Ophthotech: Start Preparing For The Blockbuster - Fovista

| About: Ophthotech Corporation (OPHT)

Summary

As Fovista gets closer to the launch, it should start reflecting positively in the stock price.

Strategically well positioned, competitively well-placed with good data and solid partnerships in place for the launch.

The importance of Fovista to Novartis and Roche as well as improving dynamics otherwise offer strong floor on the downside.

Fovista, for wet age-related macular degeneration, by Ophthotech (OPHT) is one of the most anticipated drugs in the biotech space. Whether one looks at the developmental data, partnerships made, management changes or other initiatives underway, the business seems to be ready to monetize the opportunity. In the meantime, the stock is still trading around the levels seen at this time last year, offering a good opportunity to take a closer look.

There is enough to suggest that the drug is a potential blockbuster (sales of more than a billion dollars) and considering the high stakes for Novartis (NYSE:NVS), because of Lucentis, and Regeneron (NASDAQ:REGN), because of Eylea, and the scale of trials, the commercial launch, if approved by FDA, should be swift and effective. After the poor performance of iSONEP by Lpath (NASDAQ:LPTN) in phase II wet AMD study last year, there is hardly any competition for the drug in the near future.

The promise

Driven by demographics, the number of patients getting diagnosed with age-related macular degeneration (AMD) is increasing and currently, anti-VEGF agents like Lucentis by Novartis, Eylea by Regeneron and Avastin by Roche Holdings (OTCQX:RHHBY) are the major treatments that are used to address this condition. For both Novartis and Regeneron, the treatment makes up almost $4 billion in sales, highlighting the importance as well as market potential of the treatment.

Fovista blocks PDGF, which when combined with an anti-VEGF drug can be significantly more effective than just the anti-VEGF drug for patients who gain vision for just two years after initiating treatment, patients who do not gain vision at all or the patients who experience some improvement initially, but lose vision over time.

Ready to monetize

From an operational execution standpoint, the company seems to be exceptionally well placed to monetize the opportunity, whether looking at the development progress or the preparedness for commercial launch and sales afterward, if approved.

Fovista, currently in Phase 3 clinical trials, should be able to report initial top line data from trials of Fovista in combination with Lucentis by the fourth quarter of this year. As the most advanced anti PDGF agent in development, it might be the first to market in the class of novel therapies for wet AMD, if approved, and a possible launch in the U.S. by mid-late 2017.

The partnership entered over the past two years, with Novartis as well as Roche, not just helped the company with the cash but also positions the business for a quick commercialization post approval. In mid-2014, the company, not that long after the mid-stage results, entered into an agreement with Novartis to commercialize Fovista outside the U.S. as a stand-alone treatment as well as a co-formulation for $200 million up-front and up to $800 million in milestones and potential royalties. Last year, Roche paired with Novartis to split ex-U.S. rights. All in all, once approved, commercial launch and ramp may not pose any challenge for the business.

Even though the story is all about Fovista and wet AMD right now, the development work of Zimura, an inhibitor of complement factor C5, for the treatment of a form of dry AMD is underway. Besides having trial results from Fovista-Lucentis combination by the end of the year, results from the study evaluating the combination with Eylea is expected by next year.

A strong floor

At 11-12 times EV/expected revenue for next fiscal year, the stock is trading in line with some of the other biotech names that are expecting trial results from a major drug under development over the coming months, be it Kite Pharmaceuticals (NASDAQ:KITE), which is expecting results from KTE-C19, or Achillion Pharmaceuticals (NASDAQ:ACHN), which is expecting results for Odalasvir.

Considering how important a combination with Fovista is for both Novartis and Roche, one can expect a decent floor to the stock, even if one is conservative to not expect a bidding war for the possession of Fovista.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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