Bulls, Bears: Hot Nanocap CNS Companies

In Part II of our special report on the state of companies operating in central nervous system disease in the public markets, we look at one of the most promising nanocap companies, Amarantus BioSciences, which we believe is ready to skyrocket. In addition, we discuss recent failures and explanations for historical investor hesitation — yet why a new crop of promising technologies are bucking the trend

In Part I , we identified catalysts and trends that have driven investors toward the space. We explored microcap companies with promising technology and growth opportunity, as well as analyze the recent failures by big pharma in the space.
Check out our semi-weekly “Bulls, Bears” column for in-depth articles on hot investment opportunities in the public markets.

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As the technology and understanding behind the CNS industry grows, current trends suggest the financial markets will respond favorably. Big pharma’s failures in the space can be disenchanting, however recent fundraisings in the microcap division (as well as a growing, not declining sector index) suggest institutional investors remain confident. An equally important step is understanding how to reduce costs: CNS treatments can range anywhere from $300-600,000 a year.

As more cost effective solutions such as the InVivo “scaffold” come into focus, insurers and patients will see the cost savings that these therapies will provide, and investors will entertain a second look, and further growth.  Therapies such as these will improve quality of life for patients and caregivers, reduce costs for hospitals/insurers and ultimately unlock the potential of what can be done to treat disorders and injuries to the nervous system, the complete package being a “Holy Grail” of neuroscience.

Most promising trends in the sector look to further cooperation with bigger medical companies or peers, or further M&A activity in the form of takeovers or spinoffs. Companies dealing in the CNS space will ultimately have more access to capital and more exposure through these models.

Of course, much of this depends on the will of investors to see these results through.  In the age of wild swing trades on announcements and rampant speculation, there must be a long term appreciation of the value that these companies provide. At the core, it comes down to confidence in the technology.

On the nanocap level, we are seeing several impressive strides with truly remarkable technology.  One very interesting example is the development of protein-based therapies to treat Parkinson’s, which do show substantial promise.

Amarantus BioSciences, Inc. (NASDAQ: AMBS), a biotechnology company which is developing new treatments for central nervous disorders including Parkinson’s disease and Traumatic Brain Injuries (TBI), focusing on its proprietary anti-apoptotic therapeutic protein known as MANF.

***Watch the Amarantus BioSciences presentation at OneMedForumNY 2012 here.***

Naysayers will point to two main (largely uncontrollable) factors which have driven a 96% decline YTD: the scientific community and the financial markets’ conservative stance towards treatments of Parkinson’s disease; and the end of the ‘lock-up period’ following Amarantus’ reverse merger just over a year ago, which diluted shareholder equity.

However, bulls will point towards the company’s prospects and fundamentals, which have grown significantly.  Peer-review data supporting the reproduction of the positive outcome of the MANF therapy presented in August 2011, coupled with positive interim pre-clinical data presented to the Amarantus’ Scientific Advisory Board (SAB) generated with funding from the Michael J. Fox Foundation for Parkinson’s Research in July of 2011 suggests the company’s product development pathway is sound.

“Since 2003, 14 papers have been published in highly-respected peer-reviewed journals describing MANF’s ability to rescue neurons from death in a variety of cellular and animal models of CNS disease,” said John W. Commissiong PhD, Chief Scientific Officer of Amarantus who discovered MANF. “The data presented at the SAB meeting confirms critical aspects of that work and will allow the Company to focus the MANF Parkinson’s development program on the required protocols to gain regulatory approval to initiate human clinical studies.”

Last quarter, Rainbow Coral biosciences subsidiary Rainbow BioSciences (NASDAQ: RBCC) announced a potential partnership giving Amarantus additional capital and access to additional resources to develop its therapies. This is evidence of a model of cooperation between different companies to develop a respected therapy. Further, this step shows if Amarantus can back up the results and go to human clinical testing, the company is an undervalued gem.

 

Read Part I here!

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