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If you are a CEO of a biotechnology company and are focusing on a new discipline, then you want to surround yourself with the best-of-the-best in that particular space. NeoStem (NASDAQ:NBS) is no different. The company is developing a product-- AMR-001-- that, if successful, could be the first FDA approved cell therapy product.

NeoStem not only needs to produce solid clinical results, but the company needs to answer any questions that the FDA might have along the way, and needs experience at all levels of management to ensure that its products are developed effectively. These facts are why the appointment of Stephen W. Potter as the Executive Vice President is so important for NeoStem.

A Look At NeoStem's New Hire

Back in March, I interviewed Stephen Potter when he joined NeoStem's Board of Directors. Mr. Potter is definitely one of the most decorated in the cell therapy space. His previous role was as the Senior Vice President of Operations and Corporate Development at Osiris Therapeutics (NASDAQ:OSIR). In other words, he was instrumental in the development of Osiris Therapeutics' cell therapy product, Prochymal, for GvHD in children. This is important for NeoStem, because Potter knows the steps that need to be taken and the questions that might be asked by regulators.

Moreover, in his previous role at Osiris, Potter was responsible for the launch and overall management of the company's Biosurgery business. For Osiris, all of its $11.5 million in annual revenue was created from the Biosurgery segment. NeoStem, with its PCT manufacturing business, and its $13 million in revenue over the last 12 months, has a much larger market opportunity than Osiris has with its Biosurgery segment. This should allow Potter to excel and work his magic in marketing and development.

The Opportunity Is Great For NeoStem

As I explained in this article, Osiris Therapeutics' Prochymal, which is already approved in New Zealand and Canada, will be hard-pressed to earn $50 million in peak global sales for GvHD in children. NeoStem's AMR-001 has peak sales potential in excess of $1 billion. It is a potential product that treats patients immediately following a heart attack. AMR-001 is used for the prevention of downstream adverse events after acute myocardial infarction. This cardiovascular disorder is a massive unmet medical need, and if NeoStem can continue to prove that AMR-001 works to prevent heart muscle deterioration, then it will be FDA approved.

Potter will aid in AMR-001's development, including clinical research, and ensure that the clinical studies are executed correctly. Currently, AMR-001 is being tested in a Phase II trial and should be near completing its enrollment. Once enrolled, we shall receive data within eight months, meaning that in early 2014 the future of this company should be known.

Personally, I expect a successful study. Last year, the company disclosed that it had found a threshold dose of AMR-001, and that not one patient experienced a deterioration of heart muscle function when treated with 10 million cells. However 30-40% of patients experienced deterioration when treated with fewer than 10 million cells.

The structure of AMR-001 is similar to Baxter's (NYSE:BAX) cell therapy product, which uses CD34+ cells, and both target cardiovascular disorders. Baxter's cell therapy product, developed by Dr. Douglas Losordo, was successful in its Phase II trial. In the study, patients with refractory angina and chronic myocardial ischemia saw increased exercise capacity and reduced angina episodes. Previously, these endpoints had never been met, which is a true testament to the potential of CD34+ cells in treating cardiovascular disorders, and further validates the approach of NeoStem's AMR-001.

The Center Of Controversy

With any new type of treatment, there is going to be controversy: It is natural. NeoStem's VSELs are in the early phases of development, and most of what we know stems from preclinical research and tests on mice. However, this fact has not stopped some from taking extremely bullish and bearish sides. Personally, I have been on the bullish side as I believe that, if successful, VSELs could be used to treat a wide array of degenerative diseases. Therefore, for the sake of medicine, I hope it works.

Dr. Irving Weissman recently completed a study on mice where he found no pluripotent cells and questioned the overall existence of VSELs in mice. The founder of VSELs, Mariusz Ratajczak, said, "Weissman has never visited my lab to witness exactly how we carry out the method". Others believe that it is the responsibility of Ratajczak and NeoStem to share their protocol to reproduce VSELs in laboratory work. To me, this "lack of sharing" is the center of VSEL controversy.

Russell Taichman, a researcher in dental medicine at the University of Michigan in Ann Arbor, states, "I don't see the controversy - we have seen bone grow". Taichman's statement is true: In a preclinical study with mice, VSELs created bone growth, which was its primary goal. Unfortunately, with patents, clinical studies, and billions of dollars at stake, I don't find it surprising that the researchers have not openly discussed the exact protocol to reproduce and use VSELs.

While I am not a scientist and could not possibly comprehend the process involved with these cells, I do know that every company in history has been a bit secretive regarding its main products. Hence, Coca-Cola does not openly disclose to PepsiCo how to make Coke. Therefore, why should NeoStem or the VSEL founders be open with their protocol?

This brings me to another point, and that is my excitement that Dr. Losordo (recently appointed to NeoStem's Scientific Advisory Board) and Potter will be on board while NeoStem advances VSELs. While VSELs is far down the pipeline and is hardly responsible for any of NeoStem's current valuation, this is a property that could be very lucrative to the company long-term. Neither Dr. Losordo nor Potter are strangers to controversy. Osiris' Prochymal has been debated for years, and had to endure many years of vigorous studies to become the first cell therapy product to earn a marketing approval.

In my interview with Losordo, he talked about the challenges faced with developing CD34+ cells, as many were very skeptical-- and at several points he had to virtually sell the data. Now, with the data produced in its Phase II study, Baxter's CD34+ cell therapy product is among the company's most promising of candidates. Thus, as a NeoStem shareholder I am happy to have both Losordo and Potter working with the company, and using their unique expertise to ensure that NeoStem's pipeline has the best shot of succeeding.

All references to quotes and studies above can be found in this Nature article.

Final Thoughts

The reason that Baxter's story is important is because Dr. Losordo is now working with NeoStem. This means that not only has NeoStem hired an industry vet with exceptional launch and development success in Stephen Potter, but also has a prominent physician who played a major role in the development of Baxter's now successful cell therapy product.

I would argue that no one is more educated and has performed more research on CD34+ cell development than Dr. Douglas Losordo. Hence, NeoStem has significantly strengthened its leadership and advisory team with the best of the best in the regenerative cell therapy space. The company, with three different promising divisions, is giving itself the best possible chance to become the leader in what could become a massive space. With a market cap of just $140 million, such opportunities are very rare, as is such leadership experience.

Source: Great Leadership And Massive Opportunities Makes This Hire Terrific