NeoStem Inc: Expanding Stem Cell Technology into China


NeoStem, Inc
Dr. Robin Smith, Chairman & CEO



NeoStem, Inc. is engaged in the development of stem cell-based therapies, pursuit of anti-aging initiatives and building of a network of adult stem cell collection centers in the U.S. and China that are focused on enabling people to donate and store their own (autologous) stem cells for their personal use in times of future medical need. The Company also has licensed various stem cell technologies, including a worldwide exclusive license to VSEL(TM) technology which uses very small embryonic-like stem cells, shown to have several physical characteristics that are generally found in embryonic stem cells, and is pursuing the licensing of other technologies for therapeutic use. NeoStem’s majority-controlled Chinese pharmaceutical operation, Suzhou Erye, manufactures and distributes generic antibiotics in China. For more information, please visit: .


Juan Costello: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Reporter. Joining us today is Dr. Robin Smith, CEO and Chairman of NeoStem Incorporated. The company trades on AMEX and their ticker symbol is NBS. They’re an international biopharmaceutical company, which helps individuals to collect and store their own adult stem cells for future medical use and usually leveraging their VSEL technology. Thanks for joining us today, Dr. Smith.

Dr. Robin Smith: Great to be back.

Juan Costello: Great. It’s always good to have you on. Starting off, for some of our investor audience that’s new to the NeoStem story, talk to us a little bit more about your technology?

Dr. Robin Smith: Sure. It’s been a transformational year for us and we have expanded into China. As you said, we’re an international company, and we began by realizing that our collection and storage side of our business in United States was guided by therapies. People want to have their stem cells treatments to store their stem cells today for future use. So, we expanded our business into China and basically licensed a few technologies for stem cell applications that we can start treating patients and generating revenue in orthopedics, cosmetics and anti-aging. So, that’s an exciting expansion of our stem cell side of the business while we develop our VSEL technology, which is very small embryonic-like stem cell. You and I have embryonic stem cells in our body. So, you don’t have the controversial ethical issues of destroying embryonic stem cells that are in you that we can harvest and purify and freeze for future use, and we’re focusing on taking these and discovering application for different therapies.

Juan Costello: How has NeoStem changed from our last interview, which was about a year ago?

Dr. Robin Smith: I think one of the biggest milestones we’ve had is the end of October — October 30th 2009, we purchased a majority interest in a therapeutic pharmaceutical company in China doing over $60 million in revenue there. That division has over $12 million in profits, over a 100 drugs are produced, distributed into all provinces in China. They manufacture seven out of the top 20 China pharmaceutical antibiotics that are used. Healthcare reform in China is tremendous. It’s a $124 billion a year, growing at 24% for antibiotics and it’s projected to triple by 2013. So, it’s just a wonderful market and this is a fantastic pharmaceutical company that’s well run. They’ve been capacity constraint and in the middle of a relocation that will allow doubling their capacity. So, to be in an industry where there is demand and then you can increase your supply is just terrific, and we can bring new drugs and new applications to them through the distribution model that’s been built over 60 years.

Juan Costello: Talk a little bit about some of your subsidiaries such as Suzhou Erye and what we can expect from them?

Dr. Robin Smith: So, that’s the company I just told you about. The pharmaceutical company there with seven drugs in the pipeline, two have already been approved that should start being produced this summer. Their relocation is very significant. Two manufacturing facility lines have already been up and running in the new facility, which account for 20% of revenue, increasing to 75%. And we expect to see a few more of these lines up and running over the balance of this year. So, increasing their ability to produce the drugs will increase their revenues and their profitability.

Juan Costello: What are some of the emerging trends right now that you’re seeing in the stem cell and the sector, and how well positioned is the company to capitalize on them?

Dr. Robin Smith: I think the stem cell industry continues to grow. Excitement is there. Data comes out every day, showing the efficacy and the potential of stem cell therapy. I think there is a lot of controversy and a lot of confusion about stem cells, kind of what they are, where they come from and obviously the issue of embryonic versus adult. So, our recent announcement of a collaboration with the Vatican gives us a tremendous amount of credibility and platform to having people better understand that you can have benefits of stem cell therapy, you can be a supporter of it, you can support the R&D. And this is just a tremendous, I think, corporate milestone and collaboration for our company.

Juan Costello: It’s certainly a huge step. So, what would you say makes NeoStem unique from some of the other players in the sector?

Dr. Robin Smith: I think our technology is very special, the VSEL technology. I think we have incredible management team. We have a good base of investors that has allowed us to expand internationally comfortably. And I think it’s just the right space; if you look at the projected stem cell business worldwide and the projected pharmaceutical business in China, together that’s over $200 billion a year business. So, we have a great space or spaces that we’re working in. It’s sort of mitigation of risk. It’s very steady business that’s been growing rapidly but yet steadily on the pharmaceutical side with the upside of a stem cell therapy in the future. So, it’s kind of get the best of both worlds.

Juan Costello: Can you go over some of the strength of the management team over at NeoStem for some of our listeners here that are new to the story?

Dr. Robin Smith: We have a great Advisory Board, which is very involved. They help us determine the therapies that we want to move into. We have Dr. Wayne Marasco who is on the cover in March of Nature magazine for discovery in antibiotics, Dr. Losordo who is one of the key leaders in cardiac repair using stem cell therapy, Dr. Ratajczak who is actually one of the founders of the VSEL technology, Dr. Falanga who is a wound care specialist, and we’re very focused and we’ve licensed his technology. The DoD is very excited about that for wound care for the soldiers and some of their applications. So, that’s a great group.

On a management point of view, we have the ex-treasurer of Amgen is our CFO. We have operational management of people who’ve been very focused on personalized medicine. Up in Boston, we’ve fantastic scientists. Dr. Alan Harris is a terrific addition to our team in helping us source drugs for the pharmaceutical company in China and his experience in regulatory environment, so that as we develop these stem cell technologies we’re sure to be working with the FDA and doing it right so that we get the necessary safety data and approvals in place. We have in-house counsel. We’ve been very successful and effective in our documentation from that point of view, which is good for our shareholders and their ability to have liquidity. And we just have a great team, a great in China and we’re running as fast as we can.

Juan Costello: What are the milestones that the team wants to accomplish over the next 12 months?

Dr. Robin Smith: I think we want to have our ten centers in the collection and storage side of the business up and running. We’d like to continue to advance our VSEL technology, secure some of the additional DoD funds for our wound care technology. We’re always looking to grow through licensing of technology or acquisition. We’ve a lot on our plate, but I think having the pharmaceutical company finish their relocation, which is projected in 2011 but we’re ahead of the curve there, getting some new drugs into their pipeline are all things that you should be seeing from us over the next 12 months.

Juan Costello: As you continue to communicate with the investment community, obviously you rang the bell yesterday at the New York Stock Exchange and also presented at the NASDAQ site earlier in the month — do you believe that right now investors and the investment community appreciate and understand the full NeoStem story and the company’s upside potential?

Dr. Robin Smith: I think it’s starting with a new story. Seven months ago, we completed this acquisition and it’s getting the word out to the community and it’s getting understanding. I think the Vatican initiative has certainly helped people understand better our VSEL technology and will continue to do so. So, I think it’s just getting the story out there trying to help people understand what’s real and what’s rumor and not get spooked by people trying to affect you, some of the short sellers and trying to really understand the value of what we have. And I think we’re there — we’re getting there and that will continue. We’ve gotten coverage from Maxim and from Ross. Hopefully, we’ll continue to get picked up as we grow from other analysts on the Street and continue to build our base of investors.

Juan Costello: What’s the one thing that you wish investors better understood about NeoStem, which if they did would result in a higher valuation?

Dr. Robin Smith: I think the fact that we’re taking an approach to develop technologies while we are generating revenue, and we’re focused on that for our investors. Our cellular technology is very unique and that it doesn’t require the same manipulation should have a much quicker time to get from the lab into the clinic, and not be scared of China. Sometimes, it’s an opportunity and people are afraid. We have people on the ground in both places and we’re managing it there as if they were here, and just to feel comfortable that we’re watching over both worlds of our business and just watching all the milestones and watching us grow.

Juan Costello: Once again, joining us today is Dr. Robin Smith, CEO and Chairman of NeoStem Incorporated, which trades on the AMEX, ticker symbol is NBS, currently trading at $2.76 a share, market cap is $146 million, currently discussing some of the highlights from the past year, commencement of operation in China and license stem cell application for cosmetic and wound healing and also as mentioned, the 51% stake in Suzhou Erye. Before we conclude, why do you believe investors should consider NBS as a good long-term investment opportunity?

Dr. Robin Smith: We’ve a great platform to grow from. It’s a very big industry that we continue to build and build our pipeline in. While there’s steady growth, there is also tremendous upside with the stem cell side of our business. If you look at pharmaceuticals, they need pipeline and we can certainly deliver that through what we’re creating both on the therapeutic side of the pharmaceuticals as well as the stem cell side. So, we think we’re a great place for growth in great spaces that continue to grow.

Juan Costello: We certainly look forward to continuing to track the company’s growth and report on your upcoming progress. I’d like to thank you for taking the time to join us today and to update our investors once again on NeoStem. It’s always good to have you on.

Dr. Robin Smith: Thank you for having me. Take care.

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