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Neuralstem: More Than The Winner Of Ice Bucket Challenge

|About: Neuralstem, Inc. (CUR)

Summary

Neuralstem is a niche company in a huge market.

The company is well established with a strong scientific team.

The phase 2 data in January will be a strong catalyst to the stock price.

Neuralstem (NYSEMKT:CUR) is a rather small biotech company. Most investors heard of its name the first time in the recent ice bucket challenge. Neuralstem is focusing on CNS (central nervous system) disease. Though its pipeline consists of stem cell therapy and small molecules, my article just gave an analysis of their stem cell therapy -NSI566.

ALS(Amyotrophic lateral sclerosis), also known as Lou Gehrig's disease,is a rare neurodegenerative disease. 5,600 patients are diagnosed with ALS in US every year. It is estimated that 30,000 patients are living with ALS now all over the country. ALS is a life-threatening disease, most patients died in 3-5 years after diagnosis. The patients lost their ability to move,speak and breath day by day. Take a look at the description here and you will know how much pain the patients and their families take from ALS. There is no cure for ALS(the only approved drug-Riluzole in 1995 just gave an OS benefit of 3 months). So it's a unmet medical need and huge market for drugmakers.

Since the mechanism of ALS is still unknown, the development of anti-ALS drugs are extremely slow and consist of lots of failures (the recent two large scale phase 3 failures:Biogen Idec-dexpramipexole, Cytokinetics- Tirasemtiv ). Due to the complex mechanism and the difficulty of drugdelivery to the nervous system, I don't think small molecules are effective treatment for ALS. At the same time, two stem cell companies (Neuralstem, Brainstorm Cell Therapeutics(BLCI)) both showed very promising results in their phase 1 results. It seems like that stem cells are the only hope for ALS patients now.

History of Neuralstem

Neuralstem was founded by Richard Garr(NYSE:CEO) and Karl Johe(CSO) in 1996. Karl worked in a laboratory of NIH and found a good method to isolate and proliferate neural stem cells from donors which was later developed as anti-ALS treatment-NSI-566. From 1996-2011, Neuralstem had been working very hard in the pre-clinical test of NSI-566's safety profile. Collaborated with two top experts in the field of ASL-Eva Feldman and Jonathan Glass, they did experiments on more than 100 pigs and even had proprietary Spinal Cord Delivery Platform and Floating Cannula specially designed for clinical trail. Finally Neuralstem accumulated enough safety data to get FDA approval for a phase 1 study in 2011. NSI-566 got Orphan drug desiganation and the phase 1 trial was intiated in April, 2011. It was a long run, but 15 years' research paid off.

Spinal Cord Delivery Platform and Floating Cannula - See more at: www.neuralstem.com/cell-therapy#sthash.6...

Spinal Cord Delivery Platform and Floating Cannula - See more at: www.neuralstem.com/cell-therapy#sthash.6... had

proprietary Spinal Cord Delivery Platform and Floating Cannula - See more at: www.neuralstem.com/cell-therapy#sthash.6...

proprietary Spinal Cord Delivery Platform and Floating Cannula - See more at: www.neuralstem.com/cell-therapy#sthash.6...

Spinal Cord Delivery Platform and Floating Cannula - See more at: www.neuralstem.com/cell-therapy#sthash.6...

Spinal Cord Delivery Platform and Floating Cannula - See more at: www.neuralstem.com/cell-therapy#sthash.6...

Groundbreaking clinical results

NSI-566's phase 1 trial was the first FDA approved stem cell trial in ALS. The procedure is quite invasive and Neuralstem successfully developed a device to deliver the stem cells into the body safely. With amazing data in its phase 1 ALS trial(6/18 patients showed improvements, disease progression free for as long as 30 months) , Since then,Neuralstem attracted the attention of many TV channels and newspapers. NSI-566 slowed the progression of ALS and even totally reversed it( it happened in Ted Harada and other 2 patients, which had never been observed in any clinical trials before-). Ted Harada has been living a normal life since he got injections of NSI-566 in 2010. These media reports and the miracle of Ted Harada significantly reduced the risk of the clinical development of NSI-566.Good phase 1 results-6/18 patients showed improvements.

Market analysis

Here I did a simple calculation of the market size of ALS. If the cost per patients is $100,000 annually, the market size is more than 3b (100000*$3,000). The price of the drug depends on the benefits it gives to the patients. For orphan drugs, a price tag of $100,000/year is not expensive. (As a orphan drug, Alexionn's(NASDAQ:ALXN) Soliris costs as much as $38,0000 every year) Since ALS is a orphan disease and CUR has collaborations with the predominant clinics in the field ( Emory University Hospital, Massachusetts General Hospital), the marketing wouldn't be a problem. Once NSI-566 was approved, it would take over the market very easily.

Strong management team and financial status

CUR has a good management team that are highly devoted to the clinical development. Their CEO- Richard Garr is a very smart guy good at business development and strategic collaboration. They got significant NIH grant to cover majority of Phase II trial cost. With only 15 employees in the company, now CUR has 1 phase 2 trial, more than 6 phase 1 trials and 13 clinical sites all over the world.I talked to their CEO Richard Garr once. Mr. Garr told me the only reason he has been working in CUR is that he strongly believes the efficacy of NSI-566

Eva Feldman, the PI(principle investigator) of their NSI-566 trials is the top scientist in ALS field. She works as a consultant of Neuralstem for free, which strongly proved the superiority of Neuralstem's stem cell technology.

The financial status is fine: they has 30M in cash and is burning at 10M annually. It's easy to raise more money if they report positive phase 2 results. Since ALS is a orphan disease and CUR has collaborations with the predominant clinics in the field ( Emory University Hospital, Massachusetts General Hospital),the marketing wouldn't be a problem.

The company is undervalued now.

Neuralstem is quite undervalued now with a 240M market cap. It has completed the phase 2 trial in ALS and the data had been submitted to FDA for the clearance of a phase 3 trial. ALS is a market of more than 3b without competitors. With a 5 times PS, CUR could be a 2b company( 15% penetration rate).

Typically 30% of all phase 2 drugs launched the market. Based on the groundbreaking phase 1 data and the renown scientist of the trial, I think NSI-566 has a greater possibility(more than 30%) to launch the market. A fair valuation of Neuralstem should be 600M(2b*30%). However, there hasn't been any drug approved in ALS since 1995, so investors tend to ignore the huge market. The current price gives us a good return for the risk we face.

Upcoming catalyst

In 5th, January, CUR's competitor-Brainstorm Cell Therapeutics(NASDAQ:BCLI) announced positive phase 2a/ALS results. The price of BCLI almost doubled. The two company utilize two different kinds of stem cells to fight ALS( CUR:neural stem cells. BCLI:mesenchymal stem cells). Neural stem cells are more functionable than mesenchymal stem cells( I attended the stem cells conference in the Mesa and discussed the preference of stem cells with a few experts in the field.) CUR has better phase 1 results than BCLI and I believe the phase 2 results of CUR will be amazing.

stock price of BCLI

CUR is one step ahead in phase 2 trial compared to BCLI. But the data of CUR's phase 2 trial was locked for FDA submission. The phase 2 data is expected to be released in late January. If the phase 2 results are consistent with the previous phase 1 trial, it is very likely to gain a BTD(breakthrough therapy designation) from FDA. Since ALS is taking away thousands of lives every year, FDA may grant a conditional approval to NSI-566 while the phase 3 trail is still ongoing.

The stock price has been staying in the range of $2.4-3.0 in the last 2 months. It's a good time to accumulate the stocks at a price of 2.6 or lower now. The good phase 1 data pushed the price to as high as $4.27 in March,2014.

Positive phase 2 results are very likely to push the price to $6 . It's a company worths keeping an eye on and I will give further analysis of Neuralstem upon the phase 2 results.

January is coming and I really hope Neuralstem could make a difference. Not for the money ,but for a better life of the patients and their families.

Disclosure: The author is long CUR.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are holding CUR's shares