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ATOSSA GENETICS (ATOS)

A Company Dedicated to Improving Breast Health

Breast cancer – More than just a disease!

Nurturing, an emotion ingrained in the mind of a woman is one which supports the existence of the humankind. Keeping this in mind, over the ages, the society has embraced the beauty of the female mammary glands and their life-giving property in all forms of arts, sculptures, and texts. Now imagine being a woman, in her early 30’s, with her whole life ahead of her, kids to take care of and family to raise, and being presented with the news that breast cancer has taken root in her body and might cost her life. Fear, terror, and devastation probably can be used as the fragments of the emotive diaspora looming around your family day in and day out.

Moving forward, the burden of the ever-multiplying cancerous cells rests heavily on your chest (quite literally), cloying and digging trenches of despair around you and your loved ones. As the days go numbered, tightening like a noose, the harsh reality of being a fighter and a survivor strike you like a bolt from Zeus. With pet scans, MUGA scans, chest x-rays, bone scans, blood tests, and biopsies becoming a norm, the sufferers are seen to become a shell of themselves in a span of days. As the prescribed sessions and chemo-therapy begin, with chemicals and a heavy dosage of medicines being injected in the body through tubes which are inserted in the patient’s skin, hair loss, nausea, weight loss all result in people looking like the most emancipated versions of themselves, ghostlike, barely hanging.

Written by Analyst John F. Heerdink, Jr

Major Corporate Developments

Dec-18	FDA granted approval for an "expanded access" of Atossa's proprietary oral Endoxifen in the preoperative setting in a patient awaiting surgery for breast cancer
Oct-18	Completed enrolment in Phase 2 study of topical Endoxifen to treat mammographic breast density
Sep-18	Reported that all objectives were achieved in our Phase 1 study of topical Endoxifen in men
Aug-18	Contracted with a US based additional manufacturer of Endoxifen.
Jul-18	Announced intraductal microcatheter immuno-Oncology preclinical program.
Jul-18	Opened enrolment in phase 2 study of oral Endoxifen to treat breast cancer
Jun-18	Opened phase 2 study of topical Endoxifen to treat mammographic breast density
Jun-18	Completed all dosing and clinical visits in its phase 1 study of topical Endoxifen in men

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Accounts of women and their stories as sufferers and survivors exist in the world who have battled with the evils of breast cancer and have come forth as conquerors carrying battle scars from the long, tiring and painful battles against cancer. With some giving up mid-way and others not opting for the adequate treatments (or not being able to in some cases), negligence apart from ignorance is one of the most powerful hurdles that stand in the way of recovery amongst the women suffering from breast cancer.

As the Breast Cancer Movement has garnered momentum, with people standing in support of the sufferers, there has been an upsurge in the breast cancer awareness around the world, triggering a host of pharma big-shots volleying for dominance in the industry.

Atossa Genetics (NasdaqCM: ATOS), a publicly traded, clinical-stage pharmaceutical company keeping in tandem with the rising demand for preventive breast cancer treatments, has sought to develop safe and affordable drugs for the eradicating the pain and sufferings of the people suffering from breast cancer.

Atossa’s Latest Highlights

FDA granted approval for an “expanded access” of Atossa’s proprietary oral Endoxifen in the preoperative setting in a patient awaiting surgery for breast cancer.
Completed Enrollment of Phase 2 Study of Topical Endoxifen in Women with Mammographic Breast Density
Added Alchem Laboratories as a U.S. contract manufacturer to supply Endoxifen
Raised $13.4m in rights offering

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Background & The Road Ahead

Atossa Genetics (NasdaqCM: ATOS) was orginally incorporated on April 30, 2009 in Delaware and went public in 2012. Atossa is a clinical-stage pharmaceutical firm focused on developing novel, proprietary therapeutics and delivery methods for the treatment of breast cancer and other breast conditions. Atossa is developing Endoxifen with two routes of delivery: a topical formulation, applied like a lotion, for the treatment of a condition called mammographic breast density (MBD); and an oral formulation for breast cancer survivors who do not benefit from taking oral tamoxifen, a current FDA-approved standard of care.

It is also developing a patented intraductal microcatheter technology to potentially target the delivery of therapies, including fulvestrant, immunotherapies and Chimeric Antigen Receptor T-cell therapies (CAR-T therapies), directly to the site of breast cancer. Atossa continues work on developing solutions for prevention of cancer & has made significant progress in the clinical programs in 2018 by completing the development phases of both topical and oral Endoxifen. The firm successfully also completed enrollment in the Phase 2 study of topical Endoxifen to treat mammographic breast density.

Upcoming Milestones

Oral Endoxifen: Retain CRO for refractory Phase 2 study
Topical Endoxifen:
Retain CRO for Gynecomastia
Phase 2 study
Complete first 3 months dosing in Phase 2 study MBD
Q2 ’19: complete Phase 2 MBD study
TRAP CAR-T – Seeking research partners

Approximately 12.4% of women will be diagnosed with breast cancer in their lifetime. –Cancer.gov

Large Market Opportunities

Program	Opportunity
Topical Endoxifen	10M Gynecomastia (25% of all 50-69 yrs) \| 10M Gynecomastia (25% of all 50-69 yrs)
Oral Endoxifen	1M ER+Survivors/5 Yrs \| 200k ER+Breast Cancers/Yr. US
IntraductalFulvestrant	$800MUS sales for presurgery and surgery replacement therapy
Intraductal -Immunooncology (CAR-T)	35K Triple Negative Breast Cancers/Yr.

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Experienced and Credentialed Management Team

Steven Quay, MD, PhD
Chairman and CEO

Has served as CEO, President and Chairman of the Board since incorporation in 2009
Served as Chairman, President and CEO, and Chief Scientific Officer of MDRNA, Inc.
Certified in Anatomic Pathology with American Board of Pathology
Former faculty member of the Department of Pathology at the Stanford University School of Medicine
Experienced physician-scientist, inventor, author, and serial biotechnology entrepreneur who has founded six companies, completed two successful IPOs, and rebranded a seventh company over the course of a career that spans over 25 years

Kyle Guse, CPA, ESQ

Served as Chief Financial Officer, General Counsel and Secretary since January 2013
More than 20 years of counseling life sciences and other rapid growth companies
Involved in all aspects of finance, corporate governance, securities laws and commercialization
Has practiced law at several of the largest international law firms, including Baker Botts LLP and McDermott Will & Emery LLP

Janet Rose Rea, MSPH

Nearly 35 years of industry leadership experience in regulatory affairs and quality
A Washington native, she obtained her B.S. degree in Microbiology from the University of Washington
Conferred a Master’s of Science of Public Health from U. of Washington
Began career in healthcare Miami-based Dade Division of then American Hospital Supply Corporation (now Baxter)
Held key roles at Genetic Systems and Immunex Corporation (helped initialize their first licensed product, LEUKINE®)
Also held positions with MDS Pharma, Targeted Genetics, and executive roles with AVI BioPharma, Poniard Pharmaceuticals, Protein Sciencies Corporation, and Therapeutic Proteins

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Large Market Opportunities

Program	Opportunity
Topical Endoxifen	10M Gynecomastia (25% of all 50-69 yrs) \| 10M Gynecomastia (25% of all 50-69 yrs)
Oral Endoxifen	1M ER+Survivors/5 Yrs \| 200k ER+Breast Cancers/Yr. US
IntraductalFulvestrant	$800MUS sales for presurgery and surgery replacement therapy
Intraductal -Immunooncology (CAR-T)	35K Triple Negative Breast Cancers/Yr.

FDA Expanded Access Approval For Atossa’s Oral Endoxifen

Recently FDA granted approval for an expanded access of Atossa’s proprietary oral Endoxifen in the preoperative setting in a patient awaiting surgery for breast cancer. Atossa partnered with a physician to apply for an Investigational New Drug (IND) application to use its proprietary oral Endoxifen for a pre-menopausal, estrogen-receptor positive (ER+) breast cancer patient awaiting surgery. This FDA approval can be a gamechanger for the firm considering the large untapped market available for estrogen-receptor positive (ER+) breast cancer patients.

Alternative drug, tamoxifen takes time to achieve effective therapeutic levels in 50-200 days, while time to surgery from diagnosis is typically 30-45 days, while oral Endoxifen has demonstrated therapeutic steady-state levels in only 7 days. The firm highlighted to FDA that Investigational New Drug (IND) approach can be used here since it was a similar clinical setting as the Phase 2 ‘window of opportunity’ study of preoperative systemic oral Endoxifen in breast cancer patients in Australia. The patient is currently under medication of proprietary oral Endoxifen preoperatively

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Update: Oral Endoxifen – Phase 2 “WOO” Study

Atossa has partnered with CPR Pharma in Australia for window of opportunity (WOO) study (time period between diagnosis and surgery) for a pilot phase. During this study a daily oral Endoxifen for 21 days in up to 8 ER+ stage 1 or 2 patients are scheduled for lumpectomy or mastectomy. Once the pilot fulfils the desired objectives, the study will be further expanded for 17 additional patients

Update: Endoxifen Regulatory Pathway

Atossa believes their program could qualify for designation under the 505(b)(2) status thus becoming a single clinical study of safety and efficacy and a multi-year market exclusivity is possible outcome.

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Update: Topical Endoxifen – Phase 2 for MBD in Women

The mammographic density has been recognized as the latest risk factor to breast cancer and high breast density that can mask tumors. Atossa has successfully completed the enrollment task of phase 2 of reducing the mammographic breast density (MBD) in Stockholm, Sweden. The objective of the study is to measure changes in the MBD to determine the sample size for subsequent Phase 3 study. Atossa disclosed in November 2018 that some participants in the current MBD Phase II study reported skin rashes and irritation and have withdrawn from the trial. Skin reactions were also observed in the Phase I study, but were not reported as a significant safety or tolerability concern. The firm has enrolled 90 subjects with characteristics of post-menopausal, placebo controlled, double blind where 6 months of daily topical dosing will be provided to accessing the impact and each 3rd and 6th month, the mammograms will determine the success of the study.

Update: Topical Endoxifen for Men

Atossa is planning a phase 2 study of Gynecomastia (breast enlargement and pain) in men since there is no FDAapproved therapeutic is available in the market. The current therapies such as breast bud irradiation, compression garments and plastic surgery haven’t been able to successfully address the issues. The Gynecomastia affects 25% of men ages 50-69 and the major reasons are determined as androgen deprivation therapy to treat prostate enlargement and prostate cancer; anti-anxiety medications; cancer treatments (chemotherapy), and some heart medications.

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Atossa Genetics’ Product Pipeline and Timeline

Capital Structure- Funding Runway- Sell-Side Coverage

Current capital structure (Nov. 9, 2018) of Atossa includes 5.6M shares common stock, 896k shares preferred stock, as converted basis, 3.9M warrants exercisable at $4.05/share, 442K warrants exercisable at $3.78/share, 784k options exercisable at $12.70/share & 3 Million options exercisable at $2.38/share.
As on September 30, 2018, Atossa had $13.0M net cash, which Atossa management believes offers runway through the end of 2019 and significant corporate and development milestones.
The Maxim Group’s Biotech Analyst Jason McCarthy, Ph.D. Published Coverage with a $5 Target Price

Wrapping Up: Atossa Opportunity Conclusion

The breast cancer statistics in U.S. wherein 2018, an estimated 266,120 new cases of invasive breast cancer were to be diagnosed in women, along with 63,960 new cases of non-invasive (in situ) breast cancer along with about 2,550 new cases of invasive breast cancer diagnosis in men, offers significant opportunities for Atossa.

Atossa’s mission offers a ray of hope for convenient treatment. Atossa’s Endoxifen development is in full swing and various studies have moved forward to phase 2 across several segments. Both topical Endoxifen treatment of MBD and oral Endoxifen for the prevention of breast cancer recurrence in tamoxifen-refractory patients as well as topical formulation’s opportunity in gynecomastia offers significant opportunities for the firm to meet the demand of untapped or unaddressed markets.

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Risks, Financials, & Competition

Atossa Genetics has a history of operating losses as has focused their efforts on raising capital and building their products and services in their pipeline. The Company’s consolidated financial statements are prepared using Generally Accepted Accounting Principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses and negative operating cash flows since inception. For the nine months ended September 30, 2018, the Company recorded a net loss of approximately $9.3 million and used approximately $6.5 million of cash in operating activities. As of September 30, 2018, the Company had approximately $13.0 million in cash and cash equivalents and working capital of approximately $10.4 million. On May 30, 2018, the firm announced rights offering that generated $13.3m in gross proceeds ($12.1m net) through the issue of 13,324 shares of Series B convertible preferred stock (SBCPS) and 3,784,016 warrants exercisable at $4.05 per share.On December 20, 2017, Atossa Genetics Inc. (the “Company”) entered into a placement agent agreement with Maxim Group LLC relating to the sale of the Company’s securities (the “Placement Agent Agreement”). Pursuant to the Placement Agent Agreement, on December 20, 2017,

Legal Notes & Disclosure

This report has been prepared by Vista Partners LLC (“Vista”) based upon public information available about Atossa Genetics Inc. (the “Company”). Vista has not independently verified such information, and in addition, Vista has been compensated by the Company for advisory services for up to a one year period. Statements in this report that are not historical facts are “forward-looking statements” that involve risks and uncertainties. Forward-looking statements can be identified by the use of words such as “opportunities,” “trends,” “potential,” “estimates,” “may,” “will,” “could,” “should,” “anticipates,” “expects” or comparable terminology or by discussions of strategy. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements. Additional risks, uncertainties, and other factors are identified under the captions “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in the Company’s reports filed from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the current fiscal year. Vista and the Company disclaim any intention or obligation to update publicly or revise any forward-looking statements, whether as a result of new or additional information, future events or otherwise. The Company is solely responsible for the accuracy of that information. Information as to other companies has been prepared from publicly available information and has not been independently verified by the Company or Vista. For more complete information about the Company, the reader is directed to the Company’s website, www.atossagenetics.com and the Company’s filings with the Securities and Exchange Commission available at www.sec.gov.

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Sources

http://www.breastcancer.org/symptoms/understand_bc/statistics
https://www.sec.gov/Archives/edgar/data/1488039/000161577417003470/s106726_424b3.htm
www.sec.govCancer.gov
http://www.atossagenetics.com/Atossa Genetics Presentation November 13, 2018

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