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NeoStem reports third quarter results, advances stem cell therapy focus

NeoStem (AMEX:NBS) reported Friday that third quarter revenues rose almost eight percent, as the company continues to advance its strategy of focusing on its stem cell therapy business.

For the three months ending September 30, revenues rose to $17.8 million from $16.5 million a year earlier.

In June, NeoStem announced that it hired a financial advisor to consider a possible divestiture of the company's 51 percent interest in Chinese generic pharamceutical company Suzhou Erye Pharmaceutical. The company said Friday that marketing efforts are underway, and interest has been generated from both financial and strategic buyers.

NeoStem said it believes that "the opportunities that exist today in cell therapy are robust and growing within a persistently difficult financial environment, making this an opportunistic time to monetize the company's 51% ownership of Erye and bolster its cell therapy business."

Erye's sales for the quarter were lower than the same period last year due to a strategic decision to reduce lower margin products in order to increase capacity for higher margin products. The migration of manufacturing operations from the predecessor plant to the new facility has been substantially completed, NeoStem said, making the company more competitive.

NeoStem has continued to grow and devote its resources to its cell therapy business, including manufacturing, therapeutic development, and related activities. Its revenues are derived from a combination of areas, including the contract manufacturing services performed by the recently-acquired Progenitor Cell Therapy, whose manufacturing base is one of the few accredited facilities available for contracting in the cell therapy industry.

Indeed, in mid-October, the company also completed the acquisition of Amorcyte, taking ownership of a strong patent portfolio covering the use of stem cells for cardiac disease treatment.

Amorcyte's main product candidate, AMR-001, is entering a phase two study. The product is an autologous cell therapy designed to prevent heart tissue damage and further major adverse cardiac events following a heart attack. The treament consists of a patient's own bone marrow cells, which are processed to create pharmaceutical-grade cells that are then re-injected through coronary arteries into damaged areas of the heart, 6 to 11 days after a patient experiences a heart attack.

Because the treatment is autologous, meaning cells are taken from the same individual that they're transplanted into, it has no risk of rejection and can provide support for an extended period of time.

Amorcyte is currently recruiting trial sites in connection with the launch of the phase two trial, which is expected to begin patient enrollment by the end of the first quarter of 2012.

NeoStem is busy in other areas as well, as it continues to advance the development of subsidiary Athelos Corporation's immunology platform. The company's T-cell technology is designed to restore immune balance with potential applications in solid organ transplant and autoimmune diseases, such as asthma and diabetes.

Multiple physician-sponsored phase one studies are expected to report results that will be used to determine the next direction of clinical development, NeoStem said.
NeoStem is also developing its pre-clinical assets, including its Very Small Embryonic Like technology platform for regenerative medicine, which the company believes is a pluripotent non-embryonic cell that "has the potential to change the paradigm of cell therapy as we know it today". The company has received grants in excess of $2.5 million to develop the technology.

Moreover, the stem cell company is boosting its presence in the field, with today being the final day of the first International Vatican Adult Stem Cell Conference in Vatican City, which NeoStem co-hosted.

At the three-day conference, U.S. Health and Human Services Secretary, Tommy G. Thompson, urged President Obama to establish a commission that will fund research for adult stem cells.Thompson, who intends to run for U.S. Senate in the next election, said he hopes to see a body created within the National Institutes of Health that will "be able to use the resources that we have in America to really put regenerative medicine into the forefront of therapies creating new breakthroughs in disease control."

Thompson said the commission would involve private sector business leaders who would evaluate federal efforts surrounding regenerative medicine. The group would make recommendations to Obama's administration regarding the coordination of regenerative research, uniting them with private enterprises.

The conference is part of NeoStem's partnership with the Vatican's Pontifical Council for Culture (PCC), and is driven by NeoStem's charitable Stem for Life Foundation, and the PCC's Science Theology and the Ontological Quest International to advance the use of adult stem cells by fostering scientific research and exploring the cultural, ethical and human implications of their use.

The event was attended by Church leaders, policymakers, ethicists, representatives from the stem cell business community and ministers of health from around the world.

NeoStem's CEO, Dr. Robin L. Smith, said, "It was our honor to co-host this groundbreaking event which was the result of an unprecedented collaboration among the Pontifical Council for Culture, NeoStem and their respective foundations.

"We believe this will lay a foundation for accelerating the education of society on the potential of adult stem cell therapies and to advance adult stem cell research while facilitating its safe transformation from the lab to the clinic."

NeoStem's management continues to increase the company's visibility by attending a host of scientific and investor conferences, including the American Heart Association's Scientific Sessions, and the Lazard Capital Markets' 8th Annual Conference, among others. Details of the events can be found on the company's website.

For the latest quarter, the company posted net losses of $7.5 million, or 8 cents per share, versus $7.1 million, or 13 cents per share, a year ago. The results from the third quarter of 2011 included $1.5 million of non-cash equity-based compensation costs and $2.2 million of depreciation and amortization.

NeoStem invested $5.5 million in capital expenditures during the first nine months of 2011, primarily related to the construction of a new pharmaceutical manufacturing facility for Suzhou Erye. As at quarter-end, the company had cash and equivalents of $18.1 million.