Earlier this week I met with three CEOs of the neurotech industry -- Ron Cohen of Acorda Therapeutics (NASDAQ: ACOR), Uli Hacksell of Acadia Pharmaceuticals (NASDAQ: ACAD) and Jörn Aldag, of Evotec (NASDAQ: EVTC) -- along with Zack Lynch, the director of their trade association. Their November 10 media tour gave me a chance to gain some insight into this niche within the biotech industry of companies seeking cures for brain illnesses through drugs and devices.
At a time when revenues from blockbuster drugs are tapering off as their patents expire, these companies -- and their two-year-old Neurotechnology Industry Organization -- are hoping to unlock a new area of business growth while offering cures to ailments of longer-living populations and diseases involving the central nervous system.
Hawthorne, New York-based Acorda is already selling its first product, Zanaflex Capsules, which help control spasticity. Its Fampridine medication, aimed at bettering the walking capability of people with multiple sclerosis, is still undergoing Phase 3 testing. Update: November 14: Ron Cohen let me know Acorda has successfully completed Phase 3 testing of Fampridine
and intends to apply early next year for Food and Drug Administration approval to market it.
Meanwhile, San Diego-based Acadia, led by Hacksell, is conducting Phase 3 clinical trials of pimavanserin, which addresses psychosis related to Parkinson's disease.
Evotec, a Hamburg, Germany, company, whose acquisition of San Francisco-based Renovis in May could better position it to attract U.S. venture capital, is working on remedies for insomnia, Alzheimer's disease and smoking cessation.
You don't have to be a brain scientist to understand that these three companies are tackling challenging missions. Yet, as David Duncan pointed out in a Portfolio piece that appeared before global market conditions soured, the failure rate for clinical testing of new brain drugs is greater than that for pharmaceuticals in general, while the costs run higher.
On November 10, Acorda closed at $19.10; Acadia at a rather low $1.82, and Evotec at $2.36. Closing prices on November 11: $18.45, $1.72 and $2.46, respectively. Of course, lately, shrunken stock values are not unique to the neurotech field. Fortunately for companies on the NASDAQ, on October 21 the exchange suspended for three months its rule requiring a minimum closing stock price (the condition that firms must reach a closing price of $1 over a 30-day period).
To check the sector's performance, I reviewed the track record of the NERV NASDAQ NeuroInsights Neurotech Index, begun just over a year ago, in late September 2007. From November 10, 2007, to November 10, 2008, the NERV fell 32% while the S&P 500's declined 37%, and the NASDAQ Biotechnology Index dropped 14%.
Says the Neurotechnology Industry Organization's Lynch: "Given the condition of the current global financial markets, the index is holding up relatively well. Looking forward, [with] the large market opportunities in front of these companies, . . . we would expect the value of the index to increase as these companies bring their treatments to market." To qualify for the NERV index the stocks must be listed on the NASDAQ, NYSE or AMEX exchanges, have a market capitalization of at least $200 million and a minimum three-month average daily trading volume of 100,000 shares and a closing price of at least $3 on the day of a semiannual assessment.
The NERV index launched with 32 companies and now has just 26, including Acorda and Acadia; the timing of Evotec's merger has not allowed for its participation so far. Over the past year, the NERV dropped nine companies -- Aspect Medical (NASDAQ: ASPM), Javelin (AMEX: JAV), Micrus Endovascular (NASDAQ: MEND), Neurocrine (NASDAQ: NBIX), Neurogen (NASDAQ: NRGN), Northstar Neuroscience (NASDAQ: NSTR), Penwest Pharmaceuticals (NASDAQ: PPCO), Somaxon (NASDAQ: SOMX) and Vanda Pharmaceuticals (NASDAQ: VNDA) -- in most cases because of their falling below the $200 million market cap minimum, according to Lynch. New additions are Adolor (NASDAQ: ADLR), Orexigen (NASDAQ: OREX), Noven (NASDAQ: NOVN) and Questcor (NASDAQ: QCOR).
The Neurotechnology Industry Organization is seeking Congress' help to accelerate the sector's growth. A bill it championed, the National Neurotechnology Initiative, was introduced in both houses in May. The initiative calls for a federal infusion of $200 million above current industry funding levels for each of five years. This would finance better coordination for all the neurotechnology research conducted by the 16 units of the National Institutes of Health, the Department of Defense and the Department of Veterans Affairs. The legislation would also prioritize more money for related start-ups, via the Small Business Innovation Research and the Small Business Technology Transfer programs, and would finance additional qualified Food and Drug Administration staff to speed up review of new drugs. Finally the bill calls for a new research center to examine ethical issues, such as whether "healthy" people should take brain-enhancement drugs. Anticipating that the legislation might not pass this year, the NIO is poised to push for its reintroduction early next year.
All told, this is a lively sector of the biotech industry that bears continued watching.