Neostem's cellular therapy business positioned for a rapid expansion Print E-mail
By Ray Dirks   
Wednesday, 03 November 2010 06:28

NeoStem, an international biopharmaceutical company with operations in the U. S. and China, has announced that they have been approved for their orthopedic procedures in China and have been notified by the Chinese Medical Reimbursement Office that the Weihai Municipal Medical Reimbursement Program will cover 80% of charges to the patients in stem cell isolation and extraction

, and cell culture and expansion in their collaborated AOT treatment (Autologous Bone Marrow Mesenchymal Stem Cell Treatment for Orthopedic Diseases and Injuries), effective November 1, 2010.

NeoStem has recently announced the signing of a definitive merger agreement whereby NeoStem, Inc. will acquire privately-held Progenitor Cell Therapy, LLC (PCT). Under the terms of the agreement, NeoStem will issue 11,200,000 shares of NeoStem common stock, plus warrants to purchase no less than 1,000,000 and a maximum of 3,000,000 additional shares of NeoStem common stock, in exchange for all of Progenitor Cell Therapy membership interests.  Holders of greater than 50% of NeoStem’s common stock and greater than 50% of Progenitor Cell Therapy’s membership interests have agreed to vote in favor of the merger.   PCT’s revenue-generating business would be accretive to NeoStem’s growing adult stem cell operation, and PCT’s management team would add to NeoStem management over 100 years of collective experience in the business and science of cell therapy and its development.

Since its formation in 1999, PCT has served over 100 clients from around the world, and is experienced with more than 20 different cell-based therapeutics.  PCT has performed over 30,000 cell therapy procedures in its cell therapy manufacturing facilities, and processed and stored over 18,000 cell therapy products (including approximately 7,000 umbilical cord blood units, 10,000 blood and marrow-derived stem cells, and 1,000 dendritic cells), and arranged the logistics and transportation for over 14,000 cell therapy products for clinical use by over 5,000 patients.  PCT had over $8,000,000 in revenue in 2009 and has been a vendor (expense line) for Neostem, so the merger is accretive.

Market driver:

We believe that the company is well positioned for a rapid expansion of the Cellular therapy side of the business in both the US and China. We anticipate by year end the Beijing lab construction to be completed allowing the VSEL™ technology to be utilized in Clinical trials in China. Additionally, the completion of the new facility for Suzhou Erye in 2011 will allow a rapid growth of the pharmaceutical business in China with the whole company reporting significant revenues in 2011. These milestones should drive a huge increase on the stock price.   

Ray Dirks Research recommends NeoStem (NBS) at $1.87 for as a strong BUY RECOMMENDATION
Price target:  Within one year:  $ 5.00
Price Range (52 Weeks)     $3.50 - $1.26
Shares Outstanding:   57 Million
Shares Fully Diluted:   88 Million

Revenues:  2010 Estimate   71 million

Revenues:  2011 Estimate   105 million  
Revenues: 2012 Estimate:   140 Million  

Earnings per Share:  2010 Estimate   -.37
Earnings per Share: 2011 Estimate    .00 cent
Earnings per Share: 2012 Estimate    .20 cents  

 NeoStem’s outstanding management team is led by Dr. Robin Smith. She states the acquisition of PCT is a significant step in NeoStem’s efforts to develop a “one-stop-shop” global network of cell therapy core competencies. The one-stop-shop will include cell manufacturing and storage facilities, as well as integrated regulatory compliant distribution capacity for the evolving cell therapy industry. PCT’s global reach and reputation will accelerate the combined companies’ reach into this exciting market. 

Dr. Andrew Pecora, PCT’s Chief Executive Officer commented he is pleased that after more than a decade of hard work by the PCT team,  this merger with NeoStem has resulted in liquidity for PCT’s  loyal investors. The merger will serve as a platform for growth of a wide range of adult stem cell capabilities. He pointed out that PCT played an instrumental role in manufacturing Provenge, Dendreon Corporation’s autologous cellular immunotherapy, through its clinical trials to FDA approval. It is especially exciting that PCT will bring to NeoStem its own competencies in the cell therapy development market to move forward NeoStem’s VSEL Technology and other future cell therapy products. Furthermore, Dr. Pecora said that with NeoStem’s autologous adult stem cell capabilities and PCT’s umbilical cord blood collection and long-term storage services, the combined company will be the first of its kind providing families with current Good Manufacturing Practices (cGMP) autologous stem cell collection and storage services.

Reasons to Buy:

One:  The acquisition of PCT’s revenue-generating business will be accretive to NeoStem’s growing adult stem cell operation and give added expertise to efficiently commercialize the proprietary technologies .

Two:  NeoStem’s worldwide rights to VSELTM technology for commercialization in the U.S. and China. 

Three:  NeoStem should turn cash flow positive by early 2012.

Four:   The recent FDA approval of Provenge (prostate Cancer drug) provides the basis for my belief that Neostem will be a leader in autologous cellular and immunological therapies. 

Five:  In the future, NeoStem’s Suzhou Erye company provides free cash flow for the stem cell development business and as an added platform for accelerated growth in China.  Earnings will grow as new products are acquired and developed from this platform. 

Six:  Chinese just approved reimbursement program that will cover 80% of charges to the patients in stem cell isolation and extraction, and cell culture effective November 1, 2010.  I believe this will drive revenues for the company both short term and long term.

Seven: NeoStem will be the first company of its kind providing families with current Good Manufacturing Practices (cGMP) autologous stem cell collection and storage services.

Disclosure: No Positions

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