Athersys Shares Poised To Move Higher

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 |  About: Athersys, Inc. (ATHX), Includes: CEPH, GERN, MEOBF, PFE
by: Wall Street Titan

In a move that went unnoticed by investors, Athersys, Inc. (NASDAQ:ATHX), a clinical stage biopharmaceutical company engaged in the discovery and development of therapeutic product candidates designed to extend and enhance the quality of human life, reacquired all the rights to its Multi-Stem Cardiovascular Cell Therapy Program from its collaborator and partner, Angiotech Pharmaceuticals, Inc. In an example of one man’s pain is another man’s gain, the recent bankruptcy restructuring of Angiotech apparently drained its resources and lead to its inability and/or unwillingness to move forward with the promising program.

I first discussed Athersys in depth in a Seeking Alpha article on May 1, 2011. At the time, the stock was trading at about $2.80. As the stem cell sector has gone out of favor in the ensuing months, Athersys hasn’t been an exception and now trades at just $1.30 per share. Yet, it continues to make progress in the development of its Multi-Stem product, an off-the-shelf stem cell therapy that can be mass produced in a much greater multiple than the technology of the current sector leader (based on its $2,000,000,000 market cap), Australian based Mesoblast Ltd (OTC:MEOBF). For those unfamiliar with the technologies of Athersys and Mesoblast, their cell technologies are similar in that they are both based on adult derived stem cells as opposed to the more controversial, embryonic stem cells. Recently, Geron Corporation (NASDAQ:GERN), the leader in embryonic stem cell therapy, waved the white flag on its once promising, embryonic stem cell business.

In my view, the reacquisition of complete control of its cardiovascular Multi-Stem program is a big boon for Athersys and sets up a potential short term catalyst for its sagging stock price. Now that Angiotech is out of the picture, Athersys has full control of partnership opportunities and is likely already is discussions with potential partners. In December 2009, Athersys partnered with Pfizer (NYSE:PFE) in a $111,000,000 partnership in Multi-Stem for inflammable bowel disease. As a result of the transaction, ATHX shares skyrocketed from $1.00 to $6.40 in just a few days before the unbridled enthusiasm eventually waned. Given its close relationship with Pfizer, it wouldn’t surprise me if talks between the companies for cardiac are already under way.

Since the Angiotech cardiac collaberation was signed in May 2006, the interest by big pharma in off-the-shelf stem cell therapies, especially in the cardiac area, has grown exponentially. The landmark transaction occurred in December 2010, when Cephalon (NASDAQ:CEPH) took a 20 percent stake in Mesoblast and bought the rights to market the Australian company’s adult stem-cell therapies for heart and nervous system conditions in a deal potentially worth more than $2 billion. Compare the significance and magnitude of this deal to the tiny $30 million market cap and $14 million enterprise value of Athersys and appreciation for the potential upside of a cardiac partnership becomes clear, despite the risk inherent in any biotech at this stage of development.

These are the personal views of Wall Street Titan and should not be relied upon for your investment decisions. All investors should always do their own due diligence.



Disclosure: I am long ATHX.