It isn’t easy to get profit-hungry Wall Street excited about a drug that hasn’t yet been tested in humans and is at best years and years away from generating any sales, but Athersys (NASDAQ:ATHX) CEO Gil Van Bokkelen did his best in a recent conference call with investment analysts.
That’s because there are recent signs that two obesity drugs similar to Athersys’ — Vivus’ Qnexa and Arena Pharmaceuticals’ lorcaserin — could be headed for U.S. Food and Drug Administration approval this year, and Van Bokkelen didn’t miss the opportunity to ride on those coattails and draw attention to Athersys’ search for a development partner for its preclinical obesity drug.
“We know that there are a number of companies out there that are really, really interested in the obesity area, and we feel like we are in a very strong position,” Van Bokkelen said.
Van Bokkelen’s new tone represents quite a turnaround for Cleveland-based Athersys, after the company said in 2009 that it was suspending development of its obesity drug due to rising costs.
But it makes sense, according to Ted Tenthoff, an analyst with Piper Jaffray.
“Steps toward regulatory approval are good for the whole space,” he said. “As a result of that, you have to assume there’s some value in Athersys’ preclinical asset.”
Van Bokkelen’s newfound sense of optimism around the drug has everything to do with the perception that it’s now possible to shepherd an obesity drug through the U.S. food and drug system’s regulatory process — a major departure from prevailing industry wisdom just a year ago. The FDA hasn’t approved an obesity drug since 1999.
“There has been considerable skepticism about whether it is possible to develop a pharmaceutical treatment for obesity given the recent experience of several companies, and the apparent complexity of the regulatory path,” he said.
For example, the FDA last year rejected Orexigen’s Contrave because of concerns about the cardiovascular safety after long-term use. In 2010, FDA panels voted down Qnexa and lorcaserin — but 2012 appears to be a much better year for those two drugs.
In February, an FDA panel voted 20 to 2 in favor of Qnexa, with a decision by the agency expected to come in July. Earlier this month, an FDA panel voted 18 to 4 with one abstention to recommend approval of lorcaserin, with a final decision that could come as early as this summer.
As for Athersys, it’s worth noting that while Van Bokkelen is now talking up the significance to Athersys of the FDA panel that recommended lorcaserin’s approval, he downplayed the earlier panel’s vote against the drug — a rather convenient stance for Athersys to take.
It’s certainly no coincidence that Van Bokkelen assumed the role of enthusiastic salesmen when touting Athersys’ obesity drug. Developing the drug is most likely not something the small biotech can afford on its own.
Most of Athersys’ resources are focused on developing its MultiStem adult stem cell treatment for a variety of conditions, like stroke and inflammatory bowel disease, Tenthoff said.
“Since the obesity asset is outside of that space, it’s fair to say that [Athersys] would most likely partner or seek some kind of strategic way to develop that drug,” he said.
Because Athersys’ obesity drug is untested on humans, it’d be a highly speculative investment on the part of any Big Pharma strategic partner. That means a partnership agreement would likely consist of a rather small up-front payment to Athersys with several subsequent milestone payments associated with clinical development, Tenthoff said.