Treated with the neuroprotectant Memantine, severely demented patients showed statistically significant improvement in functional independence in Phase III results disclosed by Neurobiological Technologies Inc. (NT) and its corporate partner, Merz & Co. GmbH.

Erica von Studnitz, director of clinical affairs for Richmond, Calif.-based NT, said the results are particularly encouraging because the treated population is a difficult one "in which to bring about any sort of positive change."

Severe dementia is a progressive decline of motor and cognitive skills associated with multiple central nervous system disorders, chiefly neurodegenerative conditions. About 4 million Americans are affected, according to the National Institutes of Health. No treatments are available to prevent or reverse the impairment. Existing therapies only treat specific symptoms, such as depression or behavioral changes.

In this European trial, 166 care-dependent, severely demented patients (49 percent with Alzheimer's disease and 51 percent with vascular or mixed-type dementia) received a 10 mg oral dose of Memantine or placebo for 12 weeks.

Motor performance and functional independence were assessed after four and 12 weeks of treatment, using two standard scales. Functional skills included the ability to move, wash, bathe and dress, as well as the ability to recognize persons and participate in group activities. The functional evaluations were done by physicians as well as the nursing staff.

Memantine was well-tolerated with no significant side effects reported. Studnitz said 76 percent of patients receiving Memantine improved in the primary evaluation of Clinical Global Impression of Change, as compared to 45 percent of those receiving the placebo. Two other Phase III trials for this indication are ongoing in Europe, and should be completed by mid-1999.

The drug is an orally available compound that appears to restore the function of impaired neurons by modulating activity of the N-methyl-D-asparate receptor, integral to the membranes of such cells. Such function restoration may inhibit injured or damaged neurons from firing abnormally - a pathological process associated with many neurological conditions, including dementia, Alzheimer's disease, neuropathy and AIDS-related dementia.

German chemists synthesized the Memantine in the 1970s, and the composition-of-matter patent on the drug has expired. Previously, researchers at Children's Hospital, of Boston, affiliated with Cambridge, Mass.-based Harvard Medical School, obtained patents to use the drug for AIDS-related dementia, painful neuropathies and other conditions. NT had licensed these AIDS and painful-neuropathy use patents, but later gave up its license in exchange for a share of future revenues from the sale of all Memantine indications.

While the Phase III results are robust, less healthy is the financial condition of NT itself. The 11-year-old company has only enough cash resources to last through the year.

The company stated in its first-quarter report for fiscal year 1999 that it had $1.3 million in cash, with a net loss of $640,000 (or $0.08 per share) for the quarter, which ended Sept. 30. That compares to a net loss of $1.3 million (or $0.20 per share) for the same quarter of fiscal year 1998.

"We are pursuing parallel courses," said Jack Stuppin, one of the company's founders and a member of its board of directors. "We are in conversations with several corporate and institutional investors, and the board of directors approved at our meeting this week a fall-back position of doing a private placement."

Stuppin said the placement would be expected to raise between $1.5 and $2.5 million.

"The results from the trial are pretty impressive," he said. "The tone of the shareholders about our clinical results is very positive, but they are a little bit worried about getting enough money soon enough."

NT and Frankfurt-based Merz partnered in April to develop Memantine for several medical conditions, although Merz is funding only the Alzheimer's disease study. Merz paid $2.1 million for the collaboration.

Any other corporate partnership would have to be signed by Merz with the concurrence of the company, Stuppin said. "I'd probably say it is more likely that we'd find a corporate investor, as opposed to a corporate partner," he said. "It is possible that a company would want to invest in us, perhaps thinking they would have a higher place in the queue for marketing rights. But we have no control over marketing rights."

While Merz would "have some motivation" to increase its financial involvement, Stuppin said it's too early to tell what the German company will do.

NT also is conducting Phase II trials in the U.S. for AIDS-related dementia and diabetic neuropathy.

The trial in AIDS patients started in December 1996 and enrollment is ongoing. AIDS-related dementia brings about conditions similar to senility. More than 90 AIDS dementia patients are currently taking the drug, and the company agreed to start an open-label trial next year.

This month, NT started a Phase IIb trial to evaluate Memantine as a treatment for painful peripheral diabetic neuropathy. This 375-person, 22-site trial will evaluate Memantine in relieving chromic pain due to peripheral neuropathy or nerve damage, particularly when it interferes with sleep. This trial should be completed by the end of 1999.

Neurobiological Technologies' stock (OTC Bulletin Board:NTII) closed Tuesday at $0.81, unchanged. n