Solid September Closes OIS Index 1st Year
One year ago, 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 compare the sector 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, 2016; exactly one year later, the OIS Index stands at 901.06.
It has certainly been a rough first year for the OIS Index, which declined in value by 9.9% during a year when the overall US stock market, as well as the biotechnology and medical device sectors, increased in value by about 15%. Much of this underperformance occurred during the last quarter of 2016 and the beginning of 2017, when several ophthalmology pipeline setbacks prevented the sector from participating in the post-election stock market rally.
At the beginning of each quarter, the OIS is rebalanced, and stocks are added to and removed from the index as appropriate.
At this time, we are adding Kala Pharmaceuticals to the index. Kala completed a successful initial public offering in July, and the stock has traded up to $22.84 from the IPO price of $15.00. Kala enters the OIS Index with a market cap of $553 million, making it the sixth-highest-valued company in the index. Also at this time, we are dropping two names from the OIS Index: Inotek Pharmaceuticals, which has announced a merger with Rocket Pharmaceuticals Ltd. that will shift the company’s focus away from ophthalmology; and Escalon Medical, which now has a market cap of only $1 million. We’ve reduced the number of stocks in the index from 32 to 31.
In September, the OIS Index outperformed its benchmark indices, gaining a solid 3.9%. During the month, the NASDAQ Biotechnology Index gained 0.1%, a composite of US medical device stocks gained 0.7%, and the overall US stock market, as measured by the Russell 3000 Index, gained 2.3%. Among the 32 stocks in the OIS Index, advancing stocks outnumbered declining stocks 19 to 13 during the month.
The largest positive contributor to OIS Index performance in September was Aldeyra Therapeutics (+1.0% contribution to index performance, stock up 73.5%). On September 12, Aldeyra announced positive results from a Phase IIa clinical trial of topical ocular ADX-102 in patients with dry eye disease. Later in the month, the company completed a public stock offering that raised nearly $27 million.
Other large contributors to positive OIS Index performance in September were Clearside BioMedical (+0.9% contribution to index performance, stock up 20.0%), Adverum Biotechnologies (+0.8% contribution to index performance, stock up 32.7%), and Spark Therapeutics (+0.9% contribution to index performance, stock up 8.3%), which delivered solid gains for the fourth month in a row. Other top performers during September, but with a smaller impact on the OIS Index due to lower weighting within the index, included Inotek Pharmaceuticals (+74.5%), Presbia (+50.8%), and ThromboGenics (+25.2%).
On the negative side, Aerie Pharmaceuticals (–1.4% contribution to index performance, stock down 15.3%) declined after the company announced an October 13 FDA Advisory Committee review of Rhopressa (netarsudil ophthalmic solution 0.02%) for the treatment of open-angle glaucoma or ocular hypertension. Glaukos (–0.9% contribution to index performance, stock down 12.6%) declined after the company lowered 2017 financial guidance at its September 14 investor day event. Applied Genetic Technologies Corporation (stock down 14.1%) declined after the company’s September 13 financial report and business update.
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