Thursday, May 28, 2015

NeoStem Stock Price Falls 22 Percent as It Seeks to Match California Stem Cell Grant

NeoStem, Inc., has had a wild financial ride this past week with its stock price soaring and then plummeting in the wake of a nearly $18 million award last Thursday from the California stem cell agency.

The share price of the New York firm dropped 22 percent today after it announced that it was seeking to raise $25 million by selling 12.5 million shares. The move is aimed at helping to finance its stage three melanoma trial. Terms of the California award require a dollar-for-dollar match of the agency’s funds for the trial.

The market was not happy with the company’s plans to sell more of its stock at a possible price of $2.00 share. The stock today closed at $2.06. Last Thursday it closed at $2.95, up 28 percent for the day. Its 52-week performance has ranged from a low of $2.03 to a high of $7.23.

The Street web site today was critical of the firm, giving its stock a D-minus rating and recommended selling it.  The Street said,
“This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and generally disappointing historical performance in the stock itself."
Last week, some stem cell agency board members raised questions about the financing of the trial. Steve Juelsgaard, former executive vice president of Genentech, asked about the company’s “plan B.”
David Mazzo, NeoStem photo

David Mazzo, CEO of NeoStem, responded by mentioning a possible stock sale and also said the firm had a $30 million equity line of credit.

The company plans to conclude its stock sale on June 2. The stem cell award is on a fast-track to deliver cash to the company within 45 days of approval of the grant. But that requires evidence of the matching funds.

The prospectus for the offering says the four-year trial will cost $25 million, but one analyst says it could cost as up $51 million.  The prospectus also indicated some of the money raised next week could go for purposes other than the melanoma trial.
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