By Jason Napodano, CFA

Neuralstem, Inc. (NYSE MKT:CUR) has developed a technology that allows large-scale expansion of human neural stem cells (“hNSC”) from all areas of the developing human brain and spinal cord. The company owns of has exclusive license to 25 patients and 29 patent applications pending worldwide in the field of regenerative medicine and cell therapy. Management is currently focusing the company’s efforts on replacing damaged, malfunctioning, or dead neural cells with fully functional ones that may be useful in treating many central nervous system diseases and neurodegenerative disorders.

Neuralstem’s lead development program is for Amyotrophic Lateral Sclerosis (“ALS”), also known as Lou Gehrig‘s disease, named after the famous New York Yankee first baseman who was diagnosed with the disease in 1939, and passed in 1941 at the age of only 37.

ALS Background

ALS is a rapidly progressive neurodegenerative disease characterized by weakness, muscle atrophy and twitching, spasticity, dysarthria (difficulty speaking), dysphagia (difficulty swallowing), and respiratory compromise. The disease is almost always fatal, typically due to respiratory compromise or pneumonia, in two to four years. Initial symptoms of ALS include weakness and/or stiffness followed by muscle atrophy in the arms and legs. This is followed by slurred speech or difficulty swallowing, and loss of tongue mobility. Approximately a third of ALS patients also experience pseudobulbar affect (uncontrollable emotions). As the disease progresses, worsening dysphagia and respiratory failure leads to death. A small percentage of patients may also experience cognitive affects such as frontotemporal dementia and anxiety.

The vast majority (~95%) of cases are idiopathic, although there is a known hereditary factor that leads to familial ALS associated with a defect on the 21st chromosome that accounts for approximately 1.5% of all cases. There are also suspected environmental causative factors, including exposure to a dietary neurotoxin called BMAA and cyanobacteria, and use of pesticides. However, in all cases, the defining factor of ALS is rapid and progressive death of upper and lower motor neurons in the motor cortex of the brain, brain stem, and spinal cord. Prior to their destruction, motor neurons develop proteinaceous inclusions in their cell bodies and axons. This may be partly due to defects in protein degradation.

Treatment for ALS is limited, and as of today only riluzole, marketed by Sanofi-Aventis as Rilutek, has been found to improve survival to a modest extent (several months). Riluzole preferentially blocks TTX-sensitive sodium channels, which are associated with damaged neurons. This reduces influx of calcium ions and indirectly prevents stimulation of glutamate receptors. Together with direct glutamate receptor blockade, the effect of the neurotransmitter glutamate on motor neurons is greatly reduced. Riluzole does not reverse the damage already done to motor neurons, and people taking it must be monitored for liver damaged (about 10% incidence).

The remaining treatments for ALS are designed to relieve symptoms and improve quality of life. This supportive care includes a multidisciplinary approach that may include medications to reduce fatigue, control spasticity, reduce excess saliva and phlegm, limit sleep disturbances, reduce depression, and limit constipation. As noted above, median survival is two to four years. In the U.S., approximately 30,000 persons are currently living with ALS.

Neuralstem’s Approach For ALS

Neuralstem is seeking to treat the symptoms of ALS via transplantation of its hNSCs directly into the gray matter of the patient’s spinal cord. In ALS, motor neurons die, leading to paralysis. In preclinical animal work, Neuralstem cells both made synaptic contact with the host motor neurons and expressed neurotrophic growth factors, which are protective of cells.

Neuralstem’s published preclinical data can be round here:

  • J Comp Neurol. 2009 Jun 1;514(4):297-309
  • PLoS Med. 2007 Feb;4(2):e39.
  • Stem Cells. 2006 Aug;24(8):1976-85. Epub 2006 Apr 27.

Neuralstem initiated the first FDA-approved stem cell trial for ALS in January 2010, at Emory University in Atlanta, GA. The trial is a phase 1, open-label, safety study designed to evaluate the safety of the cells and surgical technique in up to 18 patients. The goal of the program is to show that Neuralstem’s hNSC: 1) Graft permanently into the region where they were transplanted, 2) Rebuild circuitry with the patient motor neurons, and 3) Protect patient neurons from further degradation from the disease.

The primary objective is to determine the safety of the treatment (incidence of adverse events) over a 36 month timeframe. Secondary endpoints will assess signs of efficacy through various qualitative and quantitative rating scales, both patient and physician administered.

Progressing Nicely

The trial began with six mid-to-late stage (forced vital capacity > 60%) ALS patients defined as non-ambulatory with permanent paralysis. Three patients were treated with five unilateral cell injections (Cohort A1) and three patients were treated with ten bilateral (five on each side) injections (Cohort A2) into the lumbar (L2-L4) spinal cord. The protocol called for 100,000 cells per site injection.

Results after the first six patients showed no unexpected complications as a result of the surgery that would prohibit movement into the next cohort. As a result, Neuralstem moved into dosing of the next six patients, which were a similar design to Cohorts A1 and A2 only with ambulatory patients. Patients seven through nine (Cohort B) received six cell injections in the lumbar spine unilaterally. Patients ten through twelve received ten cell injections bilaterally (Cohort C).

The FDA’s data safety monitoring board (“DSMB”) has been reviewing the safety data during the trial. All patients tolerated the treatment without any long-term complications related to either the surgical procedure or the implantation of the stem cells. This was clearly an encouraging sign, and a key hurdle cleared.

Results from the first twelve patients were presented at the American Neurological Association annual meeting in September 2011 (ANA-Poster). Data has since been e-published in Stem Cells, in March 2012 (10.1002/Stem.1079). Clinical assessments ranging from 6 to18 months after transplantation demonstrated no evidence of acceleration of disease progression due to the intervention. Results even show that one patient demonstrated improvement in his clinical status, though we note these data must be interpreted with caution since this trial was neither designed nor powered to measure treatment efficacy to statistical significance.

The trial has now expanded enrollment to the next six patients, which includes three patients that received five unilateral injections in the cervical cord (Cohort D), followed by three repeat patients (patients 10-12 from Cohort C) that will receive unilateral injections in the cervical cord (Cohort E). Injections into the cervical cord (upper back) may help patients maintain, or even improve, breathing function. As noted above, the majority of ALS patients pass away due to respiratory complications. It will be interesting to see how the re-dosed patients in Cohort E perform.

Patient #13 was dosed in November 2011. In March 2012, Neuralstem noted that the 14th patient – the first woman enrolled in the study – was treated at the trials single center at Emory University. The 15th patient completed in April 2012.

This morning, Neuralstem announced that the 16th patient, the first to receive cell injections into the lumbar and cervical spine, was treated at Emory University Hospital in Atlanta, GA. This patient has now received a total of 15 injections, with 10 in the lumbar spine and 5 in the cervical spine. We expect dosing in patients 17 and 18 in the next two months.

The dosing for these re-treated patients remains at approximately 100,000 cells per injection – about 1/3rd of the number of cells per injection that management would eventually like to achieve. Besides safety, the goal of the trial is to identify the maximum-tolerated-dose (MTD), which is believed to be between 300,000 and 400,000 cells per injection.

We are expecting to see data in 2013, perhaps at the ANA meeting in October 2013 for all 18 patients. Management is currently in discussion with the FDA on expanding enrollment of the phase 1 trial, currently taking place at Emory University in Atlanta, GA to a second site at the University of Michigan in Ann Arbor, MI, and expanding enrollment up to 27 patients.

If allowed, the FDA would consider this a phase 1 / 2 trial, allowing Neuralstem to proceed in 2014 directly into phase 3. Patients 19 through 27 would receive higher doses of cells per injection – either 200,000 or 300,000. The ultimate goal is to dose patients at 20 sites (10 in the lumbar spine and 10 in the cervical spine) with 200-300,000 cells per injection. We view this potential acceleration as a clear positive for Neuralstem, as it would shave two years and several million dollars off of development.

The company is also looking to conduct a small feasibility trial in Mexico later this year or in 2013 to add to the safety database. This will be followed by a larger pivotal study (n~100 patients) in Mexico perhaps in 2013 or 2014. We think opening enrollment to a second site in the U.S. and some international sites will greatly help accelerate clinical timelines and reduce cost for Neuralstem, while increasing investor awareness to the program.

As of now, management is planning to conduct the pivotal program on its own, mostly likely seeking funding through grants with the ALS Association and U.S. National Institutes of Health. However, management is also in discussion with potential pharmaceutical partners on the pivotal program. ALS is a highly attractive area for Big Pharma. Depending on the strength of the phase 1 / 2 data, Neuralstem may be able to strike a commercialization partnership in 2014 to help defer the costs of the planned pivotal trial. We expect that any deal with a larger pharmaceutical company would include a substantial upfront payment that Neuralstem would then use to fund expansion of the development platform into new indications, such as spinal cord injury (IND filed) or stroke.

Market Opportunity

In February 2011, the U.S. FDA granted Neuralstem an Orphan Drug designation for its human spinal cord stem cells (HSSC) for the treatment of ALS. As noted above, there are approximately 30,000 patients in the U.S. living with ALS. We estimate that approximately half of these patients are characterized with an FVC > 60% and may be eligible for treatment with Neuralstem’s hNSCs. Given the Orphan Drug designation, the limited patient population, and the lack of any meaningful treatment options, we think Neuralstem or its commercialization partner could price this therapy at upwards of $100,000. Therefore, the peak market opportunity for Neuralstem is $1.5 billion.

That being said, drug development in ALS has been a graveyard for pharmaceutical companies. One would assume, based on numerous past clinical failures, that Neuralstem’s chances in ALS are slim. Small molecules including gabapentin, topiramate, celecoxib, tamoxifen, indinavir, minocycline, and xaliproden, many of which are approved for other indications and have posted annual sales over a billion dollars, have all failed human clinical programs for ALS. Even Vitamin E and Creatine have been tested, to little avail, in ALS. Failed mechanisms of action included calcium channel blockers, glutamate regulators, neuroprotectants, immunosuppressants, GABA receptors, anti-inflammatory agents, and antioxidants.

However, there is one thing in common we see in all of the above failures. They are one molecule targeting one mechanism of action or one pathway. ALS is a high complex and largely uncharacterized disease. Neuralstem’s approach uses human spinal stem cells that, once injected, can provide multiple mechanisms of action on multiple pathways to affect the disease. Plus, Neuralstem’s approach is highly targeted, with the cells injected directly into the lumbar or cervical spine. Following grafting, the hypothesis is that the cells rebuild circuitry with the patient motor neurons and protect existing neurons from further degradation. It’s clearly a unique approach, and one we believe has a better chance of success than many of the previous failed theories enacted over the past decade.

That is why we rate Neuralstem a ‘Buy’.

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