Athersys: Potential Upside – Athersys, Inc. (NASDAQ:ATHX)

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Company Overview

I will be brief in the company overview since you can get a much more detailed breakdown of Athersys (ATHX) research strategy at their website, but they are developing drugs to treat various conditions that have little or no other treatment alternatives by using their proprietary stem cell product, MultiStem, a regenerative medicine. They have various trials underway to treat neurological, inflammatory and immune, and cardiovascular diseases and conditions, which I will discuss later in this article, using MultiStem. They are partnered with Helios, a Japanese company, which is running clinical trials with their products within Japan. Athersys’ research has shown that MultiStem has shown benefits in reducing inflammatory damage, protecting tissue at the site of an injury, and the ability to stimulate the recovery of damaged neurons.

What Are Stem Cells, And What Is MultiStem?

The treatments they are researching use their MultiStem stem cell product, so let’s start with what MultiStem is and how this gives Athersys a competitive advantage against peers, assuming they find medical use for it.

Stem cells are basically potential cells; they are root cells that have the ability to develop into many different types of cells in the body. They are considered a repair system for the body and are different from other human cells in that they can divide and renew themselves, and they are unspecialized but have the potential to become a specialized cell (i.e. muscle cells, brain cells, blood cells, etc.). There are two basic types of stem cells typically discussed, embryonic stem cells and non-embryonic stem cells. The embryonic stem cells are derived from an embryo (aka fetal stem cells), and non-embryonic stem cells are “adult” stem cells. When stem cell research originally became mainstream, there was a lot of controversy around using embryonic stem cells since they were harvested from in vitro fetuses, and the public view was that that was very unethical.

MultiStem is Athersys’ proprietary stem cell product that is developed from a special class of stem cells called “Multipotent Adult Progenitor Cells (MPACs).” MPACs are derived from adult bone marrow and then expanded outside of the host using their proprietary manufacturing process. Cells obtained from a single donor can be used to produce banks yielding hundreds of millions of doses of the product and then stored frozen until needed. The cells may be used to promote healing and tissue repair without tissue matching and immune suppression, which is usually required for transplantation or other donor-derived cell therapies. Also, they currently have over 300 patents protecting their existing processes and technologies, including the extraction and expansion process of stem cells from adult bone marrow.

Their MultiStem product is a stem cell treatment that avoids any ethical dilemmas associated with using stem cells as treatment. One donor can help create millions of doses of their treatments. They have proprietary control of the process to extract the unique stem cells, and they will have IP rights associated with any treatments derived from their MultiStem product.

Financial Position

Athersys, as of the end of quarter two earnings, had $44.2 million of cash and cash equivalents, plus up to an additional $360 million potential milestone payments, subject to certain stipulations. Their net cash used in operating activities was $17.0 million for the 6 months ended June 30, 2019. They currently are relatively financially stable with cash on hand to be able to sustain themselves for at least another 1.0 to 1.5 years, assuming no more milestone payments. If certain milestones are achieved and/or if they get approval to market their treatment for acute respiratory distress syndrome (ARDS), they will have access to additional funds that would reduce the need for another potential offering to raise more money. If they need to do an additional offering, they can tap their $100M equity facility with Aspire Capital. In 2018, they entered into an agreement with Aspire Capital with the right to sell $100M of its common stock under certain conditions over a 3-year period. Further dilution would, of course, be undesirable, but it is comforting to know they have access to funding to support their operations if needed.

Pipeline/Clinical Studies

Athersys is focusing on using MultiStem in three main areas, neurological, cardiovascular, and inflammatory, immune, and related. If you click on the link above, it will give you some more insight and updates into their key programs.

Their two most anticipated treatment options are related to ischemic stroke and acute respiratory distress syndrome. There are many other areas they are looking to use this treatment, but the above two treatments are the only two that will have any meaningful impact on stock price in the near term.


ARDS is an immunological and inflammatory condition characterized by widespread inflammation of the lungs triggered by various conditions, such as pneumonia, sepsis, and trauma. It is an unmet medical need with a high mortality rate and with no effective drug treatments. The cost of care for a patient with ARDS is very high. If the treatment is successful, then it would reduce patient’s days on a ventilator and/or in the ICU; both of which are very expensive for the medical facility. ARDS currently affects about 400,000 to 500,000 patients in Europe, Japan, and the United States, and according to the American Lung Association, 200,000 patients are diagnosed with ARDS every year, and 30-50% of those diagnosed will die. A brief timeline of recent events related to MultiStem for ARDS is as follows:

  1. November 2018 – Healios ARDS trials begin
  2. January 2019 – Athersys announces favorable results from their phase 1/2 study
  3. April 2019 – First patient enrolled in Healios ARDS trial
  4. May 2019 – Athersys ARDS phase 3 trial receives FDA fast track designation

Favorable preliminary results from Athersys phase 1/2 study were released in January, and additional results related to certain 365-day endpoints are expected to be released later this year. According to the clinical trial government website, the ARDS study was started January 2016, and the actual primary completion date was September 2018. They released initial results, as mentioned above, January 2019, and the actual study completion date was July 2019. The actual study completion date means the date that the last participant in the clinical study was examined or received treatment to collect final data for the primary outcome measures, secondary outcome measures, and adverse events. Therefore, that means the full phase 1/2 study was completed for the 28-day primary endpoint and the 365-day endpoint in July, and they should have results to release relatively quickly. Based on what I have read, I would imagine there would be some announcement of the results in the coming month or two, assuming 90-120 days to evaluate the results from the clinical trial.

Additionally, the Healios study should have data related to a 28-day primary endpoint rather quickly, assuming enrollment doesn’t have any issues, then they should also have some initial data to present this year, and the study would be fully complete towards the end of next year.

Ischemic Stock

According to the World Health Organization, 15 million people suffer from a stroke each year; 5 million result in death, and 5 million cause permanent disability. Additionally, in the US, 795,000 people have strokes every year, and 87% of all strokes are ischemic strokes; an ischemic stroke is one in which blood flow to the brain is blocked. The main obstacle of treating a patient that had an ischemic stroke is the patient must receive these treatments within a few hours of the stroke.

Athersys’s MultiStem product is currently in two Phase 3 studies for treating ischemic stroke:

  1. Treasure study is being conducted in Japan (by Healios), and the first patient was enrolled late in 2017 with enrollment still ongoing.
  2. Masters-2 study is an Athersys study. Enrollment began in 2018, and they are still enrolling patients.

MultiStem would dramatically increase the treatment window for patients with ischemic stroke, from a few hours to up to 36 hours, and 90-95% of stroke patients would be eligible to receive the treatment.

The timeline for ischemic stroke results will be quite a bit longer, but as data is released, assuming it is good data, it should help increase their share price and lead to additional milestone payments and/or additional partners to help funding. The Masters (Athersys) and Treasure (Japan) phase 3 clinical trials have a primary endpoint after 90 days and secondary endpoints after 365 days. The Masters-2 trial uses 300 patients, and the Treasure trial uses 220 patients, as opposed to 36 that were used for ARDS, so the enrollment period will take longer. The clinical trial government website has the primary completion date for the Masters-2 clinical trial estimated at December 2020 and the estimated study completion date at September 2021. The clinical trial government website has the primary completion date for the Treasure clinical trial estimated at March 2020 and the estimated study completion date at December 2020. Since Japan has accelerated approval for cell therapy products, the to-market process would be much quicker than the US.

The Masters-2 trial is still authorized by the FDA under SPA, with fast track and RMAT designations, which all basically means they are eligible for a much faster priority review process after results of the phase 3 study become available.


Since 2012, the stock has basically traded in a range of $1.00 to $2.50 and is currently trading at $1.50 with a market cap of about $229 million. There are two analysts covering the stock with price targets between $6.00 (300% gain) and $11.00 (633% gain). The TAM of the above two treatments is massive, and the estimated cost of MultiStem (according to an interview with the CEO a couple years ago) is about $25,000 to $30,000, so let’s look at some conservative revenue estimates.


Ischemic Stroke

Total Yearly Diagnosis



Addressable Patients





2.5% Treated



$25,000 cost per



Yearly Revenue


Based on the back of the napkin math above, I believe it is safe to say that there is a large market potential for their treatments if endpoints are met and they receive market approval. ARDS would not necessarily be a blockbuster drug that would drive massive stock returns for investors, but it would give them much needed cash flow to help fund their ischemic stroke trials and other ongoing trials. Ischemic stroke treatment approval, on the other hand, would have the potential for huge revenue increases with just a small fraction of yearly strokes treated. The average TTM price-to-sales within the biotechnology and drug industry was 5.63 in Q1 2019, so based on those figures and the above math, it points to an absurd $48 billion market cap or $315 a share (currently $229 million or $1.50 a share).


I am not saying buy this and you will have 21,000% returns on your investment, but I am just trying to illustrate that there is huge market potential for their products, and there is currently no competition to speak of within the space. There are many risks with owning this, or any other biotechnology stock within phase 3 trials, including continued delays, additional capital raises leading to dilution, and of course, a failed trial, but I think it is worth having a small percentage of your portfolio in high-risk/high-reward stocks that can help drastically boost your gains. Approval of ARDS treatment should help boost their stock price into the $3.00 to $4.00 range (5.63 average P/S x $125,000,000 revenues from 5,000 treatments a year) and provide them with the cash flow to fund additional trials and limit the possibility of further dilution. Approval of treatment of ischemic stroke would be a game-changing treatment that would increase their share price an amount that would be futile to try and estimate. For the sake of being very conservative, let’s assume the high end of the analysts’ estimates is accurate, then at $11.00 a share, a $1,500 investment in Athersys now would be worth $11,000.

Disclosure: I am/we are long ATHX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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