Here's Why Ophthotech Corporation Is Being Obliterated Today
Image source: Getty Images.
What happened
Investors in Ophthotech (NASDAQ: OPHT),a clinical-stage biotech primarily focused on diseases of the eye, are having a brutal start to the trading week. Shares have utterly collapsed, falling by 84% as of 11:15 a.m. EST on Monday in response to disappointing results from two late-stage pivotal phase 3 trials.
So what
Ophthotech reported results from two phase 3 clinical trials, OPH1002 and OPH1003, on Monday. These trials were designed to test the company's experimental compound Fovista in combination with Novartis' (NYSE: NVS) Lucentis as a hopeful treatment for wet age-related macular degeneration, or wet AMD.
The combined analysis from the trials showed that patients who received Fovista and Lucentis in combination only demonstrated a mean gain of 10.24 letters on a standardized eye chart at 12 months. Unfortunately, that was only slightly better than the 10.01-letter gain observed in the patient group that only received Lucentis as a monotherapy.The small difference in outcomes was not shown to be statistically significant, which led the company to conclude that it sees no benefit to adding Fovista to a monthly Lucentis regimen in treating AMD.
Ophthotech CEO Dr. David Guyer said that the company wasvery disappointed with the news and that it plans to "continue to analyze the data from these two studies to better understand the trial results." Investors pummeled the stock on Monday in response to the news.
Now what
There's no doubt that this news blows a hole in the bull case for owning Ophthotech's stock. Investors were banking on Fovista's success, which seemed like a smart bet given that phase 2b studies showed that the combination of Fovista and Lucentis resulted in a 62% improvement in eyesight when compared to using Lucentis as a monotherapy. That news led Novartis to sign a deal with Ophthotech that could have been worth up to $1 billion in milestone payments plus a healthy royalty on any sales, which would have been a windfall for investors. However, that deal appears to be dead now that it looks like Fovista is a dud.
If you're looking for a reason to hang on to the company's shares, it is worth pointing out that Ophthotech had more than$320 million in cash on its balance sheet as of the end of September. That's $100 million more than the company's currentmarket capitalization.In addition, it has another drug candidate in its pipeline -- Zimura -- that is currently in phase 2/3 trials as a potential treatment for geographic atrophy, an advanced form of dry AMD. Thus, while the stock's drop today is deserved, it is possible that the markets are overreacting.
Of course, today's news completely changes the thesis for owning Ophthotech's stock, so none of the above really matters. Today is a sad day for investors and the wet AMD community alike.
10 stocks we like better than Ophthotech When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Ophthotech wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of Nov. 7, 2016
Brian Feroldi has no position in any stocks mentioned.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.