OIS Index Posts Modest Gain for Q2; Ophthalmic Market Leader Alcon Joins Index

The OIS Index of ophthalmic stocks posted a modest positive return of +0.8% during the second quarter of 2019. The index outperformed the NASDAQ Biotechnology Index (–2.4%) but lagged the overall US stock market as measured by the Russell 3000 Index (+4.3%) and a composite of US medical device stocks (+4%). Declining stocks in the OIS Index outnumbered advancing stocks by a margin of 21 to 13 during Q2.

Positive Contributors
The largest positive contributor in Q2 was Adverum Biotechnologies (+3% contribution to index performance, stock up 127%), driven by progress in the company’s Phase I trial for its gene therapy candidate for the treatment of wet age-related macular degeneration (AMD).

Two companies each contributed 1.9% to index performance in Q2. MeiraGTx (+56%, following a 78.7% gain in Q1) announced positive data from a Phase I/II trial for the company’s investigational gene therapy for RPE65-deficiency, a condition that causes blindness. Apellis Pharmaceuticals (+30%, following a 47.8% gain in Q1) continued to report progress in its Phase III geographic atrophy trials and in non-ophthalmic development programs.

Other top performers in Q1, but with smaller impacts due to lower weighting within the OIS Index, included Harrow Health, formerly Imprimis Pharmaceuticals (+74.7%), and NovaBay Pharmaceuticals (+40.8%).

Negative Contributors
Aerie Pharmaceuticals (–2.5% contribution to index performance, stock down 37.8%) had gained 31.6% in Q1 in anticipation of the March 12 Food and Drug Administration approval of Rocklatan for glaucoma. However, some of those gains rolled back post-approval, then the stock declined further following a report of lower-than-expected Q1 revenues for Rhopressa.

Seven additional stocks had declines of at least 20% in Q2, but with smaller impacts due to lower weighting within the OIS Index: Aldeyra Therapeutics (–33.6%), Clearside Biomedical (–29.6%), Eyenovia (–28.2%), GenSight Biologics (–26.1%), Kala Pharmaceuticals (–22.9%), KalVista Pharmaceuticals (–22.6%), and EyeGate Pharmaceuticals (–21.3%).

Mid-Year Index Updates
The following stocks have been removed from the OIS Index:
• Nightstar Therapeutics, which was acquired by Biogen.
• EyeGate Pharmaceuticals, which has fallen to a market cap of about $11 million and faces possible de-listing by NASDAQ later this year.
• Spark Therapeutics, which has agreed to be acquired by Roche. Closing of the deal has been delayed due to investigations by regulators in the US and UK into possible effects on competition. Spark’s stock price declined by 10.1% during Q2 as a result of the delays and is trading at a 10.6% discount to the $114.50 cash takeout offer, reflecting uncertainty regarding the deal.

Stocks Added to Index
The following stocks have been added to the OIS Index:
• Alcon. This ophthalmic industry bellwether has re-emerged as a publicly traded company following its April 8 spin-off from Novartis. With a market capitalization of $30 billion, Alcon is now the highest valuation company in the OIS Index, accounting for 38% of the total market valuation (adjusted to 10% of index valuation to limit its impact on performance).
• Cooper Companies has a similar share of the global contact lens market as the newly added Alcon. With a market cap of over $16 billion, Cooper enters with the second highest valuation in the OIS Index (21% of total market valuation, adjusted to 8% of index valuation).
• Avedro, the market leader in corneal cross-linking, completed a successful initial public offering in February, and the stock has gained 40% since then.
• REGENXBIO, the gene therapy company, has a growing focus on ophthalmology with a Phase I/II program in wet AMD and an upcoming clinical program in diabetic retinopathy.
With these latest updates to the OIS Index, ophthalmic device companies now comprise 87% of total valuation of companies in the index (vs. 13% for ophthalmic biopharma companies), and 50% of index valuation after capping of the largest companies’ weightings within the index. This represents a significant shift toward device companies since the OIS Index was launched in October 2016, when device companies represented only 40% of total company valuation and 30% of adjusted valuation within the index.

The OIS Index is a composite of ophthalmic growth stocks that tracks 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 overall stock market. The OIS Index was launched with an initial value of 1,000 on October 1, 2016; as of July 1, 2019, the index stood at 1,109.28.

Michael Lachman can be reached at Michael@EyeQResearch.com.