UPDATE: JPMorgan Upgrades Ophthotech Corp (OPHT) to Overweight

(Updated - June 2, 2016 9:36 AM EDT)

JPMorgan upgraded Ophthotech Corp (NASDAQ: OPHT) from Neutral to Overweight with a price target of $84.00 (from $60.00). Analyst Anupam Rama sees a high probability of success for its phase 3 Fovista / Lucentis combination trials. Positive data could create upside of 55%-150% vs downside of about 80%, on low probability of failure.

"We have always had a favorable view of the phase 2b dataset for Fovista. Based on further physician diligence, conversations with the company, and literature review, we continue to see a very high POS for the Fovista phase 3 Lucentis combination studies reading out in 4Q (80% POS in model). Our base case assumes a ~4+ letter gain in visual acuity (VA) compared to Lucentis monotherapy (i.e., near replication of phase 2b results; also current Street benchmark) resulting in ~55-60% upside, with the homerun scenario (5+ letter VA gain) resulting in ~150% upside, by our analysis," said Rama.

"Our very worst case scenario, or outright trial failure, would result in ~80-85% downside (or trading to cash; low probability, in our view). Indeed, we see a classic biotech binary event ahead for OPHT shares," continued the analyst.

Rama added, "Interestingly, while VA has been the major focus by the Street (rightfully so, being the phase 3 primary endpoint), we believe product differentiation by Fovista will ultimately also come from the totality of the data, including relative benefit on key secondary endpoints (i.e., % of patients with ≥20/25 vision, etc.). We believe secondary endpoint benefit is an underappreciated point by the Street and prior phase 2b data suggest differentiation from standard of care. For reference, we estimate peak Fovista sales of ~$2B+ globally in our base case. Net-net, our move to Overweight is based on our expectations of a positive results in the phase 3 Fovista readout, meaningful clinical differentiation, and multi-billion dollar sales potential."

For an analyst ratings summary and ratings history on Ophthotech Corp click here. For more ratings news on Ophthotech Corp click here.

Shares of Ophthotech Corp closed at $53.35 yesterday.

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