This year there has been a significant resurgence of interest in public biopharmaceutical companies that are focused on developing therapies to treat neurological diseases. As a result, the sector got out of the gate quickly and, by the end of June, the BioWorld Neurological Diseases index, a price-weighted index of representative companies operating in that therapeutic area, had climbed in value to over 26%, well ahead of the performance of the general markets and blue-chip biopharma companies.

Unfortunately, late-stage clinical trial stumbles and financial market turbulence has dramatically eaten into the index gains and, at market close Sept. 19, it remained in positive territory, up 5.75% year-to-date (YTD), but well behind the Nasdaq Composite index and the Dow, which closed up 23% and 16%, respectively in the same period. (See BioWorld Neurological Diseases index, below.)

The latest index member to weigh on the valuation of the index is Zynerba Pharmaceuticals Inc., which, despite reporting generally positive phase II data from its Believe 1 trial, saw its share value (NASDAQ:ZYNE) tumble as the percentage of reduction in seizures was less than investors' expectations; so far this month the shares are trading down 21%. (See BioWorld, Sept. 19, 2019.)

The Devon, Pa.-based company is a developer of pharmaceutically produced transdermal cannabinoid (CBD) therapies to treat rare and near-rare neuropsychiatric disorders. The Believe 1 trial assessed the safety and efficacy of lead candidate Zygel, a CBD gel in developmental and epileptic encephalopathies, a heterogeneous group of rare pediatric epilepsy syndromes, including Dravet syndrome and Lennox-Gastaut syndrome, in children and adolescents. Top-line data from the trial that enrolled 48 patients between the ages of 3 and 16 (mean=10.5; median=10), showed patients achieved 44% to 58% monthly median reductions in seizures compared to baseline from month two to month six of treatment. However, through six months of therapy, 96% of patients experienced a treatment-emergent adverse event and 60% of patients experienced a treatment-related adverse event, most of which were mild to moderate.

Prior to that market setback investors were bullish on the stock, elevating their valuation 280% earlier this year (now up 185% YTD). The strong performance has been driven by the company's evolving product pipeline. In its second-quarter financial results, it said pivotal data are expected from a trial evaluating the efficacy and safety of Zygel in treating common behavioral symptoms of fragile X syndrome (FXS) in patients, ages 3 through 17. If the data are positive, the company said it expects to submit its new drug application for Zygel in FXS to the FDA in the second half of next year. Top-line data are also due next year from its phase II BRIGHT trial assessing the safety, tolerability and efficacy of Zygel for the treatment of child and adolescent patients with autism spectrum disorder.

In a research note, analysts at Jefferies noted that "ZYNE stock has climbed from $3 to $16 in H1:19 as more investors seek greater exposure to the cannabis space. The strong price action can be attributed to generalist investors viewing ZYNE as a pure-play cannabis stock. That said, ZYNE has arguably become a 'show-me' story after the recent run-up, meaning that investors will want to see some [positive] clinical data before the stock can move even higher."

Hot biotech

Helping drive the index is New York-based Axsome Therapeutics Inc., whose shares (NASDAQ:AXSM) have been on a meteoric rise, up 871% YTD, making it one of the hottest biopharma companies of the year so far. A significant portion of the increase came at the beginning of January, catalyzed by the release of favorable phase II data with its N-methyl-D-aspartate receptor antagonist, AXS-05, in major depressive disorder patients in the U.S.

The drug works through the glutamatergic system, as opposed to currently approved therapies that act through the monoaminergic mechanism. It showed a clear benefit over comparator bupropion and reached statistical significance in the ASCEND (Assessing Clinical Episodes in Depression) trial's primary and several secondary endpoints. (See BioWorld, Jan. 8, 2019.)

It has continued to get better for the company, with several other of its products advancing in clinical testing and readouts of phase III trials expected later this year. "The next several months are expected to be highly active and potentially transformative for Axsome as we look forward to readouts from the phase III STRIDE-1 trial of AXS-05 in treatment-resistant depression, the GEMINI phase III trial of AXS-05 in major depressive disorder, the phase III MOMENTUM trial of AXS-07 in the acute treatment of migraine, and the phase II CONCERT trial of AXS-12 in narcolepsy, with all four anticipated before the end of this year," noted company CEO Herriot Tabuteau in the firm's second-quarter financial results and business update.

Shares of Cambridge, Mass.-based Voyager Therapeutics Inc. (NASDAQ:VYGR) have almost doubled (93%) since the start of the year. The company is developing gene therapies for severe neurological diseases, and its research has shown that its adeno-associated virus (AAV) capsids have the potential to cross the blood-brain barrier.

On the corporate front, it gained worldwide rights to the VY-HTT01 Huntington's disease program and ex-U.S. rights to the VY-FXN01 Friedreich's ataxia program following a termination of the company's 2015 gene therapy collaboration agreement with Sanofi Genzyme. Voyager made a $10 million up-front payment and will pay an additional $10 million when an investigational new drug application for VY-HTT01 is filed. The collaboration covering spinal muscular atrophy (SMA) was terminated, and intellectual property rights under the collaboration to the SMA program were returned or exclusively licensed to Sanofi Genzyme. Additionally, it obtained exclusive option rights to license up to two novel AAV capsids owned or controlled by Voyager for up to two non-central nervous system indications. Voyager's up-front payment was partially offset by a $5 million payment from Neurocrine Biosciences Inc. to the company to facilitate the transfer of the ex-U.S. rights to VY-FXN01 from Voyager to Neurocrine under the terms of the collaboration agreement the two signed in January.

Cambridge, Mass.-based Sage Therapeutics Inc. has also enjoyed a strong performance this year, with its shares (NASDAQ:SAGE) up 71%. Supporting the increase was the FDA approval of its 60-hour intravenous (I.V.) Zulresso (brexanolone) to treat postpartum depression. Zulresso consists of allopregnanolone, a potent, positive, allosteric modulator of synaptic and extrasynaptic GABA type A receptors. (See BioWorld, March 21, 2019.)

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