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NeoStem CEO's Letter To Shareholders

VSELā„¢ Technology Platform

Additionally, we continue to develop our very small embryonic like (VSEL) stem cell technology, securing additional grant funding to support this initiative. Recent data supports that VSELs are pluripotent, meaning they can develop into cells of all three germ layers and, as such, would appear to have among the greatest potential for restorative healing of current cell based regenerative medicines in development. We are developing VSELs in pre-clinical models and expect this soon to be followed by an early clinical model to assess their therapeutic potential in wound care, bone regeneration and macular restoration.

In a recent study, VSEL treated wounds induced in the tail vein of an animal (cells applied in Fibrin spray) showed complete closure by Day 14 with organized tissue remodeling including skin as compared to untreated wounds that normally take up to 21 days to achieve this result. Furthermore, these studies showed that, compared to human mesenchymal stem cells, VSELS were 200% more potent with respect to achieving complete closure with organized tissue remodeling including skin.

In the eye model, when injecting VSELs into the sub-retinal area of the severe combined immunodeficiency (SCID) mouse eye, VSELs were shown to survive and integrate into the mouse sub-retinal space staining positive for photoreceptor markers suggesting the potential for using these cells to treat disorders creating vision loss.

NeoStem continues to receive grant awards to develop this important technology with the recent award of year two funds for a National Institute of Allergy and Infectious Diseases (NIAID) research grant exploring the development of VSEL Technology for radiation exposure.

Athelos

NeoStem also continues to progress its T cell program with the goal of  developing treatments for immune-mediated diseases, such as graft versus host disease (GVHD), autoimmune disorders (such as type 1 diabetes and multiple sclerosis) and allergic conditions that result from an imbalance between T-effector cells and T-regulatory cells (Treg). Treg therapy represents a novel approach for restoring immune balance by enhancing T-regulatory cell number and function (Chai, Jian-Guo et al, Journal of Immunology 2008; 180;858-869) and NeoStem holds exclusive rights to 21 issued patents and 3 patents pending related primarily to methods of isolating, purifying and expanding Tregs. Phase 1 work is ongoing globally under several independent physician INDs, including Dr. P. Trzonkowski, Dr. Jeffrey Bluestone and Dr. Rob Negrin, results of which will inform NeoStem's future clinical direction.

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