In January, I wrote an article on regenerative medicine companies that could make headway in 2013. I would like to refocus on the subject and review some of my favorite candidates in the young, but quickly growing industry of regenerative medicine. The subject matter has worldwide appeal and relevance, as everyone on the planet can benefit from it. As a patient, regenerative medicine can save your life, and as an investor, you may strike goal. Regenerative medicine encapsulates science and technology that concentrates on the restoring and repairing of tissues, cells, and organs. In a sense, through regenerative medicine, we can restore that which was previously beyond redemption, and save a patient previously beyond the help of medicine.
PLX Cells Look to Spark Gains With Multi-Treatment Potential
My first recap company is Pluristem Therapeutics, Inc. (PSTI) which recently reported on its progress of its Phase I/II trial for the treatment of muscle injury utilizing PLX cells. The company's PLX (PLacental eXpanded) cells are derived from human placenta and can be used in a restorative sense on a variety of indications. Currently, the company is focused on peripheral artery disease (PAD) and muscle injury. Pluristem is prepared to initiate a Phase II/III of PLX-PAD for critical limb ischemia (CLI) and a Phase II study for intermittent claudication (IC). A Phase I trial in Australia is also being initiated by United Therapeutics Corporation (UTHR) for the indication of pulmonary arterial hypertension (PAH), as the two signed a licensing agreement last year, in which Pluristem already received a $7 million upfront payment, with $48 million in additional milestone payments in the future. Furthermore, Pluristem's PLX cells recently received Orphan Drug Status designation for aplastic anemia.
Currently, Pluristem is trading around $3.05 a share (still off its 52-week high) and the market cap rests at about $178 million. In the clinical realm, it is one of the more closely followed stocks in the cell therapy segment. The interest that surrounds Pluristem Therapeutics is solely related to its PLX cells, which are promising but do leave the company highly vulnerable to the outcome of clinical studies as it relates to PLX cells. With an Orphan Drug Status, a partnership with United Therapeutics Corporation, and several clinical studies, there are a lot of reasons to be hopeful. If successful, these cells could potentially be used to treat a wide array of diseases resulting in large sales potential.
According to its most recent quarterly report, the company posted a net loss of $5.68 million and cash and cash equivalents as of March 31, 2013 amounted to $27,821,000. In the last four quarters the company has lost on average, $4.57 million per quarter, meaning it has enough cash to continue with operations for six quarters. The company has no meaningful revenue but because of its cash position, we should learn the results from the Phase II/III trial of PLX-PAD for critical limb ischemia prior to the company needing additional cash.
Early Phase Company to Trade Higher on Data-Related News
Neuralstem, Inc. (CUR) has been on a decline since the beginning of the year, as far as stock price goes, but recently announced a patent allowance on its use of stem cells (NSI-566) to treat ALS or Lou Gehrig's disease. The company plans on commencing Phase II trials for this indication pending FDA approval to do so. This looks likely as the FDA already approved the company's use of NSI-566 treatment in a Phase I for chronic spinal cord injury back in January. ALS is a serious neurodegenerative disease that affects about 5,600 people a year in the U.S. in where the patients commonly die within 5 years. I could see Neuralstem's treatment for this terrible affliction one day being eligible for a Fast Track designation.
It should be noted that Neuralstem has an impressive pipeline in development, both cell therapies and drug treatments. In addition to cell therapy development for ALS, the company is concentrating on a wide variety of other indications including glioblastoma, MS, Alzheimer's, Parkinson's, and cerebral palsy, to name a few. Some of the drug treatments in development target stroke and cognitive complications due to diabetes, PTSD, and brain injury, amongst others.
The stock is trading at a $1.49, closer to the upper side of its 52-week range. Market cap is currently at $102 million. The company ended 2012 with $7 million in cash and raised another $8 million in a venture debt deal that should give the company enough cash to operate throughout 2014. By that time we should learn additional data from a Phase II, 18-patient study, or one of the other studies that are being conducted outside the U.S. Any of these early and small studies could produce large gains in the stock, as Neuralstem is testing its cells on diseases that have large addressable markets.
My only concern is the fact that Neuralstem is mostly testing in Mexico, China, and South Korea, with only its Phase I chronic spinal cord injury trial in the U.S. This leads me to wonder if the company could encounter issues with the FDA at a later time regarding the studies, but as a positive, the company is globally exposed for partnerships and grants by testing abroad. With enough cash to operate the next year-and-a-half, the stock is worth watching, as any positive data could push the stock greatly higher.
Well-Diversified Industry Leader with Value and Data Pending
NeoStem (NBS) has been in the headlines as of late, with its Vatican partnership once again in the spotlight. The company's CEO, Robin Smith, has even recently appeared on TV with the Vatican head of science and faith department, Monsignor Tomasz Trafny, wherein they discussed the partnership and their mutual investment in stem-cell research. The main purpose of this unique five-year partnership is to educate the world on the benefits of stem-cell therapy and emphasize the paradigm shift occurring in healthcare. An additional objective of the Vatican's involvement is also to help overcome prior notions that cell therapy is wrong or unethical. The fact is, NeoStem has always adhered to ethical guidelines, never using embryonic cells, and that is one reason that the Vatican chose NeoStem -- to support its "morally acceptable" research. The mission is to educate Catholics and non-Catholics alike that stem cells can be used and derived that are not sourced from embryos.
This, of course, is the key to the company's VSELs! technology -- very small embryonic-like stem cells-- a therapy, which could lead to a variety of treatments, from radiation exposure, wounds, to bone damage and osteoporosis. Tests have already successfully concluded that bone tissue can be regrown in mice.
The company continues to make headway with its manufacturing division, Progenitor Cell Therapy (PCT), constantly looking to acquire new clients and make new partnerships. Most recently, PCT signed an agreement with Sentien Biotechnologies, Inc. in where PCT will develop and manufacture Sentien's cell therapy as well as assist in training. This new development should prove to add to NeoStem's revenue stream. We can expect to see more deals strike up in the coming year.
As for the 1 in 5 patients that die shortly after having a heart attack, the solution is the much-talked-about AMR-001, brought to you by NeoStem's subsidiary, Amorcyte. This CD34+ CXCR4+ stem-cell therapy continues with its Phase II trial, after approval by the Data Safety Monitoring Board (DSMB) earlier in the year to do so. The therapy proves itself to be promising in preserving heart muscle and preventing major adverse cardiac events following acute myocardial infarction (AMI). The key discovery is that injecting 10 million cells into the heart is the ticket to success.
NeoStem announced quarterly results in the CEO's Letter to Shareholders. As of March 31, 2012 the company had cash of $9.30 million but also completed a common stock offering in early May where it created net proceeds of $10.7 million, thus the company has cash of $20 million. The company also issued a press release clarifying that it was not issuing new shares and that there was no additional financing, which was a rumor.
The company's $6.2 million loss excluding non-cash charges paints a picture that 2013's loss should be much smaller. NeoStem has something that none of the other companies on this list have, and that is a revenue producing segment of its business in PCT. Last year PCT nearly doubled in revenue to create over $14 million, and this year it was expected to grow just 10-15%. However, in 2013 the company has already signed two new clients indicating that revenue growth will be greater than expectations and that operating income should improve as well. Hence the company will have enough cash to operate over the next year, and with it being near full enrollment of its Phase II AMR-001 trial, it is likely that we will know results from the study prior to the company needing more cash. If AMR-001's success continues then NeoStem's valuation will appreciate and value a product that has peak sales potential of $1.50 billion annually.
Another Option With Upside
Cytori Therapeutics, Inc. (CYTX) deserves to be looked at closer, as it shares similarities with the aforementioned players. One thing to note is that Cytori is in the business of developing treatments for thermal burns and radiation exposure, perhaps more relevant than in a long time because of the looming threat of North Korea, and the nuclear power plant catastrophe in Japan caused by the earthquake. Cytori was awarded this therapy contract, valued up to $106 million, by BARDA.
The company also patented its method for treating renal diseases using adipose-derived regenerative cells (ADRCs), receiving US Patent 8,404,229. The patent covers treatment for acute and chronic kidney disease, as well as many others. This patent complements Cytori's already-established European patent for the treatment of renal disorders. The company's approach to these treatments utilizes autologous adult stem and regenerative cells.
Cytori has a few other innovations to call its own: Puregraft®, Cytori® Lipobank, and Celbrush®. The Puregraft System was developed to improve the predictability of outcomes for autologous fat grafting and aesthetic body contouring, using a washing and filtering system to streamline the grafting process. The Cytori LipoBank is a turn-key, GTP-compliant cryopreservation system that offers a proven long-term storage option for viable adipose tissue after a single liposuction, with great safety and post-thaw tissue recovery. Celbrush is a stainless steel, precision surgical instrument used with a syringe that enables controlled micro-droplet delivery of an autologous fat graft, featuring a thumb-wheel design instead of manual syringe delivery, minimizing the build-up of pressure within the syringe, carefully metering volume and preventing bursts of tissue during re-injection.
Cytori Therapeutics is now trading around the mid-level of its 52-week range with a market cap of $176 million. During the last quarter its sales more than doubled to $3.8 million but posted a net loss of $7.70 million. Unfortunately, Cytori is not in the best financial situation, although is a promising company. It has cash of just $16.40 million and burnt on average $7.65 million per quarter over the last year. The company has already hit the debt markets, having total debt of more than $22 million and has liabilities of almost $31 million. Thus I would expect an offering of sorts, but after that point I do think there is upside in the stock.
Investments in the biotech industry should always be carefully considered. There are the inherent risks -- the fluctuation in the share price, crashes and rallies, sometimes brought about by news and headlines, and sometimes changes that occur for seemingly no reason. All the profiled biotechs in this article are charging deep into the limitless possibilities of the "new world" of medicine, whether it be the stem-cell angle or other ingenious innovations and therapies. Any major breakthrough in any treatment or medical device for any of these candidates could prove to be the investment of the decade for investors. Of course, there is always the other side of the coin… but let's not focus on that.