Asterias' Ischemic Stroke Indication Has The Potential To Add Solid Value To OPC1 Program
Jul. 16, 2018 5:15 PM ET|38 comments | About: Asterias Biotherapeutics, Inc. (AST), Includes: ATHX, CELZ
Fini BioInvestments
Fini BioInvestments
Value, research analyst, biotech investing, short-/mid-term catalysts
(255 followers)
Summary
Although OPC1 has phenomenal responsiveness in cervical injury patients, its revenue potentials were limited because of the small size of this patient population.
The introduction of ischemic stroke as a potential indication for OPC1 will add hundreds of millions to the company's valuation should early trials pan out.
We have raised out target price to $7.72 from $7.08 due to high likelihood of success in future safety trials and strong efficacy in another progenitor ischemic stroke treatment.
Introduction
Asterias Biotherapeutics (AST) is a stem-cell and allogenic/autologous immune cell-based biotechnology company focused on two rather unrelated indications with high market penetration potential. For an in-depth look at AST in its entirety, please refer to our first article. The focus of this analysis will be the July 12th indication update for ASTs allogenic oligodendrocyte progenitor treatment, OPC1, and its implications for ischemic stroke survivors.
Ischemic Stroke Background
On July 12th, 2018, management announced a new exclusive license agreement with The Regents of the University of California for the treatment of ischemic stroke patients with OPC1. A stroke by definition is the death of neural tissue due to lack of oxygen circulation. This condition is due to either arterial blockages (ischemic) or ruptures (hemorrhagic). Common risk factors for stroke include cardioembolism and large-artery atherosclerosis.
While OPC1 has demonstrated fantastic results in cervical spinal cord-injured patients (see first AST article), the potential of this treatment was limited due to an inability of the company to find a broader market for this stem cell technology. The attempt to bring OPC1 to the ischemic stroke arena is huge for AST, as it is estimated that about 800,000 people in the United States alone have a stroke every year, with ~87% being classified as ischemic.
Stem cell therapies have several beneficial effects for treating stroke victims, which the illustration below describes. ASTs OPC1 therapy is oriented around non-neuronal cells called oligodendrocytes (the blue branch in the figure). Specifically, OPC1 would assist in re-myelination of damaged neurons, while also possibly being involved in regeneration or guidance of neurons. To be clear, the central nervous system is notorious for its inability to regenerate - this is why OPC1 is necessary for scaffolding of lesions in the spinal cord for its current indication. We do believe, however, that OPC1 may allow for relief of some of the damage by replacing oligodendrocytes that were native to the patient but died from the stroke.
The Potential for Stem Cells as Stroke Treatments
Ischemic Stroke Recovery Market
The stroke market is both innovative and crowded. Companies such as Athersys, Inc. (ATHX) and Creative Medical Technology Holdings Inc. (OTCQB:CELZ) are currently attempting to establish stem cells as a viable treatment for stroke. ATHX is likely ASTs closest competitor in the ischemic stroke segment due to its pursuit of MultiStem, a treatment derived from multipotent adult progenitor cells (whereas OPC1 is the progenitor for a single cell type, oligodendrocytes). MultiStem has received a special Protocol Assessment, Fast Track designations from the FDA, and recently obtained a Final Scientific Advice positive opinion from the European Medicines Agency. Most importantly, MultiStem received the Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA, which demonstrates great confidence in the treatment, as with OPC1 in cervical spinal cord injuries. The phase 2 trial readout (see table below) demonstrates the efficacy of allogenic progenitor cells as a treatment for victims of ischemic stroke. MultiStem achieved a significant improvement over placebo in several measurement scales, including the Barthel index, mRS, and NIHSS, leading to what the company calls a significant "excellent outcome" (although it is important to recognize that the experimental and placebo groups had vastly different sizes). MultiStem is administered to patients 18-36 hours after the stroke and serves as an immediate immuno-modulating mechanism administered after emergency treatments. ATHX reported last year that it would be running a MASTERS-2 phase 3 trial that would support filings for commercialization in the U.S. and Europe. This suggests AST will need to run pivotal phase 3 trials for OPC1 in both the cervical spinal cord and ischemic stroke indications (should results in current/future trials be positive in these indications). It will be interesting to compare the difference in outcomes for ischemic stroke patients between a broad allogenic progenitor immuno-modulator (MultiStem) and an oligodendrocytic progenitor therapy (OPC1). While these two have different mechanisms, they serve as support for the use of stem cells in treatment of ischemic stroke. More information is necessary from management's part to accurately determine whether these therapies can work in conjunction with one another or will be more competitive.
ATHX MASTERS Phase 2 Trial Readout for Ischemic Stroke
Interestingly, CELZ (although it is a nano-cap stock) is pursuing a pre-clinical candidate called Angiostem, which utilizes amniotic fluid-derived stem cells for the treatment of stroke (by stimulating the proliferation of endogenous brain cells). CELZ is also pursuing a patent for the use of autologous bone marrow stem cells as an adjuvant to FDA-approved stroke treatments to improve patient outcomes.
It is important to clarify that OPC1 will be a treatment for the recovery of stroke survivors (similar to MultiStem), rather than an emergency treatment such as tissue plasminogen activator (tPA). Because the stroke recovery patient segment is a very underserved patient population, ASTs OPC1 should be able to penetrate the market rather well if the treatment shows good safety and efficacy.
Changes to Target Price
Due to the positive safety data in OPC1 with cervical spinal cord injury patients, we believe it is appropriate to price in the stroke indication at a Phase 1 level (although OPC1 treatment for ischemic stroke is currently pre-clinical). We believe OPC1 for ischemic stroke has the potential to bring in ~$100 million in probability of success- ((PoS))-discounted revenues by 2025. This assumes a ~5.5% market penetration in its third year of sales and a price tag of $20,000. All other assumptions are the same as those listed in our original article and are visible in the model screenshot below. Compared to the PoS-discounted ~$1 million we expect OPC1 for spinal cord injuries to yield by its third marketed year, we believe the ischemic stroke indication will derive the most value from the OPC1 technology (if it works as well as OPC1 works in spinal cord injuries, that is). It is entirely possibly (and reasonable) that the OPC1 and VAC2 programs are under-priced in our model, but for the sake of conservative estimates, we will keep our price tag assumption for now.
Thus, at this point, we believe the ischemic indication currently adds about 9% to the company's value simply because of the time it will take to hit the market and the low probability of commercialization. Our new target price is $7.72, but we expect to upgrade this value should the stroke treatment have successful clinical readouts.
Concluding Remarks
We believe that the stroke indication provides serious potential upside to the company, particularly as it progresses through clinical trials in the future. Because this is a new indication for OPC1, we do not anticipate much of a downside if the treatment shows poor efficacy in stroke victims, as our thesis is highly dependent on the VAC program, with some support from the cervical injury OPC1 program.
The move to add another indication to OPC1 likely also reflects management's confidence in this treatment. In the stroke press release on July 12th, Michael Mulroy, President and CEO of AST, stated:
"The preliminary results of our ongoing spinal cord injury trial are encouraging and we are excited to begin to expand our neurology platform to other indications. We look forward to exploring whether our AST-OPC1 product candidate can help patients that have suffered an ischemic stroke and other patients with de-myelinating conditions where there is a large, unmet medical need.” This suggests that management is also planning on moving towards indications such as multiple sclerosis ("de-myelinating conditions"
, which OPC1 would be perfect for due to its theoretical re-myelinating capabilities. This would also be a huge revenue segment for the company, as it estimated that 400,000 people in the United States suffer from multiple sclerosis.
The next year or two will definitely be exciting for Asterias, and we look forward to continuing coverage of this company. Upcoming catalysts revolve around the OPC1 cervical spinal cord injury treatment, with updates on Cohorts 3/4 and full 12-month study readouts expected throughout Q3 and Q4, with FDA meetings for future trials expected at the beginning of 2019.
Disclaimer: This research is not investment advice nor a personalized recommendation. These articles are intended to supplement potential investors' knowledge of companies of their interest. All investors are expected to perform their own due diligence before making investment decisions.
Disclosure: I am/we are long AST.
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.
E
Jul. 16, 2018 5:15 PM ET|38 comments | About: Asterias Biotherapeutics, Inc. (AST), Includes: ATHX, CELZ
Fini BioInvestments
Fini BioInvestments
Value, research analyst, biotech investing, short-/mid-term catalysts
(255 followers)
Summary
Although OPC1 has phenomenal responsiveness in cervical injury patients, its revenue potentials were limited because of the small size of this patient population.
The introduction of ischemic stroke as a potential indication for OPC1 will add hundreds of millions to the company's valuation should early trials pan out.
We have raised out target price to $7.72 from $7.08 due to high likelihood of success in future safety trials and strong efficacy in another progenitor ischemic stroke treatment.
Introduction
Asterias Biotherapeutics (AST) is a stem-cell and allogenic/autologous immune cell-based biotechnology company focused on two rather unrelated indications with high market penetration potential. For an in-depth look at AST in its entirety, please refer to our first article. The focus of this analysis will be the July 12th indication update for ASTs allogenic oligodendrocyte progenitor treatment, OPC1, and its implications for ischemic stroke survivors.
Ischemic Stroke Background
On July 12th, 2018, management announced a new exclusive license agreement with The Regents of the University of California for the treatment of ischemic stroke patients with OPC1. A stroke by definition is the death of neural tissue due to lack of oxygen circulation. This condition is due to either arterial blockages (ischemic) or ruptures (hemorrhagic). Common risk factors for stroke include cardioembolism and large-artery atherosclerosis.
While OPC1 has demonstrated fantastic results in cervical spinal cord-injured patients (see first AST article), the potential of this treatment was limited due to an inability of the company to find a broader market for this stem cell technology. The attempt to bring OPC1 to the ischemic stroke arena is huge for AST, as it is estimated that about 800,000 people in the United States alone have a stroke every year, with ~87% being classified as ischemic.
Stem cell therapies have several beneficial effects for treating stroke victims, which the illustration below describes. ASTs OPC1 therapy is oriented around non-neuronal cells called oligodendrocytes (the blue branch in the figure). Specifically, OPC1 would assist in re-myelination of damaged neurons, while also possibly being involved in regeneration or guidance of neurons. To be clear, the central nervous system is notorious for its inability to regenerate - this is why OPC1 is necessary for scaffolding of lesions in the spinal cord for its current indication. We do believe, however, that OPC1 may allow for relief of some of the damage by replacing oligodendrocytes that were native to the patient but died from the stroke.
The Potential for Stem Cells as Stroke Treatments
Ischemic Stroke Recovery Market
The stroke market is both innovative and crowded. Companies such as Athersys, Inc. (ATHX) and Creative Medical Technology Holdings Inc. (OTCQB:CELZ) are currently attempting to establish stem cells as a viable treatment for stroke. ATHX is likely ASTs closest competitor in the ischemic stroke segment due to its pursuit of MultiStem, a treatment derived from multipotent adult progenitor cells (whereas OPC1 is the progenitor for a single cell type, oligodendrocytes). MultiStem has received a special Protocol Assessment, Fast Track designations from the FDA, and recently obtained a Final Scientific Advice positive opinion from the European Medicines Agency. Most importantly, MultiStem received the Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA, which demonstrates great confidence in the treatment, as with OPC1 in cervical spinal cord injuries. The phase 2 trial readout (see table below) demonstrates the efficacy of allogenic progenitor cells as a treatment for victims of ischemic stroke. MultiStem achieved a significant improvement over placebo in several measurement scales, including the Barthel index, mRS, and NIHSS, leading to what the company calls a significant "excellent outcome" (although it is important to recognize that the experimental and placebo groups had vastly different sizes). MultiStem is administered to patients 18-36 hours after the stroke and serves as an immediate immuno-modulating mechanism administered after emergency treatments. ATHX reported last year that it would be running a MASTERS-2 phase 3 trial that would support filings for commercialization in the U.S. and Europe. This suggests AST will need to run pivotal phase 3 trials for OPC1 in both the cervical spinal cord and ischemic stroke indications (should results in current/future trials be positive in these indications). It will be interesting to compare the difference in outcomes for ischemic stroke patients between a broad allogenic progenitor immuno-modulator (MultiStem) and an oligodendrocytic progenitor therapy (OPC1). While these two have different mechanisms, they serve as support for the use of stem cells in treatment of ischemic stroke. More information is necessary from management's part to accurately determine whether these therapies can work in conjunction with one another or will be more competitive.
ATHX MASTERS Phase 2 Trial Readout for Ischemic Stroke
Interestingly, CELZ (although it is a nano-cap stock) is pursuing a pre-clinical candidate called Angiostem, which utilizes amniotic fluid-derived stem cells for the treatment of stroke (by stimulating the proliferation of endogenous brain cells). CELZ is also pursuing a patent for the use of autologous bone marrow stem cells as an adjuvant to FDA-approved stroke treatments to improve patient outcomes.
It is important to clarify that OPC1 will be a treatment for the recovery of stroke survivors (similar to MultiStem), rather than an emergency treatment such as tissue plasminogen activator (tPA). Because the stroke recovery patient segment is a very underserved patient population, ASTs OPC1 should be able to penetrate the market rather well if the treatment shows good safety and efficacy.
Changes to Target Price
Due to the positive safety data in OPC1 with cervical spinal cord injury patients, we believe it is appropriate to price in the stroke indication at a Phase 1 level (although OPC1 treatment for ischemic stroke is currently pre-clinical). We believe OPC1 for ischemic stroke has the potential to bring in ~$100 million in probability of success- ((PoS))-discounted revenues by 2025. This assumes a ~5.5% market penetration in its third year of sales and a price tag of $20,000. All other assumptions are the same as those listed in our original article and are visible in the model screenshot below. Compared to the PoS-discounted ~$1 million we expect OPC1 for spinal cord injuries to yield by its third marketed year, we believe the ischemic stroke indication will derive the most value from the OPC1 technology (if it works as well as OPC1 works in spinal cord injuries, that is). It is entirely possibly (and reasonable) that the OPC1 and VAC2 programs are under-priced in our model, but for the sake of conservative estimates, we will keep our price tag assumption for now.
Thus, at this point, we believe the ischemic indication currently adds about 9% to the company's value simply because of the time it will take to hit the market and the low probability of commercialization. Our new target price is $7.72, but we expect to upgrade this value should the stroke treatment have successful clinical readouts.
Concluding Remarks
We believe that the stroke indication provides serious potential upside to the company, particularly as it progresses through clinical trials in the future. Because this is a new indication for OPC1, we do not anticipate much of a downside if the treatment shows poor efficacy in stroke victims, as our thesis is highly dependent on the VAC program, with some support from the cervical injury OPC1 program.
The move to add another indication to OPC1 likely also reflects management's confidence in this treatment. In the stroke press release on July 12th, Michael Mulroy, President and CEO of AST, stated:
"The preliminary results of our ongoing spinal cord injury trial are encouraging and we are excited to begin to expand our neurology platform to other indications. We look forward to exploring whether our AST-OPC1 product candidate can help patients that have suffered an ischemic stroke and other patients with de-myelinating conditions where there is a large, unmet medical need.” This suggests that management is also planning on moving towards indications such as multiple sclerosis ("de-myelinating conditions"
, which OPC1 would be perfect for due to its theoretical re-myelinating capabilities. This would also be a huge revenue segment for the company, as it estimated that 400,000 people in the United States suffer from multiple sclerosis. The next year or two will definitely be exciting for Asterias, and we look forward to continuing coverage of this company. Upcoming catalysts revolve around the OPC1 cervical spinal cord injury treatment, with updates on Cohorts 3/4 and full 12-month study readouts expected throughout Q3 and Q4, with FDA meetings for future trials expected at the beginning of 2019.
Disclaimer: This research is not investment advice nor a personalized recommendation. These articles are intended to supplement potential investors' knowledge of companies of their interest. All investors are expected to perform their own due diligence before making investment decisions.
Disclosure: I am/we are long AST.
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.
E
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Louis Pasteur -- chance favours only the prepared mind.
Lecture, University of Lille (7 December 1854)
Lecture, University of Lille (7 December 1854)
