NeoStem is also pursuing a secondary indication. NeoStem plans to begin a Phase Ib/IIa study with regards to AMR-001 for the treatment of coronary heart failure within the next six months. Because it is in a much earlier stage, the valuation that can be placed upon this program is naturally smaller than for the above (PreSERVE) program. That being said, this indication is likely to generate at least $500 million in annual sales, if approved. I will assign a conservative probability of success at 20%, which places the valuation at about $100 million.
Another component of NeoStem's business, that needs to be taken into account, is the value of Progenitor Cell Therapy, a wholly owned subsidiary. Progenitor Cell Therapy generated about $10 million in sales for 2011 and about $14 million in sales for 2012.
I'm certainly not expecting 40% growth each year, but I believe it is reasonable to expect 10% growth. If we extrapolate that out five years, investors should expect annual revenue of about $22.5 million in 2017. By taking a 6x multiple of sales, the valuation for PCT should be at about $135 million.
One last important note: Aegis Capital assigned a value of $200 million to NeoStem's other two technologies, Athelos' Treg therapy and the VSELs. Both of these programs have immense potential but are still early on. The $200 million value could rise or fall significantly depending on the future announcements.If we add up all the valuations for each business, the total value appears to be in the neighborhood of $685 million. Based on the current share amount, this would mean a share price of around $37. Am I expecting the share price to reach that number soon? No. But I certainly expect a more accurate valuation than $160 million.
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