Athira Pharma, Inc. (ATHA) is a clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and slow neurodegeneration. Founded in 2011 under the name M3 Biotechnology, the company has faced both successes and setbacks in its pursuit of innovative treatments for central and peripheral nervous system disorders.
Business Overview and History Athira Pharma was established in 2011 as M3 Biotechnology, Inc. in the state of Washington. The company reincorporated in Delaware in 2015 and changed its name to Athira Pharma, Inc. in April 2019. Currently, the company operates from its office and laboratory space in Bothell, Washington.
Since its inception, Athira has focused on developing small molecule compounds that positively modulate the neurotrophic hepatocyte growth factor (HGF) system, which is critical to normal brain function and may play a key role in maintaining the health and functioning of neuronal networks. This approach has led to the development of drug candidates targeting various neurodegenerative conditions.
To fund its operations, Athira has primarily relied on proceeds from the sale and issuance of common stock, convertible preferred stock, common stock warrants, and convertible notes. From inception through September 30, 2024, the company has raised aggregate net cash proceeds of approximately $407.4 million through these financial instruments.
In 2021, Athira faced a significant challenge when it was named as a defendant in multiple securities class action lawsuits. These lawsuits alleged violations of federal securities laws related to the conduct of the company’s former chief executive officer during her doctoral research. An independent special committee of the board of directors conducted a review and found that the former CEO had altered images in her doctoral dissertation and certain research papers. This issue has resulted in ongoing legal proceedings and investigations.
Over the years, Athira has built a pipeline of drug candidates, including fosgonimeton and ATH-1105, that target various neurodegenerative conditions such as Alzheimer’s disease (AD) and amyotrophic lateral sclerosis (ALS). The company’s lead candidate, fosgonimeton, was advanced into late-stage clinical trials for the treatment of mild-to-moderate AD, while ATH-1105 is currently in a Phase 1 clinical trial for the potential treatment of ALS.
Financials Athira Pharma’s financial performance has been dominated by research and development expenses, reflecting the company’s focus on advancing its drug pipeline. In the fiscal year 2023, the company reported a net loss of $117.7 million, with research and development expenses accounting for $93.8 million and general and administrative expenses at $33.3 million. The company’s cash, cash equivalents, and investments stood at $147.4 million as of December 31, 2023.
For the nine months ended September 30, 2024, Athira reported a net loss of $81.9 million, compared to a net loss of $90.4 million for the same period in 2023. The company’s research and development expenses decreased by $8.8 million, from $70.1 million in the first nine months of 2023 to $61.3 million in the same period of 2024, primarily due to decreases in fosgonimeton program costs. General and administrative expenses also decreased by $6.4 million, from $26.3 million to $19.9 million, over the same period.
In the most recent quarter ended September 30, 2024, Athira reported a net loss of $28.7 million, with operating cash flow (OCF) and free cash flow (FCF) both at negative $23.0 million. The company has not generated any revenue to date, as it is a clinical-stage company without any approved or commercialized products.
Topline Results from the LIFT-AD Trial In September 2024, Athira Pharma announced the topline results from the Phase 2/3 LIFT-AD clinical trial evaluating fosgonimeton as a potential treatment for mild-to-moderate Alzheimer’s disease. The trial did not meet its primary endpoint of the Global Statistical Test (GST), a combination of measures for cognition and function. Additionally, the key secondary endpoints of cognition (ADAS-Cog11) and function (ADCS-ADL23) also failed to reach statistical significance.
However, the company noted that in pre-specified subgroups of patients with moderate Alzheimer’s disease or who are APOE4 carriers, fosgonimeton showed a numerically greater treatment effect. Furthermore, the biomarker data across measures of protein pathology, inflammation, and neurodegeneration showed directional improvements consistent with the broad neuroprotective mechanism of HGF modulation.
Shifting Focus to ATH-1105 for ALS Following the disappointing results from the LIFT-AD trial, Athira Pharma announced its decision to shift its focus to the clinical development of ATH-1105, its novel, oral small molecule drug candidate for the potential treatment of amyotrophic lateral sclerosis (ALS). The company is currently conducting a first-in-human Phase 1 clinical trial evaluating the safety, tolerability, and pharmacokinetics of ATH-1105 in healthy volunteers, with plans to begin dosing ALS patients in 2025.
ATH-1105 is designed to positively modulate the neurotrophic HGF system, similar to fosgonimeton, but with improved blood-brain-barrier penetration and pharmacokinetic properties. Preclinical data has shown ATH-1105’s consistent ability to demonstrate therapeutic effects in various ALS models, making it a promising candidate for further development.
Challenges and Risks Athira Pharma’s journey has not been without its challenges. The company’s failure to meet the primary and key secondary endpoints in the LIFT-AD trial for fosgonimeton has been a significant setback, leading the company to reevaluate its strategic priorities and shift its focus to ATH-1105 for ALS.
The inherent risks associated with drug development in the central nervous system (CNS) space, including the complex biology, the presence of the blood-brain barrier, and the lack of translatability from preclinical studies to clinical trials, have been persistent challenges for Athira. Additionally, the company’s dependence on the successful development and commercialization of its drug candidates exposes it to significant financial and operational risks.
Furthermore, Athira has faced legal and regulatory scrutiny related to allegations of scientific misconduct by its former CEO, which could potentially impact the company’s reputation, partnerships, and future development efforts. An independent special committee of the company’s board of directors found that the former CEO, Dr. Leen Kawas, altered images in her 2011 doctoral dissertation and at least four research papers that she co-authored while a graduate student at Washington State University (WSU). The company cited these challenged research papers in certain communications and applications, and WSU’s dihexa patent, exclusively licensed to the company, incorporated certain of these altered images.
Liquidity As of September 30, 2024, Athira Pharma reported cash and cash equivalents of $68.86 million and short-term investments of $56.84 million, for a total of $125.70 million in cash, cash equivalents, and short-term investments. This liquidity position is crucial for the company’s ability to fund its ongoing research and development activities, particularly as it shifts focus to the clinical development of ATH-1105 for ALS.
The company’s debt-to-equity ratio stands at 0, indicating that it has no long-term debt on its balance sheet. Athira’s current ratio and quick ratio are both 2.95, suggesting a strong short-term liquidity position. The company has not disclosed any available credit lines.
Outlook and Conclusion Despite the setbacks, Athira Pharma remains committed to advancing its pipeline and exploring strategic alternatives to maximize shareholder value. The company’s focus on the clinical development of ATH-1105 for ALS represents a crucial pivot, as the company seeks to leverage its expertise in modulating the neurotrophic HGF system to address another devastating neurodegenerative disease.
The biopharmaceutical industry, particularly in the development of drugs for central nervous system (CNS) and peripheral nervous system (PNS) disorders, has historically faced significant challenges with very limited successes in product development. Athira’s approach of targeting neurotrophic factors through the use of small molecules is based on a novel therapeutic approach, which exposes it to unforeseen risks but also presents potential opportunities for breakthrough treatments.
As Athira navigates the challenges of the pharmaceutical industry and the inherent risks associated with drug development, the company’s ability to effectively execute its strategies, manage its finances, and address the legal and regulatory concerns will be crucial in determining its long-term success. Investors will closely monitor the progress of the ATH-1105 clinical trial and the company’s ability to explore strategic alternatives that could unlock further value for shareholders.
The company’s financial position, with $125.70 million in cash, cash equivalents, and investments as of September 30, 2024, provides runway to support the continued development of ATH-1105 and any other potential future drug candidates. However, as Athira has not generated any revenue to date and continues to incur significant losses, careful management of its financial resources will be critical to sustaining its operations and advancing its pipeline.
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