NSB - General Discussion

Background:
NeuroScientific Biopharmaceuticals (NSB) was listed on the ASX 27/07/2018. The company was founded by venture capitalist Harold Clough, the co-founder of Clough Engineering (which sold for big $ many years ago) and founder of McRae investments which is his families investment vehicle (10). Harold Cloughs ‘pet interest’ is in Alzheimer’s (23) which is probably why he acquired the IP before he took the company public – I have not heard how he came across it. The Emtin peptide technology is central to NSBs work was originally developed by scientists based at the University of Copenhagen’s Institute of Neuroscience and Pharmacology. The University of Tasmania (UTAS), subsequently acquired the intellectual property from the University of Copenhagen. NSB has an exclusive licence agreement with UTAS to develop and commercialise the intellectual property related to EmtinB (and other related peptides) (refer to Section 12.1 for a summary of the Prospectus for the licence agreement, but it is a mix of cash and shares). The Emtin intellectual property includes patents granted in the USA and European markets, research data, reports, and know-how (1). A US Patent granted for Emtin technology on 22 January 2020: USA Patent 10100100 - this is the third US patent to be granted for the Emtin technology (11). If the Company can complete the Phase 1 trials, it will seek a development partner to commercialise EmtinB with a view to retaining a commercial interest to generate revenue through licensing, royalties, or other arrangements (1). Although, Non-executive chairman Brian Leedman recently stated that if Big Pharma came along after a phase 1 clinical trial and offered a great big cheque, that he would recommend shareholders to take it (23). My bet that this is because the process of drug development is a long term, high risk, and costly process. Estimates of the cost of developing a drug through to a marketed product range are up to US$2.6 billion over up to a 15-year timeframe. An overview of the process is detailed here (1):

Since listing with the ASX, an overview of the company’s achievements are (18):


Peptides:
Emtin peptides are modelled on the domains of a naturally occurring protein, called Metallothionein-II (MTII). Extensive studies have shown that MTII is a neuroprotective protein that is expressed within the central nervous system (CNS) in response to brain injury. The Emtin peptides are synthetic peptides. NSB considers that preclinical validation of EmtinB confirms the peptide has sufficient therapeutic potential to proceed to clinical trials in humans. The potential of EmtinB was originally demonstrated in a mouse model where the optic nerve was severed but regenerated following the introduction of a protein from which NSB’s lead peptide is derived. These peptides offer a novel therapeutic treatment pathway for neurodegenerative diseases that are currently without effective treatment options.Below details the risk profile of Peptides (1)

As seen in the table above, generally speaking Peptides are safe and well tolerated, which bodes favourably for the upcoming release of toxicity results..The status of the drugs development is outlined below (18):

Application:
So far testing has only been done via injections. However, Brian Leedman said EmtinB demonstrated “enormous potential of a topical eye drop disease-modifying therapy for glaucoma patients” (24), meaning eye drops could be developed to treat the condition further down the line.

Management:
Straight from the company’s reports:
Brian Leedman, Non-executive chairman: Co-founder of ResApp Health Ltd (ASX.RAP), Imugene Ltd (ASX:IMU) and Oncosil Ltd (ASX.OSL). Formerly Director of Alcidion (ASX: ALC) and Chairman of Ausbiotech (WA). (22)
Matt Liddlelow, MD + CEO: 15 years’ experience commercialising medical devices and pharmaceuticals for multi-national companies including AstraZeneca (22)
Dr Anton Uvarov, Executive Director: Founding director of Actinogen (ASX.ACW), conducting the largest Alzheimer’s study in Australasia with 174 patients. Former analyst with Citigroup, New York (2) & (22)
Stephen Quantrill, Non-Executive Director: Chairman of McRae investments and Harry Cloughs families inside man (22)
Directors interest from the annual report 2020 is summarised below:

Remember Quantrill is probably not holding any shares due to his existing link with McRae investments being the Chairman of McRae investmentsLast week a change of directors’ interest notice came out for Brian Leedman who has sold approx. 300k units on the market to convert 600k units of options. The net result is he owns 300k units more.
I personally think this is a bad look, but as per @TerribleTadpole "The fact he sold half strongly implies he disposed to cover the income tax obligation:1. When you are gifted options as part of your remuneration the difference between the option exercise price and the market share price is counted as income (not capital gains).2. As it is income the tax on it becomes a PAYE obligation to the ATO.3. PAYE obligations have to be satisfied within 28 days.So unless they have a mound of cash sitting in the bank the recipients of remuneration options don't have a lot of discretion about how much they sell or when." So great insight mate and thanks for sharing that

Key Holders:
1) McRae Investments and Technology (two separate holdings) – the investment vehicles of the Clough family - own a combined 24.3m shares (27% approx. of current issued capital, which may be diluted if options are exercised – not sure if these guys are holding any options).
2) NSB received commitments from Geneva, Switzerland-based Alpha Swiss Partners for the placement of 8.5m fully paid ordinary shares in the Company at an issue price of $0.28 per share to raise $2.4 million before costs (9% approx. of current issued capital). Alpha Swiss is a well-respected family office with circa $1.8 Billion USD under management (19). This is stella news, why would a company in Switzerland bother about a small Australian bio-tech if it wasn’t worth bags? And that they paid a premium to what the SP is currently trading at makes me feel like this is a great buying opportunity.

Markets – Alzheimer’s, MS, Glaucoma, Post COVID Fibrosis, and more

Alzheimer’s:
48m people globally have dementia, 70% of dementias Alzheimer’s disease, US$818B global economic burden, US $5B drug sales p.a. (6) Preclinical in vitro models were successfully repeated for Alzheimer’s. NSB has partnered with Covance for safety & toxicology program; a global CRO who have worked on all the top 50 best-selling drugs available today. A main breakthrough supporting use of EmtinB was that it can cross the BBB (Blood Brain Barrier) within 1 hour of being administered and slowed progression of Alzheimer’s > 80% in the animal model (17).But Alzheimer’s has an issue that it takes a very long time to get a drug through to approval because the patient needs to be followed for many years (23) – so this would be the slowest of burn to flip a dollar… / there probably wont be any quick gains to be made off this work…

Glaucoma:
The best chance of a re-rate in the near term5% of population suffer vision loss due to damaged optic nerve. 60m people affected by glaucoma, US $3B sales p.a. (6). NSB and the Lions Eye Institute (LEI) have entered into a research agreement to develop EmtinB as a treatment for eye diseases that affect the optic nerve. LEI is one of Australia’s leading ophthalmic research institutes and is globally recognised as a centre for first-class scientific research into eye diseases. The research program is led by Professor Dao-Yi Yu, Head of the Physiology and Pharmacology Research Group at LEI. Supported by a core research team of multidiscipline experts from research scientists to clinical specialists, Professor Yu recently led the development of a treatment for glaucoma that was acquired by global pharmaceutical company Allergan (3). On 29/07/2020 Professor Dao-Yi Yu was appointed to Scientific Advisory Board. Professor Yu has published almost three hundred peer-reviewed publications in prestigious journals and will take a leading role at our Advisory Board to advance NSBs Glaucoma program into clinical studies (17)Initial studies showed the ability of EmtinB to penetrate the retina and optic nerve of the rabbit eye with no side effects (8). Subsequent studies show EmtinB Demonstrates Neuroprotective Effect in the principal site of Glaucoma Damage. Degeneration of optic nerve in glaucoma model and neuroprotective effects were measured by changes in the levels of neurofilaments and cytoskeleton proteins (i.e., study endpoints). High intraocular pressure pig model is the closest experiment to replicate severe human glaucoma pathology; positive results in this model indicate disease modifying potential of EmtinB. “The results are better than expected and unprecedented in this model,” said Matthew Liddelow, CEO and MD of NSB. “Given that we only had a six hour window for EmtinB to demonstrate its neuroprotective effect at the molecular level and the severity of the IOP model that mimics the worst human pathology, we believe in the high potential of EmtinB as a disease modifying agent in future human studies of glaucoma (13) & (17).The advantage of a Glaucoma study is the connection to the rat (optic nerve regeneration), and in a phase 1 clinical trial you can treat patients who have Glaucoma (23) – it’s not just a toxicity study. This is the work that will drive the re-rate in the short term if the company is able to get the Phase 1 human trials underway.

MS - Multiple sclerosis:
EmtinB stimulated nerve regeneration exceeding 300% compared to control and double that of Copaxon, the leading marketed drug for Multiple Sclerosis with peak annual sales of $4 billion dollars. Results clearly demonstrate significant promise of Emtins’ neuroprotective effects in multiple neurodegenerative diseases, such as Alzheimer’s, Multiple Sclerosis, Parkinson’s, etc (7). The current MS market is estimated in excess of US$20 billion with 2.3 million patients suffering from this disease globally. (17) Five concentrations of EmtinB were used: 15µg/ml, 30µg/ml, 60µg/ml, 120µg/ml, and 150µg/ml. At the 5-day incubation period, all concentrations of EmtinB increased the total number of cells. These results also exceeded NSBs expectations and profoundly demonstrate the efficacy of EmtinB in MS and across a number of other neurodegenerative conditions (14)

Post COVID Fibrosis:
On 20/11/2020 NSB decided to investigate treatment for post-COVID Fibrosis with the Institute of Respiratory Health and The University of Western Australia as potential therapy for long term respiratory complications of Covid-19. (20) @Malown1 noted on 20/11/2020 said: "screening phase with the initial term of the research agreement set at 4 months."

Risks:
The key risks of an investment in the Company are detailed on p19 of the Prospectus. (1)

Toxicity Risk:
It seems a number of toxicity programs have been conducted over the past 2 years.On the 18/11/2019 the safety and toxicology program conducted by Covance was “progressing towards the important Good Laboratory Practice (GLP) studies and the Company estimates that the program is 75% complete” suggesting toxicity is OK (9). On 03/02/2020 it was reported the preclinical safety and toxicity studies for EmtinB for Glaucoma are progressing as expected with the highest dose level of 300mg/kg being well tolerated and no abnormal findings reported to date (12). On 28/01/2021, it was reported that at approximately three times that of the planned maximum clinical dose had not resulted in any ocular safety issues (22).On 20/05/2020 it was reported that for Neurodegenerative conditions no toxicity in dose levels 60x higher than planned clinical dose were observed (16).Given Brian Leadman’s recent statements in the podcast (23) that they “will start phase 1 clinical trials”, this bodes well that the tox results will be favourable and also ties in with the characteristics of peptides mentioned earlier in this post. So far tox studies have been done on rabbits, rats, and pigs (23) with no harmful effects at the right dosages.

Manufacturing risk:
the elephant in the roomPhase 1 clinical studies initially scheduled for Q2 2019, is now expected to begin in Q2 2021 (5) after timelines have been pushed out time and time again. In his recent interview, Brian Leedman cited manufacturing issues (as the peptide needs to be of a high degree of purity) were the main reason as the manufacturing is very complex. NSB has engaged 3 separate manufactures to overcome these difficulties to provide alternatives if there delay in one supplier (23).NSB signed a manufacturing service agreement with leading Japanese company Mitsubishi Corporation (Mitsubishi). Mitsubishi was contracted to perform feasibility and analytical services for the large-scale manufacturing of EmtinB drug product (15).

Current Outlook (21):
NSB is funded through to completion of Phase I (16), according to the latest quarterly there is 6 quarters cash on hand (without even considering the cash coming in from Oppies). Also, according to Brian the company is covered for cash at least for FY 2021, but will need to raise more capital in the future.

In the prospectus it was state that NSB will now progress EmtinB through safety and toxicology studies required to permit the Company to submit an Investigational New Drug (IND) application with the FDA and prepare for Phase I human clinical trials. and with “the completion of preclinical safety studies the Company can submit an IND and begin human clinical trials” (1). I have reached out to Matt to get clarification of their FDA approval program and his response was:We will conduct pre-IND meetings with the FDA before we start clinical studies, but not necessarily submit an IND before Phase I studies. Due to the novel structure and function of EmtinB, it is necessary that we interact with the FDA before we complete the safety and tox program so that we can understand their expectations for the data required to gain approval in the future.Given that Leedman has stated NSB will start Phase 1 trials in Q2, but no contact has yet been made with the FDA (seemingly) – I am not sure if they will be able to meet this deadline… To my knowledge NSB is also yet to announce a partner like Camargo to assist them in dealing with the FDA aswell…

Options Overhang:
Options were given to the initial shareholders post IPO. It is estimated therefore the top 20 would have had a substantial number - thanks @Dortago747) . And, as per @TerribleTadpole “as the 20c options are exercised the dilution of new shares is offsetting the growth in market capitalisation: On 30-Sep-2020 there were 78,578,984 shares on issue. Since then, 8,571,429 new shares have been issued, and 3,304,305 options have been exercised. So as at today there are 90,454,718 on issue, or 15% dilution. Share price is being constrained mainly by the sheer number of options outstanding at 20c. There are still over 57 million options. If they all get exercised that is an increase of over 60% from the current 90 million shares. But if they are all exercised that will provide $11.4 million in cash.”The options Expire 7th March. 1st of Mar is the last day of quotation.

Parting Notes:
• “There are many Phase 1 clinical trial Bio-techs out there, and they have market caps considerably larger than ours... we will be in phase 1 in a matter of weeks” (23)Some on here have suggested a market cap of 100m would be fair for NSB, if all options were converted then the SP would need to get to circa 68c to achieve this.
• Can the company stick within its timelines and start Phase 1 human trials in Q2 2021 after several timeline blowouts?
• Hopefully not all the options are converted, the company has heaps of cash and we don’t need want the dilution
• There are also several good articles on small caps and stock head worth looking into, also worth following this company on LinkedIn
• Remember the stat that only 6% or so of drugs ever make it to market etc etc etc…None of this is financial advice, so please do your own research

(1) https://hotcopper.com.au/threads/ann-prospectus.4322366/
(2) https://hotcopper.com.au/threads/ann-nsb-presentation-to-investors-in-singapore.4425884/
(3) https://hotcopper.com.au/threads/ann-nsb-research-collaboration.4444022/
(4) https://hotcopper.com.au/threads/ann-annual-report-to-shareholders.4511453/
(5) https://hotcopper.com.au/threads/ann-agm-address.4552715/
(6) https://hotcopper.com.au/threads/ann-investor-presentation.4679407/
(7) https://hotcopper.com.au/threads/ann-nsb-breakthrough-results-from-spinal-cord-injury-model.4839280/
(8) https://hotcopper.com.au/threads/ann-emtinb-can-become-a-revolutionary-treatment-for-glaucoma.4986890/
(9) https://hotcopper.com.au/threads/ann-nsb-company-update.5078518/
(10) https://hotcopper.com.au/threads/ann-nsb-presentation-nov-2019.5082061/
(11) https://hotcopper.com.au/threads/ann-additional-us-patent-granted.5184403/
(12) https://hotcopper.com.au/threads/ann-nsb-glaucoma-study-update.5203966/
(13) https://hotcopper.com.au/threads/ann-positive-results-in-glaucoma-pig-model.5276629/
(14) https://hotcopper.com.au/threads/ann-positive-results-in-ms-study.5291044/
(15) https://hotcopper.com.au/threads/ann-nsb-signs-manufacturing-agreement-with-mitsubishi.5350144/
(16) https://hotcopper.com.au/threads/ann-techknow-invest-webinar-presentation.5404900/
(17) https://hotcopper.com.au/threads/ann-professor-dao-yi-yu-appointed-to-scientific-advisory-board.5524007/
(18) https://hotcopper.com.au/threads/ann-ausbiotech-invest-2020-conference-presentation.5715698/
(19) https://hotcopper.com.au/threads/ann-completion-of-strategic-placement.5756537/
(20) https://hotcopper.com.au/threads/ann-nsb-to-investigate-treatment-for-post-covid-fibrosis.5768570/
(21) https://hotcopper.com.au/threads/ann-chairmans-address-to-shareholders.5802742/
(22) https://hotcopper.com.au/threads/ann-appendix-4c-quarterly.5876966/
(23) HealthKick Podcast: NSB brings new solutions to medicine’s most stubborn eye problems on Stock Head
(24) Small Caps Article: NeuroScientific reveals positive results from pre-clinical glaucoma study
(25) https://hotcopper.com.au/threads/ann-appendix-4e-and-annual-report.5590748/