Atossa Therapeutics (NASDAQ:ATOS) is a highly intriguing company that has a great deal of potential. I recommend, however, that investors avoid taking a bullish position in ATOS stock for now.
That’s because Atossa is a very high-risk name.
A Promising Breast Cancer Treatment
Atossa is developing Endoxifen, which the company hopes will become a treatment for some breast cancer patients. Endoxifen is a metabolite of Tamoxifen, which has gotten the nod from the FDA and has been used as a breast cancer treatment for a relatively small number of patients for over four decades.
However, Tamoxifen is believed to put women at high risk of developing significantly debilitating side effects.
But in a Phase II trial of oral Endoxifen, in which six breast cancer patients were enrolled, Atossa reported that all adverse events were mild, leading it to conclude that, “Endoxifen was considered safe and well tolerated in this study.”
What’s more, the company reported that:
“Ki-67, a common measure of tumor cell activity, was reduced from an average of 25.6% at screening to 6% on the day of surgery, a 65.1% reduction. Ki-67 was reduced below 25% for all patients, which is potentially clinically meaningful because studies by others have shown that a reduction below 25% improves long term survival.”
Those are very promising findings and certainly bode very well for the drug’s safety and effectiveness.
In general, I believe that investors, analysts and some scientists are often overly skeptical and inexplicably reluctant to draw conclusions about clearly positive clinical trial results. Six patients, however, is an extremely small sample size, and it seems rather premature to be very bullish about Endoxifen and ATOS stock based on this trial.
Also noteworthy is that, according to Seeking Alpha columnist Edmund Ingham, no definite connection between Ki-67 – the endpoint used by Atossa in the Phase 2 trial of Endoxifen – and breast cancer risk have been established.
Atossa’s Covid-19 Treatments May Not Pan Out
Literally dozens of companies – ranging from giants like Eli Lilly (NYSE:LLY) and Gilead (NASDAQ:GILD) to small firms such as Sorrento (NASDAQ:SRNE) and Algernon Pharmaceuticals (OTC:AGNPF) – have tried their hands at developing one or more treatments for Covid-19. Yet none of them has yet developed any breakthrough remedies for the illness. (I’ve invested in a few of those companies, and my unimpressive ROI on those names also shows that their efforts have not been extremely rewarding.)
I’ve reached the conclusion that, although vaccines are very effective at preventing Covid-19 from becoming severe, finding effective treatments for it seems to be extremely difficult.
Atossa’s two Covid-19 therapies are still in the early stages of development, and are consequentially likely at least a year away from being able to obtain even emergency use authorization makes me even more pessimistic about their chances.
Moreover, as vaccination rates rise and more unvaccinated individuals catch the more contagious Delta strain of the illness, I believe that the U.S. and many other countries are inching closer to herd immunity. It’s worth noting that the major impacts of the Hong Kong flu, the last major pandemic, lasted for around 18 months. (It originated in July 1968 and ended as a in the winter of 1969-1970, subsequently becoming a much less threatening type of influenza). The novel coronavirus pandemic, which was first discovered in December 2020, has been around for a little over 18 months.
Further, I think that the relatively low death rate from the coronavirus in the U.S. and the rareness of severe illness among those who have been vaccinated has reduced the urgency among American government officials to find and fund a cure for the virus.
The Bottom Line on ATOS Stock
Atossa, which had no revenue last year and is not expected to generate any sales any time soon, has a market capitalization of over $470 million.
Although I think that Endoxifen has meaningful potential, there’s still a huge risk that the drug will never be approved. And the risk facing the company’s coronavirus treatments is extremely high.
As a result, I believe that the risk/reward ratio of ATOS stock is currently unfavorable.
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On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.