Athersys, Inc. (NASDAQ: ATHX)
Okay, Soulstring Nation, we are now delivering on 23 of the last 24 stocks featured in my weekly opine. Coming off last week's massive 24% increase in Biohaven (BHVN), this week's stock may offer just as much firepower as BHVN, and it's certainly time that the market appreciates the value of this innovative and fast developing company. Let's focus on Athersys Inc. (ATHX)
Athersys Is Moving Quickly
There are several moving parts to the ATHX story, and each of them deserves attention. For those new to Athersys, the company engages in the discovery and development of therapeutic candidates designed and intended to extend, enhance, and prolong quality of human life.
Athersys is developing its MultiStem cell therapy product, which is a patented, adult-derived stem cell product being targeted to treat disease indications in the neurological, cardiovascular, inflammatory, and immune disease areas. The company has several on-going clinical trials evaluating the efficacy of their proprietary and potentially regenerative medicine product.
ATHX Planned And On-Going Trials
At $1.52 a share after its 6% rise on Friday, my belief is that ATHX is still significantly undervalued based on a slew of already known data points. In fact, if there were a weak link in the armor, I would be the first to point it out. However, the company is doing just about everything right from both a clinical and managerial perspective; the only part lacking is a share price that is yet to catch up with the company fundamentals. Unfortunately, like most emerging companies, ATHX stock often gets pushed around due to its relatively low trading volume and under-the-radar status, causing both upside and downside volatility that can cause motion sickness to even the most grounded traders.
For momentum and swing traders, ATHX plays right into investors hands. Oh, I like ATHX as a long-term investment; however, the stock may be primed to deliver quick, short-term gains as the share price continues to churn through the current range and breaks free from the current consolidation. And, as stated, Athersys is already putting the pieces together that make the current share price look like the decimal point is misplaced. Consider the highlights from just the past several months, for instance.
Athersys announced that the FDA had awarded the company Fast Track Designation for its clinical stroke program, meaning that trial results become eligible for rolling data submissions, accelerated approvals, and priority review of the Biologics License Application. ATHX is further guaranteed a far more efficient and timely regulatory review process that can expedite the pace of the trial immensely.
Also, company management announced that the clinical investigators in their MASTERS trial, an on-going phase II study using MultiStem cell therapy to treat ischemic stroke patients, had two articles published in peer-reviewed journals - Stem Cells and Lancet Neurology. For those that listened to recent company conference calls, the trial investigators, many of whom exact a calculated discipline to discussing results, exuded both excitement and surprise at the pace of efficacy being demonstrated by patients in the trial.
The publications cite the potential for MultiStem to extend the treatment window for stroke patients out to 36 hours, a substantial increase in the current and critical treatment timeline for stroke victims. The publications highlight the biological mechanisms that may be directly attributable to MultiStem and illustrate the importance, value, and potential of this off-the-shelf cell treatment. The race to find a viable treatment is critical, with stroke continuing to be a leading cause of severe and debilitating effects in victims. Despite the increasing number of stroke incidents worldwide, many people are still unaware of the signs and symptoms of stroke, paying far less attention than required to the time sensitive nature of treating stroke patients. In failing to recognize an incidence of stroke, the short window for regenerative treatment closes, limiting the opportunity for long-term and sustained recovery from disabling effects. Taking advantage of stem-cell friendly nations, ATHX is working outside of the United States, as well.
ATHX is commencing their TREASURE trial in Japan, partnering with Helios. Japan has seen some of the highest increases in stroke patients in the world and is acting aggressively alongside a cooperative Japanese regulatory agency to bring a regenerative treatment to market. Japan has been a source of opportunity for those advancing treatment using stem cells, and the TREASURE trial expects to benefit from expedited review as well as the potential for limited approvals, provided the data remains supportive of probable therapeutic benefit.
Inclusive to the TREASURE trial, Athersys remains actively engaged with the FDA, the European Medicines Agency, and other regulators to obtain the necessary regulatory alignment for the company's planned MASTERS-2 phase III clinical trial for stroke. The parallel clinical study has likely potential to bring value-building relationships through new partnerships, licensing opportunities, and collaborative agreements that advance the regenerative platform being developed by the company.
Athersys By the Numbers
The company has $31.9 million in cash and has no outstanding warrants that tend to obfuscate accurate valuations. The company earned $1 million in milestone payments from its collaboration with RTI Surgical and raised an additional $20.9 million from a stock offering during the first quarter of 2017. Athersys raised extra cash during the first quarter of 2017 through the exercise of warrants, which generated an additional $1.9 million for ATHX after the issuance of 1.8 million shares. As of May 1st, ATHX reports 111,316,615 shares outstanding, with approximately 100 million of those in the trading float, and as mentioned, there are no open warrants available to be exercised at this time. Thus, for the time being, ATHX is well-funded and does not have the dilutive overhang that often keeps a lid on the price of shares.
Athersys' cash burn was $5.4 million in Q1 of 2017, and that burn rate is expected to remain consistent in the next several quarters. ATHX is a regular recipient of grant revenue and is likely to generate proceeds from the company's collaborations with Helios and RTI Surgical, which will assist in preserving capital and lower cash expenses.
Making The Case For ATHX
OK, so now a case must be built for ATHX, one that can thrust this disrespectful $1.53 share price higher. First, despite the clinical progress achieved at ATHX, the stock is relatively under-the-radar and is not widely held amongst institutional traders. I am not discounting the interest of the approximate 88 institutional firms that own ATHX stock, but I will highlight that combined they own only about 14% of the outstanding shares. That's both good and bad. It's bad because when stocks like ATHX get close to quarter's end, some of these firms like to do the window dressing maneuver, trading in and out of positions before the final deadline for publication ownership. On the plus side, these institutions have ATHX on the screen, and it will only take a small nod by one or two of the institutional folk to start a stampede. And, the rush for shares can drive the stock price significantly higher.
ATHX is a prime candidate for a near-term move higher, but not reliant on institutional interest to generate the momentum. ATHX, through their merit, has earned respect and should be trading at higher prices. The CEO is a meticulous professional, building relationships with regulatory agencies and providing detailed supporting evidence of therapeutic efficacy. While the regulatory route may take time, the interactions between ATHX and trial regulators act to ensure adequacy of data, insulating the trial from unexpected regulatory interruptions.
Investors should recognize that the managerial strength of Dr. Gil Van Bokkelen will be a primary reason that ATHX will enjoy long-term success. In his most recent conference call, he made a point of detailing his plans to implement one or more partnerships in 2017, and he indicated that good progress is being made on that mission. The fast track designation helps, as does the commencement of the MASTERS-2 phase III trial and the TREASURE trial in Japan. These on-going operations have the power to magnify the opportunity to enlist partners, and ATHX has gone as far as hiring a professional firm that specializes in arranging partnership agreements. The company has stated that active discussions, data evaluation, and diligence activities are taking place with multiple companies and ATHX management has confidence that the outcome will be to consummate a partnership deal.
In building lucrative terms, the phase III trial provides bargaining leverage for ATHX, and once again the patience of management will likely pay off for the share price going forward. Keep in mind, ATHX is not only targeting stroke. The company continues to take its cell-based platform to address new clinical indications, including current programs evaluating the treatment of patients that have suffered a myocardial infarction, as well as treatment for patients diagnosed with acute respiratory distress syndrome. Enrollment is progressing for each study and ATHX is committed to completing enrollment in both studies quickly with study results released as soon as practically possible. While no determinate time frame has been committed to by ATHX for data release, history should oblige investors to remain confident that the company will work expeditiously to advance and conclude the next stage of the trials.
Can ATHX Break Higher?
Can Athersys break higher? Well, informed investors certainly believe it can, and will. At these levels, little, if any, of the firepower available from ATHX appears factored into the current share price. In March of this year, ATHX stock price spiked sharply higher, trading at $2.01 a share on March 30th before retreating to current levels. Still, the current price represents an approximate 25% increase from the first quarter, when the stock hovered around the $1.15 level for most of February and March. ATHX likes to migrate toward the $1.50-$1.80 range, thus providing for an excellent short-term target increase of roughly 20% if the stock trends back toward its previous midpoint at $1.80 a share. But, the stock can certainly go higher.
Market conditions will move a stock like ATHX, but at some point, fundamentals take center stage. For short-term traders, taking a position and setting the sell limit at a stated percentage allows trades to be disciplined and can lock in profits as well as limit losses. Based on current technical and company fundamentals, ATHX appears ready to take a run back toward the $1.70 levels by the week's end. A one-day spike in volume on May 10th took stock prices higher by 8% intraday. Then, on May 12th, shares saw an increase of 6%, so obviously, there are interested parties at work.
Despite time horizon differences, ATHX as both a long- and short-term investment is worthy of strong consideration for all of the right reasons. The company has cash on hand, two on-going clinical trials, a CEO that is meticulous and laser-focused, and a set of data that is emerging to potentially offer best-in-class therapeutic value for stroke victims. Factoring in the motivation to consummate near-term partnership deals, the case for investment consideration is made stronger. With the potential for a few more pennies to the downside, greater opportunities exist for a quick move higher.
The bottom line is this....I like ATHX stock, I like the management, and I like the current share price as an entry point into the company. Management is laser-focused on creating shareholder value and the next several weeks may glitter with value enhancing announcements. Based on the recent news and Fast Track designations, the seats on the bleachers are getting boring. It may be time to get into the game, and investing into ATHX may provide plenty of action.
Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.
I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article. I have no position in any stock mentioned, but may initiate a long position in ATHX within the next 72 hours. Past performance may not be indicative of future results. Therefore, no current or prospective client or subscriber should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by CNA Finance, Inc., it's employees, or its affiliates), or product made reference to directly or indirectly on this website, or indirectly via link to any unaffiliated third-party website, will be profitable or equal to corresponding indicated performance levels.
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