NeoStem receives "Market Outperform", $3.00 price target from JMP Securities
NeoStem (AMEX:NBS) was Friday added to the coverage universe of JMP Securities, which initiated coverage of the the diversified stem cell technology company with a "Market Outperform" rating and a price target of $3.00 - way above its current trading price.
As at 12.16 pm EDT, shares in NeoStem were up 5% at 68 cents.
JMP's biotechnology analyst, Jason Butler, said: "NeoStem is driving the transformation to a high-value therapeutics company through the development of AMR-001."
AMR-001, acquired through the purchase of Amorcyte in mid-July, is NeoStem's autologous cell therapy designed to prevent heart tissue damage nand further major adverse cardiac events following a heart attack.
The treament consists of a patient's own bone marrow cells, which are processed to create pharmaceutical-grade cells that are then re-injected through coronary arteries into damaged areas of the heart, 6 to 11 days after a patient experiences a heart attack.
JMP anticipates "increased clarity on value-driving clinical catalysts" in the coming 12-18 months from the company, as well as "potential for further product candidate acquisitions."
A 150-patient phase II trial for AMR-001 is on track to begin enrollment in the first quarter of 2012, with results expected in the second half of 2013.
JMP views the target population for AMR-001 at at least 150,000 patients per year in the US, projecting a peak market penetration of 9.5% by 2019, and peak sales of $730 million.
"We believe that at peak sales, NeoStem can achieve gross margins of 80%," Butler said in his research note.
Commenting on NeoStem's January acquisition of Progenitor Cell Therapies (PCT), JMP said the deal expanded the company's cell processing capabilities and expertise in stem cell technologies, as well as provided a service business nearing break-even, adding that the deal "can be leveraged both to offset cash burn and, more importantly, to advance the development of NeoStem's own proprietary development programs."
Butler projects that sales growth at PCT can reach $25 million in 2015.
JMP views NeoStem's activities in China - focused on expanding stem cell therapies into the country as well as a 51% stake in generic antibiotics company Suzhou Erye - as non-core assets, and does't expect NeoStem to commit substantial capital to its efforts in the country going forward.
Any sale of Suzhou Erye would strengthen NeoStem's balance sheet, generating upwards of $35 million, according to JMP estimates, to fund further clinical advancement of its stem cell therapeutic programs.
Looking forward, JMP said it was looking to gain increased visibility on emerging clinical candidates for NeoStem's "Very Small Embryonic Like" (VSEL) stem cells technology, shown to have several physical characteristics that are generally found in embryonic stem cells.
NeoStem holds the worldwide exclusive license to the VSEL Technology, which JMP views as applicable to multiple regenerative medicine opportunities.
VSEL uses very small embryonic-like stem cells, shown to have several physical characteristics that are generally found in embryonic stem cells, but without the ethical implications.
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