A Three-Part China Merger Strategy for NeoStem (AMEX: NBS) Print E-mail
Wednesday, 07 October 2009 19:56

NeoStem (AMEX: NBS) is an innovator and leader in the pre-disease collection, processing and long-term storage of adult stem cells for the general population to use in future medical applications that is expanding into research, medical tourism, and China for the commercialization of anti-aging / cosmetic medicine and other stem cell technologies. Click here for my mid-September article, which provides an overview and details on the pending China expansion plans as part of a merger that is expected to close by the end of October.



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 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.


1.) NeoStem (U.S.) includes an exclusive worldwide license to VSELs, a strong IP sourcing network for innovative stem cell / pharmaceutical products and AMEX listing for the stock in addition to its position in the domestic market as a leading adult stem cell banking network.


2.) Suzhou Erye is a high-growth generic pharmaceutical manufacturer in China with a strong core business / profitable revenue base amidst booming demand and growth in the Chinese market.


3.) NeoStem (China) has strong support from the Chinese government for commercialization of cosmetic / regenerative medicine applications which will also expedite the process of U.S. development as the Company becomes a vertically integrated stem cell operation in a permissive regulatory environment that incldues strong government support. NeoStem plans to leverage the R&D conducted in China to fast-track the U.S. FDA approval process. In addition significant funding opportunities exist in China for government supported stem cell research, including the National High Tech R&D Program (aka 863 Program) and the National Basic Research Program (aka 973 Program).


NBS China plans to maximize its pre-therapeutic / R&D revenue by the supply of VSELs for clinical trials in China which will be provided exclusively through its subsidiary, Beijing RuiJieAo. NeoStem will also exploit the easier regulatory path to commercialization in China for near-term revenue potential while leveraging mature therapies / technology from NeoStem’s extensive U.S. network and collaboration agreements.


NeoStem is targeting the introduction of highly mature U.S.-based therapies that lack FDA approval which is necessary for widespread use in the domestic market. NBS China intends to commercialize its first stem cell therapy for orthopedic indications in 2009 while developing a pipeline of additional therapies for CNS (central nervous system) disease, wound healing, and heart disease. The initial orthopedic market will target 80-100 million arthritis sufferers in China, while future applications will be aimed at over 25 million individuals with long-term CNS conditions and heart disease (the third largest killer in China with 1.5 million deaths per year).


NeoStem will also offer medical tourism service centers to serve patients from affluent countries that have more restrictive regulatory processes such as U.S. and Europe. The Company’s medical tourism initiatives in China will offer world class SOPs (standard operating procedures), standards of care, and facilities. An estimated 7,000 patients have been treated in China’s medical tourism industry since 2001, but current offerings lack the rigorous SOPs / facilities and do not include the world class standard of care that NeoStem can offer.


NBS China will coordinate the launch of anti-aging / cosmetic medicine applications with its major principal in China while simultaneously launching its legacy adult stem cell banking business. A strong pipeline of innovative stem cell based therapies has been sourced from the Company’s network of partners in the U.S. The major principal in China will focus on five provinces, Shanghai, and Taiwan on a revenue-sharing basis with no cap-ex outlay required by NeoStem. The Company’s major principal in China has successfully operated a chain of high-end clinics in eastern China for years with extensive experience serving an affluent clientele.


Suzhou Erye provides a strong balance sheet, profitable operations, and a traditional pharmaceutical / vertically integrated platform that offers manufacturing, distribution, and research as part of a fully-funded business plan for the combined entity. China also offers a lower cost operating environment and a substantial domestic market opportunity for stem cell / regenerative medicine applications in a more flexible operating environment compared to the U.S. market and FDA regulations.


Suzhou Erye is a vertically integrated bio-pharmaceutical company in China focused on intermediate API / antibiotics which also includes a R&D team focused on drug discovery, improving existing drugs, and traditional Chinese medicine products plus a strong distribution network covering 30 provinces in China. The Company currently has 7 SFDA approved / certified production lines that are compliant with China GMP standards and is also in the process of a three-year expansion / relocation program that is expected to be completed by 2011.


NeoStem enjoys a strong IP sourcing and collaboration network that includes best in class technology in the areas outlined below.


1.) Wound Care: Vincent Falanga – Composition and Methods Using Stem Cells in Cutaneous Wound Healing


2.) Skin Rejuvenation: Vincent Giampapa – Method and Composition for Restoration of Age-Related Tissue Loss in the Face or Selected Areas of the Body


3.) Musculoskeletal (Regenexx): Christopher Centeno – Multiple patents related to orthopedic methods / compositions


4.) Cell Processing: Progenitor Cell Therapies – Collaboration to ensure cell processing meets the highest standard of cGMP requirements.


5.) Very Small Embryonic-Like Stem Cells (VSELs): University of Louisville – Exclusively licensed in November 2007 for identification, isolation, and use of population of stem cells isolated from bone marrow, umbilical cord blood, and / or other sources referred to as VSELs. Also includes therapeutic applications of VSELs, including myocardial infarction (MI / heart attack), stroke, etc.


Significant U.S. government funding for NeoStem includes Department of Defense grants of $800,000 for 2009 with 2010 applications underway. On 10/6/09, the Company was awarded a grant of $108,746 for the repair of bone defects by human stem cells under the American Recovery and Reinvestment Act (RRA) of 2009 from the National Institute of Arthritis and Musculoskeletal and Skin Disease (NIAMS) of the National Institutes of Health (NIH).


NeoStem’s strategy to greatly expand its presence and operations in China pursuant to the merger agreement will allow the Company to expedite its R&D and commercialization objectives for stem cell and regenerative medicine therapies in an environment that is more conducive to such treatments. The Company has assembled an experienced team of executives and scientific / medical advisors to implement its strategy in China to best capitalize on the opportunity, which includes both a rapidly growing middle class in China with increased spending power and a medical tourism business for those located outside of China.


Upon successful closing of the China Biopharma (OTC: CHBP.OB) merger; NeoStem will emerge as a vertically integrated platform company by partnering the stem cell leadership of NeoStem with existing operations, delivery platform, and government support for R&D activities in China. Post-merger, NeoStem will offer a diversified offering of stem cell applications, including the treatment, storage, cosmetic / anti-aging, and research that will focus on VSELs along with a rapid scale-up of commercial activities in China.


On 10/7/09, NeoStem announced that the SEC declared effective its Registration Statement on Form S-4 filed with the Commission, which is being used in connection with the proposed acquisition of China Biopharma (which owns a 51% controlling interest in Suzhou Erye). The acquisition is subject to customary closing conditions – including approval by the shareholders of each company at upcoming meetings scheduled on 10/29/09. Check out NeoStem’s ProActive News Room Page for a compilation of links, videos, articles, news feeds, and more for the Company.


Disclosure: No positions.


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