NeoStem Awarded $1.2 Million Grant For VSEL Development

| About: Caladrius Biosciences, (CLBS)

Very Small Embryonic-Like (VSEL) stem cells could be one of NeoStem's (NBS) most promising clinical products in its pipeline, but it has yet to see an aggressive plan towards clinical development. Stem cells, which reside in adult tissues, were discovered by Dr. Mariusz Ratajczak, an internationally known specialist in the field of adult stem cell biology. They possess the ability to differentiate and develop into multiple tissue types and are showing promise in treating injuries, heart disease, inflammation and a host of other ailments. Since their discovery, VSEL stem cells have been isolated from a few mouse and human tissues and then tested in disease models, but have yet to advance on a large-scale trial. VSELs are being regarded as the answer to the moral and ethical concerns associated with embryonic stem cells as they also have the ability to differentiate into multiple tissue types but are found in adult bone marrow and umbilical cord blood.

On Tuesday morning, NeoStem advanced VSEL technology when it announced that it has received a grant to move forward with the clinical study of VSELs in a Phase 2 trial, which will be the very first NIH approved clinical study of VSELs in humans. This is another win for cell therapy and, more specifically, NeoStem. The company is well positioned as a cell therapy leader and is solidifying itself with this two-year grant totaling $1,221,854. The grant comes from the National Institute of Dental and Craniofacial Research (NIDCR) for the Phase 2 SBIR submission "Repair of Bone Defects with Human Autologous Pluripotent Very Small Embryonic-Like Stem Cells (VSELs)." This development means that NeoStem is moving forward with clinical studies for this promising therapy, and that the company will add to its AMR-001 clinical development and its manufacturing segment. Accordingly, NeoStem is becoming more diversified and a safer investment in this rapidly growing space.

In the first human trial using VSELs, NeoStem will be attempting to treat periodontitis. According to the company's press release, periodontal disease is prevalent in the U.S. and affects up to 90% of the world population. The most severe case affects between 15 and 47 million Americans. The company is choosing to test VSELs on this indication most likely because of its large market potential, but also because it is believed that periodontal inflammation could have a role in the initiation or progression of coronary heart disease and stroke. NeoStem investors know that the company's lead product, AMR-001, treats patients following a heart attack. Appropriately, the two have great synergy and could allow the company to create massive sales in the cardiovascular space, which is considered the most promising with the most research of any segment in regenerative medicine.

For those of you who are unfamiliar with NeoStem's VSEL Technology, it is believed to aid in treating a variety of conditions (following initial studies), which include traumatic wound healing, osteoporosis through bone regeneration, liver regeneration, regeneration of some motor neurons, and also radiation exposure, among other possible treatments. Last month, the company announced the first piece of data that we have seen in regards to this technology. The company announced that its stem cells successfully created bone when implanted in the bone tissue of SCID mice. This development further solidifies the potential of VSELs and presents the company with a large window of opportunity, as there are many diseases that could benefit from bone regenerative capabilities.

The VSEL Technology will most likely not treat all of the above conditions on a large scale; yet it's still encouraging that it has shown a clinical benefit in these areas and that there is research to suggest it is effective as a new form of treatment-and a safer form as well. The company has received numerous grants and donations for the research and development of VSELs from various partners and supporters. On the company's website, NeoStem lists some of these investments into the research and development of the VSEL Technology. It specifically mentions $1.7 million from the Department of Defense for osteoporosis, another $700,000 from the U.S. Army for traumatic wound healing, and nearly $700,000 from the National Institute of Health for various purposes. And now the company has added its most significant award yet from the NIDCR that will provide over $1.2 million for advancing clinical studies into human trials, and will cover the costs associated with an Investigational New Drug (IND) submission to the FDA. Therefore, due to grants, NeoStem has had to spend much less of its own money; but as it advances in late-stage trials, investors should watch for even more support and greater funding for the development of this technology.

In addition to government support for the VSEL Technology, the company makes mention of the Vatican, which chose NeoStem as an exclusive partner in adult stem cell research and awareness, in part based on VSEL Technology. Other supporters also include several universities, such as University of California, Michigan, Rutgers, and of course Louisville (Dr. Ratajczak's place of research). Thus, we can conclude that there are a lot of people and organizations that are betting on the success of this new yet innovative form of cell therapy; and now it can grow beyond the preclinical phase and enter into a new era of development that could change the outlook for the company and sector.

Yesterday's news was exciting for NBS and for those who follow the space. We will now be able to learn more about what appears to be a promising therapy. I look forward to more independent studies that may show if more potential exists, as some research suggests several important markers exist on VSEL cells, but more research is needed. According to the press release, the company plans to move forward very quickly and to explore the possibilities in the next six months to develop a "plan of action." Until then the company will continue to develop its lead product candidate cell therapy, AMR-001, and provide contract manufacturing organization (CMO) services to several late-stage promising companies, which is another good point.

Some might express concerns that developing VSELs will increase the company's cost and increase the likelihood for financing. The good news is that the grant will cover the initial expenses, and because of the company's partners/supporters, it is likely that more funding will be presented. However, if not, then the company does have enough cash and the leverage available at the moment. It had $7.9 million of cash at quarter's end, but the company also just closed the sale of its Chinese generic pharmacy, which provided cash and eliminated debt. The sale of the pharmacy gives NeoStem $12.3 million in cash, eliminates $33 million in debt, and with sales growth of more than 100% year-over-year, the company looks well-positioned to add VSELs to its pipeline of products being developed without having to further dilute its shares.

Other authors have discussed the fact that NeoStem has manufactured every cell type, and that it has the best staff in the business in regards to the development of clinical candidates. When combined, it makes this newest development very encouraging, as NeoStem's experience allows it to know what works, what doesn't, and what will be effective-and it looks as if NeoStem and its many supporters believe VSELs could be an essential part of bringing cell therapies to the forefront of medical procedures. Only time will tell if retail and institutional investors will follow suit and begin investing more of their money in the promising company that the aforementioned entities have already deemed worthy of their funds.

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