One Way To Look At The Ophthotech-Regeneron Pair Trade

Opthotech Corp OPHT shares plummeted 84.6 percent on Monday morning after the company reported negative results in its Phase III OPH1002 and OPH1003 studies. The two combination trials in wet age-related macular degeneration (AMD) failed to meet primary endpoints.

“We found no material evidence of Fovista efficacy communicated in the press release and therefore model zero probability of success for Fovista going forward,” Chardan Capital analyst Gbola Amusa said in a downgrade note following the news. Chardan Capital cut its rating on Opthotech from Buy to Neutral and slashed its price target for the stock from $200 to $15.

Fortunately for Regeneron Pharmaceuticals Inc REGN investors, Opthotech’s failure eliminates a potential threat to Regeneron’s Eylea wet AMD market. Shares of Regeneron are up 5 percent on Monday.

Amusa has upgraded Regeneron from Sell to Neutral following the Opthotech news and boosted Chardan’s price target from $300 to $350.

The bad news from Opthotech certainly caught the market off-guard.

Earlier this month, Benzinga reported a number of large call options bets made on Opthotech in the $40-$95 range. Unless those purchases were made as hedges against large short bets on the stock, those gambles will all end up losers in the wake of the disappointing trial results.