NeoStem, Inc. (Nasdaq:NBS) ("NeoStem" or the "Company"), a leader
in the emerging cellular therapy industry, today announced first
quarter 2014 financial results as well as the closing of the
Company's acquisition of California Stem Cell, Inc. ("CSC"), an
Irvine, California based biotechnology company. Strategic
acquisitions that leverage the Company's strong development,
regulatory and manufacturing expertise have been the cornerstone of
NeoStem's growth and the basis for providing value to shareholders.
"We are pleased to see positive revenue growth in this quarter
over first quarter 2013 and to report that, as of March 31, 2014,
we had an ending cash balance of over $41 million," said Dr. Robin
L. Smith, Chairman and CEO of NeoStem. "Coupled with our best in
class manufacturing capability, the stage is set for us to realize
meaningful clinical development and manufacturing efficiencies,
further positioning NeoStem to lead the cell therapy industry and
achieve our goal of delivering transformative cell based therapies
to the market to help patients suffering from life-threatening
medical conditions."
California Stem Cell Acquisition
Melapuldencel-T, developed by CSC and now NeoStem's most
advanced product candidate and foundation for its Targeted
Immunotherapy Program in oncology, is a late stage novel
proprietary cancer cell therapy. NeoStem plans to initiate, before
the end of 2014, a pivotal Phase 3 trial of Melapuldencel-T, an
autologous, melanoma initiating (stem) cell immune based therapy
intended to eliminate the tumor cells capable of causing disease
recurrence. Melapuldencel-T has been approved to enter this trial
with a Special Protocol Assessment ("SPA") from the Food and Drug
Administration ("FDA") and has received Fast Track designation for
metastatic melanoma, as well as Orphan Drug designation. There are
approximately 120,000 new cases of melanoma every year in the
U.S.
Pursuant to the terms of the CSC merger agreement, on May 8th
NeoStem issued 5.33 million shares of NeoStem common stock,
restricted and subject to certain holding periods, in exchange for
all of CSC's equity interests. CSC shareholders will be eligible
for milestone and royalty payments of up to $90 million, which may
be payable in cash or shares of NeoStem common stock at NeoStem's
discretion. The shares of NeoStem's common stock issued to equity
holders of CSC are not registered under the Securities Act of 1933,
as amended, and may not be offered or sold in the United States
absent registration or an applicable exemption from registration
requirements and are subject to selling restrictions.
Recent Highlights and Upcoming Milestones
The CSC acquisition has significantly advanced NeoStem's
leadership in the cell therapy industry by adding a Targeted
Immunotherapy Program to its diversified product pipeline. The
Company looks forward to additional near term milestones in other
clinical development programs:
- Immune Modulation (T Regulatory Cell Program) – Phase 1 data in
type 1 diabetes are expected to be presented on June 15th at the
American Diabetes Association ("ADA"). meeting. NeoStem has
licensed this technology from Dr. Jeffrey Bluestone of UCSF School
of Medicine. NeoStem plans to initiate a Phase 2 study in the third
quarter of 2014 using the proprietary Treg technology to treat type
1 diabetes, which affects more than 34 million people
worldwide.
- Ischemic Repair (CD34 Cell Program) – In the second half of
2014 NeoStem expects to release Phase 2 data from its PreSERVE AMI
trial of AMR-001, the Company's second most advanced product
candidate. PreSERVE AMI is a randomized, double-blinded,
placebo-controlled Phase 2 clinical trial testing AMR-001, an
autologous (donor and recipient are the same) adult stem cell
product for the treatment of patients with left ventricular
dysfunction following acute ST segment elevation myocardial
infarction ("STEMI"), which affects more than 160,000 patients per
year in the U.S. With the last patient of the 160 patient trial
infused in late December 2013, the last patient's 6 month follow-up
is expected to occur in June 2014. Once the primary endpoint 6
month data has been collected, the data set will be locked and
analysis will begin with a submission for a possible presentation
of the study results at the American Heart Association's Scientific
Sessions to be held November 15-19, 2014. If approved by FDA and/or
other worldwide regulatory agencies following successful completion
of further trials, AMR-001 would address a significant medical need
for which there is currently no effective treatment, potentially
improving longevity and quality of life for those suffering a
STEMI, and positioning NeoStem to capture a meaningful share of
this worldwide market. The Company may also advance its CD34
Cell Program into other clinical indications, such as chronic heart
failure, traumatic brain injury and/or critical limb ischemia.
NeoStem continues to expand its intellectual property protection
including its Treg international patent portfolio with the granting
in the first quarter of a patent in Japan as well as new U.S. and
European patent allowances for AMR-001.
Progenitor Cell Therapy, LLC ("PCT") is NeoStem's
revenue-generating contract manufacturing subsidiary. PCT has two
cGMP, state-of-the art cell therapy research, development, and
manufacturing facilities in New Jersey and California, serving the
cell therapy community with integrated and regulatory compliant
distribution capabilities. The Company is pursuing commercial
expansion of its manufacturing operations both in the U.S. and
internationally. Additionally, with the acquisition of CSC, PCT can
leverage CSC's additional manufacturing capacity in Irvine,
California as well as their personnel's experience and expertise in
immunotherapy to provide additional manufacturing and/or
development work to advance NeoStem's platform technology as well
as technologies of PCT's client base.
Financial Results for the 2014 First
Quarter
Revenues for the three months ended March 31, 2014 were $4.1
million compared to $2.5 million for the same period in 2013,
representing a 61% increase. PCT's clinical services revenues, the
largest component of revenues, increased 88%. Overall, there were
approximately 50% more active clients as of March 31, 2014 compared
to March 31, 2013, including five new clinical service contracts
initiated during the first quarter.
For the three months ended March 31, 2014, research and
development expenses were $4.8 million compared to $3.2 million for
the three months ended March 31, 2013, an increase of $1.6 million,
and a result of support of the advancement of the Treg Program, and
to a lesser extent in support of the Phase 2 PreSERVE AMI
trial.
Selling, general and administrative expenses increased from $5.8
million for the three months ended March 31, 2013 to $9.0 million
for the three months ended March 31, 2014, of which $1.4 million
was related to non-cash equity-based
compensation. Equity-based compensation is expected to be
lower in future quarters. The higher general and
administrative expenses were due to higher strategic and corporate
development activities, including those associated with the
acquisition of CSC.
Net loss for the first quarter was $13.8 million (or $9.3
million when excluding non-cash charges – see reconciliation in
appendix below) compared to $8.9 million in 2013 (or $6.2 million
when excluding non-cash charges – see reconciliation in appendix
below).
At March 31, 2014 NeoStem's cash balance was $41.4 million.
Common shares outstanding as of March 31, 2014 were 28.6 million
and common shares outstanding as of May 8, 2014, following the
closing of the CSC acquisition, were 33.9 million.
NeoStem continues to pursue the preservation and enhancement of
human health globally through the development of cell based
therapeutics that prevent, treat or cure disease. The Company
has multiple cell therapy platforms that work to address the
pathology of disease using a person's own cells to amplify the
body's natural repair mechanisms including enhancing the
destruction of cancer initiating cells, repairing and
replacing damaged or aged tissue, cells and organs and restoring
their normal function. The combination of NeoStem's therapeutic
development business and a revenue-generating service provider
business provides the Company with unique capabilities for cost
effective in-house product development and immediate revenue and
future cash flow to help underwrite the Company's internal
development programs.
Appendix
Use of Non-GAAP Financial Measures
The Company uses Net Loss Excluding Non-Cash Charges as a
non-GAAP financial measure in evaluating its performance. This
measure represents net loss, less equity-based compensation,
depreciation and amortization, and other non-cash adjustments
included in net loss. The Company believes that providing this
measure to investors provides important supplemental information of
its performance and permits investors and management to evaluate
the core operating performance and cash utilization of the Company
by excluding the use of these non-cash adjustments. Additionally,
the Company believes this information is frequently used by
securities analysts, investors and other interested parties in the
evaluation of performance. Management uses, and believes that
investors benefit from, this non-GAAP financial measure in
assessing the Company's operating results, as well as in planning,
forecasting and analyzing future periods.
Net Loss Excluding Non-Cash Charges has limitations as an
analytical tool, and investors should not consider this measure in
isolation, or as a substitute for analysis of the Company's results
as reported under generally accepted accounting principles in the
United States ("U.S. GAAP"). For example, this measure does not
reflect the Company's cash expenditures, future requirements for
capital expenditures, contractual commitments, or cash requirements
for working capital needs. Although depreciation and amortization
are non-cash charges, the assets being depreciated or amortized
often will have to be replaced in the future, and Net Loss
Excluding Non-Cash Charges does not reflect any cash requirements
for such replacements. Given these limitations, the Company relies
primarily on its U.S. GAAP results and uses the Net Loss Excluding
Non-Cash Charges measure only as a supplemental measure of its
financial performance and cash utilization.
GAAP to Non-GAAP
Reconciliation |
|
|
|
|
Net Loss Excluding Non-Cash
Charges Reconciliation |
|
Three Months Ended |
(in millions) |
March 31, 2014 |
March 31, 2013 |
|
|
|
Net loss |
$(13.8) |
$(8.9) |
|
|
|
Equity-based compensation |
3.9 |
2.2 |
|
|
|
Depreciation and amortization |
0.4 |
0.6 |
|
|
|
Changes in fair value of derivative
liability |
-- |
(0.0) |
|
|
|
Changes in acquisition-related contingent
consideration |
0.2 |
-- |
|
|
|
Bad debt recovery |
(0.0) |
-- |
|
|
|
Deferred income taxes |
0.0 |
-- |
|
|
|
Net Loss Excluding Non-Cash Charges |
$(9.3) |
$(6.2) |
|
|
|
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements reflect management's current
expectations, as of the date of this press release, and involve
certain risks and uncertainties. Forward-looking statements include
statements herein with respect to the successful execution of the
Company's business strategy, including with respect to the
Company's ability to develop and grow its business, the successful
development of cellular therapies, including with respect to the
Company's research and development and clinical evaluation efforts
in connection with the Company's Targeted Immunotherapy Program in
Oncology, CD34 Cell Program and T Regulatory Cell Program, the
future of the regenerative medicine industry and the role of stem
cells and cellular therapy in that industry and the performance and
planned expansion of the Company's contract development and
manufacturing business. The Company's actual results could differ
materially from those anticipated in these forward-looking
statements as a result of various factors. Factors that could cause
future results to materially differ from the recent results or
those projected in forward-looking statements include the "Risk
Factors" described in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 13, 2014
and Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 8, 2014 and in the Company's periodic
filings with the SEC. The Company's further development is highly
dependent on future medical and research developments and market
acceptance, which is outside its control.
CONTACT: Investor Contact:
LifeSci Advisors, LLC
Michael Rice
Founding Partner
Phone: +1-646-597-6979
Email: mrice@lifesciadvisors.com
Media Contact:
NeoStem, Inc.
Eric Powers
Manager of Communications and Marketing
Phone: +1-212-584-4173
Email: epowers@neostem.com
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