NeoStem (AMEX:NBS) received yesterday a repeat "market outperform" rating from equity research firm Rodman & Renshaw, along with a 12-month price target of $3.00 per share.
The valuation is based on the future performance of NeoStem's stem cell business, as well as its 51% stake in Chinese generic pharmaceutical company Suzhou Erye.
Since starting out as a provider of adult stem cell collection and storage services, New York-based NeoStem has since branched out into cell therapeutics, focused on using stem cells to help cure disease.
In January, to enhance its portfolio of services, the company acquired Progenitor Cell Therapy, which has cell therapy manufacturing facilities, as well as processing and storage facilities for stem cells collected from the umbilical cord at birth, on the east and west coast of the US.
Progenitor has performed over 30,000 cell therapy procedures and has processed and stored over 18,000 cell therapy products. As a result of the acquisition, NeoStem can now develop stem cell therapies in-house, placing it in a solid position for future growth in the field. Revenues from Progenitor are estimated to reach $10 million by 2013.
But aside from this, the company is benefiting significantly from its Chinese pharmaceuticals business. NeoStem reported pharmaceutical revenue of $70 million in 2010, in line with Rodman & Renshaw's estimates.
In the fourth quarter of last year, NeoStem posted pharmaceutical sales of $18.2 million, representing 60% growth over the year-ago period.
In addition to 160 marketed products focused on antibiotics, Suzhou Erye has seven prescription drugs in the pipeline, with two launches expected in 2011. The Chinese company is also in the process of doubling its manufacturing capacity.
"With a growing pipeline to fuel future growth, we project a revenue growth rate of 20% during 2011-2013 with the potential to reach $120 MM in sales by 2013," Rodman & Renshaw noted in its research report.
NeoStem has also formed two lucrative partnerships with hospitals in China for its stem cell therapies. In each case, the company has built an in-hospital laboratory, with the rights to conduct an autologous adult stem cell-based treatment for orthopedic indications.
The stem cell company anticipates securing five to seven additional collaborations with hospitals by year end. According to the equity research firm's estimates, this means NeoStem could generate revenue of $5.5 million from these partnerships by 2013.
At the end of 2010, NeoStem had $15.6 million in cash and equivalents, and raised $4.5 million in the first quarter of this year, giving it enough to fund operations through the fourth quarter of 2011, Rodman and Renshaw said.
NeoStem's shares were trading at $1.97 as of 1:05pm EST on Thursday.
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