Atara plunges 56% as Stifel downgrades after early data for multiple sclerosis drug

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Atara Biotherapeutics (NASDAQ:ATRA) shed ~56% to record its biggest intraday loss after Stifel downgraded the Clinical-stage biotech on Wednesday in reaction to its Phase 2 interim data for ATA188, a CAR T immunotherapy for progressive multiple sclerosis.

The company said that the data readout was not sufficient to draw conclusions on the predictive value of six months expanded disability status scale (EDSS) improvement for 12 months even though EDSS data were available for 34 patients at six months and 15 patients at 12 months.

Stifel analysts led by Benjamin Burnett pointed out that citing Phase 1 data Atara (ATRA) had previously said EDSS improvement at six months was more than 85% predictive of achieving EDSS improvement at 12 months.

“This wasn’t confirmed in the interim analysis, which we now think supports the notion that some patients may have had inflated baseline EDSS assessments in the phase 1,” they added, downgrading the stock to Hold from Buy and slashing the per share target to $5 from $16.

In addition, citing the recent pressure on shares and lack of notable catalysts in the near-term, the team raises concerns over the risks of share dilution and cash runway.

However, the analysts continue to see the potential of ATA188 as a treatment to stabilize multiple sclerosis, a measure the interim analysis did not consider.

Wall Street has remained bullish on Atara (ATRA) stock, with an average rating of Buy from analysts. However, Seeking Alpha's quant system, which consistently beats the market, rated ATRA as a Hold.

Comments

[Arkeh Capital]

Citi apparently downgraded ATRA to Sell with a price target of $3. I believe that leadership changes are urgent and long overdue at ATRA. The current team has lost the trust of investors and employees. The company needs a strategic investor or an buyer and the management of the day is likely not willing to admit its complete failure thereby losing time and money.

[BimMu9B3]

It is already clear that ATA188 restores myelin and improves EDSS in MS patients. It is the only drug that goes after the cause of MS: EBV. It is highly likely this drug will be approved. The many other drugs currently approved for MS do not repair myelin or improve EDSS. Rather, they reduce the immune system and thereby slow progression of the disease. For that, these drugs command more than $100,000 per patient per year. Tecfidera is an example. This drug produced more than $4 billion per year, and it doesn't even remove the cause of the disease.

Wake up, people. When this drug is approved, it will be a $10 billion per year drug. Atara is currently worth $300 million.

Regarding the announcement that they don't feel the need to increase the sample size, I hardly see that as cause for concern. We already know the drug works. They will do a large phase 3 next year. They are already planning it.

[NDHT]

@BimMu9B3 Well said.

Atara has cited two recent papers from two renowned medical journals that EBV is the main culprit for MS. Atara's ATA188, an allogeneic T cell therapy, eliminates MS-causing cells that express EBV antigens.

1) Bjorneviketal.(Science,2022)
•Identified EBV as the required trigger for MS
•Risk of MS increased 32-fold after infection with Epstein-Barr virus but was unchanged after infection with other viruses
•Serum levels of neurofilament light chain, a biomarker of neuroaxonal degeneration, increased only after EBV seroconversion

2) Lanzet al. (Nature, 2022)
•Validates molecular mimicry as one of the leading mechanisms of EBV-mediated MS
•Demonstrates a mechanistic basis for how EBV infection can trigger immune cells to attack self-tissue in the CNS.

In addition, this is just a proof of concept Phase 2 trial with a target enrollment of 80 patients. Any learning Atara can glean now will help them design better pivotal Phase 3 trials later.

Today's market reaction treated this interim news as a do-or-die event for pivotal Phase 3 trials. It's quite far from that.

[BimMu9B3]

@NDHT I don't think people understand how ground-breaking ATA188 is. Every drug on the market is not getting at the cause of the disease, and they are raking in tens of billions every year. Certainly things can go wrong on the way to approval, but it seems like a blockbuster drug.

[Sage Advisors]

@BimMu9B3 The published literature is compelling. Could it be that these patients were too far in the course of their disease? I also think there is a lot of variability in progression rates between patients with MS which means you need a large n. This study is not powered for stat significance. I agree with NDHT's comment that phase 2 in an indication like this with an unproven mechanism serves to inform design of a ph 3. This is exploratory more than a it works/it failed readout IMHO.

[shake shake money tree]

Anyone listened to the conference call？ So they have 15 ppl that have been treated for 12 months. They are doing 1:1, so there are about 7 in the treatment group. I am not a statistician but i would say, there is no way to derive any statistical significant number from such a small sample. The interim analysis was designed so incredibly dumb…

[Arkeh Capital]

@shake shake money tree
Agreed. This suggests to me there is no message on the efficacy of the drug per se. Even people in the placebo group want to believe into the efficacy of what they got at the 6 months stage. Same with those who got ATA188. But even some of those 7-8 who got no placebo will have to realize that things have not really improved but only stabilized. There is no statistical base for conclusions. They raised false expectations. So what are their options now? In my view they will have to put the company up for sale as soon as the data base gets more reliable and hopefully better, unless someone takes the opportunity to build a stake and drive up the share price so that they can refinance a cash negative business. The management in any case does a very terrible job and it is a joke if the have access to lower and lower share options rewarding them for their mistakes.

[shake shake money tree]

@Arkeh Capital Your explanation makes sense! Thank you. I placed too much trust on the science/nature articles.

[shake shake money tree]

@Arkeh Capital Thinking about it more about your hypothesis. In the longer term(12 months), there might be some efficacy since the sample size was not increased. If there were absolutely no efficacy, the futility would be kicked in. They did not increase the sample size, that seems a relatively good indicator.

It seems indicating that, at 6 months, false positive is high. So nothing is conclusive at 6 months.

[sepsis74]

The crash is not warranted. The FDA has proven that they are OK approving drugs that are basically no better than placebo like Sarepta's drug for DMD, which sells millions. PTC Bio and Sarepta's DMD drugs sell millions for mostly being safe, even if they don't have much effect, because they address a desperate patient population. The question is the level of ground support MS patients will create for ATRA's drug candidate.

[Darkwhite.simon50]

And Friday, everything will be in place because institutions will buy all the shares of the retails investors… classic.

[Arkeh Capital]

@Darkwhite.simon50
The institutions will we hedge funds. Short interest in ATRA was about 10% of shares outstanding. This explains why the shares could come that much under pressure in after-market-trading. Neither indexed money nor long-only investors would have tried to sell at whatever price. But people with short-positions on had an interest to bring down the share price as much as possible in a market as illiquid as possible. I think the SEC should review trading. This said, I also believe ATRA is a very poorly managed company.