Is Altimmune a Buy?


By Zhiyuan Sun, MotleyFool

Maverick biotech Altimmune (NASDAQ:ALT) has been one of the past year's top growth stocks. In fact, if you'd invested in the company last March, during the beginning of the coronavirus pandemic, that investment would be up more than fivefold. Over the same time, the industry benchmark iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) would have only returned 67%.

Many investors are now wondering if history will repeat itself, and if they could get rich off the stock in a short amount of time should they buy now. I would heavily caution against doing that. If existing shareholders haven't taken profits already, now is the best time to do so in anticipation of what's to come.

Man fighting pathogens concept.


No easy money from here

Even after such a fantastic rally, Altimmune stock is ridiculously cheap. It has a market cap of just $617.44 million with a cash balance of $216 million, giving it an enterprise value of only $400 million. That's very low for a company developing both a coronavirus vaccine and a coronavirus treatment. What gives?

ALT Total Return Level Chart


The issue is a mismatch between the pace of the COVID-19 pandemic and the pace of Altimmune's drug development. The Biden administration is on track to vaccinate every U.S. adult by the end of July, but Altimmune's vaccine candidate and treatment are only in phase 1/2 studies. Data from those studies is due at about the same time the coronavirus vaccine market should be dissipating -- and coronavirus treatments are no longer necessary after people receive their vaccines.

Aside from its coronavirus pipeline, Altimmune does have an anthrax vaccine in development, with a total of $133.7 million in contract value with the Biomedical Advanced Research and Development Authority through phase 2. Given the extremely low prevalence of anthrax and the fact that the biotech's experimental vaccine is still in phase 1, this is not something investors can count on.

Altimmune faces the same problem with its liver disease programs. The company is testing ALT-801 in phase 1 for the treatment of patients with non-alcoholic fatty liver disease. During preclinical studies, the therapy was effective on one measure, reducing the body weight of mice by 25% after dosage. However, we all know that studies done on rodents are not a direct comparison to studies conducted on humans.

While its hepatitis B treatment has entered phase 2, again, I would advise investors to look at hepatitis B gene therapy alternatives before considering Altimmune for that purpose. The common theme here is that the company's pipeline isn't far enough along to justify investing in.

Is it a safe investment?

At the end of the day, Altimmune remains a heavily speculative stock. All of its candidates are in the early stages of clinical testing, with a lack of efficacy data, especially against placebo or other standards of care. It is critical to comprehend that biotech companies typically only have an average 8% chance of clearing a drug through the clinical trial process and subsequent regulatory approval. Moreover, that is just an average across the board. Small-cap, development-stage biotechs have significantly less chance of bringing a drug to market than big pharma, due to the latter's better capitalization, access to collaborative partners, etc. The odds are very much unknown at this point for Altimmune, and I would wait for more results to come out before I place faith in its science.

Should you invest $1,000 in Altimmune, Inc. right now?

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