Wall Street is overreacting to OvaScience data

OvaScience (NASDAQ: OVAS) made two presentations for their AUGMENT fertility treatment at the annual meeting of the Society for Reproductive Investigation. The results are positive and encouraging, but OvaScience shares have tanked 44%. I think the most recent pullback is an overreaction.

OvaScience is changing the standard in in vitro fertilization (IVF). It is well-known that adding fresh mitochondria to eggs of older women could increase IVF success. However, transferring donor mitochondria was complicated by the ethical concerns of mixing mitochondrial DNA from two different individuals. To avoid the ethical concerns, OvaScience uses fresh mitochondria isolated from patients’ own egg precursor cells.

At the previously mentioned meeting, clinic in Canada reported a 53% (9/17) clinical pregnancy rate in women who had previously failed 1-3 IVF cycles. Clinic in Turkey reported a 25% (2/8) clinical pregnancy rate in women who had previously failed 3 or more IVF cycles.

Why OvaScience shares were down on positive news? Leerink Partners analyst Gena Wang pointed out several caveats to this data. The 53% figure is based on 17 women who completed an embryo transfer. The pregnancy rates don’t look quite so good when you consider all the patients who originally enrolled. In the Canada study, 26 women went through the Augment treatment and only 17 of them actually completed embryo transfer. Beyond that, the average age of the pregnant women in the study was 33, which is very young for IVF. Although Gena Wang was skeptical about the data, she maintained a $56 price target for OvaScience.

In my opinion, a 35% (9/26) success rate is still a positive result because these women had previously failed 1-3 IVF cycles. In the Turkey study, the 2 pregnancies occurred with single embryo transfers in women aged 34 and 41 who had previously failed 7 and 3 IVF cycles, respectively. These patients had a very small chance of success with other fertility methods. According to historic data[1], the live birth rates for first cycles, second cycles and third cycles were 29%, 18%, and 14%, respectively. We should wait and see what the finally live birth rate will be.

According to Allied Market Research, the IVF market is expected to grow from $9.3 billion in 2012 to $21.6 billion by 2020. AUGMENT has the potential to be a blockbuster treatment. OvaScience expects to achieve 1,000 AUGMENT treatment cycles by the end of 2015. The total cost for a Augment cycle is about $30,000.

Currently AUGMENT is available in Canada, Turkey, and United Arab Emirates. The trials in the U.S. has been halted because of the requirement of an IND. This was no doubt a big setback for OvaScience. Although 90% of the IVF market is outside the U.S., the U.S. has the most patients willing to pay for the treatment.

[1] Proc Natl Acad Sci USA. 2010, 107(31), 13570-13575.

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