Ampio Pharmaceuticals Inc (NYSEMKT:AMPE) has had a tough year. The company collapsed at the end of June on the news that its lead candidate, Ampion, had failed to meet its primary endpoint in a phase III for osteoarthritis. It’s been dogged with supply and manufacturing issues, and its shareholders subjected to dilution – most recently the announcing of a registered direct offering of 5 million shares and warrants. The company is down more than 80% on its 2016 highs, and sentiment looks decidedly negative as things stand.
We don’t think this sentiment will last, however. We think the company may have found a floor at its current price, and that the currently held belief that an Ampion BLA submission is a hail Mary is misinformed. The drug has a far better chance of picking up approval than many believe, and this could reverse Ampio’s long term fortunes.
Ampion is what’s called an immunomodulatory molecule, and its primary ingredient is aspartyl-alanyl diketopiperazine, or DA-DKP. We don’t really need to go in to the science on this one to too deep a level, as it’s pretty complicated and not necessary for our thesis. We can offer up a top level explanation as follows, however. DA-DKP is a fragment of human serum albumin, which in turn is the most common protein found in human blood. This fragment plays a key role in suppressing inflammation. Inflammation is the primary root cause of the pain associated with osteoarthritis. The theory is, therefore, that by increasing the levels of DA-DKP by way of Ampion injection at the pain site, inflammation will reduce and the pain will subside.
So what happened with the trials?
The trial that failed to meet its endpoint used what’s called the Kellgren Lawrence scale (KL) to measure severity, and by way of this scale apply an improvement number from baseline for each patient, as measured under the industry standard WOMAC A pain scale. This is all a bit jargony, but what’s important is this: the company was looking to demonstrate an improvement from baseline in three different KL grades (2-4, moderate to severe) as measured under WOMAC A, and have this improvement beat out the level of improvement demonstrated by a saline (placebo) arm.
The numbers came in, and Ampion improved pain significantly over baseline in all KL grades – KL 2: 52%, KL 3: 36%, and KL 4: 33% reductions in pain. However, as mentioned, the trial didn’t meet its primary. What this means is that while it translated to a reduction in pain, there wasn’t any stat significance over the saline arm. For some reason, the saline arm recorded similar levels of pain reduction, outperforming on expectations.
This is how things stand – the company is going to go to the FDA with the improvement data, and see if it can pick up an approval on that data alone. However, it’s almost certainly not going to use the whole sample. In the KL 4 patients, the most severe OA patients, there was both a reduction in pain and a stat sig improvement between the active arms and the control arms.
We believe Ampio will go for an approval in this severe patient population. Yes, it’s a limited population when compared to the entire moderate to severe spectrum, but there’s still a strong market, and there’s currently no other available treatment that doesn’t involve surgery. In other words, it’s an unmet need, in which Ampion has been proven to have a stat sig improvement in pain reduction over placebo.
There’s risk, of course. The company had around $6 million cash on hand at June 30, and is set to pick up another $3.45 million net on the above mentioned common and warrant issue. This isn’t enough to fund a marketing campaign even if the FDA gives Ampion a green light, so there’s going to be further raises going forward – that or a partnership. There’s also the risk that the FDA won’t be willing to give Ampion a nod based on retrospective analysis. There’s precedence, but there’s no guarantee.
The bottom line here is that while there’s risk, this isn’t as dead in the water as markets seem to think it is.
We’re watching it closely ahead of the BLA submission. Subscribe below and we’ll keep you updated as to progress!
Disclosure: We have no position in AMPE and have not been compensated for this article.