A Repudiation Of Advance Cell Technology's 'Whisper' Results
Sep. 19, 2014 10:36 AM ET | About: ADVANCED CELL TECH NEW (ACTCD)
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Disclosure: The author is long ACTCD. (More...)
Expectations appear extremely high for Interim Phase I results.
Based on prior studies, cataract surgery could have a substantial affect on visual acuity in Dry AMD patients over time.
The market may be setting up for a let down when actual results are reported.
Investors found out last week that Advanced Cell Technology (OTCQB:ACTCD) is changing its name to Ocata Therapeutics. We also found out the company plans to increase its authorized common shares by 60%. It is well known Advanced Cell Technology (or ACT for short) needs to obtain funding for its Phase II trials for Dry Age Related Macular Degeneration and Stargardt's Macular Degeneration. ACT has also indicated they plan to up-list to a national exchange. The company executed a 100 to 1 reverse stock split earlier in the month and the stock has held up well while the market waits for interim published results of its Phase I trial. With a large capital raise apparently looming and big plans for moving the company forward, ACT has a lot riding on the results.
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As reported in other SA articles including mine, investors are expecting stellar results once the data is published. The main reason, of course, is the patient who's visual acuity improved from 20/400 to 20/40. These results, which have been touted by the company, appear amazing on the surface. When the results were discovered by shareholders and confirmed by the company, articles with headings such as "Stem-cell treatment restores sight to blind man" began to appear. What the articles (or the company) failed to mention is the patient had cataract surgery on both eyes prior to the stem cell surgery.
The Facebook Story
As I mentioned in my prior article, the patient was originally tracked down through his son's Facebook posts. What we know from the son's posts is the patient was scheduled for the stem cell surgery. However, after he was accepted for surgery (met the inclusion and exclusion criteria), the doctor discovered that he had cataracts. So, the stem cell surgery was delayed and the patient had cataract surgery on both eyes.
Several months later after he had recovered from the cataract surgery, the patient had the stem cell surgery in his right eye. After a short period of recovery, the patient started showing steady improvement in BOTH eyes. The treated eye improved over time to 20/35 while the untreated eye improved to 20/30. The results begs the question, could the cataract surgery have impacted the improvement of visual acuity in both eyes?
Age-Related Eye Disease Study Report No. 27
While waiting for ACT to deliver their results, I decided to do some research into cataract surgery in patients with Age-Related Macular Degeneration which led me to AREDS No. 27, an extensive study on the subject. The study consists of 4757 participants. The objective of the study was as follows,
To evaluate visual acuity outcomes after cataract surgery in patients with varying degrees of age-related macular degeneration (AMD for short).
The main outcome measure was as follows,
The change in best-corrected visual acuity (BCVA) after cataract surgery compared with preoperative BCVA.
Importantly, the mean time from cataract surgery to measurement of postoperative BCVA was 6.9 months, which was within the timeframe the ACT patient was demonstrating dramatic improvement in both eyes.
The study had the following conclusion:
On average, participants with varying severity of AMD benefited from cataract surgery with an increase in visual acuity postoperatively. This average gain in visual acuity persisted for at least 18 months.
To make the point clearly, cataract surgery improved visual acuity with AMD patients over time, some dramatically as the graph below from the study clearly demonstrates.
(click to enlarge)
With such a small sample size, ACT could have benefited from the luck of the draw as they say. The only way to know if RPE stem cell replacement surgery was the cause of the level of dramatic improvement is to have a statistically significant sample size of patients who have experienced cataract surgery before the stem cell surgery. And, the fact that both eyes showed improvement, makes the results all the more suspect.
What We Know And What We Don't Know
Lets start with what we know. We know from the study referenced above, AMD patients who undergo cataract surgery, even in advance stages, can have substantial improvement in visual acuity without RPE stem cell replacement surgery. We also know ACT's patient had cataract surgery followed by stem cell surgery and demonstrated substantial improvement in visual acuity.
For patients without AMD who undergo cataract surgery, the timeline for improvement for visual acuity is usually within several days to several weeks. In the study referenced above, the mean time from cataract surgery to measurement of postoperative BCVA was 6.9 months but we don't have data showing the range of improvement in the data set over time or how much variability exists from time of surgery to improvement in vision. However, since ACT's "poster child" patient waited over 4 months between cataract surgery and stem cell surgery, something more may be at play here.
Pars Plana Vitrectomy
Part of the procedure for ACT's RPE therapy involves a pars plana vitrectomy. A pars plana vitrectomy (or PPV for short) involves removing some or all of the vitreous, the eye's clear internal jelly. So, now we have a patient who has undergone cataract surgery, a pars plana vitrectomy, and stem cell replacement therapy.
We know that cataract surgery and vitrectomy can have a beneficial (and sometimes detrimental) relationship. Vitrectomies often lead to cataracts and, alternatively, vitrectomies can ensure better outcomes after complicated cataract surgery. If a vitrectomy can lead to greater visual acuity after vitreous loss due to a "loss of the integrity of the capsular or zonular structure" after cataract surgery, it doesn't take much of a leap in logic to assume it could improve visual acuity after cataract surgery in Dry AMD patients.
When I first read the PR by the company and saw this statement, "ACT cautions that the improvement in the patient's vision reported in the press release may not be indicative of future results of clinical trials of the RPE cells derived from hESCs," I wondered why is this patient so different? We now know the difference but, the bottom line is, with limited data, we just don't know what caused the substantial improvement in visual acuity above and beyond that of other patients.
"Shall We Rename AMD into Autoimmune Macular Disease?"
Another aspect of the ACT procedure I failed to mention above is the use of immunosuppressants. The cause of Dry AMD is still unknown but there is strong evidence the underlying pathology is autoimmune related. As a matter of fact, Roche's Genentech is starting a promising Phase III AMD trial that targets the "alternative complement pathway, a component of the immune system."
The point being, Dry AMD is a very complex indication with multiple variables that may impact results. The use of immunosuppressants in and of itself may have a benefit, particularly if improvement is showing in both eyes. A well designed Phase II trial will need to be powered to take all characteristics of the treatment, patient condition, and disease into account.
As a reminder, ACT re-upped its Lincoln Park Capital (or LPC for short) equity facility in July. Similar to the prior agreement, the $30 million, 3 year facility is governed by a stock purchase agreement, which allows for Regular or Accelerated Purchases. Regular Purchases are limited to 35,000 shares (split adjusted) not to exceed $1 million on a given business day and Accelerated Purchases are limited to the lessor of 200% of the Regular Purchase amount or 30% of daily trading volume. As an example, using the median share price and the trading volume on September 16th and assuming ACT included an Accelerated Purchase Notice, the aggregate maximum funding amount would be approximately $843,000 or $421,000 for each business day since there has to be a day's notice between fundings.
The above analysis is important when considering ACT's cash position and burn rate. ACT's 10-Q for the period ending June 30, 2014 showed cash of $4 million. Backing out litigation expense, the company burns about $5 million in cash per quarter. Taking into consideration cash on hand, burn rate, and the LPC's facility, ACT has ample breathing room until they are positioned for a larger capital raise.
As mentioned in the opening comments, ACT's stock price has held up nicely after the reverse split. Based on outstanding shares and the current stock price, the company has a market cap of approximately $300 million. ACT's valuation is over 30% to 50% higher than the vast majority of its Phase I peers. Importantly, the company's CSO, Dr. Robert Lanza, has been selling into the rally.
ACT is moving forward with a name change but old habits die hard. The problem with informal communication from a company during the early stages of FDA trials is it leaves room for conjecture. The cataract surgery, which was never mentioned by the company could be highly relevant to the efficacy results as the referenced study suggests. The bottom line is ACT is still in the process of completing Phase I safety trials. The results should be encouraging enough based on the safety profile to support a large, well designed Phase II study. That, of course, is the purpose of a safety trial so, in that regard, I think ACT's results will be a success. But, as I mentioned earlier, the market has focused on efficacy and expectations are high. Maybe, too high.
Disclosure: Nothing in this article constitutes investment advice or any recommendation with respect to a particular security. Investing in developmental-stage biotech is highly speculative and risky. The road to commercialization is long, and full of peaks and valleys. Take profits when offered, and most importantly, diversify.
Ok but I don't think those 37 shares are going to make much of a difference in the vote. Maybe you can get Keep_IsaDooshbagLoser to join into your consortium with her 1 share?
Keep_TheDooshbagLoser is too stupid to get paid to bash. He's an embarrassment to paid bashers everywhere.