With One Late-Stage Study Out Of The Way, Aclaris Moves One Inch Closer To Commercialization

Summary

  • Aclaris Therapeutics announced that it had achieved positive results in its Phase 3 THWART-2 study using A-101 45% topical solution to treat common warts.
  • A second Phase 3 study THWART-1 will have data readout in Q4 of 2019, which if successful will allow the company to move forward with filing an NDA with the FDA.
  • If A-101 is ultimately approved to be marketed in the United States, it would become the first FDA-approved prescription drug to treat common warts.
  • The Alopecia market could reach $12.99 billion by 2026, which is good news considering that Aclaris is seeking a partnership for ATI-501 (oral) and ATI-502 (topical), which are treatments for alopecia areata.
  • I do much more than just articles at Biotech Analysis Central: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Aclaris Therapeutics (NASDAQ:ACRS) announced that it had obtained positive results in a Phase 3 study using A-101 45% topical solution to treat patients with common warts (also known as verruca vulgaris). With this being the first of two Phase 3 studies, there is another late-stage trial readout expected in Q4 of 2019. With positive data on hand from both late-stage studies, the biotech will soon be able to file an NDA for approval of A-101 45%. This is a highly important step for the company as it seeks to get its product approved to treat common warts. That's because if it is approved, it would become the first FDA-approved prescription treatment for common warts.

First Phase 3 Study Lays The Foundation For Further Success

Aclaris' first successful Phase 3 study is known as THWART-2. This study recruited a total of 502 patients who had at least one to six warts at baseline when they were randomized. Patients either took the A-101 45% topical solution or instead took a vehicle treatment 2 times per week over 8 weeks. It was noted that the trial had achieved the primary endpoint, which was a greater proportion of patients achieving Clear of their warts at Day 60.

Specifically, patients were considered "Clear" on something known as the PWA scale (PWA=0). The primary endpoint was met with statistical significance with a p-value of p<0.0001. The trial even met all secondary points as well. In terms of safety, the treatment of A-101 45% was safe and tolerable. There were some site reactions to treatment, but other than that all was in good order. No patient dropped out of the study when given A-101 45% so that is good news.

Even better news is that this holds the potential to become the first FDA-approved prescription drug for the treatment of common warts. That would put this on a market on its own. There is another catalyst opportunity that is quickly approaching. A second Phase 3 study using A-101 45% to treat common warts, will have results that will be read out by Q4 of 2019. If all goes well with the second Phase 3 study, from there Aclaris can file an NDA to the FDA for marketing approval for this indication.

Financials

According to the 10-Q SEC filing, Aclaris Therapeutics had cash, cash equivalents and marketable securities of $115.5 million as of June 30, 2019. The company believes that it has enough cash to fund its operations into Q3 of 2021. This gives the biotech a good amount of time to generate shareholder value. In addition, this cash projection is without any type of business activity. Aclaris is in the process of looking to find a strategic partner for two clinical products.

These are for the oral drug ATI-501 and the topical ATI-502 to treat alopecia areata. I believe that the biotech can easily find a strategic partner to advance these products. Especially, when you consider how much can be generated in terms of sales for this market. It is estimated that the Alopecia market could reach $12.99 billion by 2026. By finding a strategic partner it will be huge for the company. Such partnerships bring up about large upfront payments and then the potential for milestone payments/royalties. If this happens, then the cash runway can easily be extended.

Conclusion

The ability to meet the primary endpoint for the Phase 3 THWART-2 study using the A-101 45% topical solution to treat patients with common warts is good news in terms of advancement towards eventual approval. There are two risks at play for this biotech that investors need to keep an eye on. The first is in terms of the second Phase 3 study that is set to report results in Q4 of 2019, known as THWART-1. There is a good chance that the primary endpoint will be met.

However, this remains a big risk because if the study is not successful, it will hurt the biotech. First, it could cause the stock to trade much lower. Secondly, it would become even more difficult to find a partner for the A-101 45% topical solution. Speaking of which, there is also no guarantee that ATI-501 (oral drug) will be partnered out to a pharmaceutical company after a strategic review is completed. Several of these risk factors could greatly hinder the progress of the company.

The good thing, which I highlighted above, is that Aclaris has enough cash to fund operations into Q3 of 2021. Which means that it is in no rush to dive into a bad deal and has no urgency to raise cash immediately. There are a few other risks that investors should be aware of. The first is that the stock trades at $1.24 per share with a low market cap of $51 million. That means such a stock can be easily manipulated in either direction.

The liquidity of the stock is pretty good, which is a positive. It trades with an average volume of about 1.8 million shares. Overall, based on cash until Q3 of 2021 and several products that can be partnered out in a strategic review, I believe there can be upside for the stock. A positive readout from the other Phase 3 study in common warts could possibly create a sharp reversal for the stock as well.

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