Monday, May 25, 2015

NeoStem Sees Whopping Jump in Stock Price on $18 Million Backing from California

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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