Insider Buying at NeoStem ($NBS) supports a Solid Therapeutics Story build on a Manufacturing Platform- PCT

There is nothing we like to see more than insiders putting their money with shareholders. We took note of several insiders from Neostem (NYSE AMEX: NBS) including CEO Dr Robin Smith, CMO Dr Andrew Pecora, and VP Business Development, Jason Kolbert, all making inside purchases.

NeoStem has been popping up on a radar screen a lot these days. First with the acquisition of Progenitor Cell Therapy earlier this year, and now the acquisition of Amorcyte (P2 asset for AMI). This trial is expected to enroll its first patient in Q1-2012 and according to management is ready to go. We expect the trial to enroll the target 160 patients within 12 months with data read-out 6 months afterwards.

We do know that the Amrocyte product is differentiated. It is an enriched cell population, bone marrow derived of CD 34+ cells, and that the company established a biologically effective threshold dose that must be met (>10 mln cells) to show efficacy. NeoStem talks in great definition about the mechanism of action, the dose, the biological (angiogenesis) and clinical effect they intend to measure, perfusion. There is ample historical evidence to suggest that CD34+ cells are potent ones for neoangiogenesis. A recent paper published by Baxter principal investigator and thought leader, Dr. Douglas Losordo suggests that among all the cells types, CD34+ are the most potent. (Baxter is moving forward in a P3 trial with a CD 34+ cell) for cardiac ischemia. The Baxter trial harvests the cells from peripheral blood after delivering a mobilizing agent (GCSF). Our understanding is that these cells are not as effective at homing, but that fine as Baxter delivers them locally using direct injection to the heart itself (where NeoStem injects into the infarct related artery) and allows the cells to home along the ischemic (oxygen starved) gradient travelling to where they are needed. We believe that the historical literature does not lie and that Baxter offers proof of concept for NeoStem.

Some question if the autologous model is viable in the wake of Dendrion. We would remind folks that NeoStem acquired both Progenitor Cell therapy (PCT) and Amorcyte for a 1-2 punch. PCT did the majority of clinical autologous manufacturing for Dendrion's Provenge. So PCT knows how to manufacture. We also know that autologous has lots of advantages over allogeneic.

While Bears are quick to point out the advantages of pills in a bottle model (allogeneic) the data suggests that only autologous cells (your own cells) will truly integrate into the target (your own heart) and continue to modulate neoangiogenesis. NeoStem has publically declared that they plan to divest their majority ownership in the China generic company they own. That should be a catalyst for the stock too. So by comparison to the rest of the field we see NeoStem with a solid manufacturing base of operations in PCT (several contract manufacturing clients in Phase 3, Phase 2 and Phase 1 generating revenues and creating options for commercial manufacturing down the road as one of the better positioned companies in the space. Apparently the insiders agree.

Geron versus PluriStem @ Seeking Alpha? That's the wrong question......

We saw an article at Seeking Alpha talking about Pluristem versus Geron. The PluriStem CEO does a compare and contrast. While PSTI CEO Zami makes some good points regarding market size, were not sure that any comparison to Geron makes any sense.

Allogeneic cells (other peoples cells) do fit the pills in a bottle model that Pharma craves but as we have heard Zami himself say at multiple conferences, these allogeneic cells (even though they are from a placenta) do not integrate long term to the host. Therefore the effect is likely moderate, and that may be fine depending on the indication.

CLI (Critical Limb Ischemia) itself is a very variable disease and PluriStem has Phase 1 data and is just beginning their Phase 2 trial. So its early days for sure. Aastrom is also pursuing CLI and now is in a Phase 3 trial. As we have said in the past we are hopeful that the results will be good for both companies but neither company has definitive data sets yet and the disease itself is very variable. As such investors can't be sure what the outcome of these trials might be. In the case of Aastrom the P2 first interim analysis looked great but the second did not (the amputation rate in the placebo group improved and narrowed the difference between active and control). CLI is a variable disease and this happens. Aastrom is smart, they expanded the P3 trial (made it larger), which gives them a greater chance of success but it also means it will be more expensive and probably take longer to complete.

We would push the concepts here back to basics and get away from a comparison between an off the shelf allogeneic cell that is targeting angiogenesis (new blood vessel formation), improving circulation versus an embryonic approach that it was hoped could repair damaged signal conduits (nerves), paralysis.

Rather we ask how did CLI patients become ill in the first place? Poor circulation, diabetes, and other co-morbidities are likely part of the problem. So while fixing circulation, locally, may stave off an amputation, it seems like it is not addressing the underlying cause. Why inject intra-muscular versus intra-arterial? Basic science questions such as dose, biological mechanism of action, clinical effect, even product variability remain issues with many of the institutional investors who are following these cell therapy companies.

We note that Biotech giant is Celgene (CELG) is also working on placental based cell therapy but here it is for down-regulation inflammation, in Crohns Disease for patients who have failed steroids. We also know that Athersys and Pfizer are pursuing this approach also with an allogeneic therapy (MultiStem). Proof of Concept from a Celgene or a Pfizer would be a big deal for all in the space.

We certainly believe that there is a role for allogeneic therapy as well as autologous and that indications should dictate, which therapy is best for which indication. The lower cost of goods and the multiple treatments likely for CLI do favor allogeneic players where the opposite is true in cardiovascular disease (heart attacks, CHF and cardiac ischemia). For example news today that Cytori has filed its Investigational Device Exemption (IDE) application to begin a clinical trial of the Celution® System for chronic myocardial ischemia (CMI). Cytori's ATHENA represents a device-based (Phase I/II) to investigate the use of autologous, clinical-grade adipose tissue (fat) derived stem and regenerative cells (ADRCs). This all happens at the patients point-of-care with Cytori’s Celution® System.

The institutional community evidenced by stock prices is not excited about CLI (long and expensive trials, variable disease), but granted, very much an unmet medical need. So while Geron's departure in the space is (was) a disappointment the clinical advances of other companies like MesoBlast, Athersys, Cytori, Aastrom, NeoStem, and yes PluriStem are positive.

In fact we are excited to see what happens with the work that PluriStem is doing with United Therapeutics in the COPD (airways) space.

Immunocellular ($IMUC) - Moving forward in Brain Cancer

IMUC is developing ICT-107, an autologous, dendritic cell-based vaccine (like Dendrion's Provenge) that works by activating a patient's immune system against specific tumor-associated antigens. This is accomplished by extracting dendritic cells from a patient, loading them with the antigens, and reintroducing them to the patient's body to trigger an immune response. It is still early days, but IMUC is targeting glioblastoma multiforme (aggressive brain cancer) with this product. Data from Phase 1 trials has been encouraging and the company is embarking on a P2 program. The company is also developing ICT-140: Dendritic cell-based vaccine for the treatment of ovarian cancer. This product will target multiple antigens present on cancer stem cells and daughter cells. Interesting because we have discussed Prima BioMed's dendritic approach in ovarian cancer too.

This is not new news, but its worthy of mention, according to a blurb we saw in Bio Century, IMUC announced in early December the company’s plans to raise capital in a follow-on offering with a goal to raise up to $13.8 million in cash (10 million at $1.40) with 1:1 share – warrant coverage.

Fate Therapeutics - William Rastetter becomes Chairmen & Interim CEO

William Rastetter PhD is best known for his time at Idec Pharmaceuticals (can you say rituxan). He is considered a heavyweight in the biotechnology world so his willingness to take on this role at Fate Therapeutics is not only positive for Fate but for the industry overall. Fate Therapeutics is working on ProHema (umbilical cord blood transplants (UCB), with data recently presented at ASH.

Stem Cells Inc. (STEM): Prices $10M secondary at $1.25

In a surprise offering Stem Cells Inc. (NASDAQ: STEM) announced the pricing of 8 million share offering with matching warrants for gross proceeds of $10M, at the bottom of what has been a declining valuation. Earlier in the week we discussed the perfect storm, the macro-economic outlook coupled with declining balance sheets has hurt biotechnology companies that have "miles to go" before they can reach commercialization. Dendreon's implosion and Geron's departure did not help. As a result valuations have declined for everyone in the cell therapy space. Raising capital at the bottom hurts, but it is the nature of biotechnology and the rule here is dilution versus extinction.

It is surprising to us that the company announced earlier in the week news that the first cohort of the Phase I/II trial in chronic spinal cord injury has been treated (successfully transplanted with the STEM's proprietary HuCNS-SC® neural stem cells).

This trial has a unique design, in which patients with progressively decreasing severity of injury will be treated in three sequential cohorts. The first cohort of patients all have spinal cord injury classified as AIS A, the most severe level identified by the American Spinal Injury Association Impairment Scale (AIS).

We have seen Dr. Stephen Huhn MD, FACS, FAAP, (Vice President and Head of the CNS Program at StemCells) present in the past. He is considered a KOL (Key Opinion Leader) in the field and is highly respected. He is quoted:

"Having completed dosing of the AIS A cohort, screening for AIS B patients, who have a less severe, incomplete type of spinal cord injury, can now begin. Of course, our first priority is to assess safety in each patient, but we will also be evaluating trial patients for changes in sensation, motor and bowel/bladder function."

It’s still early days for STEM and impossible to know if these cells will translate into any efficacy but the good news is that this raise does give the company some runway to see a signal from this trial. It’s a longshot for sure and there are other companies in the space with more mature trials, defined mechanisms of action, dose responses defined, large target markets, and great efficacy signals established in P1 and 2 trials. Look at the developments in cardiology (AMI / CHF) - Mesoblast, Cytori, NeoStem, where we believe proof of concept is coming, but the holy grail of stem cell therapy is to be able to show a signal, anything, in paralysis. STEM now will carry that banner.

Bio Smart Brief : Survey Picks Stem Cells

Bio SmartBrief circulated an Expert Views and Insights piece yesterday. We highlight one of the posted survey sections:

Poll: What field is most likely to yield the biggest breakthrough in the coming year?

23%		Stem-cell therapies
14%		Specific disease therapies -- HIV, cancer
14%		Vaccines
12%		Someplace unexpected
10%		Genomic discoveries
8%		Advanced biofuels
8%		Agricultural biotech
7%		Gene therapy
4%		Synthetic biology

Conference on Cell Therapy for Cardiovascular Disease (January 25-27) NYC - Baxter & More...

We picked up on an advertisement from the Cardiovascular Research Foundation for the seventh International Conference on Cell Therapy for Cardiovascular Disease. January 25-27, 2012 in New York. What struck is the lineup of the companies and panelists and the implications for the cardiovascular companies in the space, such as Baxter, Cytori, MesoBlast, NeoStem.

What caught our eye is the panel on the second day, "Acute Injury: STEMI and NSTEMI". The panel will be moderated by some very well-known KOL's such as Henricus J. Duckers, Gregg W. Stone, Andreas M. Zeiher. Dr Zeiher is one of the founders of a German private company also working on a cell based therapy (cells that follow an ischemic gradient) for AMI. Cytori will talk about the PRECISE trial (Adipose (from fat) stem cells for chronic ischemia. Dr. Doug Losorodo (who is not the principal investigator in the Baxter phase III trial) which uses CD 34+ cells (just like NeoStem (NBS) Amorcyte trial) will also present on the following panel which will review CLI (Critical limb ischemia) and CMI (Chronic Myocardial Ischemia). Even Dr. Robert Bolli who was recently features on CBS talking about his myocytes that repair dead heart muscle will be a panelist.

Our take away message: When we see Baxter and other prominent researchers now talking in these forums , presenting data and defined mechanisms of action, it raises our confidence level that proof of concept from trials is not far behind. Watch the work that NeoStem (NBS) is doing in AMI as a value play versus Baxter (BAX) with a very similar therapeutic approach. Doug Losordo (PI Baxter) has been working in the space for 20 years and adds a measure of credibility as do the entire panel members.

Link to the Conference web site: http://celltherapy.crf.org/home.html

=============================

Day 2 Panel Agenda

=============================

Acute Injury: STEMI and NSTEMI

8:30 am - 9:55 am

Moderators: Henricus J. Duckers, Gregg W. Stone, Andreas M. Zeiher

8:30 am

Trial I. Long-term FU of Patients with an AMI Treated with Adipose-Derived Stem Cells (APOLLO)

Henricus J. Duckers

8:40 am

Trial II. LATE-TIME and Others

Stephen G. Ellis, Timothy D. Henry

8:50 am

Trial III. MAPC Results and Directions

Marc S. Penn, Warren Sherman

9:00 am

Trial IV. TBA

Raj Makkar

9:10 am

EPTS

Henricus J. Duckers, Marc S. Penn

9:25 am

Discussion

Break

9:55 am - 10:25 am

CLI/CMI

10:25 am - 12:00 pm

Moderators: Francisco Fernandez-Aviles, Amit Patel

10:25 am

Trial I. CD34+ Cells for Refractory Angina

Douglas W. Losordo

10:35 am

Trial II. Adipose-Derived Cells for Chronic Ischemia: The PRECISE Trial

Francisco Fernandez-Aviles

10:45 am

Trial III. Update on Standardization of CD133 Intramyocardial BMSC

Gustav Steinhoff

10:55 am

Trial IV. BMAC for CLI: Status of a Phase 3 Trial

Thomas F. O'Donnell

11:05 am

Trial V. Placenta-Derived Cells for CLI

Christof Stamm

11:15 am

Abstract Presentation

11:20 am

EPTS

Timothy D. Henry, Amit Patel

11:35 am

Discussion

Lunch

12:00 pm - 1:00 pm

Heart Failure and Chronic Disease

1:00 pm - 2:30 pm

Les Miller

1:00 pm

Trial I. SCIPIO

Roberto Bolli

1:10 pm

Trial II. Cell Wave

Andreas M. Zeiher

1:20 pm

Trial III. SDF-1 and SDF-2

Marc S. Penn

1:30 pm

Trial IV. Cardiocyte-Driven Bone-Marrow Precursors

Jozef Bartunek

1:40 pm

Trial V. MPC's for Ischemic and Non-Ischemic Heart Failure

Emerson C. Perin

1:50 pm

EPTS

Jozef Bartunek, Randall J. Lee, Amit Patel

2:05 pm

Discussion

Cell Therapy - Is there value for stock market investors?

The cell therapy space has been hit hard over the past year triggered by a perfect storm of events from the macro-economic environment:

• Biotechnology has come under pressure, where investors fear not only dilution but extinction; and
• Companies in the Small-Cap Biotech space often operate with a years worth of cash, and this has made investors nervious.

We have been down this road in the past, can anybody say Y2K?

Dendreon's (NASDAQ: DNDN) rise became the rallying cry for investors so its subsequent plunge became the proof for the bears that cell therapy just doesn't work. Both examples are in our opinion false. Provenge, like so many biotech products before it, is the first in a new therapeutic category. We lived through the monoclonal antibodies in the 90's, and then the HIV market in Y2K. Most recently the success of the nucleosides (Pharmasset) is now destined to be acquired by Gilead (GILD). We hope our followers saw the run up in Inhibitex (INHX) that resulted.

What's the connection? A pattern has emerged, and Provenge is not just a cell therapy but the first of a cell based approach to immunology/cancer. The follow-on products will be better. Take a look at the work that PrimaBioMed (ASX: PRR) is doing or even better, Coronado (OTCBB: CNDO) (which we have been following for some time).

What we want to begin discussing today is cell therapy on the regenerative medicine side of the equation. Oncology has always had tough hurdles but on the regenerative side the unmet medical need is often just as great, in fact, greater in some places. 

No one yet has been able to explain Mesoblast (MSB-Australia) to us but Cephalon and now Teva are in partnership and the stock has a market cap approaching $2 billion. This is an allogenic (other peoples cells) model, which pharma likes. It is the so called pills in a bottle model. Peer companies include Pluristem (PSTI) and Athersys (ATHX), at much lower valuations ($100 million or lower). On the autlogous side no one seems to be paying any attention to NeoStem (AMEX: NBS). This company acquired Progenitor Cell Therapy the contract manufacturing company that worked on Provenge and today is working with many of the cell therapy companies we are following.

Can an autlogous model work?  Baxter thinks so, and has been highlighting their autlogous cells for cardiac ischemia. Interesting because the Baxter product is very similar to the NeoStem product - both are CD34+ cells with some differences. NeoStem is begining their Phase 2 trial for a cell therapy that promises to stabilze failing hearts after a heart attack.

We recently attended the Stem Cell Therapy on the Mesa conference, and we were "blown away" with the number of products in clinical trials. We saw companies from all over the world - some had revenues with approved products, and others had great data and proof of concept with thereapies that can work for everything from cardiovascular disease to healing damaged muscles and tendons.

Going Forward: We will be actively following the "Cell Therapy Space" now. That means we will be watching the developments on two fronts:

• Oncology/Immunology side, and
• Regenerative Medicine side.

We will be commenting on the trials, the news developments in the space, the competitive landscape, talking with managment, and posting our articles on where we believe the ground breaking science, product profiles, and catalysts lie that can trigger the next paradigm shift in the space.

Remember, Lipitor is going to leave a big hole in Pfizer's pipleine as it goes generic. Pharma and Biotech have to act. Early signs abound that cell therapies are no longer a case of if, but when, and the answer to that is tied to clinical trials, which represent a highly defined process.