Should You Buy MITO?

 

Stealth BioTherapeutics Corp (Nasdaq: MITO), a clinical-stage biotechnology company focused on the discovery, development, and commercialization of novel therapies for diseases involving mitochondrial dysfunction, today reported financial results for the year ended December 31, 2020 and announced recent business highlights.

“As we look forward to data from our fully-enrolled Phase 2 program in dry age-related macular degeneration during the first half of 2022, we are poised to progress our planned clinical expansion into rare metabolic cardiomyopathies and neurological diseases, with multiple trial initiations expected this year,” said Reenie McCarthy, Chief Executive Officer at Stealth. “Our recent and ongoing discussions with FDA may result in a delay in our Barth NDA submission, but helped identify options to generate additional data we believe may support a filing within a reasonable time-frame. We appreciate the strong engagement by senior Division and Office level FDA personnel, and we believe that our learnings from this program will help inform our approach to larger rare cardiomyopathic disease indications.”

Fourth Quarter 2020 and Recent Highlights

   -- Barth syndrome. In January 2021, the Company announced that it had met 
      with the Division of Cardiology and Nephrology (DCN) to discuss its Barth 
      development program and planned submission of its New Drug Application 
      (NDA) for the treatment of cardiomyopathy in Barth syndrome. In late 
      February 2021 and in early April 2021, the Company met again with DCN to 
      discuss both matters. FDA expressed its view that the existing clinical 
      data are insufficient to demonstrate substantial evidence of 
      effectiveness and do not support NDA review, and suggested potential 
      paths forward to generate additional data, including by a randomized 
      withdrawal of therapy from patients in the Company's ongoing open label 
      extension trial and from additional potential patients the Company could 
      enroll.  The Company has not yet received a record of this meeting.  The 
      Company is evaluating the proposed withdrawal protocol among other 
      potential next steps. 
 
   -- In late 2020, the Barth Syndrome Foundation, which is the global advocacy 
      group representing Barth patients, announced its petition requesting the 
      Company to submit and the FDA to review an NDA for elamipretide for the 
      treatment of Barth. On March 3, 2021, the Barth Syndrome Foundation 
      announced that DCN and other FDA representatives attended a March 3 
      listening session requested by members of the Barth syndrome community. 
      The listening session was a first-of-its-kind engagement in which the FDA 
      sought to understand the level of uncertainty Barth patients would accept 
      regarding the effectiveness of new therapies, which is a type of 
      flexibility FDA's December 2019 Guidance for Industry: Demonstrating 
      Substantial Evidence of Effectiveness recommends the FDA consider in rare 
      disease settings. 
 
   -- Geographic atrophy. In February 2021, the Company announced that it had 
      completed enrollment of 176 patients in its ReCLAIM-2 Phase 2b clinical 
      trial in patients with geographic atrophy. This milestone triggered the 
      payment of an additional $10 million of development funding to the 
      Company under the Development Funding Agreement announced in November 
      2020. Design and preliminary baseline demographics for the ReCLAIM-2 
      trial were presented at Angiogenesis, Exudation, and Degeneration 2021 in 
      February 2021. 
 
   -- SBT-272. As previously reported, data presented at the 2020 Annual NEALS 
      Meeting demonstrated that SBT-272 improved neurite length and branching 
      in mutant TDP43 primary upper motor neurons. TDP43 pathology, which is 
      believed to play a role in neuronal cell death, has been observed in 
      multiple neurodegenerative diseases, including Amyotrophic Lateral 
      Sclerosis, Frontotemporal Lobar Degeneration, Lewy Body Dementia, 
      Progressive Supranuclear Palsy, and Alzheimer's Disease. The Company is 
      conducting toxicology studies to support a potential Phase 2a clinical 
      study in patients with neurological disease in 2022. 
 
   -- Development Funding Agreement. In November 2020, the Company announced 
      the first closing under a Development Funding Agreement to support the 
      clinical development of elamipretide. To date, the Company has received 
      $30 million and is eligible to receive an additional $5 million on 
      submission of an NDA for the treatment of cardiomyopathy in Barth 
      syndrome. 
 
   -- Registered Direct Offerings. In November 2020, the Company received gross 
      proceeds of $3.2M from the registered direct offering of 2,844,446 ADSs. 
      In February 2021, the Company received gross proceeds of $4.7 million 
      from the registered direct offering of 2,339,000 ADSs.

Key Upcoming Milestones

   -- Geographic atrophy: Data expected in Q2 2022. 
 
   -- Expansion of cardiomyopathy franchise: A Phase 2a investigator-initiated 
      open-label clinical trial assessing elamipretide in a cohort of patients 
      affected by visual decline and/or cardiomyopathy associated with 
      Friedreich's ataxia is expected to commence during Q2 2021. The Company 
      anticipates that data from this trial will help inform pivotal trial 
      design. A meeting with the FDA to discuss protocol design for a trial to 
      evaluate elamipretide in patients with cardiomyopathy associated with 
      Duchenne muscular dystrophy is expected during Q3 2021. 
 
   -- Initiation of Phase 3 clinical trial in rare mitochondrial diseases 
      caused by nuclear DNA (nDNA) mutations: The Company plans to meet with 
      the FDA during Q2 2021 prior to initiating a Phase 3 clinical trial in 
      the prespecified subgroup of primary mitochondrial disease patients with 
      nDNA mutations who appeared to respond to elamipretide therapy in the 
      Company's Phase 3 trial in primary mitochondrial myopathy. 
 
   -- Expansion of neurology franchise: The Company is continuing its neurology 
      pipeline expansion efforts with SBT-272 and a group of compounds from its 
      SBT-550 series and expects to announce results of SBT-272 preclinical 
      studies and initiation of SBT-550 pre-IND enabling studies during 2021. 

Financial Results for the year ended December 31, 2020

Cash Position: Cash and cash equivalents were $32.8 million at December 31, 2020, compared to $50.8 million at December 31, 2019. In February 2021, the Company received $10.0 million under the Development Funding Agreement with Morningside Venture (I) Investments Ltd., as a result of the tranche 2 milestone event upon completing enrollment in its ReCLAIM-2 Phase 2 clinical trial of elamipretide for the treatment of dry AMD and gross proceeds of $4.7 million from a registered direct offering of its ADSs.

Revenue: We did not have any revenue in 2020 compared to $21.1 million of revenue in 2019. Revenue in 2019 represents non-refundable upfront payments under the Alexion Arrangement that were recognized in full in accordance with applicable accounting standards as we completed our performance obligation in 2019. Alexion terminated the Agreement in January 2020, and as such, no additional revenue will be recognized under the Alexion Arrangement.

Research and Development (R&D) Expenses: R&D expenses decreased by $15.3 million to $29.3 million for the year ended December 31, 2020, from $44.6 million for the year ended December 31, 2019. This decrease was primarily due to a net decrease of $8.7 million in employee and consultant related costs attributable to the strategic repositioning implemented in Q1 2020, a $3.2 million decrease in contract manufacturing, a $1.8 million net decrease in clinical costs primarily driven by the closeout of our Primary Mitochondrial Myopathy development efforts which ended in December 2019, a $1.4 million decrease in preclinical costs and a $0.2 million net decrease in regulatory costs.

General and Administrative (G&A) Expenses: G&A expenses decreased by $2.9 million to $19.4 million for the year ended December 31, 2020, from $22.3 million for the year ended December 31, 2019. The increase was primarily attributable to a decrease of $4.3 million in pre-commercial activities offset in part by a $1.4 million increase in professional services for various financing transactions and increased costs of insurance.

Other Expense: Other expense decreased by $17.1 million to $8.8 million for the year ended December 31, 2020 from $25.9 million for the year ended December 31, 2019. Other expense in 2020 consisted of a $7.1 million non-cash expense due to the change in fair value of the derivative liability and $1.8 million in interest expense offset by $0.1 million in interest income. Other expense in 2019 consisted of a $22.7 million loss on extinguishment of debt recorded in conjunction with the IPO, $6.7 million in interest expense mostly related to convertible debt and $0.3 million loss due to the change in fair value of the warrant liability offset in part by a $2.8 million gain from the fair value adjustment of the derivative liability associated with the convertible debt and $1.0 million in interest income.


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