Three Companies with Recent Successful Animal-Based Studies Could Indicate Solid Upside

In the past, a successful animal model study was viewed as “glass half empty” results, and with a sense of skepticism, as human studies and studies on animals, or mice, often do not align. However, recent data and research indicates that the connections may be closer than once considered, which is evident by the latest Nobel Prize award winners' research on cell therapy. In fact, some areas of therapy/treatment have a greater response to the preclinical study of mice compared to human trials. Certain species have more genes in common with humans and, thus, considered “model organisms” to study human genes and diseases. Nevertheless, a mice study alone is not sufficient for an FDA approval, although a good start. Ergo, I am looking at three companies that have a good head start with animal studies that may indicate a successful human trial with very promising therapies. Neuralstem (CUR) exploded in the month of September after the company announced what could be a medical breakthrough with the use of its spinal cord stem cells. Never before has there been a product, therapy, or medication for humans to regain motor function after being completely paraplegic. However, according to Neuralstem we may be one step closer, after the company's preclinical study on mice. The company announced that surgically paralyzed rats regained a “remarkable” amount of motor function in their lower extremity joints after being treated with the company's spinal cord stem cells. In the study, these rats regained movement in all lower extremity joints, as the neural stem cells became neurons and grew axons that then extended over 17 spinal cord segments. The study of surgically paralyzed rats may not be a clear indication of an approval for paralysis in humans, but it's a start. In addition to this study, the company also recently released new research from a Phase 1 study conducted at the University of Zurich. In the study, three patients had no neurological function below the point of injury, and two were able to regain some sensory function. Once again, this is not a slam dunk, but still progress. This will be an interesting study to follow over the next several years. It appears the company still has a way to go (which is why studies are conducted) and needs to find the perfect balance of cells transferred that will be effective. As of now, no dangerous side effects have been reported, and in the realm of cell therapy, this may be the most important factor. While CUR has proven itself to be a volatile and somewhat dangerous stock, StemCells Inc. (STEM) has traded higher and is yet to look back with its 150% gain during the last six months. On July 17 the company announced preclinical data demonstrating that its human neural stem cells restored memory and enhanced synaptic function in two animal models relevant to Alzheimer's disease (AD). As you might know, there are no effective treatments for patients with AD. Those who are diagnosed usually experience a steep decline in memory function. StemCells' technology statistically increased memory in both animal models. And although we don't know the degree to which these stem cells will be effective in restoring human memory, it is still a breakthrough that the company has been able to cross this boundary. Since July, StemCells is a stock that has rallied 120% with the news of preclinical data and also after transplanting neural stem cells into its first patient with dry age-related macular degeneration. The company is attempting to show that its neural stem cells can treat a wide array of degenerative conditions of the spine and brain. In early testing one cannot deny its efficiency, but only time will tell if its small tests and preclinical animal models will translate into success in the cell therapy arena. While Neuralstem has traded in a volatile manner and StemCells' rally has been sudden, NeoStem (NBS) has been the most consistent. NeoStem has traded higher by 60% during the last six months, at a slow and consistent rate, thanks to a continuous feed of key developments. The most recent was a publication in Stem Cells and Development regarding its VSELs (very small embryonic-like stem cells). In a study of mice, NeoStem found that its transplanted VSELs formed human bone in mice. VSELs is a well-funded/supported technology from various universities, the military, and the Vatican, that is currently being studied on six indications. The publication of data was significant for the company, as it will most likely create even more interest and funding for the development of this technology. NeoStem's VSELs may very well be the company's most promising technology; however, its Phase 2 candidate, AMR-001, is its most advanced. To complement the VSELs data, the company also announced further data on AMR-001, a potentially $1 billion product earlier this month. The company proved that with a therapeutic dose of more than 10 million cells, no patient experienced deterioration in heart muscle function following a myocardial infarction. Meanwhile, those who didn't receive this therapeutic dose saw deterioration—a reported 30%-40% of patients. This further validates the technology of AMR-001—and when combined with the news of its VSELs, NeoStem continues to show why it's a leader in this growing and innovating space. In the past, animal studies and their use in medical practice have been looked down on. Despite this, animal studies are often the first course of study to determine if a product could potentially be safe and effective. Both StemCells and NeoStem are already developing beyond these animal studies, and each of the three aforementioned companies has seen a number of catalysts to push shares higher. The space as a whole has become one of the more bullish in biotechnology, as all of the more advanced companies have seen major increases in valuation. Each of these companies look fairly well-positioned with regards to their cash positions relative to most of the space: Neuralstem recently completed financing after its preclinical data announcement. StemCells announced in its latest quarterly results that it had $18 million in cash at the end of June, but investors should perform further research to ascertain the potential cash burn rate since that time. NeoStem should not need a period of financing for the short term as it recently closed the sale of its Chinese generic pharmacy for $12.3 million, on top of the $7.9 million reported at the end of its last quarter. The associated elimination of debt as part of the generic pharmaceutical divestiture along with the recently announced redemption of Series E Preferred stock both also contribute to the company's short to mid-term stability. This will save the company a monthly charge in equity, and should create more value for shareholders. Overall, this is an innovating space, with true breakthrough technology. For continuation of your research and due diligence in each of these companies, I recommend visiting each company's website and view the financials, other SEC filings, the current pipeline and company news feeds for the past year or so to discern current and potential growth for each. As these three companies, along with other companies in the space, progress in later-stage studies, I'd watch for further gains in this field, as it continues to innovate and surprise.