The challenging year that 2022 has been so far, has caused equities a great hurt with the stock market nearing bear territory. The threat of a recession is imminent as Russia continues its war on Ukraine, inflation and interest rates cross 40-year highs, and the global supply chain is constrained. The macroeconomic situation has been deteriorating fast with geopolitical crises further fueling it. However, the wider downturn in the market has been much harsher on biotechnology companies still working on their pipeline to produce a viable drug/treatment. Many such biotechs have resorted to restructuring this year to help reserve some capital and find a means to survive. Some have come out victorious while others have closed doors for good after failing to find an alternative. Joining in on the restructuring spree is also the Cleveland-based biotechnology firm, Athersys Inc. (ATHX).
Athersys Inc. (ATHX) Overview
ATHX stock has been severely beaten down with over 86% decline in the past twelve months and 75% this year. The losses have been much more severe in the past month with a return of over 64%. Currently, the stock is trading at a price of just 22 cents a share as per the premarket on June 3, 2022.
In addition to the gloomy market situation, factors contributing to its downfall include a failing study, concerns over another, dwindling cash reserves, and the latest restructuring and layoffs. This comes at a time when the company is already struggling with keeping its share price above $1.00 to be compliant with listing requirements.
Following a number of concerning events in the company’s timeline, the regenerative medicine company has finally resorted to restructuring. In order to reduce costs and work on its lead programs, the company has decided to lay off up to 70% of its workforce. Expected to be completed by the end of this month, the lay-offs are only the first step in ATHX’s cost reduction plan. The company said yesterday that it is trying to become more attractive to financial and strategic partners.
Moreover, at the end of May, president and Chief Operating Officer William (B.J.) Lehmann left the company which was also said to be a part of the restructuring. Additionally, Executive VP & Chief Scientific Officer Dr. John Harrington as well as Chief Financial Officer Ivor Macleod would be leaving the company by the end of this month.
Following the huge layoffs and other steps to curb costs during the restructuring, ATHX would still be short on capital for the continuation of its trials. Thus, even after the restructuring, the company would require to raise additional funds to carry out its study programs.
Disappointing Study Results
The company’s lead platform product is MultiStem cell therapy which is an allogeneic stem cell product. ATHX has collaboration and license agreements with Healios K.K. for developing the MultiStem therapy for ischemic stroke, ARDS (acute respiratory distress syndrome), and other indications in Japan. In the last week of May, Healios shared the top-line data from the phase II/II TREASURE study of MutiStem in ischemic stroke patients in Japan. The study failed to achieve its primary endpoint which sent the shares of the company tumbling down by over 65% in just one session. The MultiStem therapy was in the most advanced stage of study in the ischemic stroke indication which disappointed big time.
In the restructuring announcement, the company said it is planning a conference call regarding the data and interpretations with a highly regarded independent neurologist.
Given the failure of the study, it is now more likely that the phase III MASTER-2 study will also disappoint. The MASTERS-2 study is evaluating MultiStem in the U.S., Europe, and Asia-Pacific, in the same patient group while the TREASURE study had relatively older patients. However, the company is confident that the results of the MASTER-2 study would be much better as age was a factor that played role in the TREASURE study.
The company’s latest quarterly results reported a net loss of $22.2 million with an increase in R&D expenses and a decrease in G&A expenses. Revenues for the quarter came at $2.9 million.
Net cash used in operating activities increased to $20.2 million while cash reserves at the end of the quarter were just $21.8 million.
Before the company shared the disappointing trial results, ATHX had been getting upgrades as approval for MultiStem in Japan was expected to help the company tap into additional non-dilutive financial options. However, disappointing big time on the Japan study, shares were downgraded to Underperform from Neutral by Bank of America.
While the company did say that it will continue the partnership with Healios and work on developing MultiStem therapy, there are now many concerns regarding it. Even after the restructuring, the company would still need more capital to continue the R&D programs. Thus, at the present, things are looking very bleak for the company. Only time will tell if the company will share the fate of those who shut doors for good or emerge victorious.