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Stem cell bill to boost biotechs?
Biotech stocks could rise if stem cell bill passes the House, analysts say.
May 20, 2005: 3:46 PM EDT
By Aaron Smith, CNN/Money staff writer

NEW YORK (CNN/Money) - Biotechs specializing in stem cell research could see a jump in stock prices next week, say analysts who are keeping a close eye on a House bill that would lift limits on federal funding.

"We think it's going to be good news for all the stem cell players," said Ren Benjamin, senior biotechnology analyst for Rodman & Renshaw. "This sort of news and this sort of media attention really brings all the attention into the [biotech] space and the stem cell stocks tend to do really well."

The House of Representatives could take action on the bill next week. President Bush, who restricted funding for embryonic stem cell research in 2001, threatened to veto the bill. But Bush aides have said they're concerned the measure, with 200 sponsors already, still may pass the GOP-led Congress by a veto-proof margin.

If the bill passes, companies like Stemcells Inc., Geron Corp., Viacell Inc. and Aastrom Biosciences Inc. could see their stock prices rise and their long-term opportunities for innovation open up, analysts said. Even Viacell, which focuses on stem cells from umbilical cord blood rather than embryonic stem cells, and StemCells, which uses adult stem cells, could benefit from an overall lift to the industry, analysts said.

Researchers are not eligible for federal funding if they use stem cells obtained after 2001, the year the president established the current restrictions. These restrictions do not have a direct impact on biotechs, which do not seek federal funding for research, said analysts. But if the bill passes, grants could open up for university researchers, leading to discoveries that could benefit biotechs indirectly, said Benjamin.

"It's very beneficial to the space," said Benjamin. "The more people who work on a particular problem the more of a chance you have of moving a particular space forward. It opens up a lot options now in the embryonic stem cell space."

However, Benjamin warned that boosts in stock price could be temporary, because the developments that would result from the easing of restrictions could take years to come to fruition.

Biotech analyst Mark Monane of Needham & Co. said that companies like Geron, which is studying stem cells to develop a regenerative enzyme, could see a lift in stock price if the bill is passed. However, it will take time for Geron and other biotechs "to translate the technology into products" that would generate revenue, said Monane.

Geron (up $0.10 to $7.31, Research), based in Menlo Park, Calif., plans to develop enzymes to heal spinal cord injuries and kill cancer cells, but the company said it has yet to begin the first phase of testing. Like the other stem cell biotechs, Geron is a research-driven company that is light on revenue, with $1.1 million in 2004 sales. Aastrom (up $0.25 to $2.80, Research), which focuses on tissue regeneration, is based in Ann Arbor and had $1.3 million in 2004 sales. StemCells (up $0.38 to $3.96, Research), based in Palo Alto, Calif., also focuses on spinal cord injuries and brought in $141,000 last year, primarily from grants and licensing agreements. ViaCell (up $0.50 to $6.55, Research) of Cambridge, Mass., the largest of the companies mentioned here, had $38.3 million in 2004 sales.

The analysts interviewed for this story do not own stock in the companies mentioned here. Rodman & Renshaw had done banking with Aastrom. Needham has a banking relation with Geron.  Top of page

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