Back the Jockey: The Alterity Story (ASX: ATH)

Good morning, Armchair Army,

Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.

My Dad had this saying…

“Back the jockey… not the horse”.

… and he was a broker for 32 years.

Now, I don’t take all of his advice.

In fact, I actively avoid it.

Particularly when it comes to the stocks that he’s picking.

But every now and then, my old man comes up with a gem.

And “back the jockey” is the crown jewel.

Biotech investing is not easy.

The science is complicated.

The trials are binary.

And sometimes, the simplest way to make sense of it is to look at the person running the show and ask… can they do it again?

That is the story of the next company in my Biotech 165 Challenge…

A company on the cusp of a Phase 3 trial for a rare neurodegenerative disease.

With potential peak annual sales of US$2.4 billion.

If successful (and there is always an if), this would be the FOURTH FDA approval on the CEO’s scorecard. 

Three down.

Going for number four.

This is the story of Alterity Therapeutics (ASX: ATH).

But first…

Paradigm Biopharmaceuticals (ASX: PAR) secures the go-ahead from the Data Safety and Monitoring Board with 80% of patients evaluated. (PAR)

🪑 Importantly, PAR said that “interim results for the Phase 3 are on track for September”.

… not too long now.

NeuroScientific Biopharmaceuticals (ASX: NSB) schedules its Pre-IND meeting with the US FDA for a Phase 2 trial. (NSB)

🪑 Nice milestone. Looking forward to this trial.

Proteomics International (ASX: PIQ) secures Australian patent for its PromarkerEndo, a blood test for diagnosing endometriosis. (PIQ)

NASDAQ-listed Definium Therapeutics LSD candidate produces clinically meaningful reductions in anxiety in a Phase 3 trial. (Reuters)

🪑 Another big win for psychedelics. 

Definium could apply for approval for its LSD candidate as early as the first half of next year.

REPORT: Psychedelics on the cusp of market breakthrough as clinical, policy support grow. (Biospace)

🪑 Great read. The sector is moving strongly, which is very good news for my second Armchair Pick, Emyria (ASX: EMD).

There is an old saying.

Once is a fluke.

Twice is a coincidence.

Three times?

Well, that’s a pattern…

When I first heard the story of Alterity (ASX: ATH), that is the thought that immediately popped into my head.

Could the CEO of an ASX-listed small-cap company really pull off a fourth FDA approval?

Meet David Stamler, the Alterity CEO.

In April 2011, he led a CNS (Central Nervous System) drug to FDA approval.

1 down.

Then in April 2017, he did it again - Huntington's disease.

2 down.

Then in August 2017, he extended the same molecule to a second indication, an uncontrollable movement disorder.

That’s 3 for 3.

That company that got approval for two indications?

Acquired by Teva two years earlier, for US$3.5 billion.

Fresh off the back of multiple FDA approvals, David could do anything.

… he chose to join Alterity as the Chief Medical Officer in 2017, and then moved to the CEO position in 2021.

Going for number 4.

Same disease family (neurodegenerative diseases). 

Same playbook.

My dad always said, "Back the jockey, not the horse."

(And he was a broker for 32 years)

So… the next company in my Biotech 165 Challenge is Alterity (ASX: ATH).

A back-the-jockey investment. 

The ‘bet’ here is that David pulls it off again.

ATH was listed on the ASX in 2000 and has been developing drugs for neurodegenerative diseases ever since.

Think Parkinson’s and Alzheimer's.

ATH’s target is a rare Parkinsonian disorder called Multiple System Atrophy, or MSA for short.

An orphan disease, with no solution other than to wait and die.

(and manage symptoms)

7.5 years median survival.

50% of people get a wheelchair in the first 5 years.

Can’t talk, can’t walk, can’t swallow.

It’s degenerative and very bad.

And there is no solution.

The goal of ATH’s drug is to slow the disease progression by targeting the underlying pathology.

Last year, ATH showed in a Phase 2 study that it could slow the disease’s progression by 46%.

For context, Lundbeck's amlenetug, the closest live competitor, showed roughly a 22% slowing in its own Phase 2.

All it needed to hit to be “clinically meaningful” was a 1.5 change from placebo.

In the 50mg dose, it hit 3.7.

More than twice as good as the hurdle. 

This is not an easy drug to get approved.

There is a graveyard of MSA assets.

2013 - Rifampicin, NIH/Mayo Clinic, FAILED.

2015 - Teva, Rasagiline, FAILED.

2021 - Biohaven, Verdiperstat, FAILED.

So, if ATH is able to replicate the results from its Phase 2 study in a Phase 3… 

Big win.

Last month, ATH got the green light from the FDA on trial design, patient populations and endpoints.

Speaking to the CEO of Neuren recently at BioShares, this is SO IMPORTANT… particularly for orphan drug trials, where there is no standard of care.

Being able to measure a signal, AND have the FDA agree that that signal is registrable in the patient population is critical.

ATH have that.

… as well as alignment on CMC (manufacturing).

Now, it is all set to move ahead with its Phase 3 trial.

ATH434 is a small molecule "iron chaperone" that is orally administered.

… and no, I’m not talking about Twiggy Forrest moving rocks across the Pilbara.

In people with MSA, excess reactive iron builds up in the brain regions that are dying.

That iron helps drive the misfolding and clumping of a protein (called alpha-synuclein), which is the thing that drives cell death.

ATH434 doesn’t strip the reactive iron out of your body.

It redistributes it.

Actually…

Is that really that different to Twiggy Forrest hauling dirt around Australia?

Making sure that iron ore stockpiles don’t grow to a size that’s dangerous.

I guess there is something in common…

By redistributing the excess reactive iron, ATH434 is designed to stop alpha-synuclein from misfolding and clumping together.

Less clumping.

Less damage to the brain cells.

And hopefully, a slower march of the disease.

A blockbuster drug is one that makes over US$1 billion in sales each year.

This drug for MSA has blockbuster potential.

In an independent study, the drug was estimated to have US$2.4 billion in peak annual sales.

This was based on a company-commissioned survey of around 100 neurologists…

As well as penetration and population estimates of MSA, as well as standard orphan drug pricing - which commands a premium.

(Treat it the way you'd treat any survey a company paid for - but it does give a target for the company to aim for.)

But that’s just for MSA.

A good result here could also lead to a larger trial in Parkinson’s Disease.

The big blue sky bet.

Yesterday, ATH secured a composition-of-matter patent over its drug in the US, meaning it can defend off generics until 2045.

Importantly, it puts Parkinson’s Disease in play as a viable target given long-dated IP protection.

Interestingly, ATH434 was originally billed as a Parkinson’s Disease asset back in 2010 when the Michael J Fox Foundation funded the initial early work.

Here’s the original announcement from all the way back in 2010.

For ATH, MSA alone could build a very valuable biotech company.

But Parkinson’s is the blue sky on top.

But like most ASX-listed small biotech companies, it’s not wise (or feasible) to attempt the summit of Mount Everest before trekking to Base Camp.

The trial will have roughly 200 patients, randomised 1:1.

ATH434 50mg twice daily versus placebo.

Same UMSARS Part I primary endpoint that produced the 46% number, which is a ranking score of a bunch of different items that are clinician-evaluated:

As the disease progresses, these UMSARS scores will degrade.

IF ATH’s drug is able to slow the loss of function when compared to the placebo (with a level of statistical significance), that should be enough to secure registration.

So…

Same drug.

Same dose.

Same primary endpoint.

Same twelve-month treatment period.

Just larger.

200 patients instead of 77.

At the end of the last quarter, ATH had $37 million in the bank.

A decent amount.

But probably not enough to get through the entire Phase 3 trial.

So, where does the funding come from?

There are roughly 18.6 million listed options expiring at the end of August.

The exercise price is 50 cents, shares trade at 56.

So they’re in the money.

If every option gets exercised, ATH receives another ~$9.3 million.

ATH is at the point in its journey where it has everything ready to go for a Phase 3.

Good Phase 2 data.

Green light from the FDA on the Phase 3 trial design, patient numbers, endpoints and CMC.

Yesterday, the company even secured a composition-of-matter patent over its drug in the US, meaning it can defend off generics until 2045.

Everything is in place for someone to come in and sign a licensing deal.

The package is there.

Now ATH needs someone to pay for it.

Right now Big Pharma is on a spending spree.

In just the first six months of 2026, there have been US$134 billion in M&A and licensing deals.

There are three key drivers.

FIRST, the patent cliff.

A number of high-profile drugs are coming off patent (about US$230 billion in sales revenue) in the next few years, which will leave a massive hole in the earnings for big pharma.

The solution is to hoover up a bunch of late assets and refill the pipeline.

SECOND, cash printing from weight loss drugs.

Eli Lilly has already made 10 M&A/licensing deals this year, and is set to do US$23 billion in sales this quarter alone.

Weight loss drugs like Wegovy and Ozempic are printing cash.

… and that cash is going right back out to acquire as many assets as possible.

THIRD, FOMO.

As the “good assets” get acquired, the urgency to make deals from Big Pharma becomes more and more apparent.

ATH finds itself in the eye of the storm.

A Phase 3 asset with a perfect package for a Big Pharma company to come and take an interest in.

We’ve seen it before with stocks on the ASX.

Dimerix and Neuron both signed M&A deals at the Phase 3 stage.

In a recent interview, CEO David Stamler said that the company has had “a lot of interest in partnering… with several interested companies” “It all started when the company got the Phase 2 data”. (Source, from 16:15)

As a public company, raising is always an option.

But I think that for ATH, if it is able to raise with a strategic investor - specifically a US-based life sciences fund (like what PYC Therapeutics did earlier this year) it could bode very well for the company.

These investors tend to be sticky, patient and can bring a lot of validation to the company.

It’s important to note that ATH is also dual-listed on the NASDAQ ADR, which means that the barriers to bringing in US investors are reduced.

(and David has been presenting at a number of US investor conferences over the last few months)

Once the trial starts, ATH either proves that it works… or it doesn’t.

But we know that the people running the trial, who have put all of this together, have done this successfully before.

A badly designed trial can kill a great drug.

That’s why, for a company like ATH, it's so important to have someone like David Stamler at the helm to help ATH navigate.

Just listening to him present the story, you can tell that he has run trials before and been successful in getting a drug to market.

Twice.

… with the second getting approved for an additional indication.

So call it three.

At the start of the article I said that this is a back-the-jockey type investment. 

ATH investors are backing David to do it again with ATH434.

He could have chosen anything.

He chose this.

A great show of confidence around ATH’s technology.

The first hurdle for the company is to answer the funding question.

Licensing deal? Strategic Investor? Tap the market?

All options available.

… then it just comes down to terms.

Funding aside, the opportunity here is big.

A A$122 million market cap company with a potential US$2.4 billion per year prize.

(and even bigger if you include Parkinson’s Disease and more years of exclusivity in MSA)

They just need to get through the trial first.

Can ATH repeat what it did in a 77-patient trial in a 200-patient trial?

THAT is the US$2.4 billion question.

I am a big believer that the ASX sits about 12 months behind the US when it comes to market interest in biotechs.

… we tend to lag behind.

ATH, as one of the few late-stage biotech companies on the ASX, is the exact type of company that turns sharply when the industry does.

Will the industry-wide bull market return?

Will it get good terms on the trial funding?

Will it work?

These are all questions that still remain for ATH, but if the answer is YES to all three, then it should lead to an interesting investment.

A big thank you to the Alterity team, including Elyse Shapiro and CEO David Stamler, for sharing the Alterity story with me.

See you all tomorrow,

The Armchair Analyst