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NeoStem (AMEX:NBS) has expanded its stem cell operations through the acquisition of a 51% stake in Suzhou Erye NeoStem has expanded its stem cell operations through the acquisition of a 51% stake in Suzhou Erye.

NeoStem first commenced trading on the American Stock Exchange in 2007, focusing on stem cell collection and storage. It quickly expanded from there by licensing additional stem cell based technologies, adding therapeutics to its offerings. By far the most transformative event has been the company’s recent acquisition of a Chinese pharmaceuticals manufacturer. This has not only provided the company with its first source of any significant revenue but also a springboard for launching new therapies.

NeoStem deals only with adult derived stem cells, thereby evading the ethical issues associated with embryonic stem cells. It’s business can be thought of as consisting of three segments:

1. Stem cell collection and storage for newborn and adults
2. Revenue generating stem cell therapeutics in Asia
3. Therapeutic development of cell therapies including VSEL technology
4. Chinese generic pharmaceutical manufacturing

Stem cell collection is a service marketed to individuals as a way to preserve healthy stem cells in the event future medical issues arise requiring stem cell transplants. Such problems may include leukemias and lymphomas, and possibly radiation exposure. There are 3500 stem cell therapy clinical trials evaluating the use of these cells to regenerate tissue. Eventually, stem cells are likely to find usage in a variety of other diseases like heart disease, Ms, Lupus, diabetes, wound care and cartilage repair for knees and hips making the storage of one’s own cells more desirable but it is still early.

NeoStem therefore shifted its emphasis on driving the development of therapeutics. The company began this effort by licensing mature stem cell technology portfolio in 2009 with an exclusive license to the use of a patient’s own adult stem cells to treat a variety of musculoskeletal diseases from in the the Asian market. Regenerative Sciences uses autologous mesenchymal stem cells extracted from bone marrow for the treatment of various orthopedic conditions, including osteoarthritis. This procedure will be augmented with its own peripheral blood stem cell collection process to enhance its marketability- a wise move considering the pain of typical bone marrow extraction.

It has begun marketing adult stem cell treatments for orthopedic indications with orthopedics specialist, Shijiazhuang Third Hospital of Hebei Province. According to the company, patient charges will be comparable to those in the US. This is possible because the government is providing 80% reimbursement for the procedure.

It also entered an agreement that year with Vincent Giampapa, M.D, one of the world’s first certified anti-aging physicians, gaining access to autologous adult stem cell-based skin rejuvenation therapies with applications for cosmetic facial and body procedures and skin rejuvenation. These technologies greatly expanded NeoStem’s offerings as it sought to expand internationally and are currently being offered through Enhance Care Biomedical Holdings.

Recently NeoStem has acquired Progenitor Cell therapy a privately held cell therapy manufacturer generating over 8m dollars in revenue annually. Since 's inception in 1999, the company has served over 100 clients and has performed more than 30,000 cell therapy procedures, and processed and stored over 18,000 cell therapy products. Equity research firm LifeTech Capital believes synergies between Progenitor and NeoStem’s current operations will ultimately result in cost savings and increased sales. Clients have included companies like Dendrion, Baxter and Sangamo. As their clients progress along the clinical trial pathway revenues should grow with the increase number of patients being enrolled.

The stem cell storage part of Progenitor Cell Therapy business augments NeoStem’s adult stem cell business by the addition of processing and storage facilities for stem cells collected from the umbilical cord. Collecting stem cells from newborn’s at birth has increased annually at a median of 14%. Progenitor cell Therapy has processed over 7,000 umbilical cord blood, 10,000 blood and marrow derived stem cells and 1,000 dendritic cells) and arranged the logistics and transportation for over 14,000 cell therapy products for clinical use by over 5,000 patients nationwide.

Progenitor has cell therapy manufacturing facilities located on the east and west coast of the US offers GMP processing which is critical to being able to using these cells in the future. Additionally as a prior vendor of NeoStem the merger will allow the family banking margins to significantly increase

NeoStem additionally has entered into the development of adult stem cell therapeutics. In 2007, the company embarked on adult stem cell therapeutics through the licensure of Very Small Embryonic-Like (VSEL) stem cell technology from the University of Louisville. A rare form of adult stem cells, they have many physical characteristics typically found in embryonic stem cells, including the ability to differentiate into specialized cells and tissue throughout the body. They may become a potential of so-called pluripotent stem cells for tissue/organ regeneration, treating diseases and conditions, including neural, cardiac and ophthalmic disorders, as well as to stimulate bone regeneration and wound healing.

The Vatican’s Pontifical Council for Culture has taken a keen interest in Neostem. A million dollars has been pledged to start a variety of collaborative activities with the goal of advancing scientific research on adult stem cells and exploring their clinical application in the field of regenerative medicine.

This technology applied in this collaboration with the Vatican opens the door to the possibility of achieving the positive benefits associated with embryonic stem cells without the ethical or moral dilemmas as well as other negative effects associated with embryonic stem cells.

In addition to the breakthrough research that will occur as part of this partnership, the Vatican and NeoStem will spearhead an education campaign geared towards generating awareness of the cultural relevance of such a fundamental shift in medical treatment options, particularly with regard to the impact on theological and ethical issues. The activities will begin with a 3 day International Conference at the Vatican on adult stem cell research, including VSEL™ technology, that will focus on medical research presentations and theological and philosophical considerations and implications of scientific achievements.

VSEL technology is now being tested in animal models of age-related-macular degeneration (AMD) and glaucoma in collaboration with the Schepens Eye Research Institute, a charitable corporation of Massachusetts and an affiliate of Harvard Medical School. Very small embryonic-like stem cells collected from the peripheral blood will be studied as a potential new method for vision repair through tissue regeneration. Additionally the company received a 1.7m dollar grant by the department of defence to study these cells for osteoporosis.

In a pivotal event, NeoStem gained a 51% majority interest in China’s Suzhou Erye, manufacturer and distributor of generic antibiotic products through a merger with China Biopharmaceuticals Holdings, Inc. in October 2009. Suzhou Erye is both revenue generating and profitable; sales in 2010 will approach $70 million. It sells over 100 products and has another seven in its pipeline.

With the acquisition, NeoStem obtained access to the large and fast-growing Chinese pharmaceutical market. Importantly, China appears to be more receptive to stem cell based therapies and is also set to spend $125 billion to provide healthcare coverage for its people.

The company is making significant investments in its China initiative, spending on research, manufacturing, and sales. The two most recently highlighted sales of NeoStem’s products have been to Chinese organizations.

The Erye pharmaceuticals business is growing well and should provide a financial cushion as NeoStem ramps up its stem cell operations in China. The $19 million in funds raised in November 2010 gives it further room to continue developing its technologies.

In just a few short years, the company has managed to morph from a small business with minor barriers to entry into an international company, with patented technologies and a presence in the world’s most enticing market.

NeoStem makes for an interesting investment: it provides exposure to the world of cutting edge stem cell therapeutics and allure of developing markets- at the same time, it has the transparency of a US based company, and the stability of solid revenues.