LifeTech Capital Updates NeoStem (NBS) Strong Buy $4.00 Target

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LifeTech Capital Updates NeoStem (NBS) Strong Buy $4.00 Target. New York, NY-based NeoStem is a multi-faceted, multinational medical company. Among their business are adult stem cell collection, processing and storage in the U.S., research and development for diagnostic and therapeutic applications using autologous adult stem cells, including their VSEL™ technology (very small embryonic-like stem cells) and several China-based, adult stem cell therapeutics operational and R&D activities for adult stem cell therapeutics focused on regenerative medicine. In addition, NeoStem and the Vatican's Pontifical Council for Culture announced a joint initiative with their charitable foundations to expand research and raise awareness of adult stem cell therapies. A 3-day international conference at the Vatican on adult stem cell research, including VSEL™ technology, is planned for 2011 and will focus on medical research presentations and theological and philosophical considerations and implications of scientific achievements.

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LifeTech Capital Updates NeoStem (NBS) Strong Buy $4.00 Target

  1. 1.  Unlocking the Value of Science ™  Boca Raton  San Francisco  New York  NeoStem, Inc. (NBS) UPDATE REPORT August 24, 2011  AMR-001 Phase II Trial in AMI (Heart Attack) to Begin Q4 Rating Target  China Pharma Sales Down on Strategic Mix Adjustment Strong Buy $4.00  Continuing Transition to a Therapeutics-Focused Company Analyst Stephen M. Dunn 1.) AMR-001 to Begin Phase II Trial: Through the recent acquisition of Sr. Managing Director Research Amorcyte (private), NeoStem gained all rights to the company’s lead sdunn@LifeTechCapital.com development candidate AMR-001, an autologous, bone marrow derived, (954) 240-9968 pharmaceutical grade cell-based product. AMR-001, is expected to initiate a William D. Dawson Phase II trial in Acute Myocardial Infarction (AMI) by Q4’11 and initiate a Senior VP Research Phase I trial in congestive heart failure during 2012. The AMI Phase II trial is wdawson@LifeTechCapital.com expected to complete enrollment within 12 months with top-line data 6 (561) 504-5818 months after the last patient is treated or mid-2013. 2.) Suzhou Erye Revenues Down for Q2 2011: China pharmaceutical revenues for Q2 2011 were $16.2M as compared to $18.1M Q1 2011 and $19.4M in prior year Q2. The lower sales are reflective of a strategic decision by management to discontinue selling certain pharmaceutical intermediates, in order to create capacity within the existing production lines for higher margin products in the future. Management expects these decreases in sales to be temporary. It is important for investors to note that management is presently Symbol: NBS considering multiple strategies in respect to its majority interest in Suzhou Market: NYSE Amex Equities Erye Pharmaceutical Co. including its possible divestiture (see Possible Sale 420 Lexington Avenue, of Eyre Pharmaceuticals) Suite 450 New York, NY 10170 3.) Transition to Cellular Therapeutics Company: While R&D efforts are (212) 584-4180 ongoing in the U.S., including VSEL™ technology (Very Small Embryonic www.neostem.com Like), AMR-001 therapy for AMI and Athelos T-cell therapy, NeoStem CEO – Dr. Robin L. Smith already has commercialized adult stem cell therapies in China with CFO – Larry A. May indications such as orthopedics, wellness, cosmetic & anti-aging. The acquisition activity during the past year has highlighted managements desire to transform NeoStem into a leading international provider (cont. next page) Market Data Share Data Most Recent Quarter Price $0.65 Outstanding 98.0M* Revenue $18.5M 52-Week $0.60-$2.15 Cash/Share $0.21* Net Income ($10.8M) Market Cap $63.7M* Book/Share $0.44* EPS ($0.13) Avg. Daily Vol. 615,500 Price/Book 1.5x* Cash $20.4M* % Short 3.0%* Debt/Share $0.40* Debt $38.8M Financial Results and Projections FYE Dec. 31 2009 2010 2011E 2012E 2013E Revenue $11.5M $69.8M $82.9M $96.5M $112.4M Net Income ($30.9M) ($23.5M) ($41.6M) ($38.8M) ($37.9M) EPS ($2.38) ($0.46) ($0.52) ($0.38) ($0.31) * Includes 13.8M shares for $15.5M net cash proceeds from 7/22/11 financing Please see last two pages for important disclosures and analyst certificationNeoStem, Inc (NBS) Page 1
  2. 2. www.LifeTechCapital.com August 24, 20113.) Transition to Cellular Therapeutics Company (continued): …of cell based therapies and a premier stem cellservice provider through the Progenitor Cell Therapy division. The company is exploring different ways to achieve thistransition including the possible sale of non-core assets such as their majority interest in Suzhou Erye Pharmaceutical Co.4.) We are maintaining our Strong Buy rating and 12-18 month Price Target of $4.00 based on a 35x multiple onprojected 2017 earnings and discounted 30% to adjust for risk: We have made changes to our financial modelreflecting management’s new business development goals moving forward. We are now including AMR-001 for AcuteMyocardial Infarction (AMI) in our model and accordingly we have raised our discount rate from 20% to 30% to accountfor the clinical development risk. We have extended stem cell-based revenues into 2017 where we expect to see growthdriven by both Progenitor Cell Therapy services and approved stem cell therapies in China. Suzhou Erye PharmaceuticalCo. continues to be a significant revenue generator for NeoStem while management is currently exploring themonetization of the asset.Company DescriptionNew York, NY-based NeoStem is a multi-faceted, multinational medical company.Among their business are adult stem cell collection, processing and storage in theU.S., research and development for diagnostic and therapeutic applications usingautologous adult stem cells, including their VSEL™ technology (very smallembryonic-like stem cells) and several China-based, adult stem cell therapeuticsoperational and R&D activities for adult stem cell therapeutics focused on regenerative medicine. In addition, NeoStemand the Vaticans Pontifical Council for Culture announced a joint initiative with their charitable foundations to expandresearch and raise awareness of adult stem cell therapies. A 3-day international conference at the Vatican on adult stemcell research, including VSEL™ technology, is planned for 2011 and will focus on medical research presentations andtheological and philosophical considerations and implications of scientific achievements.In addition to NeoStem’s adult stem cell business in the U.S. and China, NeoStem acquired 51% of Chinesepharmaceutical company Suzhou Erye Pharmaceuticals in October 2009. Erye is over 50 years old and manufactures anddistributes generic antibiotic products with sales of $70 million during 2010. They have 160+ production certificates fromthe Chinese State Food and Drug Administration (SFDA) for both antibiotic prescription drugs and active pharmaceuticalintermediates (APIs).In January 2011, NeoStem completed their acquisition of Progenitor Cell Therapy (PCT), an internationally recognizedcell therapy services and development company that, through its cell therapy manufacturing facilities and team ofprofessionals, facilitates the preclinical and clinical development and eventual commercialization of cellular therapies forclients in the United States and internationally. PCT offers cGMP-compliant cell transportation, manufacturing, storageand distribution services and supporting clinical trial design, process development, logistics, and regulatory and qualitysystems development services.Finally, on July 14, 2011 NeoStem announced a definitive merger agreement to acquire Amorcyte (private). Amorcyte’slead development candidate, AMR-001 is an autologous, bone marrow derived, pharmaceutical grade cell-based productthat uses a CD34+CXCR4+ enriched cell population and is thought to limit the damage of heart muscle that developsfollowing Acute Myocardial Infarction (AMI). AMR-001 has completed Phase I safety studies and is currently scheduledto start enrolling for a Phase II study in AMI in Q4, 2011.AMR-001 (Amorcyte Acquisition)On July 14, 2011, NeoStem announced a definitive merger agreement to acquire Amorcyte (private) whose leadcandidate, AMR-001, is expected to initiate a Phase II trial in Acute Myocardial Infarction (AMI) by Q4’11 andinitiate a Phase I trial in congestive heart failure during 2012. The AMI Phase II trial is expected to completeenrollment within 12 months with top-line data 6 months after the last patient is treated or mid-2013. NeoStem, Inc. (NBS) Page 2
  3. 3. www.LifeTechCapital.com August 24, 2011About AMR-001AMR-001 is an autologous, bone marrow derived, pharmaceutical grade cell-based product that uses a CD34+CXCR4+enriched cell population and is thought to limit the damage of heart muscle that develops following AMI.Mechanism of ActionAMR-001 works by increasing microvascular blood flow in the myocardium via neoangiogenesis, thereby reversing post-infarct ischemia and rescuing tissue from hibernation and preventing eventual death (apoptosis):  CD34+CXCR4+ cells are harvested from the patient’s own bone marrow and isolated to increase potency  The selected cells are infused via the infarct-related artery 6-10 days following the ST-Elevation MI (STEMI) –the optimal time frame for cellular intervention, after the pro-inflammatory “hot phase” and prior to permanent scar formation  The infused CD34+CXCR4+ cells home to the at-risk tissue via the SDF-1 (Stromal Cell-Derived Factor-1) gradient, inducing neoangiogenesis and a resultant functional benefit CD34+CXCR4+ Cells are a Natural Repair Mechanism 1.) A distress signal (hypoxia-inducible factors or HIF) is induced by hypoxia in the peri-infarct zone 2.) HIF induces synthesis of SDF and VEGF, which mobilize CD34+CXCR4+ cells 3.) The mobilized cells are trophic to the peri-infarct zone, preventing apoptosis and effecting neoangiogenesis Source: NeoStem Inc.Phase I Clinical Trial ResultsThe Phase I clinical trial results of AMR-001 for Acute Myocardial Infarction (AMI) were published in the January 2011issue of the American Heart Journal in a paper titled “CD34+ cell infusion after ST elevation myocardial infarction isassociated with improved perfusion and is dose dependent” which is summarized below:Background: The objective of the study was to determine whether the effects of infarct-related artery (IRA) infusion ofautologous bone marrow–derived CD34+ cells after ST elevation myocardial infarction (STEMI) are dependent on thedose (quantity and mobility) of the cells infused. Beneficial effects of IRA infusion of mononuclear cells after STEMIhave been inconsistent, possibly because of differences in timing, cell type, quantity, and mobility of infused cells.Methods: Patients were randomized to bone marrow harvest (n = 16) or control (n = 15). At a median of 8.3 days aftercoronary stenting for STEMI, CD34+ cells were infused via the IRA at 3 dose levels (5, 10, and 15 × 106) in cohorts of 5patients each. Baseline and follow-up imaging and ex vivo CD34+ cell mobility were performed.Results: Cell harvest and infusion were safe. Quantitative rest hypoperfusion score measured by single-photon emissioncomputed tomography improved at 6 months in the ≥10 million cohorts compared with controls (−256 vs +14, P = .02).There was a trend toward improved ejection fraction at 6 months (+4.5%) in the ≥10 million cohorts compared with nochange in the controls and 5 million cohort (+0.7%). Improved perfusion and infarct size reduction correlated with thequantity and mobility of the infused CD34+ cells. NeoStem, Inc. (NBS) Page 3
  4. 4. www.LifeTechCapital.com August 24, 2011Conclusions: The effects of CD34+ cell IRA infusion during the repair phase after STEMI are dose dependent and,at a threshold dose of 10 million CD34+ cells, associated with a significant improvement in perfusion that may limitdeterioration in cardiac function.Note: for the complete clinical trial design see http://clinicaltrials.gov/ct2/show/NCT00313339 Positive Dose Response Demonstrated Increasing Doses of AMR-001 Reduced the Size of the Infarct Region Increasing Doses of AMR-001 Reduced RTSS (hypoperfusion) Source: Quyyumi AA et al “CD34+ cell infusion after ST elevation myocardial infarction is associated with improved perfusion and is dose dependent” 2011, American Heart Journal; 161(1) 98-105 http://www.ahjonline.com/article/S0002-8703(10)00894-X/abstract Threshold Dose of 10 Million Cells Shows Significant Improvement in Perfusion RTSS Cohort Baseline 6 Months Change % Change Control 259.0 273.5 +14.5 +5.6% 5M Cells 714.2 722.0 +7.8 +1.1% 10M Cells 998.6 635.8 -362.8 -36.4% 15M Cells 584.0 462.0 -122.0 -20.9% Source: Quyyumi AA et al “CD34+ cell infusion after ST elevation myocardial infarction is associated with improved perfusion and is dose dependent” 2011, American Heart Journal; 161(1) 98-105 http://www.ahjonline.com/article/S0002-8703(10)00894-X/abstract Subgroup Analysis of ≥10 Million Cell Threshold on Additional Cardiac Functions RTSS Ejection Fraction End Systolic Volume Drop in Ejection Fraction % Change % Change % Change % Change Control & 5M Cells +3.3% +1.3% +4.6% 30%-40% 10M & 15M Cells -31.4%* +9.4 -6.1% 0% * Statistically Significant p=0.01 Source: Quyyumi AA et al “CD34+ cell infusion after ST elevation myocardial infarction is associated with improved perfusion and is dose dependent” 2011, American Heart Journal; 161(1) 98-105 http://www.ahjonline.com/article/S0002-8703(10)00894-X/abstract NeoStem, Inc. (NBS) Page 4
  5. 5. www.LifeTechCapital.com August 24, 2011Proposed Phase II Trial Design (subject to change)The new clinical trial is to investigate the potential of AMR-001 to preserve heart muscle function post-AMI andconsequently improve both quality-of-life and longevity by reducing the incidence and severity of Major Adverse CardiacEvents (MACE). The Phase II trial is expected to be a 150-patient U.S. multicenter, blinded, prospective, randomized,controlled clinical trial to evaluate evaluate the efficacy and safety of a single intra-coronary infusion of ≥10 million cellsof AMR-001 after STEMI in subjects with ejection fraction of <48%, as determined by screening CMR 96 hours poststenting. PROPOSED PHASE II HUMAN CLINICAL TRIAL PROTOCOL Intra-coronary Infusion of Bone Marrow Derived Autologous CD34+ Selected Cells in Patients With Acute Title Myocardial Infarction Trial Design Randomized 1:1, Double-Blind, Placebo-Controlled Phase II Trial # of Patients 150 (male and female) Ages 18 to 75 Years Arm 1: Placebo Arm 2: Intra-coronary infusion of an autologous bone marrow derived CD34+ stem cell product ≥10 million cells Primary Increased Cardiac Perfusion (RTSS) measured by SPECT and preservation of LVEF by CMR Endpoints Secondary Reduction in cumulative MACE at 12 months and 18 months, KCCQ & SAQ improvement Endpoints Centers 25 Centers in United States Primary Data 18 Months (RTSS 12 months enrollment plus 6 month post-treatment) Secondary Data 24 through 48 Months (MACE 12 months enrollment plus 12, 18, 24 and 36 months post-treatment) Source: NeoStem Inc.Progenitor Cell Therapy (PCT) On January 20, 2011, NeoStem announced they had closed their acquisitionof Progenitor Cell Therapy (PCT) which will continue as a wholly-ownedsubsidiary of NeoStem. PCT has served over 100 clients worldwide and hasexperience with over 20 different cell based therapeutics. PCT hasperformed over 30,000 cell therapy procedures in its cell therapymanufacturing facilities and processed and stored over 18,000 cell therapyproducts (including approximately 7,000 umbilical cord blood units, 10,000blood and marrow derived stem cells and 1,000 dendritic cells) and arranged the logistics and transportation for over14,000 cell therapy products for clinical use by over 5,000 patients. PCT Revenues for 2009 were $8.2M and $6.8M($5.8M excluding NeoStem) YTD Q3 2010. (Investors should note that LifeTech Capital, a division of Aurora CapitalLLC, acted as financial advisor to NeoStem.) PCT CELL THERAPY SERVICES We believe a merger with NeoStem could provide the critical mass needed by PCT to increase their clinical service revenues in the future while reducing costs through synergies with NeoStem. We also note that NeoStem and Progenitor Cell Therapy were already strategic partners for autologous adult stem cell processing and storage services under current Good Manufacturing Practices (cGMP) standards and the construction of a Beijing Facility, consisting of a clean room for adult stem Source: Progenitor Cell Therapy cell clinical trial processing, research anddevelopment laboratory space, collection and stem cell storage area and offices, together with the furnishings andequipment as well as quality control systems consisting of materials management, equipment maintenance and calibration, NeoStem, Inc. (NBS) Page 5
  6. 6. www.LifeTechCapital.com August 24, 2011environmental monitoring and compliance and adult stem cell processing and preservation which comply with cGMPstandards.Stem Cell Banking SynergiesInvestors should that NeoStem and PCT were already partners for stem cell processing and long-term storage. Theacquisition allows NeoStem to now havethese capabilities as cost. In addition, PCT FACILITES (in Square Feet)NeoStem and PCT were already partners Manufacturing Facilities Developed Undeveloped Totalin building a “Turn-Key” facility in Mountain View, California 17,425 7,599 25,024Beijing China which can also be done at Allendale, New Jersey 22,000 8,067 30,067cost. But perhaps even more importantly, Total 39,425 15,666 55,091NeoStem now has the expertise in-house Source: Progenitor Cell Therapyto leverage for increased scalability fortheir projects.Consulting SynergiesWe believe the merger with NeoStem brings PCT CELL PRODUCT EXPERIENCEcredibility and financial stability to PCT.With the backing of a sizable, publicly-traded company with significant revenues(generated by China pharmaceuticals), PCTcan now bid for contract work with new andlarger clients, which in turn provides morelong-term, complex projects with highergross margins. Of note is that PCT playedan instrumental role in manufacturingDendreon’s (Nasdaq:DNDN) Provenge®autologous cellular immunotherapythrough their clinical trials to FDA Source: Progenitor Cell Therapyapproval on April 29, 2010.Stem Cell R&D SynergiesWe believe PCT has the expertise to provide faster and cheaper development timelines for NeoStem’s stem cell therapiesincluding their VSEL™ development program. PCT brings considerable experience with the FDA and the regulatoryframework that will be needed to progress development. PCT New Product & Process Development Services Process development, optimization and scale-up Batch production record development Cost of goods reduction Product shipping validation Process validation Analytical test method development Product comparability studies Product characterization Stability studies Potency assays & Analytical test methods validation Source: Progenitor Cell TherapyDetails can be found at: http://www.sec.gov/Archives/edgar/data/320017/000114420410066939/v205571_424b3.htmFor a limited time:Background information can be found at: http://www.progenitorcelltherapy.comCorporate Presentation: http://www.progenitorcelltherapy.com/~DOCUMENTS/PCT_Corporate_Presentation_11-07.pdfTransaction SummaryOn January 19, 2011 NeoStem completed its acquisition of Progenitor Cell Therapy, LLC. NeoStem acquired all of themembership interests of PCT, and PCT is now a wholly-owned subsidiary of NeoStem. NeoStem issued 10.6M shares ofcommon stock for the acquisition. In addition, there are warrants to purchase between 1M and 3M shares of NeoStemCommon Stock, based on the following: NeoStem, Inc. (NBS) Page 6
  7. 7. www.LifeTechCapital.com August 24, 2011 (i) common stock purchase warrants to purchase 1,000,000 shares of NeoStem Common Stock exercisable over a seven year period at an exercise price of $7.00 per share (the “$7.00 Warrants”), and which will vest only if a specified business milestone is accomplished within three (3) years of the closing date and (ii) if the volume weighted average of the closing prices of sales of NeoStem Common Stock on the NYSE-Amex for the three (3) trading days ending on the trading day that is two (2) days prior to the Closing Date is less than $2.50, common stock purchase warrants to purchase 1,000,000 shares of NeoStem Common Stock exercisable over a seven year term at an exercise price of $3.00 per share (the “$3.00 Warrants”); and (iii) if the Parent Per Share Value is less than $1.70, common stock purchase warrants to purchase 1,000,000 shares of NeoStem Common Stock exercisable over a seven year period at an exercise price of $5.00 per share (the “$5.00 Warrants” and, collectively with the $7.00 Warrants and the $3.00 Warrants, the “Warrants”).Background: Prior Partnership Agreements with Progenitor Cell TherapyIn January 2009, NeoStem and Progenitor Cell Therapy (PCT) entered into a Cell Processing and Storage CustomerAgreement. Under the Agreement, PCT provides NeoStem autologous adult stem cell processing and storage servicesunder current Good Manufacturing Practices (cGMP) standards. Under the Terms of the agreement, NeoStem agreed touse PCT for processing and storage services for commercial purposes on an exclusive basis after PCT completed certainpreliminary services, consisting of technology transfer, protocol review, revision to ensure that the processing and storageservices are cGMP compliant, and confirmation that PCT ready and able to start the processing and storage services. Theterms were met and NeoStem announced on April 15th, 2009 that they will be utilizing Progenitor Cell Therapy, LLCexclusively for commercial adult stem cells processing and storage operations. PCT agreed to provide to NeoStem, stemcell processing and long term storage services for NeoStem’s business on an exclusive basis. The services are provided atboth PCT’s California and New Jersey facilities. The agreement is for four years, and is subject to early termination givena 1 year notice.Another agreement between the companies was constructed to include NeoStem’s business operations in China. OnDecember 31, 2009 NeoStem, NeoStem (China), and PCT entered into an agreement where NeoStem and NeoStem(China) engaged PCT to:  Construct a Beijing Facility, consisting of a clean room for adult stem cell clinical trial processing and other stem cell collections, which will have the processing capacity on an annual basis sufficient for at least 10,000 samples, research and development laboratory space, collection and stem cell storage area and offices, together with the furnishings and equipment.  Effect the installation of quality control systems consisting of materials management, equipment maintenance and calibration, environmental monitoring and compliance and adult stem cell processing and preservation which comply with cGMP standards and regulatory standards that would be applicable in the United States under Good Tissue Practices (GTP) standards, as well as all regulatory requirements applicable to the program under the laws of the People’s Republic of China (PRC).The aggregate cost of the program, including the phase 1 equipment purchases, is expected to be approximately $3million. The project commenced on April 1, 2010, and is anticipated to take until the end of 2010 to complete. NeoStemhas the option to terminate the agreement without cause with 60 days written notice to PCT. Under these circumstancesNeoStem would be required to pay for any services performed up to the date of termination and certain costs and expensesincurred by PCT. PCT has agreed to provide at least 90 days of support services to NeoStem for an additional fee aftercompletion of the project, which is renewable at NeoStems request for an additional 90 days.Athelos (Progenitor Cell Therapy)Through it’s acquisition of Progenitor Cell Therapy, LLC, NeoStem gained 80% ownership in Athelos, a private companydeveloping regulatory T cells (T-reg) as a therapeutic to treat disorders of the immune system. Imbalance of the immunesystem is attributed to multiple different diseases and disorders. T-reg therapy represents a new approach to treating thesediseases by restoring balance to the immune system by enhancing T-reg cell number and function. Athelos has a strong IPposition in the T-reg field and has established a consulting relationship with David Horowitz, MD, Chief of the Division NeoStem, Inc. (NBS) Page 7
  8. 8. www.LifeTechCapital.com August 24, 2011of Rheumatology and Immunology at the University of Southern California Keck School of Medicine. Pre-clinical andphase I studies are underway in multiple different indications including T-reg-based therapeutics to prevent and treat Graftvs. Host Disease, solid organ rejection as well as a broad class of other autoimmune diseases, such as asthma. There are 2different development initiatives:  Athelos 001- a cord blood or peripheral blood derived T-reg therapy to prevent and treat GvHD and solid organ rejection  Athelos 002- a peripheral blood derived T-reg therapy for all autoimmune diseaseResults from on going trials will determine the next steps in the development of these drug candidates. Though notincluded in our model or projections, investors should note that future success in these initiatives could represent potentialupside for NeoStem.What are Stem Cells?Stem cells have the ability to grow into different cell types in the body and when a stem cell divides, each new cell caneither remain a stem cell or become another type of cell with a more specialized function, such as a muscle cell, a redblood cell, or a brain cell.The two types of stem cells are embryonic and non-embryonic (also called adult stem cells) differ from their origins.Embryonic stem cells are derived from in vitro fertilized eggs. Because of their early-stage, they are theoretically morecapable of differentiating into any required cell type. The drawbacks to embryonic stem cells are potential for tumors orteratomas (tumorigenicity) as well as the moral and ethical issues surrounding the source.In contrast, NeoStem utilizes non-embryonic stem cells (adult stem cells), which are undifferentiated cells withintissue or organs that can renew and differentiate into some, or all, of the major specialized cell types of the tissue or organ.The primary roles of adult stem cells are to maintain and repair the tissue in which they are found.In addition, adult stem cells can be either the patients own (autologous) or donated from someone else (allogeneic).NeoStem utilizes autologous adult stem cells which eliminates the risk of immune system attack or Graft vs. HostDisease (GvHD). Non-Embryonic (Adult Stem Cell) Types and IndicationsStem Cell Type Indication These stem cells give rise to all the types of blood cells: red blood cells, B lymphocytes, T lymphocytes, natural Hematopoietic killer cells, neutrophils, basophils, eosinophils, monocytes, and macrophages. These stem cells give rise to a variety of cell types: bone cells (osteocytes), cartilage cells (chondrocytes), fat Mesenchymal cells (adipocytes), and other kinds of connective tissue cells such as those in tendons. These stem cells give rise to its three major cell types: nerve cells (neurons) and two categories of non-neuronal Neural cells—astrocytes and oligodendrocytes. These stem cells are in the lining of the digestive tract and occur in deep crypts and give rise to several cell Epithelial types: absorptive cells, goblet cells, paneth cells, and enteroendocrine cells. These stem cells occur in the basal layer of the epidermis and at the base of hair follicles. The epidermal stem Skin cells give rise to keratinocytes, which migrate to the surface of the skin and form a protective layer. The follicular stem cells can give rise to both the hair follicle and to the epidermis. Source: U.S. National Institutes of Health (NIH) Resource for Stem Cell Research NeoStem, Inc. (NBS) Page 8
  9. 9. www.LifeTechCapital.com August 24, 2011 Non-Embryonic (Adult) Stem Cell Differentiation Source: U.S. National Institutes of Health (NIH) Resource for Stem Cell ResearchNeoStem VSEL™ TechnologyIn the US, in addition to the company’s stem cell banking VSEL™ (Very Small Embryonic Like Stem Cell)business, NeoStem is engaged in research and development ofnew therapies based on a specific type of bone marrow derivedadult stem cell called VSEL™ (Very Small Embryonic Like).The research and development is being conducted in collaborationwith the Stem Cell Biology Program at the James Graham BrownCancer Center at the University of Louisville. The head of theStem Cell Biology Program, Dr. Mariusz Ratajczak, has shownthat bone marrow contains a natural population of stem cells thathave properties similar to those of embryonic stem cells, and thatthese cells can be collected in the peripheral blood in substantialquantity when a patient has been treated with granulocyte-colonystimulating factor, also known as Neupogen®.NeoStem’s VSEL technology identifies and collects circulating Source: James Graham Brown Cancer Center, University of Louisvillestem cells in the blood that have many physical characteristics typically found in embryonic stem cells using apheresisflow cytometry. These VSELs are very small in size, around 3.6 μm across. The cells also exhibit specific cell surfaceproteins (Oct-4+CXCR4+SSEA-1+Sca-1+CD45-lin-) and possess large nuclei containing unorganized chromatin(euchromatin). When these cells are place in co-cultures with C2C12 cells, they form embryoid body-like spheres (VSEL-DSs) that contain primitive stem cells that are capable of differentiating into cells from all three germ layers (e.g.,myocardium, neural tissue, and pancreas).1 Data from a study by the Univeristy of Louisville and collaborators publishedat the 50th annual ASH meeting in late 2008 concluded that VSELs show a similar methylation pattern to progenitor germcells (precursors to embryonic stem cells) in very specific regions. It is this similarity that supports their ability to NeoStem, Inc. (NBS) Page 9
  10. 10. www.LifeTechCapital.com August 24, 2011differentiate in ways analogous to embryonic stem cell differentiation. The scientist went on to further surmise that thedevelopmental origin of VSEL’s is directly form the epiblast/germ line, stating that that they are deposited during embryogenesis in the adult VSEL Differentiation into all Three Germ Layers tissues as a backup for tissue committed stem cells.1 Therefore, VSEL technology seems to have the potential and potency of embryonic stem cell techniques without the moral and regulatory hangs ups that accompany the development of them. More published studies at the University of Louisville have shown that VSEL stem cells have a role in cardiac regeneration and may help identify those at risk for cardiovascular disease. Both animal and human studies have Source: The National Institutes of Health: Resource for Stem Cell Research shown that the level or amountof VSELs in the circulating peripheral blood increases after acute myocardial infarction and other stress inducing eventssuch as stroke. This suggests that VSELs may be the body’s natural way of repairing damage to many different types oftissue when called upon by certain stresses and mobilized to the circulating bloodstream. This discovery supports the useof VSEL’s in therapy for MI and other cardiac indications.Congruent with the research being preformed and the University of Louisville, NeoStem is performing research of itsown. The Company opened an 8,000 square foot, state-of-the-art facility at the Riverside Technology Center inCambridge, Massachusetts on April 27th 2010. This facility will Collection Room at Cambridge Facilityfocus on expanding the current VSEL™ technology; performingdetailed characterization, purification and expansion of the stemcells. There will also be collection rooms for the harvesting ofAutologous VSELs for storage and private use. Research into theuse of VSEL technology for both therapeutic as well asdiagnostic purposes will be preformed on premises. One specificdiagnostic potential currently under investigation is a stem cellbiomarker screening panel. Such a test would use anti bodies toquantify levels of several stem cell populations that are known tobe found circulating in the bloodstream, including VSELs. Theselevels could then be compared to an age adjusted reference levelof circulating stem cells to give researchers a better indication ofthe overall wellness of an individual. Source: NeoStem, IncThere has been supporting evidence of VSELs effectiveness in treating conditions other than in cardiac indications. Astudy published in the Perspectives of Stem Cells found the same correlation of VSEL mobilization to the peripheral bloodin patients following a stroke as previously mentioned in patients experiencing myocardial infarction. What is more is thatthere was a positive correlation between the amounts of circulating VSELs found in the patient and the extensiveness ofthe stoke, suggesting the possible use of prognostic type of test and the possibility of these cells importance in neuralregeneration.2 On August 11th, 2010 NeoStem Announced a sponsored research agreement (SRA) with the Schepens EyeResearch Institute, a charitable corporation of Massachusetts and an affiliate of Harvard Medical School. Under theagreement NeoStem will collaborate with Schepens in research focused on VSEL therapy for both age-related maculardegeneration (AMD) and Glaucoma. The principal investigators are Dr. Michael Young, Ph.D., Director of the InstitutesMinda de Gunzburg Center for Ocular Regeneration, and Dr. Kameran Lashkari, M.D. The research will examine the NeoStem, Inc. (NBS) Page 10
  11. 11. www.LifeTechCapital.com August 24, 2011regenerative potential of VSEL™ Technology in the visual system through the engraftment of very small embryonic-likestem cells in animal models. Reference References1 Shin, Ph.D., Dong-Myung, Mariusz Z. Ratajczak, M.D, Ewa K. Zuba-Surma, Ph.D, and Magdalena Kucia. "The Unique Pattern ofSomatic Imprint in Oct-4+ Very Small Embryonic Like (VSEL) Stem Cells Isolated from Adult Tissues Further Supports Both TheirEpiblast/Germ Line Origin and Explains Quiescent Status: Potential Modification of Somatic Imprint as a Key to Longevity?" OnlinePrograms and Abstracts. 50th ASH Annual Meeting and Exposition, 8 Dec. 2008. Web. http://ash.confex.com/ash/2008/webprogram/Paper8719.html2 Ratajczak, Mariusz Z., Ewa Zuba-Surma, Magda Kucia, Przemyslaw Nowacki, and Bogdan Machalinski. "Potential Application ofVery Small Embryonic Like (VSEL) Stem Cells in Neural Regeneration." Perspectives of Stem Cells (2010): 231-43. SpringerLink.Web. 2 Sept. 2010. http://www.springerlink.com/content/h3nh4261663x1579/Adult Stem Cell Business in the United StatesNeoStem is a leading provider in the U.S. of adult stem cell collection, processing and storage services. The practice ofcollecting and storing adult stem cells at a younger age for later autologous use should they be needed has been termed bythe company as a “Bio-Insurance” program. Autologous cells have many advantages to currently used allogenicprocedures most notably being that a patient would have a known quantity of cells that have no risk for rejection or Graftversus Host Disease (GvHD). NeoStem has focused on a select group of customers initially, concentrating on people whocould potentially benefit from having a supply of their stem cells available for personal therapeutic use, including:  Individuals with a family history of serious diseases  Those at high risk for burns, wounds and other trauma, such as first responders and military personnel  Individuals at occupational risk from prolonged radiation or chemical exposure, such as healthcare providers, laboratory personnel and nuclear power plant workers  Wellness, cosmetic and anti-aging focused individuals  Athletes and others who could benefit from regenerative therapiesNeoStem has collection center strategically positioned in Southern California and the Northeast, and plans to have 10centers opened by the end of 2010. The procedure of stem cell collection and storage has both an upfront and a recurringfee. They charge $7,500 dollars for the stem cell collection, which involves treating the patient with a low-dose, short-course of mobilizing agent granulocyte-colony stimulating factor, also known as Neupogen™ (for an additional $1,000fee). Neupogen™ stimulates the migration of the stem cells from the bone marrow into the peripheral blood stream wherethey can be collected through a minimally invasive procedure called apheresis. The cells are then processed and sortedusing flow cytometry and stored in multiple vials containing different stem cell types. The process does not change oralter the underlying cells and does not require expansion technology. There is a recurring fee of $750 per year (if paidmonthly or $699 if paid annually) for the storage of the stem cells. NeoStem uses Progenitor Cell Therapy (PCT) on anexclusive basis for the storage of all stem cell samples. (see Partnerships) NeoStem, Inc. (NBS) Page 11
  12. 12. www.LifeTechCapital.com August 24, 2011United States Department of Defense (DoD) ContractsNeoStem continues to strengthen its ties to the Department of Defense (DoD) with another possible, and larger, grant forusing VSEL™ technology to treat osteoporosis. This follows their previous DoD contract for rapid wound healing.Update:On August 8, 2011 NeoStem announced that the Department of Defense, Peer Reviewed Medical Research Program ofthe Office of the Congressionally Directed Medical Research Programs awarded NeoStem $1,780,049 to be appliedtowards funding VSEL™ Technology. The award will support investigation of Very Small Embryonic-Like (VSEL) stemcells, for its bone building and regenerative effects in the treatment of osteoporosis. The award is being made under theNeoStem’s FY2010 Technology/Therapeutic Development Award application number PR101055.On July 12th 2010, NeoStem announced it had been awarded a $700,000 contract from the U.S. Army Medical Researchand Materiel Command, Telemedicine and Advanced Technology Research Center (USAMRMC-TATRC). The U.S.Army Medical Research Acquisition Activity contract number: (W81XWH-10-2-0039) is for the purpose of evaluatingthe use of topically applied bone marrow-derived adult mesenchymal stem cells (MSCs) for rapid wound healing.Development in this field could help save soldiers from amputations and immobilization due to injuries. This First step bythe Department of Defense could represent the beginning of more collaborative projects in regenerative therapy forcombat soldiers including spinal cord injury and retinal damage.Adult Stem Cell Business in ChinaNeoStem has made significant progress in commercializing their approved stem cell therapies in China, includingadditional sites, pricing and reimbursement allowances.On December 9, 2010, NeoStem announced that an affiliated entity had entered into an agreement with ShijiazhuangThird Hospital in the Peoples Republic of China (PRC) to offer NeoStems licensed treatments for orthopedicapplications. Shijiazhuang Third Hospital is located in Shijiazhuang, Hebei Province, approximately 170 miles south ofBeijing. Shijiazhuang Third Hospital has 800 beds, 350 of which are dedicated to orthopedics. Shijiazhuang ThirdHospital specializes in orthopedics with extensive experience in spinal, joint, and hand and foot surgeries. It also boasts ahighly regarded orthopedic trauma emergency room.This follows the November 2, 2010 announcement that Weihai Municipal Price Bureau, the local authority in charge ofpricing for public medical services in China, approved the pricing for single side and bilateral arthroscopic orthopedicautologous adult stem cell based treatment being administered at Wendeng Orthopedic Hospital ("Wendeng Hospital"),one of the leading specialist orthopedic hospitals in China based in Wendeng, Shandong Province, China. Additionally,Weihai Municipal Labor Bureau Medical Insurance Office approved Wendeng Hospitals application for reimbursementeffective November 1, 2010, whereby patients are eligible to receive reimbursement for up to 80% of the cost of theorthopedic procedure under the new technology category.Update:On May 17, 2011 Neostem announced that an affiliated entity has entered into an agreement with Tianjin Nankai Hospitalin the Peoples Republic of China (PRC) to offer NeoStems licensed treatments for orthopedic applications. This newagreement with Tianjin Nankai Hospital is now the third location where Chinese citizens can receive adult stem celltreatments for arthritis and orthopedic conditions based on technology exclusively licensed by NeoStem for Asia. NankaiHospital is located in Tianjin, approximately 80 miles from Beijing, less than a 30 minute ride on the new high-speedtrain. Tianjin is a city with a population of over 14 million and has over 400 hospitals. Tianjin Nankai Hospital hasapproximately 1,100 patient beds, of which approximately 88 are dedicated to orthopedics. Following the completion ofits planned new hospital building, orthopedic beds are expected to be expanded to approximately 1,000 beds. NeoStem, Inc. (NBS) Page 12
  13. 13. www.LifeTechCapital.com August 24, 2011China’s regulatory and scientific environment is more accepting of cellular based therapies. In addition to the morerelaxed regulatory framework, China also has a rapidly expanding upper and middle class that are interested inregenerative medicine and have the means to pay for such therapies. In 2009, NeoStem began to address this potentialmarket by creating a separate stem cell business unit. Regulations in the Peoples Republic of China are restrictive toforeign business. NeoStem created a wholly foreign-owned entity (WFOE), by the name NeoStem (China) Inc. toalleviate some of these potential restrictions to their business. In addition to the creation of the WFOE the stem cellbusiness initiates are being conducted via two Chinese domestic entities to further comply with PRC law. Qingdao NiaoBio-Technology Ltd. and Beijing Ruijieao Bio-Technology Ltd are the domestic entities and are controlled by the WFOEthrough various contractual arrangements. All of the stem cell based initiatives in China are being led by US employeeswho are utilizing Chinese experts in the respective applications and markets being pursued. The current focuses of thecompany include the following initiatives in China:  Developing a pipeline of regenerative medicine therapies initially focused on orthopedic conditions utilizing licensed procedure, Regenexx™.  Developing wellness, cosmetic and anti-aging applications through in-licensed technology from Vincent Giampapa, M.D.  Participating in the medical tourism market for regenerative medical treatments.  Establishing a network of collection, processing and storage facilities through a partnership with Enhance BioMedical Holdings Limited.  Engaging in research and development designed to improve and expand our service and product offeringsRegenexx™ Therapy and the Orthopedic MarketIn March 2009, NeoStem acquired an exclusive license for Asia to use the Regenexx™ stem cell procedure, developed byColorado-based Regenerative Sciences, Inc. (see Partnerships). The patented procedure uses autologous mesenchymalstem cell isolated from bone marrow for the treatment of a host of different orthopedic conditions including osteoarthritis,meniscus tears of the knee, avascular necrosis and bulging lumbar discs. NeoStem plans to utilize there already provenperipheral blood stem cell collection technique with the Regenexx™, which they feel will only increase the proceduresmarketability in the Asian market due to the non-invasive nature of the collection. NeoStem is creating a network ofhospitals in China to provide the Regenexx™ procedure through Qingdao Niao Bio-Technology Ltd, the domestic entitycontrolled by the WFOE (see China Corporate Structure). In June 2009, Wendeng Hospital and Qingdao Niao enteredinto a five-year agreement to treat patients and conduct clinical research regarding the application of autologous stem cellsfor the treatment of a variety of orthopedic conditions. Close to 90% of patients at Wendeng Hospital are seeking medicalattention in the orthopedic field and the hospital is considered to be one of the leading specialty orthopedic hospitals inChina. Personnel at the Wendeng have completed training by Regenerative Sciences, Inc. and operations began in the firstquarter of 2010.Wellness, Cosmetic & Anti-Aging ApplicationsIn February 2009, NeoStem entered into a world wide exclusive in-licensing agreement from Dr. Vincent Giampapa,M.D. for autologous adult stem cell based skin rejuvenation therapies. The company plans to advance this regenerativemedicine business in both the United States and China. In the three year agreement, Dr. Giampapa agreed to provideconsulting services in the anti-aging giving guidance on a range of different cosmetic procedures. The procedures were tobe provided at Qingdao Second Sanatorium of Jinan Military Command through Qingdao Niao Bio-Technology Ltd.Construction related delays at the hospital have prompted NeoStem to explore other options for the initial launch of thesetherapies.Medical TourismMedical tourism represents a significant potential source of revenue for NeoStem, as the trend of people traveling outsideof their country for access to medical therapies not currently available or affordable at home is projected to continue torise. In 2007, 750,000 Americans traveled outside of the US in order to undergo medical procedures. The World Bankestimates that number could increase to 6 million by 2010 and the market world wide to be as large as 10 billion by 2011.China has become and is continuing to become a desirable destination for patients seeking procedures in a diverse range NeoStem, Inc. (NBS) Page 13
  14. 14. www.LifeTechCapital.com August 24, 2011of medical specialties. Both private and government hospitals in major Chinese cities have begun to capitalize on thistrend by establishing medical tourism departments to provide treatment to international patients using advanced Westernmedical technology and techniques, including stem cell-based therapies. NeoStem plans to use this Chinese developmentas both a driver for their stem cell collection business as well as their stem cell therapy businesses.Stem Cell Collection and Storage BusinessIn June 2009, NeoStem entered into a ten-year, exclusive, royalty bearing agreement with Enhance BioMedical HoldingsLimited to develop an adult stem cell collection and treatment network of doctors and hospitals in Shanghai, Taiwan, andthe Chinese provinces of Jiangsu, Zhejiang, Fujian, Anhui and Jiangxi (Network Territory). Enhance BioMedicalHoldings Limited is a Shanghai corporation and a subsidiary of Enhance Holding Corporation, a multinationalconglomerate. Under the terms of the Agreement, NeoStem will provide Enhance BioMedical with the training, technical,and other assistance required for it to offer stem cell-based therapies, for which the company will receive a six figuretechnical assistance fee. After training is completed, the agreement gives Enhance BioMedical the exclusive right toutilize NeoStem’s proprietary adult stem cell technologies to provide adult stem cell services and therapies in theterritories aforementioned. NeoStem will receive milestone payments and royalties on gross revenues derived from stemcell based therapies from Enhance BioMedical. Subject to certain conditions, the agreement is renewable at the option ofEnhance BioMedical for an additional 10 years. The agreement also gives NeoStem the option to acquire up to a 20%fully diluted equity interest in Enhance BioMedical until June 2014.Enhance BioMedical already has relationships with doctors and hospitals in the territories covered in the agreement, andalso the Anti-Aging and Prevention Medical Center in Taipei, Taiwan. The Anti-Aging and Prevention Medical Centerfocuses on the development of stem cell bases anti aging therapies and could principally benefit from the technology in-licensed from Dr. Giampapa (See Wellness, Cosmetic & Anti-Aging Applications).Research and DevelopmentIn May 2009, NeoStem through Qingdao Niao Bio-Technology Ltd., leased space from Beijing Zhongguancum LifeScience Park Development Corp., Ltd at the Life Science Innovation Center, Life Science Park, in Zhongguancum,Beijing. The Facility is to be used for collection, processing and storage of adult stem cells as well as research anddevelopment of cellular based therapies in China. The facility will support the development of the Regenexx™ procedureat Wendeng Hospital. In addition to the therapies currently being pursued commercially in China, NeoStem will also beconducting research on their VSEL technology at the Beijing Facility that could include their therapeutic use in neural,cardiac and ophthalmic disease. In order to conduct cell-based clinical trials in collaboration with specialty hospitals,NeoStem was required under PRC law to form a not-for-profit organization. In July 2009, NeoStem entered into acooperation agreement with their Chinese consultant, Shandong Life Science and Technology Research Institute (SLSI)for assistance in the formation of the NPO. The organization was funded by NeoStem in the amount of 730,000 dollarsand another 500,000 dollars of funding is expected in the near future. NeoStem entered into an agreement Progenitor CellTherapy, LLC for the construction of the Beijing Facility on December 31, 2009 (see Partnerships)China Corporate Structure & Suzhou Erye Pharmaceuticals BusinessesNeoStem China Corporate StructureNeoStem has 2 business units in China, their China pharmaceutical business unit which owns 51% in Suzhou EryePharmaceuticals Company and their China adult stem cell business unit conducted their wholly foreign-owned entity(WFOE) NeoStem (China) with two Variable Interest Entities (VIE) Qingdao Niao Bio-Technology Ltd. and BeijingRuijieao Biotechnology Ltd. NeoStem, Inc. (NBS) Page 14
  15. 15. www.LifeTechCapital.com August 24, 2011 NeoStem China Corporate Structure & Ownership VIE = Variable Interest Entities Source: NeoStem Inc. & LifeTech CapitalChina Adult Stem Cell BusinessDue to PRC restrictions on foreign entities from conducting certain activities, NeoStem operates the stem cell businessthrough NeoStem (China), a wholly foreign-owned entity (WFOE). To comply with China’s foreign investmentprohibition on stem cell research and development, this business is conducted via two Variable Interest Entities (VIEs)Qingdao and Beijing Ruijieao under which NeoStem (China) is providing technical and management services to the VIEsin exchange for substantially all net income of the VIEs. One VIE will be devoted to adult stem cell related research anddevelopment activities and the other will be devoted to the commercialization of stem cell-based therapies in collaborationwith hospitals.Also due to PRC restrictions, NeoStem (China) with their China consultant, SLSI, is forming a not-for-profit organizationto conduct various clinical trials in China. SLSI has taken responsibility for establishing and structuring clinical trials withthird parties, other research institutes and a number of partner hospitals.China Pharmaceutical BusinessOn October 30, 2009, NeoStem completed a merger with China Biopharmaceuticals Holdings (CBH) resulting in a 51%controlling interest in Suzhou Erye Pharmaceuticals Company (Erye). The remaining 49% ownership is represented bySuzhou Erye Economy and Trading Co. (EET) through a joint venture agreement.Suzhou Erye Pharmaceuticals BusinessSuzhou Erye Pharmaceuticals (Erye) was founded over 50 years ago and is a vertically-integrated pharmaceuticalbusiness, focused primarily on the manufacturing and sale of antibiotics. Specifically, Erye focuses on manufacturing anddistribution of generic antibiotic products and has received more than 160 production certificates from China’s State Food& Drug Agency (SFDA) covering both antibiotic prescription drugs and active pharmaceutical ingredients (APIs). 2009revenue was over $60 million (unaudited) with approximately 536 full-time and 209 part-time employees of December31, 2009.Update - Possible Sale of Eyre PharmaceuticalsFollowing their January 2011 acquisition of PCT, NeoStem is pursuing strategic alternatives with respect to its 51%interest in Erye. NeoStem is planning to devote its resources and management efforts to cell therapy manufacturing anddevelopment, and other related activities, including adult stem cell collection and storage, and in further developing theirregenerative medicine business in China. NeoStem believes that the proposed acquisition of Amorcyte is in keeping withNeoStem’s strategic mission. NeoStem also believes that if they could monetize Erye, NeoStem would have additionalcapital needed to pursue the development of multiple cell therapies. As such, in June 2011, NeoStem engaged a financialadvisor to lead the effort to pursue the possible divesture of its 51% interest in Erye. Marketing efforts have commencedhowever it is too early to determine whether such efforts will lead to a proposal to purchase at a price and on terms thatNeoStem would consider acceptable or whether, in the event a proposal or proposals on prices and terms acceptable toNeoStem are received, whether a transaction would be completed. More information can be found in their 8-K (page 42)at: http://www.sec.gov/Archives/edgar/data/320017/000114420411040514/v228561_8k.htm NeoStem, Inc. (NBS) Page 15
  16. 16. www.LifeTechCapital.com August 24, 2011Pharmaceutical ProductsErye offers a highly diversified portfolio of pharmaceuticals with no single drug accounting for more than 10% of sales.Erye’s top 10 products in sales for 2010 are shown below: Erye Top Ten Drugs in 2010 (37% of Total Sales) % of Sales Acetylspiramycin 5% Cefamandole Natate for injection (0.5g) 4% Oxacillin Sodium 4% Amoxicillin/Sulbactum Sodium for injection 4% Cefamandole Natate for injection (1.0g) 4% Mezlocillin sodium for injection 4% Amoxicillin & Clavulanate Potassium sodium 3% Azlocillin sodium 3% Ceftizoxime sodium for injection (0.5g) 3% Ceftizoxime sodium for injection (1.0g) 3% Source: NeoStem Inc.It should be noted that currently, approximately 70% of their drug products are covered by insurance, and which isexpected to grow in the future.New Pharmaceutical PipelineErye also has a pipeline of recently approved pharmaceuticals, submitted pharmaceuticals and candidates currently inclinical trials as show: ERYE PHARMACEUTICAL PIPELINE Status Indication Drug Approved – Launch Pending GERD Omeprazol Capsules Approved – Launch Pending Anti-Infective Cloxacillin Sodium Awaiting Approval Antibiotic Clindamycin Phosphate Injection Awaiting Approval HBV/HIV Adefovi Capsules & API Clinical Trials Anti-Infective Faropenem sodium API Clinical Trials Anti-Infective Faropenem Sodium Tablets Clinical Trials HBV Tiopronin Enteric-Coated Capsules Source: NeoStem Inc.Distribution ChannelsIn China, pharmaceutical manufacturers are prohibited from selling directly to hospitals where the majority ofprescriptions are written. Erye has a distributor network that that covers all of mainland China’s provinces andmunicipalities. Erye has over 40 internal sales and marketing personnel to supervise the distributor network through threechannels: exclusive distributors for newer higher-margin prescription drugs, non-exclusive distributors for mature, lower-margin prescription drugs and exclusive distributors for active pharmaceutical ingredient sales to large pharmaceuticalmanufacturers.ManufacturingErye currently operates a production facility in the City of Suzhou, containing approximately 33,490 square meters ofoffices, dormitories, a food court, warehouse and production facilities, including 8 cGMP production lines certified by theSFDA, workshops and laboratory areas. Erye is currently transitioning to a new, state-of-the-art production facility in theXiangcheng District of Suzhou. The new facility includes 12 buildings containing a total of approximately 53,000 squaremeters of space, for which the external building construction has been completed and manufacturing equipment is beingassembled and tested. Erye began transferring its operations in January 2010 and received notification that the SFDA hasapproved the cGMP certification to manufacture solvent crystallization sterile penicillin and freeze dried raw sterilepenicillin at the new facility. Erye’s goal is to become one of the largest antibiotics producers in Eastern China. NeoStem, Inc. (NBS) Page 16
  17. 17. www.LifeTechCapital.com August 24, 2011Update:On April 26, 2011 NeoStem announced their majority-owned Suzhou Erye Pharmaceutical Company received 2 awards atthe 4th annual Chempharm Brand Summit 2011 in China where companies in the pharmaceutical industry are recognizedfor outstanding achievement in specific categories. Specifically, Erye Pharmaceutical was awarded "Top 10 Anti-InfectionDrug Award" and "Top 100 Brand Names Award".On June 13, 2011 Neostem announced that Erye Pharmaceutical had received approval from the State Food and DrugAdministration (SFDA) in China for its lyophilized (freeze dried) powder for injection production line which isresponsible for the production of over 20 finished pharmaceutical products, 80% of which are on the National InsuranceDrug List. The combined production lines now certified by the SFDA are six of eight planned and were responsible forapproximately 99% of Erye’s 2010 revenues. Approvals for the 2 remaining product lines (the oral active pharmaceuticalingredient (API) line and the capsule line) are expected by year end. The approval of this cGMP product line importantlyremoves the capacity constraints associated with old Erye manufacturing facility. Erye Pharmaceuticals Facilities and Planned Campus Source: NeoStem Inc.NeoStem and Vatican Pontifical Council Initiative on Adult Stem CellsOn May 19, 2010 NeoStem and the Vaticans Pontifical Council for Culture announced a joint initiative with theircharitable foundations to expand research and raise awareness of adult stem cell therapies. NeoStems Stem for LifeFoundation and the Pontifical Councils STOQ (Science Theology and the Ontological Quest) International foundation,will work on collaborative activities advancing scientific research on adult stem cells, exploring clinical applications inregenerative medicine and the cultural relevance on theological and ethical issues. Reverend Tomasz Trafny, of thePontifical Council for Culture stated “We are particularly excited about NeoStems VSEL™ technology and believe thatmutual collaboration between NeoStem and the Pontifical Council for Culture could lead to significant financialcommitment to support VSEL™ technology research."A 3-day international conference at the Vatican on adult stem cell research, including VSEL™ technology, is planned for2011 and will focus on medical research presentations and theological and philosophical considerations and implicationsof scientific achievements.Update:NeoStem and the Vaticans Pontifical Council for Culture announced more details regarding their partnership designed toadvance adult stem cell research and their upcoming signature event, the international Vatican conference on adultstem cells which will be held November 9th – 11th at the Vatican.The conference will include the foremost experts in adult stem cell research and recognized leaders in medicine as well asChurch and scientific leaders, policymakers, ethicists, educators, Ministers of Health from around the world, ambassadorsto the Holy See, and representatives of the stem cell therapeutic business community. The conference goal is to create agreater awareness of adult stem cells and their promise and discuss the latest research and developments along with theimplications for the future of culture, medicine, religion, and public policy. The event will also be broadcast via radio andtelevision. The conference website can be accessed at www.adultstemcellconference.org NeoStem, Inc. (NBS) Page 17
  18. 18. www.LifeTechCapital.com August 24, 2011NeoStems charitable organization, “Stem for Life Foundation” and the Pontifical Councils Foundation, STOQInternational (Science Theology and the Ontological Quest) are also sponsors of the efforts. More information on thesecan be found at www.stemforlifefoundation.com and www.stoqinternational.orgThe joint mission of the partnership, with the complete support of the Pontifical Council for Health Care Workers and thePontifical Academy for Life, will be to:1) Foster the highest levels of scientific research on adult stem cells and to explore the cultural, ethical and humanimplications of their use.2) Seek to create awareness about the promise of scientific research in concordance with ethical values through the furtherdevelopment of adult stem cell technology.3) Determine short-term and long-term actions which political, scientific, educational, and religious leaders can take to bepart of the cultural paradigm shift arising from the next wave - regenerative medicine.4) Lay the groundwork for a collaborative network of scientists and patrons who embrace the promise of adult stem cellsto reduce human suffering, advance scientific research on adult stem cells and explore their clinical application in the fieldof regenerative medicine, as well as the cultural impact of such research.5) Advance adult stem cell research and facilitate its safe transformation from the lab to the clinic.PartnershipsUniversity of LouisvilleNeoStem is engaged in research and development of new therapies based on VSEL technology with the University ofLouisville Research Foundation, or ULRF, and has a worldwide exclusive license rights. The agreement was previouslymade with Stem Cell Technologies, Inc. (SCTI). SCTI was acquired by NeoStem in November of 2007. Under theLicense Agreement, The Company agreed to engage in a diligent program to develop the VSEL technology. Certainlicense fees and royalties are to be paid to University of Louisville Research Foundation (“ULRF”) by NeoStem, and theCompany is responsible for all payments for patent filings and related applications. The Agreement has an initial term of20 years and portions of the license may become non-exclusive if NeoStem does not diligently develop the VSEL™technology. The Agreement can be terminated entirely if NeoStem chooses to not pay for the filing and maintenance ofany patents. The License Agreement calls for the following specific payments:  Reimbursement of $29,000 for all expenses related to patent filing and prosecution incurred before the effective date (“Effective Date”) of the license agreement  Non-refundable prepayment of $20,000 creditable against the first $20,000 of patent expenses incurred after the Effective Date  Non-refundable license issue fee of $46,000  Non-refundable annual license maintenance fee of $10,000 upon issuance of the licensed patent in the United States  Royalty of 4% on net sales  Specified milestone payments  Specified payments in the event of sublicensing.The agreement was amended February 2009 and items 2 and 3 were paid in March 2009. The License Agreement containscertain provisions relating to "stacking," permitting NeoStem to pay royalties to ULRF at a reduced rate in the event itis required to also pay royalties to third parties exceeding a specified threshold for other technology in furtherance ofthe exercise of its patent rights or the manufacture of products using the VSEL technology.Regenerative Sciences, Inc.In March 2009, NeoStem acquired an exclusive license for Asia to use the RegenexxTM stem cell procedure.RegenexxTM was developed by Colorado-based Regenerative Sciences, Inc. and is an innovative process that expands a NeoStem, Inc. (NBS) Page 18
  19. 19. www.LifeTechCapital.com August 24, 2011patient’s own adult stem cells to treat a variety of musculoskeletal diseases. The licensed procedure uses autologousmesenchymal stem cells extracted from bone marrow for the treatment of various orthopedic conditions, includingosteoarthritis, meniscus tears of the knee, avascular necrosis and bulging lumbar discs. Under the Terms of theagreement, RSI must provide consulting services to NeoStem in the area of stem cell-based orthopedic therapies for theAsia market. The company feels that the integration of peripheral blood collection processes (instead of invasive bonemarrow collection) into the RegenexxTM procedure will enhance its marketability in the Asian market.Immuneregen BiosciencesOn April 22, 2010 NeoStem entered into a Collaborative Research Agreement with ImmuneRegen BioSciences, Inc., awholly owned subsidiary of IR BioSciences Holdings, Inc. (IRBS.OB). The Agreement is focused on the development ofImmuneRegen’s advanced, adult human stem cell product called Homspera®. Under the agreement, NeoStem willinvestigate the effects of Homspera®, which has been shown to enhance stem cell activity, in combination withNeoStems VSEL technology. Under the collaboration, NeoStem has the right to execute an option agreement to negotiatean exclusive license to resulting technology.Enhance BioMedical Holdings LimitedIn June 2009, NeoStem entered into a ten-year, exclusive, royalty bearing agreement with Enhance BioMedical HoldingsLimited, a Shanghai corporation and a subsidiary of Enhance Holding Corporation, a multinational conglomerate. TheAgreement is to develop an adult stem cell collection and treatment network of doctors and hospitals in Shanghai, Taiwan,and the Chinese provinces of Jiangsu, Zhejiang, Fujian, Anhui and Jiangxi (Network Territory). Under the terms of theAgreement, NeoStem will provide Enhance BioMedical with the training, technical, and other assistance required for it tooffer stem cell-based therapies, for which the company will receive a six figure technical assistance fee. After training iscompleted, the agreement gives Enhance BioMedical the exclusive right to utilize NeoStem’s proprietary adult stem celltechnologies to provide adult stem cell services and therapies in the territories aforementioned. NeoStem will receivemilestone payments and royalties on gross revenues derived from stem cell based therapies from Enhance BioMedical.Subject to certain conditions, the agreement is renewable at the option of Enhance BioMedical for an additional 10 years.The agreement also gives NeoStem the option to acquire up to a 20% fully diluted equity interest in Enhance BioMedicaluntil June 2014.Enhance BioMedical already has relationships with doctors and hospitals in the territories covered in the agreement, andalso the Anti-Aging and Prevention Medical Center in Taipei, Taiwan. The Anti-Aging and Prevention Medical Centerfocuses on the development of stem cell bases anti aging therapies and could principally benefit from the technology in-licensed from Dr. Giampapa (See Wellness, Cosmetic & Anti-Aging Applications).In addition to being a partner with NeoStem, Enhance BioMedical is also a large share holder in the company as well. Thecompanies CEO, Jack Ling, invested $5M in an $11M April 13th, 2009 private placement financing. As of March 15,2010, Enhance BioMedical owned approximately 16.7% of NBS common stockIntellectual PropertyNeoStem has a number of patents and patent applications as shown below. We expect additional patent applications willbe filed in the future as development progresses. NUMBER DESCRIPTION FILED Selected NeoStem UNITED STATES Intellectual Property Filings Method and Compositions for Restoration of Age Related Tissue Loss Granted 7414021 in the Face or Selected Areas of the Body 8/19/08 Elective Collection and Banking of Autologous Peripheral Blood Stem 11/396,238 3/30/06 Cells 11/763,655 Processing Procedure for Peripheral Blood Stem Cells 6/15/07 61/266,825 Mesenchymal Stem Cells Isolated from Mobilized Peripheral Blood 12/04/09 Method of Isolation of Stem Cell Populations from Peripheral Blood 61/266,860 12/4/09 Using Size-Based Separation 12/096,754 Very Small Embryonic-Like Stem Cells and Methods of Isolating and 11/02/06 NeoStem, Inc. (NBS) Page 19
  20. 20. www.LifeTechCapital.com August 24, 2011 Using the Same Very Small Embryonic-Like Stem Cells and Methods of Isolating and 12/261,958 10/30/08 Using the Same Transplantation of Very Small Embryonic-Like Stem Cells for Cardiac PCT/US2008/081832 10/30/08 Repair Following Myocardial Infarction Methods for Isolating Very Small Embryonic-Like Stem Cells from PCT/US2009/005414 9/30/09 Cord Blood Autologous Bone Marrow-Derived Cultured Mesenchymal Stem Cells 61/039,941 Delivered in a Fibrin Spray Accelerate Healing in Murine and Human 3/27/07 Cutaneous Wounds Autologous Bone Marrow-Derived Cultured Mesenchymal Stem Cells 12/413,250 Delivered in a Fibrin Spray Accelerate Healing in Murine and Human 3/27/09 Cutaneous Wounds Autologous Bone Marrow-Derived Cultured Mesenchymal Stem Cells PCT/US2009/038666 Delivered in a Fibrin Spray Accelerate Healing in Murine and Human 3/27/09 Cutaneous Wounds Method and Compositions for Restoration of Age Related Tissue Loss 12/218,334 7/14/08 in the Face or Selected Areas of the Body Method and Composition for Restoration of Age Related Tissue Loss 61/175,275 5/04/09 in the Face or Selected Areas of the Body Mesenchymal Stem Cell Isolation and Transplantation Method and 60/761,441 1/24/06 System to be Used In a Clinical Setting Mesenchymal Stem Cell Isolation and Transplantation Method and PCT/US2007/60889 1/23/07 System to be Used In a Clinical Setting Mesenchymal Stem Cell Isolation and Transplantation Method and 12/161,911 11/07/08 System to be Used In a Clinical Setting Methods and Compositions for Optimized Expansion and Implantation 11/773,774 7/05/07 of Menechymal Stem Cells Methods and Compositions for Optimized Expansion and Implantation PCT/US2008/68202 6/25/08 of Menechymal Stem Cells 61/014,987 Compositions to Promote Implantation and Engraftment of Stem Cells 12/19/07 PCT/US2008/87452 Compositions to Promote Implantation and Engraftment of Stem Cells 12/18/08 61/036,551 Compositions and Method for Cartilage Repair 3/14/08 PCT/US2009/037126 Compositions and Method for Cartilage Repair 3/13/09 61/120,098 Methods and Compositions for Intervertabral Disc Repair 12/05/08 61/154,874 Methods and Compositions for Intervertabral Disc Repair 2/24/09 Selected NeoStem EUROPE Intellectual Property Filings 07809600.95 Processing Procedure for Peripheral Blood Stem Cells 6/15/07 Very Small Embryonic-Like Stem Cells and Methods of Isolating and 06827358.0 11/02/06 Using the Same Mesenchymal Stem Cell Isolation and Transplantation Method and 07762515.0 1/23/07 System to be Used In a Clinical Setting Selected NeoStem CHINA Intellectual Property Filings 200780030328.6 Processing Procedure for Peripheral Blood Stem Cells 6/15/07 Very Small Embryonic-Like Stem Cells and Methods of Isolating and 200680052508.X 11/02/06 Using the Same Selected NeoStem CANADA Intellectual Property Filings Elective Collection and Banking of Autologous Peripheral Blood Stem 2548580 4/05/04 Cells Mesenchymal Stem Cell Isolation and Transplantation Method and 2640185 1/23/07 System to be Used In a Clinical Setting Selected NeoStem HONG KONG Intellectual Property Filings Mesenchymal Stem Cell Isolation and Transplantation Method and 09103392.9 1/23/07 System to be Used In a Clinical Setting Source: NeoStem, IncNeoStem, Inc. (NBS) Page 20
  21. 21. www.LifeTechCapital.com August 24, 2011Recent Financing ActivityOn July 22, 2011, NeoStem completed an underwritten offering of 13,750,000 units at a purchase price of $1.20 per unityielding gross proceeds of $16.5M with each unit consisting of one share of Common Stock and a five year warrant topurchase 0.75 of a share of Common Stock (10,312,500 shares) at an exercise price of $1.45 per share.On July 14, 2011, the NeoStem announced their intention to acquire Amorcyte, Inc. and will issue 6,821,283 shares ofcommon stock plus warrants to purchase 1,881,008 shares of NeoStem common stock. In addition, 4,092,768 shares ofNeoStem stock will vest upon achievement of AMR-001 milestones. Amorcyte shareholders will receive additionalconsideration in the form of an earn-out upon commercialization. The closing of the merger is subject to approval byNeoStem and Amorcyte stockholders.On April 5, 2011, NeoStem completed a private placement with nine persons and entities of 1,244,375 shares of CommonStock at a purchase price of $1.28 for gross proceeds of $1.6M.On March 3, 2011, NeoStem completed a private placement of 2,343,750 shares of Common Stock at a purchase price of$1.28 a share for gross proceeds of $3M. Five persons and entities were involved in the private placement includingSteven S. Myers, a NeoStem director who purchased 390,625 shares, and Dr. Andrew L. Pecora, Chief Medical Officer ofNeoStem’s subsidiary PCT who purchased 78,125 sharesPCT Acquisition Transaction SummaryOn January 19, 2011 NeoStem completed its acquisition of Progenitor Cell Therapy, LLC. NeoStem acquired all of themembership interests of PCT, and PCT is now a wholly-owned subsidiary of NeoStem. NeoStem issued 10.6M shares ofcommon stock for the acquisition. In addition, there are warrants to purchase between 1M and 3M shares of NeoStemCommon Stock, based on the following: (i) common stock purchase warrants to purchase 1,000,000 shares of NeoStem Common Stock exercisable over a seven year period at an exercise price of $7.00 per share (the “$7.00 Warrants”), and which will vest only if a specified business milestone is accomplished within three (3) years of the closing date and (ii) if the volume weighted average of the closing prices of sales of NeoStem Common Stock on the NYSE-Amex for the three (3) trading days ending on the trading day that is two (2) days prior to the Closing Date is less than $2.50, common stock purchase warrants to purchase 1,000,000 shares of NeoStem Common Stock exercisable over a seven year term at an exercise price of $3.00 per share (the “$3.00 Warrants”); and (iii) if the Parent Per Share Value is less than $1.70, common stock purchase warrants to purchase 1,000,000 shares of NeoStem Common Stock exercisable over a seven year period at an exercise price of $5.00 per share (the “$5.00 Warrants” and, collectively with the $7.00 Warrants and the $3.00 Warrants, the “Warrants”).On November 19, 2010, NeoStem, completed concurrent offerings of (i) an underwritten offering of 6,337,980 commonstock units at a purchase price of $1.45 per unit, with each unit consisting of one share of common stock par value $0.001and a warrant to purchase 0.5 of a share of common stock with an exercise price of $1.85 per share, and (ii) a registereddirect offering of 10,582,011 preferred stock units at a purchase price of $0.945 per unit, with each unit consisting of oneshare of Series E 7% Senior Convertible Preferred Stock, par value $0.01 per share, convertible at $2.0004, maturing May20, 2013; a warrant to purchase 0.25 of a share of common stock with an exercise price of $2.0874 per share; and 0.0155of a share of common stock.As of June 30, 2011, there were 23.6 million warrants to purchase shares outstanding with a weighted average price of$2.70, a weighted average remaining life of 3.7 years as shown in the table. Also as of June 30, 2011, there were 16million stock options issued with a weighted average price of $1.76 and a weighted average remaining life of 7.7 yearsunder the U.S. Equity Plan. Of these, 8.1 million stock options were vested and exercisable as of June 30, 2011.Additionally, as of June 30, 2011, there were 3.1 million stock options issued with a weighted average price of $1.95 anda weighted average remaining life of 8.8 years under the Non-U.S. Equity Plan. Of these, 817K stock options were vestedand exercisable as of June 30, 2011. Finally, as of August 10, 2011, there were 98,048,447 shares common stockoutstanding. NeoStem, Inc. (NBS) Page 21
  22. 22. www.LifeTechCapital.com August 24, 2011ManagementDr. Robin L. Smith, Chairman and CEO: Dr. Smith joined the Company as Chairman of its Advisory Board inSeptember 2005 and, effective June 2, 2006, became the Chief Executive Officer and Chairman of the Board. Dr. Smith,who received a medical degree from Yale University in 1992 and a masters degree in business administration from theWharton School in 1997, brings to the Company extensive experience in medical enterprises and business development.From 2000 to 2003, Dr. Smith served as President & Chief Executive Officer of IP2M, a multi-platform media companyspecializing in healthcare. During her term, the company was selected as being one of the 10 fastest growing technologycompanies in Houston. IP2M was sold to a publicly-traded company in February 2003. Previously, from 1998 to 2000,she was Executive Vice President and Chief Medical Officer for HealthHelp, Inc., a National Radiology Managementcompany that managed 14 percent of the healthcare dollars spent by large insurance companies.Dr. Smith has acted as a senior advisor and investor to both publicly traded and privately held companies where she hasplayed a significant role in restructuring and or growing the companies. Dr. Smith served on the Board of Directors of twoprivately held companies, Talon Air and Biomega, and also served on the Chemotherapy Foundation Board of Trusteesand The New York Theatre Ballet. She currently serves on the Board of Trustees of the NYU Medical Center Board, ispast Chairman of the Board of Directors for the New York University Hospital for Joint Diseases where she headed upnew development efforts and board member recruitment, and served on the Board of Choose Living. Dr. Smith is thePresident and serves on the Board of Directors of The Stem for Life Foundation.Larry A. May, CFO: Mr. May, the former Treasurer of Amgen (NasdaqGS: AMGN), one of the world’s largestbiotechnology companies, initially joined NeoStem to assist with licensing activities in September 2003. He became anofficer upon our acquisition of the business of NS California in January 2006. For the last 25 years, Mr. May has workedin the areas of life sciences and biotechnology. From 1983 to 1998, Mr. May worked for Amgen as Corporate Controller(1983 to 1988), Vice President/Corporate Controller/Chief Accounting Officer (1988 to 1997), and VicePresident/Treasurer (1997 to 1998). At Amgen, Mr. May helped build Amgen’s accounting, finance and IT organizations.From 1998 to 2000, Mr. May served as the Senior Vice President, Finance and Chief Financial Officer of BiosourceInternational, Inc., a provider of biologic research reagents and assays. From 2000 to May 2003, Mr. May served as theChief Financial Officer of Saronyx, Inc., a company focused on developing productivity tools and secure communicationsystems for research scientists. From August 2003 to January 2005, Mr. May served as the Chief Financial Officer of NSCalifornia. In March 2005, Mr. May was appointed CEO of NS California and in May 2005 he was elected to the Boardof Directors of NS California. He received a Bachelor of Science degree in Business Administration & Accounting in1971 from the University of Missouri.Joseph Talamo, VP Corporate Controller and Chief Accounting Officer: Mr. Talamo formerly held various seniorpositions at OSI Pharmaceuticals, Inc., a publicly-traded biopharmaceutical company focused on discovering, developingand commercializing products for the treatment of cancer, diabetes and obesity, and most recently served as its VicePresident and Corporate Controller. While at OSI from 1996 to 2010, Joe helped build the accounting and financeinfrastructure to support the clinical development and commercial launch of Tarceva®, OSIs targeted therapy approvedfor the treatment of patients with non-small cell lung cancer and pancreatic cancer. Prior to OSI, Joe worked at Bristol-Myers Squibb from 1995 to 1996 in the Financial Reporting and Consolidations Group, and at KPMG from 1993 to 1995in the Health Care and Life Sciences Audit Group. Joe also served as Treasurer of OSI Pharmaceuticals Foundation from2008 to 2010.Catherine M Vaczy, VP and General Counsel: Ms. Vaczy joined NeoStem in April 2005 as Vice President and GeneralCounsel and is responsible for overseeing our legal affairs. From 1997 through 2003, Ms. Vaczy held various seniorpositions at ImClone Systems Incorporated, a then publicly-traded company developing a portfolio of targeted biologictreatments to address the medical needs of patients with a variety of cancers, most recently as its Vice President, Legaland Associate General Counsel. While at ImClone (NasdaqGS: IMCL), Ms. Vaczy served as a key advisor in the day-to-day operation of the company and helped forge a number of important strategic alliances, including a $1 billion co-development agreement with Bristol Myers Squibb (NYSE: BMY) for Erbitux® and ImClone’s targeted therapy approvedfor the treatment of metastatic colorectal and head and neck cancers. From 1988 through 1996, Ms. Vaczy served as acorporate attorney advising clients in the life science industry at the New York City law firm of Ross & Hardies. Ms. NeoStem, Inc. (NBS) Page 22

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