Applied Molecular: Interesting Drug Delivery Approach For The GI Tract

Summary

• AMTI is developing a medicine for pouchitis.
• The company is undercovered and maybe undervalued.
• Its drug delivery platform is its key asset.
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Applied Molecular Transport Inc. (NASDAQ:AMTI) is a clinical stage biopharma with one asset that has just completed phase 2 trials in pouchitis, a rather painful inflammatory disease that occurs in patients undergoing surgical treatment for ulcerative colitis. Dubbed AMT-101, this is an oral biologic fusion protein of human interleukin 10 (hIL-10), an anti-inflammatory cytokine. In surgical procedures involving UC patients, a J-shaped pouch is created with a procedure called ileoanal anastomosis (J-pouch) surgery. Here, the end of the ileum is surgically connected to a spot near the anus in a J-shape, to hold food waste before it is removed from the body. Sometimes, in about half of these patients, the lining of this pouch gets inflamed, which can cause various debilitating and lifestyle altering symptoms.

AMT-101’s goal is to treat this condition.

“In diseases like ulcerative colitis, the immune system is revved up and inflammation is not just in the gut, but in other parts of the body,” said Bittoo Kanwar, M.D., who leads clinical development at Applied Molecular Transport. “What IL-10 can do is turn that needle back to homeostasis, so what we’re doing is providing this cytokine as an agonist, where most approaches use antagonists: anti-TNFs, anti-JAKs and so on.”

Current treatment options for pouchitis are long term antibiotics, or, if the patient becomes refractory to antibiotics, they are given painkillers. There are no FDA-approved therapies for the indication which may have a target patient population as high as 20-30k US patients.

In a phase 2 trial, recently published, data was as follows:

The efficacy goals of phase 2 trial, dubbed FILLMORE, were to measure symptomatic improvement, as measured by stool frequency response; and histologic healing. The trial evaluated 3-mg and 10-mg doses of the drug.

The company said data showed that 36.4% (8/22) of patients achieved stool frequency response, defined as a reduction of ≥ 3 stools and ≥ 30% from the time treatment started.

Applied Molecular added that rapid onset of stool frequency response was seen as early as week 2 in both dosage groups and was maintained through the duration of treatment.

The company also said that an independent data monitoring committee has given the go ahead for a phase 3 trial with the 3-mg dose because the molecule was able to achieve symptomatic stool frequency response in both dosage groups which exceeded the criteria for determining advancing into phase 3.

Other data:

In addition, the company said that 22.7% (5/22) of patients met the pre-specified histologic healing response of Geboes score ≤ 3.1, an assessment of disease improvement.

AMT-101 appeared safe and well-tolerated. The molecule was earlier used for inflammatory bowel disease, but due to its systemic application, it produced unacceptable side effects. AMTI’s direct payload delivery mechanism may be able to address that shortcoming, the company hopes.

It should be noted that AMTI doesn’t position itself as a pouchitis or even an UC company, but rather it claims itself to be a platform company with a unique payload agnostic drug delivery method, with pouchitis being the first targeted indication. This technology has been described to me in this way:

Like other devious pathogens, the bacterium that causes the intestinal disease cholera secretes virulence factors that allow it to sneak past the host’s normal defenses. A certain type of the bacterium Vibrio Cholerae secretes an exotoxin called cholix (CHX), which has evolved to sneak through the intestinal barrier in a way that essentially nothing else known can. Inspired by this, AMTI has re-engineered Cholix (CHX) to serve as a carrier able to deliver a payload directly through a ‘special’ pathway enabled by Chx. No other drug has ever been delivered in this specific way.

So, the plan here is to achieve active and rapid transport of therapeutic payload across the gastrointestinal submucosal region using exploiting a natural infection causing mechanism. Pouchitis is simply the first indication - there are a host of other unmet-need diseases of this area which AMTI plans to target eventually.

The company’s pipeline looks like this:

Pipeline (Company website)

3 phase 2 trials will have topline data readouts this year, including the two UC trials and the one in rheumatoid arthritis.

There’s an extremely helpful comment over here - please head to the comment section for a nice overview of the company.

Financials

AMTI has a market cap of $165mn and a cash balance of $160mn. Given a debt of some $40mn, this means the market is valuing its pipeline at just around $45mn. If the company is successful with the phase 3 trial, this would make the valuation really low. A relatively large percentage of the float is held by smart money - almost 95% of institutional, funds and insider holding. Couple of insiders - the CEO and Chief Scientific Founder - are 10% holders. Other holders are EPIQ Capital Group, Capital World Partners and so on.

Total R&D expenses for the fourth quarter of 2021 were $21.7 million, while G&A was $9.0 million. At that rate, they appear to have funds for about 5 quarters.

Risks

AMTI has been on a consistently downward trend since April 2021. It appears that this trend started since their $105mn stock offering in April last year. It is tough to catch a falling knife stock like this at its lowest point, because, despite all logic, they may fall further down.

The stock fell ~10% after they announced "positive" data in April. The trial measured two pre-specified efficacy endpoints: 1) symptomatic improvement, as measured by stool frequency response; and 2) histologic healing, as measured by central read. Since the trial did not have a control arm, it is difficult to figure out how the responses generated by the drug compared to a control. Thus, there was no talk of statistical significance of the data. The lack of definition in the data may have contributed to the stock falling 10%.

Bottom Line

In my somewhat cursory view, AMTI looks like a promising, under-covered company. They have a promising molecule that is non-toxic and seems to be doing the work it is intended for. Their drug delivery platform is their most important asset, and it seems to have shown its viability in the early trials. I will continue watching AMTI for a better grasp on the company.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Tom W Dorsey]

Combo data in AM.

[Tom W Dorsey]

www.globenewswire.com/...

[GCManage]

Access to management is a BAD JOKE!!
We have 70 positions in our portfolio and AMTI is amazing in its lack of shareholder access, no others come close! No response to emails requesting a call, no phone numbers for the company that don’t go to full voicemail boxes and then disconnect, no quarterly earnings calls, no access to management without sending an advance application and waiting weeks. If it is anything like this for perspective business partners, these guys are in trouble.

[Micarian]

Avisol does a very nice job explaining the framework mechanics of cholix transcytosis. -nicely done. The drug delivery system used is very clever and very unique and I will be very interested to follow their evolution. I would remain intrigued but cautious. As Avisol notes, there is a regrettable absence of a control group in the FILLMORE trial and these are the sorts of clinical outcomes where placebo effects can approach drug response rates in the 30-40% range. What is somewhat more worrying is that treatment associated histological response rates (microscopic inflammatory improvement) only occurred in some 20% of patients. Based on the mechanism of action of IL-10, one might expect to see robust reduction in lamina propria inflammation associated with clinical improvement. Finally the company has bitten off a lot here. They both have a novel drug delivery system to prove but, in addition to that no one who has gone before them (and many have tried) have proven that IL-10 itself given —by ANY methodology has been proven to be effective in ANY clinical trials of ANY form of inflammatory bowel disease. I am not long. I am not short. But, I do have three decades of experience treating GI inflammatory disorders as a gastroenterologist. That said, the drug delivery system is way cool and I feel like they may well find a better clinical application but…when and how much capex from here?

[Avisol Capital Partners]

@Micarian Thanks, that nice description came from a reader who had messaged me to cover AMTI. It is not my own.

[GCManage]

I asked about the lack of a control group and was told by the company that this was part of the FDA approved trial protocol and not abnormal in cases where a potential orphan drug with nil toxicity is in trial. There are three other phase 2 drug trials ongoing and expected to read out in 2022, including ulcerative colitis. UC has a much larger patient population than pouchitis. I was also told that pouchitis is the “mt Everest” of GI inflammation and it’s a highly encouraging sign that results for it are positive. I’m not a scientist.

[Gordon Gecko was a Commie]

@Avisol Capital Partners thanks for this article! Nice introduction. I might further comment that the UC market remains very large and many patients are not helped by the primary drugs (TNFa inhibitors) used here. Humira only helps 16-18% of the patients who try it for moderate-severe UC. Upside looks huge if some of these upcoming ph2 trials readout positive. And if those readout positive, there are a lot of other indications that may be served quite well by this novel Chx delivery platform. Direct access to the gut's immune system is a very powerful concept.

[GCManage]

You are probably right, especially since there is no obvious reason why AMTI with its lack of toxicity can’t work with Humira in a cocktail. That would be great.

[Gordon Gecko was a Commie]

@GCManage one reason for optimism on the upcoming ph combo trial for UC is that TNFa inhibitors rely on IL-10 in order to do their job. We know from various experiments that: lack of IL-10 can lead to IBD, lack of IL-10 prevents anti-TNFa therapies from working in IBD, and that blocking IL-10 signaling will prevent anti-TNFa therapies from working. We don't have the specific experiment that would most most relevant: we don't yet know if adding some IL-10 will solve these problems and allow more people to benefit from anti-TNFa therapies. But there is a nice logic to hypothesize that it will help.

pubmed.ncbi.nlm.nih.gov/...

[GCManage]

@Gordon Gecko was a Commie What’s your view of AMTI at current price levels close to $1.00? Is there reason for optimism with two more clinical trials yet to read out?