We acquired our PCT subsidiary in January 2011. PCT is engaged in a broad range of services in the cell therapy market for the treatment of human disease.
Founded by Andrew L. Pecora, M.D. and Robert A. Preti, Ph.D., PCT is an internationally recognized cell therapy services and development company that represents a business for “as needed” development and manufacturing services for the emerging cell therapy industry from clinical trials through eventual commercialization. With its cell therapy manufacturing facilities and team of professionals, PCT offers a platform that can facilitate the preclinical and clinical development and commercialization of cellular therapies for clients throughout the world. Dr. Preti now serves as PCT’s President and Chief Scientific Officer and Dr. Pecora as its part-time Chief Medical Officer. Dr. Pecora also serves as Chief Medical Officer of NeoStem (effective August 17, 2011).
PCT is engaged in a broad range of services in the cell therapy market for the treatment of human disease. PCT offers cGMP compliant cell transportation, manufacturing, storage, and distribution services and supporting clinical trial design, product process development, logistics, regulatory and quality systems development services. Through its network of contacts throughout the cell therapy industry, PCT is able to identify early stage development opportunities in the cell therapy field and opportunistically develop these cell
therapies through proof of concept. From that point, products can be further developed and ultimately commercialized through NeoStem’s developing commercial structure. PCT’s expertise in the cell therapy arena includes cell-based therapeutic vaccines (with applications in oncology), other cell therapeutics, and regenerative medicine. From this platform, we hope to develop cell-based therapeutics. In addition to using PCT’s facilities and expertise to develop Amorcyte’s product candidates, as well as our MSC and VSELTM technologies, we may develop internally, or through partnerships, other allogeneic (cells from a third-party donor) or autologous (cells from oneself) therapeutic technologies.
PCT is accredited by the Foundation for Accreditation of Cell Therapies (“FACT”).
In the United States, through NeoStem Family Storage, LLC, a wholly-owned subsidiary of PCT, we offer “Family Banking” of stem cells, which services include collection, processing and storage of cells for newborns as well as adults. This enables healthy individuals to donate and store their stem cells for future personal therapeutic use, as may be needed. We have established a network of adult stem cell collection centers in the U.S. and for our cord blood business distribution channel through hospitals and obstetrician practices with a current focus on the New York and New Jersey metropolitan areas. With our acquisition of PCT, we acquired the expertise associated with cGMP, the highest Food and Drug Administration (“FDA”) standard, for stem cell banking.
We acquired our Amorcyte subsidiary in October 2011. Amorcyte is a clinical stage therapeutics company pursuing cell-based therapies for cardiovascular diseases. Amorcyte’s most advanced product candidate is AMR-001, a chemotactic hematopoietic stem cell product comprised of autologous bone marrow (“BM”) derived CD34+/CXCR4+ cells selected to treat damaged heart muscle following acute myocardial infarction (“AMI”). AMR-001 is being evaluated to determine its effect on myocardial perfusion (blood flow) and ability to prevent subsequent major adverse cardiac events following a significant AMI by preserving heart muscle tissue. AMR-001 is intended to increase microvascular blood flow in the myocardium (heart muscle) via neoangiogenesis (development and formation of new blood vessels), thereby reversing post-heart attack induced ischemia (restriction of blood supply) and rescuing tissue from hibernation and preventing eventual cell death (apoptosis). AMR-001 is injected 5 to 11 days post-stent placement (the repair phase) into the peri-infarct zone (that is, the living tissue on the periphery of the dead tissue), to restore perfusion surrounding the site of the heart attack.
Prior to its acquisition by NeoStem, Inc., Amorcyte completed a Phase 1 trial of AMR-001 in patients with damaged heart muscle following AMI and in January 2012, we commenced enrollment of a Phase 2 trial to investigate AMR-001’s ability to preserve heart function after a heart attack. We believe that Amorcyte’s Phase 1 study was the first stem cell trial to show dose-related, significant improvement over standard of care following AMI. The lack of myocardial perfusion remains a significant cause of morbidity and mortality in the United States and world-wide. Current interventions or medications have limited ability to prevent progressive myocardial cell apoptosis leading to cardiac deterioration and downstream major adverse cardiac events (“MACE”). We also believe that there are applications for AMR-001 in congestive heart failure, and we expect to begin a Phase 1 clinical trial of AMR-001 for this indication by 2013.
Just as it did for Amorcyte’s Phase 1 trial, PCT will offer its expertise in cell therapy and core process development providing a cost advantage for AMR-001 manufacturing for the Phase 2 trial.
In September 2010, the U.S. Patent Office granted Amorcyte U.S. Patent 7,794,705, protecting this therapeutic compound and method of treatment. In January 2012, the U.S. Patent Office granted Amorcyte U.S. Patent 8,088,370, expanding the protection of AMR-001 to include treatment of all vascular injury caused by vascular insufficiency, not just AMI.
We conduct other research and development activities on our own and in combination with academic, government and industry collaborators. These activities have been buttressed by our PCT acquisition with its cell therapeutic development expertise and facilities. For example, through Athelos, an 80% owned subsidiary, we are pursuing a novel regulatory T-cell (“T-reg”) therapy for restoring normal immune responses by enhancing T cell balance and function. This early clinical work provides potential applications in graft vs. host disease, solid organ rejection and autoimmune diseases such as asthma and diabetes. To date, government grants have provided funding for a portion of this program. In addition, our pre-clinical program is based on VSELTM Technology licensed from the University of Louisville. VSELTM (very small embryonic-like) stem cells have been shown to have characteristics generally found in embryonic stem cells without the potentially dangerous attributes of those cells. Our research efforts with VSELTM stem cells target osteoporosis and bone regeneration, macular degeneration and glaucoma and chronic wound healing. To date, The Department of Defense has provided funding for a significant portion of this program.
In 2009, we began certain adult stem cell initiatives in the People’s Republic of China (“China” or “PRC”) including: (i) constructing a stem cell research and development laboratory and processing and manufacturing facility in Beijing (the “Beijing facility”), (ii) establishing relationships with hospitals to provide stem cell-based therapies, and (iii) obtaining product licenses covering certain adult stem cell therapeutics focused on regenerative medicine.
In December 2011, China’s Ministry of Health announced its intention to more tightly regulate stem cell clinical trials and stem cell therapeutic treatments in the PRC. Additionally, we operate our regenerative medicine business in China through a wholly foreign owned entity (“WFOE”) and variable interest entities (“VIEs”). While often foreign companies use structures similar to the ones pursuant to which we have operated our regenerative medicine business in the PRC, and while such arrangements are not uncommon in connection with business operations of foreign companies in China in industry sectors in which foreign direct investments are limited or prohibited, recently there has been greater scrutiny by the business community of the VIE structure. Accordingly, the Company has determined to take steps to restrict, and expects to ultimately eliminate, its regenerative medicine business in the PRC.
Our Beijing Facility is located at the Life Science Innovation Center, Life Science Park, Zhongguancum, Beijing. It has been designed for comprehensive cell manufacturing, collection, processing and storage that can enable the PCT business model to launch in the PRC should the opportunity be presented. With the upcoming expiration of this lease in May 2012, the Company is considering its options with respect to extending the lease to allow for manufacturing of cell therapies, which will depend in part upon guidance from the PRC Ministry of Health with respect to regulations applicable to stem cell clinical research and applications.
We have a 51% ownership interest in Suzhou Erye Pharmaceutical Company Ltd. (“Erye”). Erye was founded more than 50 years ago and represents an established, vertically-integrated pharmaceutical business. Historically, Erye has concentrated its efforts on manufacturing and distributing of generic antibiotic products. It has received more than 160 production certificates from the State Food and Drug Administration of China, or SFDA, covering both antibiotic prescription drugs and active pharmaceutical intermediates (APIs). Our current senior executive management team at Erye, Mr. Shi Mingsheng, Chairman, and Madame Zhang Jian, General Manager, joined Erye in 1998 and in conjunction with others, bought it from the PRC government in 2003.
As part of our plan to focus our business on the cell therapy industry, we are pursuing strategic alternatives with respect to Erye. In June 2011 we engaged a financial advisor to lead the effort to pursue the possible divestiture of our 51% interest in Erye. Marketing efforts have led to a few nonbinding letters of intent. However, in addition to the factors set forth herein, it is too early to determine whether these or other proposals will lead to definitive agreements.
According to the MDB Capital Group’s January 2011 report entitled “The Regenerative Medicine Report: Part II,” cell-based therapies utilizing stem cells now represent a market of approximately $50 billion with an expected growth rate of 15% compounded annually, projected to reach an estimated $88 billion by 2014. NeoStem believes that an increasing portion of healthcare spending in the United States will be directed to cell and tissue based therapies in the coming years, driven both by aging baby boomers and the favorable pharmacoeconomic value proposition of a cell therapy treatment paradigm for chronic disease. The cardiovascular space represents one area where the forecasted burden on society is expected to rise substantially. Adverse consequences associated with severe myocardial infarctions (MI) and the progression to congestive heart failure even with current state of the art medical care, represent major unmet medical needs. These adverse consequences associated with MI typically result in an annual cost to society of $50,000 per patient per year on average for five years of life post MI and in those patients who do progress to congestive heart failure the numbers become substantially higher. Cell therapy offers the promise of alleviating much of the burdens of these chronic diseases in a cost-effective way.
With approved products currently being sold, the promise of cell therapy is close to becoming a reality. However, in 2011 the industry has faced several crises of investor confidence as industry pioneer Geron Corporation discontinued its embryonic efforts and Osiris Therapeutics, Inc., a leader in investigating the use of allogeneic cells that had signed a robust early partnership with biotechnology giant, Genzyme Corporation saw product rights returned when Genzyme itself was acquired by large pharmaceutical leader Sanofi Aventis. Both companies experienced difficulties in their ability to navigate the regulatory requirements for product approval. Inadequate trial designs was cited in the executive summary of the 2012 New York Stem Cell Summit Report as contributing to the failures. NeoStem believes that PCT’s decade of experience from manufacturing to regulatory affairs, from understanding product profile to basic mechanism of action, effective therapeutic dose, and the critical connection required in clinical design are major distinguishing characteristics of our Company versus the industry overall, and in fact position NeoStem to lead the industry in this way.
The number of companies that are currently in Phase 2 and Phase 3 trials in and around cell therapy has never been greater. As such, we believe the timeline to the next product approval in the cellular therapy industry will be visible within the next five years. While the dream of cell therapy and regenerative medicine has been the creation of biological or bio-hybrid tissues and organs that will replace and or partially regenerate tissues and organs damaged by disease, injury, or congenital anomaly, we believe the reality has never been closer. Regenerative medicine offers the promise to address many of these conditions by augmenting and or repairing malfunctioning tissues. Reports indicate that there are approximately eight million surgical procedures performed annually in the United States to treat these disorders. If approved and effective, cell therapies may have the effect of cutting health care cost as they may facilitate functional restoration of damaged tissues and not just abatement or moderation of symptoms. NeoStem’s Amorcyte subsidiary hopes to accomplish exactly this goal by strengthening failing hearts and preventing the progression to congestive heart failure which, under current standards of care, ultimately results in heart assist devices or heart transplant.
In fact, one should observe that amongst the failures of early pioneers like Geron and Osiris there are also several success stories with newly approved commercial products that include Shire plc, TiGenix NV and Dendreon Corporation. While the regenerative medicine industry is still in its early stages, the number of companies in late-stage clinical trials (Phase 2 and Phase 3) in the cardiovascular space alone represents, what we believe is a beacon for the industry.
The field of regenerative medicine continues to expand its scope but can be generally characterized into the following:
| • | Cell Therapy — the use of cells (adult or embryonic, donor or patient, stem or differentiated) for the treatment of many debilitating injuries and diseases. Therapeutic applications may include cancer vaccines, cell based immune-therapy, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and spinal cord injuries to name a few. This sector also includes the development of growth factors and serums and natural reagents that promote and guide cell development. |
| • | Tissue Engineering — using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fully functional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used as biomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquely attractive for certain applications. Therapeutic applications may include heart patch, bone re-growth, wound repair, replacement neo-urinary conduits, saphenous arterial grafts, inter-vertebral disc and spinal cord repair. |
| • | Tools, Devices and Diagnostics — i.e., creating cell lines that embody genetic defects or disease characteristics that are used for the discovery and development of new drugs. This sector also includes companies developing devices that are designed and optimized for regenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cell-based diagnostic tools. |
| • | Aesthetic Medicine — includes developing cell therapies, tissues and biomaterials for cosmetic applications. This sector includes hair follicle cells for hair regeneration, and collagen-secreting human dermal fibroblasts for facial wrinkles and other skin disorders. |
PCT is currently working with a wide range of clients in areas which range from regenerative medicine to virology and oncology. As such PCT has a unique and fundamental base platform of experience with virtually every cell type in development today. Our manufacturing service and developmental offerings are strategically aligned to participate in all of these aspects of the evolving cell therapy industry, as described above. Our goal is to continue to leverage the experience of PCT as a recognized leader of cell therapy manufacturing and development services in this industry.
All living complex organisms start as a single cell that replicates, differentiates (matures) and perpetuates in an adult through its lifetime. Cell therapy is aimed at tapping into the power of cells to prevent and treat disease, regenerate damaged or aged tissue and provide cosmetic applications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Since the 1970s, bone marrow and then blood and umbilical cord-derived stem cells have been used to restore bone marrow and blood and immune system cells damaged by chemotherapy and radiation used to treat many cancers. These types of cell therapies have been approved for use world-wide and are typically reimbursed by insurance.
Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (self-derived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. Dendreon Corporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. PCT assisted Dendreon, as its manufacturing partner, in the development of its cellular therapy and supported Dendreon’s various FDA submissions. Researchers around the globe are evaluating the effectiveness of cell therapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. We, as well as others, are developing cell therapies for cardiovascular disease. Cell therapies are also being evaluated for safety and effectiveness to treat autoimmune diseases such as diabetes, inflammatory bowel disease and bone diseases. While no assurances can be given regarding future medical developments, management believes that the field of cell therapy is a subset of biotechnology that