ALVR - AlloVir: Solid Data But Market Isn't Paying Attention

Summary

• AlloVir, Inc. has some solid data in an area of unmet need.
• AlloVir is well-capitalized to complete its trials.
• However, the market doesn't seem interested at present.

AlloVir , Inc. ( ALVR ) is a leader in the development of allogeneic, virus-specific T cell therapies ((VSTs)) targeting stem cell transplant patients. I covered this stock twice earlier ( here and here ), and the stock is down 66% from my April 2021 coverage. However, since it is only down 6% from my February 2022 coverage, I think the stock has stabilized a little.

In order to appreciate AlloVir, you need to understand a few things. First, real or not, there’s a worldwide fear among scientists and doctors that bacteria and viruses are too smart for our medicines; evolution itself is too smart for our medicines. Infections are able to adapt and change with the drugs we throw at them, creating resistant pathogens. One of the only ways to get at them is to use nature’s own methods. We can help nature do its job, we can boost up the immune system’s capabilities, but ultimately, we need to use those T cells and B cells and NK cells and other pathogen-killing immune cells against natural pathogens. The immune system is nature’s own, efficient assassin; all we can do is direct it properly.

This is what AlloVir proposes to do, using T cells against viruses. It uses an approach called multi-TAA, which another company, Marker ( MRKR ), also uses, but against cancer. In an earlier article , I thoroughly discussed how AlloVir manufactures its T cells. Its virus-specific T cells are manufactured off-the-shelf. They are allogeneic, meaning they are not patient-specific. A healthy donor can donate the T cells, which are then ramped up in huge numbers, cryopreserved, and sent to patients around the country. If one can take care of host rejection problems, i.e., graft versus host disease, then you have a universal, efficient and lower cost therapy in your hand.

So far so good, but what about proof of concept?

AlloVir’s lead candidate is called posoleucel (Viralym-M, ALVR105), which is being developed for the prevention of multiple viruses following allogeneic hematopoietic stem cell transplantation (allo-HSCT). In my first article on AlloVir, I discussed some of their earlier data from two years ago. Posoleucel is targeting five viral pathogens, BK Virus ((BKV)), Cytomegalovirus ((CMV)), Adenovirus ((ADV)), Epstein-Barr ((EBV)), and Human Herpesvirus-6 (HHV-6). It is in phase 3 trials for BKV and ADV, and in one more for multi-virus prevention. The company has other assets which are in much earlier development stages and are of negligible importance.

In that earlier article, I noted that:

??Viralym-M was evaluated in a Phase 2 open label proof-of-concept study, in which 58 allogeneic HSCT patients with treatment-refractory infections were treated with Viralym-M. 93% of patients who received Viralym-M demonstrated a predefined clinical response. Treatment with Viralym-M was generally well-tolerated.

More granular data was as follows:

A single infusion produced a cumulative complete or partial response rate of 92% (95% CI, 78.1% to 98.3%) overall and the following rates by virus: 100% for BKV (n = 16), 94% for CMV (n = 17), 71% for AdV (n = 7), 100% for EBV (n = 2), and 67% for HHV-6 (n = 3).

An off-the-shelf product had never been tried against two of these viruses, BKV and HHV-6. The data above does not specify the breakup between CR and PR, so it is difficult to be as excited as I wish to get, but overall, the data looks very good.

I discussed other reasons and datapoints in that previous article which makes AlloVir’s data special. This has not been achieved before. Standard treatment for BKV infected HSCT patients is cidofovir, but it is neither effective, with a 14% survival rate, not very safe, with reports of myelotoxicity and nephrotoxicity. There are no other useful treatment options.

It should be noted that AlloVir’s current CEO - Diana Brainard, MD - spent 10 years at Gilead (GILD) and was instrumental in developing remdesivir as the first approved therapy for SARS-COV2. Gilead recently , in July, was part of a consortium of investors who provided AlloVir with $127mn in a direct offering to help posoleucel get to the market. “ElevateBio and Gilead are among a consortium of existing investors taking part in this week’s direct offering, which also includes Series B backers F2 Ventures, Invus, Redmile Group and EcoR1 Capital. GMT Capital also joined for the direct offering.”

AlloVir recently presented positive interim data from a phase 2 trial of posoleucel in BK virus in kidney transplant patients. This trial will topline in Q1 2023. However, the 3 phase 3 studies, possibly pivotal, will be read out over the next 2 years, with the nearest reading being in mid-2023. That means, there’s a dearth of very near-term catalysts for the stock.

Financials

ALVR has a market cap of $693mn and a cash balance of $264mn including the proceeds from the Gilead direct offering. Research and development expenses were $30.0 million for the quarter ended September 30, 2022, while general and administrative expenses were $12.9 million. That gives them about 5 quarters of cash runway, if they go at that rate, which seems likely given their late stage of trials. The cash runway is enough to see them through the first pivotal data, however they will need more funding to reach commercialization.

Bottom Line

I have been trying to figure out why AlloVir, despite such solid data in an area of unmet need, is not faring too well as a stock. It is trading far below its 52-week high, and even further below its all-time high. I think the reason is the coronavirus. AlloVir went up so much in 2020 because it was looking to find a treatment for coronavirus, and even in January, when omicron was at its peak, ALVR was trading high. Right now, with the virus becoming common or garden-variety endemic, ALVR has lost some of its shine. As I have repeatedly noted, barring some honorable exceptions, the market does not value infectious disease companies too highly.

I am sure that when AlloVir produces positive pivotal data that the market will sit up and take notice, and there will be some positive movement to the stock. However, given the lack of near-term catalysts, I believe that ALVR stock will stay down for another quarter at the least. This could be a buying opportunity for AlloVir, Inc.

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