Companies Advancing Stem Cell Therapies Could Also Advance Your Portfolio Dollars

by: Glen S. Woods

Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.

Stem cell therapies are becoming mainstream. From giant pharmaceutical companies like Baxter International (NYSE:BAX), which is conducting a Phase III clinical trial using its CD34+ stem cells derived from a patient's own bone marrow to treat myocardial Ischemia, to small startups like Stemline Therapeutics (NASDAQ:STML) developing treatments to target cancer stem cells, the stigma of developing stem cell therapies to treat some of the most ravaging disease known to man is in the rear view mirror.

According to a U.S. National Academy of Sciences Report, 104 million patients could benefit from stem cell therapies (also called regenerative medicine) for diseases such as cardiovascular disease, autoimmune diseases, diabetics, amyotrophic lateral sclerosis (ALS), and a number of other diseases. The upside potential for investors in this budding field appears to be quite high as more and more companies are developing new stem cell products. Today more companies are developing stem cell therapies as part of their research and development pipelines. The U.S. stem cell market was at $5.37 billion in 2011, and is expected to rise to $8.88 billion by 2016.


NeoStem (NBS) I believe has become a company that will be a major player in the future of not just stem cell therapies but the stem cell industry as a whole. With smart acquisitions and novel stem cell products, NeoStem has advanced to be named the fastest-growing technology, media, telecommunications, life sciences and clean technology company in the Tri-State New York area by the Deloitte Technology Fast 500, and number seven in North America.

NeoStem continues to be on the forefront of novel stem cell developments with its very small embryonic-like stem cells (VSELs™), which act like embryonic cells without the negative baggage. Gearing up for a Phase II trial in 2014 for regeneration of bone tissue damaged by periodontitis, VSELs technology makes it possible to have the cells actually differentiate into target tissue and create true cellular regeneration. The technology has already created bone from cells in mouse models, and is in studies for macular degeneration, retinal disease, bone regeneration and osteoporosis.


Through the company's acquisition of Amorcyte, NeoStem is developing a treatment for cardiovascular disease. The company's AMR-001 platform, an autologous bone marrow derived CD34+ stem cells therapy that is currently in Phase II trials, has shown to increase microvascular blood flow in the myocardium (heart muscle) via angiogenesis (which is the development and formation of new blood vessels.) AMR-001 has shown to reverse post-heart attack induced restriction of blood supply, which results in rescuing tissue from eventual cell death.

On September 13, 2013, the Data Safety Monitoring Board recommended continuing the clinical trial following a third interim data and safety review. Coronary heart disease is the leading cause of death for both men and women, and the cost of the disease in the U.S. is $108.9 billion annually. After a first heart attack, approximately 20% of the patients will die within the first year, and the risk rises with patients over 65 years of age, which is why so much is riding on AMR-001's Phase II clinical trial for the preservation of heart function after a severe heart attack.

The company also plans on utilizing AMR-001 for further application, and expects to file an IND for its use in arresting the progression of congestive heart failure and treating the associated comorbidities of that disease. It is also evaluating filing an IND for the treatment of traumatic brain injury.


Athelos, another NeoStem acquisition, is developing what could be a billion-dollar platform using a person's own human regulatory T cells (Treg) to fight some of today's most chronic diseases. Athelos, which is in collaboration with Becton Dickinson (NYSE:BDX), has managed to inhibit pathogenic immune responses by enhancing Treg cell numbers and function. Tregs have the potential to treat autoimmune diseases, including steroid resistant asthma, type 1 diabetes, and other autoimmune diseases.

Today the cost to treat the symptoms of asthma in the U.S. is more than $56 billion, and type 1 diabetes accounts for $14.9 billion annually. If a drug treatment can be developed to treat the underlying causes and perhaps cure the disease, it would be worth billions. And that is what's most exciting about the Tregs platform -- the therapy is looking beyond the symptoms and actually treating and potentially developing a cure for underlying causes of the autoimmune diseases. The Treg platform has also shown success in wound healing and in is in early-phase human clinical trials to evaluate the benefits in graft-versus-host disease.


While upside potential for VSELs, AMR-001, and Tregs is in the billions, NeoStem as a company needs revenue to maintain its business. That is where Progenitor Cell Therapy (PCT), a contract developer and manufacturer of stem cells, has become a major acquisition for the company. PCT has positioned itself well with its East Coast and West Coast manufacturing plants with a combined 50,000 square feet of manufacturing space. Baxter had chosen PCT to be its contract manufacturer of its CD34+ stem cells mentioned earlier in the article.

PCT management and employees are some of the most knowledgeable in the business, as they have accumulated a wealth of experience in stem cell manufacturing with over 25 different types of cell products and 30,000 cell therapy product procedures, caring for over 18,000 stored cell products. The company also has a vast knowledge of regulatory filings as its employees have been involved in over 50 filings in the U.S and EU.

PCT recently signed a nonexclusive collaboration with ATMI, Inc. (NASDAQ:ATMI), a global technology company and leader in single-use bioprocess solutions, allowing PCT to offer clients access to ATMI's Integrity Xpansion technology. NeoStem will be able to leverage this relationship to appeal to more clients and establish PCT as the first choice of vendors for contract manufacturing.

While PCT revenues do not put NeoStem in the black, as the company still does show a loss, it does help with the costs of running a development stage company. Also given that the cell therapy manufacturing market is worth over $500 million and is projected to grow rapidly over the 10 years, PCT has the potential to grow into a major revenue source for the company.

NeoStem has a market cap of $167.5 million. The company is sitting on $50 million, giving NeoStem enough cash reserves to advance its multiple pipeline projects and PCT, and position the company for strategic and business development partnerships. In September, MLV & Co. initiated coverage and has a buy rating with a price target of $16.00. And while that might be a lofty goal for today, given that stem cell therapy is in such a young stage of development and that NeoStem has its fingers in many aspects of the stem cell business, in a few years we may be looking at MLV's price target as a bargain.


Neuralstem Inc. (NYSEMKT:CUR), a small development stage biopharmaceutical company developing treatments for central nervous system diseases, saw its stock rise over 65% in the last three months. In September Neuralstem entered into a Phase II study of its NSI-566 human spinal cord stem cells designed to treat the symptoms of ALS - AKA Lou Gehrig's disease, a disease in which motor neurons die leading to paralysis. NSI-566, which is injected directly into the gray matter of the patient's spinal cord, showed in the Phase I trials that treatment substantially slowed muscle degeneration in 6 patients and showed no signs of significant disease progression.

In the Phase II trial, which adds 15 additional patients, subjects will receive millions more cells, mostly in the upper spine. This is critical as most ALS patients die when the disease attacks muscles controlling their lungs. Neuralstem expects that the transplanted cells will permanently graft into the region where injected and then rebuild the circuitry, protecting the patient's neurons from further progress of the disease.

Neuralstem utilizes its cultivated human neural fetal cells, which differ from embryonic stem cells in that they are more mature but are still robust and controllable. But unlike fully mature adult neural stem cells, they possess fewer mutations since they are younger. To deliver treatment of its neural stem cells, the company has created a proprietary spinal cord delivery platform and floating cannula.

In March, Neuralstem signed a licensing agreement with Cedars-Sinai Medical Center in Los Angeles (which has long been on the forefront of ALS) to use its platform and floating cannula in its research into spinal cord injuries and chronic diseases. Cedars-Sinai recently announced an innovative stem cell technique to create neurons in a lab dish from skin scrapings of patients by inserting molecules made of small stretches of genetic material, blocking the damaging effects of a defective gene, and in doing so provided "proof of concept" for a new therapeutic strategy. The study is believed to be one of the first in which a specific form of ALS was replicated in a dish, analyzed and "treated," offering a potential future therapy, which is an important step from research findings into clinical trials.

Neuralstem is a $175 million market cap company, the stock closed on Friday, November 15th at $2.45 per share. The company is not generating revenue at this time as it advances NS-556, which is also in preclinical trials for a number of indications including multiple sclerosis, Alzheimer's, optic neuritis, traumatic brain injury, diabetic neuropathy, Parkinson's, Huntington's disease and cerebral palsy. The company however does appear to have enough capital to sustain its business beyond the next 12 months, so in the near term I see little risk of stock dilution in the near term.

Neuralstem is also developing a human hippocampal stem cell line for diseases of the brain, like Alzheimer's, strokes and major depressive disorders. The first of the drugs, NSI-189, has entered a Phase I safety trial and is in a Phase Ib trial for major depressive disorders. Neuralstem is developing platforms for some of the most chronic diseases of today, and is also in one of the fastest growing segments today: stem cell therapies. If Neuralstem continues to see positive results, the stock should continue to rise.


While Neuralstem's ALS therapy shows promise, it is not the only company developing a stem cell therapy for ALS. BrainStorm Cell Therapeutics (OTC:BCLI), a small biotech company out of Israel with offices in New York, has shown some success in treating ALS with NurOwn, an autologous, adult stem cell therapy that differentiates bone marrow-derived mesenchymal stem cells into specialized, neuron-supporting cells. Last year the company reported successful results in its Phase I/II human clinical trial, and that one ALS patient was able to walk and talk again after treatment with NurOwn.

NurOwn has been granted Orphan Drug Designation by the FDA, and has entered into a Phase IIa trial at Hadassah Medical Center in Jerusalem, escalating the dose in 12 patients to evaluate the safety and preliminary efficacy, and will be followed for six months after transplantation. The company is also preparing for a U.S.-based, Phase IIa trial to be conducted at Massachusetts General Hospital, the University of Massachusetts Medical School and the Mayo Clinic in Rochester, MN. BrainStorm stock is down almost 20% YTD partly due to announcing a public offering at $0.17 per share shortly after announcing that the FDA approved NurOwn's Orphan Drug status. While I like what the company is developing and that it announced it was extending to preclinical studies of NurOwn to patients with multiple sclerosis, I'd like to wait for data on its current studies before investing.


While there is risk in small development companies, there is also great reward. As these companies progress with their drug studies, they are inching closer to an FDA approval with each phase. Stem cell therapy is still in its infancy and is going to expand greatly in the coming years. And a number of the small stem cell companies of today - like NeoStem and Neuralstem - may become the Celgene's (NASDAQ:CELG) or Amgen's (NASDAQ:AMGN) of tomorrow.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.