OIS Index Deep in Bear Territory in Q3

The OIS Index of ophthalmic stocks posted a miserable Q3 performance, led by the biopharmaceutical stocks in the index. The OIS Index (-12.0%) underperformed the NASDAQ Biotechnology Index (-8.8%), the overall US stock market as measured by the Russell 3000 Index (+0.7%), and a composite of US medical device stocks (+2.7%).

Declining stocks in the OIS Index outnumbered advancing stocks by a margin of 25 to 10 during Q3, following a similar 21 to 13 ratio in Q2. Of the 35 stocks in the index, 14 declined by more than 30% in Q3, including 13 ophthalmic biopharma stocks and only one ophthalmic device stock.

Positive Contributors

The largest positive contributor in Q3 was Opthea Ltd (+2.8% contribution to index performance, stock up 400%). The company reported that its lead drug candidate met its primary visual acuity endpoint in a Phase 2b wet AMD study.

Carl Zeiss Meditec was the second largest positive contributor (+1.7% contribution to index performance, stock up 21.3%), driven by another strong quarterly report, increased revenue and EBIT margin expectations for the current fiscal year.

Other top performers in Q3, but with a smaller impact due to lower weighting within the OIS Index, included Molecular Partners (+19.8%), which along with its partner Allergan announced acceptance of a US FDA Biologics License Application (BLA) and validation of a European Medicines Agency (EMA) Marketing Authorization Application (MAA) for Abicipar pegol, an investigational DARPin therapy for wet AMD. An FDA decision on the BLA is expected in mid-2020, and the medicines agency’s decision on the marketing application is expected in H2-2020.

Glaukos’ stock fell 17.1% when the company announced its decision to acquire Avedro in Q3; Avedro’s, however, gained 15.6%.

Negative Contributors

Three of the four largest negative contributors to index performance in Q3 were gene therapy stocks. Adverum Biotechnologies (-2.5% contribution to index performance, stock down 54.2%) dropped
after data were released on the company’s gene therapy candidate for wet AMD. Efficacy data from cohort 1 of the phase 1 study were generally positive, however, mild or moderate adverse events were reported in all six patients.

The declines for MeiraGTx (-2.2% contribution to index performance, stock down 40.7%) and REGENXBIO (-1.8% contribution to index performance, stock down 30.7%) did not seem connected to specific events, but rather to a broader valuation correction among gene therapy stocks.
Aerie Pharmaceuticals (-2.1% contribution to index performance, stock down 35.0%) declined against a backdrop of slower than expected revenue growth of its glaucoma franchise. The stock has declined by 60% since the March 12 FDA approval of Rocklatan.

The stock of 11 other companies each declined by at least 20% in Q3, but these stocks had less of an impact on the OIS Index due to their lower weighting within it: NovaBay Pharmaceuticals (-63.9%), IRIDEX (-59.3%), KalVista Pharmaceuticals (-47.6%), Kala Pharmaceuticals
(-40.4%), Alimera Sciences (-36.4%), Unity Biotechnology (-35.8%), Harrow Health (-35.4%), Clearside Biomedical (-35.2%), Oxurion (-32.0%), Ocular Therapeutix (-30.7%), and Aerpio Pharmaceuticals
(-25.3%).

The OIS Index, a composite of ophthalmic growth stocks, tracks the investment performance of our sector. Our goal is to highlight ophthalmology investment performance in absolute terms, as compared to broader biotech and medical device industries, and to the overall stock market. The OIS Index was launched with an initial value of 1,000 on October 1, 2016; as of October 1, 2019, the OIS Index stood at 975.75.