When Robin L. Smith M.D., Chairman of the Board and Chief Executive Officer of NeoStem Inc. (AMEX:NBS) first got involved with the company three years ago, it was a four cent stock called “Phase III Medical.” The company was making investments in companies for pieces of royalties and revenues. To its credit, one of the companies Phase III was very interested in helping finance was a tiny company called NeoStem.
Now, as the science of stem cells continues to advance, doctors have come to realize that in each of us, stem cells become less and less in quantity and quality. This is cue not only to aging, but also to our environment, the food we eat and various other health factors.
By having one's stem cells collected and stored, it’s like taking a snap shot of your immune system. You can make sure they’ll be there for you in the future. That's what NeoStem does. It’s like Cord Blood, but it’s actually for adults.
The company is engaged in the business of developing stem cell therapies, pursuing anti-aging initiatives and is operating a network of adult stem cell collection centers that are focused on enabling people to donate and store their own (autologous) stem cells when they are young and healthy for their personal use in times of future medical need.
They have also made a name for themselved by entering the research and development arenas, through the acquisition of a worldwide exclusive license of the VSEL (very small embryonic-like) stem cell, an early-stage technology that utilizes very small embryonic-like stem cells that exist in adult human bone marrow.
BioMedReports: Tell us about your V-Cell technology?
Smith: Basically what Neo Stem does, it’s a safe, non-invasive way for you and I to have our stem cells collected today for the future. And what our company is very focused on, in taking the stems cells, and there are two keys to these stem cells. One is there autologous, so it’s your cells for your use; 70% of people die waiting for a transplant match, because it hard to get a match. Even if you do get a match, you’re on drugs that have you, not reject the cells because their not your own cells. So one of the advantages in having your own cells is the fact that your body recognizes it is its own and you don’t have to worry about infectious disease for someone else and rejection. So that’s the key to these cells. The other key is that we take cells in enough quantities and there’s plenty there that you do have to expand them. Because when you expand these cells and go from one to ten you can get DNA abnormalities and you differentiate the cells. They loose early potency and sort of go down a lineage, so you loose that 'earliness' of the stem cells.
So, the key is that the body makes enough of the cells, we collect them and they don’t have to be manipulated; which is also important, because as you manipulate you change or expand a cell, and there is no technology out there that is FDA approved.
If it were done any other way, it would have to go through an FDA approval process because it would be looked at as a drug- because you would be altering the cells.
So it's like taking a snapshot of the immune system. Tomorrow, if I had Chemo Therapy, my cells could be FedEx'd and given to me for new bone marrow.
So these are very small cells that are in adults that have all the morphological characteristics as an embryonic stem cell. So it’s really the drug within yourself; and that’s what’s really exciting. we have world wide rights to these cells and are looking to our R&D in Boston and our expansion in China to take these V-Cells and continue develop them as a therapy for many diseases, like Heat Disease, Macular Degeneration, Stroke, etc.
BioMedReports: Explain that technology a little further. Where do you find these cells, how do cultivate them, etc…?
Smith: Stem cells are mobilized and then collected, V-Cells are part of that collection stream. We know you and I have them. We can mobilize them into the blood system through a mobilizing agent, collect them and they can then be isolated, purified, stored, frozen, un- frozen and they are still functional. This is part of the latest findings and research we just presented. We now know that V-Cells can be collected, purified, and used as that drug within yourself, to start treating diseases.
BioMedReports: Where, specifically, are these V-Cells located?
Smith: They’re in your bone marrow, in your lung; there’s certain areas throughout your body where they can be mobilized from. It's done through a process thats similar to donating platelets, but it takes a bit longer. It’s the same machine, the same technology that’s been used for bone marrow transplantation, but it’s a newer technology; instead of taking a big needle and sticking it in the hip, it not as painful and it’s just a needle in each arm.
BioMedReports: That was my next question. We heard that it could be painful, but this sounds like a new process. Can you tell us a little bit more about that?
Smith: Yes, it’s really exciting; it’s literally like giving platelets ; so you take a few doses of the mobilizing agent through a tiny little needle under the skin and it makes the stem cells go into your blood stream. Then by using a needle in each arm, very slowly, your blood volume comes into the machine, stem cells are taken out and the blood is returned; it’s a closed system. You don’t have to worry about infectious disease or anything like that.
BioMedReports: So after you’ve gone through that type of a session, you then store the cells or do they have to be taken into the lab?
Smith: The cells get sent to the labs that we use in San Francisco and New Jersey. We then store them using our proprietary technology. , We actually store multiple packets so you can have multiple treatments in the future and we have enough cells that they can be divided. One collection packet would be for say, a bone marrow transplant, so there’s enough cells in there for a bone marrow; then there’s cells in 20 other viles that can be used for other things; like orthopedics, cosmetics, wounds; or other very pointed re-generative therapies that continued to be developed.
BioMedReports: Does the process take a long time and is it expensive?
Smith: The entire procedure for the collection and the storage is $7,500 and then we charge $750 for storage per year. You can get it financed for less than a car payment and it’s for multiple treatments in the future. So I guess the question is: What’s the cost of Bio-Insurance? It’s really less than a health insurance plan or life insurance. It’s a way to be protective. We think the cost savings using your own stem cells is very different than, say, a heart transplant or bone marrow transplantation from someone else.
It's more cost effective and I think, in time, insurance companies will see that and maybe incorporate the preventive aspects and the cost savings to reimburse for this. For now, it is seen as preventative; its prior to needing it for therapy so it’s not covered.
We think therapy is what is going to drive our business model; our company has grown over the last two and a half years from a single line to being a real therapeutic company. Our recently announced expansion into China is just that. We purchased a pharmaceutical company doing $60 million in revenue and we own 51% of that. They distribute IV Antibiotics mostly to 30 different provinces in China. As we expand our businesses on the stem cell side in China, we have a great platform to deliver through.
BioMedReports: What do think is going to be the financial impact of that vs. not having that partnership? In other words, is that sort of an incubator or is that going to really start to pay off almost right away?
Smith: Well, that is a good question. It pays off right away because we are going from $80K in revenue to $60 million. So it pays off in that regard, and it’s very profitable. But we want to put a little bit back into infrastructure because we have drugs that we want to put through their pipeline. The health care reform in China is where things are going. There is going to be three times a much spending in antibiotics. They think it’s an $8 billion industry, so we are very well positioned as one of the largest antibiotic deliverers in Eastern China. To continue to enhance that piece of the business as China is going through their health care reform is important. We are very well poised to accept some of those revenues and grow in that area. But on top of that we can bring new innovative drugs and technologies, with our expertise, right into China. Right into that pipeline. So we think that is a tremendous opportunity today.
BioMedReports: We've seen other stem cell companies doing a lot of outreach to China. What is your experience there? Is there more early adoption for these technologies than there is in the US?
Smith: You know it’s interesting. I think with China being in the middle of their health care reform, they want new technologies. They want U.S. technologies like our V-cells. In addition, they are very early adopters of stem cells, because remember; with abortion being legal and required there for all this time they have done a lot with the fetal tissue research.
We have seen a lot of medical tours and more people have gone to China for ALS, spinal cord injuries, Parkinson’s and other medical needs where they have exhausted all other possibilities. I think we haven’t seen that sort of thing here in the U.S. and all the data coming from overseas research gives us pause. We want to bring the opportunity but we want it to be at the strictest levels of medical standards so that we can actually be sure that everyone is treated in a consistent fashion.
It’s not just enough to put someone on a website as a testimonial, you want to know that of the 10 people who were treated 6 of them did well or 8 of them did well, so we need more data and that is something we are going to really focus on. We may help build that kind of environment, where people can travel to destination sites and know they can get a level of quality that they could get here in the U.S.A..
BioMedReports: And where are you with the development with that V-Cell technology? Are you having to do more clinical trials or testing?
Smith: We know we have them. we know we can isolate them. The key is going to be to continue to look at ways to expanding them and to start the clinical trial process. We are going to plan to do a lot of that in China. Things can move a little more quickly there, so we will be doing some more basic science here and are really going to be focusing a little more in China.
BioMedReports: Some perceive your company as under valued given all the new developments?
Smith: In my own opinion, I think we are very under valued. I mean, just on the pharma side of the business alone. I know a lot of people don’t like speculative investments, stem cells are the future. But they are also today and that is what is unique about us. We don’t have seven years and need $100 million to maybe have a drug product at the end. Our stem cells can be used today and that we are starting to generate revenue this year. We are doing it in orthopedics, next is cosmetics and aging in China, while we are developing things like wound care treatments. So I think we are undervalued. Not many people know our story, but I think this will help.
Disclosure: Long NBS