Downgrading Bionovo & Terminating Coverage
Bionovo Delays Year-End & Explores Strategic Options
Menerba^® Phase IIIa Commenced

Download Full 24-Page Report with Important Disclosures: BNVI Downgrade 02-21-12

1.) Bionovo Delays Year-End as they Explore Strategic Options: Bionovo announced today that they are pursuing financial options to fund completion of the pivotal trial but since the outcome of those efforts cannot be assured, they are exploring in parallel, other strategic options. We note the company also made the following statement:

“The Company does not currently have adequate internal liquidity to meet its cash needs in the near term including completion of the ongoing Phase 3 trial for Menerba. If sufficient additional funds are not received in the near term, the Company may not be able to execute its business plan and may need to significantly curtail or cease operations.”

2.) Downgrading Bionovo to Avoid/Sell and Terminating Research Coverage: While we continue to believe that Bionovo’s Menerba^® could represent a botanical blockbuster someday, the significant financial uncertainty just announced by the company means we can no longer forecast Menerba® development timelines with any degree of confidence. Therefore, we must withdraw our financial model at this time and downgrade Bionovo to an Avoid/Sell rating due to capital risk and a lack of a reasonable basis for developing a financial model. In addition, we are also terminating coverage as we reallocate our research resources toward other investment opportunities.

3.) Capital Requirements: As stated on management’s last conference call, they anticipate the cost of the Phase IIIa plus supporting expenses to be approximately $50M and the company expects the confirmatory Phase IIIb trial to require another $30M-$50M.

4.) $25M Capital Raise Filed: On February 9, 2012, Bionovo filed to raise $25M of Series B Preferred Stock issued in 4 closings; $4M, $6M, $7.5M and $7.5M. This includes warrants to purchase 75% of the number of shares of common stock the holders of preferred stock would receive upon conversion of the preferred stock at the original conversion price; and up to 240,000,000 shares of common stock issuable from time to time upon exercise of the warrants. However, before the 2nd close, the number of authorized shares of common stock must be at least 1,500,000,000 (requiring shareholder approval).

5.) $5M Capital Raise Completed: On January 3, 2012, Bionovo entered into a $5M securities purchase agreement with Socius CG II, Ltd., a Bermuda-based subsidiary of Socius Capital Group, LLC. Bionovo has the right, in its sole discretion, over a term of 2 years to sell to Socius up to $5M redeemable Series A Preferred Stock of the Company, payable in tranches. The Preferred Stock will accrue a 10% dividend per annum from the date of issuance. In addition, Socius will receive warrants to purchase shares of Common Stock valued at 35% of the Preferred Stock amount. The Preferred Stock is not convertible into shares of common stock. (see Recent Financing Activity)

6.) Phase IIIa Trial in U.S. Commenced: On November 16, 2012, Bionovo began enrollment of the U.S. Phase IIIa human clinical trial of Menerba® (MF101) in postmenopausal women for the treatment of menopausal hot flashes in 50 clinical sites. There will be 5 safety reviews by the Data Safety Monitoring Board during the Phase IIIa trial.

7.) Menopause Market – Large and Underserved: With approximately 80 million women in the U.S. and Europe transitioning through menopause and at least 70% experiencing hot flashes, night sweats and associated insomnia, we estimate the worldwide market at approximately $10 billion. Current hormone replacement therapy (HRT) carries warnings for increased risk of breast cancer, strokes, heart attacks, and blood clots while alternatives to HRT, such as antidepressant drugs, are not FDA approved and can cause significant side-effects as well.

Download Full 24-Page Report with Important Disclosures: BNVI Downgrade 02-21-12

Research Published on Bionovo’s Cancer Drug Candidate Bezielle^®
Bionovo’s Botanical Menerba^® Begins U.S. Phase IIIa Clinical Trial
Menerba^® Could Be First Botanical Blockbuster Drug

Download Full 9-Page Note with Important Disclosures: Morning Note 02-07-12 BNVI

Investors should note that Bionovo has been delisted from NASDAQ as of today but the company expects to trade on the OTC Bulletin Board promptly following the delisting. (see Nasdaq Delisting Strategy)

Bionovo announced the publication of two studies that characterize the anticancer properties of their drug candidate Bezielle^®. Bezielle^® (formerly BZL101) is derived from botanical extracts, specifically an aqueous extract of Scutellaria barbata, also known as Barbat skullcap, Ban Zhi Lian, and Banjiryun, similar to Menerba^®. Scutellaria barbata is a perennial herb found in Korea and southern China. The herb has been used in traditional Chinese medicine to treat ailments ranging from anxiety and depression to bacterial infections, hepatitis and cancer. Flavanoid components found within the herb including, Scutellarin are thought to be responsible for the reported antineoplastic properties of the plant. Bezielle is currently being developed to treat advanced Breast Cancer.

The two research papers were published in the Journal of the Public Library of Science One as shown below:

Bezielle Selectively Targets Mitochondria of Cancer Cells to Inhibit Glycolysis and OXPHOS
Source: http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0030300

Abstract
Bezielle (BZL101) is a candidate oral drug that has shown promising efficacy and excellent safety in the early phase clinical trials for advanced breast cancer. Bezielle is an aqueous extract from the herb Scutellaria barbata. We have reported previously that Bezielle was selectively cytotoxic to cancer cells while sparing non-transformed cells. In tumor, but not in non-transformed cells, Bezielle induced generation of ROS and severe DNA damage followed by hyperactivation of PARP, depletion of the cellular ATP and NAD, and inhibition of glycolysis. We show here that tumor cells’ mitochondria are the primary source of reactive oxygen species induced by Bezielle. Treatment with Bezielle induces progressively higher levels of mitochondrial superoxide as well as peroxide-type ROS. Inhibition of mitochondrial respiration prevents generation of both types of ROS and protects cells from Bezielle-induced death. In addition to glycolysis, Bezielle inhibits oxidative phosphorylation in tumor cells and depletes mitochondrial reserve capacity depriving cells of the ability to produce ATP. Tumor cells lacking functional mitochondria maintain glycolytic activity in presence of Bezielle thus supporting the hypothesis that mitochondria are the primary target of Bezielle. The metabolic effects of Bezielle towards normal cells are not significant, in agreement with the low levels of oxidative damage that Bezielle inflicts on them. Bezielle is therefore a drug that selectively targets cancer cell mitochondria, and is distinguished from other such drugs by its ability to induce not only inhibition of OXPHOS but also of glycolysis. This study provides a better understanding of the mechanism of Bezielle’s cytotoxicity, and the basis of its selectivity towards cancer cells.

Identification and Analysis of the Active Phytochemicals from the Anti-Cancer Botanical Extract Bezielle
Source: http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0030107

Abstract
Bezielle is a botanical extract that has selective anti-tumor activity, and has shown a promising efficacy in the early phases of clinical testing. Bezielle inhibits mitochondrial respiration and induces reactive oxygen species (ROS) in mitochondria of tumor cells but not in non-transformed cells. The generation of high ROS in tumor cells leads to heavy DNA damage and hyper-activation of PARP, followed by the inhibition of glycolysis. Bezielle therefore belongs to a group of drugs that target tumor cell mitochondria, but its cytotoxicity involves inhibition of both cellular energy producing pathways. We found that the cytotoxic activity of the Bezielle extract in vitro co-purified with a defined fraction containing multiple flavonoids. We have isolated several of these Bezielle flavonoids, and examined their possible roles in the selective anti-tumor cytotoxicity of Bezielle. Our results support the hypothesis that a major Scutellaria flavonoid, scutellarein, possesses many if not all of the biologically relevant properties of the total extract. Like Bezielle, scutellarein induced increasing levels of ROS of mitochondrial origin, progressive DNA damage, protein oxidation, depletion of reduced glutathione and ATP, and suppression of both OXPHOS and glycolysis. Like Bezielle, scutellarein was selectively cytotoxic towards cancer cells. Carthamidin, a flavonone found in Bezielle, also induced DNA damage and oxidative cell death. Two well known plant flavonoids, apigenin and luteolin, had limited and not selective cytotoxicity that did not depend on their pro-oxidant activities. We also provide evidence that the cytotoxicity of scutellarein was increased when other Bezielle flavonoids, not necessarily highly cytotoxic or selective on their own, were present. This indicates that the activity of total Bezielle extract might depend on a combination of several different compounds present within it.

Download Full 9-Page Note with Important Disclosures: Morning Note 02-07-12 BNVI

FDA Approves HuCNS-SC® IND for Human Phase I/II in Dry AMD
Second HuCNS-SC® Patient Cohort Enrolling in Chronic Spinal Cord Injury
STEM Spinal Cord Program Undervalued Compared to Geron’s at Exit

Download Full 11-Page Note with Important Disclosures: Mid-Day Note 02-02-12 STEM

StemCells Inc. announced that the FDA approved their Investigational New Drug (IND) submission to initiate a Phase I/II human clinical trial of their HuCNS-SC® (purified human neural stem cells) in Dry Age-Related Macular Degeneration (Dry AMD), which is the most common form of AMD and the leading cause of vision loss and blindness in those over 55 years of age. Approximately 85% of all AMD patients currently have the Dry form and 100% of patients with the more serious Wet form progressed from the initial Dry form. The dry form can also cause vision loss without turning into the wet form. Investors should note that there are no approved treatments for Dry AMD which affects approximately 30M people worldwide.

Trial Design: The Phase I/II human clinical trial will evaluate the safety and preliminary efficacy of HuCNS-SC® cells as a treatment for Dry AMD. The trial will be an open-label, dose-escalation study, and is expected to enroll a total of 16 patients. The HuCNS-SC cells will be administered by a single injection into the space beneath the retina. Patients’ vision will be evaluated using conventional methods of ophthalmological assessment at predetermined intervals over a one-year period. Patients will then be followed for an additional four years in a separate observational study.

ABOUT DRY AMD
Age-Related Macular Degeneration (AMD) is a medical condition that causes distortion in the central field of vision, typically in older adults. AMD occurs in two forms; “Dry” and “Wet”, both of which affect the area of the Retina called the Macula, which is responsible for central vision and seeing fine detail.

Dry AMD is caused by atrophy (called geographic atrophy or GA) of the retinal pigment epithelial layer (RPE) of the eye. AMD begins in Ruysch’s complex, which consists of the retinal pigment epithelium, Bruch’s membrane, and the choroid. When the RPE becomes dysfunctional, cellular waste accumulates between the RPE layer and Bruch’s membrane in the form of small, yellow deposits called drusen. The drusen damage the surrounding cells. Loss of photoreceptor cells (rods and cones) in the macula causes loss of central vision and difficulty seeing detail.¹ There are currently no medical or surgical treatments available for the Dry form of AMD.

Dry AMD has three stages; early, intermediate and advanced:

Early AMD: People with early AMD have either small drusen or a few medium-sized drusen. At this stage, patients may not have any symptoms or vision loss.

Intermediate AMD: People with this stage of AMD have either many medium-sized drusen or one or more large drusen. It is still possible for patients to show no symptoms at this stage. Some people see a blurred spot in the center of their vision. They often need more light to read and to do other tasks.

Advanced AMD: In addition to drusen, people with advanced dry AMD have a breakdown of light-sensitive cells supporting tissue in the macula. This breakdown can cause a blurred spot in the center of vision (geographic atrophy). The disease can progress from this point and the blurred spot can get bigger and darker, taking away a larger area of straight-ahead vision.² Advanced AMD also includes the “wet” or neovascular form of AMD where abnormal blood vessels behind the retina start to grow under the macula.

More than 8 million Americans have some form and stage of AMD making it the #1 cause of vision loss among Americans 60 yrs and older.^3,4 Investors should note that 85% of all AMD patients currently have the Dry form and 100% of patients with the more serious Wet form progressed from the initial Dry form. Currently there are treatment options for the Wet version of the disease such as anti-angiogenic drugs and photo-dynamic therapy (PDT).

There are currently no FDA-approved treatment options for the larger patient population of Dry AMD. The U.S. NIH National Eye Institute’s Age-Related Eye Disease Study⁵ (AREDS) found that taking a specific high-dose formulation of antioxidants and zinc can reduced the risk of developing advanced age-related macular degeneration (AMD) by about 25% but did not find that the formulation provided a benefit to those with early stage AMD. They are currently conducting an additional study called AREDS2.⁶

Download Full 11-Page Note with Important Disclosures: Mid-Day Note 02-02-12 STEM

Filing Lymphoseek^® MAA in EU by Year-End – FDA PDUFA June 10, 2012

Download Full 8-Page Note with Important Disclosures: Morning Note 02-02-12 NAVB

After market close yesterday, Navidea announced they will file a Marketing Authorization Application (MAA) in Europe for Lymphoseek^® by year-end 2012. Europe’s Scientific Advice Working Party (SAWP) advised the Committee for Medicinal Products for Human Use (CHMP) which determined that Lymphoseek is eligible for an MAA submission to the European Medicines Agency’s (EMA). Specifically, Navidea will file Lymphoseek MAA for use in Intraoperative Lymphatic Mapping (ILM) and also for the use of Lymphoseek in Lymphoscintigraphy imaging procedures. While investors should note that the MAA review process typically takes approximately 12 months, Navidea is already in discussions with well-known commercial partners to market and support Lymphoseek in Europe.

The MAA submission package will be similar to Navidea’s recent NDA submission to the FDA (PDUFA June 10, 2012). We also expect Navidea to include interim data from their ongoing, open-label Phase III trial (NEO3-06) in Head and Neck squamous cell carcinoma.

Background on EU Regulatory Pathway
European Medicines Agency’s (EMA) information: http://bit.ly/jiSNyj
Committee for Medicinal Products for Human Use (CHMP) information: http://bit.ly/ySyDFA
Scientific Advice Working Party (SAWP) information: http://bit.ly/w8GILh

Download Full 8-Page Note with Important Disclosures: Morning Note 02-02-12 NAVB

EJN Preclinical HuCNS-SC Retinal Safe & Effective – Human Phase I Expected
Second HuCNS-SC® Patient Cohort Enrolling in Chronic Spinal Cord Injury
STEM Spinal Cord Program Undervalued Compared to Geron’s at Exit

Download Full 10-Page Note with Important Disclosures: Mid-Day Note 01-30-12 STEM

StemCells Inc. announced the publication of preclinical results for their HuCNS-SC® demonstrating protection of photoreceptors and preservation of vision in an animal model. These results are relevant to human vision loss and we expect StemCells Inc. to begin a human Phase I clinical trial this year in Dry Age-Related Macular Degeneration (Dry AMD). The paper titled “Transplantation of human central nervous system stem cells – neuroprotection in retinal degeneration” will be the cover article for the February issue of the European Journal of Neuroscience but is available online now at (charges apply):
http://onlinelibrary.wiley.com/doi/10.1111/j.1460-9568.2011.07970.x/abstract

The researchers, led by Raymond Lund, Ph.D., Professor Emeritus of Ophthalmology, and Trevor McGill, Ph.D., Research Assistant Professor at the Casey Eye Institute, Oregon Health and Science University, summarized their findings as follows:

• HuCNS-SC® prevent retinal disease progression as reflected by functional and anatomical measures and did not elicit adverse effects in the host RCS rat retina.

• A single HuCNS-SC® transplant preserves rod and cone photoreceptors and provides long-term functional benefit strongly supports human testing in patients suffering from vision loss due to photoreceptor degeneration.

• HuCNS-SC® transplantation prevented the typical retinal pathology that normally occurs in the RCS retina over time, including deformity of the inner retinal layers and ganglion cell loss.

• Given the efficacy findings and lack of adverse events in the RCS rat in combination with the results from ongoing clinical investigations, HuCNS-SC® appear to be a well-suited candidate for cell therapy in retinal degenerative conditions.

Download Full 10-Page Note with Important Disclosures: Mid-Day Note 01-30-12 STEM

Bionovo Moving to OTC Bulletin Board Avoiding Reverse-Split
Bionovo’s Botanical Menerba® Begins U.S. Phase IIIa Clinical Trial
Menerba® Could Be First Botanical Blockbuster Drug

Download Full 8-Page Report with Important Disclosures: Morning Note 01-30-12 BNVI

On Friday, Bionovo announced that their Board of Directors decided to seek a voluntary delisting from the NASDAQ Capital Market. Form 25 will be filed with the SEC on February 7, 2012 to commence the NASDAQ delisting process and is expected that the delisting will take effect as of the close of trading on February 17, 2012. Investors should note that, at that time, Bionovo will no longer trade on NASDAQ under the symbol “BNVI” but expects to trade on the OTC Bulletin Board promptly following the delisting.

We believe this allows Bionovo to more easily raise funds in this challenging environment for their Phase IIIa clinical trial for Menerba^® and the supporting expenses which are expected to be approximately $50M, which we have included in our model. Specific benefits of the OTCBB are:

• A reverse split is not required as there is no minimum bid requirement
• No financial restrictions on capital raising
• There are no listing requirements that need to be met
• Lower continued compliance costs

We continue to believe that the top-line efficacy and safety results of the Phase IIIa trial, if favorable, would unlock additional shareholder value and attract significant financial support from a partner for the Phase IIIb trial.

Other Recent News

New Board Member: On January 5, 2012, Robert E. Farrell, J.D. was named to Bionovo’s Board of Directors. Mr. Farrell will also serve as an independent director and member of the Audit and Compensation committees. From 1996-2009, Mr. Farrell held the positions of EVP and CFO of Titan Pharmaceuticals and was appointed President and CEO of Titan in December 2008 , a position that he held through 2009. From 1991-1996, Mr. Farrell served as Corporate Group VP and CFO of Fresenius USA. Mr. Farrell holds an undergraduate degree from the University of Notre Dame and received his J.D. degree from the University of California.

New Chief Financial Officer: On January 4, 2012, David Boyle was named SVP and Chief Financial Officer. He was previously SVP and Chief Financial Officer of AVI BioPharma. Prior to AVI, he was VP, Finance and Chief Financial Officer of XOMA. In addition to his past positions as VP of Finance at Polycom and Director of Business Development at Intel, Mr. Boyle has held senior positions in biotechnology and specialty pharmaceutical companies. He was previously at Salix Pharmaceuticals, Ltd. in the U.S. and at Ares Serono Group both in the U.S. and Switzerland.

$5M Preferred Stock Agreement: On January 3, 2012, Bionovo announced that it entered into a $5M securities purchase agreement with an institutional investor where Bionovo has the right over 2 years to sell up to $5M redeemable Series A 10% Preferred Stock. In addition, Bionovo will issue warrants to purchase shares of common stock valued at 35% of the Preferred Stock amount. The exercise price of the warrants will equal the closing bid price of Bionovo’s common stock on the preceding day.

When Preferred Stock is sold, the investor is also obligated to exercise an additional investment right to purchase a number of shares of common stock valued at 100% of the amount of Preferred Stock purchased at a per share price equal to the exercise price of the warrants received in the sale of Preferred Stock. Both the warrants and additional investment right are exercised when Bionovo elects to sell a tranche of Preferred Stock to the investor.

Upon exercise, the investor must pay for the shares underlying the additional investment right and the warrants, at its option, either in cash or by delivering a full-recourse secured promissory note. Any such promissory note will bear interest at 2.0% per year calculated on a simple interest basis and be secured by certain securities owned by the investor with a fair market value equal to the principal amount of the promissory note. Bionovo may redeem the Preferred Stock at any time and, at the option of either Bionovo or investor, all outstanding promissory notes may be offset, exchanged and cancelled for all outstanding shares of Preferred Stock then held by the investor.

Download Full 8-Page Report with Important Disclosures: Morning Note 01-30-12 BNVI

Terminating Research Coverage Due to Analyst in Transition

Download Full-3 Page Note with Important Disclosures: Morning Note 01-30-12 BMOD MRNA NBY ISR OCLS

We are terminating research coverage on Biomoda (BMOD), Marina Biotech (MRNA), NovaBay Pharmaceuticals (NBY), IsoRay (ISR) and Oculus Innovative Sciences (OCLS) due to analyst in transition and the resulting resource re-allocation. The most recent company reports with company specific disclosures can be accessed free of charge as shown in the table below: 

Download Full-3 Page Note with Important Disclosures: Morning Note 01-30-12 BMOD MRNA NBY ISR OCLS

Navidea Options Altropane® from Alseres for Parkinson’s Disease Imaging

Download Full 7-Page Note with Important Disclosures: Morning Note 01-26-12 NAVB

After market close yesterday, Navidea announced that they entered into an option agreement with Alseres Pharmaceuticals (formerly Boston Life Sciences) to license Altropane® ([¹²³I]-E-IAFCT Injection), an Iodine-123 radiolabeled imaging agent, being developed as an aid in the diagnosis of Parkinson’s disease and movement disorders. The option agreement provides for exclusive rights for 6 months (June 30, 2012) to perform final due diligence and prepare the documentation necessary to enter into a definitive license agreement. We note that both Mark Pykett,CEO and Dr. Thomas Tulip,EVP are previously from Alseres.

[¹²³I]-E-IACFT is a patented, novel, small molecule radiopharmaceutical used with single photon emission computed tomography (SPECT) imaging to identify the status of specific regions in the brains of patients suspected of having Parkinson’s disease. The agent binds to the dopamine transporter (DAT) on the cell surface of dopaminergic neurons in the striatum and substantia nigra regions of the brain. Loss of these neurons is a widely recognized sign of Parkinson’s disease.

We believe that this Parkinson’s program would be complimentary to Navidea’s recent acquisition of AZD4694, a radiopharmaceutical imaging agent for Alzheimer’s disease (AD), from AstraZeneca (NYSE:AZN).

 Click Image to Enlarge

 CLINICAL HISTORY
[¹²³I]-E-IACFT has been administered to over 600 subjects to date. A Phase III Special Protocol Assessment (SPA) for [¹²³I]-E-IACFT is already in place with the FDA (POET-2) and over 50 subjects have been enrolled to establish a training data base. Results from clinical trials (POET-1) have demonstrated that [¹²³I]-E-IACFT has high affinity for DAT and rapid kinetics which enable the generation of clean images quickly, beginning within about 20 minutes after injection while other agents typically have waiting periods from 4 to 24 hours before imaging can occur. In addition to its potential use as an aid in the differential diagnosis of Parkinson’s disease and movement disorders, [¹²³I]-E-IACFT may also be useful in the diagnosis of Dementia with Lewy Bodies (DLB), a common form of dementia after Alzheimer’s disease.

POET-1: In March 2006, Alseres (then known as Boston Life Sciences) ended the Phase III SPA trial named “POET-1” early with approximately 30% fewer patients than originally specified because non-blinded data indicated that the error rate of general practitioners in the trial was higher than had been anticipated in the trial design. On September 25, 2006, they announced statistically significant results for the primary endpoint from the Company’s POET-1 (Parkinson’s or Essential Tremor) trial for the ALTROPANE® molecular imaging agent. The POET-1 trial was designed to assess whether ALTROPANE imaging is more accurate than the clinical diagnosis of primary care physicians to distinguish between tremors caused by Parkinsonian Syndrome and those associated with other disorders, as judged by comparison to a definitive diagnosis by movement disorder specialists. ALTROPANE scans showed statistically significant superiority over the diagnosis of PCPs on measures of both specificity and sensitivity, the primary endpoint of the trial. Based on data analyzed to date, with the exception of one “possibly-related” urinary tract infection that resolved after treatment, there were no drug-related serious adverse events.

POET-2: After discussions with the FDA, the POET-2 program was designed as a 2-part Phase III program using the optimized ALTROPANE image acquisition protocol. The first part of the program, a multi-center clinical study in subjects to acquire a set of ALTROPANE images, was completed. This set of images will be used to train the expert readers as is the customary process for clinical trials of molecular imaging agents. The second part involves two concurrent, replicate, multi-center Phase III trials. These two concurrent trials, the final design of which is under discussion with the FDA, will be initiated once final agreement on the design of the two trials is reached with the FDA. The completed image acquisition trial design can be found at http://clinicaltrials.gov/ct2/show/NCT00596908 The 2 concurrent Phase III trials have not yet enrolled but the trial design can be found at http://clinicaltrials.gov/ct2/show/NCT00724906

Option Terms
1.) Navidea paid Alseres an option fee of $500,000 for the exclusive right to negotiate a definitive license agreement by June 30, 2012.
2.) Navidea can extend the option period from June 30, 2012, to July 31, 2012, for an additional $250,000.

Anticipated License Terms
1.) Navidea will issue Alseres 400,000 shares of Navidea common stock upon execution of the definitive license agreement.
2.) The option also anticipates that the license agreement will provide for contingent milestone payments of up to $3.0 million, $2.75 million of which will principally occur at the time of product registration or upon commercial sales, and the issuance of up to an additional 1.05 million shares of Navidea stock, 950,000 shares of which are issuable at the time of product registration or upon commercial sales.
3.) Royalties on net sales of the approved product which are consistent with industry-standard terms.

Download Full 7-Page Note with Important Disclosures: Morning Note 01-26-12 NAVB

NeoStem Begins Enrolling Phase II Trial of AMR-001 for AMI (Heart Attack)
Market Weakness Provides Solid Buying Opportunity for NeoStem Shares

Download Full 6-Page Note with Important Disclosures: Morning Note 01-25-12 NBS

NeoStem announced the first patient enrollment in their Amorcyte PreSERVE Phase II trial for Acute Myocardial Infarction (AMI). The study is a 160-patient, multicenter, randomized, double-blind, placebo-controlled clinical trial to evaluate the safety and efficacy of intra-coronary infusion of AMR-001, an autologous bone marrow derived cell therapy enriched for CD34+ cells, in patient with AMI. AMR-001 is being developed initially for the preservation of heart muscle function for approximately 160,000 American patients who sustain a heart muscle damaging STEMI annually.

Enrollment of the 160 patients is expected to take approximately 12-18 months with top-line data expected after the 6 month follow-up of the last patient treated.

Design Summary: The study will assess the safety and efficacy AMR-001 administered 5 to 11 days post-stent placement in patients diagnosed with an ST segment elevation myocardial infarction (STEMI) with ejection fraction less than or equal to 48% as determined by cardiac magnetic resonance imaging (MRI) measured after recovery from myocardial stunning (reversible ischemic damage). Efficacy will be assessed by evaluating and comparing the autologous stem cell treatment group to the placebo control group via change in myocardial perfusion (RTSS) measured quantitatively by gated single photon emission computed tomography myocardial perfusion imaging (gated SPECT MPI) among other secondary endpoints measured by cardiac MRI in addition to clinical endpoints.

More information on the trial design can be found at: http://www.clinicaltrials.gov/ct2/show/NCT01495364

Download Full 6-Page Note with Important Disclosures: Morning Note 01-25-12 NBS

Early Stem Cell Results in The Lancet Could De-Risk HuCNS-SC® in AMD
First HuCNS-SC® Patient Cohort Completed in Chronic Spinal Cord Injury
Screening for Second Cohort in Less Severe AIS-B Patients to Begin
STEM Spinal Cord Program Undervalued Compared to Geron’s at Exit

Download Full 8-Page Note with Important Disclosures: Morning Note 01-24-12 STEM

Yesterday, Advanced Cell Technology (OTCBB:ACTC Not Rated) announced the publication in The Lancet of the early results of their embryonic stem cells in a Dry Age-Related Macular Degeneration (Dry AMD) patient and a Stargardt’s Macular Dystrophy patient. We note that only 2 patients out of the planned enrollment of 24 patients were documented and that the data was only 4 months post-implant.

The paper titled “Embryonic stem cell trials for macular degeneration: a preliminary report” described the results from the Stargardt’s patient as improving from zero letters to the 5 largest letters (line 1) on the Early Treatment Diabetic Retinopathy Study (ETDRS) visual acuity chart (consisting of 14 lines of 5 letters each or 70 letters). While the Dry AMD patient had improved vision from 21 ETDRS letters to 28 letters, there was no anatomical evidence of survival and engraftment (the patient did not comply with the immunosuppression regime). In addition, the patient reported mild visual function increases in the untreated eye, indicative of a potential placebo effect. The research paper may be downloaded and read at
http://download.thelancet.com/flatcontentassets/pdfs/S0140673612600282.pdf

In our opinion, the key takeaway from the paper is that it showed no safety signals regarding hyperproliferation, tumorigenicity, ectopic tissue formation or apparent rejection after 4 months. We believe this data provides some de-risking for StemCells Inc.’s planned IND filing for their HuCNS-SC program in Dry AMD. Investors should note that StemCells Inc. does not use embryonic stem cells, which are not patentable in Europe (see http://bit.ly/yuDMik) and do not have the ethical issues.

Investors should also note that Geron’s (Nasdaq:GERN Not Rated) decision to end their GRNOPC1 embryonic stem cell trial for spinal cord injury on November 14th has resulted in a loss of approximately $60M in Geron’s market capitalization. We believe this indicates that StemCells Inc.’s spinal cord injury program (see Ongoing Clinical Trial for Chronic Spinal Cord Injury) is significantly undervalued having a market capitalization of only $23M which also includes their Pelizaeus-Merzbacher disease (PMD) remyelination program as well as the expected Dry Age-Related Macular Degeneration (Dry AMD) IND filing.

Download Full 8-Page Note with Important Disclosures: Morning Note 01-24-12 STEM