Here's Why Ophtotech Corporation Dropped 16.5% in September

By Markets

Image source: Getty Images.

Continue Reading Below

What happened

Investors in theclinical-stage biotech Ophthotech(NASDAQ: OPHT) had a rough September. Shares fell by more than 16% during the month, according to data fromS&P Global Market Intelligence.

OPHT data by YCharts.

So what?

Continue Reading Below

Shareholders were having a pleasant month until Ophthotech's frenemyRegeneron Pharmaceuticals(NASDAQ: REGN) reported clinical data that gave investors pause.

Regeneron released data from its phase 2 CAPELLA study in late September. This trial was testing its experimental compound rinucumab-- an anti-platelet-derived growth factor receptor beta (anti-PDGFR-beta) antibody -- in combination with itsblockbuster eye disease drug Eylea as a hopeful treatment forneovascular age-related macular degeneration (wet AMD).

The data showed that thecombination therapy failed to outperform Eylea as a monotherapy. In fact, patients who received Eylea and rinucumab only demonstrated a 5.8 letter improvement on the BCVA test, which was worse than the7.5 letter improvement observed in the monotherapy group.

WhileOphthotech's lead compound Fovista was not used in this study, traders now have a renewed worry that anti-PDGF drugs like Fovista might not improve upon current standards of care. In response, they sold off the company's shares.

Now what?

While it's tempting to look at this data and conclude that Fovista is dead in the water, I think it's still too early to draw any real conclusions. After all, Phase 2b studies showed that adding Fovista toNovartis' Lucentis lead to a 62% improvement in eyesight when compared to using Lucentis as a monotherapy. If the company can repeat those results when they release data from a Phase 3 study in the upcoming months, then these renewed fears will likely to put to rest. In turn, I'd expect the company's shares to soar.

Of course, if Ophthotech's updated data suggests that anti-PDGF drugs do not lead to a clinical benefit, then look out below. That makes Ophtotech a high-risk, high-reward stock that should only be owned by shareholders who are willing to face a significant binary event.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early, in-the-know investors! To be one of them, just click here.

Brian Feroldi owns shares of Regeneron Pharmaceuticals.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.

The Motley Fool has no position in any of the stocks mentioned. 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.