Why Neuralstem, Inc. Shares Surged Higher

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Why Neuralstem, Inc. Shares Surged Higher

February 20, 2015

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of Neuralstem, Inc (NYSEMKT: CUR ) jumped by as much as 9.6% today after Brean Capital analysts initiated coverage of its shares with a buy rating, and set a price target of $8.00 on optimism surrounding the company’s current pipeline opportunities. The stock closed the day at $3.83, up about 8% from the previous close.

So What: Neuralstem is a clinical-stage biotech company that is developing treatments for central nervous system diseases that are based on human neural stem cells. The company’s clinical development pipeline includes NSI 566 for ALS and chronic spinal cord injury, and NSI 189 for major depressive disorder. Both of those are important markets with a high unmet need for new treatment options.

NSI 566 is currently in phase 2 studies in which dosing of ALS patients was completed in July 2014, and results are expected from that trial this quarter. If the trial results are compelling, then it could mark a significant advance in the treatment of the disease. Currently, there are no existing effective therapies for ALS.

Additionally, the company expects to launch a phase 2 trial of NSI 189 for MDD in the second quarter. During the phase 1b trial, Neuralstem reported that NSI 189 showed a clinically meaningful and statistically significant improvement in depression symptoms. If those early-stage results hold up it in late-stage trials, it would be welcome news given that two-thirds of MDD patients are ineffectively treated with antidepressants. The company also plans to kick off a phase 1b trial to evaluate the drug in schizophrenia patients this year.

Now what: Neuralstem is targeting high-risk/high-reward indications that could make it a very attractive clinical-stage biotech play. However, there are still question marks, including whether Neuralstem will need to raise additional money in the future. In September, the company reported that its cash stockpile totaled $26.9 million, up $10 million from December 2013. That increase came courtesy of a stock offering in January 2014. However, it’s unclear whether that will be enough money to fund its ambitious pipeline plans. As a result, this is an interesting story that should be followed by investors, but probably should only be owned by those willing to accept the risk of clinical trial failures.