Analysts are weighing in on Ophthotech Corp (NASDAQ:OPHT) and Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), as shares of both healthcare firms fell sharply today, hitting new 52-week lows. The analysts reflect on Ophthotech’s phase III clinical failure in wet AMD, and Alexion’s management transition announcement. Let’s take a closer look:
Monday turned out to be a nightmare for shareholders of Ophthotech, after the eye drug maker reported negative results in wet age-related macular degeneration for OPH1002 and OPH1003, the company’s pivotal phase III trials testing Ophthotech’s anti-PDGF therapy Fovista in combination with anti-VEGF therapy Lucentis, versus Lucentis monotherapy. In the wake of the negative results, Ophthotech shares are crashing over 80% to $5.99.
In reaction, Chardan analyst Gbola Amusa downgrades Ophthotech from Buy to Neutral, while slashing the price target to $15 (from $200), which implies an upside of 147.5% from current levels.
Amusa commented, “We found no material evidence of Fovista efficacy communicated in the press release and therefore model zero probability of success for Fovista going forward . OPH1002 and OPH1003 are international, multicenter, randomized, double-masked, controlled phase III studies containing 1,248 patients in total. There are no important safety concerns communicated for Fovista.”
“Our price target of $15 is based on a 1.9x multiple applied to roughly $300 million of Ophthotech cash. (Ophthotech had $321.2 million in cash as of 30 September 2016.) A 1.9x multiple of cash is roughly consistent with the trading of companies we cover that have had issues in the past year with mid-to-late-stage products in development,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gbola Amusa has a yearly average return of -9.9% and a 36% success rate. Amusa has a -19.3% average return when recommending OPHT, and is ranked #4116 out of 4273 analysts.
Out of the 8 analysts polled by TipRanks (in the past 3 months), 5 still rate Ophthotech stock a Buy, 2 rate the stock a Hold and 1 recommends to Sell. With a return potential of over 1000%, the stock’s consensus target price stands at $68.17, but we believe it will be reduced sooner than later.
Alexion Pharmaceuticals, Inc.
Alexion shares are falling nearly 16%, as of this writing, after the orphan-drug firm announced that CEO David Hallal is leaving “for personal reasons”; former AZN CEO David Brennan is acting as Interim CEO while a permanent CEO is sought. As well, CFO Vikas Sinha is leaving “to pursue other opportunities,” being replaced by former Honeywell CFO David Anderson. These announcements were unexpected and therefore create uncertainty and pressure on the stock.
However, Piper Jaffray analyst Joshua Schimmer remains bullish, reiterating an Overweight rating on ALXN stock, with a price target of $176, which implies an upside of 52% from current levels.
Schimmer commented, “Surprising new of both CEO and CFO departures at ALXN on the heels of the whistleblower case regarding Soliris sales practices and delayed 10Q filing. Shares are trading down heavily in the pre-market, but we still find it hard to believe that a whistleblower case that has not led to any findings which require restatement of historical results (and for a product like Soliris and with this particularly credible management team) will lead to a meaningful change in the outlook for the company. We suspect that the handling of the whistleblower case led to a fight for control of the board which the CEO/CFO lost, although time will tell if there is anything more sinister underlying. We still rank ALXN as a top pick and suspect that this will mark the peak of fear and the beginning of recovery of the stock. We would buy on this morning’s weakness.”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks.com, analyst Joshua Schimmer has a yearly average return of -5.4% and a 40% success rate. Schimmer has a -8.0% average return when recommending ALXN, and is ranked #4128 out of 4273 analysts.
Out of the 15 analysts polled by TipRanks (in the past 3 months), 12 remain bullish on the stock, while 3 are neutral. With a return potential of nearly 52%, the stock’s consensus target price stands at $170.62.