Home Biotech Are Milestone Payments to Ophthotech Corp (NASDAQ:OPHT) in Jeopardy?

Are Milestone Payments to Ophthotech Corp (NASDAQ:OPHT) in Jeopardy?

Ophthotech Corp (NASDAQ:OPHT)
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Ophthotech Corp (NASDAQ:OPHT)

Ophthotech Corp (NASDAQ:OPHT) shares declined 14.52% after Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY) said its drug for vision loss did not meet its primary endpoint in clinical trials. The ripple effect comes on the heels of the biopharmaceutical company also announcing that a Phase 3 trial of its main candidate drug for the condition, Fovista, failed to meet primary endpoints in two trials.

Opthotech Stock Performance

Last week’s sell-off brought to an end August bullish run that saw the stock add about 7.4 in market value. The stock is currently trading in a strong downtrend in a $2.59-$3.11 trading range. The stock has underperformed the overall industry after shedding more than 90% in market value since the start of the year.

A study of Fovista for the treatment of age-related macular degeneration turned out to be a disappointment as no statistical significance was observed with the drug combination. Disappointing clinical trials have been the biggest undoing for Ophthotech Corp (NASDAQ:OPHT) – thus fuelling a sell-off wave that has pushed the stock from highs of $40 a share to current lows of $2.65.

Following two successive disappointing clinical trials, investors have already started to question the future of an ongoing collaboration with Novartis AG (ADR) (NYSE:NVS).

Ophthotech Corp (NASDAQ:OPHT)
One month OPHT stock price chart

Novartis Agreement Uncertainty

Novartis has already suspended a large part of the agreement that touched on the commercialization of the drug outside the U.S. The giant drug maker insists that the AMD drug will have to prove itself in clinical trials if the licensing agreement is to hold.

Concerns that Novartis could pull away from the deal continues to fuel the sell-off of Ophthotech Corp (NASDAQ:OPHT) stock. Such a move could be catastrophic given that the company derives a good chunk of its revenues from milestones and other payments from collaborations.

Collaborations revenue declined 94% in the recent quarter to $1.7 million – an indication of how things could turn sour if Novartis pulls the plug. Ophthotech Corp (NASDAQ:OPHT) reported a net loss of (-$0.62) a share or the second quarter narrower than a net loss of (-$1.07) a share that analysts were expecting. The company exited the quarter with cash and cash equivalent of $196 million which is sufficient to fund operations over the next 12 months.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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