Athersys: Short Term Catalyst With Long Term Potential

Athersys: Short Term Catalyst With Long Term Potential 
LOS ANGELES, CA -- (Marketwire) -- 01/22/13 --  In 2012, many stem
cell stocks experienced fast-paced growth as new and promising
research continues to propel the industry forward.  
Last July, we first wrote about Pluristem Therapeutics (NASDAQ:
PSTI), a bio-therapeutics company engaged in the commercialization of
non-personalized cell therapy products for the treatment of several
severe degenerative, ischemic, and autoimmune disorders. Since the
beginning of 2012, the company has seen a 33% increase in share price
on mainly positive news regarding some patients showing signs of
improvement after receiving treatment using Pluristem's PLX
(PLacental eXpanded) cells. 
Pluristem derives its platform from cells derived from the placenta.
The placenta, or after-birth, is an organ commonly thought of as
medical waste to be disposed of after childbirth. If Pluristem
continues on its positive track, it could be a big winner this year,
especially if it can secure orphan drug status for its treatment of
Aplastic Bone Marrow. 
Today, we focus on another company in the same industry with near
term catalysts that we think has even larger upside potential in
Athersys, Inc is a clinical stage biopharmaceutical company with a
growing pipeline of highly differentiated therapeutics to treat
significant and life-threatening diseases. The company has
established a diverse portfolio of product candidates. Its most
advanced programs are in the area of regenerative medicine, which is
focused on the development of therapeutic stem cells with the ability
to reduce tissue damage and promote healing, or repair and replace
diseased/damaged tissue. 
The company is developing a patented and proprietary non-embryonic
stem cell therapy called MultiStem for the treatment of
cardiovascular disease, neurological conditions, inflammatory and
immune conditions, as well as certain other potential applications.
Over the past several years, the company has advanced multiple
programs into clinical development and currently has four clinical
stage programs involving MultiStem. These programs are exploring the
potential use of MultiStem to treat: 

--  Inflammatory Bowel Disease (Pfizer partnership)
--  Ischemic stroke (ongoing Phase 2 clinical trial)
--  Complications associated with traditional bone marrow or hematopoietic
    stem cell transplants, such as Graft Versus Host Disease (GVHD)
--  Damage from acute myocardial infarction (i.e. heart attack)

Upcoming Catalyst: 
In Q2, 2013, Athersys expects to release top line results for its
Phase II study for patients with moderate to severe ulcerative
colitis. This is part of an ongoing partnership with Pfizer Inc.
(PFE). As we have alluded to in previous articles, we often invest in
small companies who have the opportunity to learn and work with
reputable and successful companies such as Pfizer. 
In December of 2009, Athersys, Inc. announced it entered into an
agreement with Pfizer develop and commercialize MultiStem for
the treatment of Inflammatory Bowel Disease (IBD). 
Under the terms of the agreement, Athersys received an up-front cash
payment of $6 million, as well as research funding and support during
the initial phase of the collaboration. In addition, Athersys is also
eligible to receive milestone payments of up to $105 million upon the
successful achievement of certain development, regulatory, and
commercial milestones. Pfizer will have responsibility for
development, regulatory, and commercialization while paying Athersys
tiered royalties on worldwide commercial sales of MultiStem IBD
Athersys feels this study will provide the opportunity to highlight
its foundation of prior work and de-risk other opportunities,
including Crohn's disease. The company thinks the rapid progression
of this program illustrates the effectiveness of the Pfizer
collaboration. The objectives of this Phase II study for ulcerative
colitis include evaluating efficacy through week sixteen along with
one year's worth of safety data. 
Another Phase II study regarding the MultiStem technology is in the
area of ischemic stroke. We think this is a big opportunity for the
company as it represents a major unmet need and includes an annual
market opportunity of more than $15 Billion. Athersys has a big lead
in developing its technology for stroke victims over companies such
as StemCells Inc. which is in pre-clinical trials for the same
indication. In these trials, StemCells Inc. has conducted preliminary
studies in collaboration with professors of neurosurgery at Stanford
University School of Medicine, successfully demonstrating that its
human neural stem cells enhance functional recovery after stroke in
rats. This is certainly an important step for StemCells and
definitely a potential value driver for the company. 
However, StemCells market cap is almost exactly the same as Athersys,
yet Athersys has a much more intriguing pipeline as well as a much
more advanced stroke candidate. In addition, the company has an
upcoming catalyst that could rally the stock in the shorter term. The
cash position of the two companies is about the same while StemCells
burns more per quarter at $5M versus $4.55M for Athersys. While as we
mentioned, StemCells is undervalued promising speculation investment
stem cell company, Athersys offers better value at this time in my
strong opinion. 
Stroke is a leading cause of serious disability and the third leading
cause of mortality in U.S. and globally. Annually, there are
approximately 800,000 stroke victims in the U.S. and 15 M globally
(85% ischemic strokes). With an increasingly obese and aging
population, the clinical need and commercial opportunity is expected
to increase dramatically in years ahead. 
Currently the only FDA approved drug for ischemic stroke is rtPA
(recombinant tissue plasminogen activators), which helps dissolve the
blood clot that impedes blood flow to the brain. However, this is
only effective if administered within 3-4 hours of the stroke.
Athersy's Phase II study is evaluating the effectiveness of their
medicine in the 24-36 hours following the stroke. Clearly, this would
be a significant development because by the time many stroke victims
even get to the hospital and/or are properly diagnosed, the time
frame for using the currently available treatment may have elapsed. 
In its Phase II study, Athersys has involved 140 patients and is
being conducted at several leading stroke centers across the U.S. In
October of last year, the company announced the successful completion
of the first two dosing cohorts for trial. Both dose levels were
shown to be safe and well tolerated. Results from this final portion
of this study are expected within the next 12 months. 
The third area of clinical development for Athersys involves GvHD, an
imbalance of immune system function caused by transplanted cells that
attack various tissues and organs. In early 2012 Athersys announced
successful completion of a Phase I clinical study involving
administration of MultiStem to patients suffering from leukemia or
certain other blood-born cancers that undergo radiation therapy and
then receive a hematopoietic stem cell transplant. Such patients are
at significant risk for serious complications, including GvHD. Phase
I of Athersys's study was completed in early 2012 for patients
suffering from leukemia and other blood-born cancers. In the highest
single dose group "no cases of severe GVHD were observed and there
was only one moderate grade (grade 2) that resolved with treatment." 
Athersys believes there is strong rationale to support the
accelerated development of MultiStem for the prevention of GvHD. In
April 2012, it met with the FDA to discuss the clinical path. The
company is currently defining the detailed clinical plan for an
upcoming double blind, placebo controlled phase II/III study. With
these preparations taking place now, the submission to the FDA for
these trials should be imminent. 
When the submission of this Phase II/III happens, it should put more
of an emphasis on the potential success story Athersys is starting to
develop into. In addition, this could lead to additional partnerships
along with the one already established with Pfizer. This would lead
to more up-front and developmental cash payments. If Athersys can
prove its worth along the way to Pfizer and other high level pharmas,
the potential would be very high for the company and related stock
Perhaps the biggest speculative value driver for Athersys is
ATH-9I385, a 5HT2c receptor agonist the company is developing in its
pipeline. This receptor is a key for assisting the brain in
regulating appetite and food intake that is effective for the
treatment of obesity and diabetes. 
In 2012, for the first time in over 13 years, 2 companies had their
anti-obesity drugs approved by the FDA. 
Arena Pharmaceuticals, Inc had its drug Belviq approved in June of
2012, While VIVUS, Inc.  had its drug Qsymia approved in July of the
same year. 
There has been some question as to the safety of Vivus's Qsymia for
its potential to cause dangerous heart problems, birth defects, and
cognitive effects such as mental fogginess or lack of concentration
in patients taking the drug. Regardless, the FDA approved Qsymia with
a Risk  
Evaluation and Mitigation Strategy (REMS), which consists of a
Medication Guide advising patients about important safety information
and elements to assure safe use that include prescriber training and
pharmacy certification. 
Qsymia uses a combination of phentermine and topiramate. Phentermine
was an ingredient used in half of fen-phen, originally approved by
the FDA, and then withdrawn from the market in 1997 over concerns
about heart risks and other dangerous side effects. 
Arena's Belviq is believed to decrease food consumption and promote
satiety by selectively activating 5-HT2C receptors located in the
hypothalamus, as Atherys's ATH-9I385. However, Athersys believes it
has shown so far that ATH-91385 has better compound selectivity than
other 5HT2c agonists like Arena's Belviq. Additionally, ATH-91385
avoids the 5HT2b receptor and other receptors, such as 5HT2a. 
Athersys's specific goal is to develop a once-per-day orally
administered pill that reduces appetite by stimulating the 5HT2c
receptor, but that does not stimulate the 5HT2b receptor, the 5HT2a
receptor, or other receptors that could cause adverse side effects. 
If ATH-91385 ultimately proves to work as effectively as the company
believes, Belviq and Qsyimia could be facing some stiff competition
from ATH-91385 in the future. 
Technical analysis of the chart shows that the stock appears to be
forming a rounding bottom here from the $1.00 level with an
indication it wants to go higher. The first point of minor resistance
will be the 200ma at $1.33, but from there it should be clear until
the $1.50 and $1.80 level. The MACD and RSI both are indicating good
room to run with bullish momentum indicators. 
With its near term catalyst, strong chart, and adequate management,
we think the company is very undervalued with a market cap of only
$66M. If the collaboration program with Pfizer and other catalysts
solidify previous results, the stock price by the end of the year
could easily be approaching $4 to $5. 
Price target opinions: Short term (1 day - 3 months) $1.55 - $1.75,
long term (over 1 year) $5. 
Disclosure: Long ATHX 
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