Atossa Genetics Inc (NASDAQ: ATOS) is a stock that crossed my radar a few months ago, and I’ve been impressed as I’ve dug in. It looks like more investors are hopping on the bandwagon with mid-day gains as high as 26% today alone.
The gains are largely due to a report surrounding clinical research at Harvard Medical School that led to an unforeseen event. According to the report, a certain amino acid leads to cancer building a resistance to tamoxifen, a popular treatment for breast cancer.
This is the same indication that Oral Endoxifen, the lead drug candidate at Atossa Genetics is being developed for. Ultimately this is great for ATOS and its investors because should the company be approved, it has the potential to be a leading force in the treatment of this devastating condition.
However, that’s only one of the many reasons that I believe that ATOS could prove to be a strong play in the long term. Let’s dive in:
What Is Atossa Genetics
Atossa Genetics is a clinical-stage biotechnology company. The company is in the process of developing novel therapeutics to treat various forms of breast cancer. Ultimately, the company is working to increase the odds of surviving this often mortal condition.
The company is addressing cancer with a new form of delivery method known as CAR-T cells. The treatments are being delivered directly to the site of the breast cancer using microcatheters.
The company’s claim to fame is a product known as Endoxifen. The treatment is currently under development in two Phase 2 clinical programs. One of these addresses oral delivery of the drug, the other addresses topical delivery.
The ATOS Pipeline Is An Impressive One
While Atossa Genetics is a relatively young company that was founded in 2009, the company has already amassed an impressive pipeline. At the moment, there are three clinical development programs and one preclinical development program in the works. Here’s what’s happening with the pipeline:
Clinical Candidates Under Development
As mentioned above, ATOS currently has 3 clinical development programs in the works. These programs include:
- Fulvestrant – Currently in Phase 2 development for the treatment of Ductal Carcinoma in Situ (DCIS) and breast cancer.
- Topical Endoxifen – Currently in Phase 2 development for the treatment breast cancer in females and gynecomastia in males.
- Oral Endoxifen – Currently in Phase 2 development for breast cancer in a window of opportunity study and a refractory endoxifen supplementation study.
Preclinical Development Candidate
Atossa Genetics also has one preclinical development candidate. The candidate, known as CAR-T is currently being studied as yet another potential treatment option for breast cancer.
When digging into clinical-stage biotechnology stocks, I find it important to take a look at the size of the market that the company is planning on entering. For ATOS the market potential is incredible.
At the moment, it is estimated that the breast cancer treatment market will grow at a rate of more than 10% annually through 2025. This will bring the value of the market to about $38.4 billion at that time according to Grand View Research.
With a market cap of just over $32 million, a market of this size represents an incredible opportunity. After all, if the company were to take even a small percentage of that $38.4 billion in annual revenue, we would see a meaningful increase in value for shareholders.
Following News From ATOS Has Been Exciting
I like to follow clinical-stage biotech companies that seem to have a lot going on. With constant news, these companies tend to provide a steady flow of market moving catalysts. In my view, Atossa Genetics has been the spitting image of what I’m talking about here.
This year alone, the company has issued 10 different press releases providing more reasons to be excited. Here is a list of the releases that I found to be most meaningful:
Harvard Finds Flaw In Tamoxifen
On April 22, 2019, Atossa Genetics issued a press release, highlighting research that was done by Harvard. According to the release, a new study was performed by a research team at Harvard Medical School, yielding unexpected results.
According to the study, an amino acid, known as leucine, seems to be playing a role in the resistance of breast cancer to tamoxifen. The treatment is currently a best selling cancer drug, generating a massive amount of money for AstraZeneca plc (NYSE: AZN).
Unfortunately for AZN, this is a very big flaw in their treatment. However, it’s great news for ATOS as the company is currently developing Endoxifen, which seems to be a highly competitive treatment option.
In a statement, it was clear that the deficiency in Tamoxifen was no surprise to Dr. Steven Quay, CEO at ATOS. Here’s what he had to say:
“Having studied leucine metabolism for my Ph.D. in biological chemistry at the beginning of my career, this finding makes total sense. Cancer is a disease characterized by both genetic changes, that provide the “motivation” to grow abnormally, and metabolic changes, that provide the “means” to grow abnormally.
Leucine sits at the hub of metabolic pathways that have broad, pleomorphic effects. This paper joins scores of others that show the powerful effects of metabolism, including diet, on cancer growth. In our research here at Atossa Genetics, we are always watching for signs of the interplay of genetics and metabolism to help inform our clinical stage, development programs for the prevention and treatment of breast cancer.”
IRB Approves Oral Endoxifen
On March 26, 2019, Atossa Genetics issued a press release surrounding Oral Endoxifen. According to the release, the Institutional Review Board, commonly known as IRB, has approved the use of the company’s oral Endoxifen as a post-mastectomy treatment.
The treatment was approved by the IRB for a pre-menopausal, estrogen-receptor positive (ER+) breast cancer patient. This is a key development as the IRB saw enough potential efficacy and a strong enough safety and tolerability profile to move forward with treatment.
The significant news came following the FDA’s recent “safe to proceed” letter that permits the company’s Oral Endoxifen to be provided to the patient. In a statement, Dr. Quay had the following to offer:
“IRB approval was the final step in making our oral Endoxifen available to this patient. We are encouraged that the regulatory authorities recognize the potential for additional treatment options for pre-menopausal breast cancer patients.
The impact of our proprietary oral Endoxifen on this patient’s tumor during the pre-surgical treatment window is consistent with research by others, and strongly supports the continued development of our proprietary oral Endoxifen.”
Atossa Genetics Receives $10 Million
On March 18, 2019, ATOS announced the receipt of $10 million from exercises of previously outstanding warrants. According to the press release, the company retired 2.5 million warrants, issuing 2.5 million shares of common stock in exchange for the funding.
While the transaction proved to be highly dilutive, it provided the company with necessary funding to move forward with its impressive work in the treatment of breast cancer. In a statement, Kyle Guse, CFO and General Counsel at ATOS, had the following to offer:
“The $10 million in cash proceeds significantly enhances our cash position and provides working capital for our ongoing and planned clinical studies.
Moreover, the warrant exercises are essentially ‘non-dilutive’ because the warrants were previously outstanding and are now removed from our overhang.”
Taking A Look At The Company’s Finances
At the end of the day, when you make an investment, you want to make sure that you invest in a company that can afford to survive. So, how are things looking for Atossa Genetics?
As of the close of the 2018 year, ATOS had a total of $10,380,493 in cash and cash equivalents. Total current assets came to $11,549,366. During the year, the company generated an operating loss of $11,434,233 and a total net loss of $22,884,242. Based on these figures alone, ATOS would only have enough funding to make it through a couple of quarters.
However, this is why that $10 million in funding mentioned above was such positive news. The additional $10 million, brought the company’s current assets closer to $22 million, giving it the funding it needed to survive through several potentially groundbreaking catalysts ahead.
Risks To Consider
Anytime you make an investment, you’re taking on a risk. This is especially the case when investing in clinical-stage biotechnology stocks like ATOS. In this particular case, the risks that I find to be most pressing include:
- No Revenue – As a clinical-stage biotechnology company, Atossa Genetics is not able to sell its products yet. As a result, the company is not making any revenue. So, it is highly dependent on continued support from the lending and investing community. Should this support falter on either side, we could see declines.
- Clinical Failures – Any clinical trial has the potential to succeed. However, it also has the potential to fail. In general, when clinical trials fail, we see drastic reductions in the values of the stocks involved in those trials. As a clinical-stage company, this risk is present for ATOS.
- Dilution – At the end of the day, while Atossa has plenty of funding to get through several catalysts ahead, dilution could take place down the road. The reality is that cancer treatments take time to make to market approval, and during this time, ATOS is going to need capital to survive.
At the end of the day, while Atossa Genetics comes with the general risks that we see in clinical-stage biotechnology investments, the stock also represents what I believe to be a compelling opportunity.
With one of the leading products for the treatment of breast cancer running into headwinds, and recent clinical data surrounding Endoxifen proving to be positive, I believe that if approved, the treatment could become a leader.
Moreover, there’s a strong argument for a potential takeover. At a market cap of just over $32 million, the company is a cheap pickup for other larger companies like AstraZeneca. Considering the recent research from Harvard School of Medicine, AstraZeneca may be on the prowl relatively soon, looking for assets that will allow it to maintain its leading market share in the treatment of breast cancer.
Nonetheless, with or without a takeover, I believe that Atossa Genetics has the potential to lead to incredible growth ahead, making it one of the most compelling opportunities in biotechnology!