Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

AB Science : A No-brainer Long Term Buy

Founded in 2001 by a group of leading scientists, AB Science is a pharmaceutical company specializing in the research, development and commercialization of novel targeted therapies for patients with cancer and other significant unmet medical needs including inflammatory and central nervous system diseases. AB Science has developed a proprietary portfolio of protein kinase inhibitors (PKIs), a relatively new class of targeted molecules whose action is to modify signaling pathways within cells. The first FDA approval was Novartis' Gleevec in 2001, which also made the cover of Time magazine as the "magic bullet".

AB Science's pipeline, one of most spectacular of the entire pharma industry, has been entirely developed and financed in-house, and targets life-threatening diseases where no effective cure exists to date. The aggregate market potential is conservatively estimated between $10 and $15 billions.

I wrote an instablog about that company already a couple of month ago here In these article I said that AB science was a great long term buy. The bullish case doesn't change here.... it becomes even more bullish.

AB Science's lead product, masitinib, has already been registered in veterinary medicine in Europe and the US, and is currently in 9 phase III human studies, including 8 studies on-going in pancreatic cancer, GIST, metastatic melanoma expressing JM mutation of c-Kit, multiple myeloma, mastocytosis, severe persistent asthma, rheumatoid arthritis, progressive multiple sclerosis, and Alzheimer. Of all 200+ known PKI, independent experts consider masitinib the safest.

Masitinib is an investigational orally administered tyrosine kinase inhibitor that targets mast cells, important cells for immunity, as well as a limited number of kinases that play key roles in various cancers. Owing to its novel mechanism of action, masitinib can be developed in a large number of conditions in oncology, inflammatory diseases and certain diseases of the central nervous system. Through its activity of inhibiting certain kinases that are essential in some oncogenic processes, masitinib may have an effect on tumor regression, alone or in combination with chemotherapy.

Through its activity on the mast cell and certain kinases essential to the activation of the inflammatory cells and fibrosing tissue remodeling, masitinib can have an effect on the symptoms associated with some inflammatory and central nervous system diseases.

In veterinary medicine, AB Science also markets the only product in oncology approved by the FDA. Even if this market is of minor financial interest in the advent of a single approval of masitinib in human medicine, it endorses the role of a valuable collateral for our convertible loan that we have privately negotiated with AB Science.

We estimate the veterinary portfolio between 40-80 million Euros, thus covering largely the size of the convertible placement.

The near future 2012-2015

The period 2012-2015 will be crucial for AB Science. In the low-risk veterinary business, we anticipate a regular rise in revenues. An important stage is expected for 2014, when the company should become profitable thanks to revenues generated by the veterinary division alone.

In human medicine, all ongoing clinical phase III results will be announced by 2015. See below the map of expected announcements.

 

 

Indication

Country

Number of center

Number of patient enrolled

First patient enrolled

End of enrollment

End of the study (year en)

Data announcement

Pancreatic Cancer

USA

Europe : 4 pays

60

352

S2 2008

Completed

2011

S1 2012

Mastocytose

USA

Europe : 9 pays

Asie : 2 pays

70

200

S1 2009

S1 2012

2012

S1 2013

Asthma

USA

Europe : 8 pays

Asie : 2 pays

70

300

S1 2011

S1 2013

2013

S1 2014

polyarthritis rhumatoïde

USA

Europe : 7 pays

Asie : 3 pays

80

450

S2 2011

S1 2013

2013

S1 2014

Alzheimer

USA

Europe

70

300

S2 2011

S2 2012

2013

S1 2014

Melanoma

USA

Europe : 13 pays

Asie : 2 pays

90

200

S1 2011

S2 2013

2013/2014

S2 2014

Multiple scelorsis

USA

Europe : 5 pays

Asie : 2 pays

60

450

S2 2011

S2 2012

2014

S1 2015

GIST First Line

USA

Europe : 9 pays

Asie : 1 pays

70

222

S1 2009

S2 2012

2014

S1 2015

Multiple melanoma

USA

Europe : 8 pays

Asie : 1 pays

60

300

S2 2011

S1 2013

2014

S1 2015

Click to enlarge

It is necessary to fully understand the importance of each of these studies. If a single clinical phase III gets the approval by the FDA, the company will be valued in excess of 1.5 billion euros, which corresponds to 4-5 times the initial investment. Moreover, as each clinical study is independent of the others, a negative result will not eliminate the potential of the other on-going phases III. Currently, we have a great confidence in at least 5 phases III: rheumatoid arthritis, GIST, metastatic melanoma expressing transfer JM of C-Kit, severe asthma and mastocytosis.

Our confidence concerning these 5 phases III rests on the medical mechanism of the diseases concerned - which perfectly matches with the mechanism of action of masintinib - but more so because of the published phase II results of masitinib against the standard of care.

One should expect 9 to 12 months (since the end of a clinical study) to obtain an approval by the medical agency (FDA in the USA and the EMA Europe). It is possible that the Health authorities require one or more complementary studies in certain indications. However, depending on the phase III results of the candidates, the probability of approval becomes extremely high. Our central scenario is that more than one phase III study gets a full - or at least conditional - approval. A conditional approval means the product can immediately be sold, but the company is forced to conduct a confirmatory study in parallel.

On February 1st 2012, AB Science was in the limelight of the entire oncology community when it announced superlative phase II data on GIST (second line therapy for patients resisting Gleevec) against Sutent, the current standard of care and $2.6bn blockbuster marketed by Pfizer. The results of masitinib were statistically exceptional both in term of efficacy (p=0.022 - HR:3.2) and safety. The press release was:

« AB Science SA (PARIS:AB (NYSE Euronext - FR0010557264 - AB) today announced encouraging results from a phase 2 study with its investigational drug, masitinib, in Gleevec®-resistant gastrointestinal stromal tumors (GIST). Masitinib significantly improved overall survival in patients with Gleevec®-resistant gastrointestinal stromal tumors (GIST) as compared to Sutent® (sunitinib) from Pfizer, a drug approved for second-line treatment of GIST, currently the standard of care for these patients. In this study, 44 patients with inoperable, locally advanced or metastatic GIST and showing disease progression while treated with Gleevec® (imatinib) (400 to 800 mg/day) received either masitinib (23 patients) at 12 mg/kg/day or Sutent® (21 patients) until progression. After a median follow-up of 14 months, median overall survival was not reached for masitinib versus 15 months for Sutent® (p=0.022 HR:3.2). After 18 months, 79% of patients treated with masitinib were still alive, versus 20% for patients treated with Sutent®. After 2 years, 53% of patients treated with masitinib were still alive, versus 0% for the patients treated with Sutent®. The trial also demonstrated that Masitinib reported good safety profile with a significantly longer Safety Event Free Survival and a lower occurrence of severe adverse events compared to Sutent.»

Such results in phase II have the potential to completely change the structure of a market estimated at $920m per year. Thus, we can reasonably anticipate an approval within a year in 2nd line GIST. If the FDA panel were to require a confirmatory study, then GIST could be approved within 3 years as a 2nd and 1st line therapy (which is an even a bigger market).

Today, AB Science is still widely unknown due to its presence in the Euronext instead of the Nasdaq. Europe isn't known for being a great place for Biotech, which also explain the lack of coverage AB Science suffers today. However, that tendancy of ignorance is changing in the investment world and AB science starts to become a must own stock for any fund exposed to the Biotech and Pharma World.

Disclosure: I am long OTCPK:ABSCF.

Additional disclosure: My fund fully subscribed both convertible bonds (17,5Meuros total) + own a substantial equity position in addition to my personnal holding