Neuralstem Update Fails To Excite, All Eyes On Upcoming Phase II Trial

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 |  About: Neuralstem, Inc. (CUR)
by: Bio Insights

Following a clinical trial update press release on March 15th 2013, the stem cell company Neuralstem (NYSE: CUR) saw limited excitement in the market over its stem cell line NSI-566. While shares have moved off their lows for this year, the overall trend is starting to look a bit bearish.

Neuralstem, like many stem cell stocks, is especially sensitive to news releases both good and bad due to its large retail investor base. About four out of every five shares are owned by a non-institutional investor, which is quite surprising considering how early in development NSI-566 and the rest of Neuralstem's pipeline is in development. Given what we know about CUR, I found it quite surprising that the recent press release didn't move the stock more to the upside. Here is an excerpt from that particular press release:

Dr. Johe continued, "2013 promises to be a transformative year for the company, with five NSI-566 cell therapy trials planned. The two new U.S. trials will be the ALS Phase II, and the recently FDA-approved Phase I in chronic spinal cord injury. We hope to have agreements with multiple sites for the Phase I chronic spinal cord injury trial in place by the end of the 2nd Quarter and then begin the transplantations. Internationally, our ischemic stroke trial is expected to commence in Beijing at world-class BaYi BrainHospital in the coming weeks, through our subsidiary, Neuralstem China. A planned ALS combined Phase I/II is expected to take place in Mexico City, pending finalization of a partnership agreement. Later this month, we expect to file an IND for an acute spinal cord injury trial in Seoul, South Korea, which we anticipate conducting with our partner, CJ CheilJedang.

Anyone who believes in NSI-566 would probably be happy about all the news pouring in about its ongoing development, but Neuralstem continued to trade very weakly. Are investors starting to lose their faith in the company's cell line?

This is a distinct possibility, although it may simply be a matter of having phase II trial results in hand before making any more assumptions. It's also likely that recent insider selling of CUR common stock by Richard Garr and Karl Johe have caused major skepticism from the company's investor base, as the company hovers dangerously close to the $1/share mark to top it off.

Going back to 2012, notice that Neuralstem was struggling to break $1/share after May 2012 and dropped as low as $.42/share before the positive results of the phase I NSI-566 trial lifted the shares closer to $1.50/share

NSI-566 is being developed for ALS (Amyotrophic Lateral Sclerosis), spinal cord injuries, and ischemic stroke, which could be profitable indications given that the therapy can endure the long route towards FDA approval. There is also potential for Neuralstem to move favorably after the initiation of the phase II study for NSI-566 in ALS (planned to happen in Q2 2013 according to Neuralstem's comments), and positive results on the phase I trial that is currently in progress for the spinal cord injury indication.

It's good to see that the company is making some progress with its pipeline, but investors should also consider how taxing the next few years could be.

As of December 31st 2012, Neuralstem had $7.4 million in cash and cash equivalents to fund its operations this year. Given the burn rate of roughly $3 million per quarter, the company will likely have to find a way finance itself in Q2 2012. While I'm not involved with Neuralstem and don't know for sure, I find it less likely that they have the option to undergo an attractive debt financing which leads me to believe that there will be a public offering after the next piece of good news about the company hits (and makes an impact).

I think that the initiation of the phase II trial for NSI-566 in ALS makes the most sense, as the investor base will understand that the extra money is needed to bring the phase II data that will bring NSI-566 the efficacy data that it needs to convince the skeptics that this stem cell line has competitive advantages over the others.

Although there have been bits and pieces of good news about NSI-566 thus far, it comes down to this upcoming ALS trial and whether or not the stem cell line can prove its competitive advantage versus other stem cell lines in this particular indication. Due to the uncertainty surrounding this phase II trial, and the high potential for equity financing in the near future, I would avoid CUR for the time being.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.