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A Therapeutic Advantage? NeoStem (AMEX:NBS)

NeoStem is engaged in the business of developing stem cell therapies, pursuing anti-aging initiatives and is developing a network of adult stem cell collection centers that are focused on enabling people to donate and store their own (autologous) stem cells when they are young and healthy for their personal use in times of future medical need. (www.neostem.com)

Focus: NeoStem operates a network of commercial autologous adult stem cell banks that provide adult stem cell processing, collection, cryopreservation and banking services. NBS has a strategic alliance with New England Cryogenic Center, Inc. to provide processing and storage capacity.  NBS is the licensor of various stem cell technologies, including a worldwide exclusive license to VSEL  Technology which uses very small embryonic-like stem cells, shown to have several physical characteristics that are generally found in embryonic stem cells, and also is pursuing the licensing of other technologies for therapeutic use.

Market Opportunity: NeoStem has the ability to harvest and cryopreserve embryonic-like stem cells from individual patients, setting the stage for their use in personalized regenerative medicine. Collection of healthy adult stem cells prior to the disease process is important in order to avoid infusing cells that may already be damaged. Adults with a family history of cardiac disease, diabetes, cancer, neurologic diseases or autoimmune disorders could take advantage of this opportunity while they are healthy. Many people diagnosed with a disease requiring a bone marrow transplant are unable to find a healthy match. 

  • There are tremendous clinical and economic advantages to autologous stem cell transplantation (receiving your own stem cells) as there are no issues with immune rejection. Engraftment with your own stem cells is faster, safer and much less costly than receiving someone else’s stem cells (allogeneic). 

Financial: NBS has completed a number of private placements to support expansion and development: in 5/09 and 6/09, it raised gross proceeds of approximately $11 M and $5 M, through private placements of its Series D Preferred Stock and Series D Warrants:

  • NeoStem believes that China affords the best opportunity for it to expand revenues rapidly and accelerate R&D activities. NBS established a separate pharma division by acquiring a 51% ownership interest in Suzhou Erye Pharmaceuticals Company, Ltd which had gross revenues in FY08 of approximately $50 M (US?), through the merger of CBH, which currently holds a 51% ownership interest in Erye (CBH Acquisition LLC, a wholly-owned subsidiary of NBS),
  •  NBS’s rationale for expansion into China was/is to accelerate stem cell therapy, R&D and creation of intellectual property positions and an environment that is more accepting of stem cell therapies.

Bottom Line: There are two types of stem cells are in our bone marrow:  embryonic and peripheral. Neostem’s Adult Peripheral Stem Cell Collection takes peripheral stem cells from an individual and stores them for later use. These cells can later be used to re-grow damaged tissue or organs and help fight diseases using that person’s own stem cells.  This procedure is relatively new,  Stem cells can be extremely beneficial to heart attack victims when injected into damaged heart muscles. The stem cells enable the muscles to strengthen and repair themselves. Also, if diagnosed with a life-threatening disease, there will be no rejection issues during bone marrow transplants because you will be using your own cells.  Those who elect to take part in the stem cell collection will undergo a process similar to donating blood. Participants will be given an injection twice, 24 hours apart, to remove cells from your bone marrow and circulate them in your bloodstream; then hooked up to 2 IVs; the first IV slowly takes blood out of your body and passes it through a filter to remove the stems cells. Through the second IV, the blood, now free of stem cells, is re-circulated into the body. The whole process takes about 3 hours with possible lightheaded feelings associated with giving blood under any other circumstances. The entire or usual process, including blood work and 1 year of storage costs about $7 K with each additional year of storage  requiring a $200 annual fee (Dr M Gavin).

  • NBS is the 1st company to provide adult stem cell collection and banking services to the general adult population and  is pioneering this pre-disease collection, processing and long-term storage of adult stem cells for future medical need,
  • Collection of  healthy adult stem cells prior to the disease process could be important in order to avoid infusing cells that may already be damaged,
  • Adults with a family history of cardiac disease, diabetes, cancer, neurologic diseases or autoimmune disorders could take advantage of this opportunity to protect themselves now, while they are healthy. Engraftments with ones own stem cells are faster, safer and much less costly than receiving someone else’s stem cells (allogeneic),
  • NBS has evolved from its beginnings as a one dimensional healthcare services company with nominal revenues to a biopharmaceutical company,
  •  The completion on 10/30/09 of the merger with China Biopharmaceuticals Holdings, Inc. is a milestone with the net effect of the merger being a controlling 51% interest in Suzhou Erye Pharmaceuticals  (a China-based pharmaceutical company) and vertically integrates biopharmaceutical development and distribution with an effective platform for significant growth in China, which is one of the world’s most dynamic consumer markets,
  • NBS’s market capitalization has increased since the closing of the merger by approximately $40 M to a market capitalization of approximately $59 M,
  • Initial participants in collection center network had been single physician practices who opened collection centers; revenues generated by these early adopters has not been significant and are not expected to become significant,
  • NeoStem has also expanded into stem cell research as part of an exclusive licensing agreement with the University of Louisville for the identification and isolation of rare stem cells found in adult bone marrow called VSEL (Holds an exclusive, worldwide license)  for short (very small embryonic-like). As the name suggests, VSELs share traits with embryonic stem cells (ESCs), including the ability to differentiate into a wide variety of cells (pluripotency) found throughout the body for many potential medical applications,
  • NBS trades at $1.65 (52 week range of $0.41 to $2.72) with a market cap of $60.24 M, an enterprise value of $54.54M with 36.51M shares outstanding, a 26.46 M share float, a short interest ratio of 2.3; but, only $5.85 M in cash,
  • Insiders hold 31.41% (a GOOD sign) shares  with 0.40% owned by institutions,
  • Institutional investors include: RBC, Bard Associates, Paradigm Mngt, Wells Fargo, Dimensional Fund Advisors, Calpers, UBS AG, AXA, B of A-Merrill Lynch and Bessemer Group,
  • The adult stem cell industry is a field – independent – of embryonic stem cell research which NBS believes is more likely to be burdened by regulatory, legal, ethical and technical issues than adult stem cell research. Embryonic stem cell research is also burdened with the issues of tissue compatibility,
  • Investors need to read all the Forward Looking Statements,
  •  I outlined some of the essence of NBS but, still have a – LOT – of questions …. and needed supporting research on this model … as well as incorporating  foreign financial reporting legalities!!  Also, would love to see Q’s broken out by NBS’s press releases!!!