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"One in five people who suffer a heart attack will die within one year." Those were the words of Dr. Robin Smith, CEO of NeoStem (NASDAQ:NBS), a small biotech company that may be poised to make a loud rumble with their AMR-001 stem cell drug that is now in Phase II trials. AMR-001 is a stem cell therapy that utilizes both CD34+ and CXR4+ stem cells, and it may more than just up the survival odds for people who suffer from chronic myocardial ischemia (NYSE:CMI), a severe form of coronary artery disease causing long term damage to the heart, and in many cases having disabling effects on the patient. This is very encouraging for patients and investors, as not only does it indicate that there are possibilities of regenerative growth through stem cell therapy for patients, but it also has great upside potential for the investors with a large potential patient set targeted.

Before we jump on the NeoStem bandwagon, Baxter Pharmaceuticals (NYSE:BAX), the largest and most visible company to enter the stem cell therapy foray, has been developing its own CD34+ stem cells for use with patients who also suffer from CMI. The adult autologous stem cell therapy CD34+ is already in Phase III clinical trials to evaluate the efficiency and safety in treating the indication. Through the trials and multiple studies, it has been shown that Baxter's CD34+ stem cell therapy has been able to repair the damaged heart muscles, and increase blood flow. The studies have shown that injections of CD34+ have improved the test patient's ability to exercise, while reducing episodes of angina. This is especially important because of the positive results that CD34+ has shown on patients with deteriorating conditions where conventional medical treatments, balloon angioplasty or other surgical procedures, and open-heart surgery have not shown significant improvement.

According to Dr. Douglas Losordo of Northwestern's Feinberg School of Medicine and vice president of therapeutic development at Baxter, who led the study, the treatment reduced severe chest discomfort and improved their tolerance for exercise a year after injection. In a 2011 interview, he noted that in some cases patients' activities were limited to" sitting on the couch or watching television" while after treatment "they were able to walk at a comfortable pace with no painful chest discomfort, and some were able to ride a bicycle". Dr. Losordo added, "This is the first controlled trial treating chronic myocardial ischemia patients with their own stem cells to achieve significant reduction in angina frequency and improvement in exercise tolerance."

At this time cell therapy is more expensive than conventional treatment, requiring a manufacturing facility and highly experienced staff, not to mention thousands of dollars to manufacture an individual cell therapy. Therefore, Baxter has selected Progenitor Cell Therapy (PCT) to manufacturer their Phase III CD34+ trials. Now here's where it becomes interesting for investors: In January 2011, PCT was acquired by NeoStem. So in an interesting twist, NeoStem is manufacturing both Baxter's CD34+ stem cell therapy as well as their own AMR-001 stem cell therapy; one essentially mirrors the other.

However, there are differences between the two stem cell therapies, while Baxter injects its CMI therapy directly into the heart, NeoStem does not. According to Dr. Smith, "AMR-01 therapy is different in that the cells they use are not injected into the heart muscle. These cells are infused into the infarct-related artery and mobilize the area of injury where they are needed." The other difference is that AMR-001 therapy uses not just CD34+ which Baxter uses, but AMR-001 also uses the CXR4+ stem cells. When the body tissue is under ischemic stress a distress signal (NYSE:HIF) is induced in an attempt to rescue the damaged tissue. The distress signal begins the process of mobilization not just CD34+ but CXR4+ stem cells too in an attempt to rescue the damaged tissue. With the addition of CXR4+ stem cells and the infusion into the infarct-related artery it appears that AMR-100 might just be the "next generation" of stem cell therapy.

So why would Baxter choose PCT (now NeoStem)? If you take a close look at what NeoStem has to offer, the answer is evident. NeoStem has been a leader in stem cell manufacturing and has worked closely with the companies in the field of stem cell development through trials and approval with the goal to then obtain a long-term contract to manufacture and develop new stem cell products. NeoStem, with offices in New York, New Jersey, Massachusetts, and California, and through its PCT has manufacturing plants on both coasts, has one of the most experienced staff in the field. As one of the young lions, and leaders in the stem cell industry, it has manufactured over 30,000 cell products for themselves and numerous large and small companies, including Baxter , Johnson & Johnson (NYSE:JNJ), and Dendreon (NASDAQ:DNDN). So it seems like a smart move for Baxter to save time and money by utilizing NeoStem's manufacturing plant and their talent. It also is a smart move for NeoStem and their investors; the manufacturing of stem cells appears to be the more profitable end of the business and serves to diversify the company by helping it generate revenue while its own pipeline is still in various stages of development.

On another positive note, NeoStem recently announced that it has agreed to sell its entire 51% stake in Suzhou Erye, a successful generic pharmaceutical company in China, for 12.3 million in cash. Erye will also return to them 1.04 million shares of common stock and cancel 1.17 million in options along with 640,000 common stock warrants, which collectively represents 1.3% of NeoStem's common outstanding shares. To an investor this could be a boon. The sale will bolster NeoStem's cash on hand, lower debt, and will allow the company to focus on one main area: manufacturing and developing stem cells.

Baxter Pharmaceuticals closed on Friday at $53.15, up $1.57. Its 52 week high was $62.50, and low $47.55, with a target of $61.00. It has a market value of $27.14 billion, and a P/E of 12.51. The company description, as filed with the SEC, states that "through its subsidiaries, develops, manufactures, and markets products that saves and sustains lives of people… Baxter manufactures products in 27 countries and sells them in more than 100 countries." Given that Baxter is near its 52 week low, and given the upside potential, Baxter seems like a stock to buy and hold.

NeoStem Inc. is trading around $0.49 with a $59 million market capitalization. Its 52 week high was $1.76 and low was $0.30 cents. According to the NYSE MKT description, "NeoStem, Inc is an international biopharmaceutical company with global research and development capabilities and operations in three business units: U.S. adult stem cells, China adult stem cells, and China pharmaceuticals, primarily antibiotics." Although with the recent divestiture in China, the company will now be able to focus on the research and development of adult stem cell therapies.

NeoStem is a volatile investment. Just look at the rollercoaster ride it took over the last 12 months. The stock seemed to have entered a largely oversold position due to its latest round of financing which is common for biotech companies once financing is secured. Taking a closer look, the company has shown revenue of $76 million over the last 12 months, and a price to sales ratio of .60. It appears as though NeoStem is poised to be in a strong position, not only with the AMR-001 stem cell drug, but to invest in developing new products and obtaining new clients, thus affording the company a strong upside potential in both growth and development.

Given the encouraging results of the AMR-001 stem cell therapy and the company's agreements with Baxter and others, the potential for upside might become more evident sooner than later. JMP Securities has a target price for NeoStem at $3.00 a share, well above their 52-week high. Although that might be a bold target, it does appear that the upside potential far outweighs the downside. A final thought, NeoStem's PCT division has a diverse customer base in its immunotherapy and stem cell clientele. This type of networking and constant communication allows much interaction between the company and potential suitors that may be interested in lucrative partnerships or even the acquisition of a solid, manufacturing cell therapy company with a budding stem cell pipeline. The possibilities are certainly there, and could be endless.

Disclosure: I am long BAX, NBS.

Source: Baxter, NeoStem Duel For Next-Gen Heart Disease Stem Cell Therapy