U.S. Stem Cell, Inc. (OTCMKTS: USRM) Outlook and Review

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U.S. Stem Cell, Inc. (OTCMKTS: USRM), is engaged into development of effective cell technologies to treat variety of diseases and injuries. USRM’s discoveries include multiple cell therapies in various stages of development that repair damaged tissues throughout the body due to injury or disease so that patients may return to a normal lifestyle. The company was founded in 1999 and is based in Florida.

Regenerative medicine is an emerging field for regeneration, repair & replacement of damaged human tissue and organs. The global regenerative medicine market is likely to reach a cumulative valuation of US$7 billion by 2019. USRM’s focus on moving up the value & marketing chain through signing new licensing agreement & entering into partnerships is likely to enrich its business strengths.
The company’s Chief Scientific Officer, Kristin Comella recently published a paper on the Implantation of SVF in patients with Degenerative Disc Disease. The study focused on the implantation of stromal vascular fraction (SVF) in patients suffering from degenerative disc disease. Patients were monitored for a period of 6 months post-treatment, noting considerable decreases in pain and increases in flexion.

USRM is in the process of launching new clinics and programs in the Middle East and China that will feature its technologies, therapies, and products. Also, it signed new licensing agreement with High Rising Group to open clinics throughout the Middle East, with locations in Dubai, Kuwait, and Qatar. Additionally, it entered into a partnership with Hong Kong Yihe Regeneration Medical Technology, to provide Chinese patients direct access to USRM’s treatments and regenerative therapies at its Sunrise, Florida clinic.
USRM’s product specific marketing partnerships with global players is likely to enhances revenue growth prospects for the company given its product development capabilities and marketing network of its partners in different geographies. Notwithstanding USRM positive growth plan, meaningful & sizeable contribution from the same is partially constrained due to large investment requirements and still evolving commercialization pathway for its product pipeline. Also, overseas partnerships might face initial integration/gestational issues.

For 3rd Quarter, USRM’s revenue up by 31% to from $557K in Q3 2015 to $729K in Q3 2016 & Net loss improved 17% from $264K in Q3 2015 to $219K in Q3 2016

About the company:
US Stem Cell, Inc. (formerly Bioheart, Inc.) is an emerging enterprise in the regenerative medicine / cellular therapy industry. The company is focused on discovery, development and commercialization of cell based therapeutics that prevent, treat or cure disease by repairing and replacing damaged or aged tissue, cells and organs and restoring their normal function. The management believes that regenerative medicine / cellular therapeutics will play a large role in positively changing the natural history of diseases ultimately, leading to, lessening patient burdens as well as reducing the associated economic impact disease imposes upon modern society.

Major divisions:
USRM’s business includes three operating divisions (US Stem Cell Training, Vetbiologics and US Stem Cell Clinic) including development of proprietary cell therapy products as well as revenue generating physician and patient based regenerative medicine / cell therapy training services, cell collection and cell storage services, the sale of cell collection and treatment kits for humans and animals, and the operation of a cell therapy clinic.

Key differentiating factor:
USRM focusses on harnessing body’s own healing potential, by reversing damaged tissue to normal function. USRM discoveries include multiple cell therapies in various stages of development that repair damaged tissues throughout the body due to injury or disease so that patients may return to a normal lifestyle. While most stem cell companies use one particular cell type to treat a variety of diseases, USRM utilizes various cell types to treat different diseases. Management believes that the unique qualities within the various cell types make them more advantageous to treat a particular disease.

About the industry:
Regenerative medicine is an emerging field for regeneration, repair & replacement of damaged human tissue and organs. Due to its critical contribution, regenerative medicine is becoming excessively popular in the treatment of neurological, cardiovascular, musculoskeletal, and orthopedic conditions. Bone and joint conditions are among the frontline applications of regenerative medicine. According to a study, global regenerative medicine market is likely to reach a cumulative valuation of US$7 billion by 2019.
Recent developments:
During Jan’17, Chief Scientific Officer, Kristin Comella published a paper on “Effects of the intradiscal implantation of stromal vascular fraction plus platelet rich plasma in patients with degenerative disc disease”. The study focused on implantation of stromal vascular fraction (SVF) in patients suffering from degenerative disc disease. Patients underwent a local tumescent liposuction procedure to remove approximately 60 ml of fat tissue from the abdomen. The fat was separated to isolate the SVF and the cells were delivered directly into the damage discs. Patients were monitored for a period of 6 months post-treatment, noting considerable decreases in pain and increases in flexion.

Prior to this, USRM signed a new licensing agreement with High Rising Group to open clinics throughout the Middle East, with locations in Dubai, Kuwait, and Qatar. They will be treating patients suffering from chronic conditions, like COPD and Parkinson’s, with the goal of transforming their lives by helping them with these debilitating conditions.

Additionally, they also entered into a partnership with Hong Kong Yihe Regeneration Medical Technology, to provide Chinese patients direct access to USRM’s treatments and regenerative therapies at its Sunrise, Florida clinic.

Outlook over near to medium term:
Management maintains its stance that revenues and their associated cash in-flows generated from its businesses will, over time, provide funds to support clinical development activities as they do today for its general business operations. They believe the combination of its own therapeutics pipeline combined with its revenue generating capabilities provides USRM with a unique opportunity for growth and a pathway to profitability.

From an operational perspective, USRM is focusing to continue developing pioneering regenerative medicine techniques and technologies as they work to bring regenerative therapies to patients around the world.
Key Stock Influences
Some key influences that might govern future stock price performance include:
• USRM is still a research and Development Company and its MyoCell product candidate has not received regulatory approval or generated any meaningful revenues and is not expected generate revenues over the near term. Therefore, any positive announcement related with approvals, outcome of ongoing trials, synergies due to partnership efforts could be a temporary trigger for stock performance.
• Over medium to longer term, successful launch & commercialization of existing and future therapeutics products would be critical given the considerable investments undertaken in R&D and infrastructure development during the recent past.
• Given high investments incurred related to the marketing of USRM’s products in different markets, cash drainage in its ongoing R&D activities and uncertainties related to the outcome of recent partnerships, overall return/profitability indicators could remain muted during the initial gestation period. Also, optimal utilization of integration with other global players will be among the key business sensitivities for the company.
• The company is likely to generate substantial net losses and negative cash flow from operations over the near to medium term. Therefore, USRM’s available cash balance might not be sufficient to fund its anticipated level of operations for at least the next twelve months. Therefore, timely arrangement of incremental funding would remain a critical liquidity & financial flexibility factor.
Earnings Review
USRM recognized revenues of $729,813 for three months ended September 30, 2016. These revenues were generated from the sales of kits and equipment, services, MyoCath Catheters, AdipoCell, and laboratory services. It recognized revenues of $557,612 for the three months ended September 30, 2015 from the sale of MyoCath catheters, AdipoCell, physician training, patient studies and laboratory services. The differential in revenue reflected an increase based on the products and services provided.

Operating Metrics & profitability:
Cost of sales was $332,522 and $243,940 in the three month periods ended September 30, 2016 and 2015, respectively. Associated gross margins were $375,651 (53.0%) and $313,672 (56.3%) for the three months periods ended September 30, 2016 and 2015, respectively.

Cash Flow & Balance Sheet:
USRM have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future. Historically, company have relied on proceeds from the sale of common stock and dependence on debt to provide the funds necessary to conduct research and development activities and to meet other cash needs. At September 30, 2016, it had cash and cash equivalents totaling $245,991 & working capital deficit as of such date was approximately $6.7 million.
Stock Performance:

 

On Friday, March 3rd, 17, USRM shares declined by -20.17% to $0.0319 on an average volume of 24.21M shares exchanging hands. Market capitalization is $2.64 million.

The current RSI is 64.3
In the past 52 weeks, shares of USRM have traded as low as $0.00 and as high as $0.35
At $0.0319, shares of USRM are trading above its 50-day moving average (MA) at $0.01 and 200-day MA at $0.01.
The present support and resistance levels for the stock are at $0.0261 & $0.0415 respectively.
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