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| A graphic depiction of trading on NeoStem stock last week. Google chart |
The
stock price of NeoStem, Inc., shot up 28 percent in one day last week after the
California stem cell agency approved a nearly $18 million grant to the firm for
a potential therapy that “teaches
the immune system which cells to attack and kill.”
The
governing board of the state research effort awarded the funds on Thursday May
21. The grant is to assist in a third stage clinical trial involving a treatment for metastatic melanoma,
the most deadly form of skin cancer. Following the approval, NeoStem’s stock soared
from $2.30 to close at $2.95.
The
California Stem Cell Report first disclosed the agency’s virtually certain action on
Tuesday May 19.
It was an obvious boon for the New York-based company whose
CEO, David Mazzo, told the board that the award would help to raise more cash
to finance the trial which is expected to cost $45 million to $51 million,
according to analyst Yi Chen of H.C. Wainwright.
For
the California Institute for Regenerative Medicine (CIRM), as the stem cell agency
is formally known, it will be the first time that it has plunged into a stage
three trial and the closest it has come to actually bringing a therapy to
market.
Jonathan
Thomas, chairman of the $3 billion agency, told the board on Thursday that the
NeoStem project has “the greatest
chance of success for the people of California that we have funded.”
The agency was created in
2004 when voters approved a ballot initiative whose backers raised expectations of quick development of stem cell therapies. The agency has committed more
than $1.9 billion for research. Its money for new awards is expected to run out
in 2020.
NeoStem, which has
operations in Mountain View and Irvine in California, issued a press release hailing
the award. The company called the action a “significant endorsement” of its
approach which it said has potential application in other types of cancer.
The release quoted
Randy Mills, president of the agency and former head of Osiris Therapeutics of
Maryland, as saying cash would start flowing to NeoStem in 45 days. He
continued,
“But that's just the start. We are not just providing financial support; we are also partnering with these groups to provide expertise, guidance and other kinds of support that these teams need to help them be successful.”
Under
a new scoring system introduced by Mills, the agency’s blue-ribbon reviewers
voted 6-3-5 to fund the program with the three saying the application needed
improvement. That action occurred behind closed doors weeks before last
Thursday’s meeting when the board ratified the reviewers’ decision on an 11-0 vote.
One CIRM board member, Leon Fine of Cedars Sinai, said that one perspective on the
reviewers’ voting could be that eight persons thought the application needed
more work or should be rejected.
Board
member Steven Juelsgaard, former executive vice president of Genentech, raised questions
about what might happen if the board rejected the NeoStem application, given
that it has only $19 million on hand at last report. Juelsgaard said that was not
sufficient to complete the trial.
Mills
declined to speculate on what the company might do.
Juelsgaard
returned to the subject a few minutes later when Mazzo addressed the board and
asked Mazzo about the company’s “Plan B.” Mazzo said the company could go to
the “capital markets.” He also said the company had recently negotiated a $30
million equity line of credit.
Mazzo
said that the firm is constantly looking for funds and that the CIRM grant
would go “a long ways to advancing the trial.”
The
vagaries of the marketplace do, however, play a role in the investment
community’s view of the company. After the stock jumped 28 percent on Thursday,
it dropped 2 percent on Friday.
The
52-week low for the stock is $2.15 and the high is $7.23.
The
trial is currently seeking enrollees worldwide, including at seven sites in
California.
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