NeoStem Closes China Biopharma Acquisition to Boost Revenues

 |  Includes: CHBP, CLBS
by: ChinaBio Today

NeoStem, Inc. (NBS) announced it has closed its acquisition of China Biopharmaceuticals Holdings, Inc. (OTC:CHBP). China Biopharma’s sole asset is a 51% stake in Suzhou Erye Pharmaceutical Co., a 50-year old pharmaceutical company that expects to generate $60 million in revenue and net income of $12 million in 2009. The deal has been in the works for most of the past year. NeoStem is a stem cell storage company based in the US, while Suzhou Erye Pharma boasts a portfolio of 100 products on seven cGMP lines that it markets in China.

NeoStem needs revenue. The company reported just $136,000 of sales in the last 12 months and negative EBITDA of almost $11 million. After a capital infusion (Suzhou Erye was a contributor), NeoStem’s cash balance was a healthy $10.5 million on the company’s most recent reporting date.

NeoStem will exchange 13.6 million shares for the outstanding common shares of China Biopharma. To pay off China Biopharma’s Series B Preferred Stock, it will exchange 6.5 million common shares and 8.2 million Series C Convertible Preferred shares. The new Series C Convertible shares are convertible into 9,086,124 shares of NeoStem at a price of $0.90 per share. NeoStem is currently trading for $1.91.

All of China Biopharma’s Series C Convertible Preferred shares are owned by RimAsia Capital Partners, LP, a firm has been actively involved in both companies. If it exercises all its warrants, RimAsia will ultimately own almost 35% of NeoStem’s considerably increased number of outstanding shares.

Besides its stem cell storage business, NeoStem is working on developing stem cell therapies, including anti-aging and wound healing initiatives. In the past, it has also expressed interest in developing a China-based medical tourism business involving stem cell therapies.

Disclosure: none.