Applied Genetic Technologies: An Eye on Optogenetics

03/06/2019 5:00 am EST

Focus: HEALTHCARE

Bill Mathews

Editor & Founder, The Cheap Investor

Applied Genetic Technologies (AGTC) is a clinical-stage biotechnology company that uses a proprietary gene therapy platform to develop transformational genetic therapies for patients suffering from rare and debilitating diseases, explains Bill Mathews, small cap expert and editor of The Cheap Investor.

Its initial focus is in the field of ophthalmology, where it has active clinical trials in X-linked retinitis pigmentosa, achromatopsia and X-linked retinoschisis.

In addition to its clinical trials, AGTC has preclinical programs in optogenetics, adrenoleukodystrophy, which is a disease of the central nervous system, other ophthalmology and otology indications. The optogenetics program is being developed in collaboration with Bionic Sight.

AGTC also has a significant intellectual property portfolio and extensive expertise in the design of gene therapy products including capsids, promoters and expression cassettes, as well as expertise in the formulation, manufacture and physical delivery of gene therapy products.

We recommended AGTC twice. Our first recommendation was in the October 2017 issue at $3.60, and the second was in the March 2018 issue at $3.85. Recently the stock shot up to $7.50 for a potential profit of 108% and 95% respectively. Now that the price has fallen back, we think it is time to buy.

The company has a solid balance sheet with $96 million ($5.29 per share) in cash, a book value of $4.18 and no debt. Insiders own about 17% of the 18 million shares outstanding, and 69 institutions own 44% of the float. The negative factor is the price plunged from $6.87 to a low of $2.60 in December.

The company continues to enhance its clinical infrastructure resulting in the acceleration of clinical enrollment in all of its ongoing clinical trials. These resources have allowed AGTC to expand patient recruitment efforts, introduce new clinical trial sites, conduct surgical training and enhance clinical site support.

The firm completed enrollment of the nine patients in the dose escalation portion of the Phase 1/2 clinical trial of its product candidate for XLRP (X-linked retinitis pigmentosa) in December and has also treated three patients in the expansion group of the Phase 1/2 clinical trial. The company expects to provide interim six-month data on the dose escalation portion of the trial in the third quarter of 2019.

The company is presently enrolling patients in two parallel Phase 1/2 clinical trials of its product candidates for Achromatopsia (ACHM) caused by mutations in the two most common ACHM genes, CNGB3 and CNGA3.

AGTC has enrolled ten patients in the ACHM CNGB3 trial and five patients in the ACHM CNGA3 trial. The company expects to provide topline interim six-month data for the CNGB3 and CNGA3 trials in the second half of 2019.

Through the AGTC-Bionic Sight collaboration, the companies are pursuing the development of an innovative optogenetic therapy to treat patients with advanced retinal disease that utilizes AGTC's broad experience in gene therapy and ophthalmology, and Bionic Sight's neuro-prosthetic device and novel algorithm for retinal coding. Bionic Sight expects to file the IND for this product candidate in the first half of 2019.

As of December 31, 2018, the company's cash, cash equivalents, and investments amounted to $96.1 million. The company believes these funds will be sufficient to allow AGTC to generate data from its ongoing clinical programs, to move the pre-clinical optogenetic program in collaboration with Bionic Sight into the clinic and fund the currently planned research and discovery programs for at least the next two years.

AGTC is a volatile biotech stock, and the price is very attractive at this low level. It has several products in various stages of FDA trials, a large amount of cash and only 18 million shares outstanding. Positive drug trial news on any of its product candidates could send the price flying.

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