Neuralstem: Anticipating More Efficacy Data From ALS Trial And Update On New Clinical Trials

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Investment Opinion and Thesis


I don't know nor does thecompany what the efficacy results will be. I think that the efficacy data, when reported, could have a dramatic effect on the stock. I will be looking to see if the stabilization of the disease in the first five patients has been maintained; this would be dramatic. We already know in the case of Ted Harada that he continues to be in better condition than when diagnosed in 2010, which is amazing. Of equal interest will be any signals of efficacy in the six new surgeries.

There are about 25,000 ALS patients in the U.S., making it an orphan drug market. If this procedure could stabilize patients for a clinically meaningful amount of time, the surgery could be priced at orphan drug prices, which range from $100,000 to $300,000 per year. This would suggest a potential addressable market in the U.S. of $2.5 billion to $7.5 billion and perhaps double that on a worldwide basis. Of course, we have much to learn about the efficacy of this product and whether it would be applicable in all patients or just a sub-set. However, it is clear that this could be a very large opportunity.

Neuralstem has been very creative in getting grants and finding partners to fund its trials so that it has been able to maintain a modest burn rate of about $1.5 million per quarter. It ended 2012 with $7 million of cash and recently raised about $8.0 million in a venture debt deal that should extend its cash runway through 2014. Upfront milestones from partnering deals could further bolster cash. I do not see the need for an equity offering in the next year or year and a half.


This report is a follow-up to the initial report that I wrote on Neuralstem on November 6, 2012, in which I initiated coverage with a buy. This report focuses primarily on clinical trials and does not go into a basic overview of thecompany. If you are new to thecompany, you may want to first read the November 5, 2012 report in which I initiated coverage. This is not acompany that can be understood with a few bullet points.

Neuralstem's Research in Amyotrophic Lateral Sclerosis

Understanding ALS

Neuralstem has discovered and developed regionally specific neural stem cells that can be surgically implanted in the spine where they engraft in the grey matter. They then create synapses and release proteins that stimulate growth and functioning of surrounding neurons that have been damaged by disease or injury, thereby improving signaling to peripheral muscles. The initial trial of these stem cells was in amyotrophic lateral sclerosis or ALS, a progressive and always fatal neurological disease that affects motor neurons in the spinal column. These motor neurons project their axons from the spine to control voluntary and involuntary muscle contractions throughout the body. ALS results in loss of control over bodily functions involving muscles. It usually does not affect cognition or the sensations of sight, touch, smell and taste so that mentally alert patients are trapped in a dysfunctional body.

About 75% of patients first start to lose control of voluntary movement in the arms and legs. Others may initially experience problems in swallowing and chewing and a few start with breathing problems. Regardless of where symptoms originate, the disease inexorably spreads. Effects on swallowing and chewing can cause choking and aspiration of food into the lungs. In the terminal stages of the disease, most patients are maintained on feeding tubes and mechanical ventilators. The principal cause of death from ALS is respiratory failure or pneumonia, which is the result of ventilator use. Most patients die within three to five years of diagnosis.

There is only one drug approved for ALS and that is Rilutek, which produces about a three month extension of survival, but has no effect on quality of life. Nevertheless, it is used in about 2/3 of the 25,000 ALS sufferers in the US. This disease has been a graveyard for drug development. The most recent disappointment was the high profile failure of Biogen's ( BIIB ) dexpramipexole. There is huge unmet medical need for a drug to slow or halt the progression of the disease.

Measuring Efficacy Outcomes in ALS

The FDA has approved the use of a validated scale called the Amyotrophic Lateral Sclerosis Functional Rating Scale-Revised or ALSFRS-r to determine efficacy in clinical trials. It measures the change in functionality of 12 different bodily functions: speech: salivation; swallowing; hand writing; cutting food and handling utensils; dressing and hygiene; turning in bed and adjusting bed clothes; walking; climbing stairs; shortness of breath upon exertion; shortness of breath when lying still; and respiratory insufficiency. Each item is ranked by a physician on a scale of from 4 (normal) to 0 (severely disabled) and is equally weighted in the scale.

A healthy person would have an ALSFRS-r score of about 48, while a newly diagnosed ALS patient might score in the mid to high 30s or low 40s; diagnosis is generally about one year after symptoms begin. The scores at time of death are in the mid-teens. These patients tend to decline linearly and lose about 0.9 points per month on the ALSFRS-r scale. A few may experience brief periods (a few weeks) of improvement on this scale, but the decline is inexorable, and improvement, even for a few months, just doesn't occur in the opinion of investigators with whom I have spoken.

Neuralstem's Neural Stem Cells Give Encouraging Signal of Efficacy inPhase I

The first six patients surgically transplanted were advanced stage ALS patients who were non-ambulatory; this meant that the neurons located in the lumbar region of the spine that control the leg muscles were dead. In addition, three of these patients were on mechanical ventilators, indicating that they were in the terminal stage of the disease. As was previously mentioned, breathing is controlled by neurons in the cervical (upper) region of the spine and most ALS patients die of respiratory failure or pneumonia caused by impaired respiration. There was little expectation for seeing efficacy in these initial six patients.

These first six patients received 10 bilateral injections in the lumbar region containing 100,000 cells each. There was little expectation of seeing an efficacy signal because of their late stage condition and the low dosage of cells. The primary objective was to determine the safety of the surgery and the implanted cells. After these first six patients were transplanted and observed for a considerable period of time, the trial enrolled an additional six patients whose disease was less advanced; they were ambulatory.

These six new patients were also given ten injections in the lumbar region containing 100,000 cells per injection. There was some hope for a signal of efficacy because neurons in the lower part of the spine, while damaged, retained some function. Because there were no injections in the cervical region whose neurons control respiration, speech and eating, investigators did not anticipate improvement in these functions, which are usually the cause of death of ALS patients. Moreover, based on pre-clinical studies, thecompany and its investigators believed that 300,000 cells per injection was the effective dose, and the 100,000 cells was believed to be sub-optimal. However, the FDA's focus was on safety.

The outcomes for this first group of six patients, and more importantly, the second six have been followed for some time; they are now two and a half to three years past surgery. The most recently reported results in these twelve patients were presented in mid-2012.

The data that Neuralstem presents on its clinical trials in its corporate presentation shows a steady deterioration in ALSFRS-r scores in the first six non-ambulatory patients who were treated. In ALS patients, investigators tell me that there is a linear decline of about 0.9 points per month for patients treated with standard of care. This would represent a 10.8 point reduction per year. Patients with ALS usually are diagnosed with an ALSFRS-r score in the high-thirties or low forties and often die with a score in the mid-teens perhaps three to five years later.

Turning to the six ambulatory patients, one of these patients died of a heart attack and was not evaluable, leaving five patients who were evaluable. Of these five patients, Ted Harada had a dramatic and unprecedented improvement, something that physicians treating ALS just don't see. They were so surprised they re-diagnosed the patient to confirm that he had ALS. The remaining four patients were stable, which is only slightly less remarkable for this disease. Mr. Harada is a prolific blogger who has documented his treatment. His ALSFRS-r score actually improved and the other four were stable over several months or more than a year. As I mentioned before, almost all ALS patients suffer a linear decline in their ALSFRS-r scores.

In addition to ALSFRS-r, another important observed measure was forced vital capacity in which a spirometer is used to determine the functioning of the lungs by determining the amount of gas that is exhaled from the lungs with each breath. Because, most ALS patients die of breathing complications, this is a particularly important outcome. In the non-ambulatory patient group, three were on mechanical ventilators and their breathing function could not be evaluated. The other three showed a steep decline. Turning once again to the ambulatory patients, all five had stable breathing function over the two years or so. This is really what investigators want to see a drug for ALS achieve.

The next measure was of muscle strength using a hand or foot manipulated dynamometer. There was a general deterioration of muscle strength for the non-ambulatory patients and more stable function for the ambulatory patients.

Ted Harada achieved a remarkable improvement and went public with the information on his blog. He wrote on his blog that in 2010, he was diagnosed with ALS at the age of 38. He said "My left leg fatigued easily. I was short of breath, my energy tapped. I needed a cane to walk. Then came the barrage of tests, the results the same. There is no hope. You are without hope. Then I heard about a clinical trial transplanting neural stem cells into the spinal cords of ALS patients. It was the first of its kind. The Food and Drug Administration approved it and I qualified. I was treated at Emory University Hospital in March 2011. Since then, the deterioration from ALS has temporarily slowed. I even completed a 2 1/2-mile walk to defeat ALS."

Analysts like me are conditioned by experience to be skeptical about drawing conclusions from data based on small numbers of patients and to dismiss extraordinary improvements such as Mr. Harada's as occurring by chance. The most dangerous words in the English language are "this time it's different," but the situation with Neuralstem's neural stem cells in ALS may be different. In addition to Mr. Harada's remarkable story, four other evaluable patients have experienced stabilization of their disease as measured by the ALSFRS-r scale for as much as two years. This is almost as striking as the Harada story. It seems to me that the data created in these five patients is suggestive that there is a therapeutic benefit associated with Neuralstem's stem cells.

Mr. Harada was later interviewed by Fox television and on that interview, Dr. Eva Feldman, the principal investigator in the trial, was quoted as saying, "We have found the procedure to be extremely safe. In some patients, it appears that the disease is no longer progressing, but it is too early to know if the result from that small number of patients is meaningful." This physician believes that this transplantation procedure has stabilized these five patients.

My interpretation of the table supports her conclusion. I don't want to go through all of the caveats about a sample size of five patients. However, given that ALS patients experience a steady decline in function; this seems to me to be a very strong signal of activity. It is also encouraging that the physiological measures of breathing function and muscle strength are in alignment with the improved measurement of function that is the ALSFRS-r scale.

There are other very important takeaway messages. Neuralstem has demonstrated over the course of three years that the surgery is safe and the cells are safe and well tolerated. The surgery has been less onerous than expected. The original trial protocol planned for patients to be in the ICU for a week and then spend a second week in a step down ward. Instead, they found that patients could be discharged in 3 to 4 days. Investigators have shown that the surgery can be safely done in both the lumbar and cervical regions. A paper presented recently at a conference in Chicago concluded that investigators could implant the cells where they are needed and that the cells will engraft and survive in the grey matter of the spinal cord. This latter conclusion was based on analysis of patients who died.

In summary, I conclude the following:

· There is a strong signal that these cells can stabilize the functional status of ALS patients for perhaps years. If this can be replicated in a larger randomized trial, it would represent a major advance as ALS patients now experience a linear decline in ALSFRS-r resulting in death three to five years after diagnosis.

· The surgery can be safely conducted in the cervical and lumbar regions of the spinal column. The inflammation at the site of surgery resolves over the course of time.

· The cells are safe and well tolerated.

· The cells engraft in the grey matter of the spine where they synaptically integrate and create new circuitry. The cells just don't float around in the intrathecal fluid.

Expansion of thePhase I ALS Trial - Six New Surgeries

Safety was the primary endpoint and the secondary endpoints were the same as for the first twelve patient surgeries. It is hoped that the injections in the cervical region will improve breathing, speech and swallowing more than has been seen so far. This is because motor neurons that control breathing originate in the cervical region. If this is the case, there could be better scores on the ALSFRS-r scale as it contains six measures related to breathing, speech and swallowing. It is also hoped that the therapeutic effect of the cells implanted in the lumbar region previously implanted in three of these patients will be maintained over time.

The last of the six new surgeries was performed in August 2012 and investigators reported on April 29, 2013 that the surgeries were safe and the cells were well tolerated, but there was no comment on efficacy. I have been eagerly awaiting preliminary efficacy results in these six new surgeries and was also hoping for an efficacy update on the five patients who initially responded; there has been no update on these patients since mid-2012. Evidently, the investigators are preparing a paper that will summarize efficacy and safety results in all fifteen patients treated that will likely be published in a peer reviewed journal. It is also likely that this data will be presented at the American Neurological Association Meeting of October 13-15, 2013.

Moving Into aPhase II Trial in ALS

It appears that the ALS community has pressured the FDA into a more aggressive stance. The trial will be done in cohorts of three patients and I don't yet know the breakdown of number of injections in each cohort, the number of cells injected or the number of injections in the lumbar or cervical region. The highest dose yet received by any patient was ten bilateral injections in the lumbar region and five cervical injections of 100,000 cells each. This resulted in a total of 1.5 million cells being injected. Thecompany has indicated that in the sixth and final cohort, patients 16, 17 and 18 will receive 20 injections in the lumbar region and 20 injections in the cervical region of 400,000 cells each making for a total of 16 million cells. The number of cells in the lower cohorts will be less and of course, progression to the last cohort is dependent on safety in the first five cohorts.

Other Upcoming Clinical Trials in ALS and Other Conditions


These programs will produce important and significant amount of clinical data over the next two years.

Mexican ALS Trial

Neuralstem is cash constrained so that it cannot undertake this trial on its own and will only go forward if it finds a partner willing to bear the expenses of the trial. Neuralstem reports that there is considerable interest from partners, but has not issued guidance as to when or if it will sign a partnering agreement. For the sake of discussion, if we assume a partnering deal is done in Q3 2013, the trial could be quickly started and could be completed by Q4 2013 or Q1 2014 with initial results available Q3 2014 or Q4 2014. The regulatory climate in Mexico is less conservative than the U.S.

The Chronic Spinal Cord Injury Trial in the U.S.

Neuralstem was recently approved by the FDA to begin a chronic spinal cord injury trial with NSI-466. Once stabilized, these patients are not as much at risk of death as ALS patients. The FDA wanted to determine the safety results in the ALS program before allowing the spinal cord trial to go forward; it has been on clinical hold for over three years. This trial will use the same cells and surgical procedure as in the ALS trial. The spinal cord injury trial leverages the data and manufacturing that they have created in ALS. It will also be split into thoracic and cervical injections with dose escalation.

In ALS, neurons are dying throughout the spinal cord causing the neuronal circuitry to dysfunction. In the case of spinal cord injury, there is no neuronal signal below the site of injury. The intent is to bridge the gap at the site of injury and restore neuronal function below that site. They will start with ASIA patients who have complete paralysis below the site of injury, meaning they have no sensory or motor function. The FDA is requiring that they start with injections in the lower lumbar region. They will start with 100,000 cells per injection and then dose escalate to 200,000. They will start in the lumbar region and later move to the cervical region.

This trial will be easy to recruit. Readers may recall that Geron was only able to recruit two patients in three years into their spinal cord injury trial because it was an acute spinal cord injury trial. However, the patient had to be treated immediately after their accident so that unless the accident occurred near an investigational site and they were brought there for stabilization, they were not eligible for the trial. Neuralstem will be treating patients who have been stabilized. They can be transported over some distance to the four to five centers participating in the trial. They will be doing surgeries at Grady in Atlanta where the principal investigator, Keith Tansey, works. The other sites are likely to be Philadelphia, Milwaukee, Miami and San Diego.

Ischemic Stroke Trial in China

A third trial using the same neural stem cells as in the ALS and spinal cord trials is scheduled to start in H1 2013 in China. This trial involves patients with chronic motor disorders resulting from ischemic stroke that leaves patients with partial paralysis or cognitive disorders. The cells will be injected directly into the brain instead of the spinal cord. There has been a significant amount of clinical experience involving injections of stem cells into the brain so that the surgical procedure and area of administration of the cells has been established. So far, the stem cells used in this surgery have not been effective.

Neuralstem announced an agreement in April of 2011 with BaYi Brain Hospital in Beijing, China to jointly prepare a clinical protocol for treatment of neurological damage due to ischemic stroke. BaYi Brain will be the site of the trial and Neuralstem will be the sponsor. They are using an FDA compliant protocol, although it will not be registered with the FDA. This will expedite the exportation of the technology from China if the trial is successful. Neuralstem also has a GMP compliant manufacturing facility in China.

This trial is being done under the aegis of the Military Regulatory Agency, which requires only IRB approval to allow the trial to start. Anticipating approval to begin the trial, Neuralstem established a wholly-owned subsidiary in 2010 called Neuralstem China (Suzhou Sun-Now Biopharmaceutical Co. Ltd.). Neuralstem China has constructed a clinical-grade manufacturing space, and has obtained the license required by the Chinese government for doing business in China. Neuralstem has stated that China has several different regulatory paths to commercialization and that its strategy is to pursue each path simultaneously.

Acute Spinal Cord Injury Trial in Korea

A partner, CI Cheil Jadang, is also doing an acute spinal cord injury trial in South Korea. This is similar to the trial design used by Geron ( GERN ) in the U.S. The IND from the Korean government is expected in Q2 2013. The trial should start in H2 2013 pending approval of the Korean FDA. The goal is a return of motor sensory function to patients. Neuralstem is just getting milestones and royalties, although it will be helping with the trial.

Small Molecule Program, NSI-189

Neuralstem has capitalized on its ability to grow hippocampal cells in a culture dish to develop a novel new small molecule drug. The hippocampus is the area of the brain that is associated with psychiatric and cognitive disorders; these diseases appear to cause atrophy of the hippocampus. The hippocampus is virtually unique in its ability to grow new neurons so that Neuralstem focused on finding a drug that could stimulate the growth of new neurons. It selected for development a small molecule that has been shown to increase hippocampal volume by up to 20% in animal models. It is believed to do this through increasing the number of synapses and may be the first drug in the world that can do this.

Neuralstem had a major advantage in the development of this drug. Other drug developers must decide on a molecular target in the brain and develop a drug that will interact with the target, which may or may not have a therapeutic effect. Neuralstem can take a different approach by screening drugs against hippocampal cells in a culture dish; it is the onlycompany with the ability to grow hippocampal cells. It can be agnostic about the precise target and just look for a molecule that can cause neurogenesis.

The objective of the screening program was to develop a small molecule drug that can increase neurons in the hippocampus and enlarge its size. Hippocampal atrophy is implicated in major psychiatric and cognitive disorders. This drug may actually regrow the hippocampus, inducing up to a 20% increase in hippocampal volume. It believes this is due to synaptogenesis. This is the world's first truly neurogenic drug that is designed to specifically increase the number of synapses in the hippocampus.

The genesis for this program was the U.S. Army, which wanted a compound like this to treat brain injuries and post-traumatic stress syndrome for the War Fighter of the Future program. Neuralstem received $2.5 million from the army and $0.5 million from NIH to help in development. The result was a discovery of a new class of drugs, which have been the subject of new patents covering both the class of drugs and individual molecules; the lead compound is NSI-189.

Disclosure: I am long [[CUR]]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with anycompany whose stock is mentioned in this article.

See also Bull Of The Day: Integrated Device Technology on

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: BIIB , CUR , GERN



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