Although stem cell therapies are often seen as an emerging technology, they have actually been around for decades, with routine use being seen as early as the 1980s. Some procedures, such as using a patient's bone marrow stem cells to curb the risk of life-threatening infections, anemia and bleeding that occurs in leukemia, lymphoma or multiple myeloma patients after intense chemotherapy, are seen as routine medical practice in America and are used on millions of patients yearly.
NeoStem Inc. (NYSE: NBS) has acquired Progenitor Cell Therapy, a contract development and manufacturing organization, to create a global network of cell therapy developers, and has shifted their focus to be 100% cell therapy focused.
Heart disease is one of the areas that NeoStem is looking to apply their latest therapies, positioning them to become the manufacturer of a blockbuster treatment for an affliction that affects millions worldwide.
STEMIs, which more than 160,000 people a year in the U.S. suffer, cost between $30,000 and $80,000 per patient annually with costs rising dramatically with heart damage severity. With the standard of care for STEMIs (ST segment elevation myocardial infarctions) being Pfizer's (PFE) Inspra (eplerenone) blood thinner, which focuses on keeping the blood thin enough to work around the damaged heart, the development of stem cell therapies that can repair some, if not most, of the damage to the heart, could reduce long-term care cost dramatically.
In response to these staggering numbers, NeoStem is currently conducting a Phase II trial of its AMR-001 vaccine, a stem cell treatment comprised of CD34+ and CXCR4+ cells derived from bone marrow. CD34+ stem cells from bone marrow constitute a common treatment for cancer patients post chemotherapy to promote blood vessel growth to areas of poor blood flow.
NeoStem has adapted AMR-001 to be used to treat post-STEMI incident patients to restore LVEF (left ventricular ejection fraction), which is the percentage of blood pumped by the left ventricle, thereby reducing the need for acute long-term care. This treatment may also limit ventricular remodeling, the change in size and shape of the heart following a STEMI, which would further decrease the long-term effects to the patient.
These results could have NeoStem looking at annual AMR-001 sales, if it gets to market, of $1 billion, according to a research note made by RedChip in May of this year.
NeoStem has been at the center of a storm surrounding the results of a CADUCEUS study. The study noted that stem cell treatment was "safe and effective in decreasing scar size and in increasing viable tissue," but "did not lead to any significant changes from baseline to 1 year in end-diastolic and end-systolic volumes, cardiac output, or stroke volume - which also was evident at 6 months."
A post seen on Seeking Alpha ran with this statement and painted all stem cells with the same brush, which is a far cry from the truth. The CADUCEUS trial used cardiosphere-derived stem cells or CDCs, whereas AMR-001 uses stem cells derived from bone marrow, a disparity that NeoStem CEO, Robin Smith, likened to "comparing apples and oranges."
The distinction made by Robin Smith is crucial to understanding the long-term valuation of AMR-001, as a meta-analysis of 16 different studies recently published in the European Heart Journal showed that treatment with bone marrow cells led to an improvement in left ventricular function and remodeling for STEMI patients, and in particular, for "younger patients and patients with a more severely depressed LVEF (left ventricular ejection fraction) at baseline." These results are consistent with the results that NeoStem observed in its Phase I trial.
The recent drop in NeoStem stock can be, at first glance, attributed to the results from the CADUCEUS study. However, the real culprit behind the most recent drop in price of NeoStem stock is the firm's announcement of an equity sale at $7.00 per share, to increase its capital to further expand their research on stem cell therapies and their implications.
The October 4th close put the stock at $7.09 per share. The stock had been a stellar performer until that point, having nearly doubled since hitting a low of $5.09 per share on June 21st. It is likely that given some time, the stock will once again be the stellar performer it has always been, especially if AMR-001 hits the market.
NeoStem's study of the CD34+ cells somewhat mirrors the study Baxter (BAX) did on the same cells. In Baxter's study, Phase II testing results showed that patients with severe refractory angina exhibited an improvement in exercise capacity and reduced angina episodes. Baxter is currently in Phase III testing, which, unlike NeoStem's, is focused on patients with chronic myocardial ischemia, one of the severest forms of coronary artery disease.
In general, and despite growing pains, stem cell therapies present a unique value proposition. It is one made more compelling by the potential reach of the industry, and its potential to affect other sectors of human productivity through treatment that is focused more on enhancing the body's capabilities, and less on merely addressing symptoms.
With NeoStem's stem cell manufacturing subsidiary, Progenitor Cell Therapy, seeing a revenue rise of 42% to $11.5 million in 2012, and boasting clients such as Baxter, the company not only has a promising cell therapy, but it is also building operational expertise for its own use, which both offsets the development costs of AMR-001 as well as forges relationships within the industry at large.
PCT revenue should be accretive to the bottom line as more cell therapies reach later stages of testing. This is an industry in its infancy with significant growth potential. We see this as the key to NeoStem's potential to be something more than the run-of-the-mill biotech startup and a solid investment opportunity with huge potential for blockbuster revenues as Phase III trials commence.