Since it seems most investors have failed to recognize or understand the importance of Neostem's (Amex:NBS) VSEL technology and its recent endorsement by the Catholic Church, which stands firmly against embryonic stem-cell research because it destroys human embryos, perhaps they will more easily comprehend a concept they are more familiar with: revenue potential.
Even as the shorts have been attacking Neostem's stock, the company has remained focused on preparing for the commercialization and revenue stream from their breakthrough stem cell platform- something that is still three to five years away for most other stem cell companies.
In recent months, officials have been busy expanding their network of adult stem cell collection centers in the United States and now they are preparing to launch commercial activities for at least two highly profitable adult stem cells therapies in China and Taiwan.
Neostem's VSELs play a pivotal role in the normal rejuvenation of adult tissues as well as involvement in regeneration of damaged organs, and now that the company has harnessed and patented the regenerative potential of these cells, commercial applications to decelerate the aging process are ready to be monetized. In mainland China alone, at least 1000 people have joined the waiting list for either orthopedic or cosmetic treatments using the company's VSEL stem cells- which share some properties with embryonic stem cells, such as large expansion capacity and expression of Oct-4 and Nanog.
Early indications are that the price for the cosmetic medicine treatments using the company's technology, for example, will range between $5,000 and $10,000 U.S. dollars. With twenty percent of those costs payable as royalties to Neostem, the profit potential begins to become much clearer to investors.
For example, 1000 procedures priced at $10,000 equals $10 million - $2 million of that is almost pure profits for Neostem. If they do 2500 procedures in the first year, it could spell $25 million with $5 million in royalties going directly to Neostem.
Consider that there are at least 50 million people that make up China's wealthiest top 4%. It is from this group that we are likely to see many of Neostem's customers, especially once they see how well these treatments work. If one wants to play conservatively and argue that second year growth will only show double the number of procedures performed, then $10 million in earnings next year is not out of the question, and those figures are for China alone. Stop to consider even more carefully that the U.S. market is next on the list for commercialization.
2009 statistics recently released by the American Society for Aesthetic Plastic Surgery show a 147 percent increase in the number of cosmetic procedures performed since 1997. Along with more than 10 million surgical and non-surgical aesthetic enhancement procedures performed in the U.S. last year, Americans spent $10.5 billion dollars on surgical and non-surgical aesthetic enhancement procedures in 2009 and that was down 20 percent from the year before, as the economy took a toll on those opting for cosmetic surgery.
Even if they manage to steal only a small piece of the action, the profit potential for NBS becomes unbelievable, especially as investors consider that the VSEL technology-based therapies have applications in orthopedic (bone), cardio and countless other spaces. This was underscored in a recent letter to investors by Neostem's CEO, Dr. Robin L. Smith, who wrote: "The potential for very small embryonic-like stem cells is open-ended as we have found that they may have significant potential to repair degenerated, damaged or diseased tissue."
As the baby boom generation continues to get older, they are not going to accept the aging process like their parents did. It's safe to assume that we're going to see an increase in the number of procedures done on this age group population and what becomes even more fascinating is the fact that much like the platelet-rich plasma injections we've been hearing about in the sports world, which are legal and allowed by the FDA, these therapies involve patients getting injected with their own stem cells, not a foreign biological agent or drug.
The recent endorsement from The Vatican may have created some news headlines for the company but more important to the peace of mind of investors should be the church's diligent investigation of the corporation, their books and their patents. This trumps any so-called due diligence done by misleading (or misinformed) Wall Street tabloids or deceitful analysts who run their own hedge funds.
The upside here is simply far greater than the downside, especially when one considers the price at which NBS shares are trading today thanks in large part to the published attacks by those in the pockets of shorts. NBS remains a mostly undiscovered and vastly undervalued stem cell play which should pay investors handsomely in both the short and long term.
Disclosure: Long NBS
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