Investors in the Biotech industry have had a rough few weeks. The benchmark SPDR S&P Biotech ETF (NYSEARCA:XBI)has fallen 26% since peaking in February of this year. However, Atossa Therapeutics (NASDAQ:ATOS) stock seems to have bucked the overall biotech bearish trend.
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Despite the steep drop from all-time highs of $9, ATOS stock is still up for the year, trading around $3.50 today. That’s up about 270% since the beginning of this year and right with its 200-day moving average of $3.
The question is whether ATOS stock is still a good investment at these levels.
Atossa Therapeutics is a clinical-stage biopharmaceutical company focused on two main treatment lines. 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 pre-revenue as its treatments have not yet gained 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 whether that justifies its current $448 million market cap.
ATOS Stock and Treating Covid
The initial data looks promising for Atossa’s Covid treatments. AT-301, a nasal spray being developed to treat patients diagnosed with Covid-19, has had positive results from its Phase 1 studies.
The spray can reduce and relieve Covid-19 symptoms paving the way for an at-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 Atossa’s treatment seems to be safe and well-tolerated. The company aims to conduct a Phase 2 study in the U.S. after receiving guidance from the FDA.
These results are certainly encouraging. However, I believe they are a little too late. The FDA will not fast-track any treatment given that there are vaccines already available to prevent Covid-19.
Atossa would need full FDA approval rather than the EUA granted to the first movers. It typically takes years for a treatment to get FDA approval. I wouldn’t expect approval for AT-301 until at least 2023.
Furthermore, pharmaceutical companies are ramping up the production of Covid-19 vaccines in order to meet global demand.
Moderna (NASDAQ:MRNA) announced it was doubling its Massachusetts manufacturing facility as well as expanding to Canada. While it may seem like a long time, most experts predict that Covid-19 vaccines should be readily available worldwide by 2023.
Endoxifen’s Market Opportunity Is Too Small
The other important drug in Atossa’s pipeline is its breast cancer therapy, Endoxifen. This treatment is administered in the “window of opportunity” between the diagnosis of breast cancer and surgery.
Atossa recently released the Phase 2 results for Endoxifen. The drug was able to achieve its primary endpoint as the treatment resulted in a 65.1% reduction in tumor cell activity.
The measurement of this tumor cell activity is called Ki-67. For patients being treated with Endoxifen, Ki-67 dropped from an average of 25.6% to around 6%. This validates Endoxifen as a treatment as studies have shown a reduction below 25% in Ki-67 improves long-term survival.
Passing Phase 2 is a significant achievement for any Biotech firm. However, I am concerned about the size of the market for Endoxifen.
The company indicated in its 10-K that the potential market for Endoxifen is up to $1 billion annually. This assumes they will be able to grab 100% market share which is unlikely.
I have doubts about how much market share Endoxifen can actually achieve. Endoxifen is similar to an oral version of Tamoxifen, a widely used breast cancer drug, thus limiting its market stealing potential.
I believe that investors may have been carried away with ATOS stock. I don’t believe that its current market opportunities justify its $448 million market cap. I would avoid ATOS stock.
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On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.