PFE - AlloVir: 'Takes One To Know One'

2023-07-10 19:13:34 ET

Summary

• Gilead has purchased $10.9 million in shares of Allovir, a biotech company specializing in cell therapy and organ transplant, giving it a 15% ownership of the company.
• Allovir's lead product, posoleucel, is in Phase III clinical trials and targets six viral pathogens in immunocompromised individuals, making it a potential solution for patients undergoing organ transplants.
• Allovir's current cash status and increased expenditures should carry the company into 2025, when it is expected to have a steady and growing revenue stream and potentially new ownership.

"It takes one to know one ” is a well-used adage where one wishes to use a pejorative rebuttal when another person has attacked them personally. However, I wish to use the expression because it is a very supportive compliment related to a highly successful biotech wanting to be associated with another biotech because of perceived compatibility traits. In this case, AlloVir, Inc. ( ALVR ), a small $300M+ market-capitalized biotech has drawn the interest of Gilead ( GILD ), a $74.00 a share stock with a market cap of more than $95 billion. Gilead has several well-recognized drugs on the market, concentrating on viral diseases, oncology, inflammation, and fibrotic diseases. In addition, Gilead has multi-dozens drug candidates in advanced clinical trials.

At this stage of the relationship between Allovir and Gilead, Gilead has moved beyond the window-shopping stage, as reflected on June 28, 2023, in an SEC filing by Gilead, where they confirmed they had purchased $10.9 million in shares of Allovir at the price of $3.75.This purchase involved 2,930,870 shares making Gilead's ownership total 16,635,286 shares. This translates to Gilead owning 15% of AlloVir's outstanding shares. I assume this purchase was part of the just concluded $75 million secondary offering of AlloVir stock at $3.75 a share. Regardless of the motive and timing of this purchase with the prior purchase and this current infusion of cash buying, Gilead now holds a 15% ownership of AlloVir’s stock.

With this article, I wish to introduce my readers to AlloVir, a late-stage clinical cell therapy/organ transplant company now domiciled in Waltham, MA. AlloVir also has significant operations based in Houston, Texas, in the Houston Medical complex where AlloVir’s research began. What AlloVir brings to the stem cell, bone marrow transplants, and organ transplants procedure is the creation of a method for using off-the-shelf multi-virus specific T cell-VST therapies to prevent and treat a host of viral-associated diseases that often invade the patient’s body during the period the patient’s immune system has been deactivated so the patient can undergo the transplant procedure. It could be up to a year before a patient’s immune system is restored to its total capacity for warding off virus invasions.

Dr. Brainard, AlloVir’s CEO, has a long relationship with Gilead where she served as the head of their virology therapeutics efforts. Dr. Brainard led the team that developed VEKLURY-( remdesivir)- the first antiviral drug for treating COVID-19.

Gilead’s interest in AlloVir indicates a significant trend in the primary drug development industry. Starting with the largest, Pfizer ( PFE ), and down the line, many top drug companies are losing patents on their major revenue-producing drugs. These companies have massive research/development programs for finding and developing new drugs. However, the process is lengthy and costly for getting such products through the clinical trials and FDA process. The quickest and easiest way to replenish their pipeline is by purchasing smaller drug companies with critical needs drugs in late-stage clinical trials. In the case of Gilead, AlloVir has a drug in Phase III, and it fits the profile for being compatible with Gilead’s area of concentration for their drug pipeline. And now Gilead owns 15% of ALVR's common shares of stock.

A cardinal rule of mine for investing in a stock is simply that you should not buy a given stock just because it might be a target for a buyout by another company. Based on your due diligence and not just rumors, determine if the company has a valid business model, clear-cut path, and key personnel who can lead them to have a steady revenue stream and profits.

AlloVir’s History:

What is now AlloVir, Inc. was created in 2013 and operated under the name --ViraCyte, LLC. This new operating entity was created by Baylor College of Medicine, where Malcolm Brenner, MD, Ph.D., was the principal person and leading researcher in the field where AlloVir now operates .

Dr. Brenner’s Biographical Information:

Dr. Brenner is the founding director of the Center for Cell and Gene Therapy and the Fayez Sarofim Distinguished Service Professor at Baylor College of Medicine in the Departments of Medicine, Pediatrics, and Human and Molecular Genetics. He is also a member of the Texas Children’s Cancer and Hematology Center, the Stem Cell and Regenerative Medicine Center, and the Dan L. Duncan Comprehensive Cancer Center at Baylor. Over the past 30 years, Dr. Brenner has devoted his career as a physician-scientist to stem cell transplantation through the therapeutic use of T-cell immunologic approaches and genetic engineering strategies. He served as Editor-in-Chief of Molecular Therapy, Gene and Cell Therapy (ASGCT), and the International Society of Cell Therapy.

Dr. Brenner obtained his BA and medical degrees and his Ph.D. from the University of Cambridge in the UK, where he became a fellow of the Royal College of Physicians. Dr. Brenner is a co-founder of AlloVir, formerly ViraCyte, LLC.

ViraCyte Becomes AlloVir:

In 2017, ElevateBio was created. The company is in Cambridge, Massachusetts. The company was formed to develop a portfolio of novel cell therapy programs. On September 17, 2018, ViraCyte entered a preferred stock purchase agreement with ElevateBio. The principal behind Elevate is David Hallal. For those unfamiliar with Elevate Bio, with this link , it would be a worthwhile experience to visit their website and see the areas of development their scientific team is doing.

As of August 2022, this list reflects the significant shareholders of AlloVir’s common shares. Those holding shares reflect the size and diversity of those owning their shares. Interestingly, Gilead is now adding to its ownership in the stock, which they already had a sizeable stake in Allovir.

Mr. David Hallal’s Biographical Information:

Mr. Hallal has had a 30-year career in the biopharmaceutical industry with several large and highly successful companies. In his 10-year stint at Alexion, he served as Chief Executive Officer, Chief Operating Officer, and Chief Commercial Officer. He led Alexion from a single product to a multi-product company. Before Alexion, he worked for Amgen, Biogen, and Eyetech in various executive and senior leadership positions. As for ElevateBio, he serves as Chairman and CEO.

Upon the IPO issuance on August 3, 2020, the ElevateBio preferred shares converted to 39,859,139 shares of AlloVir, Inc. Thus, giving ElevateBio a controlling interest in AlloVir. At the time, Mr. Hallal assumed the company’s CEO role. Currently, he only serves as Chairman of the Board.

Dr. Diana M. Brainard Biographical Information:

In May 2021, Dr. Brainard came on board as the new CEO of AlloVir. She brought 20 years of experience in academic medicine and the biopharmaceutical industry, where she authored over 200 publications.

In her 10-year tenure with Gilead, she participated in leadership roles that created their Virology portfolio, generating over $20 billion in revenue in 2020. As senior vice president and head of the Virology therapeutic efforts, she oversaw the clinical development of novel therapeutics in HIV, viral hepatitis, and the now important work in respiratory viruses, including SARS-CoV-2.

Dr. Brainard received her internal medicine and infectious diseases fellowship training at Massachusetts General Hospital and Brigham and Women’s Hospital in Boston. Dr. Brainard served on the faculty at Harvard Medical School, where she conducted NIH-funded research on HIV immunology and T-cell trafficking. She obtained a BA from Brown University in comparative literature. Her MD was achieved at the Tulane University School of Medicine.

AlloVir’s Lead Product is Now in Phase III Clinical Trials:

AlloVir Presents Positive Final Results From A Phase 2 Randomized, Placebo-Controlled Trial Evaluating Posoleucel Treatment of BK Infection in Kidney Transplant Recipients at the American Transplant Congress (ATC 2023)

June 5, 2023

Posoleucel demonstrated clinically meaningful reductions in BK viral load as compared to placebo with the greatest antiviral activity seen among patients with higher viral loads and those who received more frequent posoleucel dosing

At Week 24, the percentage of patients with a ?1-log viral load reduction in the biweekly dosing group was 50% (10/20) vs. 28% (5/18) in the monthly dosing group and 14% (2/14) in the placebo group

In the high viral load stratum (?10,000 copies/mL), 69% (11/16) of patients who received posoleucel overall and 75% (6/8) of patients in the biweekly dosing group, achieved a ?1-log viral load reduction vs. 25% (1/4) of patients in the placebo group

Biomarker data demonstrate that BK viral load reductions coincided with substantial expansion of functional BK-directed T cells specific for both posoleucel-targeted and non-targeted antigens – indicating both direct and bystander T cell benefit not observed in placebo patients

Repeat administration of posoleucel was generally well tolerated, with balanced safety across posoleucel dosing groups and placebo group.

The above-quoted section of the June 2023 press release by AlloVir, is merely highly of the general release. This is a direct link to the entire release , where it will be worth reading and understanding that they are currently rapidly enrolling transplant patients globally, and they anticipate they will have the trial's planned enrollment done in late 2023. Then the readout of the data should take place in early 2024. Expecting that the data will support the filing of an NDA, we should see this pivotable event occurring soon after.

Why Should Anyone Consider Investing In AlloVir’s Stock:

Assuming you agree that stem cell transplants offer needy patients a solution for their medical condition, it is my firm opinion that with the in-place management and scientific team provided by AlloVir, any near-term positive data supplied on their current and newly begun clinical trials should return the investor sentiment and a stock price in the double digits level. However, there is no doubt YTD, AlloVir's stock, has been experiencing heavy selling pressure. On the bright side is the recent decision made by Gilead that they were a major buyer of the stock. However, with my assuming the shares were bought from the recent secondary offering and not necessarily on the open market, this could have muted the impact of their purchasing the share.

Currently, the most advanced potential drug is posoleucel, for kidney transplants. But it should be noted AlloVir is working with numerous other viruses. Their allogeneic, off-the-shelf VST therapy candidates benefit patients with T cell deficiencies, including transplant recipients, immunocompromised cancer patients, the elderly, and the very young at a higher risk of the devastating consequences of viral disease.

Life-Threatening Viral Infections:

Uncontrolled Viral Diseases Cause End-Organ Damage and Mortality

BK Virus Cytomegalovirus Adenovirus Epstein-Bar Virus Human Herpesvirus-6 Parainfluenza Virus Human Metapneumovirus Influenza Virus Respiratory Syncytial Virus Hepatitis B Virus Human Herpesvirus-8

From the beginning of this article, I’ve mentioned the potential for stem cell transplants, but this ignores the fact that there will be other cases where the AlloVir solution could be needed—for example, other organ transplants like heart and lungs, etc. To prevent the new organ from being rejected by the innate immune system, the same potential for foreign viruses to invade the patient’s body exists. The point is that the potential market for AlloVir’s products is worldwide. It is vast and growing. Remember that current clinical trials are being run in the European and Asian markets so that the final respective approval agency can be on the exact timetable as the FDA’s approval for the United States market.

Financial Position:

After the 1st quarter of 2023, the company held $115.698 million in Cash and Cash Equivalents. On June 21, 2023, they announced a secondary offering of 2,00,000 shares at $3.75. This offering would give AlloVir a gross amount of $75.0 million more. With the second quarter of 2023 now completed, investors should pay attention to the cash burn rate when the SEC filings are submitted in early August.

Based on the current cash status and in consideration of increased expenditures, like creating a marketing plan and sales force, the current cash should carry AlloVir into 2025, when they could have a steady and growing revenue stream and even maybe new ownership.

Upon the completion of the manufacturing process, the AlloVir product can be stored in a frozen environment for dispersing to the site where the transplant will occur. Such transplants are only done in limited hospital sites around the country and the world. This means marketing efforts will be focused on a small number of hospitals where the product can be approved for being on their hospital’s approved formulary list of drugs that can be used.

ElevateBio’s expertise and ownership of AlloVir’s stock give them an advantage and incentive to ensure successful marketing efforts. As for their marketing efforts, upon getting FDA approval, they hired Cintia Piccina, PharmD and MBA, as their Chief Commercial Officer in May of this year . Ms. Piccina brings extensive marketing skills in her two decades of work for Novartis ( NVS ) across several areas of marketing responsibilities in Brazil and the United States.

Random Data Points:

Current Analyst Ratings for ALVR:

Buy Rating –1

Outperform – 3

Short Interest in ALVR—6.49%

#Shares Shorted –7.36 million

Market Cap --$365.0 million

Shares Outstanding –93.59 million

Float in Stock: 46.69 million

Long-Term Debt --$0.00

Quant Ratings:

Seeking Alpha vs. Wall Street

SA --(2)Buy 4.00 WS --4.25 (1) Strong Buy and (3) Buy

Caveats:

There is no guarantee that the FDA will approve any drug without undergoing a complete and detailed review where the data proves the candidate has medical treatment benefits for the patient. The FDA has given a priority review status to AlloVir’s initial drug candidates—however, there is no guarantee this designation will ensure approval.

The fact the FDA is constantly allowing AlloVir to expand its targeted viruses indicates the FDA recognizes the need to address the plight the transplant patient faces from such deadly body-invading viruses. We know stem cell transplants work, and early clinical data from AlloVir’s product indicates that the response rate in the clinical setting is:

Efficacy: High Response Rates • 95% of patient s(Page-12) who had no available treatment options experienced a clinical response by Week 6

What AlloVir is offering, if the clinical data proves the case, is not only saving the patient’s life, but this will also provide cost savings by keeping the patient from being confined for more extended stays in the hospital. Commercial insurance companies and Medicare have shown they would welcome this type of savings by adding an adjunct product like AlloVir in development.

BottomLine –At this point in clinical trials, the data generated, the FDA has been very supportive in moving the drug through the necessary process. However, until the FDA gives final approval, anything can happen to a drug in clinical trials, including the FDA denying the ultimately needed stamp of approval.

Conclusion:

Let me repeat an earlier caveat. Never buy stock solely because the company could be a buyout candidate. Only buy a stock if you believe in the underlying merits of its management team, the quality of its drug candidates, and the size of its potential market.

With that said, in my opinion, AlloVir could make a desirable buyout candidate for a major drug company seeking growth opportunities for its available investing cash position. Most of the common shares of AlloVir are held by major venture capitalists, ElevateBio, and now Gilead. Such entities are always looking for their next investment if they are flush with newly obtained cash.

Good luck with your future investing decisions. Please use my article as a starting point in your due diligence review - before you invest! I own a small position in AlloVir’s stock, where I recently bought shares as low as $3.02.

Key Points to Remember:

• AlloVir is now conducting Phase III trials with their lead candidate worldwide
• Currently, the number of kidney transplants is around 90,000 cases and growing.
• The FDA has approved AlloVir to start clinical trials with three other medical indications for treatment using posoleucel.

In the case of the AlloVir-Gilead association, I think it “takes one to know one ” indicates a positive criterion for investing in AlloVir’s stock.

This is a link to the recent formal presentation of the AlloVir story---it will provide interested investors with the complete and detailed development effort they are putting forth to achieve their goal.

Good luck with your future investing decisions. Please use my article as a starting point in your due diligence review - before you invest! I own a small position in AlloVir’s stock, where I recently bought shares as low as $3.02.

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