Dawson James starts Brainstorm at buy; PT $12

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Dawson James initiated coverage of Brainstorm (NASDAQ:BCLI) with a “buy” rating and $12 price target. The stock closed at $3.05 on Dec. 17.

Brainstorm uses autologous cell therapy to treat amyotrophic lateral sclerosis (ALS) or Lou Gehrig’s disease. The company is now in a Phase 3 trial, which if successful, has the potential to be “transformational for the company and for ALS patients,” writes analyst Jason Kolbert.

“The hope is that NurOwn, the company’s lead cell therapy, may provide an improved and extended quality of life for patients,” he added.

Mr. Kolbert said the enrollment criteria for the pivotal trial is designed to include only the fast progressing patients who demonstrated superior outcomes in the prior Phase 2 trial. The 200-patient “multi-dose” pivotal trial is being conducted at six sites in the U.S. The primary outcome measure for the study will use a responder analysis score.

The NurOwn process involves isolating mesenchymal stromal cells (MSCs) from a patient’s bone marrow. These cells can be frozen and stored for later use (Brainstorm successfully demonstrated the equivalence of cryopreserved cells to fresh cells), or converted into neurotropic factor secreting cells, or MSC-NTFs. NTFs are growth factors known to support the survival of neurons, and Brainstorm’s MSC-NTFs are designed specifically to treat neurodegenerative diseases, including ALS.

“We view cryopreservation as an important part of the Brainstorm fundamental story as it allows a high cost of goods to be spread out across multiple doses, improving manufacturing margins,” he added.

With a market capitalization of just about $63-million, Mr. Kolbert said Brainstorm is trading at a distressed valuation. The Phase 2 trial demonstrated a high safety margin, so if “efficacy is demonstrated in the pivotal trial, it creates a favorable risk-reward scenario,” he said.

In addition, he said that changes in legislation around the approval of cell therapy in the U.S., Europe, and Japan should create a significant opportunity.

Stephen Kilmer