NASDAQ: ATOS
David Bautz, PhD: Welcome to the next episode of our CEO Chat series. My name is David Bautz, and I'm a Senior Biotech Analyst here at Zacks Small Cap Research. Joining me today is Dr. Steven Quay. He's the CEO of Atossa Therapeutics (NASDAQ: ATOS). Now, Atossa is a clinical-stage biopharmaceutical company that is developing oral (Z)-endoxifen as a multi-indication endocrine therapy across rare diseases and oncology. (Z)-endoxifen is an active metabolite of tamoxifen, an FDA-approved therapy for the prevention and treatment of estrogen receptor-positive breast cancer. We will get more into that in a second. We recently initiated coverage of Atossa with a $22 valuation. Hey Steven, thanks for joining me today.
Steven Quay, MD, PhD: Great to be here, David.
DB: All right, so for investors that might be new to the story, why don't we just start with a broad overview of the company? How would you describe Atossa today, and what do you believe differentiates the company from, say, other clinical stage biotechs?
SQ: Yeah, the company Atossa Therapeutics was started to focus on breast cancer prevention and treatment. Princess Atossa was the first woman in recorded history with breast cancer, about 450 BC, and was the wife of Darius, in what was then Persia. We've focused on breast cancer for the longest time, but we've also focused on where (Z)-endoxifen has most activity, and that has led to some recent work in the rare disease space. But I think all of it comes back to the fact that we are focused on a single molecule, (Z)-endoxifen, and its many properties, both at the estrogen receptor, upregulation of certain muscle proteins in Duchenne muscular dystrophy, and its activity as a PKCβ inhibitor.
DB: As you mentioned, the company has recently shifted to focus on rare diseases like McCune-Albright syndrome. What led you to prioritize that as kind of the lead development opportunity in the rare disease space?
SQ: Well, again, it's following the molecule and following the activity. So, in Duchenne muscular dystrophy, endoxifen seems to upregulate a protein that is made during fetal life, but not in adult life, that may actually cure that disease. In McCune-Albright syndrome, another rare disease, you have too much estrogen being made by the ovaries in what's called a mosaic genetic defect. So again, bringing endoxifen to bear on a situation with too much estrogen is a very natural pharmacologic response to its activity.
DB: All right, so looking specifically at McCune-Albright, what are some key clinical endpoints or regulatory milestones that investors should be watching for over the next one to two years?
SQ: Just as a background, this is a rare pediatric disease. It has a lot of manifestations. Every patient is a little bit different because the mutation, although it's a single gene, you don't get it from the parents; you get it during the fetal development. Depending on which stage of cell development, you have different attributes of it. But the girls that we will be treating have a version of this in which basically the young girls are being potty trained, and they start having vaginal bleeding. It's a peripheral too much estrogen by the ovaries, and the expression of that is vaginal bleeding, maybe a couple of times a month. It also causes a growth retardation because one of the things too much estrogen does is close the epiphyses, where the bones extend, so there is a short stature that accompanies this. Recent communications with the FDA have allowed us to begin to focus on where we would take this in the clinic, but I think changing the growth trajectory for these girls and reducing the vaginal bleeding breakthrough are strong clinical endpoints.
DB: Currently, there are off-label approaches to treating McCune-Albright, including aromatase inhibitors and even tamoxifen. Where do you think that endoxifen could demonstrate the most meaningful differentiation clinically?
SQ: That's a great question. We were just at a meeting of the McCune-Albright syndrome group with parents, doctors, and children who have this condition. I think the key differentiation is both in the efficacy and the tolerance or safety profile. We obviously need to get into the clinic to further validate this, but at least in the pharmacological models that we are looking at, we think we'll have differentiation in both key attributes.
DB: You previously were talking about DMD, and also symptomatic female carriers of the disease is something the company's looking at. What initially convinced you that there was a compelling scientific rationale to pursue both of those indications?
SQ: It began with a study of tamoxifen in boys with Duchenne muscular dystrophy. It was about 84 boys, it was a one-year study, and they got very close to showing statistical improvement. Whenever I see tamoxifen having activity, I know that when I bring endoxifen to bear on that particular physiology, I'm going to get an improvement. So, we did some preclinical work with some of the world's experts who have a mouse model, a mouse genetic model of Duchenne muscular dystrophy, where tamoxifen had been the best in class before they tried endoxifen, but in fact, their work showed that endoxifen is actually better. What it does is it seems to reverse the phenotype so that the mice actually have sort of a wild-type-like muscle activity. We're very excited about this. The FDA has looked at the data we've provided and given us both orphan status for Duchenne muscular dystrophy and endoxifen, as well as a pediatric rare disease designation, which would qualify for a voucher if endoxifen is first approved in DMD.
DB: So, of course, as you just mentioned, the priority review voucher, that could come with approval in those indications. How meaningful could that PRV be both strategically and financially for the company?
SQ: Well, this is a program that goes back almost a decade and over the years, and, as a reminder, when you get a new active ingredient approved for a rare pediatric disease that's been designated by the FDA, you get a priority review voucher, which you can sell to a large pharmaceutical company or something who wants to get their particular product reviewed more quickly. These provide about a six-month review cycle, and they sell for between one hundred and over two hundred and fifty million dollars, because when you run the numbers on a new drug for a large pharmaceutical company, six months can be extremely meaningful in terms of sales. So, this has catalyzed a lot of rare disease work. Companies specialize in this space, and I think it would be pretty meaningful for Atossa to have a rare disease voucher and to monetize that in the market that we've seen in the past.
DB: Absolutely. I want to pivot to breast cancer just for a second. The company looks like it’s moving more towards a partnership combination-based strategy rather than focusing on, say, monotherapy commercialization alone. Can you talk about kind of your evolution and thinking in that area?
SQ: Sure. We've been working on endoxifen the longest in breast cancer, and we've done really sort of the metes and bounds, as you could speak of it, in the space. For example, with the Karolinska Institute in Sweden, we looked at prevention of breast cancer. There are some landmark studies with, again, tamoxifen, showing that if you can reduce mammographic breast density, you can prevent breast cancer in about sixty percent after five years. So, looking at that biomarker, that is mammographic density reduction, we did a very large study in Sweden. It was just published in the very prestigious Journal of the National Cancer Institute, where we showed that we got a very substantial reduction in mammographic breast density after only six months, with side effect profiles that were indistinguishable from a sugar pill, because it was a double-blind placebo-controlled trial. So that places endoxifen in a key position as monotherapy in prevention.
Moving then into the actual treatment of breast cancer, we've done studies both in monotherapy with endoxifen in low-risk breast cancer, in combination therapy in high-risk cancer with Lilly's abemaciclib, and in combination therapy in premenopausal women with AbbVie’s elagolix, which is approved for endometriosis. In each of these indications, we're doing what's called a neoadjuvant trial, so it's a treatment between the time of diagnosis and the time of definitive surgery. It allows some very detailed efficacy endpoints and safety endpoints. So you get answers to, can you stop proliferation after 28 days? That's measured by Ki-67. Can you make the tumor smaller by MRI at two to three months? Can you look at the overall safety profile, and then what happens at the time of definitive surgery? All of these studies have been done in Laura Esserman's very famous I-SPY Network, an adaptive clinical trial system that she put in place over a decade ago, that have tested over 35 molecules, many of which have been first tested in that setting and are now FDA approved.
In all of these indications, endoxifen shows excellent activity with a side effect profile that has been quite uniquely benign. Having this data set, we're beginning to look at how we would take it to the next step, which is partnering with a large pharmaceutical company. My thinking about partnering is that it's a three-legged stool. You need three things. You need strong patents in the space that you're trying to get approval in, you need phase two data that's robust, that allows you to put together a phase three protocol and what the indications are, and you need communications with the FDA around what will be acceptable as a study for phase three and approval. As we get all three of these legs of this stool together, we're putting ourselves in a good position to be partnering with this molecule.
DB: Sounds great. All right, so as we look ahead over the next year or so, what do you think are the most important catalysts that could meaningfully kind of change the story or get investors' attention on Atossa?
SQ: Going back to sort of the three-legged stool, let's talk about the robust phase two data. For example, we will be at the ASCO meeting in Chicago this weekend, the largest cancer meeting in the world, with two studies that we're presenting: the update on the EVANGELINE trial, which is being led by the Mayo Clinic, is being done at about a dozen centers around the country, where we're looking at premenopausal women with early treatment, early treatment with endoxifen, and then what are the endpoints there.
We have another study, which I think is really interesting. What we now are seeing with endocrine therapy and breast cancer is that, especially with aromatase inhibitors, about half the women after a year of treatment will begin to have a mutation appear in the estrogen receptor. These are called ESR1 mutants, and they make breast cancer resistant to further endocrine therapy. This has led to the approval of two molecules, one by Menarini and one by Lilly, for FDA approval in the treatment of the ESR1 mutant space. Because endoxifen is such a robust molecule, we did work with Duke University, which is now being reported in Chicago, showing that endoxifen works not only in the wild type setting, the normal estrogen receptor, which the two FDA-approved mutant molecules do not, but it works as well as those in the mutant space.
This unique profile of working both in wild type and in mutant endocrine situations, I think, is unique for endoxifen. We may see it with others, but at this point in time, it's the only molecule I am aware of that is active in both settings. That's a very powerful story because these escape mutants are now the weak point, the Achilles heel, as it were, in endocrine therapy, which is for the most common breast cancer. Seventy-five percent of breast cancers are estrogen-driven, so if you can bring a new molecule to bear on those, if you can bring a molecule to bear on the escape mutants in that space, I think it's really meaningful.
DB: Yeah, absolutely. All right. Well, thank you very much for joining me today, Steven. It's been a great discussion.
SQ: Thank you, David.
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