Here’s Why Ophthotech Fell 15% On No News On Friday

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Here’s Why Ophthotech Fell 15% On No News
Image: NASDAQ

Here’s Why Ophthotech Fell 15% On No News On Friday

Shares of Ophthotech, (NASDAQ: OPHT), a biopharmaceutical company that specializes in the development of therapies to treat diseases of the back of the eye, fell by more than 15 percent on Friday even though the company hasn’t made any announcements nor were there any notable media reports.

However, the reason for the sharp sell-off is simple. Ophthotech, a stock valued at just $1.5 billion, is currently developing a drug called Fovista and is undergoing Phase 3 trials. Meanwhile, Regeneron (NASDAQ: REGN), a $40 billion pharmaceutical company that is developing a similar therapy as Fovista reported disappointing news from its own clinical trials.

Specifically, Regeneron said that results from a Phase 2 study evaluating its rival to Fovista ( aflibercept co-formulated with rinucumab) failed to achieve its primary endpoint of demonstrating an improvement in best corrected visual acuity (BCVA) compared to intravitreal aflibercept injection monotherapy at 12 weeks.

Investors took notice and punished Ophthotech’s stock under the assumption that if the substantially larger Regeneron can’t find success in its clinical studies with its much larger resources then how can Ophthotech achieve success?

Wall Street analysts weren’t in complete unison with the Street. For instance, Dr. Yigal Nochomovitz, an analyst at Citi noted a flaw in this logic. Among other factors, the analyst pointed out that Regeneron’s endpoint is only 12 weeks while Fovista’s endpoint is double at 24 weeks. As such, an additional 12 weeks could have been needed to demonstrate a benefit in Regeneron’s study.

All attention will now be focused on Ophthotech who is expected to report data from its ongoing Phase 3 trial evaluating Fovista at some point in the fourth quarter of this year.

There are two conclusions that investors can make from Regeneron’s announcement on Friday. First, as previously noted, Regeneron is a giant compared to Ophthotech so if Regeneron fails then there is little chance Ophthotech can succeed.

Or, Ophthotech Fovista could find success where Regeneron failed. With Regeneron’s therapy suffering setbacks, Ophthotech could dominate the market as its therapy would be without a major competitor in Regeneron.

Shares of Regeneron were trading lower on Friday but to a lesser extent. It’s stock traded as low as $390.56 but has since rebounded above the $400 level. The stock was also lower by less than one percent on the day.