VSEL has been a very quiet segment in the NeoStem business model throughout its 90-day rally but has promise and potential that could change the perception of the industry. The company is now researching and developing a slew of promising therapies to treat patients with degenerative diseases that originate from very small embryonic-like-stem cells (VSEL). However, this new technology is still in the early phases of development. As we learn more of its potential on a daily basis, it already appears to have the support of some very prominent investors, government, and universities for this innovating therapy. The company was just recently awarded a two-year grant from the National Institute of Allergy and Infectious Diseases for nearly $600,000 to aid in the development of VSEL Technology for Radiation Exposure, continuing to add to the already large amount of support for the development of this technology (the second grant recently provided from the NIAID).
The company's website lists the partnerships and support that it has received in the early development of VSEL and notes the indications that are attracting the most support. The Department of Defense has awarded more than $1.7 million in funding for research in osteoporosis treatment with the VSEL technology, and the U.S. Army Medical Research is investing into VSEL to find a better option for traumatic wound healing. The company, and more specifically this particular VSEL Technology, has received support from the Vatican (chose NeoStem as an exclusive partner), the University of California, the University of Michigan, Rutgers University, and the University of Louisville for at least one if not all-ongoing studies with the VSEL Technology.
As you can see the support for VSEL is impressive, which is mostly due to a belief that the limitations for indications are non-existent as the VSEL Technology is believed to be capable of liver regeneration, treating osteoporosis via bone regeneration, chronic wound healing, regeneration of motor neurons, and for the treatment of radiation exposure. Additionally, the list of potential treatments could rise very quickly, as bone marrow derived stem cells is still a fairly new concept. For the most part, treatments of these indications are non-existent and cell-therapy could be the only medical practice that could aid patients who have the various conditions.
The testing of the VSEL Technology is still in its early stages. As the company is now gaining support, and beginning to move forward, it's the concept of the technology combined with early studies that are providing hope to patients with incurable diseases that may provide investors with the upside potential. Just recently, the company presented at both the International Society for Cellular Therapy (ISCT) and the International Society for Stem Cell Research (ISSCR) on the use of VSEL for Macular Degeneration and Glaucoma, leading causes of incurable blindness, and showed significant cell survival in the treatment of two models of retinal diseases. Additional positive results are needed to confirm a continuation of visual function to determine if VSEL can be used as a therapy for age-related macular degeneration or other degenerative diseases. However, it is progress that had currently been unseen with other treatments, which is what makes the potential for VSEL so hopeful.
The theory behind VSEL is that it can effectively treat degenerative diseases without the ethical or moral dilemmas or even the negative biological effects that arise from using stem cells of embryonic derivation. These problems could be the reason that we are yet to see any FDA approved cell therapies, despite the fact that cell therapies show a clear benefit in treating diseases that cannot be cured with conventional medicine or surgical treatments. If NeoStem's VSEL platform proves itself successful, and bone marrow contains a sufficient heterogeneous population of stem cells that are similar to effective, yet controversial embryonic stem cells, then NBS may be the first to tap into this space with a technology that can treat virtually all-regenerative related diseases of the body with stem cells derived from bone marrow.
The VSEL Technology is still in the early stages of development and still has an excessive amount of research that must be performed to validate early results. Perhaps the most significant factor surrounding cell therapies revolves around the ethical issues because the advantages of using cell therapies for regenerative purposes shows a clear measurable advantage over other standards of care. Despite effective treatments such as StemCells' (STEM) HuCNC-SC technology, some regulators may deny its approval due to the ethical issues from neural stem cells that are derived from the brain, as some regulators may not feel comfortable with such a therapy, and choose to dwell on the negatives. Therefore, the technology of a safer VSEL Technology, if proven effective, could cross the barrier and help patients in the U.S. that lack treatment options for regenerative diseases, as a result it could open the space to other cell therapies to gain regulatory approvals.
Of course no discussion is complete without talking about the risks involved: And in shares of Neostem you will find the same risks as with any other developmental biotech company. In the past, the company faced several financial risks, yet after the sale of its generic pharmacy the company received a significant amount of cash and wiped out a heavy debt burden creating value in excess of $40 million from the sale. Hopefully, the sale will give the company the financial leverage that it needs to move forward with the development of its major segments of growth however the company will at some point need more money to fund clinical trials, unless PCT continues to grow. In regards to the VSEL technology, it is a technology in the early stages of development, and although early tests show its effectiveness, the clinical results still present the risk of failing. It is my opinion that VSEL is the next step in the process of making cell therapies more innovating, however Neostem must still face regulators, and regardless of how innovating or the effectiveness of its therapies it must still cross that barrier of having an FDA approved cell therapy in order to reach its full potential.
Earlier this year Osiris Therapeutics (OSIR) became the most high-profiled company to have an approved cell therapy, with Prochymal. Its approval was in Canada and New Zealand, and although the therapy could still gain approval in the U.S., it still shows a lack of progress or acceptance in the U.S. In my opinion, Neostem will be the second company to enter the U.S. market with its celebrated AMR-001 cell therapy. Baxter's (BAX) Phase 3 candidate for the treatment of refractory angina and chronic myocardial ischemia will be the first due to it to meeting both endpoints of increased exercise capacity and reducing angina episodes. The latter is the first candidate to ever reach such endpoints, which even further validates the potential of cell therapies if given regulatory approvals.
NeoStem bulls often point to the similarities between AMR-001 and Baxter's cell therapy and the fact that NeoStem's service business is manufacturing the cells for Baxter. These two facts have contributed much of NeoStem's rally over the last few months. Combined with the sale of its generic pharmacy business, I believe the stock is worth every bit of its rally. However, its VSEL Technology is rarely mentioned, as it's one of the newer segments of the business and is still years from creating sizable revenue. The VSEL technology shows the innovation of NeoStem, and that it's constantly trying to improve its clinical segment to remain the leader in the cell therapy arena. I believe that with VSEL, NeoStem is two steps ahead of its competition in the race to capitalize on a massive space of unmet medical needs; and that funding will continue to pour in and VSEL will become one of its bigger drivers as the company continues to explore the possibilities of stem cells derived from bone marrow, and treat degenerative diseases for patients who currently have no treatment alternatives. This is a big win for both the company and the millions who are forced to live with one of the diseases that VSEL could very well treat in the future.
Covered by Swiss Trader @ www.seekingalpha.com