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NeoStem Signs a Definitive Agreement to Divest its 51% Ownership Interest in Suzhou Erye (NBS)

NeoStem, Inc. (AMEX: NBS; Stock Twits: $NBS) is engaged in the development and manufacturing of cell-based therapies in the U.S.  ItsJanuary 2011 acquisition of Progenitor Cell Therapy, LLC ("PCT") is central to the Company's strategic mission of capturing the paradigm shift to cell therapy.

The Company announced that it has "entered into a definitive agreement to sell its 51% interest in Suzhou Erye Pharmaceutical Co. Ltd. (“Erye”), a China-based generic pharmaceutical company, for  $12,280,000 in cash and the return to the Company of (i) 1,040,000 shares of the Company’s Common Stock and (ii) the cancellation of 1,170,000 options and 640,000 Common Stock warrants, which collectively represent 1.3% of the Company’s fully diluted issued and outstanding shares. The closing of the transaction is subject to the approval of NeoStem shareholders and certain other conditions." The transaction is expected to close by the fourth quarter of 2012.

Chairman and CEO of NeoStem Dr. Robin L. Smith stated,

"We are pleased to have reached this significant milestone in our business. This divestiture will enable NeoStem to bolster its cash position in the United States, reduce its legal and financial reporting expenditures, simplify its financials and become a pure play in the rapidly growing cell therapy industry. Consummation of the transaction will also eliminate significant Erye debt from the Company's balance sheet, which was over $37 million as of March 31, 2012."

NeoStem first gained its interest in Erye in October 2009. At the time, the company was heralded for its innovative business move into the emerging Chinese pharmaceutical industry. In 2011, "the Chinese government imposed new policies affecting price and volume controls of certain pharmaceutical products, including generic antibiotics, which reduced the division’s profitability and positive cash flows. This dampened Erye’s operating results and was the catalyst for NeoStem to begin to evaluate opportunities to monetize its interest in Erye."

The divestiture "will enable NeoStem to focus full time on its goal to emerge as a leader in the cell therapy market. The Company is enrolling patients in its PreSERVE AMR-001 Phase 2 clinical trial for preserving heart function after a heart attack and expanding its cell therapeutic contract manufacturing business, PCT. NeoStem also plans to continue to develop and to build on its core capabilities in cell therapy to capitalize on the paradigm shift that is occurring in medicine."

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