Athersys, Inc. (ATHX) has two upcoming clinical trials that will significantly impact the future of the company. The first clinical trial is MultiStem for Inflammatory Bowel Disease (IBD) where results are expected 4th quarter of 2013, and the second clinical trial is MultiStem for Ischemic Stroke and results are expected the first half of 2014.
I previously provided background information on Athersys and those articles can be found here:
This article will discuss the ongoing Phase II study of MultiStem for Inflammatory Bowel Disease since that is the next scheduled catalyst for Athersys. MultiStem is a biologic product manufactured from human stem cells and not embryonic cells. What differentiates MultiStem from the competition is that MultiStem is a unique composition and it does not require tissue matching, does not engraft, and more closely resembles small molecule drugs. The aforesaid have been major impediments to other companies.
To date, pre-clinical and clinical studies performed at different institutions throughout the world have shown MultiStem to be safe and provide therapeutic benefit. MultiStem demonstrated benefit to patients with autoimmune disease, transplantation and vascular disease, spinal cord injury, acute brain injury, multiple sclerosis, Hurler's Syndrome, and clinical trials have been favorable for the treatment of acute myocardial infarction, ischemic stroke, and Graft Versus Host Disease. Based on research performed, it is my personal belief that the broad range of favorable results are due to MultiStem's unique composition and multifaceted mode of treatment. The fact that varying institutions have achieved similar results in favor of MultiStem, and for the reasons stated below, I believe that MultiStem has a good chance of showing efficacy in the upcoming IBD trial. However, no one should ever underestimate the risk with investing in small cap biotech stocks.
The upcoming Phase II results for Athersys are major catalysts for the company because it will further validate or invalidate the MultiStem technology for certain indications. Favorable Phase II results should significantly impact the value of the company given their robust pipeline, however, unfavorable results would be devastating. Assuming the Phase II results for IBD are favorable, I believe many large pharmaceuticals will show significant interest in partnering given the large market potential for their pipeline. Favorable Phase II results will also put Athersys in a position to command the deal making process.
The IBD study is partnered with Pfizer (PFE) with same fronting all costs with the study. The Phase II study is a double blinded randomized study to investigate the safety and efficacy of patients with moderate to severe ulcerative colitis. 126 patients are being tested where patients would either receive multiple doses of MultiStem or placebo over a period of 8 weeks. Efficacy is being examined up to 4 months post treatment with further medical follow-up for 1 year after.
In the IBD study, MultiStem is being administered intravenously making it a minimally invasive treatment. The therapy is mechanically comparable to intravenous antibiotics for an infection where, once administered, the therapy targets the injured site. Inflammatory bowel disease affects millions annually and encompasses a wide variety of gastrointestinal ailments. Ulcerative colitis (like Crohn's Disease) is a form of IBD with symptoms that include diarrhea mixed with blood. The inflammatory symptoms usually occur in the presence of ulcers. The current standard of care for ulcerative colitis includes anti-inflammatory drugs and immunosuppression therapy. Depending on the severity of the problems, and recurrent problems, often times major surgery is needed to resect portions of the bowel followed by anastomosis. Depending on the type of surgery performed, ostomy bags are required to expel human waste while the surgical site heals. Even with surgical resection, symptoms could still return. Effective intravenous therapy of MultiStem could be a major breakthrough for patients with moderate to severe IBD.
MultiStem is believed to provide multifaceted treatment by reducing inflammation and regulating the immune system, protecting damaged or injured cells and tissue, promoting new vessel formation, and assisting in tissue repair and healing, consistent with the variety of MultiStem's pre-clinical and clinical studies. As such, MultiStem can potentially address the immediate inflammation and autoimmune concern in patients with IBD while at the same time promote healing and regeneration of tissue. Prior studies indicate that after intravenous infusion, the MultiStem therapy attaches to the site of injury for healing but does not differentiate or graft. MultiStem reduces inflammation by reducing the amount of active immune cells at the site of the damaged tissue while simultaneously attracting cells that release anti-inflammatory cytokines. Therapeutic proteins then begin to promote healing and regeneration at the site. This multifaceted treatment modality, in my opinion, should increase the chance that the patients going through the IBD trial will receive some clinical benefit from the therapy.
Atherys' main competition for IBD treatment is Osiris (OSIR). Osiris is enrolling patients for a Phase III study for Crohns which has similar characteristics of ulcerative colitis. What is significant is that Osiris achieved favorable Phase II results for Crohns with what I believe is an inferior product compared to MultiStem. By comparison, both MultiStem and Prochymal (Osiris' stem cell therapy) use an Allogeneic approach meaning cells are taken from a donor, cultured, then used by random patients. However, it is my belief that MultiStem is superior to Prochymal because the MultiStem platform uses Multipotent Adult Progenitor Cells (MAPCs) while Prochymal uses Mesenchymal Stem Cells (MSCs). The two major differences between MAPCs and MSCs are as follows:
First, the physical differences. MultiStem cells are significantly smaller than the MSCs thereby providing administration advantages. The smaller cells allow MultiStem to pass easier through catheter and similar delivery systems, and they pass easier through the pulmonary system when delivered intravenously. MultiStem cells also grow faster than Osiris MSCs (i.e. lower doubling time) and can be expanded much longer in culture without losing potency. Those aspects provide MultiStem some significant manufacturing advantages - more product in shorter manufacturing time and more product from a single master cell bank / donor.
Second, MultiStem appears to be more potent. MultiStem appears to have a greater differentiation potential than MSCs, but this is generally of less importance given the current therapeutic approaches. What is significant is the nature of the proteins expressed by the stem cells when administered. Both MultiStem cells and MSCs produce a substantial number of proteins, which have the potential to provide therapeutic benefit. In both cases, the stem cells express proteins in response to the disease environment they are exposed to. This most likely explains why Osiris achieved favorable Phase II results for Crohns. While MultiStem cells and MSC share some protein expression, the two cell types have distinctive protein profiles. The two cell types have been evaluated in preclinical assays and models and same has observed MultiStem to be a greater advantage in some cases with comparable performance in the others. Of significance is that MultiStem cells have a greater potency for angiogenesis and new vessel formation.
Valuation comparison: Athersys has a market capitalization of less $100M while Osiris has a market cap of greater than $400M despite Athersys potentially having a better product and a more robust pipeline. I believe the market has yet to pick up on how undervalued Athersys is when compared to the competition. Furthermore, Athersys is in a partnership with RTI biologics and is still entitled to a $30M milestone payment not including royalties for their bone allograft partnership. Athersys has also publicly stated they are "evaluating partnering opportunities in several different areas around MultiStem across different therapeutic areas." There is no question the upcoming quarters will be exciting times for the company.
Most analysts have price targets between $4-$7. A $4 price point would still only give Athersys a $224M market cap compared to Osiris. This is not even considering the extremely large potential of MultiStem for ischemic stroke. The upcoming data for the IBD study due 4Q of 2013 will play a very significant role in the future of Athersys. I believe that there is a good chance that the IBD data will meet its primary end points however, no investor should ever underestimate the risk of not achieving efficacy.
I continue to be long ATHX.
This article is intended for informational and entertainment uses only and should not be construed as professional investment advice. The aforesaid is solely my opinion based on my personal due diligence. As with all stocks there is the risk of suffering financial losses. Do your own due diligence and consult with a professional financial advisor before investing in any stock including ATHX.