Neuralstem (CUR) is a nano-cap biotechnology company specializing in neural stem cell technology. Neuralstem has two compelling assets: NSI-189 for Major Depressive Disorder (NYSEARCA:MDD) and NSI-599 for ALS.
NSI-189 could be worth upwards of $1 billion, and positive NSI-599 results from the Phase 2 in China present a potentially stock doubling catalyst. Investors can benefit from the FDA approval of either therapy or a buyout of the company.
1.) Neuralstem is developing NSI-189, an entirely novel treatment for Major Depression Disorder (MDD) that works by enlarging the hippocampus in the brain.
2.) The era of multibillion-dollar SSRI antidepressants like Prozac, Zoloft, and Paxil is over. These blockbuster drugs are losing patent exclusivity and over the next few years, major pharmaceutical firms will begin a new cycle in their psychiatry portfolios through R&D or acquisitions. Neuralstem is a potential target.
3.) The market is valuing Nueralstem at a significant discount to its actual value because the likelihood of NSI-189's approval and market potential is underestimated.
4.) NSI-189's success and continued popularity in the nootropic "gray market" suggest that it is effective and a viable alternative to current depression treatments. Several anecdotal reports corroborate this conclusion.
5.) While NSI-189 is the lead candidate, Neuralstem's NSI-599 should not be underestimated. While the drug's U.S Phase 2 was disappointing, tentative new research suggests stem cell treatment for the ischemic stroke indication may be something akin to a "miracle" therapy.
6.) The $25 million investment from Tianjin pharmaceuticals secures Nueralstem's short-term funding and increases the likelihood of a buyout. This investment may demonstrate institutional confidence in NSI-599 for the treatment of ischemic stroke in China.
The Science Behind NSI-189
NSI-189 is a novel small molecule under investigation for the treatment of Major Depressive Disorder. Neuralstem discovered it through a high-throughput screening of over 10,000 neurogenic compounds.
The drug works through what is called hippocampal neurogenesis. Neurogenesis is the process through which new neurons are generated through neural stem cells. NSI-189 facilitates this process in the hippocampus, the part of the brain most known for its role in memory and learning.
NSI-189 has been found to increase the size of the hippocampus. In mouse studies, hippocampal volume increased up to 20%. For this reason, the drug also has the potential to treat conditions related to neurodegeneration or cognitive decline.
In addition to the MDD indication, NSI-189 may be effective for the treatment of the following:
1.) Traumatic Brain Injury
2.) Alzheimer’s Disease
2.) Post-Traumatic Stress Disorder (PTSD)
3.) Stroke and Diabetes
4.) Natural Cognitive And Memory Decline Related To Aging
The PTSD indication seems to have caught the attention of the United States military. And research into NSI-189 is supported by both the U.S Defense Advance Research Projects Agency (DARPA), and The National Institutes of Health (NIH).
NSI-189 successfully completed its Phase 1 in 2011 and demonstrated safety in a trail of 41 healthy volunteers. The phase 1B for MDD was a placebo-controlled, escalation study of 21 patients completed in 2014. NSI-189 was found to demonstrate significantly greater anti-depressant effects than placebo and a moderate increase in hippocampal volume.
Major Depressive Disorder: NSI-189
The link between neurogenesis and MDD is not readily apparent. Depression has been traditionally treated via MAOIs or serotonin reuptake inhibitors 'SSRIs' like Prozac and Zoloft drugs thought to treat depression by increasing the concentration of serotonin in the brain.
New research has found that SSRIs not only modulate serotonin but also stimulate neurogenesis - just like NSI-189.
This could mean that serotonin actually has NO effect on depression and SSRI drugs may not have been treating depression by increasing serotonin in the brain but through their neurogenic 'side effect'. Further evidence for this can be found in Tianeptine, another antidepressant that actually reduces serotonin levels in the brain.
The fact that an anti-depressant could treat depression via the exact opposite effect of traditional SSRI treatments suggests that serotonin may have nothing to do with this condition. What does this mean for NSA-189?
1.) If blockbuster SSRI anti-depressants like Zoloft and Prozac have been working through neurogenesis all along, NSI-189s, as a neurogenic compound, may have similar or greater efficacy because it works in the same way.
2.) NSI-189 may be a more targeted and powerful neurogenic compound than the SSRIs. This may give the drug greater efficacy and a reduced side effect profile compared to drugs that have an unnecessary serotonin modulation.
3.) If neurogenesis has been the hidden treatment for depression, NSI-189's FDA approval may be virtually guaranteed as it is a more targeted therapy. It may work in a similar way to other therapies but be differentiated because of a lower side effect profile.
NSI-189: Grey Market Insights
Is NSI-189 the 'next generation' anti-depressant? For many depressed patients, the answer is yes. The drug already has a cult following in the nootropics community where there is a cottage industry of people using the drug for its supposed cognitive and antidepressant benefits.
I became acquainted with NSI-189 on the Nootropics subreddit. The drug had rave reviews, and people were desperately trying to find a reputable source so they could try the 'brain boosting' anti-depressant for themselves. At this time, Neuralstem was sending Cease & Desist letters to nootropics vendors who were stocking their patent.
Some vendors had both NSI-189 and Bremelanotide, Palatin Technologies (PTN) female libido drug, but they stopped selling the product on Neuralstem's request. However, despite Neuralstem's protests, the gray market trade of NSI-189 continues. Now, instead of American nootropics distributors, the drug is sourced directly from China - typically via Alibaba.
NSI-189 is, surprisingly, also sold on EBAY. And I've seen a few listings on Amazon as well.
Disclaimer From the Author:
I believe NSI-189 is sourced directly from China where regulatory oversight is not as strict as in the United States. On Ebay, many of the listings say 'lab tested,' but after some digging I noticed that the Chinese pharmaceutical firms do the testing themselves, creating a conflict of interest.
In the past, U.S-based vendors independently tested NSI-189 products before selling them, but Neuralstem's legal actions have driven many of the reputable vendors out of the market.
Investors should not purchase non-FDA approved drugs for the purpose of consumption. To get an idea of how NSI-189 is performing for the people who use it, simply read the "experience reports" on Reddit and other communities.
Example NSI-189 Experience Report:
I'm on a cycle right now, 40mg phosphate, I absolutely love this stuff, it's really brought me out of my shell again, have seen improvement in memory, mood and generally dealing with life itself. I'm three weeks in, was going to cycle one month on one month off, I've had no side effects except maybe the first day which felt incredibly "speedy," and I had the tingles at the front of my head.
The Next Generation of Antidepressants
Across the board, mental health divisions see sales declines due to patent expiries on lucrative SSRI anti-depressants. And major pharmaceutical firms are milking the multibillion-dollar market through "patent extender' drugs that offer marginally greater efficacy than their predecessors.
Examples of "patent extender" drugs include Pristiq and Effexor which are essentially reformulations of the SSRI action pioneered by Prozac in the late 80s.
I think these drugs may soon become obsolete - just as MAOIs like Segeline and Nardil eclipsed older Tricyclic antidepressants like Imipramine (discovered in the 50s) only to be eclipsed by SSRIs in the late 80s and 90s. SSRIs have had a long run, but their time is coming to an end. Major pharmaceutical firms are developing novel mechanisms of action to tackle MDD.
NSI-189 is not the only novel antidepressant in development. Several other drugs, most notably of which work on the NDMA receptors, will be hitting the market soon.
Johnson and Johnson (JNJ) is developing a breakthrough therapy called Esketamine, a nasal spray based on the illegal party drug, Ketamine. Allergan PLC (AGN) acquired Naurex, a small Illinois-based biotech for 560 million to get ahold of its NDMA-based depression treatments.
The Naurex acquisition may be a good proxy for the type of deal possible in Neuralstem's future.
Commercialization Potential of NSI-189:
Neuralstem probably will not commercialize NSI-189 on its own, and so this process will be likely be done through an acquisition or partnership. The psychiatry market is ripe for these sorts of deals. But what is NSI-189 competing with?
But what is NSI-189 competing with?
Many novel antidepressant therapies can be safely assumed to represent sales potential of $300-700 million at peak. But what makes NSI-189 a possible billion-dollar drug? I believe this lies in its potentially lower side effect profile, especially compared to the ketamine-based therapies that will soon hit the market.
Right off the bat, it is unlikely for ketamine-based therapies to be sold without a black box warning, REMS or some other restriction. Ketamine is an addictive street drug with significant abuse potential.
While the drug does not carry the same risk of suicidal ideation (in teens and young adults) found in SSRI antidepressants, it will still be unsuitable for developing brains, especially considering that misuse can be fatal. Ketamine has also been linked to permanent cognitive decline - an unacceptable side effect for all but the most depressed patients.
These problems may restrict ketamine therapy to only the most extreme cases of MDD instead of the wider market.
NSI-189, on the hand, is believed to promote cognitive improvements, making it potentially a treatment of choice for depression comorbid with cognitive deficits such as ADHD or age-related mental decline. NSI-189 also shows no sign of addictive potential, and its safety has been supported by both clinical trials and gray market experience reports.
If NSI-189 is as safe as the evidence suggests, it may become the most widely applicable antidepressant on the market, possibly even being safe enough for pediatric use.
Prozac, one of the few antidepressants to earn the pediatric indication reached peak sales of $1.8 billion. Is NSI-189 the next Prozac? The drug's cognitive benefits may take sales even higher than Lilly's (LLY) iconic blockbuster treatment.
The Science Behind NSI-599
NSI-566 is Neuralstem's patented human spinal cord stem cell (HSSC) designed to be implanted directly into the patient. The therapy was originally indicated for the treatment of ALS, and in Phase 1 and 2 trials it was implanted directly into the gray matter of the patient's spinal cord.
The trials had mixed results, and the market was not impressed. Neuralstem largely abandoned its NSI-599 project and switched focus to the more promising depression treatment.
However, while NSI-566 has hit a roadblock in the United States, the is new promise for the drug in China - for a new indication, Ischemic stroke.
Neuralstem began its Chinese Phase I/II trial for ischemic stroke in 2014 under the firm's wholly owned subsidiary Suzhou Sun-Now-Bio Pharmaceutical Co. Ltd. In Shanghai.The neural stem cells are injected directly into the brain. The goal is to determine a safe dosage and measure efficacy.
What is the likelihood of approval?
I do not think the market is accurately valuing the potential of NSI-566 and the viability of neural stem cell therapies for this indication.
In late 2016, the Stanford University Medical Center released data from a test conducted on 18 patients who suffered strokes between 6 months to 36 months. According to the findings, this treatment proved safe and effective.
Substantial improvements were seen in patients' scores on several widely accepted metrics of stroke recovery. Perhaps most notably, there was an overall 11.4-point improvement on the motor-function component of the Fugl-Meyer test, which specifically gauges patients' movement deficits.
This wasn't just, 'They couldn't move their thumb, and now they can.' Patients who were in wheelchairs are walking now,"
- said Steinberg, who is the Bernard and Ronni Lacroute-William Randolph Hearst Professor in Neurosurgery and Neurosciences. He also added, quote:
We know these cells don't survive for more than a month or so in the brain, yet we see that patients' recovery is sustained for greater than one year and, in some cases now, more than two years. We thought those brain circuits were dead. And we've learned that they're not.
I believe Stanford University has conducted an essentially similar study compared to the one Neuralstem is conducting in China. The fact that the studies at Standford proved so successful is an indicator that the results out of China pose a potentially stock doubling catalyst when they are released.
Market Potential for NSI-566
NSI-566 has a potential market in both China and the United States, two nations representing the largest market for such treatments. In the United States, around 800,000 patients survive strokes every single year. This number, combined with a number of patients currently disabled for stroke in the past, mean NSI-566 could be a potentially billion dollar + therapy if it is effective.
The market potential in China, where NSI-566 is likely to be first commercialized, is even greater than the U.S. China has the largest number of stroke victims at 1,750,000 annually. And not only does China's significantly looser regulations make commercialization much more likely, but the nation's medical tourism industry provides a truly global marketplace for stem-cell based therapies in the country.
The Chinese also seem to lack much of the "ethical" roadblocks faced by this science in the United States and may be willing to try treatments that would never fly in the West. Interestingly enough, the idea of using fetal brain stem cells to heal an illness of the brain fits quite nicely with traditional Chinese philosophies about medicine. If you want to become smarter, eat animal brains, if you want to improve your libido eat something else.
Tianjin Pharmaceutical Corp, a Chinese healthcare giant, seems to be convinced of the market potential of NSI-566. And they have demonstrated their faith in the drug via a $20 million strategic investment. I don't think the market appreciates the fact that this investment may have been a vote of confidence in NSI-566 and may be a prelude to a buyout of Neuralstem's Chinese subsidiary.
It is impossible to accurately estimate what NSI-566 will be worth if it approved, but Neuralstem investors have two major catalysts coming up in regards to this therapy.
1.) Release of Phase 2 data from China
2.) A buyout of Neuralstem China or NSI-566 Chinese licensing rights.
Due to the vast size of the ischemic stroke population, NSI-566 could potentially be worth billions. Assuming the drug is worth $1 billion if approved and marketed in both the U.S and China, and applying the 9.6% likelihood of approval for neurology drugs, NSI-566's RAV is around $96 million.
All investments have risks, and Neuralstem is no exception. Neuralstem is a binary investment, and if the FDA trials don't go well, the stock doesn't have much going for it. The company's recent cash investment will be enough to take NSI-189 through Phase 2 (the time horizon of this thesis) but afterward, a dilutive capital raise will probably be necessary.
Nevertheless, Neuralstem is the most compelling biotech opportunity I have ever seen. Both of the company's lead assets, NSI-189 and NSI-566 have billion dollar potentials the market is ignoring. With Phase 2 results expected in the third quarter of this year (any moment now), there is a near-term catalyst for massive upside.
It is impossible to accurately value pre-commercialized assets, but if Neuralstem's drugs are as viable as they look, a $300-$700 million-dollar buyout is a real possibility, and this would be many multiples of the company's $70 million market cap. Nevertheless, all investments have risks, and this stock is no exception. Neuralstem is a binary investment, and if the FDA trials don't go well, the stock
Disclosure: I am/we are long CUR.
Additional disclosure: This article was written several months ago.