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RegMed sector, the pulse is returning while the Roche takes the lead with Stembancc

Proactive Investors
Wednesday, 5 December 2012

*The 6 W’s: Who, what, where, when, why and what of it …*

* *

*RegMed sector had a lot more green on the screen this am at the open but, shimmed their position by mid-day in thin and volatile trading.*

*But, slowly has been evaporating.* *Stocks are turning in a mixed performance by mid-day on Wednesday after ending the previous session modestly lower. While the NASDAQ has slid into negative territory, the Dow and the S&P 500 have moved modestly higher.*

*Drug companies and universities are spending 55.6 M euros ($72.7 M) to develop a bank of stem cells to use in testing potential treatments for hard-to- treat diseases. The effort, known as Stembancc and managed by the University of Oxford in England, will focus on generating 1,500 induced pluripotent stem cell lines, researchers said at a London news conference.*
· *The cells will be used by drug makers including Pfizer Inc., Sanofi and Roche Holding AG to test treatments for peripheral nervous disorders, pain, dementia, migraine, autism, schizophrenia, bipolar disorder and diabetes and to perform toxicology tests.  “This is a pioneering effort,” said Zameel Cader, a neurologist at Oxford and one of Stembancc’s leaders. “We want to be a flagship project within Europe.” *

*Roche (RHHBY) has taken a lead role in rallying 9 other large drug makers and additional stakeholders to build a major collection of 1,500 induced pluripotent stem (iPS) cell lines for use in early testing of drugs against a range of neurological ailments as well as diabetes.*

* *

*Research Notes:*
· *Cytomedix (OTC: CMXI), an Initiation Research Note with a “BUY” ranking …http://www.scimitarequity.com/blog/2012/12/05/cytomedix-otc-cmxi-an-initiation-research-note-with-a-buy-ranking ;*
· *Stembancc evolves to generate 1,500 induced pluripotent stem cell lines in EU …**http://www.scimitarequity.com/blog/2012/12/05/stembancc-evolves-to-generate-1500-induced-pluripotent-stem-cell-lines-in-eu*

* *

*Who is up – Athersys (ATHX +$0.01), Bioheart (PINK: BHRT +$0.001), BioLife Solutions (OTC: BLFS +$0.01), BioTime (NYSE MKT: BTX +$0.02), Cryo-Cell (OTC: CCEL +$0.16), Dendreon (DNDN +$0.09), Fibrocell (OTC: FCSC +$0.014), Geron (GERN +$0.01), NeoStem (NYSE MKT: NBS +$0.009), Pluristem (PSTI +$0.07), Proteonomix (OTC: PROT +$0.02) and Verastem (VSTM +$0.15).*

*Mid-Day: The NASDAQ is DOWN -9.96 (-0.33%) to 2,986.73 while the Dow is UP +120.91 (+0.93%) to 13,072.69.*

*Measuring the day – NEGATIVE – 12 green (ups) following 16 red (downs) and 1 fluctuating black (flats) … The CBOE Volatility Index traded near 17.*

* *

*My Model Portfolio and Indicators:*
· *Aastrom (ASTM) is DOWN … -$0.02 or -1.78%  at $1.28 with a tighter mid-day range of $1.26 – $1.33 with larger 114 K volume … compared to Tuesday’s closing range of $1.22 – $1.34 with large volume of 379.2 K. I am NOT giving up as ASTM has been getting “hammered” on filings of stock sales but, they are … related to the warrant swaps … which other companies have been … unable … to recognize with their “muddied” balance sheets!  I have maintained a “BUY” in this market and at this pricing because of the late stage trial status.* *Yesterday,* *Jason* *Kolbert of Maxim:  Rated ASTM shares a “BUY” and has a $6 price target. He derives his $6.00 price target by triangulating FCF (free cash flow), discounted EPS, and sum-of-the-parts (SOP) models. His target assumes that Ixmyelocel-T’s pivotal CLI results meet the primary endpoint and that the product is commercialized in late 2015.*
· *BioLife Solutions (OTC: BLFS) is UP … +$0.01 or +2.87% to $0.37 … the pricing is returning in a tight trading range of $0.35 to $0.36 after suffering a profit taking trader sell with low 2.5 K share volume compared to Tuesday’s closing range of $0.35 to $0.38 and larger 13.2 K volume.  I continue to reiterate this as a “BUY” on downdraft … still sticking to BLFS being under-valued –with a $0.50 target!*
· *Cytori (CYTX) is DOWN  … -$0.03 or -0.71% to $3.99 … just below my $4.00 “handle” with a tighter  trading range of $3.95 – $4.09 and thin volume of 58 K shares from Tuesday’s closing wide range of $3.79 – $4.09 with much larger 208.6 K in volume … I project… a daily “HOLD” until …the downward trend subsides. *
· *Cytomedix (OTC: CMXI) is DOWN … -$0.02 or -2.70% to $0.72 with a tight trading range of $0.72 to $0.75 with lower  volume of 29 K shares from Tuesday’s closing range of $0.74 to $0.81 and 42.2 K share volume. I initiate with a “BUY” on the basis … CMXI is undervalued.  I have commented a number of times that I have believed CMXI was undervalued and most recently stated it was worth $1.25 … at a minimum. CMXI has revenues to the tune of $11.42 M and the most recent CE Mark for the Angel cPRP system boosted the share price by $0.18 but has dropped off -$0.06 or -7.50% to $0.74 in this depreciating market. In August CMS agreed to cover AutoloGel system for wound healing in 3 major wound types with the national coverage decision or NCD, for coverage with evidence development. During Q3/12, CMXI achieved important milestones in reimbursement and regulatory areas which should have commercial implications for 2 lead products. The 52 week range is $0.57 to $2.32 with 91.75 M shares outstanding and a float of 64.43 M. One of my major interests is the highest % held by insiders … of 40.78% and their personal stake stands out! However, the cash position is generated internally and stands at $5.83 M . The Q3/12* *net loss was $3.78 M or $0.04 per share compared **to a net loss of $2.29 M or $0.04 per share in the prior year. The month of November, the stock trading range was $0.75 to $0.88 while in October the range was $0.75 to $0.90. In September, before most of the market conflagration the shares traded $0.83 to $1.13. For most of these 3 months there was little news to broaden the share pricing disparity.*
· *NeoStem (NYSE MKT: NBS) is UP… +$0.009 or +6.16% to $0.649 … with a comparable day’s range of $0.64 -$0.67 … with moderate 240 K volume so far from Tuesday’s closing range of $0.63 – $0.66 with lower than usual  354.6 K share volume. NBS is still steadier on the up and down road. I believe NBS continue a “BUY” as I have been iterating for a while!*


*Worth mentioning and with a need to know:*
· *Jason Kolbert of Maxim strikes hard …Neuralstem: Why are we … Negative ?  The company is doing pioneering research in Lou Gehrig’s disease but it’s in the very early stages and many years before any products can come to market.  Compounding this is our concern by the move to continue cell therapy trials for ALS in Mexico and start a stroke trial in China, as well as the company’s recent efforts to develop a small molecule depression drug. We see this as representing a lack of focus and discipline at Neuralstem. Especially with such a tiny company … a handful of employees and having just completed a dilutive financing… with only six months of operational cash on hand (estimate), before the next (likely) raise.  *Neuralstem spent $3.2 M in the recent quarter. The company has (as of September 2012), $9.8 million in cash, (after just having raising proceeds of $7 million in September). Are we to believe that a company that runs out of operating capital by the end of Q1-2013 will be able to run clinical trials in the US, Mexico and China, in ALS, Stroke and develop a small molecule for depression?  The company has stated that Mexico can only move forward if a partner is found.  Lou Gehrig’s disease: Competition on the horizon. While Neuralstem was in a leadership position a few years ago, other companies such as Brainstorm (BCLI-$0.25-NR) and Q-Therapeutics (private) are catching up, in our opinion. Brainstorm is holding an R&D event, December 11th, 2012. These companies have equally viable approaches that are much less invasive (so easier for the patient and less expensive and risky versus spinal (or brain) injections.  *Valuation … Neuralstem will likely have no meaningful revenues for the next seven years and we believe it is at least that far away from commercializing a therapeutic product. We expect additional capital raises in order to fund the company, and we believe current shareholders will face multiple dilutive rounds in the years ahead. As such, we believe the only way to value this company is based on its technology value versus out-year projected revenues (which would assume success based on phase 1 clinical trial data, with very low patient numbers and no meaningful prior precedent or proof-of-concept data, in our opinion). Based on our sum-of-the-parts models and comparisons to similar early-stage biotechnology companies, we see the technology value around $15 M, which translates into a $0.25 price target.*
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