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ATE.V: Raises CAD$5.0 Million in Public Offering; Data From Phase 2 GI Safety Study Expected in 1Q18

09/05/2017
By David Bautz, PhD

TSX:ATE.V

Antibe Therapeutics Inc. (TSX:ATE.V) is a Canadian biotechnology company developing treatments for pain, inflammation, and regenerative medicine. The company’s lead compound, ATB-346, is an improved non-steroidal anti-inflammatory drug (NSAID) that attempts to overcome the well-known and serious side effects of that class of compounds, including ulcers and bleeding in the gastrointestinal (GI) tract. Antibe has successfully completed a series of Phase 1 and 2 clinical trials for ATB-346 and will soon be initiating two Phase 2 clinical trials that will support a potential partnering opportunity with a larger pharmaceutical company.

The company is complementing the high-risk nature of the drug development process with its subsidiary Citagenix, a low-risk, revenue generating entity that is the leader in Canada in the sales and marketing of tissue regenerative products for primarily the dental market. 

Business Update

Upcoming ATB-346 Phase 2b Trials

In order to pursue a global licensing deal for ATB-346 with a large multinational pharmaceutical company, Antibe is planning to conduct two Phase 2 clinical trials. The first trial will consist of approximately 240 healthy volunteers and will involve an examination of endoscopically defined upper GI ulceration in patients taking ATB-346 compared to those taking naproxen over a 2-week period. Antibe has engaged Topstone Research Inc. as the contract research organization (CRO) to manage the study. In addition, Dr. Francis Chen, the Dean of Medicine at the Chinese University of Hong Kong, has been retained as a key advisor in the study. 

This study is necessary as the FDA considers endoscopically examining upper GI ulceration the ‘gold standard’ in assessing NSAID-associated toxicity. Positive results from this study would allow Antibe to pursue a GI safety claim of superiority to naproxen. On August 2, 2017, the company announced it received approval to commence the study and we anticipate results in the first quarter of 2018.

The second trial will be a placebo-controlled, dose-ranging effectiveness study and consist of approximately 200 patients with osteoarthritis of the knee in order to validate effectiveness and to establish the proper dose for Phase 3 registration studies. 

Antibe is currently planning on targeting patients with osteoarthritis, for whom NSAIDs are the most commonly used therapy. Given the risks associated with NSAID use, these patients could benefit greatly from an effective anti-inflammatory/analgesic medication that did not carry the same GI risk. Additional indications for which ATB-346 could be approved include all traditional markets for NSAIDs, including rheumatoid arthritis, ankylosing spondylitis, etc.

Advancing ATB-352 Development

On April 26, 2017, Antibe announced that it has formally begun Investigational New Drug (IND) enabling studies for ATB-352, a hydrogen sulfide-releasing derivative of ketoprofen, which is a potent NSAID that is normally prescribed for acute pain. Opioids such as oxycontin have a very high propensity for abuse due to being highly addictive, however they are still prescribed at a very high rate as 227 million prescriptions for opioid medications were dispensed in 2015 (IMS Health). In 2014, there were almost 20,000 overdose deaths resulting from the use of prescriptions opioid medications, a 300% increase since 1999 (CDC). Thus, there is an urgent need for a non-addictive acute pain reliever. 

Antibe recently confirmed that ATB-352 is non-addictive and preclinical data indicates that it results in negligible GI damage compared to ketoprofen. The following graph shows the results from a study in rats in which ketoprofen treatment resulted in significant GI damage, however no damage was seen in rats treated with ATB-352. 


Financial Update


On August 29, 2017, Antibe reported financial results for the first quarter of fiscal year 2018 ending June 30, 2017. The company reported revenue of CAD$2.3 million compared to CAD$2.6 million for the three months ended June 30, 2016. The decrease in sales was due to reduced purchases by five major accounts. 

General and administrative, selling and marketing, research and development, stock-based compensation, and depreciation and amortization expenses totaled CAD$2.6 million for the quarter ending June 30, 2017, compared to CAD$2.1 million for the quarter ending June 30, 2016. The increases in expenses were due to the following:

➢ G&A expenses increased CAD$11,853 primarily due to slightly increased wages, professional and consulting fees mostly offset by lower licensing fees.

➢ Selling and marketing expenses decreased CAD$0.1 million due to lower commissions and advertising and promotion costs partially offset by higher travel and entertainment costs. 

➢ R&D expenses increased CAD$0.5 million due to higher salaries and wage costs and development costs.

➢ Stock based compensation increased CAD$0.1 million.

➢ Depreciation and amortization expenses increased by CAD$6,582 primarily due to amortization of Citagenix brand and trademarks. 

As of June 30, 2017, Antibe had cash and cash equivalents of CAD$3.7 million with another CAD$0.5 million in restricted cash. On June 21, 2017, Antibe announced the closing of a public offering that resulted in gross proceeds of approximately CAD$4.0 million. The company issued 40,498,999 units priced at CAD$0.10 per unit, with each unit consisting of one share of common stock and one-half share of a common stock purchase warrant. The warrants have an exercise price of CAD$0.15 and an expiration date of June 21, 2020. On August 18, 2017, Antibe announced the second and final closing of the public offering that resulted in additional gross proceeds of CAD$933,000. In total, the company raised gross proceeds of CAD$4.983 million from the sale of 49,830,000 units. We believe the current cash position is sufficient to fund operations into the second quarter of 2018.

On February 22, 2017 the company announced a regional licensing agreement with Laboratories Acbel SA for ATB-346 in Albania, Algeria, Bulgaria, Greece, Jordan, Romania, and Serbia. Acbel is a pharmaceutical company with a strong sales and distribution presence in the Balkan region. As part of the agreement, Antibe was issued an upfront payment of approximately $1.1 million and is entitled to receive a 5% royalty on net sales. Given that the territory licensed represents approximately 1% of the global market for NSAIDs, Acbel is valuing ATB-346 at $110 million, not including the royalty. 

As of Aug. 29, 2017, the company had approximately 163.0 million common shares outstanding along with approximately 21.1 million stock options and approximately 60.2 million warrants. In addition, the company has approximately $3.4 million in convertible debt that can be converted into approximately 15.2 million shares. We estimate the fully diluted share count currently stands at 259.5 million shares. 

Valuation


We value Antibe using a probability adjusted discounted cash flow model that takes into account potential future revenues for ATB-346 and Citagenix. For ATB-346, we anticipate that the company will enter into a collaboration with a larger pharmaceutical company before Phase 3 studies commence. For modeling purposes, we are estimating that Phase 3 studies for ATB-346 will begin in 2019, with an NDA filing in 2020 and approval in 2021. We model for approval in the E.U. a year later. 

ATB-346 is the main value driver for Antibe as the NSAID market is valued at $8 billion total. We model for approval in OA, however we believe that if the drug is approved it will likely go on to be approved for multiple indications similar to celecoxib. There are approximately 27 million individuals in the U.S. with OA (NIAMS). Of those, we estimate approximately 50% are taking or are open to taking oral NSAIDs. With a conservatively estimated 6% of the market, ATB-346 would have peak sales of $1.0 billion. In the E.U., where there are approximately 40 million patients with OA (WHO), a similar market share could generate close to $1 billion in revenue. Using a 12% royalty rate, an 18% discount rate, and a 50% chance of approval, we estimate the net present value of ATB-346 to be $171 million. When taking into account estimated capital requirements (~$5 million), the current conversion to Canadian Dollars (USD$1 = CAD$1.24), and dividing by the fully diluted share count of 259.5 million shares leads to a valuation of approximately CAD$0.85. Antibe is certainly an interesting story and we encourage investors to get familiar with the company ahead of Phase 2 data readouts in 2018. 

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