The Endangered Species Act of 2012

No, we do not refer to darter fish, the Algerian Ribbed Newt, or Macgregor’s Skink. Those species are thriving compared to NIR’s roster of endangered species, which includes neuro-Sellside Analysts and neuro-IPOs. While there have been rumors of sightings in subway tunnels deep under the East River, most have believed these once thriving populations to be extinct. But now, this could change, because the Jumpstart Our Business Startups Act (JOBS) has been passed, intended to apply the paddles of decreased regulatory constraint to the frozen ribcage of the biotech industry. As written, these revisions would apply to ‘emerging companies,’ defined as those with less than $1 billion in annual revenue. In other words, all private biotech companies.

None of the changes will constitute recognized doctrine until codified by the SEC and FINRA, but at the moment, the revised regulations will begin with changes to Sarbanes-Oxley, making the process of going and being public less onerous and costly. That in itself would be welcome, the fact is that many of these small companies barely have any assets to regulate in the first place. But the most appealingly nostalgic element of this DeLorean trip back to the 1990s is the restoration of Sellside Analysts to a sales and marketing role in the IPO process. For almost ten years, there has been a firewall between banking and research, which seemed to be working, until someone looked on the other side of the firewall and found that all the sellside analysts had left. No wonder it was quiet. Now, sellside analysts would be allowed go back to participating in road shows, issuing glowing research reports, and being quoted in the WSJ about the ‘enormous untapped potential of the biotech area’. While good for restauranteurs and high-end hotel chains, it also constitutes welcome news for the biotech industry, even the neuropharm area. The reason being that any life whatsoever in the moribund IPO market at least conjures up the mirage of possible exits for a venture capital industry which, in recent years, has had had all the freedom of movement of James Franco under a boulder. If investors perceive a way out, they will be more inclined to buy in.

This is good news, a way to infuse a hint of liquidity into the private biotech marketplace. But even more welcome are the jobs that will be brought back to the Street, for this is not just JOBS, this is the ‘Sellside Analysts Long-awaited Improved Vocational Access’ Act (SALIVA). It will be fun to see them again cavort and play, out of captivity and in their natural environment for the first time in almost a decade.
Are there CNS companies for whom this will be an avenue to developmental maturation, and not just a source of entertainment? We are quite sure that this resurrection miracle will not mean that the IPO window will be thrown wide open to anyone with a drug and a patent. The hard-earned cynicism of the Street will mean that only companies with both POC and a defined commercial route will be taken seriously. Which points to companies in or preparing for Phase III, with solid Phase IIb data from trials conducted in the US or EU. Some of the names that come to mind as potentially approaching that threshold during 2012 include Adamas, CeNeRx, EnVivo, Euthymics, and Knopp. It is unlikely that a less mature company would reach critical mass, though if a paradigm-changer like Naurex’s GlyX-13 were to definitively succeed in Phase IIa, we can imagine that some of the feverish creativity of yesteryear might start to surface once again. After all, NIR is hardly the only place where people wonder–’If *&%! like Instagram is worth a billion dollars, what would a useful new drug be worth?’

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