BioWorld Today Contributing Writer

NeoStem Inc. has its eye on Progenitor Cell Therapy LLC, a cell therapy service with cGMP compliant manufacturing facilities, and has priced a combination of common and preferred stock units worth $19 million to finance its acquisition.

The New York-based company will issue 11.2 million shares of NeoStem common stock and warrants to purchase between 1 million and 3 million additional shares in exchange for all Progenitor Cell Therapy membership interests. The merger has been approved by the required number of shareholders in both companies.

The acquisition will round out NeoStem's business activities, giving it capabilities in all phases of stem cell therapeutic development from early discovery through commercialization and manufacturing. "Now we'll have all of the different pieces to be a single source for everything from collecting and storing your stem cells to manufacturing them," Robin Smith, CEO of Neostem, told BioWorld Today.

Neostem is offering 6,337,980 common stock units at $1 .45. Each unit contains one share of common stock and one warrant to purchase 0.5 shares of common stock at $1.85. The preferred stock offering is 10,582,011 units, and each unit contains one share of series E, 7 percent, senior, preferred stock, convertible at $2.0004, to mature on May 20, 2013, and a warrant to purchase 0.25 shares of common stock with an exercise price of $2.0874 and 0.0155 shares of common stock.

Cowen and Co. LLC acted as sole book-running manager with Maxim Group LLC and National Securities Corp. as co-managers for the common stock offering. For the preferred stock offering, LifeTech Capital, a division of Aurora Capital LLC, joined Cowen as co-placement agents. The offering will close on Nov. 19, and the number of shares outstanding prior to the offering was 57,613,794 shares of common stock, 10,000 shares preferred stock, and a possible 30,940,242 upon exercise of all options, warrants and convertible securities.

Neostem has three business units. Their business in U.S. adult stem cells includes a collection, storage and processing service as well as a research and development unit for stem cell therapies, including VSEL technology acquired from the University of Louisville, in 2006. The China stem cell business, based in Beijing, is focused on stem cell therapeutics. And in 2009, Neostem purchased a 51 percent interest in Suzhou Erye Pharmaceuticals, a maker of generic pharmaceuticals that Smith called "very profitable."

Smith said that last year, Erye "did $61 million in revenue and continues to grow between 15 and 25 percent a year." She credits NeoStem's diversified business structure for attracting investors. "We have three segments of the business: short term, middle term, long term. They see this as being very unique."

In addition to providing capital for the acquisition of Progenitor, the offering will help to fund research and development of NeoStem's products and support operations of the company through 2011. "We'll hit our milestones and continue to grow from there," Smith said.

NeoStem's flagship technology is the VSEL (very small embryonic-like) stem cell product. According to NeoStem, VSEL cells are able to differentiate into specialized cells and tissues in the body, without some of the drawbacks of embryonic stem cells such as teratoma or rejection, because the cells are taken from a person's own tissue. NeoStem is developing VSEL products for a variety of diseases including neural, cardiac and ophthalmic indications as well as regeneration and wound healing.

Out of its China stem cell business, NeoStem is devloping products and therapies in the area of wellness and aesthetics. One of its first such therapies in development will be an adult stem cell-based skin rejuvenation therapy licensed from physician Vincent Giampapa.

In other financing news:

• Beech Tree Labs Inc., of Providence, R.I., closed a Series B financing worth $7 million and received an additional $163,873 in grant funding through the U.S. Quality Therapeutic Discovery Project program. The financing will be used to fund Phase II trials for influenza and oral herpes. The grant will be used to support a third program in nicotine craving.

• Clinical Data Inc. filed a shelf registration on Form S-3 with the SEC to offer up to $200 million in common stock, preferred stock and debt securities with terms to be determined at the time of the future offering. Proceeds could be used to finance the launch of vilazodone, a serotonin reuptake inhibitor in development for depression, or for advancement of compounds in the Newton, Mass.-based company's pipeline. Stock in Clinical Data (NASDAQ:CLDA) was down $1.06, to close at $17.94 Tuesday.

• Micromet Inc., of Bethesda, Md., closed its public offering of 9.9 million shares priced at $7.30 each, recording net proceeds of about $70.5 million. Funds are expected to support general corporate purposes, which could include R&D, capital expenditures, working capital and general and administrative expenses. Shares of Micromet stock (NASDAQ:MITI) dropped 31 cents, to close at $6.48 Tuesday. (See BioWorld Today, Nov. 12, 2010.)

• Stellar Biotechnologies Inc., of Port Hueneme, Calif., closed a private placement of 6,213,000 units at 59 cents for total gross proceeds of $3,639,719. Each unit equals one share in capital and one transferable share plus a warrant to purchase an additional share at an exercise price of 88 cents through Nov. 14, 2011, and $1.12 per share between Nov. 15, 2011, and Nov. 14, 2012. Proceeds will be used to complete development of IMG KLH and its companion diagnostic product, and will fulfill the company's needs through 2012. Stock in Stellar Biotechnologies (TSX:KLH) dropped C9 cents or 9 percent to close at C90 cents.

• Cancer stem cell company Verastem Inc., of Boston, closed a $16 million Series A financing led by Longwood Founders Fund. Bessemer Venture Partners, Cardinal Partners and MPM Capital joined in the financing, which will be used by the company to advance discovery of stem cell therapies for cancer.