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Biotech / Medical : Neurobiological Tech (NTII) -- Ignore unavailable to you. Want to Upgrade?

To: Mike McFarland who wrote (342)	5/18/1998 7:57:00 AM
From: Dr. John M. de Castro	Read Replies (1) \| Respond to of 1494

I have a few corrections on your summary of the NTII conference call. First, the split with Merz is not by territory but by indication. NTII will retain the "lions share" (Freiman's words) of the revenue from the neuropathic pain and AIDS dementia indications while Merz will retain the "lions share" from the Dementia (including Alzheimers) indication. The key for NTII with dementia though is the size of the market. It is immense and worldwide. If memantine is successful, NTII stand to gain a small piece of a huge pie. For a company the size of NTII, with 13 current employees, this could produce a cash flow that could fund the company for years to come. This was where Freiman's reference to a "cash cow" comes from. The key will be whether Memantine works. Freiman said that he has seen Merz' data and it is impressive. The first of three Merz Phase III trials produced statistically significant effectiveness for memantine with dementia. The results should be published later this year. The stumbling block for Merz in finding a Pharma partner was the unclear patent rights situation. The reason for the deal with NTII, from Merz' standpoint, was to acquire clear and unambiguous patent rights. Freiman felt that this would open the door to a partnership. The key to the deal from NTII's part, aside from the much needed cash, was to have access to all the preclinical and clinical data that Merz has amassed. Freiman indicated that in order to submit an NDA, NTII would have had to perform studies that he costed at $5 million. But, now NTII won't have to do them and can submit the Merz data with the NDA. I also want to correct the impression from your post in regard to Xerecept that the program is not going well. That was not the case. The problem has been slow enrolement in the Phase II trial. This was explained to have been a problem because of treatment inertia. The standard treatment for peritumoral edema is steroid, dexamethasone, treatment. It works fairly well, but has a poor side effect profile. Xerecept appears to work better (if the Phase I results are accurate) and have a much better side effects profile. However, the problem has been to convince physicians that they should not use a known effective therapeutic and instead use an unproven drug. This does not suggest any problem with Xerecept or its effectiveness. But, may indicate that there will be considerable inertia in the market, when and if it gets approved. Freiman indicated that they have brought two more centers on line and thus enrolement should pick up. The Phase II should be complete by the end of the year and the results reported in early 1999. It would be a mistake to underestimate the value of Xerecept. I know of at least one analyst who believes that Xerecept is far more valuable than memantine. NTII has the rights to a composition of matter patent for Xerecept, orphan drug status which insures 7 years of market exclusivity, and can charge a premium price for it. For a company the size or NTII this could be an absolute blockbuster. Another point is that Freiman indicated a strong desire to get off the Bulletin Board and onto the NASDAQ Small Cap market. He felt that $5MM in the bank would do the trick. My guess is that the private placement is the most likely mode of acquiring the needed cash. He stated that the road shows to sign up a partner would commence in June and that he had set a goal for himself to have a partnership signed up by the end of the year. The private placement should occur before then. I hope this helps. I'm long and becoming more optimistic by the month. I bought some more after the call. John de C