OvaScience Reports Promising IVF Alternative, But Still Faces Challenges

OvaScience Reports Promising IVF Alternative, But Still Faces Challenges
August 28, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Cambridge, Mass.-based OvaScience announced earlier this week that it had published a study in the Journal of Fertilization: In Vitro-IFV-Worldwide Reproductive Medicine, Genetic & Stem Cell Biology that covered the company’s Augment fertility treatment.

The study compared the Augment treatment to standard in vitro fertilization (IVF). Augment takes a part of a woman’s egg, the mitochondria, and replaces them with healthy versions. The mitochondria produce energy in cells. In the study, the company studied 25 women in a pre-planned, as opposed to after-the-fact, study. Half of each of the participant’s eggs were given Augment treatment. The other half was treated with standard IVF. After analysis, 16 of the women whose eggs were healthy enough to be implanted, 14 were from the Augment treatment, two from the traditional IVF treatment.

“As with the introduction of other new fertility technologies, we anticipated that IVF clinics would gain experience using the Augment treatment by taking various approaches to demonstrate benefit,” said Michelle Dipp, chief executive officer of OvaScience in a statement. “We are pleased that the approaches used to date have shown marked and significant improvement with the Augment treatment compared to standard IVF. We believe that egg allocation offers a more controlled approach in a real-world setting. We look forward to additional patient experiences and publications that demonstrate the benefits of the Augment treatment.”

seemed to like the news, at least for a little while. On Oct. 14, 2014, shares traded for $20.82, rose to $47.85 on Dec. 19, 2014, and spiked to $53.46 on Mar. 24, 2015. It then began a big drop, hitting $24.49 on May 6. Shares rallied on June 16 to $38.74, then dropped to $18.90 on Aug. 24. Shares are currently trading for $20.88.

Don Seiffert, writing for the Boston Business Journal provided some analysis. This week’s news was a definite positive. The approach has promise. Seiffer also indicates that Dipp and other executives at the company are consistently buying shares of the company. They’re showing confidence in the company even if the market in general doesn’t seem to be. Dipp owns 3.6 percent of the company’s shares.

The company’s technology has the potential to fill an unmet need. IVF is on the increase. In the U.S. alone, which is considered to be about 10 percent of the IVF market, there were 174,962 IVF cycles in 2013, up from 165,172 in 2012. There isn’t a lot out there to replace IVF, which as the study suggests, can be a little hit-and-miss.

OvaScience has its challenges, and Seiffert outlines three of them. One reason behind why the company’s shares have lost half their value in the last year is probably related to the U.S. Food and Drug Administration (FDA) telling the company that its treatment technology should be regulated like a drug, as opposed to a biological process. The biological process approval has a lower bar to overcome. In addition, OvaScience has focused its trials outside the U.S., or in other words, the other 90 percent of the market. However, Seiffert believes that approval in the U.S. would be necessary for marketing perception for investors.

On a more investment-oriented focus, Seiffert says, “The company remains among the most heavily-shorted in the Boston area, with a short-to-float ratio of more than 37 percent.” He suggests that might be related to short sellers’ attraction to companies that take non-typical approaches to commercialization, such as OvaScience’s focus on international markets over the U.S. market.

Perhaps more critical is that OvaScience doesn’t yet generate much revenue. That’s not uncommon in development-stage biotech companies, but OvaScience has been marketing Augment for almost a year and investors may be getting impatient. J.P. Morgan analysts project the company will generate $4 million this year, but all of that will be in the fourth quarter. It’s not expected to be profitable until 2018, if it grows to $180 million by that time.

Barron’s reported in March that what the company really has going for it is potential, and predicted the possibility of the stock hitting $100. It also pointed out that the company’s “current financials aren’t much to look at. Revenue last year was zero. The net loss was about $50 million, including $22 million in research and development spending.” Yet analysts predict it could generate annual earnings of $400 million on revenue of $1 billion.

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