Athersys-Pfizer Investors: Anticipating A Phase III Trial For Inflammatory Bowel Disease

| About: Athersys, Inc. (ATHX)

Anxiously awaiting the second quarter data

Athersys, Inc. (NASDAQ:ATHX) and Pfizer, Inc. (NYSE:PFE), after starting out with carefully chosen steps, are nearing completion of a phase II trial for investigating a potential new treatment for Inflammatory Bowel Disease (IBD). This IBD trial is aimed at proving safety and efficacy in regards to treating ulcerative colitis (UC) with Multipotent Adult Progenitor Cells (MAPCs). MAPCs are a form of adult stem cell that are non controversial, as they are not derived of embryonic stem cells where the destruction of a fetus would be involved. UC is one of two main forms of IBD. Crohn's disease (CD) is the other. In this trial, moderate to severe UC was chosen for treatment over CD. UC results are easier to examine via a colonoscopy than CD, and was a consideration for Pfizer in choosing UC at this stage of development.

Investors are paying close attention to this trial and its first round of data release for good reason. If the data release shows promising results, it could be seen by investors as validation of MultiStem. MultiStem is Athersys's brand name for its patented MAPCs and the backbone of its regenerative medicine platform. The validation of this platform would likely revalue Athersys shares higher, and ahead of a second phase II trial for ischemic stroke (IS) that's also likely to revalue shares higher, which is nearing data release in July 2014. Promising results from the UC trial could trigger a milestone payment from collaborator Pfizer. A milestone payment would further strengthen an already good cash position Athersys is currently enjoying.

The Athersys market cap is currently only $324 million. This figure includes the two post November 2013 offerings and it's more accurate than the $244 million market cap frequently posted on the web. A $4.05 share value was used in calculating the current market cap.

The latest close on 1/21/2014 saw a $4.17 per share valuation and that's not where the share accumulation and appreciation is likely to end. This is evident by viewing the steady increase in share price reflecting investor sentiment. Share appreciation ahead of important events (like this data release) often continues until the odds are seen by investors as an even wager in terms of risk vs. reward. An even wager ahead of the UC data release probably has a $5.50 low end figure as was mentioned in the conclusion of the article "Prognosticating 2014: Athersys Shares Will Continue To Climb".

So what's the high end of the per share valuation ahead of the UC data release? Well, known information from other studies suggests the UC trial will have data capable of moving Athersys and Pfizer into a phase III trial for IBD, with this being the case, irrational exuberance may come into play. It's not a stretch to think investors will view any share price under $7.50 as having a low risk\reward ratio ahead of the scheduled data release. For this reason a high end of $7.50 is given for a potential price target ahead of the data release. Even independent research firm Edison revised to $4.85 ahead of the phase II data release. That target's on the conservative side, given Athersys shares have already traded to $4.33 on January 9th, 2014. With over three months to go investor sentiment is not likely to change and that sentiment has been extremely bullish as can be seen by looking at the recent price action.

MultiStem and how it works

MultiStem is created by harvesting stem cells from the bone marrow of a healthy donor. Due to the technique that Athersys uses, the donor does not have to be a tissue match for the recipient like in some other stem cell treatments. MultiStem is also easy to mass produce, as a single donor can produce hundreds of thousands or even millions of doses. This large scale production represents a substantial advantage over alternative stem cell platforms. A recent article about Pluristem Therapeutics, Inc. (NASDAQ:PSTI), "Mesoblast Is No Match For Pluristem's IP And Manufacturing" is a well written article that does not mention Athersys. Athersys has an advanced automated bioreactor system developed by ReGenesys scientists, with the support of Terumo BCT of Lakewood, Colorado. Though Athersys is progressive in this area, discussion about manufacturing systems should be cautiously viewed as distraction. The priority focus must be on ensuring the efficacy of a good adult stem cell that cures a disease. Refinements in manufacturing mechanisms will come later.

The primary role of adult stem cells is to maintain and repair the tissue in which they are found. While we call them adult stem cells, they are more accurately called somatic (soma = body) because they come in virtually any body tissue. In the case of MAPCs, they exert strong immuno suppressive effects on T-cell alloreactivity and on T-cell proliferation induced by mitogens and recall antigens. This effect is desirable to a large extent when formulating treatments for UC. The goal is to essentially "reboot" the immune system so it stops attacking the digestive tract. Here is an example of a Successful reboot the way it's been done in the past.

When UC sets in and begins to progress, the sufferer's body tries to repair the damage being done by activating stem cells. Unfortunately, these stem cells are not always up to the task of repair and regeneration. The chemical signals produced by the ailing intestinal tissues attract circulating bone marrow stem cells. However, as people are severely ill or aged, their bone marrow frequently begins to harbor more and more senescent stem cells.

The goal of MultiStem administration is to increase the number of active stem cells in circulation by turning loose many more stem cells than would ever be mobilized naturally. As a result bodily tissues that would never have had a sufficient number of stem cells around to affect repairs are amply supplied with these repair cells.

Need exists for stem cell therapy

With IBD the immune system loses tolerance to the patient's own intestinal flora, leading to an abnormal inflammatory response that continues over time. The rates of incidence of both Crohn's disease and ulcerative colitis are rising. The severe and continuous inflammation is able to disrupt the intrinsic repair system, leading to refractory ulcers in the gut. Treatment is sometimes effective for mild cases of IBD, but for the most severe cases, treatment options are limited.

The disease progresses in the form of unpredictable and variable outbreaks throughout the patient's life and the severity of the symptoms varies according to the level of involvement of the intestines and the patient's response to the assigned treatment. It's a disease that usually affects young people between the ages of 18 and 40 years. Diagnosis is often difficult because it presents symptoms similar to those of other diseases of the digestive tract: abdominal pain, diarrhea, vomiting, nausea, fever,general malaise, etc. Patients quality of life is conditioned by the severity of the disease and, in the most severe cases, prevents them from leading a normal life, with a very high level of suffering due to the acuteness and frequency of the intestinal symptoms.

The conventional therapy for IBD often fails to produce satisfactory results. Moreover, conventional therapy can involve multiple side effects, which turn into more complications at later stages of the disease. Athersys believes its current trial will ultimately lead to the development of a treatment that can cure IBD and can reduce the risk of IBD-associated complications.

Observers are quick to point out that stem cells have already been used to treat IBD. This can be seen by viewing either Stem Cell transplant or transplant cures girl. The intravenous therapy using MAPCs would represent a coming out of the dark ages when compared with currently used transplant procedures.

It's already been established that MAPCs can drive the immune system toward a more favorable balance the same way the mesenchymal stem cells (MSCs) can. It's also believed by many that MAPCs will be a superior treatment due to the different potency and extensive expansion capacity. Further down the road MAPCs also enjoy a broader differentiation potential.

MultiStem differentiation potential

Athersys believes there are significant opportunities for synergy between their small molecule platform plus related capabilities and their MultiStem technology. Using random activation of gene expression (RAGE) to activate protein production in MAPCs, Athersys will determine which proteins cause MAPCs to differentiate into specific cell and tissue types. Once they have identified these proteins, Athersys can use them to coax MAPCs into becoming nerve cells or heart cells, for example. This has enormous therapeutic potential to address many diseases, including age-related problems that are anticipated to grow in the coming years. This would not be possible using other adult stem cells that lack the differentiation potential shown by MAPCs.

Perhaps as Athersys grows in stature and market cap it can one day apply this differentiating capability to helping patients with many hard to treat diseases even IBD. Example: Making patches for the gut using a somewhat differentiated MAPC. Under the correct growth conditions, MAPCs could be induced to form the cells of mature intestinal tissue. If this seems to much like a fantasy read Stem cells repair bowel disease.

Evidence suggests a phase III trial for IBD

Recent applications of MAPCs indicate that MultiStem works and is safe in humans. This can be confirmed when one looks at the RTI Surgical, Inc. (NASDAQ:RTIX) collaboration with Athersys. RTI has successfully used its MAP3 technology based on license to use MultiStem twice now in bone graft implant procedures. MAP3 is really just RTI's brand name for its licensed use of MAPCs from Athersys. "Taking into account the published MAPC research, I decided to use MAP3 in a complex case with an immune-compromised patient because it would support the patient's ability to heal," said Dr. Lyons. Those comments and others can be found on the RTI website. Dr. Lyons continues, "I was impressed by the ease of use - it required very little time to prepare with simple instructions for preparation. I will definitely use MAP3 again when it's appropriate for the patient's case."

The Athersys\Pfizer phase II UC trial has been given plenty of thought in its design. Those involved in designing it probably watched the MSC trial as closely as possible. Since the MSC phase II trial has moved on to a phase III trial, it would stand to reason that the MAPCs will also advance to phase III. Verification of the MSC advance can be seen by viewing this Crohn's disease phase III trial. Also, when viewing Ulcerative colitis: two years of observation keep in mind that MAPCs share the same powerful immunomodulatory effects with that of the MSCs that have shown so much promise in treating patients with ulcerative colitis.

Further evidence

As stated MAPCs are similar to MSCs in terms of relevant healing properties. MSCs were used in the below study by Osiris Therapeutics, Inc. (NASDAQ:OSIR), whose MSC rights are now owned by Mesoblast (MBLTY). Mesoblast is currently engaged in a phase III trial evaluating Prochymal for moderate to severe CD patients. Prochymal is the Mesoblast brand name for its MSC line.

Here is an endoscopic view and corresponding histology in a patient with severe gastrointestinal GvHD before and nine days following mesenchmal stem cell treatment. At the time of MSC infusion, this patient was unresponsive to all other modes of intervention. Nine days after treatment with MSCs, there is a decrease in intestinal inflammation and ulceration as well as corresponding crypt regeneration as depicted by the arrows.

Two separate studies have recently highlighted the applicability of MSC therapies to Crohn's disease. MSCs from refractory Crohn's disease patients and healthy patients performed identically in laboratory experiments, indicating their equivalence. In a nine-patient study with patients receiving two infusion doses of 2 × 106 cells per kg body weight, one-third of patients experienced a clinical improvement of 70 points decrease in Crohn's disease activity index at the 6 week follow-up. Twelve patients with fistulising Crohn's disease were treated with intrafistular injection of autologous, expanded bone marrow MSC and achieved sustained complete closure of fistula tracks in seven cases and partial closure in three cases. Rectal mucosa healing was observed in all patients, as well as a significant increase in circulating T-reg cells. Source: EMM Experimental & Molecular Medicine

Off label use of MultiStem

In the United States, the regulations of the Food and Drug Administration (FDA) permit physicians to prescribe approved medications for other than their intended indications. This practice is known as off-label use. This off label use should result in a larger market for MultiStem than the market for ulcerative colitis alone. Example: Crohn's disease is similar in nature to that of ulcerative colitis and many doctors would give MultiStem a try for either indication if it were available. Why not if the other treatments aren't working?

While on the topic Athersys CEO Gil Van Bokkelen has hinted that in the next stage, the phase III trial that Crohn's disease will be the aim. Investors are sure to take this as a sign that Dr. Van Bokkelen thinks a phase III trial is forthcoming.

For those who missed it, Dr. Van Bokkelen had this to say while being interviewed on May 20th, 2013:

"We're very excited about the stroke and IBD trials that are ongoing and actively enrolling patients. The trial with Pfizer is essentially a step on the way to evaluating MultiStem as a treatment for Crohn's disease, which is where I expect the longer term focus to be in IBD."

Cost of treatment

In 2008 the direct annual healthcare costs for CD and UC were $8265 and $5066, respectively per patient. It's estimated that no fewer than 1.4 million patients exist in the United States alone at an annual cost of $5,500,000,000 ($5.5 billion annually).

Though the prevalence of inflammatory bowel diseases is much lower in Asian countries, including Japan, than in Western countries, it's rapidly increasing. Japan has a nationwide registration system of patients with intractable diseases, including ulcerative colitis and Crohn's disease. The age-standardized prevalence of ulcerative colitis in Japan in 2005 was 63.6 per 100,000 persons, and that of Crohn's disease was 21.2. Patient numbers have been steadily increasing with time.

Factoring in the potential off label use and international markets allows investors begin to begin seeing MultiStem's true potential.

Potential risks

If MultiStem is to be used as an off the shelf drug, doses of MAPCs in the thousands, millions or billions based on the recipient's body weight will need to be determined for best therapeutic effect. A detail that is often overlooked in this process is the elimination of other cell types (hematopoietic stem cells, endothelial cells and so on) and the creation of a homogeneous cell population with successive cell culture passages. The temporal change and convergent cell phenotype may have an impact on the "per cell" therapeutic efficacy. In addition, the inclusion of other phenotypes in a heterogeneous population of cells may benefit the modulation and vascularization of the targeted tissue. The trade-offs of greater MAPC numbers versus unaltered and heterogeneous cell preparations have not been sufficiently explored in the literature.

The effective dose of MAPCs remains poorly understood. To be determined is the effective response to treatment with no differences in efficacy or safety between the doses. If MAPCs are to be treated as a drug, more is not necessarily better and the minimum and maximum effective doses should be determined based on clinical application. Because of the inherent biological differences in MAPCs by donor, and where applicable, their manufacturing and delivery processes, defining such doses by indication is an obstacle for obtaining regulatory clearance of cell products classified as a drug. It's likely this obstacle will be overcome as long as trials are designed to address the issue.

On the basis of the preliminary reports of safety and efficacy in several medical applications, MAPC therapies, represent a method to treat conditions that currently are unmet and result in generally poor outcomes. Further clinical data is necessary, however, to determine the distribution and therapeutic mechanisms of MAPCs and to optimize their use as a drug. This process will require the collaborative efforts of physicians, scientists, industry and regulatory agencies to translate nature's basic regenerative element into the continuum of clinical care.


The shared similarities between MAPCs and MSCs, and the success of the RTI Surgical MAP3 application allow many conclusions to be drawn in regards to the potential for a phase III trial of MultiStem concerning IBD. The understanding of the MAPC, its metabolic activities and therapeutic potential will improve considerably from the phase II data being reviewed. Athersys is in a very good position in that even if the first wave of data confirms safety without much efficacy data a second trail for ischemic stroke is still scheduled to start releasing its data in July 2014. In the absence of any negative data, Athersys investors should continue to enjoy more upward trend in the per share price. The potential exists for multiple catalysts to surprise ahead of the end of April and the UC data release.

Disclosure: I am long ATHX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Science is still evolving regarding stem cells and many scientific points are debated including some contained in this article. To the best of my knowledge I put forth accurate information.

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