) Monday announced that it has entered into a definitive agreement to sell its 51 percent interest in Suzhou Erye Pharmaceutical Co. Ltd. for $12.3 million in cash plus stock.
The company didn't disclose the identity of the purchaser.
Shares of NeoStem rallied around 8.7 per cent Monday morning to 50 cents.
NeoStem's deal also includes the return to the company of 1.04 million shares and the cancellation of 1.2 million options and 640,000 common stock warrants, which collectively represent 1.3 percent of the company's fully diluted issued and outstanding shares.
"We are pleased to have reached this significant milestone in our business," said NeoStem Chairwoman and CEO Dr. Robin L. Smith.
"This divestiture will enable NeoStem to bolster its cash position in the United States, reduce its legal and financial reporting expenditures, simplify its financials and become a pure play in the rapidly growing cell therapy industry.
"Consummation of the transaction will also eliminate significant Erye debt from the company's balance sheet, which was over $37 million as of March 31, 2012."
The closing of the transaction is expected to occur by the fourth quarter of 2012.
NeoStem acquired its interest in Erye in October 2009 and was heralded, at that time, for its innovative business move into the emerging Chinese pharmaceutical industry.
In 2011, the Chinese government imposed new policies affecting price and volume controls of certain pharmaceutical products, including generic antibiotics, which reduced the division's profitability and positive cash flows. This dampened Erye's operating results and was the catalyst for NeoStem to begin to evaluate opportunities to monetize its interest in Erye.
The divestiture will enable NeoStem to focus full time on its goal to emerge as a leader in the cell therapy market.
The company is enrolling patients in its PreSERVE AMR-001 Phase 2 clinical trial for preserving heart function after a heart attack and expanding its cell therapeutic contract manufacturing business, PCT.
NeoStem also plans to continue to develop and to build on its core capabilities in cell therapy to capitalize on the paradigm shift that is occurring in medicine.
NeoStem is focused on accelerating the development of proprietary cellular therapies and becoming a single source for collection, storage, manufacturing, therapeutic development and transportation of cells for cell based medicine and regenerative science globally.