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The last year has been transcendent for cell therapy, with countless medical breakthroughs in the space. During the last year, we have made strides to learn more about its many benefits, and now the possibility of an approved cell therapy does not seem unrealistic. Therefore, in this article I am looking at the best of the best, those developments that could have industry changing effects, and could open new doors in the immediate future. Specifically, I am looking at the leader in cell therapy, NeoStem (NASDAQ:NBS), a company that had a truly breakthrough year.

Quick Highlights from 2012

Cell therapy has always been a segment of intrigue, but mostly for its regenerative capabilities in the sports medicine field. Up until recently, cell therapy was considered by many to be junk science, quackery, and a focus that could not hold up under the regulatory requirements of the FDA. However, in recent history, cell therapy has shown that it can be a cure for sexual dysfunction; an answer for cerebral palsy; return motor function for those with paralysis; return sight to the blind; and even stop the spread of cancer.

The developments above were those that took place in 2012; as a record $1 billion was brought and raised to continue the development of cell therapy products during the last year. In 2012 alone, the first U.S. manufactured cell therapy was approved for use - the U.S. made strides in deciding to regulate marketing claims - public companies advanced into late stage clinical studies - we saw two newly approved cell therapy products in the Korean market - a Nobel prize was awarded for research in cell therapy - and finally, a favorable debate on the regulation of adult stem cells as a drug. With such an incredible year, 2013 might be setting itself up to be even better than last year.

First Approval of a U.S. Manufactured Cell Therapy!

Cell therapy company, Osiris Therapeutics (NASDAQ:OSIR) achieved in obtaining the first approval with a cell therapy as the main component in its product, Prochymal. The therapy is now approved in both New Zealand and in Canada for children with graft-vs-host disease. This is a major accomplishment because it sets the stage for other cell therapy approvals in the future. The stock has since bolstered to a market cap of $300 million, showing a substantial amount of excitement for this company and its drug. And although the therapy will not have a large market outcome in terms of sales (the company's market is most likely less than 100 people per year), the approval itself is still exciting for the industry.

While developments surrounding regulatory approvals, spinal cord injuries, and Alzheimer's disease have remained top catalysts for the excitement surrounding the space, NeoStem continues to be the best measure of success in the industry. I have chosen to invest in NeoStem because of its diverse presence in the cell therapy arena. And in 2012, the company made several breakthroughs in the industry, some of which remained under-the-radar. I would like to more fully investigate this leader in cell therapy, and two accomplishments that may pay great dividends in the next few years.

Finding a Threshold of CD34+ Cell Dose

NeoStem's lead candidate is a Phase 2 cell therapy product, AMR-001, that has often been compared to Baxter's (NYSE:BAX) successful Phase 3 CD34+ cell therapy product. Unlike Baxter's CD34+ cell therapy, NeoStem uses a cell combination of CD34+CXCR4+ for a natural repair mechanism to repair the heart muscles following an acute myocardial infarction. There are approximately 800,000 myocardial infarction events that occur every year in the U.S., and although there is a strong clinical belief that CD34+ cells could be most effective at treating a multitude of conditions, a threshold dose has remained a mystery; that is until NeoStem's findings in 2012.

In a high-profile series of studies that measured the efficacy of autologous bone marrow mononuclear cells in acute myocardial infarction, three clinical studies supported by the U.S. Federal Government and coordinated by Cardiovascular Cell Therapy Research Network (CCTRN) found some very interesting results. The studies were considered a failure, but the reasons for the failure are now coming to light thanks to NeoStem. Among these studies was "TIME", which found that only 2.2% of participants corresponded to 3.3 million CD34+ cells. Keep in mind that these particular cells have been considered the workhorse of regeneration, but this study made many believe otherwise. In fact, it was this study that helped push shares of NeoStem lower, as many believed that it was a good indication that the company's billion-dollar product would be unsuccessful.

NeoStem's breakthrough was in its Phase 2 product, AMR-001, which uses CD34+CXCR4+ cells. The company found that, when using 10 million cells, no patients experienced a deterioration of heart muscle function. However, 30-40% of patients did experience deterioration when receiving less than 10 million cells. What does this mean? It means that NeoStem found the ever-so-important therapeutic dose to this workhorse of regeneration, and that the TIME study was most likely unsuccessful because it was not using a therapeutic dose (not even close to a therapeutic dose). This is a significant breakthrough because the use of CD34+ cells is crucial to the development of cell therapy products for the treatment of cardiovascular disorders; and NeoStem now has the leg up.

Creating a New Method of Treatment

NeoStem's very small embryonic-like stem cells (VSELs) could be the most promising game changer in cell therapy (possibly all of medicine); that is if it works and if it's developed correctly. Up until recently, it had just been an idea, one that avoids the potential political and moral dilemmas that come with using many of the best cell therapy products. The reason is because it doesn't use human embryos, but rather bone marrow-derived cells that mimic and are structurally similar to that of highly effective embryo cells.

Before going any further, I want to share an example of the dilemmas surrounding not just embryonic cells, but others. This has been a heavily debated area of development for cell therapy companies, such as NeuralStem (NYSEMKT:CUR). NeuralStem is developing an investigational cell product, NSI-566RSC, for the treatment of Lou Gherig's disease (ALS). And in a Phase 1 trial of 12 patients, with 100,000 cells per injection, the company made a true medical breakthrough as patients responded extraordinarily well to the therapy.

Neuralstem was heralded for its informative study and the results that followed by the prominent stem cells assays. We learned a great deal about the product and its efficiency as all patients tolerated the therapy well. Furthermore, these same cells were used in a study of paralyzed rats-and these rats regained a remarkable level of motor function after being treated with the stem cells.

The one problem for Neuralstem might be that its source of cell material is the spinal cord of single eight-week fetus, and for whatever reason, the company has chosen to conduct its Phase 2 trial in Mexico (and its other trial in China). The company is apparently testing U.S. patients in Mexico and the FDA has been somewhat slow to advance the trial, and has made the design difficult for Neuralstem. So despite the company having a truly transcendent and potentially life-altering therapy, we must wonder if these decisions could indicate that the FDA will not approve the therapy, regardless. More than likely, it has something to do with moral dilemmas, a problem that many cell therapy products face. The problem for cell therapy companies is and also remains developing a cell therapy product that is as effective as the more controversial cell materials while avoiding the moral and political backlash that could prevent a great therapy from earning an FDA approval.

There has been one common belief in cell therapy, which is changing the process of development: Despite the fact that embryonic stem cells (and other controversial cells) can differentiate into nearly all cell types, no therapy using these cells will ever become marketable due to ethical concerns from certain religious and political organizations. Dr. Jalees Rehman, a physician and a cell biologist, discusses this issue in-depth in his article, "The Importance of Being Embryonic".

Dr. Rehman discusses the evolution of cells and the perfect balance found with induced pluripotent stem cells, which are cells not created from embryos, but are converted into an "embryonic state". This belief, and the study behind these findings, won Shinya Yamanaka the Nobel prize in 2012, whose work abolishes the need for human embryonic cells. In comparison, the embryonic and the converted cells are near identical, thus could perform the same function without the moral drama. As a result, it is clear to see how any news regarding NeoStem's VSELs would be heralded as a potential great opportunity.

Due to the upside combined with the benefits, VSELs is a well-funded technology that is being developed to treat a variety of indications, including: bone regeneration, eye disease, wound healing, sciatic nerve regeneration, radiation exposure, etc. And recently, NeoStem found that its VSELs actually created bone from cells when implanted in the bone tissue of SCID mice. The company is now moving forward in clinical studies to further develop the technology.

Now what makes VSELs so promising, for both investors and NeoStem, are the current trends in regenerative medicine. According to a recent study by Stem Cells Assays, the NIH Center for Regenerative Medicine funded just 9% of human embryonic projects, meanwhile 30% and 47% to human non-embryonic and non-human non-embryonic cell projects. This shows that NeoStem's discovery with VSELs could continue to be developed with the support of regulators and other institutions. As a result, if VSELs can continue to produce meaningful results, then NeoStem should have no problem in gaining regulatory support, which could open the door for an entire line of therapeutics using these cells.

Conclusion:

Despite these incredible findings, NeoStem has only returned gains of 17.50% in 2012. It's a company that is already producing sales with its manufacturing business, some expecting revenue between $25 and $30 million in 2013. Therefore, the stock is trading at just 3.5 times 2013's revenue; and with the two clinical developments above (AMR-001 and VSELs), it's positioned to see a much more vital future.

NeoStem is not just creating "another drug"; its entire pipeline is unique, different, and could transcend treatments for the next decade. Its late-stage product, AMR-001, is showing all the signs of success, with a market potential of more than $1 billion annually. The VSELs Technology could usher in a line of products that have the potential to treat numerous injuries and diseases. Inevitably, VSELs could earn revenue in the multi-billions in the next decade. With that being said, NeoStem had a company-changing year; and in 2013, I expect a stock that reflects its potential as revenue continues to grow and the company builds on its clinical developments of 2012.

Source: 2012 Breakthroughs In Cell Therapy Development