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Expert Financial Analysis and Reporting

Neuralstem: Anticipating More Efficacy Data from ALS Trial (CUR, $1.18)

Investment Opinion and Thesis

I am continuing to recommend purchase of Neuralstem. The Company has completed its first trial in humans, a 15 patient phase I trial in amyotrophic lateral sclerosis or ALS. Results of this trial have indicated that the surgical procedure used to implant the cells and the cells themselves are safe, which is the critical first step. Importantly, there have been encouraging signals of efficacy in this dreadful disease which is invariably fatal and for which there is only one approved drug; Rilutek extends life by three months or so in some younger patients, but has no effect on quality of life. Most ALS patients die within three to five years of diagnosis and during that time they suffer a horrible deterioration in quality of life. There is a desperate need for effective therapy.

The clinical trial program has now gained traction. The FDA has given the go-ahead to begin a phase II trial in 18 patients. This has been a long journey for Neuralstem as the Company was founded in 1996. It took over a decade to develop a product for clinical trials and as the pioneer in neural stem cells, clinical trial progress was slowed by FDA concerns about the safety of the surgical procedure and the cells themselves. The phase I trial in ALS was started in January of 2010 and took over three years to complete. In addition to this program there are four other clinical trials using its neural stem cells that will likely begin in 2013: (1) a phase I/II trial in ALS in Mexico, (2) a phase I trial in chronic spinal cord injury in the US, (3) an ischemic stroke phase I trial in China and (4) a phase I trial in acute spinal cord injury in South Korea.

As will be discussed in this report, the first part of the phase I study in ALS allowed a meaningful evaluation of efficacy in five patients. One of these, Ted Harada, had a remarkable recovery and the other four showed stability in the disease. ALS is an always fatal disease in which there is a steady linear decline in function with death resulting in three to five years after diagnosis. Stabilization of the disease would be a dramatic achievement and improvement as in the case of Mr. Harada would be beyond dramatic. However, I need not caution investors about the risk of drawing conclusions from such a small set of patients and must point out that only one drug, Rilutek, has shown even a small benefit in ALS while all others have failed.

The second part of the phase I study resulted in new surgeries on six patients, the last of which completed in August of 2012. Investigators recently reported that there were no new safety issues in these patients, but made no comment on efficacy. In addition, we have seen no new updates since mid-2012 on the durability of the efficacy outcomes in the five patients who responded in the first part of the phase I trial. I understand from the Company that investigators are withholding efficacy data on these eleven surgeries in order to prepare a paper for publication in a peer reviewed journal. The timing of the publication of this data is uncertain, but I would think that it will certainly be before the American Neurological Association conference of October 13 to 15 of this year as investigators will certainly want to present their data at that key conference.

I don't know nor does the Company what the efficacy results will be. I think that the efficacy data when reported could have a dramatic effect on the stock. I will be looking to see if the stabilization of the disease in the first five patients has been maintained; this would be dramatic. We already know in the case of Ted Harada that he continues to be in better condition than when diagnosed in 2010 which is amazing. Of equal interest will be any signals of efficacy in the six new surgeries.

I think that the efficacy and safety data known so far about the five patients from the first part of the phase I is quite significant. The FDA appears to agree as it has given the go ahead for an 18 patient phase II trial in ALS that will begin in 2Q, 2013. Given that the FDA already knows the efficacy data that we are now waiting on, when presented it is unlikely to have any negative surprises. The Company will not comment on time to completion of the soon to begin phase II trial nor the phase III that would follow if it is successful. My estimate is that the phase II could be completed by mid to late 2014 allowing for the phase III to begin in late 2014 or early 2015 assuming positive results in phase II. A 40 to 50 phase III trial might complete in mid-2017 and if successful could allow for possible US approval in mid-2018.

There are about 25,000 ALS patients in the US making it an orphan drug market. If this procedure could stabilize patients for a clinically meaningful amount of time, the surgery could be priced at orphan drug prices which range from $100,000 to $300,000 per year. This would suggest a potential addressable market in the US of $2.5 billion to $7.5 billion and perhaps double that on a worldwide basis. Of course, we have much to learn about the efficacy of this product and whether it would be applicable in all patients or just a sub-set. However, it is clear that this could be a very large opportunity.

It is sometimes overlooked that the Company has a novel, small molecule in phase I clinical benefit. Using its proprietary line of hippocampal cells, the company was able to develop a proprietary screen for compounds and found one that it believes can regrow cells in the hippocampus region of the brain. This could have wide applications in central nervous system disease like Parkinson's disease and Alzheimer's disease and also traumatic brain injury. The Company should complete the evaluation of the third cohort of a phase I/II trial by September. If encouraging, the Company will seek to partner the product later this year or early next.

What does all this mean for the stock? I think that Neuralstem has been ignored by institutional investors feeling that the science is too early stage and too unproven to warrant an investment. If the additional, upcoming ALS efficacy data from phase I am positive, it could create interest that could have a very significant and positive effect on the stock price. The breadth and depth of the clinical trials in progress could provide further validation that investigators believe the neural stem cells have promise. The efficacy data release is the big catalyst for 2013. A partnering agreement for the Mexican phase I/II trial in ALS and a partnering of the small molecule drug could also have a lesser, but meaningful impact on the stock.

Neuralstem has been very creative in getting grants and finding partners to fund its trials so that it has been able to maintain a modest burn rate of about $1.5 million per quarter. It ended 2012 with $7 million of cash and recently raised about $8.0 million in a venture debt deal that should extend its cash runway through 2014. Upfront milestones from partnering deal could further bolster cash. I do not see the need for an equity offering in the next year or year and one-half.



This report is a follow-up to the intial report that I wrote on Neuralstem on November 5, 2013 in which I initiated coverage with a buy. This report focuses primarily on clinical trials and does not go into a basic overview of the Company. If you are new to the company you may want to first read the November 5, 2012 report in which I initiated coverage. This is not a company

that can be understood with a few bullet points.


Neuralstem's Research in Amyotrophic Lateral Sclerosis


Understanding ALS

Neuralstem has discovered and developed regionally specific neural stem cells that can be surgically implanted in the spine where they engraft in the grey matter. They then create synapses and release proteins that stimulate growth and functioning of surrounding neurons that have been damaged by disease or injury, thereby improving signaling to peripheral muscles. The initial trial of these stem cells was in amyotrophic lateral sclerosis or ALS, a progressive and always fatal neurological disease that affects motor neurons in the spinal column. These motor neurons project their axons from the spine to control voluntary and involuntary muscle contractions throughout the body. ALS results in loss of control over bodily functions involving muscles. It usually does not affect cognition or the sensations of sight, touch, smell and taste so that mentally alert patients are trapped in a dysfunctional body.

About 75% of patients first start to lose control of voluntary movement in the arms and legs. Others may initially experience problems in swallowing and chewing and a few start with breathing problems. Regardless of where symptoms originate, the disease inexorably spreads. Effects on swallowing and chewing can cause choking and aspiration of food into the lungs. In the terminal stages of the disease, most patients are maintained on feeding tubes and mechanical ventilators. The principal cause of death from ALS is respiratory failure or pneumonia which is the result of ventilator use. Most patients die within three to five years of diagnosis.

There is only one drug approved for ALS and that is Rilutek which produces about a three month extension of survival, but has no effect on quality of life. Nevertheless, it is used in about 2/3 of the 25,000 ALS sufferers in the US. This disease has been a graveyard for drug development. The most recent disappointment was the high profile failure of Biogen's dexpramipexole. There is huge unmet medical need for a drug to slow or halt the progression of the disease.


Measuring Efficacy Outcomes in ALS

The FDA has approved the use of a validated scale called the Amyotrophic Lateral Sclerosis Functional Rating Scale-Revised or ALSFRS-r to determine efficacy in clinical trials. It measures the change in functionality of 12 different bodily functions: speech: salivation; swallowing; hand writing; cutting food and handling utensils; dressing and hygiene; turning in bed and adjusting bed clothes; walking; climbing stairs; shortness of breath upon exertion; shortness of breath when lying still; and respiratory insufficiency. Each item is ranked by a physician on a scale of from 4 (normal) to 0 (severely disabled) and is equally weighted in the scale.

A healthy person would have an ALSFRS-r score of about 48 while a newly diagnosed ALS patient might score in the mid to high 30s or low 40s; diagnosis is generally about one year after symptoms begin. The scores at time of death are in the mid-teens. These patients tend to decline linearly and lose about 0.9 months points per month on the ALSFRS-r scale. A few may experience brief periods (a few weeks) of improvement on this scale, but the decline is inexorable and improvement, even for a few months, just doesn't occur in the opinion of investigators with whom I have spoken.


Neuralstem's Neural Stem Cells Give Encouraging Signal of Efficacy in Phase I

The first surgical transplantation in humans of Neuralstem's neural stem cells (called NSI-566) was in a trial in phase I trial in ALS that began over three years ago; the first patient was dosed in January of 2010. The FDA took a very slow and cautious stance on the conduct of this trial with a focus on demonstrating safety for both the surgical procedure and transplanted cells. They initially only allowed injections in the lumbar region (lower part of the spine) and the number of cells injected were about one-third of what animal studies suggested would be the effective dose.

The first six patients surgically transplanted were advanced stage ALS patients who were non-ambulatory; this meant that the neurons located in the lumbar region of the spine that control the leg muscles were dead. In addition, three of these patients were on mechanical ventilators indicating that they were in the terminal stage of the disease. As was previously mentioned, breathing is controlled by neurons in the cervical (upper) region of the spine and most ALS patients die of respiratory failure or pneumonia caused by impaired respiration. There was little expectation for seeing efficacy in these initial six patients.

These first six patients received 10 bilateral injections in the lumbar region containing 100,000 cells each. There was little expectation of seeing an efficacy signal because of their late stage condition and the low dosage of cells. The primary objective was to determine the safety of the surgery and the implanted cells. After these first six patients were transplanted and observed for a considerable period of time, the trial enrolled an additional six patients whose disease was less advanced; they were ambulatory.

These six new patients were also given ten injections in the lumbar region containing 100,000 cells per injection. There was some hope for a signal of efficacy because neurons in the lower part of the spine, while damaged, retained some function. Because there were no injections in the cervical region whose neurons control respiration, speech and eating, investigators did not anticipate improvement in these functions which are usually the cause of death of ALS patients. Moreover, based on pre-clinical studies the Company and its investigators believed that 300,000 cells per injection was the effective dose and the 100,000 cells was believed to be sub-optimal. However, the FDA's focus was on safety.

The outcomes for this first group of six patients and more importantly the second six have been followed for some time; they are now two and one half to three years past surgery. The most recently reported results in these twelve patients were presented in mid-2012.

The data that Neuralstem presents on its clinical trials in its corporate presentation shows a steady deterioration in ALSFRS-r scores in the first six non-ambulatory patients who were treated. In ALS patients, investigators tell me that there is a linear decline of about 0.9 points per month for patients treated with standard of care. This would represent a 10.8 point reduction per year. Patients with ALS usually are diagnosed with an ALSFRS-r score in the high-thirties or low forties and often die with a score in the mid-teens perhaps three to five years later.

Turning to the six ambulatory patients, one of these patients died of a heart attack and was not evaluable leaving five patients who were evaluable. Of these five patients, Ted Harada, had a dramatic and unprecedented improvement, something that physicians treating ALS just don't see. They were so surprised they re-diagnosed the patient to confirm that he had ALS. The remaining four patients were stable which is only slightly less remarkable for this disease. Mr. Harada is a prolific blogger who has documented his treatment. His ALSFRS-r score actually improved and the other four were stable over several months or more than a year. As I mentioned before, almost all ALS patients suffer a linear decline in their ALSFRS-r scores.

In addition to ALSFRS-r, another important observed measure was forced vital capacity in which a spirometer is used to determine the functioning of the lungs by determining the amount of gas that is exhaled from the lungs with each breath. Because, most ALS patients die of breathing complications, this is a particularly important outcome. In the non-ambulatory patient group, three were on mechanical ventilators and their breathing function could not be evaluated. The other three showed a steep decline. Turning once again to the ambulatory patients, all five had stable breathing function over the two years or so. This is really what investigators want to see a drug for ALS achieve.

The next measure was of muscle strength using a hand or foot manipulated dynamometer. There was a general deterioration of muscle strength for the non-ambulatory patients and more stable function for the ambulatory patients.

Ted Harada achieved a remarkable improvement and went public with the information on his blog. He wrote on his blog that in 2010, he was diagnosed with ALS at the age of 38. He said "My left leg fatigued easily. I was short of breath, my energy tapped. I needed a cane to walk. Then came the barrage of tests, the results the same. There is no hope. You are without hope. Then I heard about a clinical trial transplanting neural stem cells into the spinal cords of ALS patients. It was the first of its kind. The Food and Drug Administration approved it and I qualified. I was treated at Emory University Hospital in March 2011.Since then, the deterioration from ALS has temporarily slowed. I even completed a 2 1/2-mile walk to defeat ALS."

Analysts like me are conditioned by experience to be skeptical about drawing conclusions from data based on small numbers of patients and to dismiss extraordinary improvements such as Mr. Harada's as occurring by chance. The most dangerous words in the English language are "this time it's different", but the situation with Neuralstem's neural stem cells in ALS may be different. In addition to Mr. Harada's remarkable story, four other evaluable patients have experienced stabilization of their disease as measured by the ALSFRS-r scale for as much as two years. This is almost as striking as the Harada story. It seems to me that the data created in these five patients is suggestive that there is a therapeutic benefit associated with Neuralstem's stem cells.

Mr. Harada was later interviewed by Fox television and on that interview, Dr. Eva Feldman, the principal investigator in the trial, was quoted as saying, "We have found the procedure to be extremely safe. In some patients, it appears that the disease is no longer progressing, but it is too early to know if the result from that small number of patients is meaningful." This physician believes that this transplantation procedure has stabilized these five patients.

My interpretation of the table supports her conclusion. I don't want to go through all of the caveats about a sample size of five patients. However, given that ALS patients experience a steady decline in function; this seems to me to be a very strong signal of activity. It is also encouraging that the physiological measures of breathing function and muscle strength are in alignment with the improved measurement of function that is the ALSFRS-r scale.

There are other very important takeaway messages. Neuralstem has demonstrated over the course of three years that the surgery is safe and the cells are safe and well tolerated. The surgery has been less onerous than expected. The original trial protocol planned for patients to be in the ICU for a week and then spend a second week in a step down ward. Instead, they found that patients could be discharged in 3 to 4 days. Investigators have shown that the surgery can be safely done in both the lumbar and cervical regions. A paper presented recently at a conference in Chicago concluded that investigators could implant the cells where they are needed and that the cells will engraft and survive in the gray matter of the spinal cord. This latter conclusion was based on analysis of patients who died.

In summary, I conclude the following:

· There is a strong signal that these cells can stabilize the functional status of ALS patients for perhaps years. If this can be replicated in larger randomized trial, it would represent a major advance as ALS patients now experience a linear decline in ALSFRS-r resulting in death three to five years after diagnosis.

· The surgery can be safely conducted in the cervical and lumbar regions of the spinal column. The inflammation at the site of surgery resolves over the course of time.

· The cells are safe and well tolerated.

· The cells engraft in the grey matter of the spine where they synaptically integrate and create new circuitry. The cells just don't float around in the intrathecal fluid.


Expansion of the Phase I ALS Trial; Six New Surgeries

The demonstration of safety and the signal of efficacy led in the first part of the phase I trial led the FDA to approve six new surgeries; the first was performed on November 23, 2011. These were planned to evaluate injections in the cervical region. As I previously mentioned, neurons in the cervical region control speech, eating and respiration; it is the loss of these functions that are most disabling and life-threatening. Three of these surgeries were in new patients and the other three were drawn from the six ambulatory patients, Ted Harrada being one. These new surgeries involved five cervical bilateral injections of 100,000 cells each, still far below what Neuralstem believes will be the most effective dose of 300,000 or more cells.

Safety was the primary endpoint and the secondary endpoints were the same as for the first twelve patient surgeries. It is hoped that the injections in the cervical region will improve breathing, speech and swallowing more than has been seen so far. This is because motor neurons that control breathing originate in the cervical region. If this is the case there could be better scores on the ALSFRS-r scale as it contains six measures related to breathing, speech and swallowing. It is also hoped that the therapeutic effect of the cells implanted in the lumbar region previously implanted in three of these patients will be maintained over time.

The last of the six new surgeries was performed in August 2012 and investigators reported on April 29, 2013 that the surgeries were safe and the cells were well tolerated, but there was no comment on efficacy. I have been eagerly awaiting preliminary efficacy results in these six new surgeries and was also hoping for an efficacy update on the five patients who initially responded; there has been no update on these patients since mid-2012. Evidently, the investigators are preparing a paper that will summarize efficacy and safety results in all fifteen patients treated that will likely be published in a peer reviewed journal. It is also likely that this data will be presented at the American Neurological Association Meeting of October 13 to 15, 2013.


Moving Into a Phase II Trial in ALS

In phase I, Neuralstem has now performed 18 surgeries in 15 ALS patients in the US. The studies done so far have shown that the cells are safe and well tolerated and that the complex surgical procedure does not confer undue risk. This along with the encouraging signal of efficacy that was seen in the five ambulatory patients definitely warrants the beginning of a phase II study. The completed surgeries have been primarily about safety; the next round will be more about determining the optimal dose. Neuralstem has been in discussions with the FDA on this next phase of the study and the FDA granted approval of the phase II trial protocol in April 2013.

Details of the trial have not been published on, but it will be a non-randomized trial that will enroll ambulatory patients. The primary endpoint will probably be safety with the secondary endpoints being ALSFRS-r and other physiological endpoints used in the phase I trial. There will be a special focus on injections in the cervical region in which the neurons that activate muscles that control breathing, speech and eating are located. As was previously discussed, the most important thing to do for an ALS patient is to aid their breathing and keep them off mechanical ventilation while improving speech and eating are critically important to quality of life.

The FDA in phase I applied the traditional pharmaceutical model approach of gradual dose escalation. In the first 15 patient surgeries there was a go slow approach on the number and location of injections, the number of cells per injection and the time between surgeries. The issue for the phase II trial was whether the FDA would be more aggressive in the number of injections given, the number of cells given and with a significant number of injections in the cervical as well as the lumbar region of the spine. The ALS advocate community pressured the FDA be more aggressive in what it would allow for dose escalation. Citing the impressive efficacy seen in five ambulatory patients and the acceptable safety profile of the surgery, they wanted to accelerate dosing in the trial; they believe this risk is acceptable when viewed against the morbidity and the mortality of ALS and the lack of any effective therapies.

It appears that the ALS community has pressured the FDA into a more aggressive stance. The trial will be done in cohorts of three patients and I don't yet know the breakdown of number of injections in each cohort, the number of cells injected or the number of injections in the lumbar or cervical region. The highest dose yet received by and patient was ten bilateral injections in the lumbar region and five cervical injections of 100,000 cells each. This resulted in a total of 1.5 million cells being injected. The Company has indicated that in the sixth and final cohort, patients 16, 17 and 18 will receive 20 injections in the lumbar region and 20 injections in the cervical region of 400,000 cells each making for a total of 16 million cells. The number of cells in the lower cohorts will be less and of course, progression to the last cohort is dependent on safety in the first five cohorts.

In the second part of the phase I trial of six patients, the initial patient was dosed in November 2011 and the last patient in August of 2012 or in other words, it took about nine months to enroll and treat six patients. If this were to hold true for the phase II trial, it would take 27 months to enroll the trial. I think that the FDA will allow quicker enrollment in this trial and there are also two centers enrolling instead of one which should speed the trial. The University of Michigan medical school has joined Emory as a clinical site. The trial could begin in 2Q, 2013 and could complete in a year or less or sometime in 2Q, 2014.

Assuming a six month follow-up to the phase II trial, this could allow for a phase III trial to begin as early as 4Q, 2014. This could be a 40 to 50 patient trial performed at four centers. Enrollment could take a year and assuming a six month follow-up from the time of last patient treatment, initial results could be reported in mid-2017. If positive, an NDA filing could be made in and I would expect a quick review by the FDA leading to a possible approval in early 2018.


Other Upcoming Clinical Trials in ALS and Other Conditions



In addition to the phase II US trial in ALS, Neuralstem has also been very successful in dealing with international regulatory agencies. I expect clinical trials to begin shortly in three distinct geographic regions using the same stem cells as were used in the US phase I ALS trial. These are:

  • A phase I/II trial in ALS in Mexico.

· A phase I trial in in chronic spinal cord injury patients in the US.

· A phase I trial in acute spinal cord injury patients in South Korea.

· A Phase I trial is ischemic stroke patients in China

These programs will produce important a significant amount of clinical data over the next two years.

Neuralstem is a company focused on living cell therapy. However, its technology has allowed it to develop a small molecule drug that is now in phase I trials. This drug appears to cause regrowth of neurons in the hippocampal region of the brain and could be useful in a broad range of psychiatric and cognitive disorders. I expect this product to be partnered in 2H, 2013.


Mexican ALS Trial

Neuralstem has also planned for an ALS trial in Mexico; the Mexican surgeons have already been trained at Emory on the procedure. The plan is to start with a phase I/II trial that will use a dose escalation similar to that approved in the US for the phase II trial. The Mexican trial can draw on the knowledge gained in the US trial on safety and dose and can move more quickly.

Neuralstem is cash constrained so that it cannot undertake this trial on its own and will only go forward if it finds a partner willing to bear the expenses of the trial. Neuralstem reports that there is considerable interest from partners, but has not issued guidance as to when or if it will sign a partnering agreement. For the sake of discussion, if we assume a partnering deal is done in 3Q, 2013, the trial could be quickly started and could be completed by 4Q, 2013 or 1Q, 2014 with initial results available 3Q, 2014 or 4Q, 2014. The regulatory climate in Mexico is less conservative than the US.

Assuming positive results in this phase I/II trial, the plan is to then go directly into a phase III trial involving 100 patients. This could allow the start of the phase II/III trial in 2H 2014 or 1H, 2015. It would take about two years to complete the trial and analyze results so that regulatory approval could be sought in 1H, 2016 with potential approval in late 2016 or early 2017; this obviously assumes positive outcomes.


The Chronic Spinal Cord Injury Trial in the US

Neuralstem was recently approved by the FDA to begin a chronic spinal cord injury trial with NSI-466. Once stabilized, these patients are not as much at risk of death as ALS patients. The FDA wanted to determine the safety results in the ALS program before allowing the spinal cord trial to go forward; it has been on clinical hold for over three years. This trial will use the same cells and surgical procedure as in the ALS trial. The spinal cord injury trial leverages the data and manufacturing that they have created in ALS. It will also be split into thoracic and cervical injections with dose escalation.

In ALS, neurons are dying throughout the spinal cord causing the neuronal circuitry to dysfunction. In the case of spinal cord injury, there is no neuronal signal below the site of injury. The intent is to bridge the gap at the site of injury and restore neuronal function below that site. They will start with ASIA patients who have complete paralysis below the site of injury meaning they have no sensory or motor function. The FDA is requiring that they start with injections in the lower lumbar region. They will start with 100,000 cells per injection and then dose escalate to 200,000. They will start in the lumbar region and later move to the cervical region.

This trial will be easy to recruit. Readers may recall that Geron was only able to recruit two patients in three years into their spinal cord injury trial because it was an acute spinal cord injury trial. However, the patient had to be treated immediately after their accident so that unless the accident occurred near an investigational site and they were brought there for stabilization, they were not eligible for the trial. Neuralstem will be treating patients who have been stabilized. They can be transported over some distance to the four to five centers participating in the trial. They will be doing surgeries at Grady in Atlanta where the principal investigator, Keith Tansey, works. The other sites are likely to be Philadelphia, Milwaukee, Miami and San Diego.


Ischemic Stroke Trial in China

A third trial using the same neural stem cells as in the ALS and spinal cord trials is scheduled to start in 1H, 2013 in China. This trial involves patients with chronic motor disorders resulting from ischemic stroke that leaves patients with partial paralysis or cognitive disorders. The cells will be injected directly into the brain instead of the spinal cord. There has been a significant amount of clinical experience involving injections of stem cells into the brain so that the surgical procedure and area of administration of the cells has been established. So far, the stem cells used in this surgery have not been effective.

Neuralstem announced an agreement in April of 2011with BaYi Brain Hospital in Beijing, China to jointly prepare a clinical protocol for treatment of neurological damage due to ischemic stroke. BaYi Brain will be the site of the trial and Neuralstem will be the sponsor. They are using an FDA compliant protocol, although it will not be registered with the FDA. This will expedite the exportation of the technology from China if the trial is successful. Neuralstem also has a GMP compliant manufacturing facility in China.

This trial is being done under the aegis of the Military Regulatory Agency which requires only IRB approval to allow the trial to start. Anticipating approval to begin the trial, Neuralstem established a wholly-owned subsidiary in 2010 called Neuralstem China (Suzhou Sun-Now Biopharmaceutical Co. Ltd.). Neuralstem China has constructed a clinical-grade manufacturing space, and has obtained the license required by the Chinese government for doing business in China. Neuralstem has stated that China has several different regulatory paths to commercialization and that its strategy is to pursue each path simultaneously.

This phase I/II trial will start in 1H, 2013. It will involve nine to eighteen patients who have suffered neurological damage due to ischemic stroke. They must be stabilized for four months or more in order to enter the trial. The procedure will involve five surgical tracks given at different depths of the brain. The trial will assign patients to cohorts which will receive ascending doses of NSI-566. There are three to five deposits of cells at various depths of the five surgical tracks with 80,000 cells per deposit.

Interim data from this trial is expected by early 2014 and will be primarily related to safety. Under Chinese regulatory practice, a phase II trial could start almost immediately after this, so that it could begin in mid- 2014. This could involve 100 patients suffering from neurological damage due to ischemic stroke. Surgeries will begin after the patients have been stabilized for at least four months and will be combined with physical therapy.

There will be a control group that receives only physical therapy, but will not be given sham surgery. Stroke has been extensively studied in clinical trials and there are a number of well validated scales that evaluate functional recovery. Evaluations of these two groups will be made by investigators who are blinded to the treatment received by the patient. The initial results could be reported in as soon as one year so that results may be available in 2H, 2015. Success in the phase II trial could lead to approval in China in 2H, 2016 and subsequent commercialization.


Acute Spinal Cord Injury Trial in Korea

A partner, CI Cheil Jadang, is also doing an acute spinal cord injury trial in South Korea. This is similar to the trial design used by Geron in the US. The IND from the Korean government is expected in 2Q, 2013. The trial should start in 2H, 2013 pending approval of the Korean FDA. The goal is a return of motor sensory function to patients. Neuralstem is just getting milestones and royalties although they will be helping with the trial.


Small Molecule Program, NSI-189

Neuralstem has capitalized on its ability to grow hippocampal cells in a culture dish to develop a novel new small molecule drug. The hippocampus is the area of the brain that is associated with psychiatric and cognitive disorders; these diseases appear to cause atrophy of the hippocampus. The hippocampus is virtually unique in its ability to grow new neurons so that Neuralstem focused on finding a drug that could stimulate the growth of new neurons. They selected for development a small molecule that has been shown to increase hippocampal volume by up to 20% in animal models. It is believed to do this through increasing the number of synapses and may be the first drug in the world that can do this.

Neuralstem had a major advantage in the development of this drug. Other drug developers must decide on a molecular target in the brain and develop a drug that will interact with the target, which may or may not have a therapeutic effect. Neuralstem can take a different approach by screening drugs against hippocampal cells in a culture dish; they are the only company with the ability to grow hippocampal cells. They can be agnostic about the precise target and just look for a molecule that can cause neurogenesis.

The objective of the screening program was to develop a small molecule drug that can increase neurons in the hippocampus and enlarge its size. Hippocampal atrophy is implicated in major psychiatric and cognitive disorders. This drug may actually regrow the hippocampus, inducing up to a 20% increase in hippocampal volume. They believe this is due to synaptogenesis. This is the world's first truly neurogenic drug that is designed to specifically increase the number of synapses in the hippocampus.

The genesis for this program was the US Army which wanted a compound like this to treat brain injuries and post-traumatic stress syndrome for the War Fighter of the Future program. Neuralstem received $2.5 million from the army and $0.5 million from NIH to help in development. The result was a discovery of a new class of drugs which have been the subject of new patents covering both the class of drugs and individual molecules; the lead compound is NSI-189.

They are also in a phase Ib dose escalating trial of NSI-189 to treat major depressive disorder. They have finished dosing in two of three cohorts; the third and last will be finished in 1Q, 2013. Patients then come back for MRIs to detect any change in the size of the hippocampus. They could have data at the end of 2Q, 2013 or in 3Q, 2013.

Discussions are ongoing with a number of potential partners. Neuralstem also submitted phase II trials design for approval. They will partner as soon as possible. They are a cell therapy company and will spend most of their resources in this area.

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