Eye National Eye Institute

Source: National Eye Institute.

Growing interest in the potential for Ophthotech's (NASDAQ:OPHT) Fovista to one day become part of a standard of care treatment for wet age related macular degeneration, or wet AMD, a condition that's a common cause of vision loss in seniors, sent the company's shares soaring by 30% in July, according to data from S&P Capital IQ.

In the second quarter, Ophthotech completed enrollment in the first of two phase 3 trials evaluating the use of Fovista alongside Novartis' widely-used wet AMD drug Lucentis. The company also reports that a second similarly designed trial expects to complete enrollment in the third quarter.

Results from both of those trials will be reported by the end of 2016, and if they confirm mid-stage trial results, Fovista stands a good shot at becoming a top seller.

In phase 2, combining Fovista with Lucentis improved vision by an additional 4.1 letters on a standard eye chart versus Lucentis alone. Those results prompted Novartis to ink a deal worth up to $1 billion, plus royalties, for ex-U.S. rights to Fovista last summer.

An additional trial studying Fovista alongside Regeneron's wet AMD drug Eylea is also under way, with results likely in 2017. If that trial pans out, too, then Fovista could become a therapy-agnostic option in a market worth billions of dollars annually.

Looking forward
Lucentis and Eylea are racking up annualized sales of $4 billion and $3.2 billion, respectively, so Fovista's market opportunity is undeniably big.

However, there's a lot that still needs to go right for Ophthotech investors in order to justify its current $2.3 billion market cap. Up to 40% of phase 3 trials historically fail, and that means Ophthotech is far from a risk-free investment.

Investors can take some solace in knowing that Ophthotech's balance sheet is healthy, with $449 million in cash and equivalents, and no debt. That makes it unlikely that the company, which had operating expenses of $44 million last quarter, will need to do another dilutive stock offering soon.

Overall, the potential for this drug's use as a co-therapy in this indication makes it very intriguing, especially since it has so far retained its U.S. rights to Fovista. For that reason, I think Ophthotech could make sense for investors able to withstand the risk of a late-stage trial failure.

Todd Campbell owns shares of Ophthotech. Todd owns the equity research firm E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.