There is little doubt that the stem cell industry – or regenerative medicine industry – is rapidly growing in size and popularity around the world. In fact, stem cell pioneers John Gurdon and Shinya Yamanaka were recently awarded the Nobel Prize in Physiology or Medicine for their work in laying the foundation for the regenerative medicine industry.
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Investors have been equally optimistic over the past couple of years, as the regulatory uncertainty around the industry has improved. The U.S. FDA approved its first cord blood product for use in transplantation last year, while Osiris Therapeutics Inc.’s (NASDAQ: OSIR) Prochymal became the first Western-approved stem cell therapy in May of 2012.
What is Regenerative Medicine, Exactly?
Regenerative medicine refers to process of replacing or regenerating human cells, tissue or organs to restore or establish normal function. Rather than relying on chemical-based drugs to modify the behavior of natural systems, regenerative medicine uses the body’s own cells to repair broken biological systems and recover their original function.
Scientists take stem cells from the patient (autologous) or from a donor (allogeneic) and grow them into specific cell types that are then transplanted into patients to repair or replace damaged or destroyed cells. Since there are no external chemical used, scientists believe that these processes involve far fewer risks than traditional pharmaceuticals.
The regenerative medicine industry is expected to reach $1.4 billion by the end of 2015, according to a new report by Global Industry Analysts Inc., led by an increasing focus on stem cell research, greater use of non-autograft products, ageing baby boomers and higher investments in research and development activity.
China Represents a Promising New Market
Currently, the U.S. houses just over half of worldwide regenerative medicine clinical trials, but only about 43% of late-stage Phase III clinical trials. Meanwhile, China is rapidly developing a regenerative medicine regulatory framework and has already surpassed Germany and France to become the third largest pharmaceutical market after the U.S. and Japan.
Clinical trials in China cost about a tenth of those conducted in the U.S., while regenerative medicine treatments could also be approved much more quickly. As a result, regenerative medicine companies are increasingly focused on building global brands that can be rapidly commercialized in some markets, while setting the stage for others.
EastBridge Merges with One Such Company
On November 14, 2012, EastBridge (EBIG) announced a merger agreement with Cellular Biomedicine Group Inc. (CBMG), a translational regenerative medicine company with multiple planned clinical trials in the Greater China market. Under the terms of the agreement, CBMG will own approximately 70% of the combined company, while EBIG shareholders will own 30% of the entity.
Here’s an outline of the structure and benefits to each party:
CBMG’s Chairman and CEO Steve Liu will lead the combined company as Chairman and CEO, EastBridge’s Keith Wong will remain on the Board of Directors, and EastBridge’s Norm Klein will serve as CFO of the combined company as well as being a Board Director. The two divisions will operate autonomously within the new company that will trade under the future ticker symbol “CBMG”.
A Look at CBMG’s Strong Market Potential
Cellular Biomedicine Group Inc. is a translational medicine company focused on the regenerative medicine space with existing and planned clinical trials in both the United States and China. With an extensive portfolio of biomedicine patents, the company is positioning itself to become of the leading players in China’s regenerative medicine industry.
Currently, the company has several biomedicine patents and has in-licensed exclusively for greater China a completed U.S. FDA Phase II clinical trial for late stage skin cancer (melanoma) immunotherapy (tumor cell targeted dendritic cells) and has agreements with three large AAA China hospitals to expedite liver cancer and skin cancer clinical trials based on U.S. protocols.
The company also has significant existing business operations in Greater China, including a diverse set of autologous and allogeneic regenerative medicine technologies, as well as two U.S. compliant biologics cGMP facilities for manufacturing new drugs and therapies. Finally, its seasoned scientists and management team are well equipped to generate significant revenue.
Several Catalysts Moving Forward
Prior to the merger, EastBridge’s market capitalization was approximately $6.58 million, which means that the combined entity would need to be worth $21.93 million in order for existing shareholders to break even on the transaction. With the enormous potential outlined above, the stock could very well exceed this figure and deliver significant value to shareholders.
The merger may also enable the combined company to pursue an uplisting to the NASDAQ stock exchange. With many institutional investors forbidden to invest in OTC securities, the move could open the door to a far wider investment audience and help unlock additional value. And, any added funding could expedite clinical trials and lead to nearer term commercialization.
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