Battered Ophthotech Cuts 80% of Staff After Failed Clinical Trials

Battered Ophthotech Cuts 80% of Staff After Failed Clinical Trials January 18, 2017
By Mark Terry, Breaking News Staff

New York City and Princeton, NJ-based Ophthotech Corporation has announced that it is cutting about 80 percent of its staff in the first six months of this year.

On December 12, 2016, the company announced that its two pivotal Phase III clinical trials evaluating Fovista (pegpleranib) anti-PDGF therapy in combination with Lucentis (ranibizumab) compared to Roche ’s Lucentis monotherapy for wet age-related macular degeneration (AMD) failed to hit their primary endpoints. The pre-specified endpoints were mean change in visual acuity in 12 months.

As of January 31, 2016, the company employed 116 full-time employees. Ophthotech’s recent SEC filing did not specify the current number of employees, but indicated it would cut 125 to 135 staffers, which would leave 20 to 30 remaining.

The company projects that the cuts will create about $25 to $30 million in annualized costs savings beginning in the third quarter of 2017. It will incur about $14.4 million in pretax charges during the first half of this year related to the job cuts.

In September 2016, Ophthotech took a drubbing when Regeneron Pharmaceuticals reported a midstage combination trial with anti-PDGF beta rinucumab with Eylea also failed to show an improvement over Eylea as a monotherapy. Regeneron’s Phase II CAPELLA trial also indicated that patients receiving the combination therapy had more adverse events. As Brian Feroldi wrote for The Motley Fool at the time, “While this study did not involve Ophthotech’s lead compound Fovista—itself an anti-platelet-derived growth factor (anti-PDGF) agent—the markets now have a renewed worry that anti-PDGF treatments may not improve upon the current standard of care. Given that a lot of Ophthotech’s $1.5 billion market valuation hinges on the future success of Fovista, investors are selling off shares on the news.”

In mid-2017, there will be another Phase III trial report, which evaluates Fovista, Eylea and Roche’s Avastin (bevacizumab).

In May 2014, Novartis and Ophthotech signed an ex-U.S. licensing and commercialization agreement for Fovista. Novartis gained exclusive rights to commercialize the drug outside the U.S., while Ophthotech retained commercial rights in the U.S. Potential payments to Ophthotech in upfront and milestone payments could exceed $1 billion, not including any royalties.

Further exaggerating Ophthotech’s woes, yesterday Los Angeles-based Lundin Law PC, a shareholder rights firm, filed a class action lawsuit against Ophthotech on behalf of investors who bought or acquired company shares between May 11, 2015 anad December 12, 2016. The lawsuit alleges that Ophthotech published deceptively positive reports about Fovista’s success and potential used in combination with Lucentis. The case argues that the false claims caused company stock to trade at artificially inflated prices.

Ophthotech dropped at the news in December and has remained flat ever since, currently trading for $4.72.

Of 12 analysts, three gave the company a “buy” rating, zero a “sell” and nine a “hold.” Generally speaking, these occurred on December 12, 2016 or shortly afterwards. The company’s market cap is $167.14 million and currently has negative earnings.

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