Banking on NeoStem

by: Mike Havrilla

The ETF Innovators Global Stem Cell and Regenerative Medicine Index tracks the performance of 40 stem cell and regenerative medicine companies on a global basis with market caps of less than $1 billion at the inception of the index. The total market value of the index will be tracked as a gauge of investor and trader sentiment toward stem cell companies from a starting value of 3,928 on 2/22/09.

The table at includes statistics for the 40 companies in the ETF Innovators Global Stem Cell and Regenerative Medicine Index, which is down 10% at a composite market value of 3,533 from 3,928 at the index inception on 2/22/09.

The index is down by 23.7% over the past year on an equal-weight basis, compared to losses of 24.5% for the Healthcare Sector SPDR (NYSEARCA:XLV), 16.2% for iShares Nasdaq Biotech (NASDAQ:IBB), 18.5% for SPDR S&P Biotech (NYSEARCA:XBI), 28.5% for PowerShares Biotech & Genome (NYSEARCA:PBE), and 36.9% for the S&P 500 SPDR (NYSEARCA:SPY).

On a year-to-date basis (YTD), the stem cell index is up 28.8% on an equal-weight basis, thanks to major gains in many of the smallest companies in the index with the companies listed in the table in descending order by their YTD stock price changes. The stem cell index performance on a YTD basis compares favorably to losses of 9.1% for the Healthcare Sector SPDR, 6.8% for iShares Nasdaq Biotech, 13.5% for SPDR S&P Biotech, 6.6% for PowerShares Biotech & Genome, and 4.9% for the S&P 500 SPDR.

Integra LifeSciences (NASDAQ:IART) regained its position as the market cap leader in the index at $634M since I last wrote about the index one month ago. Osiris Therapeutics (NASDAQ:OSIR) has lost over one-third of its market value so far this year after halting a Phase 3 clinical trial in late March for what the Company termed a flawed trial design resulting in higher than expected placebo response rates. The most widely followed and traded proxy included in the index is StemCells (NASDAQ:STEM), which has gained about 15% YTD and 8% over the past year.

One of the top 10 stock price gainers YTD (registering a gain of nearly 100%) is NeoStem (NBS), which is a leader in the pre-disease collection, processing and long-term storage of adult stem cells for future medical applications. Click here for a link to NeoStem's five minute adult stem cell documentary video, which is hosted at their website.

Last month, NeoStem announced a deal to expand its national network of stem cell collection centers as part of a deal to open a new location at the Giampapa Institute for Anti-Aging Medical Therapy in Montclair, NJ. The agreement builds on a previous deal announced in February to license the exclusive worldwide rights to Dr. Giampapa's stem cell technology for anti-aging applications in cosmetic and regenerative medicine.

Dr. Giampapa is a Board-certified plastic reconstructive surgeon and Assistant Clinical Professor of Plastic and Reconstructive Surgery at the University of Medicine and Dentistry of New Jersey. One of the first certified anti-aging medical physicians in the world, he is Director of the Plastic Surgery Center Internationale as well as The Giampapa Institute.

The deal also expands NeoStem's leadership in the anti-aging and regenerative medicine space as one of the Company's original stem cell collection centers is focused on anti-aging treatments. NeoStem recently acquired control over the Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine in China, which is a leader in the practice of integrated traditional and western medicine, offering a variety of treatments focused on cell-based regenerative therapies.

NeoStem's business model includes generating revenue through ongoing fees associated with a minimally invasive, proprietary stem cell collection process, in addition to fees charged to the centers for marketing and long-term storage. The Company targets its marketing efforts toward health conscious consumers to encourage them to donate and store their stem cells as a form of bio-insurance for possible use in later years or to address an emerging medical need.

The Company makes its stem cell banking services affordable through a financing program using CareCredit, a GE Money company, which allows clients to participate in a monthly payment plan with no interest over 18 months. The monthly fee includes the collection, processing, cryopreservation (freezing), and two years of storage at prices as low as $495 per month. Other plans are also available to extend the months of payment and lower the monthly fees.

NeoStem has also expanded into R&D with it exclusive licensing agreement with the University of Louisville for the identification and isolation of rare stem cells found in adult bone marrow called VSEL for short (very small embryonic-like). As the name suggests, VSELs share traits with embryonic stem cells (ESCs), including the ability to differentiate into a wide variety of cells found throughout the body.

The Company is working on a method to expand VSELs collected from individual patients while preserving their ability to differentiate in an embryonic-like manner for a wide variety of regenerative medicine applications. The use of VSELs would avoid the ethical controversies associated with ESCs, in addition to eliminating the risk of immune system reactions since VSELs originate from the patient and would not be rejected as foreign by the body.

NeoStem represents an emerging investment opportunity for speculative investors and traders in the healthcare sector which is expanding upon its core adult stem cell collection and banking business model into related areas such as research on VSELs and anti-aging, cell-based regenerative medicine applications.

Disclosure: No positions.