Wednesday, January 30, 2008

Neuro Companies Causing Headaches

Ever since President Bush (the First) declared the 1990s to be the Decade of the Brain, hopes have been high for device innovations to treat a variety of neurological conditions ranging from stroke to migraines to depression.

For all the promise these therapeutic areas hold, neurological device applications have proven to be among the most inscrutable for entrepreneurs and investors, replete with technological and clinical challenges, not the least of which is the difficulty of conducting neuro trials, e.g., the inherent problems in enrolling acute patients for stroke studies.

Several recent announcements have done nothing but confirm how challenging the neuro space is. In fact, this year is starting out to be one that neuro investors would just as soon forget. Highlighting the bad news cascade was Northstar Neuroscience Inc.'s announcement that its EVEREST pivotal trial failed to meet its primary efficacy endpoint. This caused Northstar's stock to immediately plummet by nearly 90%, hovering today at just above $1 per share. Coming off what many investors called the most successful device IPO of 2006 (raising more than $100mm), Northstar's stock took an unexplained hit not long after going public, but there is no doubt about the reason behind this most recent crash.

Hopes surrounding Northstar were high. The EVEREST trial was designed to determine whether cortical neurostimulation, together with rehab therapy, would improve hand and arm function in stroke survivors better than rehab alone. Not only did the initial four-week data fail to show any meaningful difference between the investigational and control groups, but a preliminary review of the longer-term (24-week data) appears to show similar results. John Bowers, Northstar's president and CEO, during a conference call discussing the trial results, noted, "To put it mildly, we are extremely surprised and disappointed" by the study's outcome, and couldn't explain why EVEREST failed to reflect the positive results demonstrated by the company's two previous feasibility trials.

Northstar remains well-financed--the company reported having more than $80mm in cash and investment on hand as of year-end 2007. While feasibility studies are still being explored for possible applications of Northstar's Renova technology to treat tinnitus, aphasia and depression, Bowers acknowledged that it is unlikely the company will make sufficient progress in any of those areas to launch a new pivotal trial this year.

Northstar is not the first high-profile failure in the hot neurostim/neuromodulation space. Cyberonics' decision to no longer focus on treatment-resistant depression with its vagus-nerve stimulation technology--concentrating instead on epilepsy--has been well documented. Northstar's fall may, however, cause investors to pause and assess what progress other players in this area are making before committing additional funds.

Other recent examples of bad neuro news come from one particular therapeutic area: PFO closure (a hole in the heart that fails to close after birth) thought to possibly cause both migraines and stroke. NMT Medical Inc. just announced that it was shutting down its MIST II PFO/migraine trial, primarily due to patient enrollment difficulties, to concentrate on its CLOSURE I pivotal PFO/stroke trial. Investors didn't take the news well, driving the company's stock price down as much as 35%, although it has regained about half of that lost value in the last couple of days.

Indeed, one whole area of PFO closure technology--so-called energy-based approaches that use sources including RF-energy to seal the PFO--has apparently proven unworkable. Cierra Inc., a company out of The Foundry incubator, is in the process of winding up its operations, and, according to executives familiar with this space, CoAptus Medical Corp., the other player in this space using an energy-based approach, may soon follow suit.

Lest we leave you with a completely negative take on the prospects for device-based neurological therapies, here's one recent positive development: earlier this month, the FDA cleared Penumbra Inc.'s system, which is a tool-set designed to treat ischemic stroke by removing occlusions from the brain's larger vessels. Penumbra's approach is designed to provide neuro-interventionalists with an approach that can be used beyond the narrow, three-hour window during which the drug tPA is indicated, as the company's system can be employed within eight hours of an ischemic event.

"Human Brain" by Flickr user Gaetan Lee used under a creative commons license.

No comments: