Ovid Therapeutics ($OVID) a farmaceutical company that focuses on medication for Dravet syndrome (DS) or Lennox-Gastaut syndrome (LGS) – two rare and difficult forms of epilepsy with children – noticed a powerful spike with the stock before the promising phase 2 results for a medication called Soticlestat. This medicine is being developed in a 50-50 partnership with Japanese pharmaceutical company Takeda (TAK).

The lead drug candidate for Ovid is OV101 which targets Angelman syndrome and Fragile X syndrome, two rare diseases. OV101 has performed well since the results of last year. The organization had previously struggled to impress with the data from OV101’s Phase 2 analysis of STARS, where the endpoints were 16 symptoms assessed individually.

The organization then moved to the Professional Global Impression (CGI-I) scale, where doctors rate on a seven-point scale to have a comprehensive look at the outcomes. More news followed recently on August 25, as Ovid Therapeutics tendered a stock deal at $8 dollars to raise $50 million dollars. The share of the company closed at $6.33 dollars. This bid comes on the heels of a promising data readout from one of its lead candidates, Phase 2 research OV935.

Takeda and Ovid partner 50/50 in the production and promotion expenses on OV935, and 50/50 benefit sharing if the applicant succeeds. If Ovid will create and sell OV935 worldwide, Takeda will be in charge of marketing in Japan, and probably other selected countries. The corporation hopes to earn such bonus rewards upon further production of the product. OV101 will announce findings about the stage 3 trial of Angelman syndrome in the end of this year. And this is the catalyst so far. Phase 2 evidence from OV101 has only been announced in FX syndrome and for OV935 in DS, there are no near-term catalysts for this.

Lundbeck ‘s firm has issued OV101 patents, with expiry dates ranging from 2025 to 2028. There are others, including patents granted for treating Angelman syndrome and OV101 Fragile X syndrome, which expire in 2035. Lundbeck is owed bonus awards of about $200 million and tiered profits based on single-digit to low-double-digit percentage of OV101 net sales. The business is a little short on cash, which is potentially the main risk factor here considering the $50mn raise opportunity with the bid. The several trials it has under way would need even more investment when they enter phase 3.

OVID seems like a solid buy backed with good data on the latest dilution. While current competitive drugs do not exist, a variety of companies are developing drugs in the same field. Since the conditions are uncommon, competitive medications will decrease the opportunity for earnings considerably. Inadequate phase 3 data against promising phase 2 data is always risky. Investing in OVID can be seen as a risk, but if you think about investing in the company, this could be the right moment.

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By Omar