New Era Begins for NeoStem Following China Acquisition

By Mike Havrilla, ProActive News Room

NeoStem (AMEX: NBS) [click on preceding link for the Company’ s News Room website] is an innovator and leader in the pre-disease collection, processing and long-term storage of adult stem cells for the general population to use in future medical applications that is expanding into research, medical tourism, and China for the commercialization of regenerative medicine and other stem cell applications. In late October, NeoStem completed its acquisition of China Biopharmaceuticals, which resulted in a controlling 51% interest in Suzhou Erye Pharmaceuticals (Erye) and established three business segments for the Company (US + China stem cells and China pharmaceuticals focused on antibiotics and active pharmaceutical ingredients).

1.) NeoStem (US) includes an exclusive worldwide license to VSELs, a strong IP sourcing network for innovative stem cell / pharmaceutical products and AMEX listing for the stock in addition to its position in the domestic market as a leading adult stem cell banking network.

2.) Erye is a high-growth pharmaceutical manufacturer in China with a strong core business / profitable revenue base amidst booming demand and growth in the Chinese market.

3.) NeoStem (China) has strong support from the Chinese government for commercialization of cosmetic / regenerative medicine applications which will also expedite the process of US development as the Company becomes a vertically integrated stem cell operation in a permissive regulatory environment that includes strong government support. NeoStem plans to leverage the R&D conducted in China to fast-track the U.S. FDA approval process.

Erye is a China-based pharmaceutical company that is expected to record revenue exceeding US$60 million in 2009. Since closing the merger, the market cap of NeoStem has more than tripled to about $60 million, which reflects additional shares of common stock issued as part of the merger and also approximates the projected revenue for Erye during 2009. Erye is a vertically integrated bio-pharmaceutical company in China focused on intermediate API / antibiotics which also includes a R&D team focused on drug discovery, improving existing drugs, and traditional Chinese medicine products plus a strong distribution network covering 30 provinces in China. The Company currently has 7 SFDA approved / certified production lines that are compliant with China GMP standards and is also in the process of a three-year expansion / relocation program that is expected to be completed by 2011.

NeoStem has embarked upon several stem cell initiatives in China this year, including the creation of a separate stem cell operation in China, the construction of a stem cell R&D facility in Beijing, the establishment of relationships with hospitals to provide stem cell therapies, and the licensing of stem cell therapeutics focused on regenerative medicine applications. During 2010, NeoStem plans to begin offering stem cell banking services and therapies in China, in addition to medical tourism initiatives that will offer these services to those living in developed countries such as the US where such treatments are either unavailable or unaffordable.

In addition, the current network of US adult stem cell banking facilities is focused on Southern California and the Northeast region with a goal of expanding coverage to include 10 markets by the end of 2010. NeoStem has also expanded into stem cell research as part of an exclusive licensing agreement with the University of Louisville for the identification and isolation of rare stem cells found in adult bone marrow called VSEL for short (very small embryonic-like). As the name suggests, VSELs share traits with embryonic stem cells (ESCs), including the ability to differentiate into a wide variety of cells (pluripotency) found throughout the body for many potential medical applications.

NBS China plans to maximize its pre-therapeutic / R&D revenue by the supply of VSELs for clinical trials in China which will be provided exclusively through its subsidiary, Beijing RuiJieAo. NeoStem will also exploit the easier regulatory path to commercialization in China for near-term revenue potential while leveraging mature therapies / technology from NeoStem’s extensive U.S. network and collaboration agreements.

NeoStem is targeting the introduction of highly mature U.S.-based therapies that lack FDA approval which is necessary for widespread use in the domestic market. NBS China intends to commercialize its first stem cell therapy for orthopedic indications in 2009 while developing a pipeline of additional therapies for CNS (central nervous system) disease, wound healing, and heart disease. The initial orthopedic market will target 80-100 million arthritis sufferers in China, while future applications will be aimed at over 25 million individuals with long-term CNS conditions and heart disease (the third largest killer in China with 1.5 million deaths per year).

NeoStem will also offer medical tourism service centers to serve patients from affluent countries that have more restrictive regulatory processes such as US and Europe. The Company’s medical tourism initiatives in China will offer world class SOPs (standard operating procedures), standards of care, and facilities. An estimated 7,000 patients have been treated in China’s medical tourism industry since 2001, but current offerings lack the rigorous SOPs / facilities and do not include the world class standard of care that NeoStem can offer.

NBS China will coordinate the launch of anti-aging / cosmetic medicine applications with its major principal in China while simultaneously launching its legacy adult stem cell banking business. A strong pipeline of innovative stem cell based therapies has been sourced from the Company’s network of partners in the U.S. NeoStem has assembled an experienced team of executives and scientific / medical advisors to implement its strategy in China to best capitalize on the opportunity, which includes both a rapidly growing middle class in China with increased spending power and a medical tourism business for those located outside of China.

Disclosure: No positions.

The comments are closed.