Health and Healthcare

Should Atara Bio's Stock Volatility Consider Any Valuation at All on Multiple Sclerosis?

Jon C. Ogg

Published: May 26, 2020 12:21 pm

Last Updated: September 15, 2020 12:40 pm

Atara Biotherapeutics Inc. (NASDAQ: ATRA) is finding itself caught between a rock and a hard place after Friday’s drug study news. The company’s ATA188 was shown to have positive results in a study to treat multiple sclerosis (MS). The company reported that sustained disability improvements were seen at the six-month interval and were also maintained at 12 months with ATA188. The company’s own view is that its potential therapeutic response is a meaningful positive in progressive MS cases.

The results were posted last Friday at the 6th Congress of the European Academy of Neurology’s virtual meeting site. The price for Atara stock initially shot higher on the news, only to fall back and then go even lower on Tuesday, after the Monday holiday for Memorial Day.

While ATA188 may be a positive development for MS patients, Atara Bio may be more know for a potential CAR-T platform against solid tumors, leukemia, human papillomavirus and other cancers. In the company’s detailed pipeline is also a transplant complication treatment related to Epstein Barr virus (EBV). Atara is not currently generating any revenues.

The additional safety and efficacy data was from an ongoing Phase I study of ATA188, an off-the-shelf allogeneic EBV-specific T-cell immunotherapy. The data showed that the candidate was well-tolerated across all four dose cohorts. There was shown to be a higher proportion of patients showing sustained disability improvements at higher dosages.

Atara’s press release from last week indicated that no dose-limiting toxicities and no fatal adverse events were seen. Rhinorrhea (runny nose) was the only treatment-related event seen in more than one subject. The company indicated that there were also no dose-related safety trends and that ATA188 infusions showed no clinically meaningful effect on cytokine levels post-infusion.

Atara is a stock in which the options market was signaling a big move one way or the other, as the implied volatility for the June 2020 puts and calls were more than 100% each in the $15 strike prices when the shares were trading at roughly $14.75. The stock traded as high as over $19 a share briefly on Friday but closed down eight cents on the day at $14.81. On Tuesday, the shares were down another 13% at $13.00.

The brokerage firm Canaccord Genuity reiterated its Buy rating and kept a $70 price target on Atara. What’s interesting here is that its expectations are on the lead program, with positive pivotal data for post-transplant disease in both stem cell and solid organ transplants. The firm currently does not even model revenues for the MS program but says the readouts in 2020 for primary progressive and secondary progressive MS could provide upside. Canaccord Genuity’s John Newman said:

ATA188 demonstrated a clinically significant improvement in sustained disability improvement (SDI) as measured by Expanded Disability Status Scale (EDSS) at 12 months in 2/6 multiple sclerosis patients from dose cohort 3 (20M cells), and a dose dependent response in terms of less disability progression at higher doses. We view this encouraging data as a meaningful positive for Atara Biotherapeutics.

Back on May 12, JPMorgan maintained a Neutral rating but raised its target to $23 from $22. The firm had a $43 price target back in November of 2019 before it slashed its outlook.

Citigroup also raised Atara Bio to Buy from Neutral back on April 23, but the $9 share price at that time was against a $14 target price.

It is not unusual at all for volatility to follow study releases from biotech companies. That said, it is unusual that a sudden gain of 20% goes back to even and then turns into an even larger loss the next trading day.

While writing this report, Atara shares had slid to a loss of more than 15% at $12.50 on Tuesday at the noon hour. Its 52-week trading range is $4.52 to $24.75, and its market cap is close to $740 million.

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