OIS Index: No Immunity to Coronavirus Selloff

OIS Index: No Immunity to Coronavirus Selloff

The OIS Index of ophthalmic stocks followed global stock markets into bear market territory in Q1, declining 21.2%, in line with the overall US stock market as measured by the Russell 3000 Index (-21.3%). Biotech stocks (-10.4% as measured by the NASDAQ Biotechnology Index) and medical device stocks (-14.7%) have been relative safe havens, likely driven by demand for healthcare products to address the coronavirus pandemic and the urgent need for vaccinations and treatments.

Ophthalmic stocks have more closely tracked the broader market than the biotech and medical device sectors. This should come as no surprise, given that the bellwether procedure in ophthalmology – cataract surgery – has been classified as non-essential and subject to postponement, and that other key ophthalmic products and procedures, including contact lenses and refractive surgery, have a strong consumer component.

Declining stocks in the OIS Index outnumbered advancing stocks by a margin of 31 to 4 during Q1.

Positive Contributors

The largest positive contributor to index performance in Q1 was Oyster Point Pharma (+1.1% contribution to index performance, stock up 43.2%). In January, the company announced positive top-line results from a Phase 2 study for its nasal spray to treat dry eye disease. At the end of the quarter, Oyster Point announced completion of enrollment in its pivotal Phase 3 trial.

Kala Pharmaceuticals was the second largest positive contributor (+0.8% contribution to index performance, stock up 138%). The stock moved higher in January following completion of enrollment in the company’s STRIDE 3 Phase 3 study in dry eye disease and received a further boost in March with the announcement of positive topline results from the trial.

Ocular Therapeutix (+25.3%) announced positive efficacy data from a Phase 1 study of the company’s long-acting travoprost intracameral implant for the treatment of glaucoma or ocular hypertension, as well as positive interim Phase 1 data for a long-acting intravitreal implant for the treatment of wet AMD.

Negative Contributors

The largest negative contributor in Q1 was Bausch Health (-3.8% contribution to index performance, stock down 48.2%), giving up the gains delivered in Q4-2019, during which this stock was the largest positive contributor to OIS Index performance. In February, Bausch reported Q4-2019 financial results, including a large net operating loss driven by the accrual of legal reserves, primarily related to legacy Valeant litigation.

Glaukos was the second largest negative contributor (-2.6% contribution to index performance, stock down 43.3%). The stock declined following the announcement of lower-than-expected 2020 revenue guidance.

Nine additional stocks in the OIS Index declined by more than 40% in Q1, but with less impact on overall performance due to lower weighting within the index. These include:

• Second Sight Medical Products (-83.3%), which at the end of Q1 announced that it would wind down operations due to inability to secure additional financing.
• IVERIC bio (-59.9%), which announced in March a delay in pivotal trial enrollment initiation due to the coronavirus. This stock was the largest percentage gainer in the index in Q4, driven by positive Phase 2b results in geographic atrophy secondary to dry AMD.
• Aldeyra Therapeutics (-57.5%), which announced strategic prioritization of late-stage ocular disease programs and placed on hold two non-ophthalmic programs.
• KalVista Pharmaceuticals (-57.1%), which announced Phase 2 study results in DME that did not meet the primary endpoint in the overall study population, resulting in expiration of an option agreement with Merck.

The OIS Index is a composite of ophthalmic growth stocks which tracks the investment performance of our sector. Our goal is to highlight ophthalmology investment performance, in absolute terms and compared to broader biotech and medical device industries, as well as the overall stock market. The OIS Index was launched with an initial value of 1,000 on October 1, 2016; as of April 1, 2019, the OIS Index stood at 893.90.