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Dendreon (NASDAQ:DNDN) was the start of something special. It was the first company that challenged the boundaries of medicine and cancer: to take a chance and develop a cancer therapy that used the body's immune system to fight the disease. The stock reached a peak price over $50 in 2010, but has since fallen to near $4 as the company has faced several problems. However, Dendreon opened the door for many other companies with a first-of-a-kind therapy that has led to a change in standard of care.

In biotechnology, it takes a lot of nerve to try to set trends, change standards, and become the first of anything. Sometimes "the first" is warmly welcomed by Wall Street, and then other times it is not. One of the newest forms of treatment that is marching to the beat of its own drum is cell therapy. This, along with regenerative medicine, makes up an industry that some believe will revolutionize medicine and break barriers that have never been conquered.

Cardiovascular Cell Therapies are Changing Lives

In an article published by The Miami Herald last week was a story about a 63-year-old man, Peter Harrison, who had suffered from a severe heart attack at the age of 43 that left him suffering with the lingering symptoms of a damaged heart. The man had been healthy prior to his heart attack, but the severity of the attack had forced him in and out of the hospital over the years in search of an answer.

To make a long story short, Harrison was given stem cells that were injected into his heart as part of a study - and within three weeks he was hiking up the steep hills of the Virgin Islands. It is stories such as these that are enlightening and create optimism that those with incurable diseases may finally have hope at some point in the near future. And so far, all data points to the fact that cell therapies for the heart will break this barrier.

The Two Companies that are Breaking These Barriers

Stories of success, such as the one above is why patients are seeking, and companies are developing, cell therapies. The industry is still largely in the developmental stage, but so far, data shows clear benefits in treating diseases for everything from Alzheimer's disease to recovering from a stroke. Companies such as StemCells (NASDAQ:STEM) and Neuralstem (NYSEMKT:CUR) are in early phases of development, but have shown us that cell therapies could treat diseases in which there are currently no effective therapies. Neither company will see an approval for several years, but because of the severity of the diseases attempting to be treated, both could lead to a revolutionary shift to cell therapy from conventional treatments.

The reason that cell therapies are so exciting, and the reason that the space is growing and becoming more valuable, is because of the progress at treating complicated diseases. Currently, Osiris Therapeutics (NASDAQ:OSIR) is the only company that has an approved product with a cell therapy as the main component, but there are other companies close behind. Companies such as Baxter (NYSE:BAX) and NeoStem (NASDAQ:NBS) are developing cardiovascular therapies that have been largely successful and look to break barriers in the realm of medicine.

This particular concentration of cell therapy, "heart conditions", has been warmly welcomed, and even endorsed from famed physician Dr. Sanjay Gupta on his CNN blog. Of course there are other promising products and companies, but due to late stage products and increased support, therapies of the heart have a great chance at breaking the barrier of innovation and paving the way for earlier stage cell therapy companies. Because although cell therapy is a competitive landscape, it's also one in which success benefits the development of others.

Baxter's cell therapy is a Phase III product that is using CD34+ cells to help strengthen the heart. The company's product is being tested on chronic myocardial ischemia, and in Phase II trials the product reduced episodes of angina while increasing the patient's ability to exercise. According to the company's Vice President of Therapeutic Development, Dr. Losordo, it is the first time that such endpoints have ever been reached. The company is now embarking on a large 400 patient trial to evaluate efficiency and safety, in which all early studies suggest that it will be successful.

Strangely enough, Baxter and NeoStem's cell therapy are closely connected: The two both use CD34+ cells, both are treating conditions of the heart, and NeoStem's PCT business is manufacturing the cells for Baxter in its Phase III trial. However, while Baxter aims to strengthen, NeoStem aims to repair heart muscles following a heart attack, also called myocardial infarction. In October, there was a publication by the International Scholarly Research Network on a study showing that patients receiving more than 10 million of NeoStem's cells saw no deterioration in heart muscle function. Yet 30-40% of patients who did not receive more than 10 million cells saw deterioration. This proves that not only are CD34+ cells very effective at treating cardiovascular diseases (combined with data from Baxter), but it also gives NeoStem a gauge for using its cells at an effective number.

Data Continues to Support this Broken Barrier

If proven effective, both NeoStem and Baxter are poised to enter large markets with therapies that treat large unmet medical needs, with estimated sales potential between $700 million and $1.4 billion. There is still a lot to be learned about the potential for either therapy. Baxter's therapy is very close to an eventual FDA approval, and will most likely become the first therapy approved in the U.S. with a cell therapy as the main component. If so, it will create a lot of momentum for the space, and will lead new investors to explore cell therapy, as companies such as StemCells and Neuralstem will benefit from its success with larger valuations. NeoStem is deep within the testing phase. The company's recent publication gives the company a clear measure of success based on the number of cells to use. And in a recent TIME study, the company was given a guideline for the best time to administer the cells. Thus, it can continue with late-stage testing and is in a good situation to see continued success.

As we progress into 2013, investors should look for more data and more support for cell therapies, and in particular, those in cardiovascular treatments that are further along in clinical development. To date, all data has been positive, and these two companies are leading the charge as both companies place an emphasis on the outcomes of each respective study. As a result, it might be wise to monitor both companies over the next year, keeping both on your radar, because both are breaking barriers that were otherwise untested in later stage human trials.

Baxter/NeoStem as Potential Investments in Cell Therapy

Baxter is a diversified healthcare company with a market cap greater than $35 billion and revenue of more than $14 billion. Accordingly, Baxter's cell therapy presence is yet one more tool in the shed for the large-cap company, and is not going to make or break its long-term success. Baxter is building a great presence in the space and, if success continues, the company might further develop other cell therapies because of the sales potential. Keep in mind that cell therapy companies are developing products to treat diseases that lack options, such as certain cardiovascular diseases, Alzheimer's disease, paralysis, etc. Consequently, the market potential is significant for these companies; and with a strong cell therapy presence, Baxter could add billions to its topline with minimal costs.

NeoStem is just a $100 million company, but has certain characteristics of a larger company. NeoStem is categorized with others in the space, such as StemCells and Neuralstem, but NeoStem is much further along in clinical trials, has a large pipeline, and has a growing revenue-producing segment. In the company s most recent quarter, it posted revenue of $4.4 million, a gain of 104% year-over-year thanks to its manufacturing business. This segment gives NeoStem an advantage because it allows the company to grow while in clinical trials, due to growth in the manufacturing business. In terms of traditional biotechnology companies that accumulate large loss while in clinical trials, NeoStem can eventually become profitable while in late stage trials because of its manufacturing segment.

NeoStem is manufacturing the cells and providing other services for SOTIO, ImmunoCellular Therapeutics (NYSEMKT:IMUC), and Baxter (among many others), which are all in late-stage large trials, and could see FDA approvals in the near future. As a result, its revenue has increased, and will continue to grow as other clients advance into later-stage trials. The company reported a net loss of $8.5 million; but after closing the sale of its generic pharmacy business, it will save on costs associated with operating three large segments and will receive a large sum of cash.

NeoStem is a very intriguing company, because it is a clinical-stage biotechnology company that is focusing on a new form of therapy, yet it's growing fast at the same time, in both sales and in asset development. Like I said, it has certain characteristics of a large company, with over 65,000 square feet of development and manufacturing space. Last week the company was named as part of Deloitte s 2012 Technology Fast 500 list. However, the company was not just an addition to the list, but rather the top spot in its tri-state region and number seven nationally. The company joined this exclusive list with the likes of other innovating companies such as Celgene (NASDAQ:CELG), LinkedIn (NYSE:LNKD), and Google (NASDAQ:GOOG). And considering its topline growth, its data, and all the signs that indicate a revolutionary decade ahead for cell therapy, I believe that it might just continue to grow at a market-leading rate.

The key moving forward for NeoStem is that it should be able to continue with operations without diluting its shares with financing, which means continued optimism in the space. The company has worked hard to clean up its balance sheet in the last few months, and is now growing revenue while cutting costs due to the divestiture of its pharmacy business. The company had just $7.9 million in cash as of September 30, but has since received an additional $12 million in cash and has eliminated $33 million in debt and short-term obligations following the sale of its Chinese pharmacy business. The bottom line: The company looks to have the financial strength present, the catalysts and growth moving forward, and the technology in its pipeline to be a large success in this industry as a small-cap stock that could aid in breaking the barrier in cardiovascular therapies.

Disclosure: I am long BAX, NBS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Breaking Barriers In Cardiovascular Treatments