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BCLI: Determining Path Forward Following “Right to Try”; Warrant Exercise Raises $12.3M

06/11/2018
By David Bautz, PhD

NASDAQ:BCLI

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Business Update

Determining Path Forward Following Signing of “Right to Try”

On June 7, 2018, BrainStorm Cell Therapeutics (NASDAQ:BCLI) held a conference call to engage with ALS patients and caregivers following the signing of the “Right-to-Try” legislation by President Trump. The law allows those with a terminal illness to seek out treatments from pharmaceutical companies that have not yet been approved by the FDA. However, the treatment would have to be beyond Phase 1 safety testing. In addition, the bill does not guarantee that a company will offer the therapy to those who request it. Before the passage of the “Right-to-Try” law, patients could petition the FDA for access to an experimental treatment through the “expanded access program”. Thus, the “Right-to-Try” law just removes the process of having to petition the FDA.

During the call, management touched on a number of the issues that the company will have to work through as it determines how to move forward under “Right-to-Try”. Among these are:

How to handle what is sure to be an overwhelming demand. Just judging by the number of participants on the call (which was in the hundreds), there are likely to be a sizeable number of patients that will want access to NurOwn®. Unfortunately, the company can only accommodate a limited number of patients per year and will need to determine a process by which patients are selected for treatment.

How to educate patients and caregivers. BrainStorm will need to be sure that those who access treatment under “Right-to-Try” have realistic expectations about what to expect, particularly given the heterogeneity of each patient’s symptoms and progression.

How NurOwn® will be paid for. Under “Right-to-Try” a company is allowed to charge patients for the treatment. Based on the fact that cell therapies are inherently expensive to produce, and insurance coverage is likely not going to be available for a drug that is not approved by the FDA, BrainStorm is evaluating how those who are unable to afford to pay for it can still receive treatment with NurOwn® such that it is not only for wealthy individuals.

How “Right-to-Try” will impact the ongoing Phase 3 trial. As a small company, BrainStorm has limited resources, which are mostly being used to conduct the Phase 3 trial. The company will need to determine how to allocate those limited resources between patients in the Phase 3 trial and any patients that are treated under “Right-to-Try”.

Lots of Strong Opinions on Both Sides. “Right-to-Try” has elicited very strong opinions both for and against the legislation. Thus, the company will work to gain support for allowing patients to seek treatment from regulators, physicians, and KOLs before moving forward.

Financial Update

On June 7, 2018, BrainStorm announced the exercise of approximately 2.4 million warrants at an amended price of $5 per share generating gross proceeds of approximately $12.3 million. These warrants were originally issued in January 2015. For each warrant exercised, investors were issued a replacement warrant to purchase one share of common stock at $9 per share with an expiration date of Dec. 31, 2020.

Based on this raise, we estimate that BrainStorm has approximately $18 million in cash, cash equivalents, and short-term deposits. This does not include the approximately $9 million left from the CIRM grant that is helping to fund the Phase 3 clinical trial. Thus, we believe that the company now has sufficient capital to fund operations through the end of the Phase 3 trial and to potentially move other development projects forward.

Conclusions

In our opinion, BrainStorm is in a very tough position with “Right-to-Try” and we applaud the cautious approach taken by the company thus far. As was stated on the conference call, these patients do not have a lot of time, thus management is aware of the need to come to a quick decision regarding the company’s policy while at the same time not rushing into it knowing all the various issues there are, as discussed above. Raising sufficient capital to fully fund the Phase 3 trial was the right thing to do before moving forward with “Right-to-Try”. Because of this, the company is not in a position where they have to treat patients under “Right-to-Try” in order to generate enough revenue to finish funding the trial. We do not anticipate waiting long before the company announces how it will move forward under “Right-to-Try”, and in the meantime our valuation remains at $15 per share.

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