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Can Atossa Therapeutics Stock Keep Climbing?

By Cory Renauer - Jun 28, 2021 at 6:46AM

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Investors want to know if this clinical-stage cancer drug developer can keep putting up big gains.

Atossa Therapeutics (ATOS -0.95%) has been a top-performing biotech stock rising more than this year. Successful results from a mid-stage clinical trial with a potential new breast cancer treatment propelled the stock 61% higher last week and investors want to know if it can go any higher.

To find out if this clinical-stage company's best days are in the past, present, or future, we'll need to look at its lead asset, endoxifen. Here's what you need to know about this company and its potential new breast cancer drug.

A woman in a lab coat looks up from behind her computer.

Image source: Getty Images.

Oral endoxifen

Atossa Therapeutics is betting just about everything it has right now on developing a new and improved version of a very old breast cancer treatment. The company's lead candidate, endoxifen is a more potent metabolite of tamoxifen. Tamoxifen is frequently used to reduce the risk of recurrence for women with estrogen receptor (ER) positive breast cancer for decades. Atossa's previous attempts to do the same with a topical endoxifen-containing lotion hit a dead-end years ago, but it looks like oral endoxifen might help newly diagnosed patients in the pre-surgery setting.

On June 9, Atossa reported finalized phase 2 clinical trial results from a trial with endoxifen and ER-positive breast cancer patients who were in between their initial diagnosis and a mastectomy. Average measurements of Ki-67, a protein that only shows up when cells proliferate, fell 65.1% by the time patients were admitted for surgery.

Investigators were particularly encouraged by a reduction of 25% or greater measured for every patient in the study. This strongly suggests giving patients oral endoxifen can prevent breast cancer from progressing. 

Ideal conditions?

A lot of institutional investors are betting against Atossa Therapeutics at the moment. Until recently, though, there hasn't been a whole lot of trading activity related to the stock.

Lots of shares sold short for an under-the-radar biotech stock sure seems like ideal conditions for a short squeeze. Before exposing yourself to this particular stock, though, you really should look under the hood.

A woman in a lab examines some sample tubes.

Image source: Getty Images.

Why short-sellers are piling in

Rapidly advancing potential new cancer drugs through clinical trials is really expensive. That said, raising enough capital to develop potential blockbusters at top speed is rarely a challenge.

As a treatment to be prescribed following an initial breast cancer diagnosis, endoxifen could generate several billion in annual sales at its peak. Despite the apparent potential, Atossa Therapeutics has been dragging endoxifen along the path to FDA approval at a snail's pace.

All the way back in 2019, Atossa Therapeutics completed a 90-patient phase 2 trial with a topical version of endoxifen. The company still hasn't started testing an oral version of the drug in the U.S. though. 

The successful phase 2 trial results that are driving the stock higher now, enrolled just seven patients in Australia and it doesn't look like Atossa Therapeutics is in a hurry to confirm the initial sign success. The company still hasn't started the relatively simple toxicology studies required by the FDA before the company can apply to begin clinical trials in the U.S. with oral endoxifen.

Instead of advancing oral endoxifen's progress last year, Atossa Therapeutics splashed out on a potential COVID-19 treatment called AT-301. The company announced the successful results of a safety study with 32 healthy patients last November, and it hasn't moved forward since. 

A matter of time

A few years ago, the National Cancer Institute tested oral endoxifen against cheap generic tamoxifen as a potential treatment for breast cancer patients who relapsed after standard care. While there was a trend toward a progression-free survival benefit with endoxifen over widely used tamoxifen, the difference wasn't strong enough to be considered statistically significant.

It will take years to find out, but it doesn't look like Atossa Therapeutics' cancer drug candidate can provide a significant survival benefit compared to relatively cheap generic tamoxifen. In the meantime, Atossa Therapeutics' market cap has soared up to $1.0 billion at recent prices. That's just way too much to pay for a company that doesn't have any compelling assets.

Individual investors following their social media feeds could drive this undeserving stock higher in the near term. Eventually, though, a valuation that makes sense is going to catch up with Atossa Therapeutics.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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