Small Cap Stocks Lead the Way for OIS Index in September

Small Cap Stocks Lead the Way for OIS Index in September

The OIS Index of ophthalmic stocks gave back some of its recent gains in September, declining by 4.1% against an overall flat market backdrop. The NASDAQ Biotechnology Index and the overall US stock market as measured by the Russell 3000 Index were essentially unchanged during the month, while a composite of US medical device stocks continued its strong run with a gain of 3.5%. Declining stocks outnumbered advancing stocks in the OIS Index 24 to 11 in September. Despite this correction, the OIS Index has delivered solid returns relative to its key market benchmarks over the past three, six, and 12 months.

Top Performers

The key drivers of the OIS Index in September were companies with lower weightings within the index due to their smaller market capitalizations.The largest contributor to OIS Index performance was Aldeyra Therapeutics (+0.9% contribution to index performance, stock up 63.3%). The stock surged following the September 26 announcement of positive results from a Phase IIb trial of the topical ocular solution reproxalap in patients with dry eye disease. The company immediately followed this announcement with a public stock offering expected to raise approximately $70 million.

The second largest contributor to OIS Index performance last month was EyePoint Pharmaceuticals (+0.6% contribution to index performance, stock up 63.0%). Over the past quarter, the company has raised $35 million in capital and received pass-through status and a C-code for DEXYCU (dexamethasone intraocular suspension 9%). EyePoint has a Food and Drug Administration Prescription Drug User Fee Act date of November 5 for YUTIQ for non-infectious posterior segment uveitis.

Applied Genetic Technologies Corporation (AGTC) gained 64% in September, surging at the end of the month following positive analyst commentary regarding the prospects for its adeno-associated virus gene therapy candidate for the treatment of X-linked retinoschisis.

KalVista Pharmaceuticals gained 30.1% in September, on the heels of an 81.5% gain in August. The company has significantly bolstered its balance sheet over the past two months. It raised $78 million in a public stock offering on September 10, following a $14.6 million registered direct stock transaction on July 30.

Negative Contributors

The four largest negative contributors to OIS Index performance in September were not impacted by significant negative news, but instead declined following gains in earlier periods. They include Unity Biotechnology (–14.5%), Adverum Biotechnologies (–20.4%), Kala Pharmaceuticals (–26.9%), and Oxurion (previously ThromboGenics, –25%).

The stock with the largest percentage decline in September, but with a smaller impact due to lower weighting within the OIS Index, was EyeGate Pharmaceuticals (–44.6%). The company announced disappointing top-line results from its Phase III study of EGP-437 delivered through the EyeGate II Drug Delivery System (EGDS) in patients with non-infectious anterior segment uveitis.

OIS Index Quarterly Update

With the October 1 quarterly rebalancing, Bausch Health Companies has been added to the OIS Index. Valeant Pharmaceuticals rebranded itself as Bausch Health in July, two years into a turnaround process focused on the resolution of legal and financial issues. Over this period, eye care grew from 36% to about 44% of the company’s total revenues. Bausch Health enters the OIS Index as the largest component, accounting for 27% of total market capitalization of companies in the index, which has been adjusted to 10% of total index value.

Bausch Health replaces Realm Therapeutics, which has been removed from the index. Realm’s market capitalization has fallen to $10 million following disappointing clinical trial results. The company is exploring strategic alternatives.

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 October 1, 2018, the OIS Index stood at 1,121.70.

Michael Lachman can be reached at