NeoStem Q2 revenues rise 55%, to close planned divestment in few months

NeoStem (AMEX:NBS) said Tuesday revenue from continuing operations rose nearly 55 per cent in the second quarter as the cell therapy company continues to complete the divestiture of its Chinese generic pharmaceutical business.

For the three months that ended June 30, revenues from continuing operations, which consist of the company's cellular therapy business in the United States, were $3.4 million, versus $2.2 million a year earlier.

The growth was driven mainly by clinical service revenues in the company's Progenitor Cell Therapy (PCT) manufacturing subsidiary, reflecting increased penetration into the cell therapy marketplace.

The company also said it saw a general increase in the development of autologous cell therapies in the United States due to enhanced investment and expanded marketing programs both this year and last.

NeoStem's business combines a contract development and manufacturing organization (CDMO) with a cell therapy product development program. The results from Erye, a China based generic pharma company NeoStem is divesting, were included only in discontinued operations.

Since the announcement on June 18 of NeoStem's agreement to divest its majority stake in Erye and to focus on its cell therapy business, its stock price has risen over 50 per cent.

NeoStem has now received directly or into escrow $6.2 million from the deal, representing 50 per cent of the total $12.3 million cash purchase price. The divestiture will also return around 1.0 million shares of its stock and cancel 1.2 million stock options and 640,000 warrants.

The cash will be used toward its US operations, and will bolstern its balance sheet by eliminating more than $35 million in short and long-term debt obligations. The deal is expected to close in the next 6 to 10 weeks, subject to China regulatory approvals.

The company's PCT subsidiary in the US acts as a consultant, and cGMP (current good manufacturing practice) service provider from product discovery to commercialization for product developers.

In its thirteen year history, the unit has supported over 100 regenerative medicine companies and NeoStem anticipates growth in the United States and abroad by expansion into Europe, it said.

In addition to PCT, NeoStem also owns an autologous adult stem cell therapy, known as AMR-001, which is designed to prevent adverse cardiac events following acute myocardial infarction (AMI), or what is commonly referred to as a heart attack.

The company is currently conducting its PreSERVE phase 2 clinical trial in the U.S. for the treatment, and anticipates completing enrolment in 2013, with six months initial data readout near the end of next year.

Peak annual worldwide sales of AMR-001 for this indication could exceed $1 billion, NeoStem said Tuesday. The therapy is protected by two issued and multiple pending U.S. patents with corresponding patent coverage in selected markets globally.

The Amorcyte AMR-001 product development program also extends to congestive heart failure, with the company preparing to launch a phase 1 clinical trial in early 2013. The worldwide congestive heart failure patient population is estimated to be four times larger than that of AMI.

Net loss from continuing operations attributable to NeoStem common shareholders in the latest quarter was $7.2 million, or $0.05 per share, compared to $10.1 million, or $0.13 per share, a year earlier.

Loss from discontinued operations, including the company's 51 per cent share of a total $28.0 million asset impairment charge from Erye, amounted to $13.4 million, or 10 cents per share.

Through warrant exercises and equity sales, NeoStem has raised $17.6 million year to date. The company closed its Boston facility and has consolidated these operations into its cellular therapy operations in Allendale, New Jersey and Mountain View, California in an effort to save costs

At quarter end, the company had cash and equivalents of $2.1 million and another $2.5 million held in escrow.