The Bear Case for Atossa Therapeutics Makes More Sense at This Time

The shares of clinical-stage biotech company Atossa Therapeutics (NASDAQ:ATOS) have been on a wild run in the past month. ATOS stock has lost  41% in the past month, despite a series of positive catalysts for the stock recently.

The company has multiple treatments in its pipeline, including Endoxifen, a drug that’s meant to be given to breast cancer patients prior to surgery. However, its therapies have not yet been shown to be genuinely effective and are at least two to three years away from (possibly) being approved.

ATOS stock has been among the top-performing biotech stocks since the beginning of the year, as the shares have gained a whopping 242% in 2021. However, the rally has slowed down considerably in the past few months.

Moreover, the stock has attracted a lot of interest from short sellers, as over 15% of the stock’s float was being shorted last month. So the shares are incredibly volatile now and not worth buying, considering the red flags surrounding the drugs in the company’s pipeline.

Endoxifen

Atossa’s lead drug candidate is Endoxifen, which is essentially a refined version of an old breast cancer treatment. It is a more robust metabolite of Tamoxifen, a treatment that’s given to some women with estrogen receptor (ER) positive breast cancer.

In June, the company reported results from a Phase 2 trial of Endoxifen involving ER-positive breast cancer patients.. Ki-67, a protein that shows up when cells multiply, fell by roughly 65.1% in the patients. The results are encouraging and suggest that the drug could potentially prevent breast cancer from progressing.

In the past, the difference between Endoxifen and Tamoxifen as a treatment for breast cancer wasn’t statistically significant. The latest results are encouraging, but there are still several regulatory hurdles for Endoxifen ahead.

AT-301

The second candidate in  Atossa’s pipeline is AT-301, a Covid-19 therapy that’s administered with a nasal spray. The company posted Phase 1 data on the therapy back in February, showing  that the drug was well-tolerated at two different dosages after 14 days. The company is now planning a Phase 2 trial in the United States. However, after receiving the FDA’s feedback, Atossa would need to launch a second preclinical study before moving on to  a Phase 2 trial.

The requirement of another preclinical test suggests that the FDA was lukewarm on AT-301.  Moreover, Atossa has not talked much about the candidate in over two months, suggesting that it might be looking to reallocate its funds to another project.

AT-H201

The last of Atossa’s main candidates is an inhaled therapy for Covid 19 patients and those suffering from post-infection pulmonary disease. After completing in-vitro studies on the drug, Atossa states that it is four times more effective than current standard treatments such as Remdesivir.

However, the FDA has asked the company to provide more preclinical data before the agency will approve its Phase 2 trial. That explains why the company has moved its Phase 2 trial down-under to Australia .

As with AT-301,  Atossa’s management may feel that developing AT-H201 might not be worth the effort.

The Bottom Line on ATOS Stock

In light of the recent plunge of ATOS stock, it appears that investors are losing faith in Atossa’s pipeline. It will be a long time before the company’s main candidates have a chance of being approved.  The lack of late-stage efficacy data on the firm’s main drugs and the FDA’s apparent lack of enthusiasm towards two of its candidates are worrisome. Therefore, it’s best to avoid ATOS stock at this time.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.