Northstar Neuroscience (Seattle) stock plunged 83% on news that its EVEREST pivotal trial evaluating cortical stimulation to improve hand and arm function in stroke survivors failed to meet its primary efficacy endpoint.

“To put it mildly, we are extremely surprised and disappointed by these results,” said John Bowers, president/CEO of Northstar during a conference call yesterday morning.

Wall Street’s reaction perhaps could be taken with a grain of salt considering overall market woes on Tuesday. Growing fears of a recession sent global markets tumbling and major U.S. stock indexes plummeted after the opening bell. By the end of the day, Northstar’s stock closed at $1.37 in heavy trading – 16 million compared to average volume of 290,000.

Despite the stock tumble, Northstar nevertheless is in a solid financial position to press forward with other neurostimulation indications and applications. As of Dec. 31, 2007, Northstar had $80 million in cash and investments. (The company had the most successful med-tech IPO in 2006, raising more than $100 million [Medical Device Daily, May 6, 2006]).

Hopes in the stroke sector were high for EVEREST, which was designed to determine whether cortical stimulation in conjunction with rehabilitation therapy would provide greater gains in hand and arm function for stroke victims and improve on daily living activities, compared to rehabilitation therapy alone.

Cortical stimulation therapy is a method for the precise delivery of low levels of electricity to the outer layer of the brain via an implanted stimulator system.

At the four-week follow-up, 30.8% of the patients receiving cortical stimulation achieved the threshold of clinically meaningful improvement for the composite primary efficacy endpoint defined in the study protocol, compared to 29.1% of the patients in the control group.

The primary efficacy endpoint required a 20% absolute difference between these two groups.

Further analyses of the components of the primary endpoint also failed to show a statistically meaningful difference between investigational and control subjects.

In addition to performing the primary efficacy endpoint analysis on the four-week data, Northstar is in the process of collecting and processing data through 24 weeks in readiness for analysis of longer-term follow-up and other secondary outcome measures.

“While this process is not yet complete, we’ve conducted a preliminary review of some of these longer-term data,” Bowers said. “Based on this initial review, we believe that our subsequent formal analysis of these data is unlikely to provide sufficient evidence of efficacy to support a PMA submission for our therapy.

“Importantly, we’re sorry we are not able to offer a new therapy to provide greater hope for the millions of people who suffered a stroke and are living with upper extremity disability,” Bowers said. “If there’s a silver lining for the stroke community, it may lie in the better-than-expected response in the control patients to a course of aggressive rehabilitation performed, on average, four to five years post-stroke. Perhaps it will lead to more research and emphasis for the rehabilitation of chronic stroke suffers.”

One of the other outcomes on the plus side from EVEREST was that cortical stimulation therapy was found to be safe.

“We believe that the continued excellent safety profile is a positive as we evaluate our technology going forward,” he said.

“Based on clinical results achieved to date in other feasibility studies, we continue to believe that cortical stimulation holds potential for the treatment of depression and tinnitus,” Bowers said. “These disorders involve different patient populations and distinctly different brain targets than our stroke motor recovery indication. In the coming weeks we intend to provide more detail about our plans going forward.”

Current studies for tinnitus, aphasia and depression are still in the feasibility stages and the company said it does not expect to launch a pivotal study for any of them this year.

Broca’s aphasia, the loss or impairment of the power to use or comprehend words, is the focus of a study called CHESTNUT, designed to assess the safety and effectiveness of cortical stimulation system when used during speech-language rehabilitation. In the CHESTNUT study, participants were randomized to either as implanted with the cortical lead and generator, and receiving cortical stimulation during intensive speech-language therapy; or receiving intensive speech/language therapy only (MDD, Oct. 2, 2006).

Another indication is for tinnitus, a chronic or intermittent ringing in the ears. Patient enrollment for the SAHALE trial was completed in November 2006.

In the PROSPECT trial for depression, 10 patients received 16 weeks of active stimulation. Hamilton Depression Rating Scale scores improved by an average of 27% from baseline and the Montgomery-Asberg Depression Rating Scale scores improved by 31% from baseline. The Global Assessment of Functioning (a scale used to rate the social, occupational and psychological functioning) scores improved by 50% from baseline, indicating an improvement in patient’s quality of life and ability to function. Each of these rating scales indicated a continuing trend of improvement at 16 weeks.

Some of the other key players in the neurostimulation space include Advanced Neuromodulation Systems (Plano, Texas), Medtronic (Minneapolis), Boston Scientific (Natick, Massachusetts) and Cyberonics (Houston).