Why Ophthotech Corp. Shares Soared 14.9% in May

What: After Ophthotech Corp. (NASDAQ: OPHT) released quarterly financials on May 4 and updated investors on the clinical trial progress of its lead drug candidate, Fovista, shares of the biopharmaceutical company rallied 14.9% last month,according toS&P Global Market Intelligence.

So What:Ophthotech is developing Fovista as an add-on therapy for the treatment of wet age-related macular degeneration (AMD). Specifically, Fovista is being studied for use alongside Novartis' Lucentis and Regeneron Corp.'s Eylea, two multibillion-dollar blockbuster therapies.

Previously, Ophthotech reported that dosing Fovista with Lucentis led to a10.6 letter improvement in vision on a standard eye chart. That compared favorably to the 6.5-letter improvement witnessed in patients receiving Lucentis monotherapy.

Management expects that phase 3 confirmatory results will be released for Fovista plus Lucentis in the fourth quarter. Assuming those results are positive, then the company will file for FDA approval of Fovista shortly thereafter.

Results from another phase 3 trial evaluating Fovista alongside Eylea and Avastin, another widely used drug in the indication, should be available next year. If those results are positive, then they could serve as the basis for a future label expansion that makes Fovista a therapy-agnostic component of standard of care.

Now What:Wet AMD occurs in seniors, and 10,000 baby boomers a day are turning 65, so the tailwinds for this market opportunity are significant. Lucentis and Eylea's sales exited the first quarter at an annualized pace of more than $3 billion and $4 billion, respectively, so Fovista has a good chance at becoming a blockbuster drug too.

Because of Fovista's potential, Novartis licensed ex-U.S. rights to the drug from Ophthotech in 2014. In that deal, Novartis agreed to pay Ophthotech up to $1 billion, plus 30% royalties on future sales. Ophthotech has retained its rights to Fovista (so far) in the United States.

Assuming Fovista delivers similar efficacy and safety in its late stage trials, then Ophthotech could begin generating revenue from Fovista by the end of next year. If so, then its $2 billion market cap may undervalue the drug's peak sales potential. However, investors should remember that there's no guarantee that these trials will succeed, nor that the FDA will approve Fovista. Therefore, this stock is still risky.

The article Why Ophthotech Corp. Shares Soared 14.9% in May originally appeared on Fool.com.

Todd Campbell owns shares of Ophthotech.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him onTwitter where he goes by the handle@ebcapital to see more articles like this.The Motley Fool owns shares of Regeneron Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.