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  • AtheroNova Deserves More Attention 3 comments
    Mar 2, 2014 9:05 PM | about stocks: AHRO

    Background

    AtheroNova (AHRO) is a young biotech company looking to revolutionize the cholesterol lowering medication market. The current standard of care is statin therapy which lowers LDL (bad cholesterol) and stabilizes arterial plaque. AtheroNova has developed a product (AHRO-001) that lowers LDL (60% in preclinical trials) and reduces arterial plaque significantly. No other medication has shown to reduce plaque significantly. Here is an excerpt from their website summarizing the results of their pre-clinical trial work.

    • The Company successfully completed preclinical studies at both UCLA and Cedarsā€Sinai. In these studies, use of AHRO-001 led to a 95% reduction in innominate arterial plaque formation versus the control group. The compound has not shown morbidity, adverse effects, or mortality and was well tolerated at high doses.

    Why is plaque reduction so important? Arterial plaque is what causes clinical disease like heart attacks, strokes, peripheral artery disease, and claudication (decreased blood flow to the lower extremities causing pain with walking). LDL doesn't cause clinical disease, it is what LDL does that causes the disease (binds to the walls of the arteries). Statin therapy is trying to reduce circulating bad cholesterol and thus decrease the amount of cholesterol available to bind to arterial walls. It does nothing once the cholesterol attaches to the walls besides "stabilize" the plaque. AHRO-001 does what statins do but also reduce the plaque on the arterial walls, thus in theory, prevent clinical disease. Here is a link to a presentation on their website describing their pre-clinical work (Link) as well as an investment discussion with the CEO last fall (Link). With their ground-breaking pre-clinical trial work completed, they have moved on to human trials.

    Clinical Trials

    AtheroNova joined forces with Maxwell Biotech Group's subsidiary, CardioNova with an agreement for up to $4.1 million equity investment in exchange for funding clinical phase 1 and phase 2 trials in Russia as well as a licensing agreement with them to commercialize AHRO-001 in 10 countries. The phase 1 trial started last summer and completed enrollment in December 2013. News was just released this week (Link) which announce preliminary positive phase 1 clinical data. The specific data is still blinded but should be released in the next 2-4 weeks in my opinion. They also mentioned in this release that with this information in hand, they will be able to move forward with their phase 2 trial. They will likely announce this formally in the next 1-2 months with initiation of the trial thereafter. Phase 2 will be a 3 month trial and the data will be released 60-90 days after completion of the trial, meaning sometime at the end of this year. They are also looking to start clinical trials here in the USA sometime later this year/early next year.

    Safety is the biggest thing the FDA looks at when approving a new drug. We do know that AHRO-001 is safe and well tolerated with minimal side effects (their phase 1 data will prove this as well) because similar compounds are being used in clinical practice for other applications, mainly primary biliary cirrhosis.

    Valuation

    The company saw its largest volume ever traded on 2/27/14 after the announcement of their preliminary positive phase 1 results. This company was largely flying under the radar prior to this. It is currently trading at $0.49 and is currently undervalued at this level. Two analysts are following this stock and have price targets of $1.03 and $2 over the next year. The current outstanding shares are 41.6 million with a market capitalization of $20.4 million. There is a clear cut path Atheronova needs to follow to get this medication approved by the FDA as a lipid lowering therapy. This has been demonstrated by other companies before and AtheroNova knows how to do this. This is the first target for the company. The next target will be the application of arterial plaque regression/prevention. Since this is the first drug to ever show this, they will need to create a new path with new trials in order to get this approved for this application by the FDA. This will be year (5-10) down the road.

    The first market they want to promote their drug in once approved is patients that are statin intolerant (about 15% of the population) or as an additive agent to statin therapy. Cholesterol lowering medications have a market capitalization of around $35 billion dollars annually, of which statin therapy is just over $20 billion dollars. Using 100 million outstanding shares (currently 41.6 million, I will get into this in the next section why I chose this number but want to be conservative in my assessment) and getting into 50% of the market for the statin intolerant people, that would leave a price per share of $26.25 once the drug goes to market (Probably 2-5 years away although with their licensing agreement with CardioNova, they could start generating revenue next year). This is a 5350% return on investment over the next 2-5 years including a significant dilution to the current shares.

    Now you can see the potential of this drug and if it is able to show plaque reduction in clinical trials, how this company could take over this large market capitalization and the share price would be significantly higher than the above estimate.

    RISKS/CONCERNS

    There are many risks associated with small biotech companies, the main one being funding, as it requires significant funds to bring medications to the market. This stock is no different. Based on their 10-K filed 2/27/14, they currently have $266,000 on hand as of December 31st, 2013. They did have a capital raise early February which raised $1.9 million. Based on their release, this will be enough money to fund them through April 2014. The funding of their phase 2 trial is already complete with CardioNova as they are paying for this. Their cash balance is a big concern and they will require additional capital or licensing agreements in order to continue with their current research plan. This is why I chose 100 million outstanding shares in my valuation as they might need to have more share sales to raise this capital. That is over 50% dilution of the current shares but as you can see, AtheroNova still has significant profit potential even with this dilution.

    There are also many other drugs in development looking at getting into the space of statin intolerant people which dilutes the market capitalization. I tried accounting for this in my valuation by 50% of the market going to AtheroNova. No other drug in development to my knowledge has shown significant plaque reduction.

    AtheroNova only has one medication in their pipeline currently. From their website, they are looking at getting into other sectors but no formal announcement of trials or approvals have been made to date.

    AtheroNova recently filed a patent application for potentially revolutionary obesity treatment. There are multiple other applications directed to treating atherosclerosis with various methods of administration and compounds. Additional patents are pending, including applications for obesity, lipomas and adiposities.

    • Localized reduction of subcutaneous fat deposits through transdermal application
    • Obesity
    • Hypertension
    • Diabetes
    • Peripheral Artery Disease (PAD)

    CONCLUSIONS

    Even with the cash concerns, I feel AtheroNova is very undervalued and deserves more attention from investors. There will be continued positive press releases over the next 1-2 months with release of specific results of their phase 1 data and initiation of their phase 2 trial. I will not be surprised to see additional share offerings between now and the end of April to raise additional capital. I think as they get more human trial results, it will become easier to establish licensing agreements with companies and possibly a buyout from a large pharmaceutical company.

    DISCLOSURES

    I am long on AtheroNova. This article reflects my opinion based on public knowledge facts about this company and its compound AHRO-001. Please do your due diligence and research this company yourself prior to making any decisions about investing in this company.

    Disclosure: I am long AHRO.

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Comments (3)
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  • Mark2589
    , contributor
    Comments (3) | Send Message
     
    Thanks for the information. Do you think this drug could be considered for one of the FDA's expedited drug approval processes? Do you have any idea how they will prove plaque regression or if they might get some of that information from Phase 2?
    3 Mar, 01:25 AM Reply Like
  • NB MD
    , contributor
    Comments (8) | Send Message
     
    Author’s reply » I do think it could be considered for fast tracking through the FDA. I believe the company his hoping for this as well. They will not be able to get any plaque regression data from this phase 2 study. A study of this type won't be for a few years but the likely way they will have to evaluate this is either with serial imaging studies like CT scans or angiograms.
    3 Mar, 05:49 PM Reply Like
  • Mark2589
    , contributor
    Comments (3) | Send Message
     
    Thanks. This stock has great potential and I believe it is a once in a life time opportunity. The more I learn about the company and AHRO-001, the more I'm convinced. I've looked at numerous other biotech companies (I own some of the most promising ones) and this one just stands out. AHRO's market cap is so low and the potential is so high, it just can't be ignored for much longer. I feel more confident this drug will be approved by the FDA than a drug like ManKind's Afreeza which I'm very optimistic about and own. Mankind's market cap is 100+ greater than AHRO and I believe AHRO has a bigger market potential for their product than MNKD and MNKD's is huge. I see no reason why AHRO-001 will not be successful in Phase 2 or 3. They should follow in the steps of ICPT and other companies that are using bile acids based products.
    4 Mar, 02:51 PM Reply Like
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