Biotech In Focus: Vericel Corp (NASDAQ:VCEL) and Ophthotech Corp (NASDAQ:OPHT)

We’re off to a fresh week in the biotech sector, and there has been no short of catalysts to get markets moving both ending in to the close of last week, and the start of this. Here’s a look at two of the biggest movers, what’s driving the action in each, and where we expect things to go from here.

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The two companies in focus are Vericel Corp (NASDAQ:VCEL) and Ophthotech Corp (NASDAQ:OPHT).

Let’s kick things off with Vericel.

Vericel is sub $100 mm biotech company based out of Massachusetts, with a focus on the development of cellular based therapies in severe indications. It’s lead (development) asset is a product called MACI. MACI stands for the very wordy ‘matrix applied characterized autologous cultured chondrocytes’ and is under investigation as a product for the treatment of symptomatic cartilage defects of the knee in adult patients. The system involves the combining of what are called autologous cultured chondrocytes, which are the only cells found in healthy cartilage, with a collagen membrane. It’s an implant type system, and it’s designed to encourage the growth of cartilage in (in this instance) the knees of patients whose cartilage has deteriorated for whatever reason.

The current standard of care (SOC) in this space is something called microfracture treatment, which is a process through which a surgeon creates tiny fractures in the joint ends of a patient. The tiny cracks fill up with cartilage, and this – in turn – promotes further cartilage growth. Vericel attempted to prove as part of a phase III investigation called SUMMIT that its MACI procedure was superior to microfracture treatment in patients with a severe form of the condition, and the trial was a success. It submitted a biologics licensing application (BLA) to the FDA for the treatment, and the agency set a PDUFA of January 3, 2017. The company is gaining strength (hence its inclusion in this list) as markets buy in to the stock ahead of the PDUFA, in anticipation of a regulatory green light for commercialization. Between December 7-12, Vericel’s price per share rose from $2.35 to $2.88, a gain of more than 22%, on far higher than average daily trading volume. We expect this one to continue gaining strength heading into the middle of this week, as the accumulation continues ahead of decision day.

So, moving on, let’s look at Ophthotech.

This one is a similar event driven move to that seen in Vericel, albeit for a different target and at a different stage along the regulatory pathway than MACI. The asset in question is called Fovista, and it’s a treatment designed to target a condition called wet age-related macular degeneration, or WAMD. The condition occurs when – as its name suggests – the macula in the eye deteriorates. It’s the leading cause of vision loss in the US, outweighing both glaucoma and cataracts, and affects more than 10 million Americans at time of writing. It’s a big target indication, and one that could be a blockbuster for a treatment that successfully navigates the path to approval.

Unfortunately, it doesn’t look like its going to be Fovista.

Ophthotech gained in to the end of last week, as markets bought in to the company in anticipation of a data drop from two phase III trials investigating the impact of Fovista in WAMD patients early this week.

The company just put out the data, as expected, but it doesn’t read well. Across the two phase III trials, Fovista failed to meet its pre-specified primary endpoint of mean change in visual acuity at 12 months. There was some slight comparability to current SOCs across a spectrum of secondary endpoints, but none significant enough to warrant any real further investigation, and it looks like Fovista is off the table for the time being. Management put out a statement saying it will continue to analyze the data for the purposes of “better understanding” the numbers, but this is generally management speak for “we’re discontinuing this one” in the development stage biotech space.

As is to be expected, the company is down on the news, and dramatically so. At time of writing – midday US on Monday – Ophthotech is down close to 85% on its Friday close. The company relied almost exclusively on this program to underpin its valuation, and so we don’t expect a recovery near term.

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