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Thread: Asterias Biotherapeutics' Stem Cell Program Is Dead On Arrival

  1. #1

    Asterias Biotherapeutics' Stem Cell Program Is Dead On Arrival








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    Asterias Biotherapeutics' Stem Cell Program Is Dead On Arrival

    Must Read | May 18, 2015 2:52 PM ET | 12 comments | About: Asterias Biotherapeutics, Inc. (AST), Includes: BTX, GERN
    [COLOR=#999999 !important]Disclosure: The author is short AST. (More...)


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    Summary

    • Its development portfolio is based on a stem cell program that had been abandoned by its previous owner and has shown no signs of efficacy.
    • Asterias has been repackaging old clinical data as new developments.
    • Asterias has ties to a stock promotion and faces a near-term need to raise significant capital.



    We believe Asterias Biotherapeutics (NYSE: AST) is one of the most compelling shorts today.

    1. Its development portfolio is based on a stem cell program that had been abandoned by its previous owner and has shown no signs of efficacy.
    2. Asterias has been repackaging old clinical data as new developments.
    3. Asterias has ties to a stock promotion and faces a near-term need to raise significant capital.

    Asterias' pipeline was abandoned by Geron in 2011 after showing no signs of efficacy in its first Phase 1 trial
    To best understand the prospects for Asterias' stem cell portfolio, it is important to examine its development history when it was under Geron's (NASDAQ: GERN) ownership. For background, Asterias purchased its entire stem cell program (AST-OPC1, AST-VAC1, and AST-VAC2) from Geron in October 2013 (here), but it was Geron who initially developed the stem cell program and conducted early clinical trials.
    AST-OPC1 is the furthest along in terms of development and is Asterias' main focus, so we will concentrate our analysis there.

    AST-OPC1 had a difficult history while under Geron's ownership when it was known as "GRNOPC1." First, it was placed on Clinical Hold by the FDA in May of 2008 (here) soon after filing an IND. It was later revealed, as per a release in October 2009 (here), that the FDA instituted the clinical hold due to a higher frequency of animals developing "cysts in the injury site than had been seen in numerous previously conducted preclinical studies with clinical grade GRNOPC1." GERN initiated its Phase 1 trial for GRNOPC1 in October of that same year after the FDA Clinical Hold was lifted in July 2010 (here).
    In our view, a Clinical Hold by the FDA is a red flag. Not only does it raise safety concerns, but it also highlights the difficulty of bringing therapies successfully through the development pathway, especially stem cell therapies which are not well understood.
    Just over a year later, Geron announced on November 15, 2011 that it was ceasing development on GRNOPC1 and the entirety of its stem cell portfolio (here). On the conference call to explain their decision, Geron executives initially noted the cost and time required to develop GRNOPC1. Later on the call, GERN admitted that GRNOPC1 had shown no signs of efficacy in its Phase 1 trial, which we believe to be the more important factor. Quotes from the conference call are below:

    This lack of efficacy or signs of improvement was further corroborated by a press release from Asterias on May 22, 2014 that reported updated long-term results from the original Phase 1 trial by Geron. In the release (here), Asterias stated:

    After abandoning its stem cell program Geron could not find a partner
    Upon announcing Geron's decision to cease development of its stem cell program, Geron said it was looking to find a partner for the program. On the same conference call, the GERN CEO expressed optimism and said he hoped for a major partnership: "In fact a number of the potential partners that we have ongoing discussions with are global companies."
    A research note by Roth Capital Partners following the conference call mentioned three major companies as potential partners:

    Despite optimism for signing a partnership with a major company, GERN could not find a single development partner. In November 2012, GERN announced that it had agreed to divest its stem cell assets to BioTime Acquisition Company, a subsidiary of BioTime, Inc (NYSE: BTX), that was later renamed to Asterias BioTherapeutics (here, here and here).
    GERN received no cash as part of the divestiture and only received Asterias Series A common stock. As part of the transaction, GERN agreed to divest the Asterias Series A common shares through a distribution to shareholders (here), and on May 28, 2014 (here), Geron announced the distribution of Asterias Series A common shares. We believe this is a strong sign that Geron did not believe in the potential of its stem cell portfolio and wanted to quickly dispose of the shares. We're not sure where current Asterias shareholders' misplaced enthusiasm comes from.
    To summarize:

    1. Asterias' AST-OPC1 has been hit with a Clinical Hold by the FDA.
    2. AST-OPC1 was abandoned by its previous owner, Geron, who admitted that AST-OPC1 exhibited no promising signs of efficacy.
    3. Geron failed to sign a partnership with any major player for its stem cell portfolio, sold its stem cell program to Asterias in exchange for shares in Asterias, and later disposed of all of its shares.
    4. Subsequent to its divestiture by Geron, the new owner also reported that patients in AST-OPC1's first Phase 1 trial showed no signs of improvement.

    History of stem cell therapies is against AST-OPC1
    Proponents of Asterias say that Geron's Phase 1 dosage was too low (only 2 million AST-OPC1 cells) to show any efficacy and that safety was the primary endpoint, which was met. They claim higher doses of AST-OPC1 at 10 million or 20 million cells are needed to show efficacy.
    That may be true; however, there's been zero clinical evidence to support this claim. In its clinical trial, Geron's original study called for an increasing dosage in later cohorts, but as a result of the initial findings, Geron didn't even move onto the higher dosages. Both Geron and Asterias have made it clear that AST-OPC1 has failed to show any sign of efficacy.
    Furthermore, we highlight below a list of numerous other stem cell therapies that have failed. Stem cell therapies have not shown much success. We don't believe investors should put much faith into AST-OPC1 when it has shown no signs of efficacy in clinical trials and when multiple other stem cell therapies have failed, either due to lack of efficacy or due to significant adverse safety effects.

    1. NeuralStem - Failed to show efficacy in ASL in its Phase 2 trial (here)
    2. Cytori - Phase 2 trials halted due to cerebrovascular events (here)
    3. Athersys - Phase 2 studies failed in ischemic stroke (here) and in ulcerative colitis (here)
    4. More stem cell trial failures from 2014 can be found here in this article: http://celltrials.info/2015/01/04/failures-2014/

    It is clear that to us that both its own history and the stem cell field's history are heavily against AST-OPC1.
    Asterias is repackaging old clinical data as new
    Moreover, it is worth pointing out that Asterias has not presented any new data or shown further development of Geron's stem cell portfolio. The recent Investor Meeting that Asterias held on May 8, 2015 was more or less a review of Geron's previously presented data on AST-OPC1. Asterias did review the trial design of their current Phase 1/2a clinical trial of AST-OPC1, which is under way. However, this clinical trial is nearly identical to Geron's initial Phase 1 conducted in 2010, which Geron terminated mid-way through because the compound failed to show any signs of efficacy.
    On May 14, 2015, Asterias announced the availability of an abstract regarding Phase 2 clinical data on AST-VAC1, which is another of the assets that Asterias acquired from Geron, in Acute Myelogenous Leukemia (AML) (here). However, this long-term follow up on the trial provided little new information relative to what Geron had presented in 2010 at ASH. We believe this "update" is completely meaningless given that Asterias has no plans to further develop AST-VAC1 and admitted on the 1Q 2015 earnings call that they had no update on a potential partnership (here).
    Despite the flurry of news, it's important to dig into the details. We found that:

    1. Asterias has been presenting updated data on trials that we believe provides no meaningful new information.
    2. Asterias has not significantly altered the clinical development program for AST-OPC1 from Geron's original development pathway, which Geron abandoned because of a lack of efficacy.

    Ties to BioTime and Low Cash Levels
    Finally, we want to highlight two specific risks associated with Asterias. First, Asterias was created and spun out of BioTime.
    As documented in the following two articles (here and here), BioTime has a checkered history. The first article highlights BioTime's history of failures in stem cell therapies. It also explains how BioTime has used the creation of numerous subsidiaries like Cell Cure NeuroSciences, ES Cell International, and OrthoCyte to create short bursts of enthusiasm to boost BioTime's share price. This is the same path that BioTime is pursuing with Asterias. The second article highlights how BioTime was the subject of promotional newsletters that boosted BioTime's share price.
    It should also be noted that BioTime has failed to successfully develop and commercialize any therapy. Over the last 10 years, BioTime has earned just over $23 million in cumulative revenues, according to FactSet. In the meanwhile, BioTime has lost $143.7 million in net income and burned through $119 million in cash flow from operations. Its high cash burn has forced BioTime to increase its share count from 17.85 million shares on March 4, 2005 to over 83.15 million shares as of March 9, 2015 through eight stock issuances.

    This heavy cash burn reflects the second risk that should be noted for Asterias. Based on the cash balance as of March 31, 2015 and 2015's estimated cash burn of $15 million to $17 million, as provided by the company here, Asterias is set to run out of cash by the beginning of September, which is less than five months away.
    (click to enlarge)
    To no one's surprise, Asterias entered into an ATM (at-the-market issuance sales) agreement with MLV & Co on April 10, 2015 (here). It was filed in an SEC 8-K filing; neither BioTime nor Asterias issed a press release announcing that Asterias shareholders were soon going to be diluted. Given the high cash burn and imminent funding needs, Asterias shareholders should expect Asterias to withdraw on the ATM very quickly.
    Conclusion
    We believe Asterias BioTherapeutics is a compelling short. Its lead stem cell compound, AST-OPC1, had been abandoned by its previous owner after showing no signs of efficacy in its first Phase 1 trial. Furthermore, Asterias' parent company BioTime has a checkered past, both with its own development and with its manufactured subsidiaries like Asterias. Lastly, we believe that it is evident that Asterias is in dire need of capital, which suggests to us that shareholders should expect significant dilution in the near-term. Our price target is $0. [we are short this stock]

    http://seekingalpha.com/article/3192796-asterias-biotherapeutics-stem-cell-program-is-dead-on-arrival
    In God we trust; all others bring data. - Edwards Deming

  2. #2
    I wonder if c473s has any comment...

    Paolo
    In God we trust; all others bring data. - Edwards Deming

  3. #3
    Never have followed any of this based on investment potential. Could be accurate if no additional venture money arrives. I thought they were in California for that reason. I don't see any data here on any patients in the new iteration. No news available in rumor mill about new patients

    Quote Originally Posted by paolocipolla View Post
    I wonder if c473s has any comment...

    Paolo
    Last edited by c473s; 05-23-2015 at 06:16 PM.

  4. #4
    Quote Originally Posted by c473s View Post
    Never have followed any of this based on investment potential. Could be accurate if no additional venture money arrives. I thought they were in California for that reason.
    Thanks for your comment.

    Paolo
    In God we trust; all others bring data. - Edwards Deming

  5. #5
    Reading it closely they are offering opinions on the cells based solely on old GERON data. They may or may not work at the higher doses but Asterias did not comment on that. I can't seem to source the financial data to the quarterly call. I assume the author can.

    Quote Originally Posted by paolocipolla View Post
    Thanks for your comment.

    Paolo

  6. #6
    I realize first I should have posted this blog from Alexey Bersenev on the issue, he ends like this:

    "Frequently, there is no reason to pick up divested products and try to ask “dead horse to race”. Let it go, kill it. Learn from it and develop new amazing product! For those of you, who picked up divested products and trying to resuscitate it – good luck guys! I’d not be in your place."
    http://stemcellassays.com/2015/05/de...Cell+Assays%29

    I think he makes good points.

    Paolo
    In God we trust; all others bring data. - Edwards Deming

  7. #7
    I guess we should drop efforts for regenerative medicine with stem cells and push the epidural stimulation. The exoskeletons are getting better too.

    Quote Originally Posted by paolocipolla View Post
    I realize first I should have posted this blog from Alexey Bersenev on the issue, he ends like this:

    "Frequently, there is no reason to pick up divested products and try to ask “dead horse to race”. Let it go, kill it. Learn from it and develop new amazing product! For those of you, who picked up divested products and trying to resuscitate it – good luck guys! I’d not be in your place."
    http://stemcellassays.com/2015/05/de...Cell+Assays%29

    I think he makes good points.

    Paolo
    Last edited by c473s; 05-24-2015 at 08:00 AM.

  8. #8
    Quote Originally Posted by c473s View Post
    I guess we should drop efforts for regenerative medicine with stem cells and push the epidural stimulation. The exoskeletons are getting better too.
    I just think we should not be afraid to move beyond stem cells to find a way to repair the chronically injured spinal cord.
    I believe it is clear enough that just parachuting stem cells in the injury site does very little to repair the damage, we need better results.
    Here I am not saying to dump stem cell research, I am just saying we need to move to a more complex and possibly effective level.

    Paolo

    P.S. If you were been sarcastic I think it wasn't necessary as I am honestly trying to stimulate a useful discussion as in the end all we want is to see people getting out of w/c, don't we?
    In God we trust; all others bring data. - Edwards Deming

  9. #9
    In the U.S. there have been fewer than 25 patient treated. Not enough for me to say it doesn't work. OEG cells by Lima had far higher numbers yet failed to produce results so far. You have to hep me understand what you mean by more complex level. Different cells, more of them, include lithium, estim..............

    There was a wee bit of sarcasm too.

    Quote Originally Posted by paolocipolla View Post
    I just think we should not be afraid to move beyond stem cells to find a way to repair the chronically injured spinal cord.
    I believe it is clear enough that just parachuting stem cells in the injury site does very little to repair the damage, we need better results.
    Here I am not saying to dump stem cell research, I am just saying we need to move to a more complex and possibly effective level.

    Paolo

    P.S. If you were been sarcastic I think it wasn't necessary as I am honestly trying to stimulate a useful discussion as in the end all we want is to see people getting out of w/c, don't we?
    Last edited by c473s; 05-24-2015 at 05:16 PM.

  10. #10
    Quote Originally Posted by c473s View Post
    In the U.S. there have been fewer than 25 patient treated. Not enough for me to say it doesn't work. OEG cells by Lima had far higher numbers yet failed to produce results so far. You have to hep me understand what you mean by more complex level. Different cells, more of them, include lithium, estim..............

    There was a wee bit of sarcasm too.
    With "more complex level" I wanted to say a "higher level of understanding" of spinal cord injury (hope that is a bit more clear)
    Since Hans Keirstead did his discovery about oligodendrocyte derived from embryonic stem cell (more than 10 years ago) lot more has been learned about SCI. Think of the research that Murray Blackmore is doing or Jerry Silver peptide, just to name 2 that CC members are rather familiar with.
    Also let's not forget all the biomaterials that have been developped. Perhaps before moving forward withs Asterias trial it would be a good idea to at least combine the cells with a biomaterial or a drug that give better results in a relevant SCI animal model, possibly a chronic SCI animal model (just to make the clinical trial economically affordable).

    Just my opinion.

    Paolo
    Last edited by paolocipolla; 05-25-2015 at 04:40 PM.
    In God we trust; all others bring data. - Edwards Deming

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