Exciting Stem Cell Investment Candidates With Near-Term Catalysts

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 |  Includes: ATHX, CLBS, CUR
by: Chemistfrog

(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)

2013 has proven to be yet another exciting year for the stem cell sector. Clinical trials have yielded exciting results with more hope becoming evident in the many applications of the technology. While final marketing approvals have been few and far between thus far for the sector, many companies have been advancing trials to the registration phase of development with just a few short months to final data. Investors may find significant value in many of the publicly traded entities with much upside possible with wise decisions. Below I wish to present a review for what I believe to be three of the more exciting members of the sector with a brief overview of each company's financials and the potential upcoming catalysts that could yield increased investor interest in the coming weeks. Remember, these companies are still in the development phase of their life cycles, with limited revenue for two of the candidates and the other still operating in the red despite growing revenue. Each company's finances should be viewed carefully with the understanding that financing of some sort is likely at some point in the future whether imminently or in the months ahead.

Athersys (NASDAQ:ATHX) investors have enjoyed one of the best years in terms of returns on their investments with the company keeping the sector abuzz with its MultiStem® technology. Shares that closed at $1.06 on December 31st are now trading over $1.60, topping at $2.42 in April as the company's platform continues to progress and validate itself. MultiStem®'s therapeutic properties are exciting in that the technology works through multiple mechanisms of action. Just as exciting is the efficiency of the technology as the company claims millions of dosages can be obtained from a single donor. With a claimed long storage life while being frozen of several years, the product's most promising properties for the company -- therapeutically and financially-- is that it is an "off-the-shelf" product, meaning that it requires no tissue matching and is therefore universal with regard to its targeted patient set.

A good summary of Athersys' year can be found in its Q1 and Q2 results. With so much potential promise in MultiStem®, all eyes are on actual efficacy and safety validation in the form of expected interim Phase II data in Q1, 2014 for an ulcerative colitis indication with partner, Pfizer (NYSE:PFE). Primary endpoints for the double blind, placebo-controlled trial for safety are incidence and severity of adverse events. Athersys announced the collaborative agreement with Pfizer in late 2009 with the company eligible to receive up to $105 million from Pfizer from the agreement upon completion of certain milestone events. While specific details on the agreement were not released, solid interim data would not only help to validate the product's potential, but could give an indication on the potential for near-term milestone payments. An additional near-term catalyst is the anticipated announcement from the company of additional clinical sites in the U.K. to expand enrollment of the company's Phase II trial for patients who have suffered an ischemic stroke. The announcement was made in April, but the company hasn't yet announced final approval or the final preparations and readiness of the clinical sites to begin accepting patients. The Phase II study is expected to enroll 136 patients and is currently enrolling already at multiple centers throughout the United States.

Athersys burned through roughly $4.2 million in Q1 and $2.4 million in Q2, ending June 30th with $18.9 million in cash and equivalents, indicating a need of financing of some sort in mid to late 2014. The company announced on October 24th that it was releasing Q3 financials and company update on November 14th. Although I wouldn't necessarily expect huge news from the 10Q, I would expect clarification on when in Q1, 2014 the Phase II ulcerative colitis could yield data. Q4 could certainly see much volatility and interest as this important data approaches. Only time will tell how this anticipation will affect the company's current $92 million market capitalization.

NeoStem (NBS) has had an exciting year with many positive developments. Unlike Athersys, its shareholders have not yet experienced a significant return on their investments for 2013. On an adjusted reverse-split basis, shares that closed December 31st, 2012 at $5.96 are now trading at $6.35 for only modest gains, although 52-week highs of 9.89 back in September did represent possible gains of 66% YTD. NeoStem is comprised of multiple divisions, each with a specific focus predominantly in the stem cell sector. In terms of its pipeline, NeoStem's lead product candidate is AMR-001, under development through the company's Amorcyte division. The therapy is currently being evaluated for the preservation of heart function after a severe myocardial infarction (heart attack). Termed the "PreSERVE" trial, the clinical is a randomized, placebo controlled, double-blind study designed to treat 160 patients with enrollment completion expected in 2013 and data expected 6-8 months after final patient treatment. On September 17th the company announced the Data Safety Monitoring Board (DSMB) recommended continuation of the trial after a third interim data and safety review of the patients. With an indication targeting a large unmet need, the readout in what appears to be mid-2014 will be a huge catalyst and one that interested investors should consider for run up potential. NeoStem's Athelos division is also on the move clinically with a July 15th announcement that it had reached an agreement with the University of California, San Francisco and the laboratories of Jeffrey Bluestone, PhD, and Qizhi Tang, PhD, to collaborate on the development of human Regulatory T cells ("Tregs") for the treatment of type 1 diabetes. With no subsequent updates on the planned Phase II trial to target the disease, which affects 340 million people worldwide, updates for this collaboration are forthcoming and should be construed as imminent.

Like most stem cell companies, NeoStem does incur costs as a result of its pipeline research. However, the company does offer a bit more for the more risk-averse investors as it is fairly unique in the sector with a growing revenue stream as a result of the company's Progenitor Cell Therapy (PCT) division. PCT is a CDMO (contract development and manufacturing organization), which has had yet another exciting year with multiple contract awards and expansions. The division supports cell therapy manufacturing for clinicals in stem cell and immunotherapy programs for therapies at multiple levels of development and was responsible for clinical-phase manufacturing of Dendreon's (NASDAQ:DNDN) Provenge®, the first FDA-approved immunotherapy agent for cancer. In 2013 alone, the division announced agreements with the following entities:

  1. Hackensack University Medical Center for a cell processing and storage services agreement.
  2. Adaptimmune for the manufacturing of its NYESO-1c259-T cell therapy product under development for multiple oncology indications.
  3. Sentien Biotechnologies to provide services to support the development of its cell therapy product, including technology transfer, staff training, and manufacturing.
  4. MedStar Georgetown University Hospital in Washington, D.C. to provide cellular therapy services for cellular products provided by MedStar Georgetown University Hospital ("MGUH") and deliver the cellular therapy products to MGUH for patient care.
  5. ImmunoCellular Therapeutics (NYSEMKT:IMUC) manufacturing services to support research and development of its ICT-121 cell therapy product candidate, a dendritic cell vaccine targeting CD133 cells. PCT already provides manufacturing services for IMUC's lead product candidate, ICT-107 under development to treat glioblastoma multiforme (GBM), a formidable brain cancer in a Phase II trial well underway.
  6. ATMI, Inc. (NASDAQ:ATMI) collaboration enabling PCT and its affiliates to offer to their respective clients access to the Integrity®Xpansion™ technology platform from ATMI.

Although not mentioned in a press release in 2013, investors should certainly be aware of a pivotal Phase III trial currently underway that is sponsored by Baxter International (NYSE:BAX). The trial is evaluating Baxter's adult autologous CD34+ stem cells to evaluate safety and efficacy in treating patients with chronic myocardial ischemia (CMI). Increase in exercise capacity will be measured at 12 months following treatment as well as reduced occurrence of angina at 12 months after treatment. Enrollment of the trial began in February of 2012 with approximately 450 patients expected to ultimately be enrolled. NeoStem's PCT division is conducting the cell processing for the trial in which final data will be utilized in a regulatory marketing application once available. Not only does the ongoing trial represent current income for PCT, but success in the trial could very well mean that PCT could be the provider of the therapy on a commercial basis upon regulatory approval. Updates on this trial should be considered to be significant for not only Baxter but also NeoStem as developments unfold and data are presented.

NeoStem reported its Q2 financials and corporate update on August 8. Revenue for the quarter was $4.4 million with a net loss of $8.6 million. The company had $14.7 million in cash as of June 30th with an additional $3.9 million subsequent to the end of that quarter as announced in the press release from warrants and issuance of stock. The company has raised additional funds since then with gross proceeds announced on October 9th of $40,250,000 at a price of $7.00 per share. With a quarterly cash burn rate in 2013 of roughly $8.5 million, NeoStem should be adequately funded through 2014 depending on revenue increase as a result of its growing customer base. With cell therapy customers in both the stem cell and immunotherapy sectors, NeoStem's PCT division should provide for many company updates in 2014 and beyond for the exciting $172 million stem cell company. With financing already out of the way for at least the foreseeable future, NeoStem does appear to be poised for gains from current levels with multiple possible catalysts in the clinical and manufacturing divisions in the near future.

Neuralstem (NASDAQ:CUR) shareholders have been rewarded in 2012 with gains of over 115% over December 31st, 2012 closing price of $1.09. Shares closed Tuesday at $2.50, just under the 52-week high of $3.02 but with a bullish chart for the past quarter particularly. Like NeoStem and Athersys, Neuralstem has had an exciting and news-filled 2013. The company is taking a targeted approach for it therapy product line by growing specific and already-differentiated cells and infusing them into targeted regions. For example, Neuralstem is infusing its human NSI-566 stem cells only for spinal cord treatment indications. While the company appears to be focusing on many regions of the central nervous system (CNS), much of 2013's focus has been on indications utilizing NSI-566. In its March 15, 2013 review of 2012 and clinical updates, the company noted that it had five trials planned utilizing NSI-566. The most noteworthy of these trials was announced on September 10th as the Neuralstem announced commencement of dosing a Phase II trial utilizing NSI-566 to treat amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease). The 15-patient trial is expected to complete enrollment sometime in Q2, 2014 and could begin drawing investor and healthcare sector attention as data release approaches soon thereafter. The primary goal of the trial will be to determine maximum dosages as part of its safety study, with likely secondary endpoints to evaluate efficacy via quality of life maintenance and longevity. The company received FDA approval to commence a trial to evaluate NSI-566 for the treatment of chronic spinal cord injuries on January 14th, with no announcement yet on its enrollment initiation, which should be construed as an imminent catalyst.

Neuralstem mentioned another NSI-566 trial in its Q2 update evaluating the therapy's safety in ischemic stroke via a Phase I/II trial (to be conducted in Beijing, China at BaYi Brain Hospital) that began enrollment in August or September and would take about 7-8 months for the dose escalation study. This should reach enrollment completion in March or April, another catalyst interested investors should consider. Afterward, a full Phase II multi-site, randomized, controlled, single-blind study with up to 100 patients, designed to evaluate efficacy and safety for clinical proof-of-concept, would ensue for the same indication.

In reviewing NSI-566 data as it becomes available in the near future, investors should consider reviewing early clinical and preclinical data. A particularly-exciting preclinical data set was announced on August 1st in which rats with irradiated brains that were subsequently treated with NSI-566 stem cells experienced "improved hippocampal spatial memory as well as contextual fear conditioning performance, a brain function that relies on intact amygdala function" relative to the non-treated counterparts.

Neuralstem had $11,166,000 in cash and equivalents as of June 30th with an average quarterly loss of $4,921,000 in 2013. Subsequent to the Q2 financials release, the company raised an additional $4,056,000 via a registered direct offering as announced on September 5th. Depending on increases in research costs associated with additional trials beginning enrollment, Neuralstem should be adequately funded into Q2, 2014. With multiple trials underway and others set to begin enrollment soon, catalysts should be plentiful in the coming months and could keep investor interest strong for this $182 million market capitalization stem cell company.

Presented above were three stem cell candidates that I believe are worthy of investment consideration in Q4, 2013 and beyond. Each of these companies is largely development-stage by definition and should be considered as high risk relative to the more stable and proven revenue-generating companies that more conservative investors may consider. With clinical trial data expectations only to be considered as speculative until officially released, upside and downside risk can be significant. Positive data for the mentioned clinical trials could mean not only possible marketing approvals later for the indication, but they could also help validate each company's development platform and give indications of possible safety and efficacy for many other indications. The opposite can also be true with much downside possible due to poor safety or efficacy results. I advise interested investors to perform much additional research into each of the presented companies before making final investment decisions on either.

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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.