Back in July of this year, we wrote about Atossa Genetics (“ATOS”), which trades on the Nasdaq under ticker: ATOS. After performing our diligence we believed Atossa had a strong clinical pipeline, high caliber management and trading at a steep discount relative to its peer group. At that time Atossa was trading around $0.35 and a few hundred thousand shares a day. See the July article here. In the four months following our initial write-up, the stock has gone from $0.31 to as high as $1.59 with massive trading volume. During that time, Atossa Genetics reported Phase I data on its topical Endoxifen formulation and it is now developing this as a potential treatment for high mammographic breast density, which is associated with increased breast cancer risk. Atossa is also developing oral Endoxifen for patients refractory to Tamoxifen, and its intraductal microcatheter, combined with established cancer drug Fulvestrant. Atossa also bolstered its balance sheet with a $5.5M equity raise (at $0.44 per share) with institutional investors. Lets first review the clinical pipeline before delving into, what do I think happens next.
Topical Endoxifen targets high breast density
Oral Tamoxifen, a selective estrogen receptor modulation (SERM) drug, aims at reducing both high mammographic breast density (MBD) and the risk of cancer recurrence in women with breast cancer, but its adverse effects (AE) have limited its use. Endoxifen is a Tamoxifen metabolite that is responsible for much of the oral drug’s SERM action. Atossa believes that topical Endoxifen can exert SERM effects to breast tissue and reduce MBD, with fewer significant AE. Following its Phase I study showing early safety and signs of dose-dependent absorption. As a reminder, Tamoxifen, which is used to treat women with breast cancer driven by the estrogen hormone, has, via various studies, been shown to reduce the incidence of breast cancer by at least 30% if it is given before cancer develops in women who are at high risk of developing cancer due to factors such as a family history of breast cancer. Atossa plans to start a 480-patient Phase II trial in the second quarter of 2018.
Oral Endoxifen for women refractory to oral Tamoxifen
According to Atossa, up to 50% of the up to 1 million US women currently taking Tamoxifen (largely to prevent recurrence of breast cancer) do not achieve sufficient concentrations of Endoxifen and may have increased the risk of cancer recurrence. Atossa believes that oral Endoxifen can reduce recurrence risk in these patients and recently reported positive data from the oral arm of the Phase I study. A Phase II study of IDMC-Fulvestrant is also underway to determine if the IDMC provides superior targeting.
After the publication of our July article, the stock soared to $1.59 per share, but came off the highs significantly after pricing its financing at $0.44. At the time the financing was announced, the deal was roughly 50% below the share price. Though the stock is still trading well below its recent peak of $1.59, fundamentals of the company’s pipeline have not changed, and Atossa now has added over $5 million to its balance sheet. In addition, and perhaps most importantly, as a result of the spike in trading volume, Atossa now has financing optionality. Why does that matter? Because a company like Atossa that trades an average of over 4 million shares per day is in a much stronger position to negotiate better terms with prospective partners and/or an acquirer. Additionally. since Atossa now trades more than $1.6 million dollars of stock per day, the door is open for fund managers to purchase the stock (either in the open market or through a private placement) without having to worry about liquidity if they need to exit their position.
Therefore, I believe Atossa is in a better position today than they were when I initially wrote about them in July. The company has increased their cash position substantially, announced preliminary results from the Phase 1 study of oral Endoxifen with all objectives successfully met, and has additional clinical data readouts coming near term which could potentially prove to be a catalyst for the stock. In addition to all of that, the company now has financing optionality due to their increased stock price and trading volume.
I think this is an exciting time to consider an investment in Atossa Genetics, ticker: ATOS. Be sure to stay updated on Atossa by following our Twitter handle: @SylvaCap.
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