Posted 04 May 2012 Category BAX, Biotechnology and Drugs, GERN, Healthcare, IMUC, Investing, Market News, Medical Equipment and Supplies, NBS, OSIR, Sectors, SNY, Stocks, Trading By Dutch Trader As an investor I am always searching to find the next "big thing". Looking for that company that is developing a technology that will revolutionize its industry. Coming from a family of healthcare professionals, I often find myself joining their conversations, because of the success I have had previously investing in biotech stocks. I recently read that companies using cell-based therapies utilizing stem cells currently represent a market of around $50 billion dollars and is projected to swell to over $88 billion by 2014. That's when I began to do an investigation into biotech companies that are leading the way in stem cell research. What I discovered was an oversold and undervalued company in NeoStem.
Major Shift In Stem Cell Leadership In 2011 the industry had faced several crises of investor confidence as the stem cell pioneer Geron Corporation (NASDAQ:GERN) discontinued its embryonic efforts, to focus on oncology treatments. Osiris Therapeutics, Inc. (NASDAQ:OSIR), a leader in investigating the use of allogeneic cells, had signed a significant early partnership with biotech giant Genzyme Corporation (Private). However, they saw product rights returned when large pharmaceutical leader Sanofi-Aventis (Sanofi SA, NYSE:SNY) acquired Genzyme itself. Both companies experienced difficulties in their ability to navigate the regulatory requirements for product approval. Inadequate trial designs were cited in the executive summary of the 2012 New York Stem Cell Summit Report as contributing to the failures. Trial design is something that NBS has extensive knowledge of with the acquisition of Progenitor Cell Therapy (PCT). In January 2011, NBS completed the merger with Progenitor Cell Therapy LLC. PCT is the industry leader in commercial cell therapy and provides the company with direct access to cell therapy manufacturing facilities and cell storage facilities. They produced Dendreon Corporation's (NASDAQ:DNDN) ground breaking immunotherapy treatment Provenge during its clinical trials and have manufacturing agreements in place with a host of other companies, such as small cap ImmunoCellular Therapeutics, Ltd. (OTC:IMUC) and large cap Baxter International Inc. (NYSE:BAX). Progenitor's acquisition will prove to be a good complement to NeoStem's stem cell work. Not only would this facilitate quicker and cheaper stem cell therapy manufacturing for the company's growing pipeline, but it is also proving to be a source of revenue for the company, by serving as a manufacturing facility for several pharmaceutical companies. The relationship they have in place, working with the FDA trials of other companies and the fact that they have been recognized for meeting purity and viability standards at their facilities will give NBS a competitive advantage over their competition. Failed trial design will not be an issue for them, as they have had the opportunity to learn from the mistakes made by others in the field. NeoStem, Inc. (NYSEAMEX:NBS) incorporated in September 1980, is an international biopharmaceutical company with global research and development capabilities and operations in five business units: U.S. adult stem cells, China adult stem cells, PCT, stem cells as therapeutic products and China pharmaceuticals, primarily antibiotics. In the United States the company is a provider of adult stem cell collection, processing and storage services enabling healthy individuals to donate and store their stem cells for personal therapeutic use. Similar to the banking of cord blood, pre-donating cells at a younger age helps to ensure a supply of one's own stem cells should they be needed for future medical treatment. NeoStem is also engaged in research and development of new therapies based on very small embryonic-like stem cells (VSEL) technology, with the University of Louisville Research Foundation. It is also engaged in licensing new adult stem cell-based therapies that it plans to use to commercialize therapeutic applications. The company is developing a program that includes products and therapies, including stem cell-based therapies and health supplements that it seeks to offer for wellness, cosmetic and anti-aging applications.
Growth Path In October 2011, the company acquired Amorcyte Inc., a leading autologous cell therapy company for the treatment of an acute heart attack. Amorcyte's lead product candidate, AMR-001, for the prevention of major adverse cardiac events following acute myocardial infarction (AMI), has completed Phase I clinical trials demonstrating feasibility, safety and biologic activity at a threshold dose. This is the first prospective stem cell trial in AMI ever conducted that has established a statistically significant relationship between dose and effect. Last January Amorcyte announced the enrollment of the first patient in the Amorcyte PreSERVE Phase 2 trial for acute myocardial infarction. The trial has been designed to evaluate the potential of AMR-001 to improve perfusion, preserve cardiac function and improve clinical outcomes.
Valuation The sum of the parts is larger than the current market valuation. Especially NeoStem's China pharmaceutical business (generics) could bring in over $40 million if divested. Right now the company is valued the half of their book value ($62 million). NeoStem's book value (BV) per share in the most recent quarter was $0.57 and their cash per share $0.12. On March 12, 2012 there were 114,348,438 shares outstanding. A successful sale could add $0.35 per share to their cash position. The completion of the sale of the China generic pharmaceutical business will likely to happen this year, according to their annual report they have received two letters of intent for its purchase, which will bolster the NeoStem's balance sheet and will allow the company to focus their attention and resources on the development of their stem cell applications for heart diseases, as well as, be a manufacturing base for other biotech products. A successful sale will also support its stem cell therapeutic programs as well as PCT, the main value drivers over the next 18-24 months. Also it would it provide the company with significant capital to fund its operations without any additional dilution of shares. At its current price point of less than $0.40/share this stock could easily reach $2.00 in the very near future. Disclosure: The Author is Long NBS
No comments:
Post a Comment