NMS Research Analysis: Stem Cell Companies: Burning Cash on Research with Hopes of New Drugs and Therapies

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Stem Cell Companies: Burning Cash on Research with Hopes of New Drugs and Therapies

Michael Wijaranakula*
Staff Researcher, Infotix Systems, Inc. - September 09, 2005

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Stem cell research continues to be a major news topic with many reports indicating strong public support for the advancement of stem cell research. While universities, private research groups and others are vying for federal and state funding, publicly traded biotech companies that specialize in stem cell research such as Geron Corp.(NASDAQ: GERN), StemCell, Inc.(NASDAQ: STEM), Aastrom Biosciences (NASDAQ:ASTM) and ViaCell, Inc. (NASDAQ: VIAC) are still trying to translate their technologies into products that would generate revenue and potential profits.

Market analysis firms including Drug & Market Development, based in Westborough, MA, and Jain PharmaBiotech based in Basel, Switzerland, forecast that the cell therapy and stem cell-based markets could reach $30 and $56.2 billion, respectively, by 2010. Some experts, however, are cautious that only a handful of new drugs and therapies may emerge from stem cell research in the next ten years.

Stem Cells and Experimental Therapy. Stem cells are unlike other types of body cells as they are unspecialized cells that renew themselves for long periods through cell division and can potentially give rise to specialized cells to help treat problems and diseases previously thought to be incurable.

Human Embryonic stem cells are derived from a fertilized egg, produced from in vitro fertilization and then donated for research. The embryos are cultured and human embryonic stem cells (hESCS) isolated. After growing and subculturing the cells for many

months, an embryonic stem cell line is produced, consisting of undifferentiated (unspecialized) stem cells. Embryonic stem cells are pluripotent, meaning they can self-replicate into almost any tissue or organ in the body, regardless of their origin.

Adult stem cells, or somatic stem cells, are similar to embryonic stem cells in that they are undifferentiated. Found among differentiated cells in certain tissues or organs, adult stem cells can renew themselves and can then differentiate to produce the major specialized cells of the particular tissue or organ in order to maintain or repair the tissues in which they are found if activated by disease or injury. Tissues thought to contain adult stems cells include bone marrow, brain, blood and blood vessels, skeletal muscle, skin and liver.

Stem cells from umbilical cord blood and placental-derived stem cells are collected following the normal birth process. Similar to bone marrow-derived stem cells in their ability to form blood and tissues, stem cells from umbilical cord blood may have a greater ability to generate new blood cells than bone marrow and can be used to treat various genetic disorders that affect the blood, immune system or body chemistry as well as certain cancers. Umbilical cord blood can be stored by a commercial blood bank or a public cord blood bank, and transplanted back into the donor or other recipient if needed in the future.

Biotech companies are working with stem cells in hopes of developing viable medical therapies for various human diseases or genetic conditions such as cancer, diseases of the central nervous system, cardiac disease or infertility, by enabling applications in the fields of biopharmaceuticals and biotherapeutics. Stem cell-based therapy utilizes living stem cells to either replace or initiate production of cells damaged from disease or injury. Despite low earnings and negative incomes, stem cell-based companies continue to proceed with their research to develop and commercialize products or procedures.

Are there any Investment Opportunities in Stem Cell Companies? Due to short-selling activities and relatively high open interests in stem cell company stocks, long-term investors should be aware that share prices of stem cell companies could move substantially in response to company news events, posing substantial upside or downside risk potential especially when valuation reaches extremes or in the event of positive or negative news. Investors should therefore consider the stem cell companies' intellectual properties, fundamentals and potentials for wide-based applications if considering a long-term investment in company stock.

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About NMS Research Analysis: NMS Research Analysis is a private independent research entity of Infotix Systems, since 1999, bridging the gap between cutting-edge scientific research and the investment community. We offer in-depth research analysis of companies and emerging technology in sectors ranging from semiconductors, biotech, nanotechnology, novel materials for aerospace and energy industries. At the time of publication, Mr. Wijaranakula's portfolio holds long positions or controls in GERN and IVGN. *Mr. Wijaranakula is now with the Department of Immunology, University of Washington.