ATHX: Athersys Analysis and Research Report

2018-07-17 - by Asif , Contributing Analyst - 177 views

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Overview and Recent Developments

Athersys is an international biotechnology company that is focused primarily in the field of regenerative medicine. The company's MultiStem® cell therapy, a patented and proprietary allogeneic stem cell product, is its lead platform product and is currently in later-stage clinical development. The company's current clinical development programs are focused on treating neurological conditions, cardiovascular disease, inflammatory and immune disorders, certain pulmonary conditions and other conditions where the current standard of care is limited or inadequate for many patients, particularly in the critical care segment.

Current Programs

By applying its proprietary MultiStem cell therapy product, the company established therapeutic product development programs treating neurological conditions, cardiovascular disease, inflammatory and immune disorders, and other conditions. The company's programs in the clinical development stage include the following:

  • Ischemic Stroke: Athersys is actively engaged in advancing the next stage of clinical development of this program, both independently and with Healios. Athersys is currently preparing to launch its pivotal Phase 3 clinical trial of MultiStem cell therapy for the treatment of ischemic stroke, referred to as MASTERS-2. The company intend to begin the study with specific high-enrolling sites, adding additional sites over time and as clinical product supply is available. The MASTERS-2 study has received several regulatory distinctions including Special Protocol Assessment, or SPA, Fast Track designation and the Regenerative Medicine Advanced Therapy designation, which was established under the 21st Century Cures Legislation, from the U.S. Food and Drug Administration, or FDA, as well as a Final Scientific Advice positive opinion from European Medicines Agency, or EMA.
  • Healios’ confirmatory clinical trial, TREASURE, evaluating the safety and efficacy of administration of MultiStem cell therapy for the treatment of ischemic stroke in Japan, is ongoing and continuing its enrollment. TREASURE will be evaluated under the recently established regulatory framework for regenerative medicine therapies in Japan.
  • Acute Respiratory Distress Syndrome, or ARDS: Athersys has an ongoing Phase 1/2 clinical study for the treatment of ARDS in the United Kingdom and in the United States, and its objective is to complete this study in 2018. Athersys was awarded a grant from Innovate UK as partial support of this clinical study, and such grant funding was concluded in the first quarter of 2018, according to its terms. The company look forward to obtaining the study results.
  • Acute Myocardial Infarction, or AMI: Athersys is conducting an ongoing Phase 2 clinical study in the United States for the administration of MultiStem cell therapy to patients that have suffered an AMI, but continue to enroll below expectations despite numerous efforts to improve the enrollment rates. The study had been supported by a grant from the National Institutes of Health, which has now concluded. The company will provide updates regarding the conduct and completion of the study, as appropriate.
  • The University of Texas Health Science Center at Houston has announced plans recently to conduct a Phase 2 clinical trial evaluating MultiStem cell therapy for early treatment and prevention of complications after severe traumatic injury. This first-ever study of a cell therapy for treatment of a wide range of traumatic injuries will be conducted at Memorial Hermann-Texas Medical Center, one of the busiest Level 1 trauma centers in the United States. The study will receive grant support of $2.0 million from the Medical Technology Enterprise Consortium and the Memorial Hermann Foundation will provide an additional $1.5 million. The company will provide the clinical product for the conduct of the trial, as well as regulatory and operational support, as its contribution to the trial. The plans for this study are in the early stage, and the company will provide further updates as preparations for the trial progress.
  • Hematopoietic Stem Cell Transplant / Graft-vs-Host Disease, or GvHD: Currently, this program is staged for future registration-directed development dependent on the achievement of certain business development and financial objectives and the development and success of alternative therapies for treating the underlying conditions leading to transplant. Following its completed Phase 1 clinical study of the administration of MultiStem cell therapy to patients suffering from leukemia or certain other blood-borne cancers, in which patients undergo radiation therapy and then receive a hematopoietic stem cell transplant, the company were granted orphan drug designation by the FDA and the EMA for MultiStem treatment in the prevention of GvHD, and the MultiStem product was granted Fast Track designation by the FDA for prophylaxis therapy against GvHD following hematopoietic cell transplantation. Subsequently, its registration study design received a positive Scientific Advice opinion from EMA and a SPA designation from the FDA.
  • While development of its clinical programs for human health indications remains its priority, based on its research to date and work performed at its wholly-owned subsidiary, ReGenesys, Athersys is also evaluating its cell therapy for use in treating diseases and conditions in the animal health area. Athersys has demonstrated in preclinical animal health models that its cell therapy can promote tissue repair and healing that could provide meaningful benefits to animal patients, including those suffering from conditions with unmet medical need. In January 2017, the company entered into an evaluation and option agreement with a global leader in the animal health business segment to evaluate its cell therapy technology for application in an undisclosed animal health area, and such evaluation is ongoing.

Athersys is engaged in preclinical development and evaluation of MultiStem therapy in other indications, focusing on the neurological, cardiovascular and inflammatory and immune disease areas, and the company conduct such work both through its own internal research efforts and through a broad global network of collaborators. The company also engage in discussions with third parties about collaborating in the development of MultiStem therapy for various programs and may enter into one or more business partnerships to advance these programs over time.

In January 2016, the company entered into a license agreement with Healios K.K., or Healios, to develop and commercialize MultiStem cell therapy for ischemic stroke in Japan, and to provide Healios with access to its proprietary technologies for use in Healios’ proprietary “organ bud” program. Healios is working toward the development and commercialization of the MultiStem product in Japan, and Athersys is providing the manufactured product to Healios for its clinical studies; provided, that, if the company fail to perform its responsibilities to supply clinical trial product to Healios, then under certain circumstances, the company may be required to grant Healios a license to make the product solely for use in the licensed field in Japan. Under the agreement, Healios also obtained a right to expand the scope of the collaboration to include the exclusive rights to develop and commercialize MultiStem for the treatment of certain additional indications in Japan, including ARDS.

In March 2018, the company entered into a letter of intent, or LOI, as amended in April 2018, with Healios to expand Healios’ license to develop MultiStem products and are working to execute the necessary agreements by May 31, 2018. If the expansion is consummated as contemplated by the LOI, Healios would, among other things, (i) expand its license in Japan to include ARDS (including idiopathic pulmonary fibrosis) and trauma in Japan, and use of MultiStem worldwide for organ buds for all organ diseases, (ii) obtain a worldwide exclusive license for use of MultiStem product to treat certain ophthalmological indications, and (iii) obtain an exclusive option to a license to develop and commercialize MultiStem products for ischemic stroke, ARDS and trauma in China. In exchange, if the expansion as contemplated by the LOI is consummated, the company would be entitled to receive payments of $35 million ($10 million of which is funded in an escrow account to be paid to it upon execution), as well as additional possible payments, including milestones and royalties, including for the license in China if Healios elects to exercise the proposed option for the license in China.

The company also have a collaboration with RTI for the development of products for certain orthopedic applications using its stem cell technologies in the bone graft substitutes market, and the company continue to receive royalty revenue from product sales and may receive other payments from time to time upon the successful achievement of certain commercial milestones. In 2017, the company received a $1.0 million payment associated with achievement of a commercial milestone. Also, in the fourth quarter of 2017, its royalty rate increased as a result of reaching a milestone for product sales. No milestones were achieved in the first quarter of 2018.

Athersys has also developed other earlier stage programs targeted at indications with significant unmet needs. The company may elect to enter into partnerships to advance the development of these programs, or pursue independent development.


As addressed herein, if the expansion of its collaboration with Healios is concluded as contemplated under the LOI, the company expect to receive, at a minimum, the $10 million license fee that has been funded by Healios into an escrow account. If the full expansion is consummated, the LOI provides that the company would be entitled to receive additional payments of $25 million, as well as additional possible payments such as milestones and royalties.

For the ischemic stroke indication under the existing 2016 license with Healios, the company may receive additional success-based development, regulatory approval and sales milestones of $225 million in aggregate, subject to certain potential milestone credits, and tiered royalties on product sales that start in the low double digits and increase incrementally into the high teens depending on net sales levels. Additionally, the company receive payments for product supplied to Healios under a manufacturing supply agreement, which is initially focused on clinical product supply, and, in 2017, the company agreed to a cost-sharing arrangement with Healios for clinical product for its TREASURE trial in Japan that may impact the amount of proceeds the company receive from future milestones. The company began receiving cost-sharing proceeds late in 2017, and product supply is ongoing.

In addition, in September 2017, the company entered into a services agreement with Healios, in which Healios provides financial support to establish a contract manufacturer in Japan to produce product for Healios, and services began in the fourth quarter of 2017. The costs of the services are reimbursed by Healios.

In connection with the entry into the LOI, Healios purchased 12,000,000 shares of its common stock for $21,100,000, or approximately $1.76 per share, and a warrant, or Warrant, to purchase up to an additional 20,000,000 shares of common stock. The Warrant will become exercisable once Healios makes the initial payment under the planned expansion under the LOI, except with respect to 4,000,000 shares underlying the Warrant that would become exercisable prior to such time upon release of the $10 million that has been funded into escrow, depending on the scope of the expansion. The Warrant may be terminated by it under certain conditions, including if Healios does not make its required expansion payments.

Athersys has in place an equity purchase arrangement with Aspire Capital Fund LLC, or Aspire Capital, which provides it the ability to sell shares to Aspire Capital from time-to-time, as appropriate. The company's current arrangement with Aspire Capital that was entered into in February 2018 includes Aspire Capital’s commitment to purchase up to an aggregate of $100 million of shares of common stock over a three-year period and 450,000 shares of common stock were issued as a commitment fee. The company filed a registration statement for the resale of 24,700,000 shares of common stock in connection with the new equity facility. Furthermore, the prior facility that was entered into in December 2015 with Aspire Capital has approximately 2.0 million shares that remain available to it for issuance. During the quarter ended March 31, 2018, the company sold 3,300,000 shares to Aspire Capital at an average price of $1.67 per share. The company sold no shares to Aspire Capital in the first quarter of 2017.

During the year ended December 31, 2017, the company received proceeds of approximately $1.9 million from the exercise of warrants. All of its previously outstanding warrants were either exercised prior to expiration or expired in March 2017, and the company had only the Warrant outstanding at March 31, 2018.

In 2016, a flood caused damage to its primary facilities that required the reconstruction of certain laboratory space and was covered by insurance at replacement cost. In February 2018, the company received an additional $0.4 million in insurance proceeds.


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