Stem cell stocks volatile after Senate vote

NEW YORK (CNNMoney.com) -- Some of the biotechs specializing in stem cell research took a hit Thursday after the Senate voted to remove a ban on federal funding for embryonic stem cell research but not by a wide enough margin to overcome an expected presidential veto.

The declines came even though only two of the companies, Geron and Advanced Cell Technologies, use embryonic stem cells. Geron's (down $0.16 to $7.40, Charts) stock dropped more than 2 percent. Advanced Cell, which is traded over the counter, also fell more than 2 percent.

The other biotechs use stem cells from adult tissue.

StemCells, Inc., (down $0.09 to $2.77, Charts) which according to analysts experiences big swings on these issues thanks to its distinctive ticker symbol - STEM - tumbled nearly 5 percent.

Aastrom Biosciences (down $0.05 to $1.45, Charts), which also uses adult tissue, lost more than 3 percent.

"It's a mystery to us why we track with the pack, because we're not embryonic," said Aastrom Chief Executive George Dunbar to CNNMoney.com.

But Osiris Therapeutics (up $1.54 to $17.60, Charts), which extracts stem cells from bone marrow as opposed to embryos, was an exception, experiencing a surge of nearly 6 percent.

Cytori Therapeutics (up $0.07 to $6.00, Charts), which derives its stem cells from fat tissue, rose nearly 2 percent.

Jose Haresco, analyst for the investment research firm Merriman Curhan Ford, said day traders were buying and selling "off the political momentum" of the Senate vote, even though "it's not related to the companies and the fundamentals of the science at all."

But Stephen Brozak, analyst for the investment research firm WBB Securities, said Osiris and Cytori stocks are up because these companies are the most advanced in getting new stem cell products on the market.

"These are the two companies that are the closest commercially to any kind of revenue going forward in the stem cell space," said Brozak.

Cytori and Osiris both hope to launch new stem cell products in the U.S. market by 2008. Cytori is planning to introduce its Celution System in Europe this year, using stem cells from liposuction fat to rebuild breast tissue in cancer survivors who have undergone partial mastectomies.

Osiris is developing Prochymal, a potential treatment for acute graft versus host disease, an immune condition affecting cancer survivors with bone marrow transplants, and Crohn's disease, which causes inflammation of the digestive tract.

Osiris, based in Columbia, Maryland, is currently the only company with an FDA-approved stem cell-based product on the market. The company produces OsteoCell, which stimulates bone growth.

The Senate voted 63-34 on Wednesday to remove President Bush's 2001 restrictions on federal funding for research involving embryonic stem cells. But the vote failed to reach the two-thirds majority needed to override Bush's expected veto.

In a statement issued after Wednesday's 63-34 vote, Bush said he would veto the new bill, saying it "crosses a moral line that I and many others find troubling."

Stem cells serve as a repair system for the body. They can morph into other types of cells, according to the National Institutes of Health, and scientists hope to harness the cells to repair damage from crippling injuries and diseases.

The analysts quoted in this story do not own shares of company stocks mentioned here. Merriman Curhan Ford makes a market in StemCells and Aastrom, and Aastrom was an investment client in the past. WBB acts as financial adviser for Cytori.

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