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.

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.