MITHRA RESEARCH. NeoStem, Inc. (NBS - ASE) - $2.40. MITHRA RESEARCH LLC Frelinghuysen, NJ Research@MithraResearch.com

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1 MITHRA RESEARCH NeoStem, Inc. (NBS - ASE) - $2.40 Initiating Coverage with Speculative Buy Rating NeoStem, Inc.: Leading-Edge Health Services NeoStem, Inc. (NBS) NeoStem, Inc. is the first company to provide adult stem cell collection, processing and banking services both to the general adult population and the stem cell research industry with the goal of promoting the development, awareness and utilization of stem cell therapies. NeoStem s medically proven process is the least invasive, painless and the safest form of adult stem cell collection. Its rapidly growing network of doctors and its science specialize in the collection, processing, and long-term storage of adult stem cells generating the opportunity for people to store their own stem cells for current and/or future healthcare needs. NeoStem has the further goal of promoting both the development and utilization of stem cell therapy research, and to that end just announced the acquisition of Stem Cell Technologies, Inc. NeoStem is not a traditional R&D company: NeoStem is a nextgeneration bio-insurance and research/health services provider. In addition to stem cell banking, NeoStem plans to become a leading provider of adult stem cells for diagnostic and therapeutic use in the burgeoning field of regenerative medicine. Rapidly Growing Market: Stem cell company revenues are projected to grow from $16.4m(A) in 2006 to $37m in 2007, $178m in 2009, and $8.5 billion in 2016 (A). Hundreds of New Stem Cell Therapies in the Pipeline: According to there are 793 clinical trials underway relating to the use of adult stem cells (255 relating to autologous use) in the treatment of numerous serious diseases and conditions. (B) Non-Capital Intensive Business Plan: NeoStem s business model is easily scalable, can be quickly implemented, and minimizes risk ordinarily related to long-term biopharmaceutical research & development. Rapidly Growing National Network of adult stem cell collection centers. In October alone, NeoStem has announced agreements for the opening of stem cell collection centers in Las Vegas, New York, New England, and a multi-territory development agreement with Stem Collect, LLC. Initiating Coverage with Speculative Buy Rating and 12- month Price Target of $10.00 (+317%) 52-week range: $ $2.10 Div Yield: 0.0% Capitalization ($M M s) Valuation Summ ary Mkt. Cap (1) $18.7 EV/Sales FY07E nm + Total Debt 0.0 Price/Book 4.6x + Other (2) 0.0 RO E nm - Cash 3.6 Debt/Tot Cap. 0.0% = Ent. V alue $15.0 Cash Per Share: $0.47 Ow nership/trading Profile Shares Outstanding (M M s) (1,2) 7.8 Institutional O w nership na Insider Ownership 15.2% Float 3.6 Short Interest (Oct 26) (000s) 2.6 Avg. Daily V olume (000s) 16 No. Thomson-First Call Analysts 0 Summary Fundamentals ($000s except per share items) Please refer to Growth Sensitivity Tables on pages ) F.D. shares out include 4.7m shares outstanding and 2,084,938 warrants issued & outstanding; exercise price range is $ $ ) In 3/2007 the Series A Conv. Pfd. Stock (681,171 shares) was converted into 544,937 common shares. Note: NBS raised $6.3m ($5.77m net) in 8/07 (1.27m units at $5.00) and implemented a 1:10 reverse stock split upon listing on AMEX. MITHRA RESEARCH LLC Frelinghuysen, NJ Research@MithraResearch.com November 19, Page 1 of 32

2 Table of Contents NeoStem Summary of Achievements.. 3 Corporate History.. 4 Business and Strategy. 4 Non-Capital Intensive Business Plan Marketing and Customers Company Initiatives The Stem for Life Foundation Stem Cell Technologies, Inc. Acquisition Significant Development Milestones. 7 Stem Cell Basics. 8 History of Stem Cell Research 9 Adult Stem Cell Plasticity. 9 VSELs. 10 Obtaining Adult Stem Cells.. 11 Bone Marrow Cord Blood Peripheral Blood Cord Blood vs. Peripheral Blood Why Autologous Stem Cell Use?.. 12 Intellectual Property.. 12 Overview of Stem Cell Market/Research.. 14 NeoStem Key Personnel NeoStem Scientific Advisory Board.. 16 NeoStem Advisory Board. 17 Summary of Financial Position 18 NeoStem Growth Sensitivity Tables 19 Scenario 1: New Donors Year 1 = 210; Growth rates of 100%, 200% & 300% Scenario 2: New Donors Year 1 = 305; Growth rates of 100%, 200% & 300% Scenario 3: New Donors Year 1 = 475; Growth rates of 100%, 200% & 300% Scenario 4: New Donors Year 1 = 210, 305 & 475; Growth Ramps up in each NeoStem Valuation Tables 23 Historic Financial Tables 24 Appendix A: Business Development Timeline 25 NeoStem One-Page Summary Overview 27 Glossary of Terms 28 Footnotes & Sources of Information 31 Risks and Important Disclosures.. 32 November 19, Page 2 of 32

3 Human stem cell research holds enormous potential for contributing to our understanding of fundamental human biology. Although it is not possible to predict the outcomes from basic research, such studies will offer the real possibility for treatments and ultimately for cures for many diseases for which adequate therapies do not exist. (C) American Association for Advancement of Science Summary of Achievements As a leading-edge health services provider, NeoStem is seeking to capitalize on existing treatments and future breakthroughs in the rapidly growing field of adult stem cell therapies, a market sector expected to reach $8.5 billion in the U.S. in Since its current formation in mid-2006, in its short lifespan NeoStem has: Improved its financial position Opened 3 stem cell collection centers and signed agreements for a further two centers Created alliances with four major medical services companies Acquired Stem Cell Technologies, Inc., a wholly owned subsidiary of UTEK Corporation Strengthened its management team and its advisory boards with biomedical and business leaders Key to the company s growth initiatives are opening stem cell collection centers. To that end, in the past year NeoStem has opened centers in Encinitas, CA Bethlehem, PA Las Vegas, NV Further, agreements have been signed with: ProHEALTH Care Associates one of the largest and most prominent multi-specialty practices in the NY metropolitan area. ProHEALTH is the official medical provider to major regional sports franchises and events, including the NY Jets, the NY Islanders and the US Open Tennis Championships. Stem Collect LLC is opening a Beverly Hills, CA location as part of a multi-territory development agreement. NeoStem has established alliances with four nationwide regional bio-service companies: Stem Collect LLC: Based on the multi-territory agreement signed with Stem Collect, regional exclusivity is granted, however, each collection center will be required to generate a minimum number of adult stem cell collections in order to retain that exclusivity. New England Cryogenic Center Inc. (NECC): This will provide NeoStem with an East Coast storage facility, complimenting its existing West Coast facility. NECC is one of the largest cryogenic laboratories in the country. HemaCare Corporation: NeoStem signed a five-year agreement with HemaCare to provide NeoStem with outpatient collection services. HemaCare s high quality cost-effective blood-related services are well known to hospitals and medical communities throughout California and on the East Coast. HemaCare s mobile units and freestanding facilities will enhance NeoStem s growing collection infrastructure. CareCredit: The agreement with CareCredit, a GE Money Company and the nation s leading patient financing program, allows NeoStem customers to choose to pay fees at a set rate over a specified time period, making NeoStem s adult stem cell collection services available to a broader potential customer population. NeoStem acquired Stem Cell Technologies, Inc. from UTEK Corporation November 14, 2007: this acquisition provides an initial opportunity for NeoStem to participate in the development of stem cell therapeutic applications with its ability to harvest, cryopreserve, and license VSELs ( very small embryonic-like stem cells) for further development and research. (Please refer to page 6 and page 10 for further information). The company also launched the Stem for Life Foundation and significantly bolstered its management team and its advisory boards, as outlined in the report. November 19, Page 3 of 32

4 NeoStem Corporate History Business and Strategy Since the acquisition of NS California, NeoStem has successfully been developing its principle business: the collection, processing, and banking (long term storage) of somatic (adult) stem cells for autologous use. Previously operating as Phase III Medical Inc., a Delaware corporation, the company s business was to provide capital and business guidance to companies in the healthcare and life science industries. Additionally, through June 30, 2002, the company had been providing extended warranties and service contracts via the Internet. The company recognized run-off of the extended warranties and service contracts through the first quarter of On January 19, 2006, Phase III Medical acquired the assets of NS California, a California corporation. NS California had been a company to which Phase III had been providing business guidance. Effective with the acquisition, the business of NS California became the principal business of the company. NS California was acquired for 4,000,000 shares of stock (40,000 adjusted for two 1:10 splits, the first occurring on 8/29/06 and the second occurring on 8/9/07) valued at $200,000. In addition, the company assumed $489,989 in liabilities. The underlying physical assets were valued at 109,123, resulting in the recognition of goodwill in the amount of $580,866. On August 29, 2006, the company effected its first 1:10 reverse stock split and changed its name from Phase III Medical, Inc. to NeoStem, Inc. Since June 2006, NeoStem has raised a total of approximately $12.6 million in equity offerings. Since the acquisition of NS California, NeoStem has successfully been developing its principle business: the collection, processing, and banking (long term storage) of adult stem cells for autologous use with a portion of the collection potentially going to adult stem cell research. As stem cell therapies obtain necessary regulatory approvals and become standard of care, NeoStem believes individuals will need the infrastructure, methods and procedures being developed by the company to have their stem cells safely collected and conveniently stored for future therapeutic use. The company also just completed its first acquisition in line with its plan to participate in the further development and research of stem cell therapies and will continue to identify appropriate paths to promote regenerative medicine research and development. NeoStem is a leading-edge health services company that provides bio-insurance and research services related to stem cell technologies. Capitalizing on breakthroughs in the burgeoning field of adult stem cell therapies, NeoStem currently operates a commercial autologous (donor and recipient are the same) adult stem cell bank and is pioneering the pre-disease collection, processing and long-term storage of stem cells from healthy adult donors that they can later access for their own present and future medical treatment. NeoStem further plans to use this platform to support awareness, research and education in adult stem cell therapies and diagnostics. As stem cell therapies obtain necessary regulatory approvals and become standard of care, NeoStem believes individuals will need the infrastructure, methods and procedures being developed by the company to have their stem cells safely collected and conveniently stored for future therapeutic use. The company further believes that companies conducting research on and development of adult stem cell therapies will need access to material for research and additionally plans to choose appropriate paths to promote research and development of regenerative medicine involving stem cell therapies. The Company currently intends to generate revenues from the following: 1) Initial collection of adult stem cells; 2) Processing and storage of adult stem cells (which will generate recurring revenue streams); 3) Utilization of adult stem cells (when the stem cells are used); 4) Licensing of stem cells and related technologies; 5) Provision of stem cells for research studies; 6) Research Grants & Partnerships: NeoStem plans to work with academic researchers to seek government grants for research studies with donated adult stem cells. As the NeoStem banks increase in size and scope, partnerships with pharmaceutical and November 19, Page 4 of 32

5 biotechnology companies should result in additional research-based revenues. NeoStem is developing a service model to create a source of stem cells that potentially enables physicians and scientists to treat a variety of diseases and engage in research to progress therapeutic development using adult stem cells. NeoStem anticipates fees being derived from company-owned collection centers and collection centers operated by physicians and medical institutions with which it collaborates, and has established a business model that allows the creation of revenue from each step in the process. The company is seeking to obtain government grants to catalogue and store adult stem cells in a biorepository. As this biorepository grows, it is anticipated there will be revenues derived from relationships with pharmaceutical companies and other companies developing stem cell therapies that require access to cells. Additionally, NeoStem plans to expand its patent portfolio in the adult stem cell arena, and has taken its first step in achieving this goal with the acquisition of Stem Cell Technologies, Inc.. NeoStem is currently processing and storing the adult stem cells collected with its processes at its California facility, and has signed an agreement for a second storage facility on the East Coast. NeoStem has agreements in place for collection centers in Los Angeles, Pennsylvania, Las Vegas, New York, and a multi-territory agreement covering California (including Beverly Hills) and Colorado. Non-Capital Intensive Business Plan NeoStem s business model is easily scalable, can be quickly implemented, and minimizes the risks ordinarily related to long-term biopharmaceutical research & development. NeoStem s non-capital intensive business plan is a service model that is completely scalable and can be quickly implemented, minimizing risk ordinarily related to most longterm biopharmaceutical research and development. Under NeoStem s strategic initiatives, the company has already begun opening a nationwide network of adult stem cell collection centers, and NeoStem will process and store those stem cells. The collection technologies and processes will be located in physician offices and medical facilities, where trusted personal physicians and medical professionals can administer the procedures. This build-out strategy dramatically lowers the capital requirements of building out an owned network, and leverages its business via existing infrastructure. Marketing and Customers NeoStem is building an aggressive direct-to-consumer marketing plan to drive awareness and target individuals who can afford its services. As outlined in Appendix A: Business Development Timeline, (page 25) NeoStem has also made provisions for those with economic constraints to be able to afford its services with the financing relationship established with GE CreditCare. The company plans to educate individuals that have a family history or early diagnosis of diseases being treated with stem cell therapy as well as those who have banked their infants stem cells that can afford this bio-insurance. Additionally, NeoStem is establishing collaborations with high profile medical centers and academic institutions involved in cutting edge research and clinical trials to evaluate the use of stem cells for the treatment of various diseases. NeoStem also believes that there is a significant need for its banking services for our Nation s first responders and homeland security personnel. NeoStem is moving forward to educate those groups and find resources to protect those individuals who protect us. The company s other go-to market strategies include collaboration with cord blood companies, tissue banks, pharmaceutical companies, concierge medical programs, executive health plans, and regenerative medicine specialists. The company is embarking on significant marketing, advertising and sales campaigns individually and through collaborations with others for the purpose of educating physicians and potential clients on the benefits of adult stem cell collection and storage. The Company s Go-To-Market strategy is to drive this general awareness. The essence of this strategy is to reach the end-customers as quickly as possible and to accelerate the adoption curve of the company s service. In addition, NeoStem plans to utilize marketing resources to increase the number of physicians who collaborate with it in the operation of collection centers. The company believes numerous consumer segments may recognize and experience the long-term benefits from stem cell collection and banking services. These include: Individuals with a family history of serious diseases that show potential for treatment with stem cell therapies that are currently under research, e.g. diabetes, heart disease, or cancer; Wellness and regenerative medicine communities; Families who have already banked the umbilical cord blood from their newborns; Patients diagnosed with early stage cancer, cardiovascular disease, or diabetes; Individuals with increased risk of exposure to radiation; November 19, Page 5 of 32

6 High net worth and educated consumers Cord blood companies, tissue banks, and pharmaceutical companies in partnership with NeoStem Academic Institutions interested in opening collection centers for research-related purposes Government agencies in efforts to raise adult stem cell therapy awareness The company is designing its marketing efforts to educate physicians on the benefits both of making stem cell collection and banking services available to their adult patients, and the benefits of participating in the company s collection program. The Company has appointed an experienced medical services Marketing Director, is utilizing the expertise of certain outside marketing consultants, and is increasing its internal marketing staff in connection with the expansion of its marketing efforts and is increasing its marketing personnel. Company Initiatives The company s initiatives include plans to: Develop strategic initiatives with cord blood companies, tissue banks and pharmaceutical companies; Collaborate with academic institutions on licensing opportunities, build-out of collection centers, and provision of collection services for ongoing clinical trials; Develop partnerships with executive health programs, wellness physicians, concierge medical programs, medical spas and first responder groups; Expand the Company s intellectual property portfolio within the stem cell arena; Expand its Government Programs Initiatives and in this regard has recently hired Arlene Graime as Director of Government Affairs and Special Projects to spearhead efforts aimed at working with key federal and state agencies as well as congressional committees in order to raise awareness for the benefits of adult stem cell therapy as a treatment option; Submit grant applications to National Institutes of Health and others to fund Company programs; Assist in developing The Stem for Life Foundation, an adult stem cell foundation formed to generate awareness of stem cell therapies (launched September 27, 2007). Stem Cell Technologies, Inc. Acquisition NeoStem acquired Stem Cell Technologies, Inc, a wholly owned subsidiary of UTEK CORP., on November 14, Stem Cell Technologies, Inc. owns a worldwide exclusive license to a technology developed by researchers at the University of Louisville to identify and isolate rare stem cells from adult human bone marrow, called VSELs very small embryonic-like stem cells. This acquisition provides an initial opportunity for NeoStem to participate in the development of stem cell therapeutic applications with its ability to harvest, cryopreserve, and then license VSELs for their use by those interested in conducting research in the arena. Acquired for 400,000 common shares (total value of transaction estimated to be $940,000), this acquisition marks the first step in NeoStem s goal of participating in and promoting the research and development of stem cell therapies. VSELs have been shown to have several physical characteristics that are generally found in embryonic stem cells. They also have been shown to grow in the laboratory and multiply into clusters of cells that can differentiate into specialized cells found in different types of tissue including cardiac, neural, endothelial, muscle, pancreatic and hematopoietic cells. NeoStem s ability to harvest and cryopreserve the pluripotent VSELs from individual patients basically sets the stage for their potential use in personalized regenerative medicine, and also provides the potential for future licensing revenue streams. Concurrent with the Stem Cell Technologies, Inc. acquisition, NeoStem entered into a Sponsored Research Agreement with the University of Louisville under which NeoStem will support further research in the University of Louisville laboratory of Dr. Ratajczak, a portion of which will be covered by the acquisition. With planned acquisition of further research grants, this research would be essentially selffunding. The Stem for Life Foundation In April 2007, the Company participated in the founding of The Stem for Life Foundation. The Mission of the Foundation is to heighten public awareness and knowledge of the benefits and promise of Adult Stem Cells in treating serious medical conditions. The Foundation is committed to assisting those who protect us. First Responders (Fire, Police, Rescue and Military) are at high risk for exposure to radiation, burns, wounds, and other trauma. The Foundation is designed to help provide resources, not just for those emergency workers, but also to other individuals who become chronically ill and will be in need of assistance to collect, process and store their own stem cells now for use in the future. The Foundation was formed under the Pennsylvania Not-for-Profit Corporation Law and is intended to qualify as a 501(c)(3) corporation under the Internal Revenue Code, as amended. Certain members of the Company s management are officers and/or sit on the Board of Trustees of the Foundation. November 19, Page 6 of 32

7 Significant Development Milestones In just a little over a year, NeoStem has strategically positioned itself for success by putting together first-class Advisory/Scientific Advisory Boards, an experienced management team, signing a series of significant collection agreements, and signing a financing agreement with GE credit for use by potential donors. As a result, NeoStem is now transitioning from a development-stage company to a commercial services provider. NeoStem has set the stage for 2008 to be a groundbreaking year. Under the leadership of Dr. Robin Smith, Chairman and CEO, in just a little over a year NeoStem has built a solid infrastructure and is now strategically positioned to make the successful transition from a development-stage company to a unique health services provider. A few significant business development milestones are highlighted; please refer to Appendix A: Business Development Timeline, on page 25 for the complete list of advances/announcements. November 28, 2006: Grand Opening of Henderson, NV stem cell collection center. The first official collection of adult stem cells in Nevada using NeoStem's process will occur during the Grand Opening on Wednesday, November 28. August 14, 2006: NeoStem acquired Stem Cell Technologies, Inc., a wholly owned subsidiary of UTEK Corporation. This acquisition provides an initial opportunity for NeoStem to participate in the development of stem cell therapeutic applications with its ability to harvest, cryopreserve, and license VSELs ( very small embryoniclike stem cells) for further development and research. We anticipate this acquisition will create opportunities for NeoStem to generate revenue streams from licensing the VSEL technology. August 8, 2006: NeoStem received its license from the State of California permitting the company to begin the commercial collection, processing and storage of peripheral blood progenitor cells (adult stem cells) for autologous use at its California facilities. September 18, 2006: NeoStem signed its first adult stem cell collection center agreement. The agreement was with Ron Rothenburg MD, FACEP, (please refer to NeoStem s Advisory Board, page 17), of Encinitas, California, and initiated NeoStem s launch to facilitate the opening of adult stem cell collection centers both nationally and internationally. collection services, expanding its collection infrastructure through HemaCare s mobile units and free standing facilities in Maine and California. March 22, 2007: NeoStem announced further expansion of its network with the launch of its third stem cell collection center. The Bethlehem, Pennsylvania facility will serve as a launching pad for the company s east coast expansion. April 26, 2007: The New York State Department of Health issued two provisional licenses to allow NeoStem to begin commercializing its next generation stem cell collection services in New York. October 10, 2007: Continuing to execute its business plan, NeoStem announced the opening of the Las Vegas adult stem cell collection center. October 15, 2007: NeoStem signed a multi-territory development agreement with Stem Collect, LLC to accelerate growth of its nationwide network. This multiterritory development agreement signals a business development milestone for NeoStem as it seeks to quickly and efficiently penetrate additional metropolitan areas. Stem Collect purchased the right to open six adult stem cell collection facilities with an option to develop significantly more territories. Stem Collect is entitled to begin by expanding the NeoStem network throughout most of California and to launch the Colorado market. October 17, 2007: NeoStem signed an agreement with ProHEALTH to open an adult stem cell collection center in the New York metropolitan area. ProHEALTH is one of the largest and most prominent multi-specialty practices in the NY metropolitan area; it has over 100 providers in its network and provides care for over 250,000 patients. Located in Nassau County on Long Island, ProHEALTH has gained particular renown by becoming the official medical provider of major regional sports franchise and events, including the NY JETS, the NY Islanders, and the US Open Tennis Championships. October 23, 2007: Beverly Hills is to be the first area opened pursuant to the recently announced multi-territory agreement signed with Stem Collect, LLC. Finalization of the site is underway and will be opened upon build-out and satisfaction of licensing requirements. December 20, 2006: The company signed a five-year agreement with HemaCare Corp. to provide NeoStem with November 19, Page 7 of 32

8 Stem Cell Basics (D) There are currently almost 800 clinical trials under way related to adult stem cell research as scientists seek new therapies in regenerative medicine. Simply put, a stem cell is a special kind of cell that has a unique capacity to renew itself and to give rise to specialized cell types. Although most cells of the body are committed to conduct a specific function, a stem cell is uncommitted and remains uncommitted until it receives a signal to develop into a specialized cell. There are over 200 different known cell types. The proliferative capacity of stem cells combined with their ability to become specialized cells makes them unique: there are almost 800 clinical trials under way as scientists seek ways to use stem cells to replace cells and tissues that are damaged or diseased. (E) Stem cells have two important characteristics that distinguish them from other types of cells. 1) They are unspecialized cells that renew themselves for long periods through cell division; 2) under certain physiologic or experimental conditions, they can be induced to become cells with special functions, such as the beating cells of the heart muscle or the insulin-producing cells of the pancreas. Figure 1: Stem Cell Scientists primarily work with two kinds of stem cells from animals and humans: embryonic stem cells and adult stem cells. Each has different functions and characteristics. Embryonic stem cells are derived from embryos that develop from eggs that have been fertilized in vitro and then donated for research with the consent of the donors. They are not derived from eggs fertilized in a woman s body. They are a hollow microscopic ball of cells called the blastocyst. The blastocyst includes three structures: the trophoblast (the layer of cells that surrounds the blastocyst); the blastocoel, (the hollow cavity inside the blastocyst); and the inner cell mass (a group of approximately 30 cells at one end of the blastocoel). Adult stem cells are undifferentiated cells found among differentiated cells in a differentiated tissue. It has the ability to renew itself, and to become specialized to yield all the cell types of the tissue from which it originated and in the appropriate environment it can also become a specialized cell of a different tissue, which is defined as pluripotent. The primary role of adult stem cells in a living organism is to maintain and repair the tissue in which they are found. (Some scientists now use the term somatic stem cell instead of adult stem cell). Unlike embryonic stem cells, which are defined by their origin (the inner cell mass of the blastocyst), the origin of adult stem cells in mature tissues is unknown. Adult stem cells are capable of self-renewal for the lifetime of the organism. Sources of adult stem cells are primarily the bone marrow, but adult stem cells have been found in the blood stream, the umbilical cord, the cornea and retina of the eye, the dental pulp of the tooth, the liver, skin, gastrointestinal tract, adipose tissue (fat) and pancreas. A fertilized egg is considered to be totipotent, meaning that its potential is total; it gives rise to all the different types of cells in the body. Pluripotent stem cells can give rise to any type of cell in the body except those needed to develop a fetus. Stem cells that can give rise to multiple different cell types are generally referred to as multipotent. Source: Understanding Stem Cells: An Overview of the Science and Issues from The National Academies (F) Research on stem cells is advancing knowledge about how an organism develops from a single cell and how healthy cells replace damaged cells in adult organisms. This very promising area of research is leading scientists to investigate the possibility of cell-based therapies to treat disease, which is often referred to as regenerative or reparative medicine. November 19, Page 8 of 32

9 History of Stem Cell Research (G) The use of adult stem cells in regenerative medicine is not new: they have been used to treat blood cancer for over 40 years. Importantly, recent breakthroughs in stem cell research are rapidly expanding potential therapies. Adult stem cell research began in the 1960s when scientists discovered that bone marrow contains at least two kinds of stem cells. One population, called hematopoietic stem cells, forms all the types of blood cells in the body. A second population, called bone marrow stromal cells, was discovered a few years later. Stromal cells are a mixed cell population that generate bone, cartilage, fat, and fibrous connective tissue. Hematopoietic stem cells are currently the only type of stem cell commonly used for therapy. Doctors have been transferring HSCs in bone marrow transplants for over 40 years: more advanced techniques of collecting HSCs are now used in order to treat leukemia, lymphoma and several inherited blood disorders. Also in the 1960s, in studies conducted with rats, scientists discovered two regions of the brain that contained dividing cells that become nerve cells. Despite the initial reports, most scientists believed that new nerve cells could not be generated in the adult brain. However, in the 1990s, researchers discovered that the adult brain does contain stem cells that are able to generate the brain s three major cell types: astrocytes and oligodendrocytes (which are non-neuronal cells), and neurons (nerve cells). In 2003, Vroemen reported that embryonic and adult neural stem cells differentiate into astrocytic phenotypes upon grafting into injured spinal cord (H). Adult Stem Cell Plasticity Adult stem cells have been identified in many organs and tissues: they enter normal differentiation pathways to form the specialized cell types of the tissue in which they reside. Adult stem cells also appear to exhibit the ability to form specialized cell types of other tissues, known as transdifferentiation or plasticity. In 1998, for the first time, investigators were able to isolate pluripotent stem cells from early human embryos and grow them in culture. In the few years since this discovery, evidence has emerged that these stem cells are, in fact, capable of becoming almost all of the specialized cells of the body and thus may have the potential to generate replacement cells for a broad array of tissues and organs such as the heart, the pancreas and the nervous system. At about the same time that scientists were beginning to explore human pluripotent stem cells from embryos and fetal tissue, a flood of research emerged on adult stem cells. During the past decade, researchers have discovered adult stem cells in tissues previously not thought to contain them. More importantly, adult stem cells from one tissue appear to be capable of developing into cell types that are characteristic of other tissues. Certain adult stem cells types are pluripotent. The following list offers examples of adult stem cell plasticity (as reported by the National Institutes of Health (NIH)) that have been reported during the past few years: Hematopoietic stem cells may differentiate into: three major types of brain cells (neurons, oligodendrocytes, and astrocytes); skeletal muscle cells; cardiac muscle cells; and liver cells. Bone marrow stromal cells may differentiate into: cardiac muscle cells and skeletal muscle cells. Brain stem cells may differentiate into: blood cells and skeletal muscle cells. Adult stem cells have not been found for all types of tissue, but discoveries in this area of research are increasing. For example, as outlined earlier, until recently it was thought that stem cells were not present in the adult nervous system, but in recent years such stem cells have been found in the brain. Pluripotent embryonic stem cells, while having great therapeutic potential, face formidable technical (not to mention political) challenges. First, scientists must learn how to control their development into all the different types of cells in the body. Second, the cells now available for research are likely to be rejected by a patient's immune system. Another serious consideration is that the idea of using stem cells from human embryos or human fetal tissue troubles many people on ethical grounds. According to the NIH, until recently, there was little evidence that stem cells from adults could change course and provide the flexibility that researchers need in order to address all the medical diseases and disorders they would like to. However, a number of clinical studies over recent years have affirmed the plasticity of adult stem cells. Further, new findings in animals suggest that even after a stem cell has begun to specialize, it may be more flexible than previously thought. Because of the plasticity of adult stem cells, adult stem cells are the perfect ethical and moral alternative to the controversial embryonic stem cells. There are almost 800 adult stem cell clinical trials listed by November 19, Page 9 of 32

10 and they are showing great promise for therapies such as skin/wound healing, peripheral vascular disease, lupus, scleroderma, multiple sclerosis, juvenile diabetes type 1, congestive heart failure, myocardial infarction, liver disease, orthopedics and many more. Figure 2: Stem Cells and Pluripotency Ectoderm Skin Hair Brain Nerves Etc. Stem Cell -Primitive and thus unspecialized -Self-Renewing -Can differentiate into cells with specific functions Source: NeoStem, Inc. Mesoderm Endoderm Progenitor Cells Cardiac Skeletal Renal Muscle Blood Etc. Lung Gut Thyroid Pancreas Etc. VSELs Very Small Embryonic-Like Cells Background Dr. Mariusz Ratajczak, Director of the stem cell biology program at the University of Louisville s James Graham Brown Cancer Center, and his colleagues published a paper in the January 2004 issue of the journal Leukemia. The paper describes a strategy for identifying and isolating rare cells from adult human bone barrow, which have since been named VSEL (very small embryonic-like) stem cells. This research has demonstrated that bone marrow contains more than one type of stem cell and that VSELs are different from hematopoietic stem cells (HSCs); this has been confirmed by two further (independent) studies. HSCs, blood forming stem cells found in bone marrow, are routinely being used to treat disease. Early on, scientists assumed that HSCs could be used as precursors for other stem cells that could be used to regenerate various organs, but to date, as outlined above, research has shown mixed results. The 2004 paper by Ratajczak et al. has been highly cited in the scientific literature because it: Demonstrated that there is more than one kind of stem cell present in adult humane bone marrow; November 19, Page 10 of 32

11 Demonstrated that VSELs are pluripotent and have the potential to develop into liver, pancreas, neural tissue, skeletal muscles, or heart muscle; Identified and isolated VSELs that are shown to have several characteristics (cell structure and protein markers) that are generally found in embryonic stem cells; Demonstrated that VSELs can mobilize into peripheral blood in situations of stress and are used by the body to contribute to tissue repair/regeneration of specific organs; Explains conflicting data as to whether cells derived from bone marrow have regeneration potential; Points out new directions for stem cell research, encouraging other scientists to consider sources of stem cells other than human embryos for tissue repair and regeneration. Research announced by the University of Louisville appears to demonstrate that these rare cells not only have the physical characteristics of embryonic stem cells, but also can be cultured and grown in the laboratory, multiplying into clusters of cells that then can differentiate into several different types of tissues cells as outlined above. Obtaining Adult Stem Cells Bone Marrow Most of the stem cells in the human body reside in the bone marrow. Until recently, the only way to obtain stem cells for transplantation was to remove a portion of the bone marrow. Collecting stem cells from bone marrow is usually done in a hospital operating room under general anesthesia: this method of collecting stem cells is not without risk to the donor and is very expensive. Bone marrow stem cells have been used for both allogeneic (from another person) and autologous (from yourself) transplantation. Due to the difficulty of obtaining these cells, storage by cryopreservation has been extremely rare and limited. Cord Blood A more recent source of adult stem cells is from blood from a newborn s umbilical cord. Stem cells can be extracted from the blood that remains in the placenta and umbilical cord following delivery of the baby. Adult stem cells obtained form umbilical cord blood can be processed and stored cryogenically for future use for both allogenic and autologous treatments. Today, about five percent of parents nationwide store the stem cells derived from the cord blood of their newborns for future autologous use. Peripheral Blood The collection of stem cells from peripheral blood is available to adults, is safe and is non-invasive. It involves a non-surgical procedure performed on an outpatient basis. Finally, through recent medical advances, it is now possible to collect stem cells from a person s peripheral blood. Today, most autologous transplants utilize peripheral blood stem cells (PBSCs). No general anesthesia is required for this collection method, and with NeoStem s process, it is done in an outpatient setting. Because most stem cells reside in the bone marrow, it is necessary to move stem cells form the bone marrow to the bloodstream prior to their collection. This procedure is called mobilization. NeoStem s process of mobilization involves two injections of a medicine that temporarily causes stem cells, residing in the bone marrow, to move into the blood stream. Once a sufficient number of stem cells are mobilized from the bone marrow into the blood stream, the stem cells are collected using a non-surgical procedure called apheresis. This is a painless and safe procedure similar to donating blood, where blood is removed from the patient or donor via a needle in the arm. The blood is then circulated through a cell separator, whereby the white blood cell component enriched for stem cells is separated out. The collection process usually lasts about three to four hours during which time the patient is in a comfortable, relaxing reclined position, enjoying a great movie on a flat screen TV (or enjoying your favorite tunes with headphones). After the collection, approximately 50% of the collection is stored in an immune reconstitution bag and can be used should the donor be diagnosed with a stem cell treatable cancer or become the victim of radiation or chemical exposure and thus require an immune system transplantation. The remaining stem cells are stored in up to 20 separate containers that can be used for new regenerative medicine therapies in the future. All stem cells are stored and tracked through a system designed to return stem cells only to the donor from whom they were collected. Once the donor s stem cells are safely stored in the cryopreservation tank, they should be available for the rest of the donor s life. Studies have shown that stem cells preserve quite well, and only 3% of the banked stem cells should die off every 20 years. (I) November 19, Page 11 of 32

12 Figure 3: Apheresis Why Autologous Stem Cell Use? There are tremendous clinical and economic advantages to autologous stem cell transplantation (receiving your own stem cells rather than those from a donor). The primary reason is immune rejection. There are many mechanisms by which an immune response can be activated in a cell. For example, an immune response is found when a blood transfusion is made across blood types because of specific unrecognizable proteins on the cell walls of foreign blood types. Similarly, when stem cells are transplanted from one person into another, unless properly matched, the hosts s immune system will not recognize the surface antigens of the transplanted cells and will attempt to destroy them. An example of how difficult it may be to match adult stem cells, according to the American Bone Marrow Donor Registry, the odds are 1 in 20,000 of identifying an unrelated compatible marrow donor (and is much higher for patients of minority heritage ). (J) Source: NeoStem, Inc. Cord Blood vs. Peripheral Blood While umbilical cord blood is a growing source of stem cells, it has limitations that peripheral blood stem cell collection does not. For autologous use, the main problem is the size of the addressable market. There are approximately 4 million births in the U.S. while according to NeoStem, there are over 50 million people in the U.S. with diseases where stem cell therapies are used as currently available treatment or for which stem cell related clinical trials are in progress. Another issue to consider in the difference between the cord blood stem cell industry and peripheral blood adult stem cell industry are the quantities of stem cells available to harvest. With umbilical cord blood, the number of stem cells derived from an umbilical cord and placenta is fixed with no opportunity for further collection, thus the number of cells available for future transplant is limited, and the cell dose required for treatment increases as a function of the recipient s weight. The number of stem cells harvested from umbilical cords are on average sufficient until a child reaches approximately 100 Kg, or approximately seven years of age. Please refer to Table 1 on the next page. In hope of limiting the immune response in humans, a large number of immunosuppressant drugs have been developed. They have allowed for the transplantation of organs and can be used to treat autoimmune diseases, however, every immunosuppressant currently on the market has serious side effects. These drugs could potentially be used to trick the body into tolerating foreign stem cells, however, according a publication of Brown University s Biological Sciences Department, the side effects would often outweigh the benefits of the therapies. (K) Engraftment with your own stem cells is faster, safer and much less costly than receiving allogenic (someone else s) stem cells. Intellectual Property NeoStem acquired two U.S. patent applications that had been submitted by NS California and are pending. The first patent application is directed to the process by which NeoStem prepares and stores the stem cells derived from adult peripheral blood by apheresis following mobilization of the stem cells from the bone marrow. The second patent application is directed to, among other things, the use of stored stem cells to form the basis for medical information that may provide statistics on the etiology of disease, and the use of stem cells in the treatment of infectious diseases and breast cancer. In addition, NeoStem has filed a patent application directed to low dose, short course, cytokine induction of stem cell mobilization. November 19, Page 12 of 32

13 Table 1: Umbilical Cord Adult Stem Cell Collection vs. NeoStem s Peripheral Blood Adult Stem Cell Collection CONSIDERATION Time of Collection Addressable market Volume Considerations CORD BLOOD Birth 4 million births in US per annum Quantity sufficient until about a child reaching 100Kg or approximately 7 years of age NEOSTEM Adulthood 50+ million in U.S. with diseases where stem cell therapies are used as a currently available treatment or for which stem cell-related clinical trials are in progress Quantity sufficient for adults throughout life Incidence of transplantation and use Limitations Source: NeoStem, Inc. Estimate of.1% to.0005% for children Quantity of cells collected is too small and rejection remains an issue Expansion technology not available Much greater for adults, especially as disease becomes more prevalent with age and stem cell technology advances NeoStem solves the issues associated with donor cord blood transplants November 19, Page 13 of 32

14 Overview of Stem Cell Market/Research Recognized industry expert Robin Young, C.F.A. estimates that domestic stem cell company revenues should reach $8.5 billion in 2016 (H), where Frost & Sullivan project worldwide stem cell company revenues to reach $20 billion by While these may appear to be aggressive estimates, the message is the same: stem cell therapies are a rapidly growing therapeutic field. Current & Future Applications of Stem Cell Therapies Today Leukemias Lymphoma Multiple Myeloma Coronary Heart Disease Radiation Sickness Multiple Sclerosis Lupus Erythematosis Other Autoimmune Diseases Tissue Repair & Burns Type I Diabetes Orthopedics Source: LIFE EXTENSION October 2007 (L) Tomorrow Spinal Cord Injuries Stroke Severe Infectious Diseases Lou Gehrig's Disease (ALS) Breast Cancer Ovarian Cancer Diabetes Osteoporosis Amyloidosis Type II Diabetes Others Current scientific and clinical research indicate that stem cells have promise in the treatment of numerous diseases in addition to those currently addressed with hematopoietic stem cell therapy. The success of current and emerging stem cell therapies is dependent upon the presence of a rich and abundant source of stem cells. Somatic (adult) stem cells are a noncontroversial, rich source of stem cells with proven therapeutic use in the treatment of over 40 diseases including certain blood cancers and genetic disorders, and include: Cancers Acute Lymphoblastic Leukemia (ALL) Acute Myelogenous Leukemia (AML) Burkitt Lymphoma Chronic Myelogenous Leukemia (CML) Juvenile Chronic Myelogenous Leukemia (JCML) Juvenile Myelomonocytic Leukemia (JMML) Liposarcoma Myelodysplastic Syndrome (MDS) Chronic Myelomonocytic Leukemia (CMML) Neuroblastoma Non-Hodgkin Lymphoma Hodgkin s Lymphoma Bone Marrow Failure Severe Aplastic Anemia Diamond-Blackfan Anemia Dyskeratosis Congenita Fanconi Anemia Amegakaryocytic Thrombocytopenia Kostmann s Syndrome Blood Disorders Sickle-Cell Anemia β-thalassemia (Colley s Anemia) Metabolic Disorders Adrenoleukodystrophy Batten Disease Gunther Disease Hunter Syndrome Hurler Syndrome Krabbe Disease Lesch-Nyhan Disease Maroteaux-Lamy Syndrome Immunodeficiencies Omenn s Syndrome Severe Combined Immune Deficiency (SCID) Reticular Dysplasia Thymic Dysplasia Wiskott-Aldrich Syndrome X-linked Lymphoproliferative Disease Leukocyte Adhesion Deficiency Other Diseases Evan s Syndrome Familial Hemophagocytic Lymphohistiocytosis Osteopetrosis EBV-assoc. Hemophagocytic Lymphohistiocytosis Langerhans Cell Histiocytosis With over 200 companies worldwide conducting research on stem cell therapies and 793 adult stem cell studies found listed at (as of November 8, 2007) and 255 studies found when searching under autologous stem cells it is clear that stem cell therapies are being widely researched and are an extremely promising area of future medicine. November 19, Page 14 of 32

15 According to industry expert Robin Young, C.F.A in the Stem Cell Market Analysis Fact Sheet, (M) stem cell therapies with cardiovascular applications, orthopedic applications, autoimmune disease applications, applications in diabetes, and other diseases should be on the market within the next five-toten years. Further, significant strides have already been made in wound-healing therapies. Robin Young, C.F.A. also estimates that domestic stem cell company revenues should reach $8.5 billion in 2016 (N), where Frost & Sullivan project worldwide stem cell company revenues to reach $20 billion by While these may appear to be aggressive estimates, the message is the same: stem cell therapies are a rapidly growing therapeutic field. NeoStem Key Personnel NeoStem's combined Management Team and Boards of Advisors/Directors have extensive experience in the healthcare industry. Collectively they have expert experience in the general medical industry, life science marketing, business management, capital raising, licensing, clinical trails, and strategic partnering. Robin Smith, M.D., MBA, Chairman of the Board, CEO. Dr. Robin L. Smith joined the Company as Chairman of its Advisory Board in September 2005 and, effective June 2, 2006, is the CEO and Chairman of the Board. Dr. Smith received a medical degree from Yale University in 1992 and a master s degree in business administration from the Wharton School in From , Dr. Smith served as President and CEO of IP2M. During her term, the company was selected as being one of the 10 fastest growing technology companies in Houston; it was sold to a publicly traded company in From she was Executive V.P. and Chief Medical Officer for HealthHelp, Inc., a National Radiology Management company that managed 14% of the healthcare dollars spent by large insurance companies. Dr. Smith also serves on the Board of Directors of two privately held companies, Talon Air and Biomega, as well as on the Board of Trustees of the NYC School of Medicine Foundation (becoming the NYU Medical Center Board) and Co-Chairman of the Board of Directors for the New York University Hospital for Joint Diseases, where she heads up new development efforts and board member recruitment. She was also recently appointed to the Chemotherapy Foundation Board of Trustees, The New York Theatre Ballet, and Choose Living. Mark Weinreb, Board Director, President. Mr. Weinreb, an experienced CEO and public company manager, oversees the Company s business and strategic initiatives. Mr. Weinreb joined the Company in February 2003 as Chairman of the Board of Directors, President and Chief Executive Officer, and in June 2006 continues as a Director and the Company s President. In 1976, Mr. Weinreb joined Bio Health Laboratories, Inc., a stateof-the-art medical diagnostic laboratory providing clinical testing services for physicians, hospitals, and other medical laboratories. He proceeded to become laboratory administrator in 1978 and then an owner and the laboratory s COO in He oversaw all technical and business facets including finance, laboratory science technology, among other responsibilities. He left Bio Health Labs in 1989 when he sold the business to a biotechnology company listed on the NYSE. Mr. Weinreb then founded Big City Bagels, which later went public. He has since worked in various senior management posts until joining NeoStem in Larry A. May, Chief Financial Officer. From Mr. May worked for Amgen as Corporate Controller; he worked at Amgen as Vice President/Corporate Controller/Chief Accounting Officer, and then as Vice President/Treasurer from From , Mr. May served as the Senior V.P., Finance and CFO of Biosource International, Inc., a provider of biologic research reagents and assays. From , Mr. May served as CFO of Saronyx, Inc., a company focused on developing productivity tools and secure communication systems for research scientists. Prior to the acquisition of NeoStem, California by Phase III Medical, Mr. May served as CFO of NeoStem. Denis Rodgerson, Ph.D., Director of Stem Cell Science. Dr. Rodgerson joined the Company upon the closing of the Company s acquisition of the business of NeoStem, Inc. (California). Dr. Rodgerson, one of the original founders of NeoStem (California), Inc., has over 36 years experience managing large tertiary care and reference clinical laboratories with many patents and articles to his credit. Prior to NeoStem (California), he co-founded StemCyte, and oversaw the company s growth to become the world s second largest umbilical cord stem cell bank with multinational collection centers. George Smith, M.D., Medical Director of Laboratory Operations, California. Dr. George Smith was appointed NeoStem s Medical Director of Laboratory Operations, California in January Dr. Smith graduated from UCLA Medical School with five years of specialty training in Pathology in He spent two years in Public Health Service assigned to the Atomic Bomb Commission in Hiroshima, Japan. He then rejoined UCLA Pathology faculty in 1967 until retirement in July, For six years he was Assistant Head of the Blood Bank and Associate Head of Hematopathology where he established a unique bone marrow service. He as appointed Director of UCLA Clinical Laboratories in 1975, which included supervision of 32 patient care laboratories. During this period he November 19, Page 15 of 32

16 was also Director of the Blood Bank, Director of the Medical Technologist Training Program and Chief of Clinical Pathology. Catherine M. Vaczy, Esq., Vice President and General Counsel. Ms. Vaczy joined the Company in April 2005 as Vice President and General Counsel. From , Ms. Vaczy held various senior positions at ImClone Systems Inc., most recently as its Vice President, Legal and Associate General Counsel. Julio C. Guerra, MD, ABP, Director of Marketing. As a pioneer in umbilical cord and placental stem cell science since the mid 1990s, Dr. Guerra brings extensive experience in healthcare marketing. Dr. Guerra was Senior V.P. of Marketing and New Program Development at Anthrogenesis Corp. until 2002, when the company, a private business focused on cord blood banking and placental stem cell therapeutics, was acquired by Celgene. Mr. Guerra is an experienced healthcare marketing consultant for many Fortune 500 companies, and has worked with companies such as Gerber, Ross Products and Mead Johnson. He is also the Medical Director of College Plaza Pediatrics and is a diplomat of the American Board of Pediatrics. He has received many awards including Best Doctors of America in He is an associate member of the American Society of Blood and Marrow Transplant. He has also lectured to many medical professional groups both in the U.S. and internationally regarding the science of umbilical cord and placental stem cell technologies. Renee Cohen, Vice President of Operations & Corporate Strategy. From , Ms. Cohen managed large-scale business strategy projects for pharmaceutical, biotechnology and medical products clients while working with the Strategic Consulting Life Sciences Group at Accenture. She then cofounded and was COO for DrugVoice, an e-health company focused on understanding consumers approaches to managing their diseases: DrugVoice achieved profitability in less than one year. From 2002 until her employment with NeoStem, Ms. Cohen worked as a Director and Team Leader in Planning and Business Development at Pfizer where she worked in venture management, product management, venture capital, on marketing strategy, and in acquisitions and divestitures. She has extensive experience in formulating corporate strategy, managing operations and in evaluating new business opportunities at growing, entrepreneurial healthcare services companies. Arlene Graime, Director of Government Affairs and Special Projects. Ms. Graime s career began working on Capitol Hill at the House of Representatives for Congressmen Jim Florio and Jack Kemp as a Legislative Assistant. Ms. Graime then worked for Group W Cable, Inc. in Southern California as an Area Manager working to secure cable franchises. From , Ms. Graime worked for the United States Olympic Committee where she served as the Eastern Regional Manager for the Development Division and later became the National Director of Events. She has worked on diplomatic efforts to promote goodwill and sportsmanship through public relations with United States and International Olympic athletes. She also worked with key staff members of three White House administrations. From Ms. Graime worked as the Senior Director of Marketing at Coach, Inc. NeoStem Scientific Advisory Board Wayne A. Marasco, MD PhD, Chairman of the Scientific Advisory Board. Dr. Marasco is an Associate Professor in the Department of Cancer Immunology & AIDS at the Dana-Farber Cancer Institute and Associate Professor of Medicine in the Department of Medicine, Harvard Medical School. Dr. Marasco is a licensed physician- scientist with training in Internal Medicine and specialty training in infectious diseases. His clinical practice sub-specialty is in the treatment of immunocompromised (cancer, bone marrow and solid organ transplants) patients. Dr. Marasco's research laboratory is primarily focused on the areas of antibody engineering and gene therapy. New immuno- and genetic- therapies for HIV-1 infection / AIDS, HTLV-1, the etiologic agent in Adult T-cell Leukemia, and other emerging infectious diseases such as SARS and Avian Influenza are being studied. Dr. Marasco's laboratory is recognized internationally for its pioneering development of intracellular antibodies (sfv) or "intrabodies" as a new class of molecules for research and gene therapy applications. He is the author of more than 90 peer reviewed research publications, numerous chapters, books and monographs and has been an invited speaker at many national and international conferences in the areas of antibody engineering, gene therapy and AIDS. Dr. Marasco is also the Scientific Director of the National Foundation for Cancer Research Center for Therapeutic Antibody Engineering (the "Center"). The Center is located at the Dana-Faber Cancer Institute and will work with investigators globally to develop new human monoclonal antibody drugs for the treatment of human cancers. In 1995, Dr. Marasco founded IntraImmune Therapies, Inc., a gene therapy and antibody engineering company. He served as the Chairman of the Scientific Advisory Board until the company was acquired by Abgenix in He has also served as a scientific advisor to several biotechnology companies working in the field of antibody engineering, gene discovery and gene therapy. He is an inventor on numerous issued and pending patent applications. Douglas W. Losordo, MD. For many years a Professor of Medicine at Tufts University School of Medicine and Chief of Cardiovascular Research at St. Elizabeth's Medical Center in November 19, Page 16 of 32

17 Boston, Dr. Lorsordo was recently appointed Professor of Medicine at Northwestern University and Director of the Feinberg Cardiovascular Research Institute and Program in Cardiovascular Regenerative Medicine. A Fellow or Member of many national professional organizations, he currently serves on committees of the American College of Cardiology, the American Diabetes Association and the American Society of Gene Therapy where he chairs the Cardiovascular Gene Therapy Committee. Dr. Losordo serves as Principal Investigator in many grant research projects and has published widely, contributing to more than 300 professional articles, abstracts and book chapters in recent years. He also serves on the Editorial Boards of numerous medical specialty journals including Stem Cells, Vascular Medicine and Circulation Research. Stephen D. Nimer, MD. Dr. Nimer is Professor of Medicine and Professor of Pharmacology at Weill Medical College of Cornell University. He also serves as Chief of Hematology Service and Head of the Division of Hematologic Oncology at Memorial Sloan-Kettering Cancer Center in New York City. Dr. Nimer is a member of many national professional organizations, including the American Society of Hematology, the American Society of Clinical Oncology, and the International Society for Stem Cell Research. He serves as a Reviewer for major medical journals, including the New England Journal of Medicine and the Journal of the American Medical Association (JAMA) among many others. He serves on numerous national and international Grant Review Committees and is a prominent invited speaker at conferences on his areas of expertise. He has authored or co-authored nearly 200 peerreviewed papers, reviews, editorials and textbook chapters, primarily focused on issues concerning hematology and oncology. NeoStem Advisory Board Ron Rothenberg MD, FACEP. Dr. Rothenberg is a Fellow of the American College of Emergency Physicians (FACEP) and is the founder of the California HealthSpan Institute in Encinitas, California. He was the 10th M.D. in the world to become fully board certified by the American Board of Anti-Aging Medicine. A graduate of Columbia University, College of Physicians and Surgeons, and a specialist in Emergency Medicine at Los Angeles County-USC Medical Center, he has served as Clinical Professor of Preventive and Family Medicine at the UCSD School of Medicine Clinical Facility. He is currently Attending Physician at Scripps Memorial Hospital in Encinitas. Douglas Wynyard. Mr. Douglas Wynyard is a Senior Vice President for Nordblom Company, a full-service commercial real estate firm headquartered in the Boston area. Mr. Wynyard has worked in the field of commercial real estate for more than thirty years and has been associated with Nordblom Company since He is experienced in real estate development, asset management, leasing, investment sales, and marketing. He also represents numerous corporations with the planning, acquisition and disposition of their facilities. Having received a Bachelor s degree in Zoology from Bristol University, Mr. Wynyard is passionate about the biological sciences and is an investor in a number of med-tech companies. Richard Gatti, MD. Dr. Richard Gatti, a professor at the University of California, Los Angeles (UCLA) and renowned Pathologist at the UCLA Medical Center, was one of the early pioneers of bone marrow transplantation, among the earliest known forms of adult stem cell therapeutics, for immunodeficiency in the late sixties. Dr. Gatti is also a leading authority in the field of gene therapeutics and has authored or co-authored hundreds of papers related to the molecular identification and treatment of genetic disorders. He has worked for many years to help find a cure for Ataxia-Telangiectasia, a progressive neurological disorder of childhood, associated with increased cancer risk, immunodeficiency, radiosensitivity, and cell cycle defects. Dr. Neil C. Livingstone. Dr. Livingstone is currently the Chairman and Chief Executive Officer of ExecutiveAction LLC. He was the founder and, until January, 2007, Chief Executive Officer of GlobalOptions Inc., which went public in He is also Lead Director of Erickson Air-Crane, a $200 million helicopter company. Dr. Livingstone has noted expertise on national security, and is the author of nine books on terrorism. He has served on advisory panels to The Secretary of State, The Chief of Naval Operations, and The Pentagon. He has testified before Congress and delivered more than 500 major addresses in the U.S. and abroad, including recent speeches at The House of Commons and The United Nations. Dr. Livingstone serves on numerous advisory boards, including Supercom Inc., Digital Ally, the Africa Society, and No Greater Love. He was a Founding Member and Incorporator of the Solidarity Endowment, formed in the West to promote the goals of Polish Solidarity. He was the Founder and Chairman of the Institute on Terrorism and Sub-national Conflict and served as President of Watergate South for more than seven years. Bradford E. Billet. Mr. Billet is an executive with the City of New York, where his responsibilities include matters of international affairs, security and emergency management. He is also chairman of the Billet Group, a management consulting company. Mr. Billet s company assists its clients on a full range of issues, not related to City of New York. During the past 20 plus years, Mr. Billet has acquired extensive experience in International Affairs, Emergency Management, November 19, Page 17 of 32

18 Security, Governmental and Business Management, Administration and Operational disciplines. He has held highranking positions in both the private and public sectors with budgets in excess 180 million dollars. Mr. Billet has responded, coordinated and directed multi-agency emergency operations, including the September 11th attacks and the 1993 bombing of the World Trade Center, 20 aviation accidents, as well as numerous manmade and natural disasters, involving mass casualties and/or fatalities. He has received numerous honors and commendations throughout his career and he continues to lecture on public safety and crisis management issues. Mr. Billet has been nationally accredited as a Certified Emergency Manager and New York State Continuing Legal Educator. In 2002, Her Majesty Queen Elizabeth II awarded Mr. Billet an Officer of the Most Excellent Order of the British Empire (OBE). Summary of Financial Position To advance its development, since the acquisition of NS California, NeoStem, Inc. has raised a total of approximately $12.5 million, $6.3 million of which was raised in August The company effected two 1:10 stock splits, the first on 8/29/06 and the second in conjunction with the recent raise and listing on the American Stock Exchange on 8/9/07. After the acquisition of Stem Cell Technologies, Inc., NeoStem currently has 5.1 million shares outstanding and 2,084,938 warrants issued, with exercise prices ranging from $ $ Year-to-date, NeoStem has earned $18,000 in collection revenues. As the company has just opened collection centers, we view these revenues as transitional, and merely point up the fact that NeoStem is indeed in the process of transitioning from development stage to commercialization stage. With 3 centers now open and two agreements signed one covering 100 doctors and the other a multi-territory agreement, NeoStem is now positioned to begin aggressive donor recruiting and acquisition. Year-to-date, NeoStem has generated $8.1m in operating losses, and is currently operating at a normalized loss (excluding noncash based compensation expense) of approximately $2.5 million per quarter (a loss of approximate $0.73 per share per quarter). This includes fees for the patent defense, however, in our assumptions in the scenarios for revenue growth and operating income on pages 19 22, we assume ongoing legal fees in addition to the marketing campaign expense. For more information, please contact us at Research@MithraResearch.com or refer to the company s website, NeoStem Growth Sensitivity Tables Pages The assumptions used are based upon NeoStem s business model that entails: Collection/Processing Fee per donor: $7,500 Monthly Storage Fee: $62.00 Please note that we have included no license/royalty income in any year, however, with the acquisition of Stem Cell Technologies, Inc., licensing or royalty income revenue streams may begin as early as Further, NeoStem anticipates receiving utilization fee revenue and research-related revenues when it creates partnerships with pharmaceutical companies, academic institutions and/or government agencies, however we have modeled no future revenues from these potential sources of income (which may include milestone payments). Expense assumptions: Collection/Processing & Revenue Sharing Expense: 75% Monthly Storage Expense: 40% In Q307, direct expenses represented 53.1% of revenue. We believe the number of collections is too small on which to base projections, and have used a more conservative assumption. We also include no assumption for non-cash compensation expense. In Scenarios 1, 2, and 3, we assume a varying rates of new donor acquisition and portray revenue growth at 100%, 200% and 300% with attrition rates of 10% at the lower growth rates and at 15% at the higher growth rate of 300% in each. New donor acquisition rates in 2008 are portrayed at 210, 305, and 475, respectively. We note that NeoStem has 3 collection centers open and operating, and has signed the 100-physician ProHEALTH (New York) network in addition to the multicenter agreement with Stem Collect LLC. In Scenario 4, we provide a summary of the effect of a ramping growth rate on differing initial new donors in Year 1. We believe this is a more realistic scenario as growth should be expected to ramp as the effect of marketing on consumer awareness has its impact and NeoStem signs additional collection and collaboration agreements. In scenario 4a we assume the conservative new donor rate of 205 in Year 1; in scenario 4b we assume the moderate new donor rate of 305 in Year 1, and in scenario 4c we assume a more aggressive acquisition rate of 475 new donors in Year 1. In each scenario, we assume growth of 100% off the base in 2009 vs. 2008, and we ramp growth to 150% in 2010, 200% in 2011, and finally to 250% in 2012 certainly achievable rates of growth based on the experience of existing cord blood competitors, but keeping in mind that awareness of potential future stem cell therapies is already growing, and that NeoStem has targeted a much wider, potentially more affluent, and likely more educated target market. November 19, Page 18 of 32

19 NeoStem, Inc. Growth Sensitivity Tables: Scenario 1 New Donor Base Rate Assumption Year 1: 210 Excludes non-cash based compensation expense Scenario 1a: Growth 100%/Attrition 10% Beginning number of donors ,407 3,003 Number of new donors ,680 3,360 Attrition Revenues Gross Collection Revenue $1,575,000 $3,150,000 $6,300,000 $12,600,000 $25,200,000 Gross Storage Revenue 62, , , ,487 1,830,829 Total Revenue $1,637,062 $3,329,980 $6,715,815 $13,487,487 $27,030,829 Expenses Collection, Processing & Revenue Sharing Expense 1,181,250 2,362,500 4,725,000 9,450,000 18,900,000 Storage Expense 24,825 71, , , ,332 Total Direct Expense $1,206,075 $2,434,492 $4,891,326 $9,804,995 $19,632,332 Gross Profit $430,987 $895,488 $1,824,489 $3,682,492 $7,398,497 SG&A 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 Operating Income ($9,569,013) ($9,604,512) ($9,175,511) ($7,817,508) ($4,601,503) Scenario 1b: Growth 200%/Attrition 10% Beginning number of donors ,646 8,127 Number of new donors ,890 5,670 17,010 Attrition Revenues Gross Collection Revenue $1,575,000 $4,725,000 $14,175,000 $42,525,000 $127,575,000 Gross Storage Revenue 62, , ,981 2,401,799 7,261,254 Total Revenue $1,637,062 $4,967,042 $14,956,981 $44,926,799 $134,836,254 Expenses Collection, Processing & Revenue Sharing Expense 1,181,250 3,543,750 10,631,250 31,893,750 95,681,250 Storage Expense 24,825 96, , ,720 2,904,502 Total Direct Expense $1,206,075 $3,640,567 $10,944,042 $32,854,470 $98,585,752 Gross Profit $430,987 $1,326,475 $4,012,939 $12,072,330 $36,250,502 SG&A 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 Operating Income ($9,569,013) ($9,173,525) ($6,987,061) $572,330 $24,250,502 Scenario 1c: Growth 300%/Attrition 15% Beginning number of donors ,019 4,253 17,189 Number of new donors ,360 13,440 53,760 Attrition ,016 Revenues Gross Collection Revenue $1,575,000 $6,300,000 $25,200,000 $100,800,000 $403,200,000 Gross Storage Revenue 62, ,001 1,256,756 5,079,775 20,371,852 Total Revenue $1,637,062 $6,601,001 $26,456,756 $105,879,775 $423,571,852 Expenses Collection, Processing & Revenue Sharing Expense 1,181,250 4,725,000 18,900,000 75,600, ,400,000 Storage Expense 24, , ,702 2,031,910 8,148,741 Total Direct Expense $1,206,075 $4,845,400 $19,402,702 $77,631,910 $310,548,741 Gross Profit $430,987 $1,755,600 $7,054,053 $28,247,865 $113,023,111 SG&A 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 Operating Income ($9,569,013) ($8,744,400) ($3,945,947) $16,747,865 $101,023,111 November 19, Page 19 of 32

20 NeoStem, Inc. Growth Sensitivity Tables: Scenario 2 New Donor Base Rate Assumption Year 1: 305 Excludes non-cash based compensation expense Scenario 2a: Growth 100%/Attrition 10% Beginning number of donors ,044 4,362 Number of new donors ,220 2,440 4,880 Attrition Revenues Gross Collection Revenue $2,287,500 $4,575,000 $9,150,000 $18,300,000 $36,600,000 Gross Storage Revenue 88, , ,322 1,262,075 2,603,582 Total Revenue $2,375,757 $4,830,945 $9,741,322 $19,562,075 $39,203,582 Expenses Collection, Processing & Revenue Sharing Expense 1,715,625 3,431,250 6,862,500 13,725,000 27,450,000 Storage Expense 35, , , ,830 1,041,433 Total Direct Expense $1,750,928 $3,533,628 $7,099,029 $14,229,830 $28,491,433 Gross Profit $624,829 $1,297,317 $2,642,293 $5,332,245 $10,712,149 SG&A 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 Operating Income ($9,375,171) ($9,202,683) ($8,357,707) ($6,167,755) ($1,287,851) Scenario 2b: Growth 200%/Attrition 10% Beginning number of donors ,190 3,843 11,804 Number of new donors ,745 8,235 24,705 Attrition Revenues Gross Collection Revenue $2,287,500 $6,862,500 $20,587,500 $61,762,500 $185,287,500 Gross Storage Revenue 88, ,202 1,112,038 3,415,546 10,326,069 Total Revenue $2,375,757 $7,206,702 $21,699,538 $65,178,046 $195,613,569 Expenses Collection, Processing & Revenue Sharing Expense 1,715,625 5,146,875 15,440,625 46,321, ,965,625 Storage Expense 35, , ,815 1,366,218 4,130,428 Total Direct Expense $1,750,928 $5,284,556 $15,885,440 $47,688,093 $143,096,053 Gross Profit $624,829 $1,922,146 $5,814,098 $17,489,953 $52,517,516 SG&A 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 Operating Income ($9,375,171) ($8,577,854) ($5,185,902) $5,989,953 $40,517,516 Scenario 2c: Growth 300%/Attrition 15% Beginning number of donors ,479 6,176 24,964 Number of new donors 305 1,220 4,880 19,520 78,080 Attrition ,928 Revenues Gross Collection Revenue $2,287,500 $9,150,000 $36,600,000 $146,400,000 $585,600,000 Gross Storage Revenue 88, ,046 1,787,204 7,223,835 28,970,360 Total Revenue $2,375,757 $9,578,046 $38,387,204 $153,623,835 $614,570,360 Expenses Collection, Processing & Revenue Sharing Expense 1,715,625 6,862,500 27,450, ,800, ,200,000 Storage Expense 35, , ,882 2,889,534 11,588,144 Total Direct Expense $1,750,928 $7,033,719 $28,164,882 $112,689,534 $450,788,144 Gross Profit $624,829 $2,544,328 $10,222,323 $40,934,301 $163,782,216 SG&A 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 Operating Income ($9,375,171) ($7,955,672) ($777,677) $29,434,301 $151,782,216 November 19, Page 20 of 32