Asterias Biotherapeutics Inc (NYSEMKT: AST)
For any of you that are surprised that Asterias Biotherapeutics has run higher by roughly 12% during the past week, don’t be. Finally giving credit where credit is due, investors have been replacing skepticism for an opportunity and are coming to appreciate that while the AST share price has been weak, the company has certainly not missed a beat in reaching clinical milestones. True, by the end of last week AST had given back over half of its 28% gain, but the company shares ultimately closed the week appreciably higher and on better than average volume.
Asterias is not new to the Soulstring universe, and I certainly shared in the frustration when the stock was unable to maintain its footing at higher levels. Experienced traders live through the fact that a stock price is not always reflective of what a company may truly be worth, and it’s during these times that investors must stay focused on fundamentals. As painful as it may be for investors, a depressed share price should not serve as the lead indicator for when to throw in the towel on an investment. It’s the fundamentals of a company that matter, and at AST, the fundamentals and clinical success have certainly made a case for continued conviction in the stock.
Asterias Should Never Have Dropped
Stocks fluctuate, that is a given. And for stocks like AST, who are relatively under the radar, they can get whipsawed back and forth faster than a frog in a paddle wheel. But, there are times when investors just need to admit that stocks like AST often get beaten down for all the wrong reasons. Sometimes they have ineffective IR companies managing their exposure or offer press releases that are more technical than explanatory. Add to that the loose notion that many in the institutional class won’t ordinarily purchase a stock that trades under the $5.00 threshold, and we get delivered a trifecta of reasons that may contribute to a lower share price. For long-term AST shareholders, here we are again, riding a seesaw of price action. AST is trying to complete its most recent round-trip in price, from the $5.00 level in January, down to $2.83 during mid-April, and now working its way higher in price, flirting with the $4.00 level at Friday’s close.
Personally, I never wavered in my belief that what the company has been accomplishing has been nothing short of remarkable. Oh, it hurts to watch 30% of a portfolio position shrink in value for no apparent reason, and it’s obviously frustrating that the share price has been depressed despite some amazing clinical data, which the company announced during a recent investor conference call.
Studies indicate most people are not good listeners, with few being able to memorize and repeat more than six items in a given list. So, the fact that investors failed to grasp the pertinent data during that call is entirely understandable, because there was a lot of substantial news to digest. Regarding the share price, though, that lack of paying attention has cost the stock price dearly. But, and this but comes at a great time, AST continues to tell a great story, and as of last week, the company has added two additional chapters which demonstrate the inherent value which is being overlooked by investors.
AST Is Stronger Than Ever
The current share price clearly contradicts the value proven by clinical data. And, factoring in the most recent company news, the progress at AST may now prove to be stronger than ever. For investors that are new to the AST story, a brief course in Asterias Biotherapeutics is warranted.
I first covered AST back in November of 2016. At that time, the company was already well on its way to advancing its AST-OPC1 trial, demonstrating statistically significant clinical results in patients with severe spinal cord injury(SCI). Asterias was not only developing the AST-OPC1 trial but was further focusing on therapeutic treatments to address both AML and lung disease.
Asterias is no stranger to the spinal cord injury community. In fact, because the company and its science are so well respected, they have received grants and awards of more than $14.3 million from renowned benefactors, such as the California Institute of Regenerative Medicine. The grants and awards are to be used primarily in its advance of the AST-OPC1 trial, and as noted, the trial is progressing extremely well. In published data from two trial cohorts, using the pluripotent stem cell platforms, patients have shown no material, adverse, or unexpected events.
But, in all honesty, there was one unexpected event, and it would be unethical if I did not point what happened during the AST-OPC1 trial, so I will. Brace yourself because despite the fact that the phase I/II trial was designed to demonstrate safety and tolerability, well it did something more. IT SHOWED CLEAR AND ROBUST SIGNS OF CLINICAL EFFICACY. In other words, it was providing an effect that gave SCI patients increased motor level function, and in some cases providing a motor activity where none existed before treatment. Sorry, I didn’t mean to yell. But, when a company is in the beginning stages of a trial, and an unexpected event happens, most everyone in the biotech sector usually jumps in line to shout the results. While that did not turn out to be the case when Asterias released their very encouraging results, the data presented may ultimately prove to be a groundbreaking milestone for both AST and SCI patients.
Here’s what happened with the trial. After receiving a short course of low-dose immunosuppression drugs, patients received treatment as part of a ten million cell cohort. Of the five patients treated, those diagnosed as having had a neurologically complete thoracic spinal cord injury, AST reported that at day 90 of the SciStar trial, all five patients treated in the cohort had shown at least a one motor level improvement using the standardized ISNCSCI neurological classification scale. That measure quantifies function status of patients who have severe spinal cord injury. More impressive, considering that the study was primarily evaluating safety and tolerability, is that at least two of the patients had achieved a two motor level improvement on at least one side of their body. Now, critics argue that spontaneous recovery rates may account for some of the data. However, AST hit 100% efficacy on all patients on motor level improvement, and if spontaneous recovery is going to happen at that rate while the patients are under the care of AST, then perhaps all patients should be sent to the company’s address. If the AST-OPC1 treatment is not the primary cause for success, then maybe there is something good in the water.
Forget the water. The probable likelihood for AST cohort patients is that the AST-OPC1 therapy was the major contributing factor to the patient improvement. And, more impressive to previous results is that patients are showing cumulative improvement throughout the status visits, a signal that the cells are continuing to do their job. And for the patient, the cumulative benefit from the cell treatment may become the key to bringing back autonomy and independent living during their life.
The SCI Market Is Significant
The humanitarian contribution for a successful treatment speaks for itself, but there may also be a financial windfall for the company that delivers an effective therapy. Estimates indicate that approximately 17,000 patients per year get treated for SCI. Of those, many lose the ability to live independently and often face enormous lifetime medical costs that can range upwards of $5 million based on the age of the patient. AST has put their pencil to the pad and believes that with an approved treatment, the company can expect to treat over 9000 patients per year based on the direct and off-label treatment. The projected revenue after a successful trial completion can deliver a large part of the $2 billion being spent per year to treat SCI patients. Based on published and cumulative data, indications lead to the fact that AST may be getting close to bringing a best-in-class option to the SCI market.
Recent News On The AST-OPC1 Trial
Earlier, I pointed out that AST has added two additional chapters to the promising SCI story. On April 25th, AST announced that following a regularly scheduled interim review of safety data generated from the SciStar phase I/IIa trial to treat acute SCI, the study’s Data Monitoring Committee recommended continuation of enrollment of both the 10 million and 20 million cell dose cohorts, allowing the study to proceed as planned.
Investors hate when clouds hang over a trial, and this unanimous DMC decision replaces a potential dark cloud with one that is puffy white and bright. Both AST and its investors are aware that the trial has been showing no adverse events, and are embracing the DMC endorsement to continue the trial at increased dosages, which is, of course, a significant and necessary step forward for the trial. The DMC approval allows the highest planned dosage cohort to get treated, granting permission to advance a study that is in a relatively unchartered territory. The approval was not simply a rubber stamp, by the way.
The DMC first reviewed all of the accumulated safety data to date. The report included safety data from six complete cervical injury patients (AIS-A) dosed with 10 million AST-OPC1 cells, with each patient having to have completed at least six months of follow-up treatment. The DMC further analyzed initial safety data from the patients currently enrolling and treated in cohorts 3 and 4 that are classified as AIS-A patients, with dosing at the highest level with 20 million cells. Note, cohort 4 is taking a slightly different tact, treating AIS-B patients, those with incomplete SCI, and treating them with a 10 million dose treatment.
AST has set a consistent standard of reporting encouraging news from the SciStar trial. The company previously reported positive safety and efficacy results data from its cohort 2, using AIS-A patients and a 10 million cell dosage. All patients in that group demonstrated improvement in upper extremity motor function at 3-months post administration of AST-OPC1 cells. Additionally, AST reported that these patients continued to show marked signs of improvement in motor skill at the six months and nine month period. The results translate into a meaningful and favorable recovery of arm, hand, and finger function in patients treated with 10 million cells. The results further highlighted an apparent recovery differentiation rate from those patients in the control group, who’s level of spontaneous recovery failed to be statistically similar to the treatment using AST-OPC1.
Good news for investors is that AST plans on releasing in-between data results from this ongoing trial throughout 2017. Thus, it may prove to be a catalyst driven year for the company.
Asterias is developing a second clinical trial targeting AML and other cancers. AST hit the market with a one-two punch last week, publishing an impressive release on Wednesday announcing that the results from its completed phase II trial of AST-VAC1 have been published and made available online in Cancer, a leading peer-reviewed journal of the American Cancer Society.
The review is substantially positive and bolsters the case that AST remains undervalued at current levels. In the peer-reviewed analysis, patients with Acute Myeloid Leukemia (AML) being treated in the phase II study of AST-VAC1, a particular dendritic cell cancer vaccine, demonstrated a 57% higher rate of prolonged relapse-free survival. Importantly, that number includes high-risk patients that are over 60 years of age or in a second remission.
The completed phase II trial was a multicenter, open-label trial designed to evaluate safety and tolerability of the AST-VAC1 vaccination regimen in patients with intermediate or high-risk AML who were in complete clinical remission. Data from long-term follow-ups showed that 11 of the 19 patients (58%) were relapse-free while being treated with AST-VAC1, with a median follow-up period of 52 months. Additionally, 57% of the patients over 60 years of age had remained in remission after a median 54 months of follow-up treatment. These prolonged levels of relapse-free survival were favorable compared to prior data that that showed an extended survival rate of between 10-20% for patients in the same age group. Like AST-OPC1, AST-VAC1 was found to be both safe and tolerable over multiple vaccinations.
AST Is Two For Two
From a clinical perspective, AST is doing extremely well. In fact, many believe that they are batting 100% in both trials. Each study has produced encouraging efficacy results from what were primarily safety and tolerability trials. AST went as far as having one young man speak during a company conference call, a moving experience for all listening, whereby this patient explained that AST had changed his life. From a routine of reliance on others, this young patient now has movement in hands, arms, and fingers. The changes allow him to feed himself, dress and have the opportunity to live an independent life. And, he is not the only patient showing significant levels of improvement. While improving one motor skill may sound minimal to the uninformed, when using the INSCSCI scale, it is a far more telling detail. Few will argue that a one motor skill change is not significant, but may sometimes get attributed to spontaneous recovery. A two motor level improvement, on the other hand, is an extraordinary measure, and unlikely to be attributed to spontaneous recovery within the percentages delivered by AST.
This company should have never fallen off of traders radar. Perhaps abandoned by momentum and swing traders, retail traders often get pulled into an abyss of lower share prices that had more to do with quick profits than it did about company fundamentals. As a long term holder in AST, the current price action may complete my first round-trip ticket from low to high, but in all honesty, it may not be the last. While AST can spike significantly higher on any combination of news, partnerships or results, perhaps the best way to play AST may be just to buy and hold a position.
Yeah, it’s painful to watch dollars evaporate on paper, but, it is even more frustrating to see good companies get unfairly bullied. For AST investors, time, results and emerging data are all on their side, making AST a stock to own through 2017. Accounting for the promise of pending catalysts, which have consistently been positive, the next set of results may finally have the power to unleash the company’s fair value.
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.
While I seek to uncover emerging companies that I feel have true value and potential, it’s important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.
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.
Additional Disclosure: I am long AST and may purchase additional shares within the next 72 hours.