StemCells Inc. To Wind Down Operations After Phase II Failure
Executive Summary
StemCells Inc. plunged 81.2% to $0.57 per share on May 31 after the company revealed little chance of success for a Phase II spinal cord injury study, which has been terminated, and said that it may not be able to return any cash to shareholders after StemCells winds down its operations this year.
StemCells Inc. plunged 81.2% to $0.57 per share on May 31 after the company revealed little chance of success for a Phase II spinal cord injury study, which has been terminated, and said that it may not be able to return any cash to shareholders after StemCells winds down its operations this year.
The Newark, California-based company has struggled to keep its share price above $1 and executed a 12-for-1 reverse stock split on May 6 to boost its stock value from $0.24 to $2.50. StemCells shares now are heading back to pre-stock split levels with the discontinuation of the lead development program for the company's HuCNS-SC human neural stem cells and the revelation that it has too little cash and too few strategic alternatives to avoid a shutdown.
Based on six-month data from the Phase II Pathway Study in the treatment of chronic spinal cord injuries, StemCells thought that its stem cell therapy may significantly improve patients' physical strength and function, but a 12-month assessment revealed a more rapid than expected decline. In other words, the treatment's effects were not maintained over time in the study's 17 patients.
StemCells, after consulting with its Interim Assessment Data Monitoring Committee (IA-DMC), determined that: "While the results showed overall improvement in patients treated with the company's proprietary cells, the magnitude of the effect and the perceived trend of the effect over time did not justify continuing the study or exploring the variability in the initial patient observations, given the financial resources available to the company."
StemCells had $5.5m in cash as of May 31, but given that small sum and the minimal prospects of attracting buyers for its technology in light of the Pathway Study's termination, the best option was determined to be an orderly winding down of operations. The company will seek buyers for its intellectual property, but even if the assets are sold, there may not be enough cash to distribute to shareholders after the company meets outstanding obligations and pays for the shutdown.
President and CEO Ian Massey expressed the company's disappointment in the Pathway results in a statement from StemCells and said he was proud of its employees' work over the last several years. However, Massey only joined the company about 14 months ago as president and chief operating officer. He was named CEO in January to replace long-time chief executive Martin McGlynn in a planned transition to facilitate commercialization of the company's stem cells. (Also see "StemCells names president & COO" - Scrip, 25 Mar, 2015.)
McGlynn's tenure was not without controversy. The CEO and StemCells ended up in hot water in mid-2014 when the company appointed former California Institute of Regenerative Medicine (CIRM) president Alan Trounson to its board of directors. CIRM is the agency that oversees $3bn in bond proceeds that California raised to fund stem cell research and development in the state – an agency that previously granted two separate $20m loans to fund development programs run by StemCells. (Also see "BioNotebook: Controversial StemCells board appointment; Portola/Daiichi Sankyo, Lexicon/JDRF, Supernus; and stock offerings" - Scrip, 12 Jul, 2014.)
The company retained one $20m CIRM loan to fund Alzheimer's R&D, but declined the $20m loan for its spinal cord program in favor of other financing. (Also see "Second $20m loan for StemCells Inc alongside Capricor's first under California stem cell programme " - Scrip, 10 Sep, 2012.) (Also see "StemCells raises cash, brings spinal cord injury study to US" - Scrip, 3 Oct, 2013.)