Alcobra Pharmaceuticals Ltd. (Nasdaq: ADHD), which is developing a drug for treatment of attention deficit hyperactivity disorder (ADHD), raised $26 million last Friday in a Nasdaq offering. The offering was at a $4 share price, a 5% discount on the Nasdaq Friday share price, after which the share rose 26% to $5.25. The company's market cap is now $72 million, slightly less than its value for its May 2013 IPO.
The event comes as a surprise, several months after Alcobra lost 85% of its value within two weeks, following the failure to achieve its main target in the clinical trial of its leading product for treating ADHD. The company portrayed the trial as a success, following a retroactive statistical analysis, but the market did not accept this interpretation, and sent the share price spiraling downward: once because of the results themselves, and a second time due to what was perceived as a misleading presentation. The event generated widespread negative sentiment towards the Alcobra share, and even several lawsuits.
Alcobra was the first Israeli company to hold a Nasdaq IPO in the recent wave of biomedical offerings, coming to the market as an unknown company under the sponsorship of founder and inventor Dalia Megiddo and CFO Udi Gilboa. The company had barely any employees, other than CEO Yaron Daniely, while outsourcing all its activity. Alcobra also had almost no cash when it held its offering. Wall Street gave a good reception to the company, which raised $27 million at an $89 million company value, following good results in Phase IIB trials of its ADHD drug. Alcobra proceeded to become one of Nasdaq's most successful shares in 2013, raising $33 million more in October of that year, this time at a $189 million company value.
In the prospectus for the current offering, Alcobra sets forth for the first time its plans for its leading product, whose trial has failed. "We plan to begin a second Phase III trial in the US for ADHD in adults, while drawing lessons from the previous Phase III trial," the company wrote, "such as the duration of the treatment, the number of patient visits to the clinic, and the selection of patients. If the additional trials show effectiveness, we will take action to obtain approval." The trial is scheduled to begin in the second half of 2015, and the results are expected in early 2016.
The FDA in any case usually requires two Phase III trials, but even if the second trial is successful, Alcobra may need a third trial, due to the inadequate results of the first one. According to Alcobra, the problem lay with the trial, not with the product. In presenting the first trial, the company stated that result for three of the patients in the control group were exceptionally good, thereby blurring the difference between the trial group and the control group - a difference required in order to portray the trial results as significant.
The company felt that something was "not right" about the patients in the control group: either they were not really patients, or they had been treated with something else, or for some reason the results of their initial test had been especially bad. Note that even if these three cases are removed, the results are still not unequivocal, and several more results must be "corrected" in order to present significant results. Meanwhile, Alcobra is expected several interesting events in the immediate future: results of two Phase II trials - one for treatment of ADHD in children in the current quarter and one for treatment of Fragile X Syndrome, probably in the second quarter of 2015.
ADHD is a larger market for children than for adults, but the company does not yet have any results for children, and it is therefore difficult to predict what the trials results will be. Fragile X Syndrome is an orphan disease. If one of these trials yields good results, it will support the assessment that the product is really effective, and also increase expectations from the main trial. As of the end of the third quarter of 2014, Alcobra had $28 million, meaning that the current offering is enabling the company to complete most of its clinical plans. The company lost $26 million in the first three quarters of 2014.
Published by Globes [online], Israel business news - www.globes-online.com - on January 11, 2015
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