NeoStem, Inc. (NBS) reported last Wednesday that the company had received approval from a data monitoring committee to continue moving forward with its Phase II PreSERVE trial. Such an approval is a nice sign of validation for any developmental company as it looks to bring a new treatment or product to market.  Regenerative medicine is predicted by many to be THE big next-generation medical breakthrough and any signs of progress in the field are heavily watched by investors.

Overall, it's been a relatively good year for companies in the stem cell sector. Many, like NeoStem, are looking to position themselves to play a key role in what is arguably being considered as the future of medicine. With a solid portfolio of intellectual property, a strong pipeline of clinical and pre-clinical treatments, and with encouraging progress noted thus far in development, NeoStem is boasts the potential to become a major 'next-generation' type of player in treatment using cell therapies.

Just a few months ago shares of NeoStem were trading for below forty cents before flying to north of eighty again as investors continued to be attracted by the company's growing potential in the field of regenerative medicine. Shares also received a boost as the company decided to divest its majority stake in a subsidiary, Erye, in order the strengthen its balance sheet. Through the noted divestiture, as outlined in the company's quarterly report:

"NeoStem expects to receive $12.3 million in cash and further bolster its balance sheet by removing $35 million in short- and long-term debt obligations through the divestiture of Erye. Fifty percent of the cash price has now been received directly or is in escrow and closing is expected to occur over the next 6-10 weeks."

Additionally, the company has raised $17.6 million year to date through warrant exercises and equity sales. Those are significant sums of money for a still-developing company and strengthen the company's ability to bring its technology through the developmental stages and ultimately to market.

NeoStem's most advanced therapy candidate, AMR-001, is most likely to first benefit from the cash influx. AMR-001 is designed to prevent major cardiac events following acute myocardial infarction (AMI) - or better known to us as a heart attack. Phase I trials were successfully completed for this indication, as outlined in a recent company presentation, and the first patient has already enrolled in the ongoing PreSERVE Phase II trial.

According to estimated numbers by NeoStem - numbers also cited by the American Heart Association - Of the roughly 800,000 annual AMI patients, about 20% are considered ST segment elevation myocardial infarction (STEMI), a condition that places patients at risk to experience conditions of progressively deteriorating heart function. It is that 20% of patients who will be systematically targeted for treatment via the PreSERVE trial. The market targeted by AMR-001 for its intended market - the company is also developing the therapy to treat congestive heart failure - stands in the billions.

Results from the PreSERVE trial are expected to start rolling in during the latter half of 2013, at which time the NBS share price could appreciate quite significantly, if results are positive.

Additionally, NeoStem completed in early 2011 the acquisition of Progenitor Cell Therapy a large-scale contract manufacturing facility that has the potential to bring in additional revenue for the company in order to fund its pipeline candidates. Revenue generated by this division has already led to a growth rate of 95% during the past two reporting quarters, according to numbers presented the latest quarterly report.

With a market cap of under $100 million at the current time - as the pipeline in still in the relatively earlier stages of development - NBS may be a nice one to accumulate and keep an eye on in a rapidly-expanding sector. Advanced Cell Technology (ACTC), another company developing cell therapies, has recently traded with a cap nearly triple that of NeoStem's while its pipeline is also in the earlier stages of development.

When the day comes that stem cell therapies are proven to work, investors will have wished they had gotten in on the ground floor - and that's where companies such as ACTC and NBS might be right now, posing a unique opportunity for those willing to hold with eye towards the future.

NeoStem's is a story worth watching. 

Disclosure:  No position.

Contact VFC's Stock House: vfc@vfcsstockhouse.com

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