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Taking another look at NeoStem

January 5th, 2014 by John Eastman

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Taking a look again at NeoStem (NBS) after some time could prove beneficial for new investors as 2014 holds multiple upcoming catalysts for this biotech firm. Neostem develops Cellular therapies derived from individual human cells and is active in the cardiovascular disease area, autoimmune disorders, and tissue regeneration business. Key to the company is the firms lead candidate, AMR-001 a phase II therapy used to treat Acute Myocardial Infarction (AMI). As reported Neostem has completed its enrollment of 160 patients for a phase II preSERVE AMI study with results expected in mid-to-late 2014, a potential catalyst event, of course pending positive outcome.

A look at the structure of Neostem will provide a layout of the multiple subsidiaries that the company has assembled over prior years. It’s consistent revenue driver (Q3 2013 $4.4 million) is Progenitor Cell Therapy (PCT), a wholly owned subsidiary. PCT provides pre-clinical and clinical current Good Manufacturing Practice (“cGMP”) development and manufacturing services to drug therapy firms in the regenerative medicine industry. Active since 1997 with a healthy client list, the company can be a one stop shop for drug development firms for manufacturing. It also provides NeoStem the ability to control its own manufacturing, a significant cost saver relevant for the future.

Amorcyte, another wholly-owned subsidiary acquired in October 2011, is developing the aforementioned AMR-001. It represents their most advanced pipeline product. Significant of AMR-001, is that if FDA approved, it would represent the solution to an unmet need in the treatment of AMI, and potentially garner a strong share of the market.

Athelos Corporation is an early stage majority-owned partnership with Becton-Dickinson for clinical development of a therapy utilizing T-cells, collaborating for autoimmune and inflammatory conditions, including graft vs. host disease, type 1 diabetes, steroid resistant asthma, lupus, multiple sclerosis and solid organ transplant rejection. It is conceivable that 2014 could bring the first clinical trial for T-cells.

Other pre-clinical assets include VSEL TM (Very Small Embryonic Like) Technology platform. A IND filing is forthcoming with the FDA in early 2014 to initiate an National Institutes of Health (“NIH”) funded human clinical studies treating periodontitis with VSELs TM. The company also has NeoStem Family Storage, that engages in stem cell banking.

Catalysts in 2014

The major upcoming catalyst of course is the data results from the phase II trial of AMR-001 in mid-to-late 2014. Looking ahead to commercialization, it could gain significant market share in a projected $55 billion treatment market for STEMI leading to revenues in the billions. Looking further, company officials have said that they are pursuing a path for AMR-001 for additional indications. These include evaluations for treatment of congestive heart failure (CHF) and traumatic brain injury. Catalysts include IND filings for 2014. Following the approval of IND for congestive heart failure, a phase Ib/IIa study is planned, enrollment stage first, then study, representing effectively two events for uptick. Activity for VSEL’s is next with a IND filing to the FDA in 2014, followed by a clinical trial to initiate human studies to treat periodontitis with VSELs, this one funded by the National Institutes of Health (NIH). Sometime in 2014 the company’s Athelos partnership is expected to initiate a Phase II trial in type 1 diabetics patients and a Phase Ib/IIa trial steroid resistant asthma using regulatory T cell therapies with the University of California in San Francisco. Again an uptick opportunity.

Lastly the company is presenting at multiple conferences including the 16th Annual BIO CEO & Investor Conference between in February (10th-11th). In addition, ECI’s Scale-Up and Manufacturing of Cell-Based Therapies III (Jan 7th), Biotech Showcase 2014 (Jan 13th), 7th Annual OneMedForum (Jan 13th-14th) Alliance for Regenerative Medicine’s 4th Annual State of the Industry Briefing (Jan 13th), Noble Financial Capital Markets Tenth Annual Equity Conference (Jan 20th), and the Ninth International Conference on Cell Therapy for Cardiovascular Disease (Jan 23-24th) These presentations broaden the reach and interest of the company, sometimes providing a boost of interest, activity, and price.

A further note of interest is that Progenitor Cell Therapy’s expansion of its two manufacturing sites is scheduled to come online in 2014, furthering their ability to generate additional revenue and larger scale commercial contracts.

Recent Public Offering

In October of 2013 the NeoStem completed a public offering, netting the company gross proceeds of $40.25 million. In November the company reported cash and equivalents to over $50 million, providing almost 2 years of operational funds considering a quarterly cash burn rate of approximately $7 million. However with new trials often comes big capital requirements for funding so dilution may be a possibility if they go back to the markets for funding. A partnership may be a great idea for that would lessen expenses.

Nasdaq listing and reverse split

In July of 2013, the company effected a 1-for-10 reverse split. It jumped markets to Nasdaq from NYSE as well, putting it on the radar of many new investors with a higher stock price.

Currently trading at $8.08, with a Market Cap of $219 million, the abundance of upcoming catalytic events that could trigger upticks are apparent, and present a valid opportunity to profit from investment. With PCT in place and growing while providing revenue stabilization for NBS, investment profit opportunity looks positive.

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