Scimitar Equity Blog

Neuralstem is a biotechnology company, focuses on developing and commercializing human neural stem cell technology in the field of regenerative medicine primarily in the United States. Market Opportunity: Amyotrophic lateral sclerosis (ALS), often referred to as “Lou Gehrig’s Disease,” is a progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord. Motor neurons reach from the brain to the spinal cord and from the spinal cord to the muscles throughout the body. The progressive degeneration of the motor neurons in ALS eventually leads to their death. When the motor neurons die, the ability of the brain to initiate and control muscle movement is lost. With voluntary muscle action progressively affected, patients in the later stages of the disease may become totally paralyzed.

• The onset of ALS is insidious with muscle weakness or stiffness as early symptoms. Progression of weakness, wasting and paralysis of the muscles of the limbs and trunk as well as those that control vital functions such as speech, swallowing and later breathing generally follows,
• It is estimated that ALS is responsible for nearly 2 deaths per 100 K population annually,
• Approximately 5,600 people in the U.S. are diagnosed with ALS each year. The incidence of ALS is two per 100,000 people, and it is estimated that as many as 30,000 Americans may have the disease at any given time,
• Although the life expectancy of an ALS patient averages about 2 to 5 years from the time of diagnosis, this disease is variable and many people live with quality for five years and more.  More than half of all patients live more than 3 years after diagnosis,
• About 20 % of people with ALS live 5 years or more and up to 10 % will survive more than 10 years and 5 % will live 20 years. There are people in whom ALS has stopped progressing and a small number of people in whom the symptoms of ALS reversed.

Focus: CUR uses its human neural stem cell technology to create bio-therapeutic products for the treatment of central nervous system diseases and various neurodegenerative conditions and for the regenerative repair of acute diseases with its proprietary technology being small-molecule drug discovery

• Neuralstem’s patented technology enables the ability to produce neural stem cells of the human brain and spinal cord in commercial quantities and the ability to control the differentiation of these cells into mature, physiologically relevant human neurons and glia,
• CUR is targeting: Ischemic Spastic Paraplegia, Traumatic Spinal Cord Injury, Huntington’s disease and Amyotrophic Lateral Sclerosis (ALS), often referred to as Lou Gehrig’s disease. ALS is a progressive fatal neurodegenerative disease that affects nerve cells in the brain, leading to the degeneration and death of the motor neurons in the spinal cord that control muscle movement.

Regulatory Status: In 9/09, the FDA approved its IND) application to commence a Phase I trial to treat Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease) with its spinal cord stem cells which is expected  in Q1/10.

Financial: In Q3/09, CUR reported a net loss of $5,096,983, or $0.15 per share. For the 9 months ended 9/30/09, cash used in operating activities totaled $3,613,084.   Net loss attributable to common stockholders for the 1^st 9 months of 2009 was $7,380,751 or $0.22 per share. Cash, cash equivalents and short-term marketable securities at 9/30/09 totaled approximately $2.4 M.

Bottom Line: Neuralstem’s patented technology enables the ability to produce neural stem cells of the human brain and spinal cord in commercial quantities and the ability to control the differentiation of these cells into mature, physiologically relevant human neurons and glia by allowing for the isolation of CNS stem cells from tissue as well as the expansion in vitro of each cell up to a billion times (60 doublings):

• The heart of CUR’s therapeutic cell development programs is the ability to isolate and grow human neural stem cells from diverse regions of the developing human brain and spinal cord,
• CUR received notice of allowance from the United States Patent and Trademark Office (USPTO) for its patent entitled “Transplantation of Human Neural Cells for Treatment of Neurodegenerative Conditions,” In addition to it’s stem cell intellectual property, CUR has been active in licensing intellectual property rights for newly developed devices and equipment that will be required to optimize delivery of  it’s stem cell therapeutics through surgical transplantation into the brain and spinal cord,
• STEM is in litigation with Neuralstem to stop the development of rival products saying it owns the basic technology for the use of neural stem cells, derived from the brain and spinal cord and that Neuralstem lacks a license, according to a lawsuit filed in US District court in Maryland. STEM sued over 4 patents tied to the cell cultures grown in labs, ways to make them grow and their use. STEM has failed (to date) to persuade the U.S. Patent and Trademark Office to withdraw a Neuralstem patent,
• In 8/09, its Exchange listing compliance plan was accepted by the NYSE AMEX LLC outlining a plan for regaining until 12/6/10 to become compliant,
• CUR’s Corporate Governance Quotient is better than 28.4% of Pharmaceuticals, Biotechnology & Life Sciences companies,
• In 6/09, Vicis Capital Master Fund purchased 800,000 shares of CUR common stock at $1.25 per share, reflecting an approximate 20% premium to the closing price of the stock on 6/29. CUR also issued warrants to Vicis to purchase 2.4 M shares of CUR common stock at $1.25 a share, 1/3 of which must be exercised within a year from the date of issuance, 1/3 within 3 years, and the final 1/3 within 5 years from the date of issuance. CUR used these proceeds for working capital,
• As of 9/30/09, estimated that its cash position would meet (??) its operating needs into Q1/10 including estimated costs associated with the clinical trials for its ALS programs planned in 2010,
• CUR trades at $1.76 (52 week range of $0.75 to $2.95) with a market cap of $61.30 M, an enterprise value of $58.88 M with 34.83 M shares outstanding, a 27.74 M share float, a short interest ratio of 1.4 but, only $2.4 M in cash,
• Insiders hold 14.53 % shares (not bad) with 0.80 % (very low)owned by institutions,
• Institutional investors include: Vanguard, Barclays Global, Davenport& Co, Morgan Stanley, CitiGroup, State Street, Timber Hill LLC, AIG, UBS, and Logan Capital Mngt,
• CUR has held its stock value for the past few months,
• I would rank this a “HOLD” but, the interest in Stem Cell companies is expanding as trials come on line and news proliferates!

For the record, re Reg. AC, Analyst Certification: I, Henry W. McCusker, hereby certify that all the views expressed in this blog accurately reflect my personal views about CUR.