NervGen Pharma is a buy, says Paradigm

Paradigm Capital delivered a healthcare sector update on Wednesday on drug developer NervGen Pharma (NervGen Pharma Stock Quote, Charts, News, Analysts, Financials TSXV:NGEN), with analyst Scott McAuley saying the company has a number of significant inflection points coming up. McAuley reiterated a “Speculative Buy” rating on the stock and maintained his $4.50 target price, which at the time of publication represented a projected 12-month return of 166 per cent.

NervGen, which is developing novel treatments for neurodegenerative diseases and central nervous system injury, announced on Tuesday that the US Food and Drug Administration had given clearance for NGEN to expand the trial population for its ongoing Phase 1 study of its NVG-291 peptide drug candidate. The partial lifting of the FDA’s clinical hold allows for men and pre-menopausal women to be included in the study.

“We’ve now achieved two more significant milestones for the Company: completing enrolment of the final multiple ascending dose (MAD) cohort in postmenopausal females and being able to enroll bridging cohorts of males and premenopausal females,” said NervGen Executive Chairman and Interim CEO Bill Radvak, in a press release.

“The doses of NVG-291 studied in each of the MAD cohorts exceed the corresponding doses that resulted in significant functional improvements in animal models of nervous system damage. Being able to enrol the bridging cohorts underscores that we are a step closer to initiating the Phase 1b/2 efficacy studies in spinal cord injury, Alzheimer’s disease and multiple sclerosis patients,” he said.

In March, 2020, the FDA had placed a partial clinical hold on NVG-291 due to dose-dependent reproductive toxicity observed in seven-day and 28-day rat toxicity studies. The FDA had restricted NervGen to proceed with females only for the single ascending dose (SAD) portion and post-menopausal women for the MAD, after which NervGen ran a number of additional pre-clinical tests, with none replicating the initial toxicity, hence the new FDA clearance. The hold is only partially removed since it still restricts the maximum dose in men and pre-menopausal women.

Commenting on the development, McAuley said NGEN will need to do pre-clinical animal testing at higher doses for the full hold to be removed but that he sees this as a low risk given that current doses in the Phase 1 studies are above 170 per cent the equivalent highest dose in animal efficacy studies.

“It is positive to see the FDA partially lift the partial clinical hold and we will look for recruitment of the new bridging cohorts to begin in early 2023. The lack of a permanent CEO will likely remain a near-term headwind, but we see significant upcoming inflection points as the company launches and completes its early efficacy studies over the next 12–24 months,” McAuley wrote.

NervGen’s share price has been sliding since about this time last year, going from a high of just under $3.00 to now around $1.70 per share.