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

Geron Corporation (NASDAQ: GERN), a Menlo Park, CA-based biopharmaceutical company, is developing and commercializing three groups of products: i) therapeutic products for oncology that target telomerase, an enzyme enabling cancer cell growth; ii) pharmaceuticals that activate telomerase in tissues impacted by aging, injury or degenerative disease; and iii) cell-based therapies derived from its human embryonic stem cell platform for applications in multiple chronic diseases.

GRN163L, Geron’s anti-cancer drug candidate - Normal cell division causes telomeres, located at the ends of chromosomes, to shorten. The cell division progresses until telomeres reach a certain short length which then causes the cells to stop growing. In 85 percent to 90 percent of cancerous cells, however, the presence of telomerase enables telomeres to maintain their length to keep tumor cells dividing and growing. Inhibiting telomerase activity should result in telomere shortening to cause cancer cells to age and die. GRN163L, Geron's proprietary telomerase inhibitor, directly interferes with the function

of the telomerase enzyme in human tumor cells of many cancer types including lung, breast, prostate, liver, and early stage of human breast cancer.

Earlier this month, Geron said that its GRN163L has shown a positive response in stopping the spread of human liver and lung cancer in mouse models by inhibiting telomerase in tumor cells. Geron also said that that they received FDA clearance to begin human clinical studies of GRN163L in patients with chronic lymphocytic leukemia. A therapeutic vaccine targeting telomerase in patients with metastatic prostate cancer is currently in Phase I/II clinical studies at Duke University Medical Center. The National Institutes of Health estimates that Americans spend $61 billion in direct medical costs for cancer treatment each year.

Geron is also developing cell-based therapeutics based on differentiated cells derived from hESCs including neural cells to repair spinal cord injuries, dopaminergic neurons that are lost because of Parkinson’s disease, cardiomyocytes for heart disease, pancreatic islet ß cells for type 1 diabetes, chondrocytes for osteoarthritis, osteoblasts for osteoporosis, and hematopoietic stem cells for blood diseases and to prevent immune rejection of the other cell types. Geron plans to begin clinical trials on acute spinal cord injury treatment in early 2006, according to chief executive officer Tom Okarma.

Recently, research scientists at the University of Washington, in collaboration with Geron, successfully transplanted human embryonic stem cells into the rodent heart thereby creating new blood vessels around the hearts. "The successful engraftment of the hESC-derived cardiomyocytes provides evidence for the feasibility of using these cells in myocardial repair," stated Jane S. Lebkowski, Ph.D., Geron's senior vice president of regenerative medicine.

Last quarter, Q2 2005, Geron reported revenues of $4.7 million with a net loss of $3.1 million or $(0.06) per share, compared to revenues of $366,000 and losses of $8.9 million or $(0.20) per share in the second quarter of 2004. A marked increase in quarterly revenue was due to an upfront payment of $4 million in conjunction with the transfer of intellectual property rights related to nuclear transfer for use in animal cloning to the company's new joint venture, stART Licensing, Inc.

The Research and Development (R&D) expenses of $6.8 million for Q2 2005 decreased compared to

operating expenses of $9.5 million in 2004 due to reductions in costs to produce supplies of GRN163L. Geron expects R&D expenses to increase in the next year as the company incurs expenses related to clinical trials of telomerase inhibitor, GRN163L, continued clinical trials of their telomerase cancer vaccine and continued development of their hESC programs.

Geron's share price soared 26.6 percent in July of this year after the company announced a collaborative agreement with Merck (NYSE:MRK) on development of cancer vaccines. We are expecting additional positive announcements from Geron in the coming quarters regarding their therapeutic vaccine targeting telomerase in patients with metastatic prostate cancer and cell-based therapies which could drive the share price even higher in the next 12 months.

StemCells Inc. (NASDAQ: STEM), a Palo Alto, CA-based biotechnology company, is focused on stem cell-based therapies to treat diseases and disorders of the central nervous system (CNS), as well as diseases of the liver and pancreas. StemCells Inc., has isolated human central nervous system stem cells (hCNS-SC) directly from normal brain tissue and has shown that these adult stem cells can migrate to different regions of the brain to become specialized cells as a potential treatment for Batten disease, spinal cord injury, demyelinating diseases, stroke and Alzheimer's disease.

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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. Mr. Wijaranakula's portfolio holds long positions or controls in GERN and IVGN.