Cellular therapy is slowly emerging to be the next way to treat illness, and provides benefits over conventional therapy as it boosts the patient's immune system, using his/her own cells. One of the companies advancing in the development of this therapy is NeoStem, Inc. (NBS), using stem cell therapy for cardiovascular diseases, autoimmune disorders, and tissue regeneration. The company's lead candidate, AMR-001, has yielded encouraging results in the phase I trial and is also expected to report positive phase II results.
AMR-001 Source: NeoStem Investor Presentation
AMR-001 is a stem cell therapy comprised of the autologous bone marrow derived cells, CD34+/CXCR4+, and used to treat heart muscles damaged after a heart attack -- known as an Acute Myocardial Infarction (AMI). The CD34+/CXCR4+ cells are a body's natural repair mechanism and proven effective in repairing the heart muscles following a heart attack (which, of course, is caused by blockage of blood flow to a part of the heart). The loss of blood flow causes extreme damage to the heart muscles and may even lead to a patient's death.
AMR-001 is used to avert incidents post-acute ST elevation myocardial infarction (STEMI), a type of AMI. The therapy is also being evaluated to test its effect on the restoration of left ventricular function, responsible for pumping blood. Multiple publications and research scenarios indicate that AMR-001 may have the ability to increase blood flow in muscles through angiogenesis -- development and formation of new blood vessels. This would result in reversing the blood supply, rescue the tissue from cell death, and prevent incidence of myocardial infarct expansion and block ventricular remodeling.
The phase I trial results of AMR-001 for 31 patients showed statistically significant improvement in the amount of blood in the heart (myocardial perfusion). The patients receiving 10 million cells (n=5) or 14 million cells (n=4) showed improvement in the resting perfusion rates as compared to control groups (n=15) or 5 million cells (n=6). Other improvements included ejection fraction, end systolic volume, and reduction in infarct size. Overall, not even a single patient experienced heart muscle deterioration when administrated with AMR-001.
The phase II preSERVE AMI study completed enrollment of 160 patients recently and data is expected in the third quarter of 2014. The trial is focused on the impact of AMR-001 in left ventricular dysfunction patients after STEMI.
Business & Subsidiaries
NeoStem is a development stage company engaged in developing proprietary cell therapy products. It's developing a number of cell therapies for areas other than cardiovascular disease as well, including autoimmune disorders and tissue regeneration.
The company has multiple subsidiaries that complement the business.
Some of NeoStem's competitors for cell based therapies include Baxter International, Inc. (BAX), Aastrom Biosciences, Inc. (ASTM), Angioblast Systems, Inc., Athersys, Inc. (ATHX), Pluristem Therapeutics, Inc. (PSTI), ReNeuron Group (OTC:RNUGF), Stemedica Cell Technologies, Inc., Bioheart, Inc. (OTCQB:BHRT), Cytori Therapeutics (CYTX), and Miltenyi Biotec.
Progenitor Cell Therapy (PCT) is a wholly owned subsidiary of NeoStem and also the revenue generator for the company. PCT is a contract development and manufacturing organization (CDMO), and a leader in the field. It's core competencies include manufacturing cell therapy based products, cell and tissue processing, regulatory support, product and process development, consulting services, storage, distribution, and delivery services. PCT, since its inception, has been providing current Good Manufacturing Practice (cGMP) development and manufacturing services for clinical and preclinical studies to more than 100 clients; notable ones include Dendreon, Inc. for Provenge; Athersys; Pfizer; Coronado Biosciences; Osiris Therapeutics, Inc.; Baxter; Stem Cells; and Prima Biomed Limited.
PCT has two state-of-the-art research, development, and manufacturing facilities in California and New Jersey, which are currently under expansion to be completed by first quarter 2014. This expansion is aimed at expanding PCT capabilities to include commercial stage projects, which could potentially bring in bigger clients and major profits. PCT gives NeoStem the ability to control its own manufacturing, along with the fact that it generates revenue since proceeds from the clients ultimately go to NeoStem. In the third quarter alone, PCT's revenue was $4.4 million.
Conservatively speaking, if PCT is contracted from the preclinical stage to the eventual commercialization of a single company's medium complex product, it will generate proceeds of approximately $80-200 million per year, where the commercialization proceeds of only one year are included. NeoStem's revenue potential via PCT is major. Since PCT is considered a leader in the CDMO field, it is safe to expect that major contracts will be landed in the future.
Amorcyte, LLC., another wholly owned subsidiary of NeoStem, is developing AMR-001. It is the most clinically advanced product in NeoStem's pipeline and has recently completed enrollment in the phase II PreSERVE clinical trial in an effort to assess the therapy's safety and efficacy. The results from the study are expected in the next six to eight months, somewhere in mid-2014. The success of AMR-001 has the potential to position NeoStem/Amorcyte as a market leader in the AMI market worldwide. Amorcyte is also exploring AMR-001's viability in additional indications, including traumatic brain injury and congestive heart failure.
Athelos Corporation is a majority owned (83.3%) subsidiary of NeoStem, engaged in the development of T-cell based therapies for the treatment of autoimmune and inflammatory conditions. NeoStem, through Athelos, is collaborating with Becton-Dickinson (16.7% ownership of Athelos) and the University of California for the early-stage development of T-cell based therapies. Athelos has approximately 21 U.S. patents for the regulatory T-cells (Treg) field, which include natural Tregs (nTregs), induced Tregs (iTregs), and other use of Tregs for treating or preventing certain conditions or diseases. Human Treg therapy works by enhancing the regulatory T-cells number and function to restore immune balance.
NeoStem Family Storage, LLC. is a wholly owned NeoStem subsidiary that engages in stem cell storage or banking, viz. adult stem cell banking and cord blood banking. The adult stem cells are collected and stored at the facility and can be used in the future for treating illness, since autologous stem cell transplantation overcomes the issue of immune rejection. The Cord Blood Banking collects and stores the umbilical cord blood stem cells for future use.
The AMR-001 therapy has earlier been compared with the CADUCEUS (CArdiosphere-Derived aUtologous Stem Cells to Reverse ventricUlar dysfunction) study, which focused on shrinking the scarred tissue and forming heart tissues instead of improving the overall heart function. The CADUCEUS study did use autologous cells; however these cells were taken from the cardiac tissue, whereas AMR-001 uses autologous cells from the bone marrow. Additionally, CADUCEUS was administered almost a month after the heart attack, whereas AMR-001 is given within 5 to 14 days of the attack.
Comparisons of both therapies were drawn based on the indication-- i.e., heart attack-- and the fact that both therapies use autologous cells. However, critical analysis of the therapies reveals that they are worlds apart and are not a fair comparison.
Baxter's CD34+ Versus AMR-001
The company's AMR-001 competes with Baxter's CD34+ stem cells, though the indication for which they are being developed is different. Both therapies use autologous CD34+ stem cells from the bone marrow to help the heart muscles recover.
(per kg body weight)
Autologous bone marrow derived stem cell population enriched for CD34+CXCR4+ cells
10 x 106 cells
Angioplasty balloon and catheterization
Acute Myocardial Infraction
Repair the heart
CD34+ stem cells
Autologous bone marrow derived CD34+ endothelial progenitor cells
1 x 106 cells
Endocardial catheter injection using Noga cardiac navigation system
Chronic Myocardial Ischemia
Strengthen the heart
Adapted from: Sheridan, C. (2013)
The progenitor cells used in the Baxter study are provided by Progenitor Cell Therapy, which is also responsible for the stem cell processing. Thus the success of Baxter's trial not only validates the capabilities of PCT, but also of the CD34+ bone marrow derived cells.
Phase II of the CD34+ candidate was evaluated on three groups, viz. low or high dose cell concentrations, or placebo, where the extracted cells were administered through a multi-point injector in 10 sites in the heart tissue. The trial results demonstrated that the low-dose treatment patients had few angina episodes as compared to the control group (6.8 vs. 10.9 episodes per week), and after one year (6.3 vs. 11 episodes per week). Moreover, at six months of treatment the low-dose group was able to exercise on a treadmill for an average of 139 seconds as compared to 69 seconds of the control group. However, adverse events were also reported, including three heart attacks in both the low and high dose groups. On the contrary, AMR-001 didn't report any adverse events related to therapy.
The major upcoming catalyst for the company is the data readout of the phase II trial of AMR-001, being conducted by Amorcyte, expected in the third quarter of 2014. This data, if positive, will not only sky rocket the shares, but also solidify the company's position among the cell therapy companies. It could prove to be a life-turning event for the company as well as the patients. If approved, AMR-001 will become part of a $55 billion treatment market for STEMI, based on 200,000 U.S. patients each year. Conservatively speaking, if AMR-001 is able to capture only 10% of the market, it entails annual sales of approximately $5.5 billion. Thus success in phase II and the subsequent trials is of paramount importance to NeoStem.
As aforementioned, AMR-001 is also being evaluated for additional indications, out of which congestive heart failure (CHF) and traumatic brain injury are touted for IND filing in 2014. Following the approval of IND for CHF, the company expects to begin enrollment for a phase Ib/IIa study. This will have a catalytic impact on the share prices, because CHF affects approximately 5.7 million people in U.S. alone, thus presenting a huge market potential.
The company also expects to file the investigational drug application (IND) with the FDA, for the company's proprietary VSELs™ (very small embryonic like stem cells) technology platform by early 2014 or so. This will allow the company to initiate human clinical studies to treat periodontitis with VSELs, funded by the National Institutes of Health (NIH). This will have a catalytic impact on the share price.
Other trials expected to initiate in 2014 include a phase II trial for type I diabetes using Tregs, with the University of California San Francisco, and preparation to initiate a phase Ib/IIa trial for steroid resistant asthma using Tregs in the second half of 2014. The phase I Tregs results for type I diabetes are also expected in the first quarter of 2014. Of course these events are cardinal for advancing therapies with Tregs.
NeoStem is also expected to present at the 16th Annual BIO CEO & Investor Conference between 10th and 11th of February 2014. The event will help highlight the opportunities that exist in investing in NeoStem. This conference is expected to boost the share price of the company based on the news relayed.
Price per share is also expected to rally on every new contract that Progenitor Cell Therapy lands. With PCT's expansion to be completed early next year, it will be better able to undertake commercial projects-- in addition to providing services to its current notable clients. Accordingly, news relating to these events will boost the share price.
Additionally, the positive phase III trial results for Baxter's CD34+ candidate will also positively impact NeoStem, since it would suggest the ability of stem cells to help the heart recover. Also it will help to boost PCT's prospects since it processes Baxter's stem cells. Positive results are highly anticipated and will be greatly welcomed.
Fundamentals and Potential Risks
In October the company completed a public offering, which resulted in gross proceeds of $40.25 million, bringing the cash and equivalents to over $50 million as of November 7. This amount is expected to suffice for the next two years and averts the risk of dilution for the given period. With the quarterly operating cash out flow hovering between $6-$7 million, a cash pile of around $50 million ensures smooth sailing for even more than 2 years.
However, once the company advances AMR-001 to phase III (in case of positive phase II results), it will use up its resources quickly and will be in need of additional funds. Also, a collaborative effort to run the phase III trials is also not out of question, and NeoStem might turn towards that goal instead of dilution.
In July the company effected a 1-for-10 reverse split and was subsequently listed on Nasdaq from the NYSE market. This transfer to Nasdaq put the company on investors' radar and has garnered interest. Such reverse splits play an effective role in increasing interest of funds and brokers who are prohibited from investing in stocks that trade at very low prices.
NeoStem is an emerging company with major potential, not only because it has some promising therapies in the pipeline, but also because it has diversified its operations through subsidiaries. PCT alone has billion-dollar potential, which could help support the company even if all else fails. The company also has billion-dollar potential for its AMR-001, which could revolutionize AMI treatment. Additionally, NeoStem currently doesn't face direct competition for AMR-001, giving it a healthy head start.
All in all, NeoStem is a must-have in the portfolio as it is bound to progress in the years to come. It's financially stable at the moment and is expected to generate revenues from its PCT subsidiary. In my opinion, the stock is an amazing long-term investment and has the potential to bring in major profits over the next few years.