M. E. Garza's  Instablog

Since it seems most investors have failed to recognize or understand the importance of Neostem's (Amex:NBS) VSEL™ technology and its recent endorsement by the Catholic Church, which stands firmly against embryonic stem-cell research because it destroys human  embryos, perhaps they will more easily comprehend a concept they are more familiar with: revenue potential.

Even as the shorts have been attacking Neostem's stock, the company has remained focused on preparing for the commercialization and revenue stream from their breakthrough stem cell platform- something that is still three to five years away for most other stem cell companies.

In recent months, officials had been busy expanding their network of adult stem cell collection centers in the United States and now they are preparing to launch commercial activities for at least two highly profitable adult stem cells therapies in China and Taiwan.

Neostem's VSELs™ play a pivotal role in the normal rejuvenation of adult tissues as well as involvement in regeneration of damaged organs, and now that the company has harnessed and patented the regenerative potential of these cells, commercial applications to decelerate the aging process are ready to be monetized. In mainland China alone, at least 1000 people have joined the waiting list for either orthopedic or cosmetic treatments using the company's VSEL™ stem cells- which share some properties with embryonic stem cells, such as large expansion capacity and expression of Oct-4 and Nanog.

Early indications are that the price for the cosmetic medicine treatments using the company's technology, for example, will range between $5,000 and $10,000 U.S. dollars. With twenty percent of those costs payable as royalties to Neostem, the profit potential begins to become much clearer to investors.

For example, 1000 procedures priced at $10,000 equals $10 million- $2 million of that is almost pure profits for Neostem. If they do 2500 procedures in the first year, it could spell $25 million with $5 million in royalties going  directly to Neostem.

Consider that there are at least 50 million people that make up China's wealthiest top 4%. It is from this group that we are likely to see many of Neostem's customers, especially once they see joust how well these treatments work. If one wants to play conservatively and argue that second year growth will only show double the number of procedures performed, then $10 million in earnings next year is not out of the question, and those figures are for China alone. Stop to consider even more carefully that the U.S. market is next on the list for commercialization.

2009 statistics recently released by the American Society for Aesthetic Plastic Surgery show a 147 percent increase in the number of cosmetic procedures performed since 1997. Along with more than 10 million surgical and non-surgical aesthetic enhancement procedures performed in the U.S. last year, Americans spent $10.5 billion dollars on surgical and non-surgical aesthetic enhancement procedures in 2009 and that was down 20 percent from the year before, as the economy took a toll on those opting for cosmetic surgery.

Even if they manage to steal only a small piece of the action, the profit potential for NBS becomes unbelievable, especially as investors consider that the VSEL™ technology-based therapies have applications in orthopedic (bone), cardio and countless other spaces. This was underscored in a recent letter to shareholders by Neostem's CEO, Dr. Robin L. Smith, who wrote: "The potential for very small embryonic-like stem cells is open-ended as we have found that they may have significant potential to repair degenerated, damaged or diseased tissue."

As the baby boom generation continues to get older, they are not going to accept the aging process like their parents did. It's safe to assume that we're going to see an increase in the number of procedures done on this age group population and what becomes even more fascinating is the fact that much like the platelet-rich plasma injections we've been hearing about in the sports world- which are legal and allowed by the FDA- these therapies involve patients getting injected with their own stem cells, not a foreign biological agent or drug.

The recent endorsement from The Vatican may have created some news headlines for the company but more important to the peace of mind of investors should be the church's diligent investigation of the corporation, their books and their patents. This trumps any so-called due diligence done by misleading (or misinformed) Wall Street tabloids or deceitful analysts who run their own hedge funds.

The upside here is simply far greater than the downside, especially when one considers the price at which NBS shares are trading today thanks in large part to the published attacks by those in the pockets of shorts. NBS remains a mostly undiscovered and vastly undervalued stem cell play which should pay investors handsomely in both the short and long term.


Disclosure: Long NBS

Just as we have speculated in articles and trade alerts for the past few weeks, the Roman Catholic church appears to be getting ready to support Neostem's (AMEX:NBS) stem cell initiatives in a very big way and one can only imagine the types of new headlines this news may generate both on and off Wall Street.
One of the biggest questions now is just how high NBS shares will run on news of the scientific support that would have made Galileo jealous. An easy double? Perhaps easily over $10 or $15 given the fact that the company should be easily trading at $6 per share now without the news? Analysts I spoke to this morning say it's too soon to tell since historic news like this isn't announced very often.

NBS announced this morning that the Vatican’s Pontifical Council for Culture, today announced a joint 5 year initiative between the companies and their charitable organizations to expand research and raise awareness of adult stem cell therapies. NeoStem’s Stem for Life Foundation, formed to create awareness about the promise of adult stem cells to treat disease, and the Pontifical Council’s Foundation, called STOQ International (Science Theology and the Ontological Quest), will work on a variety of collaborative activities with the goal of advancing  scientific research on adult stem cells, exploring their clinical application in the field of regenerative medicine and the cultural relevance of such a fundamental shift in medical treatment options, particularly with regard to the impact on theological and ethical issues. As we understand it, this Vatican has endorsed NBS's method of extraction and storage of autologus(self-derived) adult stem cells as well as the growing number of NBS's proprietary treatments for these cells in the orthopedic,cardiovascular, cosmetic areas.

The Vatican is especially interested in NBS's VSEL technology which we indentified in our friday alert. VSEL, very small embryonic like, adult stem cells have all the characteristics of embryonic stem cells but avoid the rejection issues that occur with using another person's embryonic stem cells. The weight of the Vatican's political,financial and promotional  backing of such technologies clearly makes NBS the leading stem cell play.

The Vatican will exclusively partner with NBS to host a stem cell summit in Rome in 2011 to highlight the practical use of these treatments and will also teach courses at all its universities and hospitals about the scientific advantages of adult stem cells, especially the VSEL, over other non-autologus stem cell treatments.  This ringing endorsement of NBS's science will ensure continuous media attention as it has solved society's ethical dilemma of using non-autologus embyronic stem cells. The Vatican has backed the superior science and has stayed within its mandate of sustaining life. Compared to all other stem cell companies, NBS's treatments will begin to be marketed this year in China.

We anticipate that NBS will generate significant revenues from these treatments beginning in the second half of this year. The key to the fountain of youth is in our own bodies and NBS will get a technology fee on each extraction and application of that product. Thus they are the regenerative and rejuvenation company. We believe that the ability to use our own embryonic stem cells to repair damage or grow replacement parts will dramatically vault NBS's share price. NBS is like a pharma company with several blockbuster products approved at one time. Such companies attain stratospheric valuations.

NeoStem, Inc. (NYSE Amex: NBS) bought majority-owned pharmaceutical subsidiary Suzhou Erye (Erye) October 31, 2009. Erye began relocation of its operations to its new state-of-the-art manufacturing facility with the State Food and Drug Administration (SFDA) approval of two production lines at the new plant. Expanded capacity at the new plant will enable Erye to increase its product supply to meet the rising demand in China’s growing pharmaceutical market. Transition to the new facility is on track to complete by 2011 and is expected to significantly expand Erye’s manufacturing capacity. Erye’s development pipeline continues to advance, including SFDA approval to manufacture the sterile active pharmaceutical ingredient of the anti-infective cloxacillin sodium. This new product and the SFDA approved omeprazole for GERD are pending commercialization during the summer of 2010 and are expected to generate additional growth opportunities in the second half of the year. Erye has an additional five products in its pipeline and is working with NeoStem to evaluate opportunities to in-license or acquire new drug opportunities to enhance the long-term growth potential.

First quarter revenues rose 24% over the same period last year to approximately $15.8 million.  Continued growth would put them at over 80m in revenues for 2010. Of major importance to investors should be the revelation in today's 8K filing that NBS has also signed an agreement with AQUA, a large investment fund, to enable NBS to draw down at is own discretion up to $20 million at a slight discount to market without warrants as an equity investment. This firm commitment from one of the premier investment institutions will provide NBS all the funding it needs, at the lowest dilution, to allow it to expand its fast growing Chinese pharma company and to market these proprietary stem cell treatments and benefit from times when there is stock is performing extremely well.

In other words, the company will raise money based on the good news that will be announced at the press conference, but there will not be a Rodman & Renshaw type financing deal that will dillute shares and scare investors. Those shorts who thought NBS was doing a highly dilutive secondary financing have already initiated a bear attack using their usual ploys in order to start to cover. This key revelation should also alleviate those concerns for longs who were sitting on the sidelines waiting to jump in. The company is scheduled to give updates on May 25th at a press conference at the NASDAQ market site and sources tell us that major TV news outlets and newspapers have already begun to confirm their attendance at the event. In addition, we are hearing rumors that the Catholic church may also be planning their own press events and around this major news. This is the stock to own as traders and investors will run the price up in anticipation of those announcements to come in the days and weeks ahead.

Disclosure: Long NBS

I know many of our readers are keeping an eye on NewCardio, Inc. (NWCI.OB). In addition to last week's announcement that Clinilabs signed an agreement with the company, we continue to anticipate more revenue generating contracts to be announced shortly. Today's news that Software maker Oracle Corp (NasdaqGS:ORCL) is set to buy drug data management software company Phase Forward (NasdaqGS:PFWD) for about $685 million, shows that more buyers are entering into the health sciences business.

Oracle will pay Phase Forward $17.00 per share in cash, the companies said on Friday, a 30 percent premium over Thursday's closing price of $13.08. Phase Forward shares jumped 29 percent to $16.89 in premarket trading.

NewCardio's technologies and vast patent portfolio alone still make it an undervalued play at these prices. The fact that more players are looking to get into the automation of clinical trials bodes very well for the company as NWCI's own pending partnership/investment deal is getting closer to reality as well.

As predicted earlier, the millions of naked shorts are starting to buy back in to RNN after the erroneous reports about the company's "failed clinical trials." In addtion, there are several milestone payments and a forward looking news item next month that continue to push the stock price higher.  In the opinion of many of us who follow the company and have spoken to management, RNN is a $15 stock waiting to happen.

As I said in my previous article, The company has stated that they have been receiving warrant exercise money and that they now have more than $10 million in cash. Keep in mind that they will also be receiving $3.5 million from Teva in June in a further private placement at 20% above the stock's market price. This is in addition to the $4 million in milestone payments that they'll get from Teva by year end.

Don't forget, also, that next month the company will have some important Zoraxel data to present and we believe they will make a deal with one of the six interested major pharmas for Serdaxin. Sources told us that they anticipate that partnership (worst case scenario) by year's end.

Disclosure: Long NWCI, RNN