The big money is not in the buying and selling. But in the waiting. – Charlie Munger
Atara Biotherapeutics (NASDAQ:ATRA) is one of the most promising growers that weve encountered thus far. As follows, the company is hitting its growth inflection with a key late-stage T-cell immunotherapeutic (tab-cel, formerly known as ATA-129). In anticipating the strong data reporting, the company is preparing for launch in the EU by hiring more professionals and investing in logistics. That aside, this robust grower is deepening its research and development (R&D) into the highly lucrative, next-generation cancer treatment, chimeric antigen receptor and T-cell receptor (CAR-TCR or CAR-T). But thats not all. There is an extremely intriguing molecule in-development (ATA-188) that can shock the medical as well as investment community: it is likely the silver bullet for the highly difficult-to-manage autoimmune condition, multiple sclerosis. As reflective of the increasing intrinsic value, the stock has been on an uptrend for the past 52 weeks. Since our recommendation, the shares appreciated by $28.42 to trade at $42.75 for over 205% profits. In this research, well elucidate the latest earnings developments and catalysts that can catapult the shares to a new high.
Figure 1: Atara Biotherapeutics stock chart. (Source: StockCharts).
We wish to provide a brief background on Atara for new investors. Headquartered in South San Francisco, California, the company is focusing on the innovation allogenic T-cell immunotherapies (A-TCI) to service a vast number of cancers and autoimmune diseases (as depicted in figure 2). A-TCI functions quite similar to CAR-T: both therapeutics enlighten the key regulatory cells of the immune system (i.e., the T-cells which are analogous to the generals of an army). We noted in the prior research,
Ataras A-TCIs are differentiated from those of Kite Pharma (NASDAQ:KITE), a bioscience acquired by Gilead Sciences (NASDAQ:GILD). In specific, Ataras A-TCI primed the intelligence of CD8 (killer) T-cells to detect and destroy cancers. This is important, as killer T-cells are adept at attacking viruses (to kill virus-induced tumors). Of note, tab-cel is an off-the-shelf Epstein-Barr virus (EBV)-specific A-TCI. Accordingly, the FDA gave the firm the nod to initiate their two phase 3 trials (MATCH/ALLELE) for ATA-129 in patients with rituximab-refractory EBV associated PTLD. Moreover, the said molecule gained the orphan designation from both the FDA and the EMA. Furthermore, the agency designated the mentioned drug as a Breakthrough Therapy while the EMA put it in the Priority Medicines regulatory pathway. In addition, Health Canada placed it in the expedited approval category.
Figure 2: Therapeutic pipeline (Source: Atara).
Of the various developing events, we are most interested in the development regarding tab-cel. Interestingly, the clinical sites for the two phase 3 (MATCH and ALLELE) have opened in the US. And, sites elsewhere are expected to be available soon. In anticipation of the launch of tab-cel, the company pushed various programs. For instance, the hiring of Manuela Maronati signifies the anticipation of an EU approval (and for tab-cel to be initially commercialized in Europe). In addition, the recent partnership with TrakCel is certainly foretelling an upcoming launch. As the industry-leading software provider, TrakCel developed the logistics program coined Atara MatchMe. This is to improve the customer experience (to push for the most aggressive/prompt delivery of tab-cel to patients). Its important for investors to realize that a drug approval does not guarantee a launch success. Instead, prior preparations such as the hiring of experts and logistics planning (as what Atara accomplished) are crucial steps for the improved launch outcomes. Commenting on such developments, the President and CEO (Dr. Isaac Ciechanover) enthused,
During Q1 2018, we continued to advance our T-cell immunotherapy pipeline and platform. Our two phase 3 pivotal studies of tab-cel are progressing, and we remain focused on building Ataras global commercial and operational capabilities in anticipation of the first tab-cel Phase 3 results and submission of an EU conditional marketing authorization application in H1 2019. We are also excited to have recently expanded our collaboration with Memorial Sloan Kettering Cancer Center to develop next-generation CAR-T technologies, marking our entry into genetically engineered T-cells and furthering our leadership position in off-the-shelf, A-TCI. I am pleased with our strong operational and strategic execution in Q1 and look forward to both continuing this momentum and updating you on our progress throughout the rest of the year.
Aside from the upcoming tab-cel launch, were highly excited about the recent MSK-partnership to deepen the research and development (R&D) for tapping into the highly lucrative field (CAR-T) that we discussed in the prior research. Along with this catalyst, the company inked an extensive partnership with MSKs think-tank, Dr. Michel Sadelain. This contract secured the top-notch intelligence for the innovation of a novel CAR-T construct that is both gene-edited and off-the-shelf. We elucidated,
On May 08, 2018, Atara announced the expansion of its collaboration with MSK for the innovation of the next-generation CAR-T. As alluded, Ataras A-TCI functions quite similar to that of CAR-T. What is unique is that A-TCI – and CAR-T – are off-the-shelf: this confers the rapid commercialization as well offers patients convenience. As a ramification, the agreement extended the original collaboration between Atara and MSK – in the hopes to deliver stellar medicines that have the potential to transform the lives of patients afflicted by life-threatening malignancies. Pertaining to the deal specificity, Atara will have access to MSKs key biotechnologies (including a novel CAR-T construct). The said technology would enable Atara to design physiologic T-cell activation properties.
For Q1 2018 (ended on March 31), Atara reported $41.4M ($1.05 per share) in net losses compared to $28.5M ($0.88 per share) decline for the same period a year prior. The higher losses were due to the increasing R&D, which is prudent for a company advancing its therapeutic development. Investors should be cognizant that it is the norm for a relatively young bioscience like Atara to incur significant losses for many years prior to banking a net profit (due to the lengthy and low success rate of the innovation process). Nonetheless, it only takes one blockbuster to make your investment worthwhile. Regarding the balance sheet, there was $407.3M, thereby representing the 39% improvement versus the $293.3M for Q1. Based on these metrics, there should be adequate cash to fund operations into mid-2020 (prior to any additional financing).
Atara is brewing two stellar analogous platforms (A-TCI and CAR-T). There are numerous catalysts powering this superb grower. One, the advancement of tab-cell development and the corporate preparation for the EU launch are signaling that the company is at its growth inflection: this is a point in the companys growth cycle where the stock can trade aggressively higher. The deepened relationship with MSK for the novel CAR-T development – to service cancer, autoimmune as well as infectious diseases – added significant value to the pipeline. Additionally, the increased cash position via the public offering to gear up for launch and to expand its R&D is highly strategic. Despite the highly favorable chances of positive outcomes for MATCH and ALLELE, there is roughly a small chance of a negative clinical binary. In that case, its most likely that the shares will depreciate over 80%, and vice versa.
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