- 1.EQUITY RESEARCH Biotechnology March 7, 2013 Vernon Bernardino
Neostem, Inc. (NYSE:MKT: NBS;
$0.53)[email protected] Focused on
Shifting the Paradigm in Cell-Based Therapies Rating: MARKET
OUTPERFORM NeoStem Inc. (NBS) is developing autologous bone marrow
stemRisk Profile: SPECULATIVE cell-derived therapies for the
treatment of diseases with blockbuster opportunities. In our view,
NBS cell products focused subsidiaries each Price Target: $6.00
with dominant intellectual property portfolios positions NeoStem as
one of the leading companies advancing adult stem cells as
treatments for Market Data diseases that are high cost burdens to
the healthcare system. We employed valuation methods that show
significant potential upside in NBS share price,52-Week Range:
$0.84-$0.30 and derived an average value of $6.45 per share. We
initiate coverage onAverage Daily Volume:618,753 NeoStem with a
Market Outperform rating and 12-month price target of $6.Market Cap
($M): $84 Enterprise Value ($M): $72 We believe NeoStem is
positioned at the forefront of a paradigm shift Cash ($M): $12.0 in
cell-based therapy. NeoStem is developing an active portfolio of
product Shares Outstanding:159.4 candidate assets based on the
companys diverse array of technology Public Float ($M):$124.3
platforms and leading adult stem cell products that target
blockbuster market Short Interest:4,391,642.0 opportunities. We
believe the companys business components, Amorcyte, Athelos, VSEL,
and stem cell banking, position NeoStem at the forefront ofVol.
(mil)Price shifting paradigms and advancements in the stem cell
industry. 6 15 NeoStem is poised to capture the economic benefits
of industry growth. 0.8 NeoStem acquired Progenitor Cell Therapy
(PCT), a contract development 4 and manufacturing organization, in
an effort to bring additional cell therapy3 0.6 expertise in-house
and establish a one-stop-shop global cell therapy product
development organization. By generating revenues ($9.5mn in 2011
20.4 and a projected $14mn in 2012) and leveraging its cGMP
manufacturing 1 flexibility for scale-up production, PCT helps
offset the cost of developing0 0.2 NBS own proprietary cell
products, as PCT gives the company an ongoingMAR-12JUL-12
NOV-12MAR-13 opportunity to capture revenues from cell therapy
industry growth. We anticipate NeoStem emerges in 2013 leading the
paradigm shiftCompany Description underway in the stem cell
industry. We believe innovative approachesNeoStem Inc. (NYSE: NBS)
is developing autologous have led companies like NeoStem to
demonstrate the viability of cell- bone marrow stem cell-derived
therapies for the based product manufacturing technologies to
realize untapped potentialtreatment of diseases with blockbuster
opportunities. for profitability. With AMR-001 we believe the
company has refined aNBS cell-products focused subsidiaries each
with BMC-based cell therapy approach and demonstrated potential to
changedominant intellectual property portfolios in several the
history of heart disease. We anticipate NeoStem will further
explorecategories positions NeoStem as one of the leading AMR-001s
potential in other ischemia-related therapeutic indication and be
companies advancing adult stem cells as treatments first to bring
the first stem cell based therapy to blockbuster product status.
for multiple diseases that are high cost burdens to We look for the
outlook in the group, as well as investor returns, to further the
healthcare system. Discovered by its Amorcyte improve in
2013.subsidiary, lead product AMR-001 is a proprietary +
preparation of CD34 cells that employs a novel ischemia-targeting
strategy that produced positive Phase I results in acute myocardial
infarction. NeoStemFYE Dec2011A2012E2013E captures the economic
benefits of stem cell industryRevenue ($M) 1Q $1.4 $3.8A$3.5 growth
with subsidiary, Progenitor Cell Therapy, a 2Q $2.2 $3.4A$3.6
leading contract development and manufacturing 3Q $2.2 $4.4A$4.0
organization with $15mn in projected 2012 revenues 4Q
$3.6$2.7$4.2Total $9.5 $14.3$15.2 and 30% yr/yr annual growth, thus
lowering the riskEPS1Q$(0.14)$(0.08)A $(0.04) with its internal
development programs. 2Q$(0.13)$(0.15)A $(0.04) 3Q$(0.08)$(0.06)A
$(0.04) 4Q$(0.25) $(0.05) $(0.04)Total$(0.54) $(0.35) $(0.16)Please
refer to pages 29-30 for important disclosures 1
2. Brinson Patrick Neostem, Inc. - March 7, 2013 Investment
Summary and Key Points V NeoStem Inc. (NYSE: NBS) is developing
autologous bone marrow stem cell-derived therapies for the
treatment of diseases with blockbuster opportuntieis. In our view,
the companys cell products focused subsidiaries each with dominant
intellectual property portfolios in several categories positions
NeoStem as one of the leading companies advancing adult stem cells
as treatments for multiple diseases that are high cost burdens to
the healthcare system. We employed valuation methods that show
significant potential upside in its share price, and derived an
average value of $6.45 per share. We initiate coverage on NeoStem
with a Market Outperform rating and 12-month price target of $6.
Key Points We believe NeoStem is positioned at the forefront of a
paradigm shift in cell-based therapy. NeoStem is developing an
active portfolio of product candidate assets based on the companys
diverse array of technology platforms. The companys subsidiaries
are developing leading adult stem cell products that target
blockbuster market opportunities. Discovered by NeoStem subsidiary,
Amorcyte, + AMR-001 is a proprietary preparation of autologous bone
marrow-derived CD34 cells that employ a novel ischemia-targeting
strategy that produced positive Phase I results in acute myocardial
infarction. NeoStems Athelos subsidiary is developing T-cell based
therapeutics to target autoimmune conditions. The companys
exclusive worldwide license to VSEL technology utilizes the unique
regenerative properties of human very small embryonic-like stem
cells to explore their potential use as treatments for tissue
regeneration. Lastly, Progenitor Cell Therapy, NeoStems premier
contract manufacturer of cell- based products generates revenues
that significantly lower risk in the companys internal cell therapy
product development programs. As a result, we believe NeoStem has
developed an organization with broad capabilities to be positioned
at the forefront of leading advancements in the stem cell industry.
NeoStem captures the economic benefits of stem cell industry growth
with Progenitor Cell Therapy. NeoStem acquired Progenitor Cell
Therapy (PCT), a contract development and manufacturing
organization (CDMO), in an effort to bring additional cell therapy
expertise in-house and to establish a one-stop-shop global network
of cell therapy product development organization. PCT brings
NeoStem closer to its goal of becoming a leader in the fast-growing
cell therapy industry. By generating revenues ($9.5mn in 2011 and a
projected $14mn in 2012) and leveraging its cGMP manufacturing
flexibility for scale-up production, PCT helps offset the cost of
developing its own proprietary cell products. PCTs strong
leadership position is built on a foundation of services that cater
to the cell therapy industry as a whole, including being the only
contract manufacturing organization to have worked with a clients
product development through all phases of clinical trials and FDA
approval. This position reduces NeoStems reliance on any one of its
varied technology platforms to achieve commercial success, as PCT
gives the company an ongoing opportunity to capture revenues from
cell therapy industry growth. NeoStem has fully transitioned to a
cell products development company. In June 2012, NeoStem signed a
definitive agreement to divest the companys 51% ownership interest
in Suzhou Erye Pharmaceutical Co. Limited. The $12mn sale of its
ownership interest bolstered NeoStems balance sheet and increase
its cash position. The company is now focused fully on its cell
therapy business and its transition to a cell products development
company with AMR-001 as its lead candidate. Sale of its stake
removes the recognition of >$50mn in annual revenues from Suzhou
Erye, however, the divestiture also removes the burden of >$25mn
in operating expenses, which was primarily driven by the costs of
selling products in China, which failed to live up to expectations,
but also removes >$30mn in debt. With improved capital reserves
and a simplified business structure, NeoStem can now fully
transition to focusing on cell product development. 2 3. Brinson
Patrick Neostem, Inc. - March 7, 2013 Certain types of stem cell
therapy have been around for decades and are now routine. Although
stem cell therapy sounds innovative and cutting edge, this type of
therapy has been around for decades. An infusion or injection of
bone marrow stem cell (BMC) transplant, for example, may sometimes
be performed if a patients bone marrow stops working and doesnt
produce enough healthy stem cells. A stem cell transplant may also
be performed if high-dose chemotherapy or radiation therapy is
given in the treatment of blood disorders to reduce the risk of
life-threatening infections, anemia and bleeding, such as occurs in
leukemia, lymphoma or multiple myeloma. As a result, harvesting
stem cells from adult patient bone marrow and then re-injecting
them into the same patient is now routine therapy in US medicine,
and roughly 1mn patients have been treated with their own bone
marrow stems cells since the mid-1980s. Stem cell therapy has
potential to fill the gap in demonstrating clinically meaningful
cardiac repair. By the sum of all interventions currently used to
improve cardiac function and prevent ventricular remodeling after
acute myocardial infarction, the primary goal of repairing
compromised myocardium is not achieved, leaving the door open for a
therapeutic approach that activates the hearts repair mechanism. A
decade of experience with intracoronary infusion of BMCs after
myocardial infarction has demonstrated this approach could be the
key to cardiac repair and durable benefit in altering the cycle of
progressive cardiac dysfunction. We believe stem cell therapy
represents an emerging approach that can fill the gap in
demonstrating clinically meaningful repair of compromised
myocardium, prevention of ventricular remodeling, and improvement
in cardiac function, especially for patients refractory to standard
pharmacologic or revascularization treatment. AMR-001 refines
BMC-based cell therapy in heart disease. Myocardial infarction (MI)
is associated with increased levels of inflammatory and
hematopoietic cytokines which, in turn, are associated with+
increased progenitor cells and other subpopulations such as CD34
cells in bone marrow. Prior to their involvement in cardiac repair
and regeneration after MI, however, BMCs must first mobilize into
peripheral blood and be guided to the heart. Stem cell homing
signals that are upregulated within hours of acute myocardial
infarction, such as the chemokine, stromal cell derived factor-1,
therefore, play an important role in stem cell mobilization from
the bone marrow to the ischemic cardiac environment. Stromal cell +
derived factor-1 stimulates the natural healing process by
recruiting CD34 cells to the site of injury and inducing
neovascularization and angiogenesis. A body of research supports
temporal alignment between stromal cell derived factor-1 myocardial
expression and upgregulation of its receptor, CXCR4, which is +
observed for weeks. The mobilization of CD34 stem cells into
peripheral blood early in ST-elevation MI (STEMI) is also
positively correlated with left ventricular ejection fraction. As a
result, a number of studies+ have explored the usefulness of CD34
cells in the treatment of ischemic conditions in Phase I and Phase+
II clinical trials. Aligning the myocardial signal of stromal cell
derived factor-1 and delivery of CD34 cells that co-express CXCR4
to the heart is the strategy being advanced by NeoStem with
AMR-001, the++ companys proprietary preparation of autologous bone
marrow-derived CD34 cells selected for CXCR4 co-expression.++
NeoStems strategy with transfusion of CD34 CXCR4 showed promising
results in Phase I. Meta- analyses showed left ventricular ejection
fraction (LVEF), a measure of cardiac function, significantly +
improved with increasing numbers of certain cells mobilized, such
as CD34 , within 12 hours after myocardial infarction. Peak cell
numbers were significantly lower in patients with LVEF $2bn with
AMR-001 in acute myocardial ischemia alone. Broad intellectual
property portfolio carves out significant protection of NeoStems
clinical product assets. NeoStem has built a dominant IP portfolio
to protect its cutting edge technologies within the field of cell
therapy. Notably, this patent estate includes composition of matter
patents for Athelos (2023) and AMR-001 (2028). The patent estate
overall includes over 30 issued patents, over 90 pending patent
applications, composition of matter and method claims, and
geographic breadth of filings that cover North America, Europe,
Asia, Australia, Israel and South Africa. The companys IP focuses
on 4 5. Brinson PatrickNeostem, Inc. - March 7, 2013 immunology,
cardiology, orthopedic, wound healing, age related tissue
restoration, stem cell isolation, collection, and storage, and VSEL
discovery and applications. Stem cell valuations starting to catch
up with stem cell industry growth. A study conducted by the New
York Stem Cell Summit group estimated that, while purchases of stem
cell-based products or equipment increased from $78mn in 2009 to
$139mn in 2010 and purchase growth continues to nearly double
annually, the average market capitalization of public stem cell
companies declined 25% from 2010 to 2011, but rebounded up 16% in
2012. We believe with increasing interest and knowledge about stem
cell products coming to market and positive results from ongoing
clinical trials with stem cells in novel therapeutic indications
emerging, investors could see further market capitalization
appreciation in 2013 and beyond. Valuation review and price target
reveal tremendous upside potential in NBS shares. We used a variety
of approaches to arrive at 12-month price target for NBS shares.
Using a traditional, DCF-based analysis, we derived a per share
valuation of $5.20. We also derived a $13.23 per share valuation
using our relative CAGR valuation model for currently unprofitable
companies. Using comparable company analysis, we derived a value of
$0.92 per share or minimum upside potential of 74%. Synthesizing
the various valuation approaches, we derived an average value of
$6.45 per share. We therefore recommend investors buy NBS shares
and set a Market Outperform rating with a 12-month price target of
$6. We anticipate NeoStem emerges in 2013 as the leader in the
paradigm shift underway in the stem cell industry. The commercial
viability of cell-based therapies is still relatively early,
however, we believe advancements in the field are leading companies
to promising clinical trial results. We believe innovative
approaches have led companies like NeoStem to demonstrate the
viability of cell-based product manufacturing technologies to
realize untapped potential for profitability. We anticipate NeoStem
will further explore AMR-001s potential in other ischemia-related
therapeutic indication and be first to bring the first stem cell
based therapy to blockbuster product status. We look for the
outlook in the group, as well as investor returns, to further
improve in 2013. Anticipated Key Milestones VProjected
EventTimingComplete enrollment in PreSERVE-AMI Phase II clinical
trial evaluating AMR-001 in patients with post-STEMI2Q13Publication
of, "The Healing Cell: How the Greatest Revolution in Medical
History is Changing Your Life"2Q13Announce additional agreements
for PCT cell products development services 1H13Announce selection
of first T-cell based therapeutic candidate for human clinical
trial evaluation3Q13Announce topline 6-month outcome data from
AMR-001 PreSERVE-AMI Phase II in patients with
post-STEMI4Q13Conduct FDA End-of-Phase II meeting for further
AMR-001 evaluation in patients with post-STEMI4Q13Initiate Phase
III clinical trial evaluating AMR-001 in patients with
post-STEMI2014Initiate first human clinical trial for VSELs for
periodontitis 2014Announce topline 12- and 18-month outcome data
from AMR-001 PreSERVE-AMI Phase II 2014BLA submission for approval
of AMR-001 in patients with post-STEMI2017FDA approval for
licensing the use of AMR-001 as a treatment for patients with
post-STEMI 2018 Source: Company reports and Brinson Patrick
Securities research.5 6. Brinson Patrick Neostem, Inc. - March 7,
2013 Business OverviewV NeoStem is developing an active portfolio
of product candidate assets based on the companys diverse array of
technology platforms. The companys wholly-owned Amorcyte subsidiary
is developing leading autologous bone marrow derived adult stem
cell products to target blockbuster market opportunities in
cardiovascular disease. NeoStems 80%-owned subsidiary, Athelos, is
developing T-cell based therapeutics to target autoimmune
conditions. The companys exclusive worldwide license to VSEL
technology utilizes the unique regenerative properties of human
very small embryonic-like stem cells (VSELs) to explore their
potential use as treatments for a wide range of conditions from
macular degeneration to liver regeneration to osteoporosis. The
final component, albeit perhaps most critical and least risky of
NeoStems businesses is Progenitor Cell Therapy, which is a premier
contract manufacturer cell-based products. Exhibit 1: Clinical
Product Assets Source: Company reports and Brinson Patrick
Securities research. Amorcyte Amorcyte was spun off from Progenitor
Cell Therapy in 2006 and, in October 2011 was acquired by NeoStem
as a wholly-owned company, effectively reuniting it with Progenitor
Cell Therapy and providing capital to fund the next steps for its
clinical development programs. Amorcytes lead product, AMR-001, is
an autologous bone marrow derived stem cell treatment designed to
prevent major adverse cardiac events following acute myocardial
infarction. AMR-001 in Acute Myocardial Infarction AMR-001 is
comprised of a homogeneous and highly purified + + population of
cells enriched for CD34 CXCR4 . As its lead indication, NeoStem is
developing AMR-001 as a regenerative cell-based therapeutic for
high risk patients with acute myocardial infarction, which X. Final
Phase I results published in 2011 showed AMR-001 IRA infusion was
safe, and as measured by+ change from baseline, demonstrated dose-
and CD34 cell-dependent effects on improvement in 2 2 perfusion (r
= 0.45, p = 0.011) and improvement in tissue preserved (r = 0.49, p
= 0.015), respectively. + In subjects receiving a high dose of CD34
cells, there was an absolute 1.2% increase in LVEF at three months
and a 4.5% increase at six months. Moreover, while 30% of control
patients and 40% of low- 6 7. Brinson Patrick Neostem, Inc. - March
7, 2013 dose subjects showed absolute reductions in LVEF compared
with baseline, none of the patients+ receiving the high dose of
CD34 cells had an absolute reduction in LVEF compared with
baseline, + supporting the evaluation of dosing with a high dose of
CD34 cells for further study. Based on the success of the Phase I
trial, the PreSERVE-AMI Phase II trial began enrolling patients in
January 2012. The company expects clinical trial site participation
from leading US research hospitals. We anticipate the Phase II
trial will complete enrolment of 160 patients (80 treatment and 80
control) in more than 40 sites in 2013. The patients will be
followed initially for 6 months to determine the key study endpoint
outcomes, and will continue to be tracked for 3 years
post-treatment. PreSERVE AMI was designed to evaluate the potential
of AMR-001 to improve perfusion, preserve cardiac function and
improve clinical outcomes. A composite of cardiac measures,
including clinically meaningful endpoints, will support the primary
endpoint of perfusion. AMR-001 in Other Target Indications
Neurohormonal responses activated by ischemia serve as signals+ for
homing CD34 cells to damaged tissue. As AMR-001 has potential to
change the history of progression of ischemia-related diseases, a
disease related to is dilated cardiomyopathy (DC), which like
myocardial infarction is characterized by ventricular enlargement
and contractile dysfunction albeit with normal left ventricular
wall thickness, ultimately leading to progressive heart muscle
deterioration. As a + result, as the degree to which homing CD34
cells occurs drives improvement in ventricular function, DC would
be a natural as the next target indication for AMR-001 development.
With its potential for use as an ischemia-targeting therapy, we
therefore believe AMR-001 also has potential application in other
indications such as congestive heart failure, critical limb
ischemia, and ischemic brain injury. Athelos Athelos is a T-cell
based therapeutic development business concern, 80% NeoStem owned
through PCT and 20% owned by Becton Dickinson. Immune mediated
diseases, such as graft versus host disease (GvHD), autoimmune
diseases and allergic diseases, are a result of an imbalance
between T effector cells and T regulatory cells. T-reg therapy
represents a novel approach for restoring immune balance by
enhancing T-regulatory cell number and function. Phase I work is
ongoing globally under several independent physician INDs, results
of which will guide NeoStems near-term future clinical direction
with this therapeutic approach. VSEL Technology VSELs offer the
potential to go beyond the paracrine effect, yielding cells that
actually differentiate into target tissue and induce cellular
regeneration. NeoStems animal model studies to date, for example,
suggest that human VSELs have the potential to differentiate into
cells of each of the three germ lineages. Recently, NeoStem and its
partners at the University of Michigan demonstrated that VSELs can
regenerate bone in a mouse model. NeoStem is seeing progress in
animal models of wound healing and intends to begin the first human
clinical trial for VSELs for periodontitis in late 2013 or early
2014. Wound Healing In April 2009, NeoStem entered into a License
Agreement with Vincent Falanga, MD, and acquired a worldwide,
exclusive license to stem cell technology and applications for
wound healing. In conjunction with that license NeoSTem entered
into a multi-year sponsored research agreement, funded by the US
Department of Defense, with Roger Williams Medical Center and Dr.
Falangas laboratory to study the use of VSELs and mesenchymal cells
for the treatment of chronic wounds. NeoStem was subsequently
awarded a $700,000 contract from the US Army Medical Research and
Material Command, Telemedicine and Advanced Technology Research
Center (USAMRMC-TATRC) for the purpose of evaluating the use of
topically applied bone marrow-derived adult mesenchymal stem cells
for rapid wound healing. In September 2009, NeoStem was notified of
an award of a Grand Opportunities 7 8. Brinson PatrickNeostem, Inc.
- March 7, 2013 grant in the amount of $108,746 from the National
Institutes of Health (NIH), which is being applied to research in
the field of bone defect repair. Commercial Operations Contract
Manufacturing and Stem Cell Banking Progenitor Cell Therapy NeoStem
acquired Progenitor Cell Therapy (PCT), a contract development and
manufacturing organization (CDMO), in an effort to bring additional
cell therapy expertise in-house and to develop a one-stop-shop
global network of cell therapy. PCT brings NeoStem closer to its
goal of becoming a leader in the fast-growing cell therapy
industry. By generating revenues ($9.5mn in 2011 and a projected
$14mn in 2012) and leveraging its cGMP manufacturing flexibility
for scale-up production, as well as continue signing external cell
product development and licensing opportunities both in the US and
abroad, PCT helps NeoStem de-risk development of its own
proprietary cell products. PCT has provided services to over 100
clients in its 14-year history, and through its agreement for
Provenge development with Dendreon (DNDN, Not Rated) is the only
contract manufacturing organization to have worked with a clients
product development through all of phases of clinical trials and
FDA approval. PCT offers its clients and NeoStem cell processing
and development capabilities on both the East and West Coasts of
the US. PCTs strong leadership position is built on a foundation of
services that cater to the cell therapy industry as a whole. This
position reduces NeoStems reliance on any one of its varied
technology platforms to achieve commercial success, as PCT gives
the company an ongoing opportunity to capture revenues from cell
therapy industry growth. PCTs manufacturing revenues, for example,
would increase significantly should a client advance its product
through Phase I, II, and III trials, as well as into
commercialization, where larger numbers of cells for commercial
product will likely be needed. Stem Cell Banking Should a patient
be diagnosed with a stem cell treatable cancer, or require an
immune system boosting stem cell transplantation, NeoStem provides
stem cell collection and banking services at approved collection
facilities in NeoStems network of collection centers. One problem
with autologous use of adult stem cells is that the quantity of
cells is only as good as the patients supply. NeoStems process
helps to increase the number of stem cells in a patients peripheral
blood through a painless and safe procedure. With the capacity for
ready expansion of its manufacturing facilities, PCT provides its
clients and NeoStem with a significant opportunity to take
advantage of economies of scale and realize significant cost of
revenues savings and gross margin improvement. We believe NeoStem
could achieve its first year of positive cash flow in 2018 from
PCTs projected contract cell product manufacturing revenues alone.8
9. Brinson PatrickNeostem, Inc. - March 7, 2013 Intellectual
Property NeoStem has built a dominant IP portfolio within the field
of cell therapy to protect its cutting edge technologies. Notably,
this patent estate includes composition of matter patents for
Athelos (2023) and AMR-001 (2028). The patent estate overall
includes over 30 issued patents, over 90 pending patent
applications, composition of matter and method claims, and
geographic breadth of filings that cover North America, Europe,
Asia, Australia, Israel and South Africa. The companys IP focuses
on immunology, cardiology, orthopedic, wound healing, age related
tissue restoration, stem cell isolation, collection, and storage,
and VSEL discovery and applications. NeoStems Athelos subsidiary
holds composition of matter patents and method patents, mostly
relating to the isolation and expansion of Regulatory T cells.
In-licensed from the University of Pennsylvania, the University of
Minnesota and the University of Southern California, the exclusive
world-wide rights to a broad patent estate is comprised of
approximately 30 issued patents and approximately 50 pending patent
applications. The companys Amorcyte subsidiary was granted US
patent numbers 7,794,705 and 8,008,370 titled "Compositions and
Methods of Vascular Injury Repair." The patents contain both
composition of matter and method claims surrounding a therapeutic
chemotactic hematopoietic stem cell product used in treating or
repairing vascular injury following an acute myocardial infarction
or any other vascular injury caused by vascular insufficiency. The
patented pharmaceutical composition is comprised of autologous+ +
non-expanded CD34 cells with an enriched subpopulation of CXCR4
cells. Pending patent application filings include, Infarct Area
Perfusion-Improving Compositions and Methods of vascular Injury
Repair, and Compositions and Methods for Treating Progressive
Myocardial Injury Due to a Vascular Insufficiency." NeoStem has
patent applications for certain internally developed technologies
regarding the apheresed collection, isolation, and storage of adult
autologous stem cells. The world-wide patent rights and know- how
regarding very small embryonic-like (VSEL) stem cells, their
isolation, purification and therapeutic use was in-licensed from
the University of Louisville. Joint inventorship for a provisional
patent using VSELs for the repair and regeneration of bone tissue
is established with the University of Michigan. In- licensed rights
to therapeutic stem cell treatments for wound healing, cartilage
repair and restoration of age-related tissue loss in the face.
Recently, NeoStem further expanded its intellectual property
coverage around AMR-001 with the grant of US patent number
8,343,485 entitled "Compositions and methods of Vascular Injury
Repair." This is the third US granted patent for AMR-001,
protecting further+ expansion of its CD34 chemotactic stem cell
product composition claim, as well as method of sourcing and
administration of cells claims, and significantly protects the
companys most mature clinical asset.9 10. Brinson Patrick Neostem,
Inc. - March 7, 2013 Brief Overview of Stem Cells V Stem cells are
unspecialized cells found throughout the body that give rise to
specialized cells. They are defined by their ability to self-renew
and differentiate into multiple different cell types while
remaining unspecialized until a signal from the body tells them to
develop into specific cells such as blood, liver, muscle, nerve,
skin, and cells of other organs. Their function is to begin the
cascade of healing when the body is injured. When the body is
injured, for example, stem cells become active, move through the
body to the site of injury, express proteins to down regulate
inflammation, express other proteins to stimulate new cellular
growth, recruite growth factor proteins, and themselves may begin
to change into the very cells that were damaged. As a result, they
serve as part of the bodys repair and renewal system. Because of
this ability, it is hoped that stem cells can be used for a variety
of applications, ranging from developing novel therapies to drug
discovery and toxicity, as well as understanding basic biology. The
easiest way to categorize stem cells, no matter their source, is by
dividing them into two types: mature and early. Mature stem cells,
often called adult stem cells are found in mature body tissues such
as bone marrow, blood stream, cornea and retina of the eye, the
dental pulp of the tooth, liver, skin, gastrointestinal tract, and
pancreas, as well as umbilical cord and placenta afterbirth. Early
stem cells, often called embryonic stem cells, are found in the
inner cell mass of a blastocyst and develop after approximately
five days of embryo development. Both types of stem cells have
distinct advantages and disadvantages associated with them. Each
offer important insight into how cells rejuvenate the body and
cause disease. The list below provides select details on their
characteristics: Mature Stem CellsEarly Stem Cells Adult, somatic
Embryonic, blastocystic Obtained from mature body tissues (i.e.,
bone Obtained from the inner cell mass of a marrow, fat, skin),
umbilical cord, and placentablastocyst afterbirth Primarily
multipotent give rise to multiple but Pluripotent give rise to all
cell types limited cell typesexcept the cells of the placenta
Become cells with specific functions Although the procedure to
replenish a patients supply of healthy blood-forming cells is
generally called a stem cell transplant, depending on the source of
the adult stem cells, the procedure may be referred to as a bone
marrow transplant, peripheral blood stem cell transplant or an
umbilical cord blood transplant. In addition, stem cell transplants
can use cells from your own body (autologous stem cell transplant),
from a donor (allogeneic stem cell transplant) or from an identical
twin (syngeneic transplant). The following provides brief details
on sources of stem cells and their properties: Embryonic stem cells
and induced pluripotent stem cells Being pluripotent, these stem
cells are undifferentiated, inducible, and have the potential for
unlimited expansion, retention of normal karyotype, and the ability
to generate cells of all three germ layers. As a result, high
interest arises for studies with these cells because of their
potential to form the basis of cellular therapies for diseases
affecting organ systems with limited regenerative capacity, to
provide enhanced systems for drug screening and toxicity testing,
as well as to gain insight into early human development, and with
induced pluripotent stem cells (iPSCs), obviate the need for human
embryos. There are currently two major methods for generating cells
with pluripotent properties. The first is controversial and
involves isolating the inner cell mass from an early human
blastocyst and culturing the resulting cells in appropriate culture
conditions to generate human embryonic stem cells (ESCs). The
second involves artificially expressing a defined number of factors
in somatic cell types, which, with the appropriate10 11. Brinson
PatrickNeostem, Inc. - March 7, 2013culture conditions, causes the
cells to be reprogrammed into iPSCs and exhibit the characteristics
ofESCs. Hematopoietic stem and progenitor cells Although
hematopoietic stem cells are rare, residing inadult bone marrow
where hematopoiesis is continuously taking place, they can also be
found in cordblood, fetal liver, adult spleen, and peripheral
blood. Being multipotent, they can differentiate into anumber of
cell types, exhibit remarkable self-renewal capacity, and are
responsible for the life-longmaintenance of the hematopoietic
system, which is made up of progenitor cells and all mature
bloodcell types, including erythrocytes, megakaryocytes (platelet
precursors), and cells of the myeloid andlymphoid lineages. Mammary
epithelial cells The epithelium of the mammary gland exists in a
highly dynamic state, isbipotent (i.e., give rise to mammary cells
and their progenitors), and undergoes dramaticmorphogenetic changes
during purberty, pregnancy, lactation, and regression. Mammary
epitheliumis composed of a hierarchy of cells that spans from the
most primitive mammary stem cells todifferentiated myoepithelial
and luminal subtypes. Mesenchymal stem cells These stem cells
(MSCs) are multipotent stromal cells that occur at lowfrequency in
tissues such as bone, cartilage, fat and umbilical cord, with the
latter being the youngestand most primitive MSC source. These cells
also have a great capacity for self-renewal and arereadily expanded
in vitro to obtain sufficient numbers for research and therapeutic
applications. Neural stem cells These stem cells are functionally
characterized as cells with the capacity toproliferate, self-renew,
and produce a large number of progeny that can differentiate into
neurons,astrocytes and oligodendrocytes. They have been identified
in nearly all regions of the embryonicmouse, rat and human central
nervous system (CNS). In the mature CNS, neural stem cells
andneural progenitor cells have been shown to contribute towards
ongoing neurogenesis only within twospecialized niches: The
subgranular layer of the dentate gyrus, and the subventricular zone
of thelateral ventricle. Recently, malignant multipotent neural
stem-like cells have also been isolated fromvarious types of brain
cancers, including gliomas, medulloblastomas, astrocytomas
andependymomas. Prostate epithelial cells The prostate consists of
glandular epithelium embedded in a fibro-muscularstroma. This
epithelium is composed of two histologically distinct layers. The
secretory luminal layeris made up of tall columnar cells that are
responsible for the production of prostate-specific antigen(PSA),
prostatic acid phosphatase (PAP), and human kallikrein-2, which are
secreted as part of theseminal fluid into the glandular lumina.
This layer of cells is underpinned by a basal layer of
cuboidalepithelial cells. The basal layer also contains a stem-like
cell population that is responsible for thedevelopment of all
epithelial cell types in the prostate. When the stem-like cell
undergoes mitosis itgives rise to two cells, another stem cell and
a daughter progenitor (transit amplifying) cell which, inturn,
differentiates into a terminal end-stage secretory luminal cell.
Skin stem cells These stem cells occur in the basal layer of the
epidermis and at the base of hairfollicles. They are able to
self-renew but are only progenitors of skin cells (unipotent).
Epidermalstem cells give rise to keratinocytes, which migrate to
the surface of the skin and form a protectivelayer. Follicular stem
cells can give rise to both the hair follicle and to the epidermis.
Bone Marrow Stem Cell Preparation Although stem cell therapy sounds
innovative and cutting edge, this type of therapy has been around
for quite some time. An infusion or injection of bone marrow stem
cell transplant, for example, may sometimes be performed if a
patients bone marrow stops working and doesnt produce enough
healthy stem cells. A stem cell transplant may also be performed if
high-dose chemotherapy or radiation therapy is given in the
treatment of blood disorders to reduce the risk of life-threatening
infections, anemia and bleeding, such as occurs in leukemia,
lymphoma or multiple myeloma. As a result, harvesting stem cells
from adult patient bone marrow and then re-injecting them into the
same patient is now routine therapy in 11 12. Brinson Patrick
Neostem, Inc. - March 7, 2013 US medicine, and roughly 1mn patients
have been treated with their own bone marrow stems cells since the
mid-1980s. Exhibit 2: Bone Marrow Aspiration from Pelvic Arch
Source: Company reports and Brinson Patrick Securities research.
Stem cells are often collected by aspirating bone marrow from the
back of the patients pelvis through a small needle, usually with
minimal discomfort (see Exhibit 2). Most procedures require about
60cc of bone marrow aspirate and usually contain mesenchymal stem
cells, platelets, and other types of stem cells useful for therapy.
Mature stem cells associated with those that form blood in bone
marrow are the most common type of stem cell used to treat human
disease, however, stem cells previously were very difficult and
expensive to obtain. With newer techniques and equipment, stem
cells from bone marrow are now easily be obtained and concentrated
by a simple office procedure. The bone marrow aspirate is
centrifuged at very high speed to separate stem cells and platelets
from the rest of the blood products to form bone marrow aspiration
concentrate (BMAC). Using common medical procedures, BMAC can then
be reintroduced into the patient to treat the injured area.
Intracoronary and intramyocardial stem cell therapy, for example,
can be performed with standard cardiac catheterization techniques
in the conscious patient, as well as during cardiosurgical
interventions. Competitive Landscape A study conducted by the New
York Stem Cell Summit group estimated that, while purchases of stem
cell-based products or equipment increased from $78mn in 2009 to
$139mn in 2010 and purchase growth continues to nearly double
annually, the average market capitalization of public stem cell
companies declined 25% from 2010 to 2011, but rebounded u 16% in
2012. We believe with increasing interest and knowledge about stem
cell products coming to market and positive results from ongoing
clinical trials with stem cells in novel therapeutic indications
emerging, investors could see further market capitalization
appreciation in 2013 and beyond. Weve previously provided a brief
overview of the stem cell competitive landscape and select details
on a group of companies that, similar to NeoStem have proprietary
stem cell technologies, are developing or marketing stem cell
products, and have significant licensing agreements. [Please see
our report on Pluristem Therapeutics (PSTI, Market Outperform),
Flexibility to Explore the Broad Potential of PLX Cells, published
on November 19, 2012.]12 13. Brinson PatrickNeostem, Inc. - March
7, 2013 Brief Overview of Myocardial Infarction V Commonly known as
a heart attack, a myocardial infarction (MI) is a type of acute
coronary syndrome (ACS) that arises from the irreversible necrosis
of heart muscle secondary to prolonged cardiac ischemia. Ischemia
results from an abrupt imbalance in oxygen supply and demand, and
in the heart is most often caused by plaque rupture with thrombus
formation in a coronary blood vessel (thrombosis). This results in
an acute reduction of blood supply to a portion of the myocardium.
MI is further differentiated according to the appearance of waves
on the electrocardiogram (see Exhibit 3) as follows: STEMI, non-
ST-elevation myocardial infarction (NSTEMI), and unstable angina
(UA), which is not associated with heart muscle damage. (For the
purpose of brevity, we limit our discussion to STEMI as these are
the higher risk patients.) Exhibit 3: Waves of the
Electrocardiogram (ECG) and ST-Elevation Source: Company reports
and Brinson Patrick Securities research. ST elevations seen on the
ECG reflect active and ongoing transmural myocardial injury. When
an ECG shows a STEMI, it predicts with reasonable certainty that
there is thrombosis of a fairly large coronary vessel. ST-segment
elevation and its evolution during a STEMI is depicted in Exhibit
4. Exhibit 4: ECG Evolution during STEMI Source: Company reports
and Brinson Patrick Securities research. Without immediate
reperfusion therapy, most people with STEMI develop persistent
abnormal Q waves, which reflect a functioning heart with a zone of
myocardium that has undergone irreversible damage and cell death.
Patients without ST elevations may be diagnosed with either UA or
NSTEMI, which are differentiated by the presence of cardiac enzymes
and may or may not have changes on the surface ECG, including
ST-segment depression or T-wave morphological changes. 13 14.
Brinson Patrick Neostem, Inc. - March 7, 2013 The factors that
determine prognosis after acute MI are considered the following:
Size of ischemic area at risk Percent of myocardium that has
already undergone irreversible necrosis Severity of ischemia
Presence of previous MI or fibrosis Presence of distal ischemia The
immediate prognosis in acute MI patients is inversely related to
the amount of myocardium reserves (i.e., total myocardial mass less
the ischemic area at risk), however, among patients with low
myocardical reserves due to previous MI or diffuse fibrosis, even a
relatively small infarction may induce ischemia in remote segments
of myocardium and be detrimental, putting the patient in a post-MI
cycle of risk. The Post-MI Cycle of Risk The significant morbidity
and mortality associated with heart failure has been attributed to
structural changes associated with the post-MI cycle of risk. A
succession of infarction, peri-infarct zone ischemia and apoptosis,
infarct expansion, and recurrent MI is frequently observed 5-6
weeks after acute MI, resulting in post-MI cycles that can advance
to ventricular remodeling, long-term cardiac dysfunction, and
ultimately, chronic heart failure (see more below). The decision
whether to treat a STEMI patient with thrombolysis or primary
percutaneous coronary invervention (PCI) must be made quickly.
However, ischemic heart muscle function may not be restored or
restored only to a minor degree by revascularization (i.e., PCI or
coronary artery bypass graft surgery). Left ventricular (LV)
enlargement, a marker of long-term cardiac dysfunction, has been
associated with an increased risk of major adverse cardiac events
(MACE), and an improvement in survival after MI has been associated
with attenuation of LV enlargement (e.g., by early treatment with
ACE inhibitors and ARBs). Post-MI cardiac remodeling, therefore,
the pattern of LV morphological change, in particular, are
prognostic for the severity of cardiac injury and its correlation
to clinical outcomes. Exhibit 5: Cardiomyocyte Loss within the
Peri-Infarct Zone Leads to Infarct Expansion Source: Company
reports and Brinson Patrick Securities research.14 15. Brinson
PatrickNeostem, Inc. - March 7, 2013 Remodeling and Infarct
Expansion Cardiac remodeling occurs in approximately 60% of
patients after acute MI, and is associated with progressive
dilation, where the size of the heart cavity becomes enlarged and
stretched, thinning out the myocardium. The extent of remodeling is
initially linked to infarct size and control of myocardial loading
conditions, as the patient transitions from compensation (i.e.,
increased stroke volume, heart rate or both) to adapting to cardiac
dysfunction. In high-risk MI patients (e.g., STEMI), a significant
region of myocardium with inadequate blood supply surrounding the
infarct (i.e., peri-infarct zone) is working hard to compensate for
the dead, non- functioning myocardium (see Exhibit 5). Hypoxic
conditions result in the release of hypoxia inducible factor-1
(HIF-1), which signals the need for perfusion, and in response to
injury, triggers a cascade of cytokine and chemokine expression. If
there is an inadequate response in the repair or renewal of damaged
tissue within the weeks following acute MI, tissue in the
peri-infarct zone undergoes the process of apoptosis and fibrosis,
resulting in structural and functional changes throughout the
ventricle. Ventricle dilation and shape change subsequently occur
through cardiomyocyte loss and hypertrophy within the
peri-infarcted zone, resulting in increased fibrosis and further
apoptosis, infarct zone expansion, and as a result, recurrent MI.
Patients with a greater degree of cardiac remodeling therefore
remain in a cycle of risk and recurrent MI, and manifest the worst
outcomes, with increased mortality and progression to end- stage
heart failure. Exhibit 6: VALIANT Showed the Relation of Left
Ventricular Dysfunction to Risk of Events Source: Company reports
and Brinson Patrick Securities research. VALIANT showed chronic
long-term pharmacotherapy has positive effects on late remodeling
in patients at high risk for cardiovascular events after MI.
Results from the Echo substudy in VALIANT, which showed that
clinical risk post-MI is related to progressive LV dysfunction, as
well as older studies such as SAVE and CAPRI, also showed drugs
that modestly increase ejection fraction lead to compelling
clinical impact (see Exhibit 6). However, by the sum of all
interventions currently used to improve cardiac function and
prevent ventricular remodeling, the primary goal of repairing
compromised myocardium is not achieved, leaving the door open for a
therapeutic approach that activates the hearts repair mechanism. A
decade of experience with intracoronary infusion of BMCs post-MI
has demonstrated this approach could be the key to cardiac repair
and durable benefit in altering the cycle of risk. 15 16. Brinson
Patrick Neostem, Inc. - March 7, 2013 Post-MI Stem Cell Therapy V
We believe stem cell therapy represents an emerging approach that
can fill the gap in demonstrating clinically meaningful repair of
compromised myocardium, prevention of ventricular remodeling, and
improvement in cardiac function, especially for patients refractory
to standard pharmacologic or revascularization treatment. Since the
first-in-human use of bone marrow stem cells (BMCs) in 2001, a
number of clinical studies have demonstrated the clinical benefit
of BMC therapy after acute MI, with 6 7 numerous studies showing
positive results. As cell quantity ranged from 12.5 x 10 to 246 x
10 cells and type of cells varied, later studies focused on
specific cell populations, optimal number for infusion, and
evaluating refinements to BMC route of delivery. Mobilization of
BMCs After Acute MI ACS such as MI are associated with increased
levels of inflammatory and hematopoietic cytokines which,+ in turn,
are associated with increased progenitor cells and other
subpopulations such as CD34 cells in bone marrow. Prior to their
involvement in cardiac repair and regeneration after MI, however,
BMCs must first mobilize into peripheral blood and be guided to the
heart. Stem cell homing signals, therefore, play an important role
in stem cell mobilization from the bone marrow to the ischemic
cardiac environment. SDF-1 and CXCR4 The treatment of cancer
patients with granulocyte-colony stimulating factor (G-CSF) is
considered the standard for mobilizing hematopoietic progenitor
cells, however, the most prominent stem cell homing signal for bone
marrow-derived cells is the chemokine, stromal cell derived
factor-1 (SDF-1). SDF-1, also referred to as the chemokine ligand,
CXCL12, stimulates the natural healing process by recruiting
endothelial progenitor cells to the site of injury and inducing
neovascularization and angiogenesis. Exhibit 7: Upregulation of
SDF-1 in Myocardium and Stem Cell CXCR4 Expression Post-MI Source:
Brinson Patrick Securities research. Upregulation of SDF-1 is
observed within hours of acute MI, and is followed by increased
expression of its receptor, the progenitor cell surface protein,
CXCR4, which remains upregulated for several weeks. Studies such as
the Reinfusion of Enriched Progenitor Cells and Infarct Remodeling
in Acute Myocardial Infarction trial (REPAIR-AMI) show there is
homing of progenitor cells to the heart, and a body of research
supports post-MI temporal alignment between SDF-1 myocardial
expression and stem cell CXCR4 expression, as presented in the
construct above (see Exhibit 7). As cardiac myocytes in the16 17.
Brinson PatrickNeostem, Inc. - March 7, 2013 infarct border zone
have been shown CXCR4 upregulation after MI, a number of studies
have explored manipulating SDF-1 and CXCR4 as targets for central
regulation of the stem cell mobilization process. Targeted
expression of SDF-1 after MI, for example, showed increased BMC
engraftment into infarcted myocardium, and was accompanied by
beneficial effects on cardiomyocyte survival, neovascularization
and cardiac function. By attracting circulating stem cells to
remain, survive and possibly differentiate in the infarct area,
activating the relation between CXCR4 and SDF-1 represents a
promising novel therapeutic approach. Other research shows,
however, instead of the mere existence of temporal alignment
between CXCR4 and SDF-1 expression in the myocardium, SDF-1
upregulation is observed for a much longer period than days (i.e.,
weeks), which is more important for homing and supports the
strategy of aligning the myocardial signal of SDF-1 and delivery of
BMCs to the heart being advanced by NeoStem (see more below).++
CD34 Cells Bone marrow-derived CD34 cells are a well-characterized
population of stem cells that are+ used to reconstitute a cancer
patients hematopoietic system after radiation or chemotherapy. CD34
cells have also been shown to induce angiogenesis in animal models
of myocardial, peripheral, and+ cerebral ischemia. The mobilization
of CD34 stem cells into peripheral blood early in STEMI is also+
positively correlated with LVEF. As a result, a number of studies
have explored the usefulness of CD34 cells in the treatment of
ischemic conditions in Phase I and Phase II clinical trials.++
Exhibit 8: Increasing Levels of SDF-1 are a Strong Homing Signal
for CD34 CXCR4 Cells Source: Company reports and Brinson Patrick
Securities research.+ The mechanism by which CD34 cells promote
angiogenesis is not completely understood, however, evidence
supports both direct incorporation of the cells into the expanding
vasculature and paracrine secretion of angiogenic growth factors
from exosomes. Further evidence is found in the direct interaction+
+ of CD34 cells with SDF-1. CXCR4 is found on approximately 20-25%
of CD34 cells, and within hours++ after acute MI, CD34 CXCR4 cells
show more than a two-fold increase in number in peripheral blood.
The pioneering study, Transplantation of Progenitor Cells and
Regeneration Enhancement in Acute+ Myocardial Infarction
(TOPCARE-AMI), showed that the migratory capacity of infused CXCR4
progenitors induced by SDF-1 was the strongest independent
predictor of the reduction of infarct size as assessed by contrast
MRI. A gradient of SDF-1 upregulation in hypoxic regions of
myocardium, therefore, is a strong homing signal and drives these
cells to move toward the region of ischemia, release their
exosomes, and trigger capillary formation within hours after acute
MI (see Exhibit 8). 17 18. Brinson Patrick Neostem, Inc. - March 7,
2013 Early studies such as TOPCARE-AMI were conducted specifically
to evaluate infarct remodeling and improving post-MI outcomes after
either bone marrow or peripheral blood-derived progenitor cell
therapy. TOPCARE-AMI demonstrated that infusion of progenitor cells
leads to LVEF improvement. Systematic reviews of subsequent
controlled clinical trials appraising the impact of intracoronary
cell therapy provide further evidence that a significant increase
in LVEF is observed with cell therapy compared with control (see
Exhibit 9). Exhibit 9: Meta-Analysis Provides Evidence of Benefit
from Intracoronary BMCs on LVEF in AMI Source: Company reports and
Brinson Patrick Securities research. Meta-analyses showed
autologous bone marrow mononuclear cell ICA infusion resulted in
modest improvement in LVEF, but significantly improved with
increasing numbers of certain cells mobilized, such ++ ++ as CD34 ,
CXCR4 , CD117 , and c-met cells, within 12 hours after MI. Peak
cell numbers were + significantly lower in patients with LVEF
$300K. With potential for economies of scale from its PCT
subsidiary, we anticipate sales of AMR-001 could realize product
manufacturing margins in the 45%-65% range, which is comparable to
some cost of revenues observed with the manufacture of certain
complex biologics such as monoclonal antibodies. We project a BLA
for AMR-001 in acute MI in 2017, followed by FDA approval and
launch in 2018, driving NeoStem to its first full-year of
protability in 2019. We note, however, that driven by projected
contract cell product manufacturing revenues potentially realized
by PCT alone, NeoStem could achieve its first year of positive cash
flow in 2018. Our preliminary projections conclude that NeoStem
could realize earnings per share cumulative average growth (CAGR)
of 42.9% between 2019-2022 and realize peak sales >$2bn with
AMR-001 in acute MI alone (see Exhibit 16). 22 23. Brinson Patrick
Neostem, Inc. - March 7, 2013Exhibit 16: Revenue Model of AMR-001
in Acute STEMIAMR-001 in Post-Acute STEMI Revenue Build, US2013E
2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023EAcute
Myocardial Infarction (MI) Prevalence, US935,180 935,270 935,360
935,450 935,540 935,630 935,721 935,811 935,901 935,991
936,081Percent Diagnosed with Acute STEMI 20.0% 20.0% 20.0% 20.0%
20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%Number of Patients with
Acute STEMI187,018 187,018 187,018 187,018 187,018 187,018 187,018
187,018 187,018 187,018 187,018Percent Treated with Intracoronary
Stent Implantation80.0% 80.0% 80.0% 80.0% 80% 80% 80% 80% 80% 80%
80%Number of Patients Treated with Intracoronary Stenting 149,614
149,614 149,614 149,614 149,614 149,614 149,614 149,614 149,614
149,614 149,614Percent with LVEF 50% 67.4% 67.4% 67.4% 67.4% 67.4%
67.4% 67.4% 67.4% 67.4% 67.4% 67.4%Number of STEMI with LVEF 50%
Implanted with a Stent100,840 100,840 100,840 100,840 100,840
100,840 100,840 100,840 100,840 100,840 100,840AMR-001 Penetration
of Stented STEMI Patients 0.0%0.0%0.0%0.0%0.0%3.1% 12.7% 22.8%
25.7% 28.8% 29.7%Number of Patients Treated with AMR-001, US - - -
- -3,12612,80722,99225,91629,04229,950Annual Cost of therapy$30,000
$30,900 $31,827 $32,782 $33,765 $34,778Change in Price
3%3%3%3%3%3%Total AMR-001 Sales, US ($mn) - - - - -
$94$396$732$850$981$1,042% Growth322.0% 84.9% 16.1%
15.4%6.2%AMR-001 in Post-Acute STEMI Revenue Build, ROW 2013E 2014E
2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023EAcute
Myocardial Infarction (MI) Prevalence, ROW2,805,411 2,805,616
2,805,822 2,806,027 2,806,232 2,806,438 2,806,643 2,806,849
2,807,054 2,807,260 2,807,465Percent Diagnosed with Acute STEMI
20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
20.0%Number of Patients with Acute STEMI561,082 561,123 561,164
561,205 561,246 561,288 561,329 561,370 561,411 561,452
561,493Percent Treated with Intracoronary Stent Implantation50.0%
50.0% 50.0% 50.0% 50% 50% 50% 50% 50% 50% 50%Number of Patients
Treated with Intracoronary Stenting280,541 280,562 280,582 280,603
280,623 280,644 280,664 280,685 280,705 280,726 280,747Percent with
LVEF 50% 67.4% 67.4% 67.4% 67.4% 67.4% 67.4% 67.4% 67.4% 67.4%
67.4% 67.4%Number of STEMI with LVEF 50% Implanted with a Stent
189,085 189,099 189,112 189,126 189,140 189,154 189,168 189,182
189,195 189,209 189,223AMR-001 Penetration of Stented STEMI
Patients 0.0%0.0%0.0%0.0%0.0%0.2%2.7%7.0% 13.0% 17.0% 21.0%Number
of Patients Treated with AMR-001, ROW- - - -
-3785,10813,24324,59532,16639,737Annual Cost of therapy$25,000
$25,500 $26,010 $26,530 $27,061 $27,602Change in Price
2%2%2%2%2%Total AMR-001 Sales, ROW ($mn)- - - -
-$9$130$344$653$870$1,097% Growth164.5% 89.4% 33.4% 26.0%Total
AMR-001 Sales, WW ($mn) - - - -
-$103$526$1,076$1,502$1,851$2,138Source: Company reports and
Brinson Patrick Securities research.23 24. Brinson Patrick Neostem,
Inc. - March 7, 2013 Valuation Analysis V We used a variety of
approaches to arrive at 12-month price target of $6 for NBS shares
(see Exhibits 17- 22). Using a traditional, DCF-based analysis, we
derived a per share valuation of $5.20. We also derived a $13.23
per share valuation using our relative CAGR valuation model for
currently unprofitable companies. Using comparable company
analysis, we derived a value of $1.03 per share. Exhibit 17:
Discount Rate Calculation. Blended Discount Rate
CalculationProductRisk level Discount 2020 RevSecond full year of
profitabilityServices In-Market10% 195Cell ProductsPhase 230%
1,502Royalties -Total 1,697Blended Discount Rate =27.7%Assumptions
CommentsBlended Discount Rate 27.7% Through 2019Stage 2 Discount
Rate 16.5% 2021 through 2029Terminal Discount Rate11.0% After
2029Terminal Growth3% After 2029Long Term Debt0Shares
Outstanding172.6 Projected YE13 Source: Brinson Patrick Securities
research. Exhibit 18: Discounted Cash Flows.DCF Valuation Terminal
2013 - - - 2017 2018 20192020 2021202220232024Value Contract /
Manufacturing Services 19.755.0 75.0100.0 125.0 156.3195.3 236.3
283.6 340.3 Cell Therapy Products-- -103.2 526.01,076.21,502.1
1,851.0 2,221.2 2,665.5 Royalties-- -- --- - - - Total
Revenues19.755.0 75.0203.2 651.01,232.41,697.4 2,087.4 2,504.8
3,005.8 Cost of Sales 16.341.8 54.2125.1 393.7 745.6 1,028.7
1,262.7 1,515.4 1,818.5 COGS as % of total revenue83.0%76.1% 72.2%
61.6% 60.5% 60.5%60.6% 60.5% 60.5% 60.5% R&D Expense 11.219.4
24.2 27.332.048.0 75.394.2 117.7 147.1 R&D as % of product
revenue 56.9%32.3% 28.4% 10.8%4.0%3.2% 3.6%3.6%3.6%3.6% SG&A
Expense17.821.8 25.7 32.941.850.6 59.766.373.681.7 SG&A as % of
total revenues 90.4%36.3% 30.2% 13.1%5.2%3.4% 2.9%2.6%2.5%2.5%
Interest and other income0.00.4 0.81.6 2.63.43.8 4.2 4.6 5.0 EBIT
(25.6) (27.6) (28.3) 19.4 186.1 391.7537.4 668.4 802.7 963.5
Provision for Income Taxes -1.6 3.15.744.3 104.7159.0 198.5 206.5
214.7 Effective Tax Rate 0.0%11.0% 13.0% 15.0% 18.0% 21.0%23.0%
23.0% 23.0% 23.0% Free Cash Flow (FCF) (25.6) (29.2) (31.4) 13.7
141.8 287.0378.4 469.8 596.2 748.85,269.7 Discount Factor1.02.0
2.53.2 4.15.26.1 7.1 8.2 9.624.0 Present Value of FCF (25.6) (14.9)
(12.6)4.334.855.2 62.466.572.578.1 Terminal Value 219.9 NPV of the
company$ 896.77 Est. YE13 Shares Outstanding 172.6 Price per share
$ 5.20 Source: Brinson Patrick Securities research. Discounted Cash
Flows Analysis We derived a blended discount rate of 27.7% using
weighted average discount rates based on each drugs contribution to
revenues in 2020, our projection for NeoStems second full-year of
profitability. We next projected revenues through 2023, discounted
back using a discount rate of 16.5% derived above for the
profitability stage, modeled in a terminal growth rate through 2029
of 3% (driven by AMR-001s composition of matter patent life) and
discounted back using an estimated NBS cost-of-capital of 12.5%,
and derived a share fair value price of $5.20 (see Exhibit 18). We
believe this target price reflects a probability-adjusted premium
in AMR-001s market potential in MI.24 25. Brinson Patrick Neostem,
Inc. - March 7, 2013 Exhibit 19: Relative CAGR.CAGR Valuation
ComparablesBiotech Group P/E (2013)17.30Biotech Group Forward CAGR
(2013-2015) 14.9% Valued CompanyYear used for discounting 2020Price
Target Year 20133-year EPS CAGR (2020-2022)42.9%Second Profitable
Year EPS (2020)$1.47Blended Discounting Rate 27.7%# Years for
Discounting 7 Target Price $13.23 Source: Brinson Patrick
Securities research. Relative CAGR Model We also derived a $13.23
per share valuation using our relative CAGR valuation method for
currently unprofitable companies by multiplying the FY13 mean
forward P/E ratio of profitable biotech companies of 17.3 by a
ratio of NeoStems FY20-FY22 projected 3-year CAGR of 42.9% to the
groups FY13-FY15 CAGR of 14.9%, then by our FY20 EPS estimate of
$1.47, discounted back at our blended rate of 27.7% (see Exhibit
19). By conducting a sensitivity analysis of blended discount rate
versus CAGR (see Exhibit 20), we believe significant upside may be
realized as AMR-001 development risk would decrease with the
announcement of top-line Phase II data later this year, as
commercialization risk decreases from gaining insight into whether
AMR-001 has potential to demonstrate a long-term mortality benefit,
and NeoStem potentially signs an ex-US AMR-001 commercialization
partner. We do not model a partnership, however, with its
blockbuster ex-US market opportunity, we believe an agreement for
ex-US rights to AMR-001 is highly probable. We believe this target
price best reflects NeoStems unrecognized value relative to its
peer group, which we believe is supported by NeoStems potential to
achieve its first year of positive cash flow profitability in only
three years. Exhibit 20: Discount Rate vs. CAGR Sensitivity
Analysis.Sensitivity Analysis Discount RateCAGR 17.7%
22.7%27.7%32.7%37.7%12.9%$7.03 $5.25$3.97$3.04$2.3422.9%$12.49$9.33
$7.06 $5.39$4.1632.9%$17.95 $13.42$10.14 $7.75$5.98 42.9% $23.41
$17.50$13.23 $10.11 $7.8052.9%$28.88 $21.58$16.31 $12.47
$9.6262.9%$34.34 $25.66$19.40 $14.83 $11.4472.9%$39.80 $29.74$22.49
$17.18 $13.26Note: Used FY20 estimated EPS of $1.47. Source:
Brinson Patrick Securities research. Comparable Company Analysis We
believe current share prices of stem cell companies reflects overly
negative investor sentiment regarding the early-stage of clinical
trials and the wait-and-see view of big pharmaceutical companies.
In sympathy of this view, NeoStems enterprise value is currently
trading at a 30% discount to the mean enterprise value of a peer
group of stem cell companies ($72mn versus $104mn, respectively),
resulting in a share valuation of $0.76 using this methodology (see
Exhibit 21). We note, however, that NeoStem is undervalued when
compared with a more select group companies (highlighted in light
green below) that have proprietary stem cell technologies, are
developing or25 26. Brinson PatrickNeostem, Inc. - March 7, 2013
marketing stem cell products, and have significant licensing
agreements. These include Advance Cell Technology (ACTC, Not
Rated), Cytori Therapeutics (CYTX, Not Rated), Pluristem
Therapeutics, and Osiris Therapeutics (OSIR, Not Rated). By
adjusting for this select groups mean enterprise value of $158mn,
we derive an enterprise value for NeoStem of $126mn or $0.92 per
share, representing 74% upside to current prices near-term. Exhibit
21: Comparable Company Valuation Analysis.Price SOS1Mkt. Cap.Cash
2Debt3Enterprise Value CompanyTicker3/6/13($ MM) Total /ShareTotal
/ShareTotal /Share AASTROM BIOSCIENCES, INC. ASTM $1.29 44 5621
$0.480 $0.00350.81 ADVANCED CELL TECHNOLOGY, INC.ACTC $0.07 2,192
1588$0.002 $0.00151 0.07 ATHERSYS, INC.ATHX $1.56 53 838$0.150
$0.00751.41 CYTORI THERAPEUTICS, INC. CYTX $2.86 5916818 $0.30 25
$0.42176 2.98 GERON CORP.GERN$1.44131188 100 $0.770 $0.00880.67
NEURALSTEM, INC.CUR$1.17 68 8010 $0.150 $0.00701.02 PLURISTEM
THERAPEUTICS, INC. PSTI$3.2658 190 65$1.110 $0.00126$2.15 OPEXA
THERAPEUTICS, INC.OPXA $1.666 106$1.080 $0.05 40.63 OSIRIS
THERAPEUTICS, INC. OSIR $9.36 3330837 $1.130 $0.01271 8.23
STEMCELLS, INC. STEM $1.79 37 6722 $0.580 $0.01461.22 Median 120
19$0.530 $0.0081 $1.12 Mean 131 29$0.583 $0.05104$1.92 NEOSTEM,
INC.NBS $0.53159 8412 $0.080 $0.00720.45 All numbers are in $
millions except per share data. EV = enterprise value1Shares
outstanding (SOS) as of most recent reported quarter adjusted for
effects of recent financing activities.2, 3 As of most recent
reported quarter. NBS Discount to Mean Market Cap -35% NBS Discount
to Mean EV -30% Comparable EV Multiple (Mean/NBS)1.4 Target Price
(comparable EV div ided by NBS shares out) $0.76Adjusted Comparable
EV Multiple (Select Group Mean/NBS)1.7 Adjusted NBS EV (YE13) $126
Adjusted Target Price (comparable EV divided by NBS shares out)
$0.92 Source: Brinson Patrick Securities research. Review of
Valuation Approaches and Price Target Determination Synthesizing
the various valuation approaches, we derived minimum upside
potential to $0.92 and an average value of $6.45 per share (see
Exhibit 22). We therefore recommend investors buy NBS shares and
set a 12-month price target of $6. Exhibit 22: Summary of Valuation
Results. Review of Valuation CalculationTechniqueTargetDCF
$5.20CAGR $13.23Comparables $0.92Valuation Average $6.45 Source:
Brinson Patrick Securities research. 26 27. Brinson Patrick
Neostem, Inc. - March 7, 2013 NeoStem Inc. (NBS) Quarterly Income
Statement VIncome Statement ($
MM)2011A1Q12A2Q12A3Q12A4Q12E2012E1Q13E2Q13E3Q13E4Q13E2013ECell
Therapy Contract and Manufacturing Services 9.5 3.83.44.4 2.714.3
3.53.64.04.2 15.2 % Yr/Yr Growth160%53% 104%-26%50.7%-8.4% 7.6%
-10.8%53.8% 6.4% % of Revenues 100.0% 100.0% 100.0%Cell Therapy
Product Sales - ---- - --- -- % Yr/Yr GrowthTotal Revenues,
Net9.53.83.44.42.7 14.33.53.64.04.2 15.2% Yr/Yr Growth160.3%52.5%
103.7% -25.7%50.7%-8.4% 7.6% -10.8%53.8% 6.4%Cost of Revenues
8.83.02.73.72.2 11.62.93.03.33.4 12.6 % Total Revenues
92.7%78.3%81.1%84.5%81.3%81.3%83.0%83.0%83.0%83.0%83%Gross Profit
0.70.80.60.70.52.60.60.60.70.72.6 Gross
Margin7.3%21.7%18.9%15.5%18.7%18.5%17.0%17.0%17.0%17.0%17.0%Research
and Development 7.71.9 2.72.82.5 10.0 2.52.72.93.011.2 % Yr/Yr
Growth -23% 71% 7%20% 29.2%30.1% 1.3% 7.0%21.4%12.2%General and
Administrative27.56.44.7 5.9 5.7 22.84.44.44.5 4.5 17.8 % Yr/Yr
Growth-1% -47%7% -8% 5.0% -31.6%-6.4% -24.8%-20.7%5.0%Total
Operating Expenses35.2 8.47.48.88.232.8 6.97.27.4 7.6 29.0Operating
Income (Loss)(34.5)(7.5)(6.8)(8.1)(7.7) (30.1)(6.3)(6.6)(6.7)(6.8)
(26.4) MarginNA NA NA NA NA NA NA NA NA NA NAOther Income
(Expense)(1.5)(1.3)(0.4)(0.5)(0.1)(2.3)0.00.00.0 0.00.0Pretax
lncome(36.0)(8.8)(7.2)(8.5)(7.8) (32.4)(6.3)(6.6)(6.7)(6.8)
(26.4)Provision for Income Tax(0.4)---- - --- --Effective Tax Rate
0.0% 0.0% 0.0%Amounts Attributable to NBS Common ShareholdersFrom
Continuing Operations (35.6)(7.9)(7.2)(8.5)(7.8)
(31.3)(6.3)(6.6)(6.7)(6.8) (26.4)From Discontinued Operations - net
of taxes (2.6)(1.5) (13.4)0.10.1 (14.6)--- --Warrant Inducements-
--(1.0)(0.3)(1.4)(0.3)(0.3)(0.3)(0.3)(1.2)Preferred Dividends
(0.6)0.1(0.1)(0.1)-(0.1)--- --Net lncome (Loss)(38.5)(9.5)
(20.6)(9.5)(8.0) (47.5)(6.6)(6.9)(7.0)(7.1) (27.6)Margin NA NA NA
NA NA NA NA NA NA NA NAEPS from Continuing Operations (0.50) (0.07)
(0.05)(0.06)(0.05) (0.23) (0.04) (0.04) (0.04) (0.04) (0.15)EPS
from Discontinued Operations (0.04) (0.01) (0.10) 0.00 0.00 (0.11)
0.00 0.00 0.000.00 0.00EPS Attributable to NBS Common
Shareholders(0.54) (0.08) (0.15)(0.06)(0.05) (0.35) (0.04) (0.04)
(0.04) (0.04) (0.16)Weighted Shares Outstanding,
basic71.8111.8134.4148.2159.4138.5161.1168.7170.4176.4169.2Weighted
Shares Outstanding,
diluted71.8111.8134.4148.2162.6139.3164.4172.1173.8180.0172.6
Source: Company reports and Brinson Patrick Securities research.27
28. Brinson Patrick Neostem, Inc. - March 7, 2013 NeoStem Inc.
(NBS) Annual Income Statement (2011A-2022E) VIncome Statement ($
MM)2011A2012E2013E2014E2015E2016E2017E2018E2019E2020E2021E2022ECell
Therapy Contract and Manufacturing Services 9.515.119.7 27.0 38.0
55.0 75.0100.0125.0156.3195.3236.3 % Yr/Yr
Growth59.2%30.6%37.1%40.7%44.7%36.4%33.3%25.0%25.0%25.0%21.0% % of
Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
100.0%89.1%40.0%15.9%10.7% 9.7% 9.6%Cell Therapy Product Sales
------- 103.2526.0 1,076.21,502.11,851.0 % Yr/Yr Growth NA 409.5%
104.6%39.6%23.2% % of Revenues 41.3%67.0%73.7%74.9%74.9%Total
Revenues, Net9.5 15.1 19.7 27.0 40.0 60.0
85.2252.1802.21,503.22,088.32,580.4% Yr/Yr Growth
59.2%30.6%37.1%48.1%50.0%41.9% 196.0% 218.2%87.4%38.9%23.6%Cost of
Revenues 8.8 12.3 16.3 22.431.5 45.7 61.5155.2485.2909.3
1,265.61,560.9 % Total Revenues
92.7%81.3%83%83.0%78.9%76.1%72.2%61.6%60.5%60.5%60.6%60.5%Gross
Profit 0.72.83.34.68.514.4 23.7 96.9317.0593.8822.7 1,019.4 Gross
Margin7.3%18.5%17.0%17.0%21.2%23.9%27.8%38.4%39.5%39.5%39.4%39.5%Research
and Development 7.710.0 11.2 13.4 16.1 19.4 24.2 27.3 32.0 48.0
75.3 94.2 % Yr/Yr
Growth29.2%12.2%20.0%20.0%20.0%25.0%13.0%17.0%50.0%57.0%25.0%General
and Administrative27.5 22.817.8 18.7 19.6 21.8 25.7 32.9 41.8 50.6
59.7 66.3 % Yr/Yr Growth 5.0% 5.0% 5.0%
5.0%11.0%18.0%28.0%27.0%21.0%18.0%11.0%Total Operating Expenses35.2
32.8 29.0 32.1 35.8 41.2 49.9 60.3 73.8 98.6135.0160.4Operating
Income (Loss)(34.5) (30.0) (25.7) (27.6) (27.3) (26.8) (26.3)
36.7243.2495.3687.7859.0 MarginNA NA NA NA NA NA NA
15%30%33%33%33%Other Income (Expense)(1.5)(2.3) 0.00.10.20.40.8
1.62.63.43.84.2Pretax lncome(36.0) (32.3) (25.6) (27.4) (27.1)
(26.4) (25.5) 38.2245.9498.7691.5863.1Provision for Income Tax(0.4)
---0.71.63.15.744.3104.7159.0198.5Effective Tax Rate 0.0% 0.0% 0.0%
0.0% 8.0%11.0%13.0%15.0%18.0%21.0%23.0%23.0%Amounts Attributable to
NBS Common ShareholdersFrom Continuing Operations (35.6) (31.1)
(25.6) (27.4) (27.8) (28.0) (28.6) 32.5201.6394.0532.4664.6From
Discontinued Operations - net of taxes (2.6) (14.6) -----
-----Warrant Inducements- (1.4)(1.2)(1.8)(2.7)(4.1)(6.1)(9.1)
(13.7) (20.5) (30.8) (46.1)Preferred Dividends (0.6)(0.1) -----
-----Net lncome (Loss)(38.5) (47.4) (26.8) (29.2) (30.5) (32.0)
(34.7) 23.4187.9373.5501.7618.5Margin NA NA NA NA NA NA NA
13%25%26%25%26%EPS from Continuing Operations (0.50) (0.23) (0.15)
(0.14) (0.14) (0.13) (0.13) 0.14 0.83 1.55 2.01 2.41EPS from
Discontinued Operations (0.04) (0.11)0.00 0.00 0.00 0.00 0.000.00
0.00 0.00 0.00 0.00EPS Attributable to NBS Common
Shareholders(0.54) (0.35) (0.16) (0.15) (0.15) (0.15) (0.16) 0.10
0.77 1.47 1.90 2.25Weighted Shares Outstanding,
basic71.8138.5169.2188.7195.8203.0214.2224.4234.6244.8255.0265.2Weighted
Shares Outstanding,
diluted71.8139.3172.6195.8203.3210.7222.3232.9243.5254.1264.7275.2
Source: Company reports and Brinson Patrick Securities research. 28
29. Brinson Patrick Neostem, Inc. - March 7, 2013 Valuation
Methodology We used a variety of approaches to arrive at 12-month
price target for NBS shares. Using a traditional, DCF- based
analysis, we derived a per share valuation of $5.20. We also
derived a $13.23 per share valuation using our relative CAGR
valuation model for currently unprofitable companies. Using
comparable company analysis, we derived a value of $.92 per share
or minimum upside potential of 72%. Synthesizing the various
valuation approaches, we derived an average value of $6.45 per
share. We therefore recommend investors buy NBS shares and set a
Market Outperform rating with a 12-month price target of $6.
Company Risks Development risk, as the latest data from evaluating
AMR-001 cells in acute MI are early, and therefore, there is no
guarantee future and ongoing clinical trials will be successful.
Regulatory risk as, although there are other cell based therapies
further along in development that may establish a path for
approval, there has been no stem cell based therapy approved to
date. Commercialization risk given the rigid and well-established
treatment paradigms in cardiovascular disease. Financial risk as
based on our analysis of the historical costs of conducting
clinical trials, we anticipate NeoStem periodically will need to
conduct successful financing activities through 2018.RELATED
COMPANIESCompany Ticker Rating PricePrice TargetOpexa Therapeutics,
Inc. OPXA$1.66 Pluristem Therapeutics, Inc.PSTI Market
Outperform$3.26 $5.00 IMPORTANT DISCLOSURES Analyst Certification
Vernon Bernardino hereby certifies that the recommendations and
opinions expressed in the research report accurately reflect the
research analysts personal views about any and all of the subject
securities or issues discussed herein. Furthermore, no part of the
research analysts compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views
expressed by the research analyst(s) in this research report.
Brinson Patrick and/or its affiliates expect to receive or intend
to seek compensation for investment banking services from Neostem,
Inc., Opexa Therapeutics, Inc. and Pluristem Therapeutics, Inc. in
the next three months. In the past 12 months, Brinson Patrick or
its affiliates have received compensation for investment banking
services from Opexa Therapeutics, Inc. .Ratings Distribution &
Investment Banking DisclosureRatingCount Ratings DistributionCount
*Investment BankingMarket Outperform9100.00% 111.11%Market Perform
00.00% 0 0.00%Market Underperform00.00% 0 0.00%* Percent of
companies under research coverage from which Brinson Patrick
received compensation for investment banking services provided in
the previous12 months. Ratings Definitions Market Outperform: Over
the next six to twelve months, the common stock of the company is
expected to outperform a passive index comprised of all the common
stock of companies within the same sector, as defined by various
market indices and ETFs. Market Perform: Over the next six to
twelve months, the common stock of the company is expected to
reflect the performance of a passive index comprised of all the
common stock of companies within the same sector, as defined by
various market indices and ETFs. 29 30. Brinson Patrick Neostem,
Inc. - March 7, 2013 Market Underperform: Over the next six to
twelve months, the common stock of the company is expected to
underperform a passive index comprised of all the common stock of
companies within the same sector, as defined by various market
indices and ETFs. UNDER REVIEW: The current rating and financial
estimates of the common stock of the company are suspended while
being reviewed. NOT RATED: Brinson Patrick does not maintain
research coverage on the common stock of the company. Risk Profiles
Definitions SPECULATIVE: The common stock risk level is materially
higher than its benchmarks based on various market indices and
ETFs. The price of this common stock has been, or likely will be,
exceptionally more volatile than its benchmarks. AGGRESSIVE: The
common stock risk level is higher than its benchmarks based on
various market indices and ETFs. The price of this common stock has
been, or likely will be, more volatile than its benchmarks.
MODERATE: The common stock risk level is in-line with its
benchmarks based on various market indices and ETFs. The price of
this common stock has been, or likely will be, just as volatile as
its benchmarks. Visit us at http://www.brinsonpatrick.com The
analyst(s) responsible for preparing this research received
compensation that is based on various factors, including Brinson
Patricks total revenues, a portion of which is generated by Brinson
Patricks investment banking activities. Investors should assume
that Brinson Patrick is seeking, or will seek, investment banking
or other services from the covered companies. Employees of Brinson
Patrick not involved in the preparation of this report may have
investments in securities or derivatives of securities of companies
mentioned in this report, and may buy, sell, or trade them in ways
different from, or in a manner inconsistent with, those discussed
in this report. This report does not provide individually tailored
investment advice. It has been prepared without regard to the
individual financial circumstances and objectives of persons who
receive it. The methods used by Brinson Patrick to determine the
price target for this security, along with the risks, are detailed
within this report. Additional information available upon request.
For additional information and disclosures, please contact Matthew
Muszala, Director of Research, at [email protected]
Copyright 2013 Brinson Patrick Securities Corp. The study herein is
not a complete analysis of every material fact respecting any
company, industry, or security. The opinions expressed here reflect
the judgment of the author at this date and are subject to change.
Facts have been obtained from sources considered to be reliable,
but are not guaranteed. Brinson Patrick, its officers, directors,
and/or employees may have an interest in the securities of the
issue(s) described herein and may purchase, sell, trade or act as
market maker while this report is in circulation.30