PIZZODIGINO
Pacifico
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Conclusion: We view the large and durable market opportunity for ophthalmology drugs as positive for companies with ophthalmic pipelines that target retinal diseases, dry eye, and glaucoma. We estimate these markets represent $8B-$10B of sales in the U.S. annually, which could grow to $12B-$15B by 2020 (assuming an 8% CAGR), and we expect much of this growth to be driven by new launches. Our diligence suggests the U.S. ophthalmology market represents about half of the eye drug market worldwide. Therefore, these pipeline opportunities could meaningfully grow the worldwide ophthalmology market and sustain robust sales growth for the foreseeable future. This supports our BUY ratings for ACT and VRX. Other companies this could be positive for include COO, AERI, OPHT, OCUL, AAVL, Nicox, Molecular Partners, and EBIO, among others.
We ForeSEE Three Reasons to Own Ophthalmology Stocks:
#1. Favorable macro trends support the market. This includes an aging demographic (especially in developed markets); rapid growth of middle class in the emerging markets; and an increased global prevalence of diabetes, which leads to higher rates of diabetic retinopathy and diabetic macular edema.
#2. Innovation coming from large and small pharma. We expect approvals and pipeline advancements of important ophthalmology drugs in '15 and '16. 1) The PDUFA date for Shire's Lifitegrast (dry eye) is 10/25/15. 2) VRX/Nicox expect to file their NDA for Vesneo (glaucoma) mid-2015 with approval and launch in '16. We think Vesneo's peak sales potential is underappreciated because we expect its superior safety and efficacy profile to drive uptake. 3) ACT/AGN's DARPin (AMD) will enter Phase 3 trials by 3Q15. 4) EBIO's EBI-005 (for dry eye) first Phase 3 study results are expected 2H15. 5) Phase 3 results are expected for OPTH's Fovista (AMD drug) in 2016. 6) Phase 2a top-line results for AAVL's AVA-101 (AMD) are expected in mid-2015.
#3. Increasing interest and focus on ophthalmology. Ophthalmology drugs and assets have created real value for drug companies. In 2014, the stocks of publicly traded ophthalmology companies such as Regeneron, Cooper, and Santen outperformed the S&P500. There have been five ophthalmology IPOs (OPTH, AAVL, AERI, OCUL, EBIO) over the past two years that have also, for the most part, outperformed the S&P500. Finally, the M&A landscape has been rewarding in ophthalmology as well. This is evidenced by transformational deals such as: Novartis/Alcon, Valeant/Bausch & Lomb, and Actavis/Allergan.
Conclusion: We view the large and durable market opportunity for ophthalmology drugs as positive for companies with ophthalmic pipelines that target retinal diseases, dry eye, and glaucoma. We estimate these markets represent $8B-$10B of sales in the U.S. annually, which could grow to $12B-$15B by 2020 (assuming an 8% CAGR), and we expect much of this growth to be driven by new launches. Our diligence suggests the U.S. ophthalmology market represents about half of the eye drug market worldwide. Therefore, these pipeline opportunities could meaningfully grow the worldwide ophthalmology market and sustain robust sales growth for the foreseeable future. This supports our BUY ratings for ACT and VRX. Other companies this could be positive for include COO, AERI, OPHT, OCUL, AAVL, Nicox, Molecular Partners, and EBIO, among others.
We ForeSEE Three Reasons to Own Ophthalmology Stocks:
#1. Favorable macro trends support the market. This includes an aging demographic (especially in developed markets); rapid growth of middle class in the emerging markets; and an increased global prevalence of diabetes, which leads to higher rates of diabetic retinopathy and diabetic macular edema.
#2. Innovation coming from large and small pharma. We expect approvals and pipeline advancements of important ophthalmology drugs in '15 and '16. 1) The PDUFA date for Shire's Lifitegrast (dry eye) is 10/25/15. 2) VRX/Nicox expect to file their NDA for Vesneo (glaucoma) mid-2015 with approval and launch in '16. We think Vesneo's peak sales potential is underappreciated because we expect its superior safety and efficacy profile to drive uptake. 3) ACT/AGN's DARPin (AMD) will enter Phase 3 trials by 3Q15. 4) EBIO's EBI-005 (for dry eye) first Phase 3 study results are expected 2H15. 5) Phase 3 results are expected for OPTH's Fovista (AMD drug) in 2016. 6) Phase 2a top-line results for AAVL's AVA-101 (AMD) are expected in mid-2015.
#3. Increasing interest and focus on ophthalmology. Ophthalmology drugs and assets have created real value for drug companies. In 2014, the stocks of publicly traded ophthalmology companies such as Regeneron, Cooper, and Santen outperformed the S&P500. There have been five ophthalmology IPOs (OPTH, AAVL, AERI, OCUL, EBIO) over the past two years that have also, for the most part, outperformed the S&P500. Finally, the M&A landscape has been rewarding in ophthalmology as well. This is evidenced by transformational deals such as: Novartis/Alcon, Valeant/Bausch & Lomb, and Actavis/Allergan.