Adult stem cell biotechs: better prospects, less controversy
Several outfits are in the advanced stages of testing adult stem cells to help repair damaged bones as well as heart and breast tissue.,
NEW YORK (CNNMoney.com) -- Embryonic stem cells might hold the secrets to curing paralysis and brain damage, but they've also garnered plenty of controversy with the anti-abortion lobby because they're harvested from embryos.
However, work using adult stem cells - which are donated by grown men and women - is not only free of such controversy, it's actually much closer to getting effective products on the market.
The adult stem cell research at several biotech outfits in particular - Osiris, Cytori, Aastrom - is worth keeping an eye on according to analysts.
"From a Wall Street perspective, adult stem cells are a much better investment," said Stephen Dunn of Dawson James Securities. "These are the guys who are going to be in the news in 2007 and 2008."
President Bush recently vetoed a bill that would loosen federal restrictions on funding for embryonic stem cells, and some analysts fear that as a result the best developments in this area will be made overseas.
But work with adult stem cells isn't being held back by funding restraints and political opposition, analysts say.
"Embryonic stem cell research hasn't kept up pace with adult stem cell research," said Dunn. "Adult stem cell research is advancing so far you might not need embryonic stem cells. If the federal government is reluctant to put their money into it, then Wall Street is as well."
So while embryonic stem cell researchers are experimenting with rats, adult stem cell researchers have moved on to more advanced tests with humans. The embryonic-based stem cell treatments are probably a decade away, but the U.S. market could see its first adult-based stem cell treatments within the next couple of years.
Osiris Therapeutics (down $0.08 to $10.93, Charts), a Baltimore-based biotech, recently raised $38.5 million via its Aug.4 IPO. The company already has a stem cell-based product on the market called Osteocel, which spurs growth in damaged bones. But the company has had a hard time finding enough donors of bone tissue to build up its inventory.
Osiris is also working on other products, including Prochymal, a treatment for a life-threatening affliction called Acute Graft versus Host Disease. This disease affects half of all patients who receive a bone marrow transplant for anemia and other diseases, and attacks the gastrointestinal tract, skin and liver.
"I like Osiris' Graft versus Host product," said Stephan Brozak, analyst for WBB Securities. "You've got a terrible disease, where Osiris has used [its product] with remarkable results."
The company just began phase 3 of clinical trials for Prochymal, which is the latest stage of testing before submission to the FDA, but it could be ready for submission in 2007. This same drug is in phase 2 testing as a treatment for Crohn's disease, a painful inflammation of the bowel.
The biotech is also in earlier stages of testing for Provacel, which would use stem cells to rebuild heart tissue following a heart attack, and for Chondrogen, which may rebuild knee cartilage.
Aastrom Biosciences (down $0.01 to $1.20, Charts), a biotech based in Ann Arbor, is also developing products with adult stem cells to help regrow bone tissue. The company is conducting clinical trials on stem cell-based healing of long bone fractures and jaw bone reconstruction.
Dunn is bullish on Aastrom's "low-risk" trials, rating the company a "buy," with a 12-month price target of $3.75.
The San Diego biotech Cytori Therapeutics (up $0.11 to $5.80, Charts) uses stem cells from fat -- which is extracted through a one-hour liposuction procedure using the company's Celution technology - to rebuild damaged tissue.
"Fat tissue is the richest source of stem cells," said Cytori chief executive Chris Calhoun, who hopes to submit Celution to the FDA in 2007.
Unlike Osiris, Cytori does not use donors, but instead extracts stem cells from the patient, then processes them in the Celution device and re-injects them into the patient.
Celution is being tested in human patients in Japan who have had a single-breast mastectomy to see if the stem cell-based technology can rebuild damaged breast tissue. If successful, Celution would be used in place of silicone implants, the current treatment for rebuilding breasts.
Celution is also being tested to improve heart function in patients with severe coronary artery disease.
"We're salvaging that part of the heart that would otherwise go on to die," said CEO Calhoun, who hopes to file this treatment with the FDA in 2008.
But these tests are less advanced, and the test subjects are pigs, not humans.
Analysts are reluctant to estimate when any of these adult stem-cell treatments will come to market, or how much they'll garner in sales. With stem cells, the FDA is encountering a relatively new type of science, so the regulatory process might not be even less predictable than it is with the more traditional type of medical devices and drugs.
"The FDA is engaging in a learning process," said WBB Securities' Brozak, and that will introduce new variables into the agency's review process.
The analysts interviewed for this story do not own stock in the companies mentioned here, but Dawson James Securities conduct banking for Aastrom.