Neostem's market drivers for 2011 Print E-mail
By Ray Dirks   
Tuesday, 12 April 2011 05:07
NeoStem (Amex:NBS) is at the forefront of a revolution in Cell therapy, but this time it’s taking an old idea and making it better, the bone marrow transplant. Bone Marrow Transplant has been the first line rescue therapy for Acute Radiation Exposure (ARS).

NeoStem’s origins are in the collection and storage of our own adult stem cells. Adult Stem Cells are the first line rescue therapy of choice for Acute Radiation Syndrome or ARS. In a world where the awareness of Acute Radiation Syndrome (ARS) is rising, NeoStem offers a solution to people who can do something about their concerns now.  Adult Stem Cells once collected are cryo-preserved (frozen) and last for decades. They can be used later in life if one faces diseases such as blood cancer, Leukemia and yes, radiation exposure.

One of the sad lessons of the nuclear disaster in Fukushima Japan is the reality that a 10 km safe zone is really not adequate to protect residents near a plant from potential leakage of radiation. This has vast implications for communities that could be at risk.  NeoStem in the weeks ahead will be rolling out the company’s new family cell banking plan.  The company currently operates a dozen collection centers across the United States. The recent acquisition of Progenitor Cell Therapy (PCT) now accomplishes two specific tasks for the company:

1.    It in-sources what had been outsourced, raising the margins associated with that business.

2.    PCT is a CGMP certified facility which meets FDA standards. As such, it means that your cells may be used for multiple purposes later in life if need be, because they have been stored and cared for, like a pharmaceutical product.

NeoStem is a diversified company with multiple operations. Adult Stem Cell Collection and Storage represent the company’s origins but its other operating divisions represent tremendous growth opportunities.

•    VSEL’s: NeoStem has identified a unique type of adult stem cell present in our body known as VSEL (Very Small Embryonic Like). These (VSEL) stem cells may have the potential to be used in multiple indications from Acute Radiation Syndrome to Regenerative Medicine. The company expects to see VSEL’s enter the clinic in early trials in 2011.

•    Progenitor Cell Therapy (PCT): PCT is considered one of the top quality cell manufacturing companies in the world. This is the company that Dendrion (DNDN) used to manufacture Provenge. PCT has a visible list of key clients who are in Phase 1, 2 and 3 development stages. As these clients’ products advance, so will PCT’s contract manufacturing revenues. The company is on track to do $10 million or more of revenues in 2011.

•    NeoStem as a Therapeutics Company: NeoStem through the PCT acquisition owns 80% of Athelos. Athelos is developing a T-reg therapeutic that may have utility in a range of auto-immune diseases such as Asthma, Diabetes, and Graft versus Host Disease. Phase 1 programs will determine the clinical road ahead. NeoStem also owns a minority interest in Amorcyte. Amorcyte has a cell therapy, Phase II ready, for Acute Myocardial Infarction, (healing the damage, post heart attack).

•    Suzhou Erye: This is NeoStem’s non-strategic asset. A Chinese pharmaceutical manufacturing company that will generate $70-$80 million in revenues in 2011. NeoStem owns 51% of the company. The company has been capacity constrained; however, the constraints are now lifting as the company transitions to a new state of the art manufacturing plant in 2011.

•    China Commercialization of Stem Cell therapies & Medical Tourism. It’s no secret that in Asia the culture is more-friendly to the use of one’s own cells to heal our bodies. NeoStem is pioneering that process through the company’s technology which allows patients interested in better orthopedic outcomes to utilize their own cells to regrow cartilage. The Chinese government is reimbursing the procedures at NeoStem’s first hospital at an 80% rate, We expect to see many years of growth in China with a population of 1.2 billion not to mention medical tourism based on the availability of this therapy.

Through its research, combined now with its manufacturing acumen and a growing collection and storage business NeoStem is developing the next generation of stem cell therapeutics. The collection of adult stem cells may play an important role in the event of a future nuclear emergency. Importantly, NeoStem has the resources in place now for individuals to proactively protect themselves by providing storage for their healthy stem cells until such time as they are needed, this idea is simple, but the potential benefits are enormous. The events of the last few weeks have put that in perspective.

 
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 to see the company enter the clinic with its own therapeutics platform, leveraging PCT’s expertise in cell based manufacturing. We expect to see a rise in China Hospital revenues and the number of hospitals that are participating. We expect to see PCT’s contract manufacturing revenues rise as clients products move forward in the clinical trial process.


RAY DIRKS Research recommends NeoStem (NBS)
at $1.80 per share as a strong BUY RECOMMENDATION


Price target:  Within one year:  $ 5.00
Price Target:  Within one year: $10.00
Price Range (52 Weeks)     $3.50 - $1.26
Shares Outstanding:   57 Million
Shares Fully Diluted:   88 Million

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

For additional info contact: 
RAY DIRKS   rdirks(at)nyc.rr.com



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