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In the last Neostem (NASDAQ: NBS) article we discussed some of the key events coming in 2014 that could significantly impact the share price, and we provided some superficial details on the company's structure and financial situation. This article will elaborate on what we view as the single most important catalyst for Neostem this year - the Phase II data release for AMR-001.

We believe that it is excitement over the completed enrollment phase of this trial that has already driven shares of NBS 12% higher YTD (at time of writing). Other major moves may occur before the Phase II release as well.

PreSERVE-AMI

This is the Phase II trial for AMR-001 in ST Segment Elevation Myocardial Infarction, or STEMI.

AMR-001 is a therapy made up of patient cells that are altered to rapidly increase perfusion to damaged tissue. This is a possible way to reduce damage to affected regions of heart muscle during the recovery stage of a heart attack. AMR-001 is quite unique in its therapeutic application, and it does not have a direct competitor. Because of this, the trial is only attempting to prove the efficacy of this autologous cell therapy against placebo.

Neostem is testing AMR-001 infused at a specific dosage (10+ M CD34+ cells) in its treatment arm against a placebo comparator arm (double blinded). 160 patients are randomized into both arms. Efficacy will be proven with the trials' primary endpoint, which is based on visual improvements seen via an imaging procedure (Gated SPECT).

We expect full data from this trial to be released in Q4 2014. Supplemental safety and outcomes data from this trial should trickle in until 2017, adding more depth to the Phase II dataset.

AMR-001 Phase I

Phase I results showed that infusion of AMR-001 has the ability to improve capillary blood flow to infarcted regions of heart muscle.

(click to enlarge)

The size of the infarct region itself also shrank with increasing dosage of AMR-001, as demonstrated in the figure below:

(click to enlarge)

Lastly, we see that left ventricle ejection fraction (LVEF) data also showed that AMR-001 is able to prevent the deterioration of left ventricle function following AMI.

(click to enlarge)

While there were only 31 patients in this trial, it's worth noting that there were no adverse events reported in the trial that were determined to be the result of AMR-001. The benefits of the therapy are also demonstrated in multiple ways. This should remove some doubt as to whether or not the cells are actually affecting perfusion to infarcted regions of the heart. These results will also serve as a general guideline to the Phase II results. If the therapy can hold up to the standards that were set in Phase I, both the viability and the consistency of AMR-001 would be proven with more data.

Data source: Neostem Investor Presentation, 2014

The Implications

Neostem investors are clearly very focused on AMR-001 after completion of enrollment for the Phase II. The enrollment process was lengthy and tedious, and completion of this portion of the Phase II significantly increases the chance of success of completion of the trial (basically to ~100%).

Positive data will significantly increase the chance of approval for the therapy itself (from 50% to 75% in our view), and it would serve as a validation of the company's technology. Positive AMI data would also help a planned AMR-001 expansion into the congestive heart failure indication.

In a note released last week by Aegis, Ram Selvaraju bumped his price target on NBS from $21 to $23. The implication is that the stock will triple given that the Phase II is a success, due to the value added to AMR-001 from the Phase II.

But even with a more conservative estimate on the probability of success for AMR-001, we can easily see NBS at $16/share (about double the current price) in Q3 or Q4 2014 after the presentation of data from PreSERVE. STEMI is a large indication, and we believe that the discounted cash flow available after estimated approval in 2017 is worth more than the current market capitalization of the company ($219 M). As mentioned earlier, success in acute myocardial infarction also paves the way for indication expansion into congestive heart failure. Progression of clinical trials in these indications would add additional value.

Investment Risk

AMR-001 is a highly experimental therapy, and there is a chance that it will fail its current trial or future trials. This may have a negative effect on common shares of Neostem, since investors are currently attributing some probability of success to the AMR-001 program. However, it is worth noting that Neostem's progenitor cell therapy (PCT) business provides an immediate stream of revenue that will sustain a certain valuation for the company. The company also has other proprietary technologies that can be developed into therapies for immune disorders and tissue regeneration.

Source: Neostem Could Rally On Phase II Results