Investors in the biotech industry have had a tough few weeks. The benchmark ETF de SPDR S&P Biotech (NYSEARCA:XBI) has fallen 26% since peaking in February this year. Nevertheless, Atossa Therapeutics (NASDAQ:ACTS) stocks appear to have run counter to the general downtrend of biotech.
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Despite the sharp drop from the all-time highs of $ 9, ATOS shares are still on the rise for the year, trading around $ 3.50 today. That’s 270% up from the beginning of this year and right with its $ 3 200-day moving average.
The question is whether ATOS shares are still a good investment at these levels.
Atossa Therapeutics is a clinical-phase biopharmaceutical company focused on two main lines of treatment. The first is a treatment for breast cancer. The second is a pair of drug candidates to treat Covid-19 patients.
The company is still in the pre-revenue phase, as its treatments have yet to gain FDA approval. Therefore, in order to estimate a value for the company, it is necessary to access this clinical pipeline.
We need to know the potential of Atossa’s treatments and if that justifies its current market capitalization of $ 448 million.
ATOS stock and Covid treatment
Initial data looks promising for Atossa’s Covid treatments. AT-301, a nasal spray that is being developed to treat patients diagnosed with Covid-19, has had positive results in its phase 1 studies.
The spray can reduce and alleviate Covid-19 symptoms paving the way for a home treatment option for the disease.
The study involved 32 healthy participants. Only one of them developed moderate side effects. Therefore, the conclusion of the study is that the Atossa treatment appears to be safe and well tolerated. The company aims to conduct a phase 2 study in the US after receiving guidance from the FDA.
These results are certainly encouraging. However, I think it’s a bit late. The FDA will not expedite any treatment since there are already vaccines available to prevent Covid-19.
Atossa would need full FDA approval rather than the EUA given to the pioneers. Typically, a treatment takes years to get FDA approval. I would not wait for the approval of the AT-301 until at least 2023.
Additionally, pharmaceutical companies are increasing the production of Covid-19 vaccines to meet global demand.
Modern (NASDAQ:MRNA) announced that it would double its manufacturing facilities in Massachusetts and expand into Canada. While it may seem like a long time, most experts predict that Covid-19 vaccines should be available worldwide by 2023.
Endoxifen’s market opportunity is too small
The other major drug in Atossa’s production line is its breast cancer therapy, Endoxifen. This treatment is given in the “window of opportunity” between a breast cancer diagnosis and surgery.
Atossa recently published Phase 2 results for Endoxifen. The drug was able to meet its primary endpoint as treatment resulted in a 65.1% reduction in tumor cell activity.
The measurement of the activity of this tumor cell is called Ki-67. For endoxifene-treated patients, Ki-67 was reduced from an average of 25.6% to around 6%. This validates endoxifene as a treatment, as studies have shown that a below 25% reduction in Ki-67 improves long-term survival.
Passing Phase 2 is a significant achievement for any biotech company. However, I am concerned about the size of the endoxyphene market.
The company indicated in its 10-K that the potential market for Endoxifen is up to $ 1 billion annually. This means that they will be able to seize 100% of the market share, which is unlikely.
I have doubts about how much market share Endoxifen can achieve. Endoxifene is similar to an oral version of tamoxifen, a widely used breast cancer drug, limiting its potential for stealing from the market.
Investor takeaway
I think investors may have gotten carried away with ATOS stocks. I don’t think its current market opportunities justify its $ 448 million market capitalization. I would avoid the actions of ATOS.
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As of the date of publication, Joseph Nograles did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to the InvestorPlace.com Publishing Guidelines.
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