Neuralstem set for OTC listing

Rockville firm working to develop treatments using fetal stem cells

December 21, 2006|By Tricia Bishop | Tricia Bishop,SUN REPORTER

Neuralstem Inc., a Rockville company hoping to develop fetal stem cell research into treatments for central nervous system diseases, expects to begin trading shares on the over-the-counter bulletin board today.

It will be the second Maryland stem-cell company to go public this year.

In August, Baltimore's Osiris Therapeutics Inc., which uses stem cells donated from adult volunteers and has one product on the market, began trading on Nasdaq. The stock has more than doubled since the initial offering and closed at $26 yesterday, up 96 cents from the day before.

Neuralstem's stock isn't expected to reach that level yet, and likely won't while listed on the OTC, as the bulletin board is called. It will trade under the symbol NRLS.

Unlike the Nasdaq and New York stock exchanges, there are relatively few rules and standards for listing on the OTC, and many shares trade for under a dollar. Last month, the average price of the shares traded was about 12 cents.

Neuralstem's goal is to make the leap from OTC to a mainstream exchange within a year, but for now, it is grateful to be listed anywhere.

"You have to be able to access the public market to move into clinical trials," chief executive Richard Garr said.

The five-person company, founded a decade ago, has developed technology to isolate and multiply neural stem cells in commercial-sized quantities as well as control their development into particular cells, which it believes could be used to treat various diseases, including Alzheimer's.

Garr plans to file a investigational new drug application with the Food and Drug Administration early next year and, soon after, hopes to begin clinical trials of a treatment for ischemic spastic paraplegia, a form of leg paralysis affecting about 10,000 people in the United States.

Neuralstem has already shown the ability to reverse such paralysis in certain animals. But human trials are costly, and funding for stem cell companies - particularly those based on the young and controversial science of embryonic stem cells - has been spotty.

Venture capitalists prefer to wait for drugs to develop before investing, and federal sources have been steering clear of projects perceived as ethically controversial.

The public, however, seems to support the work - at least in attitude. A report in August from the Pew Research Center in Washington says 56 percent of the population favors stem cell research of all kinds.

"The appetite's there in the public, so we should go directly to the public," said Garr, an attorney who co-founded the company with Chief Scientific Officer Karl Johe. Johe developed Neuralstem's technology while working at the National Institute of Neurological Disease and Stroke within the National Institutes of Health.

"It's exciting to have more shareholders and investors who believe in our story," Johe said of the stock offering.

The company received its proceeds from the stock sale in March, before it even filed plans to become public with the Securities and Exchange Commission. Typically, businesses register with the SEC, then sell their shares in an initial public offering.

Neuralstem instead sold $5 million worth of shares at a dollar apiece, along with warrants potentially worth $8.75 million, in a private placement and then registered with the SEC. The company won't receive any funds from investments made from resale of its stock today.

"[The method is] atypical, but it's not the first of its kind," said Steve Chizzik, whose New Jersey firm is handling Neuralstem's investor relations. "It's more expeditious."

At least one financial analyst expects a strong interest in shares traded today.

"This stock might trade substantially higher" than anticipated, financial analyst and former University of Virginia professor Michael A. Berry wrote on his investment Web site last week.

He based the prediction on the types of questions analysts asked of Neuralstem at a New York investor conference last month and the "significant potential" for the company to treat diseases such as Parkinson's.

tricia.bishop@baltsun.com

Neuralstem Inc. at a glance

Headquarters: Rockville

Founded: 1996

Employees: five

Ticker symbol: NRLS

Technology: Isolates brain stem cells from fetal tissue and expands them up to a billion times to transplant as treatments for central nervous system disorders.

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