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A Whole New Paradigm, Athersys (Nasdaq: ATHX)

Athersys (NASDAQ:ATHX) is a bio-pharmaceutical company engaged in the discovery and development of therapeutic product candidates designed to extend and enhance the quality of human life. ATHX is developing MultiStem(NYSE:R), a patented adult-derived “off-the-shelf” stem cell product platform for multiple disease indications, including damage caused by myocardial infarction, bone marrow transplantation/oncology support, ischemic stroke and other indications. ATHX is also developing a portfolio of other therapeutic programs, including orally active pharmaceutical product candidates for the treatment of metabolic and central nervous system disorders, utilizing proprietary technologies, including Random Activation of Gene Expression (RAGE). (www.athersys.com)

Focus: ATHX’s MultiStem is a biologic product that is manufactured from human stem cells obtained from adult bone marrow or other non-embryonic tissue sources.  Unlike other cell types, MultiStem cells after isolation from a qualified donor may be expanded on a large scale for future clinical use and stored in frozen form until needed. Cells obtained from a single donor require no genetic modification and may be used to produce banks yielding hundreds of thousands to millions of doses of MultiStem – an amount far greater than other stem cell types. Each bank is extensively characterized to ensure product consistency and safety. This “master file” approach uses a single product manufacturing platform to achieve consistency in product manufacturing, characterization and validation while pursuing multiple distinct pre-clinical and clinical product portfolios within the MultiStem application.

The pharmaceutical industry faces a growing problem in the drug development process; obtaining access to validated drug targets in order to develop new therapies without infringing on patents that restrict the use of cloned and isolated gene sequences encoding the target.

  • ATHX’s RAGE technology provides a comprehensive solution to this obstacle to drug development. RAGE can be used to express validated protein drug targets from virtually every gene in the human genome without having to clone cDNA molecules. As a result, RAGE may be used to create cell lines that express certain validated drug targets in a manner that is independent of conventional approaches, overcoming a significant hurdle in the drug development process,
  • RAGE provides a unique solution for drug development or other research applications in the post-genomic environment, since it can be used to produce human cell lines expressing virtually any protein encoded in the human genome, without requiring the cloning and isolation of individual genes. RAGE is used to randomly activate genes, including those that are expressed rarely or expressed at very low levels, solving one of the major problems in genomic research,
  • RAGE enhances productivity and shortens the drug discovery process by enabling researchers to directly link biological function with expression of a specific protein. As opposed to taking the approach of systematically searching one by one through thousands of genes to ultimately find a protein with an interesting or medically relevant characteristic; RAGE allows for genome-wide, simultaneous analysis and the rapid association of proteins with their biological function,
  • Athersys  licenses its patented RAGE technology which produces human cell lines that express specific, biologically well validated drug targets without relying on cloned and isolated gene sequences.

Market Opportunity: There are 800,000 people who suffer from ischemic stroke on an annual basis; a number that is expected to increase over time with the aging of the “baby boomer” generation.  Neurological injury as a result of a stroke represents one of the leading causes of death and disability in the U.S. and the rest of the world.  Ischemic stroke, (caused by a blockage in blood flow to the brain) accounts for more than 85% of all strokes according to AHA estimates. Recent progress toward the development of safer and more effective treatments for ischemic stroke has been disappointing. Despite the fact that stroke is the leading cause of disability and third leading cause of death, there has been little progress toward the development of treatments that improve the prognosis for stroke victims. The only FDA-approved drug currently available for ischemic stroke is the anti-clotting factor, tPA, which must be administered to the patient within 3 to 4  hours of the onset of the stroke. Administration of tPA beyond this time frame is not recommended, since it can cause bleeding or even death. Given this limited therapeutic window, it is estimated that less than 5% of ischemic stroke victims currently receive treatment with tPA.

Financing: The cash position is strong but, partnerships and additional financing if and when available could/should advance programs. Is it not the case to raise money when a company does NOT need it?

  • On 6/27/09, The Center for Stem Cell & Regenerative Medicine (CSCRM), comprised of Case Western Reserve University (CWRU), Cleveland Clinic (NYSE:CC), University Hospitals (UH) and ATHX  has received $5 M from Ohio’s Third Frontier Commission under the Research Commercialization Program. The funding will help support new and innovative stem cell technologies including two commercial, four emerging and three pilot projects. This funding will be matched by each of the projects to create a $10 M grant benefiting stem cell and regenerative medicine in Ohio.

Corporate Governance: Is better than 66.1% of companies and 40.4% of Pharmaceuticals, Biotechnology & Life Sciences companies.

Regulatory Status: The ongoing phase I studies involving administration of MultiStem for the treatment of AMI and for cancer treatment support in patients at risk for GVHD and other complications continued to progress, and new clinical sites have been added for both studies. ATHX have been enrolling patients in the second dosing cohort for the AMI study and overall enrollment is now halfway complete. The single-dose arm of the GVHD trial had been reported as nearly one-third complete.

  • Continued enrollment in 2 MultiStem phase I clinical trials for patients who suffer an acute myocardial infarction (AMI) and for the complications, including Graft-Versus-Host Disease (GVHD), associated with bone marrow and peripheral blood stem  cell transplants for treating leukemia and related cancer,
  • Expanded number of participating clinical centers in both the MultiStem AMI and GVHD trials,
  • Awarded with collaborators (Center for Stem Cells and Regenerative Medicine) a grant from the State of Ohio’s Research and Commercialization Program, which will support the further development of MultiStem,
  • Suspended the development of ATHX-105, ceasing further expenditures on this program in the 2nd quarter,
  • Also, concluded an agreement with Bristol-Myers Squibb extending its discovery collaboration through the end of 2009.

Bottom Line: ATHX’s MultiStem development program is a cell based therapy that could deliver therapeutic benefit through – multiple mechanisms of action – by the production of factors that: protect damaged or injured neurons, reduce inflammation common in ischemic injury, promote new blood vessel formation to augment tissue repair and healing.

  • In 12/2000, ATHX entered into collaboration with Bristol-Myers Squibb (NYSE:BMY) to provide cell lines expressing well validated drug targets produced using their RAGE technology for compound screening and development. ATHX may receive as much as approximately $5.5 M per cell line in additional license fees and milestone payments for this technology,
  • Shares are trading at $1.06 with a market cap of $20.06, an enterprise value of 280.39 K (this is an interest divergence) with shares outstanding of 18.93 M with a float of 14.53 M with a 52 week range of $0.15 – $1.56,
  • I also like the fact that they have revenues of $2.34 M with grants that are non-dilutive,
  • The % held by insiders is 24.15% and the % held by institutions is 25.00% with H & Q Capital Management (HQL/HQH), ORBIMED Advisors, Wexford Capital, KBC Group, UBS AG, AIG and Ameriprise,
  • ATHX is based in Cleavland, OH and seems to be a SOLID mid-west values based company. cash has been posted at 19.59 M with total cash per share of $1.035 – which is not far from the trading value,
  • For additional disclosure purposes, this blog is posted without  any contact with ATHX and is my own view  with NO personal holdings (see disclosure section in Scimitar Equity site),
  • This market has NOT been good for “this” sector but keep your eyes on this stock, regulatory achievement – Will – truly drive value!
  • Note – The quarterly conference call should be worth listening to and scheduled for 11/5/09 @ 4:30 pm- listen to this conference call by dialing 800-273-1254.