CellCyte Genetics Corp.


• CCYG is developing a breakthrough technology that may improve stem cell delivery and retention mechanisms to selected organs using a patient’s circulatory system. CCYG is in the process of developing regenerative medicines with multiple uses and huge market potential. According to the International Society of Organ Transplants, the current size of the heart and liver transplant market in the United States is estimated at $6 billion. The Company employs a strategic policy of developing synergistic compounds that could be used alone or in combination with other compounds or devices. This feature will widen market reach and facilitate acceptability in the market for the Company’s products. The Company believes that its patented (CCG-TH30) approach will improve stem cell delivery efficiency 10–15 times compared to the current approach. We expect CCYG to start Phase I clinical trials of its first product, CCG-TH30, in early 2009. The stem cell business is projected to reach $10 billion by 2013, up from $6 billion estimated in 2006. CCYG is negotiating a contract with a plasma fractionating company for the supply of glycoprotein, a compound platform for the development of a therapeutic product line. The supply of glycoprotein will help the Company move its products into clinical trials faster. Research collaborations with leading universities and clinics, including the Cleveland Clinic, Washington University, and Northwestern University, will boost the research programs and reduce commercialization time for its products. CCYG has developed a significant intellectual property rights (IPR) portfolio. These patent rights protect the Company from any possible attempt by other companies to replicate CCYG’s technology. The Company has successfully completed fundraising to meet preclinical research programs. We initiate coverage on CCYG with a “Speculative Buy” rating and a 12-month target price of $0.80.

Ajay Mohan, MFM 1 - 800 -RED-CHIP


• • • •

Cellcyte Genetics Corporation 1725 220th Street SE Bothell, WA 98021 Phone: 425-483-6101 Web Site: www.cellcyte.com

© RedChip Visibility, a division of RedChip Companies, Inc. | 500 Winderley Place, Suite 100, Maitland, FL 32751 | 1-800-RED-CHIP | www.RedChip.com Information is obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Copying, faxing, replicating, or quoting from this report without permission is in direct violation of copyright laws.

CellCyte Genetics Corp. (CCYG)
CellCyte Genetics Corporation (OTC BB: CCYG) is a development stage biotechnology firm engaged in the discovery and development of stem cell therapeutic products and medical devices for cell production. CCYG is in the process of developing a crucial technique for the delivery and retention of stem cells to an affected organ (e.g., the heart in the case of heart failure) using the patient’s circulatory system. The research platform for this delivery technique has been patented and licensed from the U.S. Department of Veteran Affairs. The Company has a valuable asset in its substantial data generated during clinical and preclinical studies. CCYG is developing a line of therapeutic products which may deliver high-quality regenerative medicines. CCYG has a patented and licensed technology of delivering stem cells to the specific organ. The Company is developing therapeutic products for the delivery of stem cells under CCG-TH30, CCG-TH35, and various other programs using a glycoprotein platform. The CCG-TH30 program is aimed at cardiac delivery of adult CD34+ stem cells, and the CCG-TH35 program involves the development of cardiac delivery of adult mesenchymal stem cells. These products will be useful in the treatment of Acute Myocardial Infarction (AMI) and Congestive Heart Failure (CHF) once approved by the FDA. The Company is also involved in the research and development of device technologies that have the capability to grow various types of cells such as stem cells and islet cells for therapeutic and industrial applications. CCYG is developing this technology under three different programs: CCG-E45 Cell Expansion, CCG-P30 Stem Cell Purification, and CCG-T55 Tumor Detection. The CCG-E45 Cell Expansion program is in late-stage development, as the cell expansion bioreactor based on the Company’s innovative technology has successfully grown, expanded, and extended the life of 14 various cell lines including stem cells. This technology also allows highly controlled oxygenation of cell cultures. The CCG-T55 Tumor Detection program has developed adenocarcinoma diagnostic technology, which has been licensed from the U.S. Department of Veteran Affairs. Use of this technology enables detection of adenocarcinoma tumors as small as 2 mm. This is a huge success in comparison to the generally available technology that is capable of detecting tumors only as small as approximately 5 mm.

Stem cell research is a recently evolved discipline. The first test on the embryonic stem cell of a mouse was done in 1980–81, but it was not until 1998 that tests were carried out on a human embryonic stem cell. There are legal and ethical issues related to the use of human embryonic stem cells in clinical experiments. Myths surround stem cell research as people generally tend to mix human cloning with the stem cells, but the fact remains that the two topics are wholly different. Stem cell research also generates much debate because the public in general is ignorant of the difference between the embryonic stem cell and adult stem cell. An embryonic cell is derived from the embryo, and thus ethical issues related to the destruction of the embryo come into play. An adult stem cell, however, is the undifferentiated cell of any adult animal. As awareness of the importance and potential of stem cell research increases, acceptance for such research has started to grow. The U.S. government permitted federal funding of stem cell research projects in 2001. The potential for stem cell research to improve the quality and health of human life is unquestionable. Better understanding of the stem cell will help to clear many misconceptions and further expand its applications, and thus the market.

A stem cell is an unspecialized cell that has the ability to regenerate and become a specialized cell under certain conditions. A specialized cell such as a blood cell or a bone cell has a specific function, while an unspecialized cell is a cell that does not have a special function. Stem cells have the ability to develop into mature cells that have characteristic shapes and specialized functions and this characteristic feature of stem cells has attracted the attention of the research community. Stem cell research aims to devise a medical solution for repairing a damaged organ or regenerating an entire organ. Research on stem cells will have a far-reaching impact on all disciplines of medical science, especially organ transplant and acute cases such as heart failure and neurological disorder.

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CellCyte Genetics Corp. (CCYG)
Generally, two types of stem cells are used in any stem cell research: embryonic and adult. In addition, there are many other types of stem cells based on their source of origin such as the fetal stem cell, a stem cell taken from aborted fetal tissues; the umbilical stem cell, a stem cell taken from an umbilical cord; and the amniotic stem cell, a stem cell taken from human amniotic fluid.

CCYG is in the process of developing a technology for repairing the damaged organ through delivery and retention of stem cells to the specific organ. For instance, if there is heart failure or the heart is damaged, stem cells can be injected to the local area via either needle or open-heart surgery for the regeneration of the damaged part. However, only a small percentage (3%–5%) of stem cells are retained in the heart after these procedures as the primary clearance of stem cells by the liver and spleen receptors is minimal resulting in a high level of rejection of stem cells by the liver and spleen. This lack of a proper technology to deliver the adequate quantity of stem cells to the specific damaged organ and a lack of mechanism to retain these stem cells to the desired location is the opportunity CCYG is eyeing. CCYG has developed the modified plasma glycoprotein (CCG-TH30) which along with the stem cells is delivered intravenously to the heart to be transported through the circulatory system. CCG-TH30 blocks the primary clearance receptors in the liver and spleen resulting in a higher number of stem cell iterations in the circulatory system. This enhances stem cell retention in the heart and other organs. In preliminary studies conducted by government scientists, the investigator reported up to 77% of intravenously injected CD34+ cells targeting the heart of normal Nonobese Diabetes / Severe Combined Immunodeficiency (NOD/SCID) mice, versus 1%–5% reported in current methods and best practices. The efficiency of stem cell delivery using CCG-TH30 was reported to improve targeting 10–15 times over the current methods. The technology has shown promise studies conducted on mice. The delivery of hematopoietic stem cells (CD34+) and mesenchymal (MSC) stem cells has been conducted on animals without any damage to the organ. It provides a solid foundation for further research in the delivery mechanism of stem cells with a greater chance of success. CCYG is also in the process of developing a technology that will enable the patient to use his or her own stem cells to repair the damaged organ. Approach – Current Methods Approach – CCYG’s CCG-TH30

(Source: Company) CCYG has licensed the patented the technology for stem cell organ delivery, retention, and repair and has obtained the license from the U.S. Department of Veteran Affairs. The application of this technology is unlimited and could be used in a large number of cases such as heart, liver, or kidney failure and neurological disorders. Delivery of stem cells to the specific organ is currently one of the most challenging tasks in stem cell studies.

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CellCyte Genetics Corp. (CCYG)
The Company is in the process of taking this technology to the human trials phase, and the first organ for this trial is the heart. The difficulty so far has been that stems cells do not stay in the heart or other organ; rather, they flow down and accumulate in the liver or spleen. CCYG has discovered a mechanism by which certain receptors are blocked in the liver and spleen with the compound CCG-TH30 or CCG-TH35, and is believed to allow stem cells to remain in the heart or potentially other organs. CCG-TH30 Program. Under this program CCYG is developing a drug for the cardiac delivery of adult CD34+ stem cells. CD34+ cells are normally found in the umbilical cord blood and bone marrow. CCG-TH30 is designed to allow the autologous bone marrow derived (adult) stem cells to accumulate in the heart. In the preclinical model conducted by government scientists, CCG-TH30 increased the retention of stem cells up to 77% compared to the traditional methods where retention is about 6%. This product should be helpful in the treatment of AMI and CHF. This program will be the first to enter the phases of human trials scheduled to start in 2009–10. CCG-TH35 Program. This program is aimed at cardiac delivery of adult mesenchymal stem cells. Mesenchymal stem cells (MSCs) are multipotent stem cells that have the capacity to differentiate into a variety of cell types. The product developed under this program will be helpful in treating AMI upon approval from the FDA. Apart from these programs aimed at the treatment and repair of the heart, CCYG is also developing therapeutic products for other organs using similar technology. Various programs to conduct preclinical and clinical studies for the development of product compounds for other organs are CCG-TL35 for liver and other organs.

CCYG primarily has two divisions: Therapeutic and Device. In addition to its CCG-TH30 program, the Company also has organized the research and development of its therapeutic products under various programs. The Therapeutic Division looks after the development of stem cell delivery and retention programs, while the Device Division works on the development of hardware technology that can help in expanding and growing the various cells, including stem cells. Currently, CCYG is working on the development of stem cell organ delivery products and technologies for expanding various types of cells, such as islet cells, to be used for research and therapeutic applications. In the area of therapeutics the Company is in the process of developing technologies for the delivery of stem cells delivery to the heart and liver and other organs under various programs—CCG-TH30, CCG-TH35, and CCG-TL35. Most of these delivery technologies are based on modified glycoprotein usage as the compound for delivery to the required organ and to enhance the retention of stem cells in the organ. CCYG is negotiating contracts with a few partner companies to ensure the long-term, uninterrupted supply of glycoprotein, which will help the Company to push the product compounds into the human trail phase more quickly. Exhibit 2. CCYG’s products in their respective phases

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CellCyte Genetics Corp. (CCYG)
Device Technology for Cell Expansion. CCYG is in the process of developing a device technology for cell expansion that should be useful for therapeutic. The various research programs for the development of this technology are CCG-E45, CCG-P30 and CCG-T55. The technology for growing cells is crucial, as sometimes people cannot get an adequate amount of stem cells from their own body, which could hinder their treatment seriously. By using this technology, however, cells could be cultured and grown in the laboratory. CCG-E45 Program. This program involves the development of a cell expansion bioreactor based on an innovative technique. It permits the controlled oxygenation of cell cultures and has been successful in growing, expanding, and extending the life of 14 different cell lines, including mouse stem cells. This technology may be used to grow and expand cells that are important for clinical use such as CD34+ hematopoietic stem cells, umbilical cord blood stem cells, and islet cells. CCG-P30 Stem Cell Purification. This technology is the next generation development of immunoaffinity capture system for stem cells. This technology has implications in the treatment of cancer, genetic blood disorders, and autoimmune diseases. Purified stem cells are needed in the case of autologous transplants. This technology is in its early stage of development. CCG-T55 Tumor Detection. This program undertakes the development of a technology that detects adenocarcinoma’s (e.g., ovarian, breast, prostate, and colon cancers) at a very early stage. Adenocarcinoma diagnostic technology is licensed from the U.S. Department of Veteran Affairs. With the help of this technology, adenocarcinoma tumors as small as 2 mm can be detected, and this could prove to be a competitive advantage for the Company as the present technology can only detect tumors approximately 5 mm in size.

The biotechnology industry is a research-intensive industry and encourages companies to create and maintain a strong line of intellectual property. CCYG has a substantial intellectual property pipeline with exclusive worldwide licenses for therapeutic product compounds from the Department of Veteran Affairs. The Company has a policy of acquiring licenses from others as this may reduce both cost and effort at the same time and provides an opportunity to market products more quickly by working on these acquired technologies. CCYG has recently acquired two issued patents (Cell Production Bioreactor, US Patent Number 5,622,857, and Incubation Device, US Patent Number 5,882,918) from a biotechnology company. CCYG has intellectual property protection, which means no other biotechnology or pharmaceutical company can replicate CCYG’s products based on similar technology. The Company also has some pending U.S. patents, including a patent for an adenocarcinoma tumor diagnostic, and also 11 foreign patent applications. The biotech industry in the United States is regulated by the U.S. FDA, the Environmental Protection Agency (EPA), and the Department of Agriculture (USDA). In the United States, any medicine or medicinal product is subjected to FDA approval before it can be launched in the market. A company has to go through a five-stage process in order to comply with the regulations: 1) preclinical laboratory and animal testing, 2) Investigative New Drug Application (NDA) submitted to the FDA and approved before human clinical trials start, 3) well-controlled human clinical trials, 4) Marketing Authorization Applications (MAA) should be submitted to the FDA, and 5) FDA must approve applications before any sale of the drug in the market.
Exhibit 1. Pictorial Representation of Government Norms for the launch of medicinal products in the United States

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CellCyte Genetics Corp. (CCYG)
Biotechnology is a research and finance intensive industry focusing extensively on the unexplored aspects of biology, biochemistry, and biophysics to improve the quality of human life. The Biotechnology sector is characterized by high research and development costs and the substantial gestation period between the start of research and when a drug is brought to the market. At the same time, the sector has witnessed great rewards being bestowed upon entities for their innovation. Currently, the Biotech industry is moving toward a mature phase with many players participating in this space. According to a report by Ernst & Young, in the United States there are more than 300 public Biotech companies representing about $400 billion in market capitalization. Stem cell research is one of the emerging and exciting areas of the Biotech industry that has unlimited potential. Stem cell research has emerged as a high potential area due to new discoveries related to stem cells that present a lucrative opportunity for the Biotech industry players. Organ failure has become more common, with little or no solution from traditional methods and medicine, while recent developments in stem cell research have been promising. Heart failure alone is one of the biggest mortality factors in the United States today, and there are many other incurable diseases such as paralysis, neurological disorders, and certain fatal forms of cancer that can be possibly cured by using stem cells. Clearly, there is a huge potential market for stem cell research-based products, and there is a greater need to explore these facts which could improve the quality of human life. This is where stem cell research companies come into play. CCYG is involved in developing regenerative medicines that may find applications for the treatment of various malfunctions, disorders, and diseases such as AMI, CHF, hemophilia, cirrhosis, hepatitis, alcoholic liver disease, nonalcoholic steatohepatitis (NASH), diabetes, and various types of organ transplants. According to a study undertaken by the Congressional Budget Office (CBO) on health-care spending, the growth rate of spending on health care is higher than the growth rate of the U.S. economy. Currently, health-care spending amounts to 16% of the GDP and is expected to reach 25% by 2025. According to the International Society of Organ Transplants, there are some 8,000 transplants being done each year in the United States for the heart and liver alone. It is estimated to be a $6 billion market. According to a report by UBS, there are some 700,000 Medicare beneficiaries diagnosed with cancer annually. The same report estimates total dollar spending on biotechnology products is expected to increase from 19% in 2005 to 28% in 2009 as a percentage of total pharmaceutical spending.

• • • • • High rate of organ rejection in transplants creates an immediate need for regenerative medicines Little or no alternative medicine available for the repairing of the vital organs in the market provides opportunity area for stem cell-based products Lack of concrete medical treatment for neurological disorders creates a demand for stem cell-based products Need in the market for growing and expanding stem cells and islet cells for regenerative purposes Lack of proper technology in the treatment of certain types of cancer and paralysis creates a demand market for the use of stem cells in the treatment of these diseases

CCYG’s CCG-TH30 is primarily intended for use in the treatment and regeneration of the heart and other cardiovascular ailments. Researchers across the United States and elsewhere have been actively researching the usage of stem cells for the treatment of heart failure as well as bone growth and a variety of other orthopedic ailments. RRY Publications, LLC that publishes books and research containing global and U.S. market forecasts and analyses for the spine technology and stem cell industries, stated in a recent report that in clinical trials during 2007, patients were found to have an increased number of myocytes (cells that grow heart muscles) in their damaged

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CellCyte Genetics Corp. (CCYG)
hearts when they were administered stem cells. Science Daily reported that Dutch researchers at University Medical Centre Utrecht and the Hubrecht Institute were successful in growing large number of stem cells from adult human hearts into new heart muscle cells. In an another development, Daily Mail of U.K. reported that two heart attack patients were treated with their own stem cells aimed at repairing the damaged tissues and to delay or prevent the onset of heart failure. Companies like Mytogen, Inc. and Osiris Therapeutics along with many other companies and foundations are currently involved in the research of stem cell usage for heart treatment. As these researchers report success, we believe there will be an ever increasing demand for stem cell products for treatment of heart diseases. The report by RRY Publications estimates that approximately five million Americans have a heart attack annually, and treatment of these patients is estimated to be a $33 billion business. In contrast, treating these patients with stem cell products could cost as little as $2 billion and, hence, can translate into a huge market opportunity for stem cell products aimed at heart failures and diseases.

Annual U.S. Shipment of Stem Cell Products
10000 150% 120% 90% 60% 30% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Est. Annual Sales ($ Mln)

8000 6000 4000 2000 0


Annual Sales

Growth %

Gary A. Reys, Chairman, President and Chief Executive Officer Mr. Reys is the co-founder of CellCyte and has more than 30 years of experience with Fortune 100 and 500 publicly traded companies and emerging growth companies in the pharmaceutical, biotechnology and medical device sectors. He held executive positions with Pfizer and with Rhone Poulenc Rorer (now Aventis), North America. Mr. Reys was one of the pioneers in the generic pharmaceutical industry as part of a five member founding executive team of Schien Pharmaceutical, which Bayer AG acquired a 28% ownership and the the company went on to complete a successful IPO (now Watson Pharmaceuticals). Mr. Reys was president and CEO of Cennapharm, a biopharmaceutical company, Clear Medical and Genespan, a cell expansion and DNA biotechnology company whose intellectual property assets were acquired by CellCyte. Mr. Reys has also served as a member of the University of Washington’s Graduate School, M.B.A. Mentor Advisory Board. Ronald W. Berninger, Ph.D, Executive Vice President and Chief Scientific Officer Dr. Berninger is the co-founder of CellCyte and has more than 20 years of experience in managing research teams and the efficient management of research and product development. Before co-founding CellCyte, he served as vice president and director of research and development and quality assurance/regulatory for Genespan Corporation and Cennapharm Corporation. In that capacity he was responsible for the formulation of drugs and building the infrastructure for R&D, quality, regulatory, and documentation. Dr. Berninger has served as senior scientist and head of biochemistry at CellPro, a stem cell company. He has also served as an assistant professor at the School of

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CellCyte Genetics Corp. (CCYG)
Medicine, Johns Hopkins University and Tufts University. He has a B.S degree from Drexel University and a Ph.D. in organic chemistry from the University of Pittsburgh. He holds various awards, patents, and honors and has more than 70 scientific publications to his credit. Mark Hollywood, Director, Quality Assurance and Quality Control Mr. Hollywood has held various positions through his career with major biotechnology companies, such as Zymogenetics, Dendreon, Amgen, and Armour Pharmaceutical. He has been engaged in a range of activities associated with the development and commercialization of novel recombinant protein therapeutics, cellular immunotherapies, and human plasma derived products. Mr. Hollywood has a B.S. in Microbiology/Biochemistry from Western Illinois University. Nathan McDonald, Vice-President, Finance Mr. McDonald has a rich business and organizational background. He has been a financial advisor on business strategy and financial opportunities for more than 150 up-and-coming companies. He co-founded the northwest region of Keiretsu Forum, a large international network of accredited angel investors and serves as its regional director. Mr. McDonald has a Bachelor’s degree with a special focus in finance from the University of Washington Business School. H. Andreas Kalmes, Ph.D, Vice President, Pharmacology Dr. Kalmes has quality experience in the field of biomedical research, especially in cardiovascular biology, inflammation, oncogenic growth factor signaling pathways, and imaging modalities. Prior to CellCyte, he worked with Amgen and Immunex, where he and his team were responsible for investigation into the involvement of inflammation in the progression of atherosclerosis leading to heart attacks. He was also with the University of Washington as senior fellow and acting instructor. He has the degree Diplom-Biologe (equivalent to a master’s degree) from the University of Mainz. Dr. Kalmes has received his Dr. rer. nat. (Ph.D). from Johannes Gutenberg University, Germany, for research conducted at the German Cancer Research Center in Heidelberg, Germany.

CCYG is a development stage company and has recently filed its annual report. The Company has changed its line of business after a reverse merger of CellCyte Genetics and Shepard Inc. General and administrative expenses for 2007 were $573,703, compared to $112,636 for 2006, primarily reflecting an increase in business operations, post-merger. Research and development expenses were $674,508 in 2007 due to a change in the line of business; there was no such expense in 2006. Management expects R&D expenses will continue to rise as CCYG is still in the process of conducting its clinical trial phases and developing new products to keep up with market needs in a research-intensive industry where R&D is essential. There has been a considerable increase in consulting and professional fees in 2007 compared to 2006 due to increased legal and accounting costs. Consulting and professional expenses for 2007 were $499,021 and $196,903, respectively, compared to $203,386 and $18,879, respectively, for 2006. CCYG reported an expense of $801,617 for salaries and benefits in 2007. However, the largest component of operating expense in 2007 was stock-based compensation of $1.8 million. CCYG incurred an interest expense of $50,738 in 2006 due to the presence of significant debt in its capital structure. After the acquisition of CellCyte, the Company has been able to maintain a debt-free capital structure as it is focused on securing equity sources of financing rather than on debt. CCYG’s revenue stream from its CCG-TH30, in our opinion, is at least four years away. In the interim the Company will continue to incur operating expenses. The Company reported a net loss of $4.5 million for the year ended December 2007, compared to a loss of $385,639 for the year ended December 2006. The sharp increase in the net loss was primarily due to stock-based compensation expense of $1.7 million related to the acquisition of CellCyte.

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CellCyte Genetics Corp. (CCYG)
CCYG is a development stage company and currently does not have a revenue stream to cover its expenses. As a result, it continues to burn cash. The Company will need to raise debt and equity funding to meet its operating expenses. Its cash burn was $4.5 million in 2007 and $385,639 in 2006. As of December 31, 2007, CCYG had cash and cash equivalents of $2.2 million as the Company raised funds totaling $5.9 million through the issue of common stock units (3,981,164 at $1.50) during 1Q07. According to management, the cash available to the Company is not sufficient to cover expenses for the next 12 months. In line with management’s guidance, we estimate CCYG will raise $18 million via equity financing during 2008 and 2009.

Uses of Funds - 2007
34% 17% 49%

R&D Expense

Working Capital


CCYG is in its development phase and plans to enter human clinical trial phases in 2009; it could expect revenues only after 2012–13. We expect the Company will keep burning cash due to mounting R&D and other operating expenses. As per our projections, R&D expenses are expected to reach $3.9 million in 2008, reflecting an increase of 477% compared to $674,508 in 2007. General and administrative expenses, according to our projections, will be $525,000 for 2008 and $993,622 for 2009. We project net income will remain negative in the absence of any meaningful revenue generation. Accordingly, we expect the Company to post a net loss of about $6.9 million in 2008 and a net loss of $9.8 million in 2009. Earnings will be negative with ($0.109) per share in 2008 and ($0.134) per share in 2009.

CCYG is expected to complete its clinical Phase II and III trials by 2012–13. Accordingly, we believe revenue will start flowing in 2014. CCYG’s valuation is driven by the innovativeness and uniqueness of its technology. However, the stock is high risk due to the inherent nature of risk in developing an innovative technology. At its current price of $0.48, the stock seems to be undervalued and a good investment for investors with a higher risk appetite and who are seeking a high risk-return tradeoff on a long-term horizon.

V a lu a tio n M o d e l, C C Y G

FY 2014E
Market Size CCYG's Market Share: 2% Share Outstanding Revenue Per Share Industry P/S Multiple Price Per Share Discount Rate Discounting Factor Present Value of Price Per Share 10,000,000,000 50,000,000 100,000,000 0.500 13 6.50 35.00% 0.122 $0.80

We are initiating coverage of CCYG with a “Speculative Buy” recommendation and a 12month target price of $0.80. We assume that CCYG will be able to commercialize its CCG-TH30 and CCG-TH35 programs in 2014 and accordingly will start generating revenue from 2014. Our model assumes CCYG will be able to capture 2% of market potential of $10 billion in 2014. We are projecting CCYG’s weighted average number of shares will increase to 100 million in 2014 from approximately 60 million currently as a result of future public or private equity offerings. Assuming CCYG will report revenue of $50 million in 2014 with 100 million shares outstanding, we calculate revenue per share of $0.50 in 2014. A 13x industry P/S multiple gives us the future price of $6.50 per share. Applying a 35% discount factor to the future price of $6.50 per share, our model derives a present value for CCYG of $0.80 per share.

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CellCyte Genetics Corp. (CCYG)
Company Cellcyte Genetics Corporation Stem Cell Innovations, Inc International Stem Cell Corporation StemCells Inc Aastrom Biosciences, Inc. Geron Corporation
Data as of May 16, 2008


Price $0.52 $0.01 $0.38 $1.43 $0.39 $3.97

Market Cap. 31.16 M 7.67 M 13.44M 115.45 M 53.32 M 309.28M

Price to Sales (X) N.A 36.91 346.72 2035.3 88.09 36.82

Price Forward Book value to Book P/E (X) Per Share (X) 8.81 N.A 63.33 3.28 1.6 1.53 N.A N.A N.A N.A N.A N.A 0.06 (0.01) 0.01 0.44 0.25 2.59

The biotech industry in general is moving towards a mature stage, but stem cell research is a strong emerging segment within the industry. There are more than 300 public companies operating in the Biotech sector. Some of the dominant players in the space are Amgen (AMGN), Genentech Inc. (DNA), and Gilead Sciences Inc. (GILD). Stem cell research in the past few years has attracted many companies such as Stem Cell Innovations Inc., International Stem Cell Corp., and Aastrom Biosciences Inc. Stem cell research has presented lucrative opportunities from revolutionary discoveries and approvals of the characteristic features of stem cells. The competitive landscape for CCYG is crowded, with many players seeking to enter the world of stem cell research. Stem Cell Innovations Inc. (OTC BB: SCLLE.OB) is a stem cell research company engaged in the development and production of pluripotent stem cells. The company has a proprietary C3A human liver cell line in the field of drug discovery and toxicology testing. It uses a C3A human liver cell line for the production of human serum proteins, including the clotting factors used by hemophiliacs to allow their blood to clot, and develops other products, such as the production of antibodies and the treatment of various diseases by in vivo cellular replacement therapy. International Stem Cell Corporation (OTC BB: ISCO.OB) is a development stage biotechnology company that, through its subsidiary Lifeline Cell Technology, LLC, uses human embryonic stem cells for the treatment of various diseases, including diabetes, liver disease, and retinal disease, through cell transplant therapy. StemCells Inc. (NasdaqGM: STEM) is a clinical stage company engaged in product development programs for two cell types: the human neural stem cell and human liver engrafting cells. The company aims to discover and develop cell-based therapeutics to treat diseases of the central nervous system and liver. Aastrom Biosciences, Inc. (NasdaqCM: ASTM) is a biotech company engaged in the development of regenerative medicine through the development of autologous cell products for the repair or regeneration of multiple human tissues, based on its proprietary Tissue Repair Cell (TRC) technology. Geron Corporation (NasdaqGM: GERN) is a biopharmaceutical company that develops biopharmaceuticals for the treatment of cancer and chronic degenerative diseases, including spinal cord injury, heart failure, and diabetes. The company also develops human embryonic stem cell-based therapeutics.

Legal battles. In early 2008, CellCyte faced one of its toughest challenges in the form of legal notices from various law firms representing CellCyte’s investors questioning the various biographical details of none other than its CEO, Gary Reys. It was alleged that certain objectionable portions of Company officials’ biographical information misled investors. However, on January 18, the Company replied that these allegations are without merit and will prove such in court. CellCyte has hired the international law firm of Duane Morris LLP and will vigorously defend itself in court.

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CellCyte Genetics Corp. (CCYG)
Change of headquarters. CellCyte has moved its headquarters from Kirkland to a new 26,500-square-foot facility in Bothell, Washington, located in the Canyon Park Biotechnology Complex. New appointments. On May 20, 2008, CellCyte appointed Jay Traverse, M.D., FACC, FAHA, to its Scientific Advisory Board as a clinical consultant. Traverse is an interventional cardiologist with the Minneapolis Heart Institute at Abbott Northwestern Hospital with extensive experience in cardiovascular stem cell clinical trial research.On December 5, 2007 CellCyte appointed Fred Mill as director of engineering for the Company’s newly formed Device Division. Mr. Mill has more than 30 years of experience in the areas of engineering design, electromechanical design, and prototype development. Technology patented. On November 9, 2007, CellCyte patented (US Patent No. 7,282,222) its new methods and compositions approach to deliver and direct stem cells to target organs in the body. Collaborative research agreement. On September 11, 2007, CellCyte entered into a research agreement with physician scientists at Cleveland Clinic of Cleveland, Ohio. The main aim of this collaboration is to investigate the presence and regulation of heart receptors involved in stem cell trafficking in normal and diseased human hearts by using the CellCyte technology base. Creation of new division. CellCyte introduced its new Device Division on September 19, 2007, to develop, manufacture, and market its patented line of stem cell cultivation and replication devices.

Continued funding requirement. CCYG is a development stage company and is yet to build its revenue stream. Revenues will be delayed as the Company’s medicine is subjected to various clinical trials and regulations before it enters the market. The Company will continue to require fresh funding to meet its operating expenses. Any failure to raise funds may result in cuts to its marketing and R&D efforts, which in turn may further delay the revenue generation. Regulatory risk. There are ethical issues related to stem cell research. It is possible the government could impose certain bans on these types of research. Surviving the competition. CCYG is still far away from its revenue generation stage, as it plans to enter Phase III of clinical trials in 2011–12. Meanwhile, any other competitor company can come up with the same line of medicines based on similar technology. Litigations and negative publicity. CCYG has been engaged in legal battles with some investors and one of its exemployees since January 2008. The Securities and Exchange Commission (SEC) is also investigating matters related to the Company. Negative publicity from the media has further tarnished the Company’s image.

CCYG was initially incorporated as Shepard Inc. on March 9, 2004, under the laws of the state of Nevada. As Shepard Inc., its business was to engage in the acquisition and exploration of mineral properties with a view to exploit any mineral deposits discovered during the operations. The Company owned 100% beneficial interest in the gold mining site known as CB-1 claim. The Company, however, was not successful in finding the gold, and it abandoned the project. On February 16, 2007, Shepard Inc. was merged with its wholly owned subsidiary CellCyte Genetics Corp., based in Washington, after it acquired all issued and outstanding shares of CellCyte Genetic Corporation and changed its name from Shepard Inc. to CellCyte Genetics Corporation. After the acquisition, the Company changed its line of business from gold mining to discovery and development of stem cell therapeutic products. CCYG, also listed on the Frankfurt exchange (LK6), is headquartered in Bothell, Washington.

RedChip Visibility | 11 | CellCyte Genetics Corp.

CellCyte Genetics Corp. (CCYG)

Income Statement All Figures in US$, except share data FY Ending December 31,
Total revenues Cost of revenues Gross profit Consulting General and administrative Professional fees Stock based compensation Research and development Salaries & benefits Total cost & expenses Operating income (loss) Interest income Interest expense Other income Total other income (expense), net Income before income taxes Income taxes Net income (loss) Net income (loss) per share-diluted Diluted weighted average shares outstanding

(351,995) (71,430) (1,780,000) (2,203,425) (2,203,425) (8,315) (8,315) (2,211,740) (2,211,740) (0.05) 40,654,936

(81,938) (189,978) (41,687) (24,276) (342,988) (680,867) (680,867) (5) (5) (680,872) (680,872) (0.01) 59,854,225

(79,701) (153,156) (87,846) (281,915) (220,687) (823,305) (823,305) (207) (207) (823,512) (823,512) (0.01) 59,854,224

(337,382) 121,426 4,060 (368,317) (237,942) (818,155) (818,155) 13,083 13,083 (805,072) (805,072) (0.01) 59,854,224

(499,021) (573,703) (196,903) (1,780,000) (674,508) (801,617) (4,525,752) (4,525,752) 4,556 4,556 (4,521,196) (4,521,196) (0.08) 55,120,154

RedChip Visibility | 12 | CellCyte Genetics Corp.

CellCyte Genetics Corp. (CCYG)
Balance Sheet All Figures in US$, except share data FY Ending December 31,
Assets: Current assets Cash & cash equivalents Restricted cash Accounts receivable, net Inventories, net Prepaid expenses and other current assets Total current assets Intellectual Property Furniture & equipment Intangible and other assets Deposits Goodwill Other assets Total assets Liabilities and Shareholders’ Equity: Current liabilities Accounts payable Current portion of long-term debt Accrued expenses Due to related parties Convertible notes Other current liabilities Total current liabilities Long-term debt Convertible debenture Non-Current liabilities of discountinued operation Total liabilities Preferred stock Common stock Additional paid-in capital Accumulated deficit Common stock purchase warrants Total stockholders’ equity (deficit)






779,327 4,971,751 5,946 5,757,024 464,817 6,221,841

4,621,041 27,000 154,976 4,803,017 498,715 8,847 5,310,579

3,484,943 25,253 241,673 3,751,869 514,850 266,871 4,533,590

2,291,457 181,140 2,472,597 575,894 1,036,456 4,084,947

395,844 4,000 399,844 6,221,841 59,854 7,276,553 (2,912,410) 1,398,000 5,821,997

61,506 107,949 169,455 5,310,579 59,854 7,276,553 (3,593,283) 1,398,000 5,141,124

74,288 33,741 107,949 215,978 4,533,590 59,854 7,276,553 (4,416,795) 1,398,000 4,317,612

412,837 51,619 107,949 572,405 4,084,947 59,854 7,276,553 (5,221,865) 1,398,000 3,512,542

RedChip Visibility | 13 | CellCyte Genetics Corp.

CellCyte Genetics Corp. (CCYG)
Cash Flow Statement All Figures in US$ FY Ending December 31,
Cash flow from operating activities Net income Depreciation & amortization Non-cash interest expense Stock based compensation Common stock issued Warrants issued for interest expense Balance sheet: Accounts receivable Inventory Prepaid expenses Increase in deposits Accounts payable Accrued interest Accrued expenses Net cash flows from operating activities Cash flow from investing activities Capital expenditures (intellectual property aquisition) Deposits Cash aquired in reverse aquasition Net cash flows from investing activities Cash flow from financing activities Proceeds from issuance of convertible notes Proceeds/(repayments) from short-term notes Advances from related parties Proceeds from issuance of common stock Net cash flows from financing activities Net increase (decrease) in cash & cash equivalents Cash & cash equivalents, beginning of period Cash & cash equivalents, end of period







(2,211,740) 6,476 1,780,000 58,719 8,066 (45,000) (403,479)

(680,872) 7,176 (27,000) (153,776) (334,338) (1,188,810)

(823,512) 18,665 1,747 (86,697) 12,782 33,741 (843,274)

(805,072) 49,314 25,253 60,533 338,549 17,878 (313,545)

(4,521,196) 81,631 1,780,000 (179,940) 75,712 8,066 6,619 (2,749,108)

(101,627) (4,746) 1,429 (104,944)

(49,921) 4,746 (45,175)

(292,824) (292,824)

(879,943) (879,943)

(1,324,315) 1,429 (1,322,886)

5,971,751 5,971,751 5,463,328 287,750 5,751,078

103,949 103,949 (1,130,036) 5,751,078 4,621,042

(1,136,098) 4,621,042 3,484,944

(1,193,488) 3,484,944 2,291,456

103,949 5,971,751 6,075,700 2,003,706 287,750 2,291,456

RedChip Visibility | 14 | CellCyte Genetics Corp.

CellCyte Genetics Corp. (CCYG)
Projected Income Statement 2008 All Figures in US$, except share data FY Ending December 31,
Total revenue Cost of revenue Gross profit Consulting General and administrative Professional fees Stock based compensation Research and development Salaries & benefits Total cost & expenses Operating income (loss) Interest income Interest expense Other income Total other income (expense), net Income before income taxes Income taxes Net income (loss) Net income (loss) per share-basic Basic weighted average shares outstanding Net income (loss) per share-diluted Diluted weighted average shares outstanding


(78,750) (130,500) (701,100) (423,000) (1,333,350) (1,333,350) (1,333,350) (1,333,350)

(105,000) (174,000) (856,900) (528,750) (1,664,650) (1,664,650) (1,664,650) (1,664,650)

(152,250) (78,300) (1,246,400) (571,050) (2,048,000) (2,048,000) (2,048,000) (2,048,000)

(189,000) (52,200) (1,090,600) (592,200) (1,924,000) (1,924,000) (1,924,000) (1,924,000)

(525,000) (435,000) (3,895,000) (2,115,000) (6,970,000) (6,970,000) (6,970,000) (6,970,000)

(0.022) 59,854,224

(0.024) 69,854,224

(0.029) 69,854,224

(0.025) 77,854,224

(0.090) 77,854,224

RedChip Visibility | 15 | CellCyte Genetics Corp.

CellCyte Genetics Corp. (CCYG)
Projected Income Statement 2009 All Figures in US$, except share data FY Ending December 31,
Total revenue Cost of revenue Gross profit Consulting General and administrative Professional fees Stock based compensation Research and development Salaries & benefits Total cost & expenses Operating income (loss) Interest income Interest expense Other income Total other income (expense), net Income before income taxes Income taxes Net income (loss) Net income (loss) per share-basic Basic weighted average shares outstanding Net income (loss) per share-diluted Diluted weighted average shares outstanding


(207,900) (56,898) (1,221,472) (627,732) (2,114,002) (2,114,002) (2,114,002) (2,114,002)

(232,848) (63,157) (1,368,049) (665,396) (2,329,449) (2,329,449) (2,329,449) (2,329,449)

(260,790) (70,736) (1,532,214) (705,320) (2,569,060) (2,569,060) (2,569,060) (2,569,060)

(292,085) (79,224) (1,716,080) (747,639) (2,835,027) (2,835,027) (2,835,027) (2,835,027)

(993,622) (270,014) (5,837,815) (2,746,086) (9,847,538) (9,847,538) (9,847,538) (9,847,538)

(0.027) 77,854,224

(0.030) 77,854,224

(0.033) 77,854,224

(0.036) 77,854,224

(0.126) 77,854,224

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RedChip Visibility | 16 | CellCyte Genetics Corp.