NeoStem boosts 2011 revenues as it transitions to cell therapy business

NeoStem (AMEX:NBS) reported Tuesday higher revenues for 2011 as the company underwent a strategic transition, acquiring contract manufacturing facilities and bulking up its cell therapeutics pipeline.

NeoStem has continued to devote its resources to its cell therapy business, including manufacturing, therapeutic development, and related activities. Its revenues are derived from a combination of areas, including the contract manufacturing services performed by the Progenitor Cell Therapy, whose manufacturing base is one of the few accredited facilities available for contracting in the cell therapy industry.

For 2011, the company reported revenues of $73.7 million, compared to $69.8 million in 2010.

The company is focused on accelerating the development of proprietary cellular therapies and becoming a single source for collection, storage, manufacturing, therapeutic development and transportation of cells for cell-based medicine and regenerative science globally.

In mid-October last year, the company completed the acquisition of Amorcyte, taking ownership of a strong patent portfolio covering the use of stem cells for cardiac disease treatment.

Amorcyte's main product candidate, AMR-001, is currently in phase two studies. The product is an autologous cell therapy designed to prevent heart tissue damage and further major adverse cardiac events following a heart attack. The treament consists of a patient's own bone marrow cells, which are processed to create pharmaceutical-grade cells that are then re-injected through coronary arteries into damaged areas of the heart, 6 to 11 days after a patient experiences a heart attack.

Because the treatment is autologous, meaning cells are taken from the same individual that they're transplanted into, it has no risk of rejection and can provide support for an extended period of time.

The phase two study, for which enrollment began in January, is a randomized, double-blind, placebo-controlled clinical trial to evaluate the safety and efficacy of AMR-001. The trial, which will include 160 subjects aged 18 and older, will be supported by Progenitor Cell Therapy.

"One of the most important attributes of AMR-001 is that it's 'natural', " said CEO Dr. Robin Smith.

"Ample historical evidence, published literature and our own compelling Phase 1 data give us confidence that this product will ultimately make it to the marketplace."

Aside from its operations in the US, NeoStem has a network of adult stem cell therapeutic providers in China as well as a 51 percent ownership interest in a Chinese generic pharmaceutical manufacturing company, Suzhou Erye Pharmaceutical Co.

The company said, however, that since opportunities in the cell therapy space are growing, it sees this as an opportunistic time to sell its 51 percent stake in Suzhou, and to bolster its cell therapy business.

Last June, NeoStem hired a financial advisor to assist with the potential sale process, with marketing efforts underway. So far, the company said it has generated interest from both financial and strategic buyers.

On the therapeutics side of the business, in addition to Amorcyte, the company is also developing its subsidiary Athelos Corporation's immunology platform - currently in phase one trials. The company's T-cell technology is designed to restore immune balance with potential applications in solid organ transplant and autoimmune diseases, such as asthma and diabetes.

Multiple physician-sponsored phase one studies are expected to report results that will be used to determine the next direction of clinical development, NeoStem said.

NeoStem is also developing its pre-clinical assets, including its Very Small Embryonic Like technology platform for regenerative medicine, which the company believes is a pluripotent non-embryonic cell that "has the potential to change the paradigm of cell therapy as we know it today". The company has received grants in excess of $2.5 million to develop the technology.

In 2011, the company reported a net loss of $56.6 million, including $10.3 million of non-cash equity-based compensation expense, $19.4 million of goodwill impairment charges and $9.0 million of depreciation and amortization.

Overall, the company's consolidated cash loss for 2011 was $15.5 million. Net loss attributable to NeoStem common shareholder interests was $47.8 million, or $0.54 per share.

But, the company is continually increasing its top line. In February, Baxter International (NYSE:BAX) named the stem cell company's Progenitor Cell Therapy unit (PCT) as the contract manufacturer for a phase three stem cell trial.

Baxter started a phase three, 450 patient pivotal clinical trial to evaluate the efficacy and safety of an individual's own CD34+ stem cells to increase exercise capacity in patients with chronic myocardial ischemia (CMI), a coronary artery disease.

Smith continued: "Behind the development of [our] therapeutic assets is the NeoStem cell therapy contract manufacturing business (PCT) which itself continues to grow.

"New clients have engaged PCT to assist them in the development of their products, including a global, diversified healthcare company who recently selected PCT to provide stem cell processing in our two GMP manufacturing facilities in the United States (California and New Jersey).

"PCT's prominence in the marketplace continues to grow and that is reflected by both client satisfaction and the revenues the company generates."

As at year-end, the company had cash and equivalents of $12.7 million, and an additional $2.5 million in cash held in escrow.

"As we look to the year ahead, we are excited on multiple fronts. Our capital preservation efforts are now bearing fruit as our cash burn rate is in-line with our peers.

"We expect to continue to carefully invest our capital in projects that meet our internal rate of return hurdle and risk parameters. We believe the PCT and Amorcyte acquisitions have created true value for our shareholders and we look forward to demonstrating that as these assets reach their respective value inflection points," concluded Smith.