Is 'Apples To Oranges' Really The Best Biotechnology Investment Strategy?

| About: Caladrius Biosciences, (CLBS)

The success or failure of one study for one clinical product does not reflect the outcome of a similar trial. This is a concept that many retail investors struggle with, but has been the cause for volatility in several small cap biotechnology stocks. Essentially, some investors try to compare apples to oranges, and there are perhaps no better examples than with NeoStem (NBS).

CADUCEUS's relation to AMR-001

Apples and oranges are both round, sweet, and classified as fruits, yet are completely different. Such is the case with similar studies, drugs, or indications in biotechnology. An investor simply cannot look to the data of one drug as an indication for the outcome of another drug's study. With that said, NeoStem, a Phase 2 company with a promising candidate has faced recent scrutiny with an apples to oranges comparison.

NeoStem, a clinical development and contract manufacturing business, is developing a product called AMR-001. It is comprised of autologous bone-marrow-derived CD34+/CXCR4+ cells, which are then used to treat damaged heart muscle following a heart attack. If successful, this indication alone could create U.S. sales north of $1.3 billion annually, and open the door for other indications such as congestive heart failure.

With AMR-001 being part of the new but exciting cell therapy space, there are natural questions and uncertainty that arise. Hence, AMR-001 would be the first such product, meaning investors don't really know what to expect. This fact has made NeoStem very volatile, especially in connection to a trial that completed last year called CADUCEUS.

This CADUCEUS trial was given to heart attack patients - just like AMR-001 - and also uses cells - just like AMR-001. Therefore, investors have been quick to act on any AMR-001 comparisons to CADUCEUS. The reason is because CADUCEUS shrank cardiac scar tissue, increased heart tissue, but had little effect in improving the function of the heart; AMR-001's goal is to increase the function of the heart.

Unsurprisingly, when the CADUCEUS trial was announced, NeoStem's stock came under pressure. Last year there were several mentions where NeoStem would tick lower on CADUCEUS news. But most recently it was a focus article by Probio Invest that sent shares lower by more than 10%, and even a slight mention by Tech Guru that put pressure on the stock.

A comparison of little relevance

While excessive volatility is normal in biotechnology, this is one comparison that should have no impact on the stock whatsoever.

For one, the cells aren't even used in the same way! AMR-001 is derived from the bone marrow and expresses a completely different receptor. The CADUCEUS trial used cells derived from cardiac tissue. In retrospect, it should be common sense that different cells in the body perform different functions. Hence, this should be the first thing investors think of when the CADUCEUS trial is even mentioned, making the comparison almost irrelevant.

Moreover, AMR-001 was given at a different time, between days 5 and 14 post-heart attack. We now know that this period is most crucial to regenerating the heart. CADUCEUS was given a month after the heart attack, a point where damage is permanent and some tissue cannot be rebuilt.

Also, AMR-001 induces the coronary artery, while CADUCEUS was given through injection. CADUCEUS gave no information regarding potency or dose. This fact, along with the others noted, might explain why the trial was ineffective. To me, even if CADUCEUS would have used all of the same noted variables as the AMR-001 study, dose remains a key, as each product must be given at appropriate doses.

Last year NeoStem found a threshold dose for AMR-001 that includes 10 million cells, a level that no other study has investigated. With 10 million cells, not one patient saw a deterioration of heart muscle function, and this compared to an average of 35% who were treated with fewer than five million cells.

Final Thoughts

While it is easy to understand that investors seek an edge when investing in biotechnology, looking to trials that you believe to be similar may not be the best option.

With NeoStem, if you're going to draw a connection to CADUCEUS, then you also have to look at Baxter's (NYSE:BAX) Phase 2 data with its CD34+ product. Baxter's product treats a cardiovascular disease with the same cells, although administered differently, and reached endpoints of increased exercise capabilities and reduced angina that had never before been reached. So, if you're going to compare, then look at all angles. But for the sake of reason, you might be better off avoiding "apples to oranges" comparisons all together.

Disclosure: I am long NBS. 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.