The biotech sector has been buzzing with activity lately, especially in the area of stem cell research for the treatment of cancer, tissue regeneration, and treatment of many other infections. While NeoStem (NBS) has been focusing on its contract manufacturing business, PreSERVE Phase 2 clinical trials, and VSELTM technology, Geron (GERN) has been focusing on telomerase inhibitors, aimed at stopping or inhibiting the growth of tumors. Meanwhile, Pluristem Therapeutics (PSTI) has been concentrating on its PLX cell therapy for the treatment of Buerger's disease. I will discuss each development in detail below, show how it could impact the company's bottom line, and show how this could impact each company from an investment standpoint.
NeoStem recently reported its results for the second quarter and provided an update on its business operations. The company's business strategy can be broken down into two parts. The first part is a contract development and manufacturing operation (PCT) that uses state-of-the-art technology. The second part is a product development program involving advanced stem cell therapy. The platform provides the opportunity for both short-term and long-term revenues. Since the company announced its decision to divest its stake in Erye, a Chinese generic pharmaceutical manufacturer, to focus on its stem cell business, it now expects to receive $12.3 million in cash, and strengthen its balance sheet by removing $35 million in debt as part of the divestiture. At this time, NeoStem has received $6.2 million, which is half of the total $12.3 million cash purchase price.
Net loss from discontinued operations attributable to NeoStem shareholders for the three and six months ended June 30, 2012 was $13.4 million and $14.8 million, respectively, or $0.10 and $0.12 per share, compared to $0.5 million and $0.8 million, or $0.01 per share for both the three and six month periods ended June 30, 2011. This loss includes a 51% share of a total $28 million non-cash asset impairment charge. Revenues from continuing operations representing the stem cell business in the U.S. were $3.4 million, compared to $2.2 million in the same quarter of the previous year. These revenues primarily represent service revenues from PCT, the contract manufacturing subsidiary. The cash loss for the quarter was $9.9 million. As of June 30, 2012 the company had cash and cash equivalents of $2.1 million, with an additional $2.5 million held in escrow. Since the end of the second quarter, NeoStem has raised an additional $7 million through the exercise of warrants and private placement. In addition, the balance of the divestiture amount is expected shortly on receipt of Chinese regulatory approvals.
NeoStem is continuing the enrollment for the PreSERVE Phase 2 clinical trial in the U.S. for post AMI (acute myocardial infarction) patients, and expects to begin receiving the initial data by the end of 2013. Peak annual worldwide sales of AMR-001, the therapy being tested, are estimated to be over $1 billion (as part of the $50 billion global regenerative medicine market), based upon a conservative estimate. Approval has been received to continue the PreSERVE AMI Phase 2 clinical trial following its first interim data and safety review by the Data Safety Monitoring Board (DSMB). This means that there are no safety signals that would force the discontinuation of the trial. The drug has the potential of becoming a blockbuster. In addition, Athelos, which is 80% owned by NeoStem, is working on T-cell therapeutic targeting autoimmune conditions in association with Becton Dickinson (BD). Finally, the company is working on the initial development of "VSEL! Technology: Pluripotent adult stem cells can regenerate tissues and potentially treat conditions ranging from macular degeneration to liver regeneration to osteoporosis (exclusive worldwide license)."
There are several reasons NeoStem looks promising as a biotechnology investment. First, the company is focusing on several promising areas of new stem cell treatment development. Second, its contract manufacturing business brings in revenues to offset some of its drug development expenditures. Third, the contract manufacturing business could earn substantial royalties if any of the products on which it works with customers proves to be a commercial success. Now that it has shed its Chinese pharmaceutical business and renewed its focus on stem cell technology, I believe it has become a prime acquisition candidate. I urge investors looking for exposure in the biotech sector to further research and consider NeoStem today.
Geron was established in 1990 and completed its IPO in 1996. It is unusual to see a biotech company which has survived for that length of time without a product on the market. Most biotech companies in this position either fail or get acquired. Geron started out by focusing on stem cell treatments as well as oncology treatments, but decided to abandon stem cell research in 2011 due to the high cost of working on both, and decided to focus solely on oncology. It is working on the disposal of its stem cell assets, but there has been no progress reported so far. The company has two oncology drugs under development which have the potential to revolutionize cancer treatment if they are successful. The company has six Phase 2 trials currently underway.
The company's first, and most advanced drug, is called Imetelstat, a telomerase inhibitor which is currently in Phase 2 trials. Telomerase is the enzyme that enables cells to divide indefinitely without becoming unstable, thus allowing tumors to grow. There is plenty of scientific evidence to indicate that the enzyme is a key factor in the development of cancer. Geron is not the only company working on telomerase inhibitors, but it is the most advanced. Its strategy for cancer treatment is to stop or inhibit the growth of tumors. Imetelstat is currently in trials for the treatment of four different types of cancer, including breast cancer, NSCLC (non-small cell lung cancer) for solid tumors, multiple myeloma, and essential thrombocythemia for malignancies related to hematology. The data from all four trials is expected to become available over the next twelve months.
GRN1005 is an LRP-directed peptide drug combination aimed at treating brain cancer, which is currently very difficult to treat, because existing cancer drugs cannot penetrate the barrier between circulating blood in the body and the fluids of the brain. GRN1005 uses the LRP-1 transport mechanism, which uses a particular protein to bypass the blood-brain barrier and deliver cancer drugs to the brain. GRN1005 is now in Phase 2 trials to test the effectiveness of treatment in breast and lung cancer that has spread to the brain.
Geron's approach to oncology is unique, and positive results from any of the trials could potentially boost the price of the stock. Conversely, there is also limited protection for the stock price because of the number of trials that are in progress simultaneously. Additionally, failure in one trial may be construed as a possible failure in other trials utilizing the same drug which could be catastrophic for the share price. I urge risk tolerant investors interested in Geron to conduct further research and be prepared to hold for twelve months or longer.
Pluristem Therapeutics has recently reported promising new developments that make it worthy of further research. The company has received approval from the Indian government to conduct Phase 2 trials using its PLX cell therapy for Buerger's disease, an inflammation of the small blood vessels of hands and feet, which currently has no treatment and commonly leads to gangrene and amputation in nearly 50% of cases. The company has applied for Orphan Drug status for the treatment of the condition, which is widespread in India and South-East Asia. The disease has a strong link to smoking bidis (hand-rolled raw tobacco wrapped in leaf), and more than 40% of the Indian population smokes them. The majority of the affected population is under 40 years old. If the trials are successful, the company will gain exposure to a vast new market.
The company also recently announced that people affected with peripheral arterial disease, or PAD, may soon have an alternative to Bristol-Myer Squibb's (BMY) troubled anti-clotting drug, Plavix. Plavix has been identified as having a long list of negative side effects, such as bleeding, which can occur in 5% of users. Severe allergic reactions and difficulty breathing are also common side effects. There is currently no alternative to Plavix, and users must use it throughout their lifetime or risk recurrence of the disease. Pluristem Therapeutics has announced an alliance with the world-famous Paul Ehrlich Institute in Germany, which has long been associated with Nobel Prize winning research. The company is among the first biotechs chosen to conduct clinical trials under the sponsorship of the Institute, and will soon start Phase 2 trials for intermittent claudication (IC), the painful first sign/symptom of PAD. PAD affects over 5% of the American population, and up to 14% of PAD sufferers do not respond to Plavix.
Bone marrow transplants are traumatic and very expensive, and despite the significant amount being spent on research, there are currently no viable alternatives for indications requiring such. Patients often remain sick for up to one year after the transplant, and face a host of complications, including graft-versus-host disease (GVHD), where the body rejects the treatment. Companies like Pfizer (PFE) and Eli Lilly (LLY) are trying to develop substitutes for chemotherapy, while other companies are focusing solely on treating chemotherapy symptoms with products like Neulasta by Amgen (AMGN) or Emend by Merck (MRK). Data presented by Pluristem Therapeutics for a viable replacement for bone marrow transplants suggests that intramuscular injection of its PLX cells showed positive results on a range of blood diseases that included failures from chemotherapy and radiation treatment. The company is reasonably well funded with around $42 million in cash and cash equivalents. The company has filed for Orphan Drug status, which means that its PLX cell treatment could be approved more quickly and, if successful, the treatment could be on the market in as little as one year with added protection from competition by the FDA.
The three companies discussed above are showing much potential for growth. If you are looking for exposure in the volatile biotech sector, I would recommend exploring each company further and watching closely for additional developments that could lead to buying opportunities.