even reduce anemia as well

There are many other additional types of surgeries as well, like cutting off the blood supply to kill the fibroid off. The thing is that the uterine fibroids market is a large one. Well, it only treats women and it is just benign fibroids that are being formed in the uterus. Yes, but believe it or not it is indeed a major problem. Just in the United States alone, it is expected that the uterine fibroids treatment market is estimated to be worth $298.5 million by the end of 2027.

One of the first regulatory approvals was achieved back on June 22, 2022, from the European Commission (EC). This approval was followed by a positive opinion from the Committee Medicinal Products for Human Use of the European Medicines Agency back in April of 2022. Then, the biotech was able to receive UK Medicines and Healthcare Products Regulatory Agency (MHRA) approval of Yselty for this very same patient population.

The reason why Yselty was approved was because of positive results from the two phase 3 PRIMROSE studies that were done. It was noted from 24 weeks that there were huge response rates. The breakdown of such response rates is as follows:

• A responder rate of 84.5% in women who received 200 mg linzagolix with hormonal add back therapy (ABT)
• A responder rate of 56.5% in women who received 100 mg of linzagolix without ABT

These two response rates, plus safety profile of the drug, is what allowed for these regulatory approvals. However, where I believe ObsEva may have a competitive advantage is that Yselty is the first drug approved for this specific patient population that gives women the option to be treated without the need for hormone therapy. The need for a drug like Yselty now is to help a woman either delay or avoid the need for surgery altogether.

There is potential to expand regulatory approval of Yselty to the United States with the upcoming FDA decision in the 2nd half of 2022. A Prescription Drug User Fee Act (PDUFA) date has been established with an action date of September 13, 2022. Agreement has been made in partnership with Theramex to sell Yselty outside of the U.S., Canada and Asia. Another agreement had been made with Syneos Health to sell the drug in the United States upon regulatory approval.

Financials

According to the 6-K SEC Filing, ObsEva had cash and cash equivalents of $57.6 million as of March 31, 2022. It has been able to raise cash through several different methods over the years. It raised about $5.7 million of net cash in Q1 of 2022 using its at-the-market offering program. Then, made $8.3 million in proceeds from its securities purchase agreement with JGB Management. Speaking of which, this JGB Securities Purchase Agreement is structured to provide about $135 million in borrowing capacity in nine tranches. The first and second tranche were achieved, October 2021 and then January 2022 respectively.

The downside is that in order for ObsEva to receive additional tranches, it has to meet the “Minimum Stock Price Condition” and “Shareholder Approval Condition.” If either of these aren’t met at future tranche dates, then it won’t be able to obtain cash this way. This is a huge risk and it may need to finance its operations through the use of other financial methods. It believes that its cash on hand is enough to fund its operations into Q4 of 2022. This won’t be enough cash to fund its operations and that means I believe it will have to raise additional cash in the coming months.

Risks To Business

There are several risks that investors should be aware of. The first risk would be with respect to the PDUFA date approaching September 13, 2022. Even though Yselty had already been approved in two other territories, there is no guarantee that ObsEva will receive marketing approval of the drug in the U.S. for the treatment of women with uterine fibroids.

A second risk would be with respect to the use of Yselty for the treatment of women with endometriosis. Additional results from the phase 3 EDELWEISS 3 trial as well as long-term data from the extension stud are expected soon in the 2nd half of 2022. Another readout from post-treatment follow-up from the extension study is expected in early 2023. There is no guarantee that these results will turn out to be positive and such it remains a huge risk.

The final risk to note would be with respect to the cash position noted above. It believes it only has enough cash to fund its operations into Q4 of 2022. As such, I think it will need to immediately raise cash in the coming months, which will likely dilute shareholders.

Conclusion

I believe that ObsEva is a great long-term biotech to own because it has already received regulatory approval of Yselty for two territories, as highlighted above. There is a possibility that it could receive approval of this drug for the treatment of women with uterine fibroids for the United States as well. This will be the upcoming PDUFA date, which is set for September 13, 2022. Besides only targeting this indication, the drug is also being developed for the treatment of women with endometriosis. Results from a phase 3 study, plus several other updates, are expected to be released in the 2nd half of 2022/early 2023.

I believe that there is great potential here based on ObsEva’s ability to already get two commercial partners on board. It won’t have to do commercial activity on its own. Based on its recent progress, especially a few regulatory approvals for Yselty, these are the reasons why I believe ObsEva is a great long-term buy.