StemCells Inc (NASDAQ:STEM) Is Todays' NASDAQ Focus

StemCells Inc (NASDAQ:STEM) has been an underperformer for quite some time. This occurred under the watch of former CEO Martin McGlynn. He oversaw the company blow through $450 million without moving a drug through the three-phase drug-approval process. Luckily for him, he got a $1 million severance package. Now investors are asking what's next. Many are nervous about a possible new wave of dilution and a reverse split. While these events may occur, we think there are more positives than negatives lining up for StemCells.StemCells is currently engaged in clinical development of its HuCNS-SC platform technology (purified human neural stem cells) as a potential treatment for chronic spinal cord injury (SCI). The company's Pathway Study, a Phase II proof-of-concept trial in cervical SCI is actively enrolling at twelve sites. Six-month interim data for the first cohort of the Pathway Study showed the first-ever clinical evidence of a treatment effect improving both muscle strength and motor function following cellular transplant in spinal cord injury. Top-line data from the Company's Phase I/II clinical trial in thoracic SCI showed measurable gains involving multiple sensory modalities and segments, including the conversion of two of seven patients enrolled in the study with complete injuries to incomplete injuries, post-transplant. The company has also completed its Phase I/II clinical trial in geographic atrophy dry age related macular degeneration. Top-line results from this study show a positive safety profile and favorable preliminary efficacy data. In a Phase I clinical trial in Pelizaeus-Merzbacher disease (PMD), a fatal myelination disorder in children, the Company showed preliminary evidence of progressive and durable donor-derived myelination by MRI.In December, StemCells' management made the decision to focus on the spinal-cord injury (SCI) trial. Management suspended the company’s phase II age-related macular degeneration (AMD) (Radiant) study. These changes should reduce cash expenditures up to $20 million over the next two years. Management also highlighted expectations that they will complete enrollment in the SCI trial by year-end 2016.We believe this is the correct decision by the company. The singular focus on chronic spinal cord injury will allow the company to effectively demonstrate clinical proof-of-concept for its lead product candidate. This helps patients and the company. We expect this proof of concept to occur some time next year after the last patient has been treated.The Phase II Pathway Study, titled “Study of Human Central Nervous System (CNS) Stem Cell Transplantation in Cervical Spinal Cord Injury,” will evaluate the safety and efficacy of transplanting the company’s proprietary human neural stem cells (HuCNS-SC cells) into patients with traumatic injury in the cervical region of the spinal cord. Conducted as a randomized, controlled, single-blinded study, the trial will measure efficacy by assessing motor function according to the International Standards for Neurological Classification of Spinal Cord Injury (ISNCSCI). The primary efficacy outcome will focus on change in upper extremity strength as measured in the hands, arms and shoulders. The trial will enroll approximately 52 subjects in three cohorts. Enrollment in the first cohort of six subjects has been completed. The company is actively enrolling 40 patients in cohort II.So far, what we know is that based on a six-month follow-up of the first cohort, an overall pattern of motor improvement was detected in four of the six patients as measured by gains in both strength and function on the collective ISNCSCI and GRASSP outcomes. Furthermore, muscle strength was improved in five of the six patients; four of the six patients had improvement in the spinal level of injury as defined by the ISNCSCI assessment; three were upgraded one level, and one was upgraded two levels; based on a Patient Global Impression of Change assessment, four of the six patients reported that their condition had improved post transplant; and no adverse events were attributed to the cells.StemCells is one name that we think has more upside than downside. The company now has a singular focus and has taken steps to reduce its cash burn making significant dilution less likely. With a market cap of just $40 million and $20 million in cash, we believe the worst is over for STEM. We will be updating Insider Financial as soon as we know more. For continuing coverage on STEM and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in STEM and have not been compensated for this article.