Brainstorm Cell Therapeutics: Poor Cash And Specific Risks Make This An Avoid

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About: Brainstorm Cell Therapeutics Inc. (BCLI)
by: Avisol Capital Partners
Summary

BCLI is developing stem cell therapy targeting Amyotrophic lateral sclerosis.

The company has very little cash. Moreover, its phase 2 data was disappointing.

Based on these reasons, I will be avoiding this stock.

Brainstorm Cell Therapeutics (BCLI) is targeting Amyotrophic lateral sclerosis (ALS), a progressive neurological disease famously associated with Lou Gehrig, the baseball player. This is a type of motor neurone disease that destroys nerve cells and causes disability. Fellow contributor Wall Street Titan wrote,

“According to the Center for Disease Control, about 12,000-15,000 people in the United States have ALS and every year about 5,000 more people are afflicted.”

The science

BCLI is using a stem cell-based approach to treat the disease. Their lead candidate is called NurOwn, and it is an autologous cellular technology platform targeting neurodegenerative diseases. The platform harvests mesenchymal stem cells (MSCs) from the patient's own bone marrow. The technology harvests and differentiates these cells in such a way that they secrete higher levels of NTF or neurotrophic factors. Per the company, the process produces MSC-NTF cells in the following degree:

Source

Neurotrophic factors are a class of molecules that “enhance the growth and survival potential of neurons.” A number of them have been investigated for treating neurodegenerative diseases. Their inability to effectively cross the blood-brain barrier is a problem; in order to overcome this, they are delivered through cell and gene therapies instead of direct delivery to the brain.

Catalyst

BCLI's lead drug candidate NurOwn is in a phase 3 trial targeting ALS. Interim analysis and safety data are due by July 2019. Topline data is due by mid-2020.

NurOwn has another phase 2 trial in Progressive Multiple Sclerosis. This trial will yield data by February 2020.

Previous trial data

In 2016, BCLI announced results from a phase 2 trial of NurOwn in ALS. There were 48 subjects, with 36 taking the drug and 12 placebo. Trial was conducted in the USA (note that BCLI is an Israeli company). Patients were followed monthly for approximately three months before treatment and six months following treatment, assessed at 2, 4, 8, 12, 16, and 24 weeks. The data produced is voluminous, complicated, and meant to take away your focus from the key finding - to which we will come in the Risks section below. Let's take a quick look at the data first. I will quote the important sections:

The study achieved its primary objective, demonstrating that NurOwn was safe and well tolerated. NurOwn also achieved multiple secondary efficacy endpoints, showing clear evidence of a clinically meaningful benefit. Notably, response rates were higher for NurOwn-treated subjects compared to placebo at all time points in the study out to 24 weeks….

The pre-specified efficacy analyses were: change in the slope of Amyotrophic Lateral Sclerosis Functional Rating Scale (ALSFRS-R) score, change in Slow Vital Capacity (SVC) and muscle strength, responder analysis (the percentage of subjects who improved post-treatment compared with pre-treatment), and a subgroup analysis excluding slowly progressing patients who are less likely to have a detectable benefit from NurOwn.

The data goes on to describe signs of efficacy seen in the trial. Most of the above endpoints saw signs of efficacy. However, a phase 3 trial will be needed to confirm these because this trial was really not powered for efficacy. What it was powered for was safety, and as we will see, this was not too satisfactory.

Execution

The company has a market cap of $86.18M, a cash balance of $10.27M as of the December quarter, and burn is -12.39M. Conditions are precarious.

Here’s a chart showing recent insider buy/sells:

Source

Competition

Two medications are FDA-approved for ALS - riluzole and radicava. Here’s what the Mayo Clinic says about them:

  • Riluzole (Rilutek) - This drug appears to slow the disease's progression in some people, perhaps by reducing levels of a chemical messenger in the brain (glutamate), that's often present in higher levels in people with ALS. Riluzole is taken as a pill and may cause side effects such as dizziness, gastrointestinal conditions, and liver function changes.
  • Edaravone (Radicava) - The FDA approved edaravone in 2017 based on the six-month clinical trial that showed it reduced the decline in daily functioning associated with ALS. The drug is given via intravenous infusion (typically 10-14 days in a row, once a month), and side effects may include bruising, gait disturbance, hives, swelling, and shortness of breath. Edaravone contains sodium bisulfite, which may cause serious allergic reactions in people with sulfite sensitivity.

Neuralstem (NASDAQ:CUR) is the only other company with a competing stem cell approach to ALS. It uses human spinal cord-derived neural stem cells (HSSC) to stabilize functioning of amyotrophic lateral sclerosis (ALS) patients.

Risks

We cited Wall Street Titan, who wrote a bearish article on BCLI in 2017. The stock is not well-covered on Seeking Alpha, and anyway, that article is still relevant because there has been no new trial data since that time. In that article, the author says that, first, the trial was not powered to test efficacy, but then, he goes on to complain that the trial only shows “there is no evidence that the patients treated with NurOwn have seen the disease either stabilize or reverse by the end of the 24-week trial.”

I think the author is being a bit unfair to BCLI because they have clearly said that the primary endpoint of the trial was safety and tolerability, not efficacy.

However, on the safety front, the author makes statements that are more pertinent. Citing an AE chart, he/she says that the AEs definitely appear to be more on the drug arm than in placebo. This is hardly surprising, however; you will be hard put to find a drug trial with placebo in control where AEs are less in the drug arm. What’s important is that there were no SAEs serious enough to cause drop-outs.

However, what concerns us - and what the author also notes but doesn’t elaborate on - is this statement:

"Post-therapy SAEs related to disease progression (e.g. G-tubes) were more frequent in the MSC-NTF cells group."

Why would NurOwn-treated patients have more frequent SAEs after therapy? And worse, why would these be disease progression-related SAEs? Obviously, disease progression was more frequent in treated patients. So, if 100 people take the drug and 100 people take placebo, more people taking the drug will have progressive disease after therapy? That’s unbelievably bad, needs an immediate explanation, and with or without any explanation the company may put forward, is the single biggest reason I would not invest in BCLI.

In order to look for an explanation, here’s what the company said:

“Post-therapy serious adverse events (SAEs) tended to occur more frequently in active-treatment patients (8/36, 22.2%) than in placebo patients (1/12, 8.3%). Most SAEs were related to the progression of the underlying ALS, most commonly dysphagia. No SAEs were related to study treatment.”

So, it seems what they are trying to say is that this was a chance occurrence and that drug-arm patients were sicker to begin with, or somehow developed progressive disease, but it was not treatment-related. However, the difference is quite large, 22.2% vs. 8.3%. This is too large to be a coincidence.

The other reason is their precarious cash position. With only a few million dollars in hand, this company is on the verge of dilution, or bankruptcy, or both. No investor in his senses should look at a company in such a situation, especially given reason number 1 above.

Opinion

Due to the risks outlined here, and the cash position, we are staying away from this company.

Disclosure: I/we 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.