OIS Index Declines in May Despite Positive Pipeline News from Aerie

In October, we launched the OIS Index, a composite of ophthalmic growth stocks, to track the investment performance of our sector. Our goal is to highlight ophthalmology investment performance, in absolute terms and compared with broader biotech and medical device industries, as well as the stock market as a whole. The OIS Index was launched with an initial value of 1,000 on October 1; as of the market close on May 30, the OIS Index stood at 865.43.

After three straight months of gains, the OIS Index declined by 2.5% in May. The OIS Index outperformed the NASDAQ Biotechnology Index, which declined by 4.5% in May. The overall US stock market, as measured by the Russell 3000 Index, gained 0.8% over the same period, and a composite of US medical device stocks gained 2.0%. Although the OIS Index declined only modestly in value during May, the number of declining stocks outnumbered advancing stocks by 24 to 7.

Over the three-month period ending on May 30, the OIS Index (–0.7%) outperformed the NASDAQ Biotechnology Index (–4.3%), but underperformed both the Russell 3000 Index (+1.7%) and US medical device stocks (+7.7%).

Drivers of OIS Index Performance

By far, the largest contributor to OIS Index performance in May was Aerie Pharmaceuticals (+2.0% contribution to index performance, stock up 26.0%). On May 24, the company reported positive top-line efficacy results from the 90-day Phase III “Mercury 2” registration trial for Roclatan, a fixed-dose combination product candidate for glaucoma. These results were consistent with the successful 90-day top-line efficacy results from the Mercury 1 trial, reported in September 2016. Mercury 2 achieved its primary efficacy endpoint of demonstrating statistical superiority over each of its components, including Aerie product candidate Rhopressa (netarsudil ophthalmic solution 0.02%), and prostaglandin analogue latanoprost. Immediately following this announcement, Aerie raised $125 million in a stock offering.

The largest percentage gain was posted by pSivida Corp. (+0.4% contribution to index performance, stock up 34.9%). The stock surged on reports of Durasert pipeline progress, including positive 12-month data from the first Phase III trial of the Durasert three-year sustained release treatment for posterior segment uveitis.

Ocular Therapeutix (+0.5% contribution to index performance, stock up 8.9%) gained following clinical data presentations on DEXTENZA and sustained release intravitreal tyrosine kinase inhibitor (TKI) depot at the ASCRS and ARVO meetings.

Nicox (+0.4% contribution to index performance, stock up 8.8%) has gained steadily over the past seven months (+44% since November 1), leading up to the May 31 FDA approval of ZERVIATE (cetirizine ophthalmic solution 0.24%), the first topical ocular formulation of this antihistamine, for the treatment of ocular itching associated with allergic conjunctivitis. This news posted after the end of the month, so it could have an even greater impact on June performance of the OIS Index.

Like Nicox, Carl Zeiss Meditec (+0.9% contribution to index performance, stock up 8.7%) has also gained steadily over the past seven months (+46% since November 1), and reported strong six-month financial results on May 10.

As was the case in April, the largest negative impact on the OIS Index in May came from Glaukos Corp. (–1.1% impact on index performance, stock down 14.8%), which continued its valuation correction after the stock reached an all-time high in early April.

Spark Therapeutics (–1.0% impact on index performance, stock down 11.6%) and STAAR Surgical (–0.8% impact on index performance, stock down 12.5%) both declined following quarterly reports of financial results and business progress.

Four stocks in the OIS Index each declined by more than 20% in May, but had a combined impact of only 1.6% on index valuation due to relatively low weightings within the index: Imprimis Pharmaceuticals, NovaBay Pharmaceuticals, Ophthotech Corp., and Iridex Corp.