Quiet Altus Pharma Has Big Things in Store

Altus Pharmaceuticals(ALTU) has a novel drug-enhancement technology, two products entering phase III clinical trials, and most recently, a collaboration with one of biotech's biggest players.

But one year after going public, this young biotech firm still keeps a fairly low profile.

If you haven't gotten to know Altus yet, now is a good time, before the phase III trials begin in the second quarter and the news flow gears back up. Altus' lead product, known as ALTU-135, is a pancreatic enzyme-replacement therapy for cystic fibrosis and other diseases.

Highly pure, with more stability and improved convenience and dosing compared with existing products, ALTU-135 should be able to grab a significant chunk of a $600 million to $700 million worldwide commercial opportunity.

The second late-stage product in Altus' bag is ALTU-238, an extended-release human growth hormone that appears to be potent enough to allow for once-weekly injections. Existing human growth hormones -- a large, $2 billion market -- require daily injections. In December, Genentech(DNA) signed on as Altus' development and marketing partner for ALTU-238.

It's Altus' core technology platform that ties together these two drug programs -- and the rest of the company's early-stage pipeline. Altus has figured out a way to produce crystallized formulations of protein drugs at commercial scale.

Crystals are pure and highly stable (think table salt), which is one reason why Big Pharma has focused historically on developing small-molecule drugs in crystalline form. Proteins, on the other hand, are larger molecules, more complex and therefore harder to crystallize.

Confused? A couple of examples borne of Altus' technology platform will help clarify. ALTU-135, its pancreatic enzyme-replacement therapy, is a single capsule taken by patients before every meal. Existing pancreatic enzymes, by comparison, are less potent, which forces patients to swallow three to five larger capsules per meal.

Likewise, the slow release of human growth hormone from the protein crystals that make up ALTU-238 are what should allow the therapy to be dosed weekly.

Biotech companies -- and stocks -- are typically associated with a very high level of risk due to the uncertain nature of drug development, not to mention the guessing game that can be the Food and Drug Administration. But in Altus' case, clinical and regulatory risk is reduced because the therapies and diseases the company is attacking are very well understood, with plenty of scientific and commercial precedent.

Altus was spun out of Vertex Pharmaceuticals(VRTX) in 1999 and went public in January 2006, selling 7 million shares at $15 that raised $95 million. On Thursday, Altus' stock closed at $18.53, which gives the company a $425 million market cap and $344 million enterprise value.

Altus Pharmaceuticals (ALTU:Nasdaq)

A look at Altus' chart shows the stock on a nice run -- it's up almost 60% since August, when a manufacturing glitch in the ALTU-135 program rocked investor confidence. That problem has been fixed, and ALTU-135 is back on track with only a small delay in timelines.