New stem cell treatments on the way

NEW YORK (CNNMoney.com) -- Two new stem cell treatments could be entering the U.S. market next year.

Two biotechs, Cytori Therapeutics and Osiris Therapeutics, each hope to get their experimental stem cell products approved by the Food and Drug Administration and into the U.S. market by 2008.

Both outfits work with stem cells that are derived from adult tissue, not embryos, so they're insulated from the controversy surrounding the use of stem cells harvested from human embryos. Other companies, like Geron (up $0.22 to $7.48, Charts) and Advanced Cell Technologies, do use embryos as a source for their stem cells.

Stem cells serve as the body's repair system. Theoretically they can divide without limit and morph into different types of cells, according to the National Institutes of Health. Researchers hope to harness these cells for use in therapies that can heal crippling trauma, like brain damage or spinal injury, or to reverse disabling disease like Parkinson's or Alzheimer's.

Cytori (down $0.02 to $5.62, Charts) is planning to launch its first stem cell medical device in Europe this year, said Eric Daniels, senior director of business development for the company, with a market debut planned for Spain and Italy. The company's Celution System uses stem cell technology to rebuild breast tissue in cancer survivors.

After the European launch, Cytori hopes that the Food and Drug Administration will grant its product full approval for a late 2008 entry in the U.S. market, said Daniels.

The Celution System extracts stem cells from liposuction fat, which are then used to grow breast tissue in women who have undergone partial mastectomies to remove cancer, said Daniels.

"It turns out that subcutaneous fat is a very rich source of stem and regenerative cells," he said. The device would be used to inject "a cocktail of therapeutic cells" into the woman's body. Daniels speculated that product sales could reach several hundred million dollars a year.

Stephen Brozak, analyst for WBB Securities (which does not own any Cytori shares, but does act as a financial advisor for the company), has high hopes for the Celution System, which he sees as a potential blockbuster.

"This is the billion dollar product," said Brozak, who added that the first FDA-approved stem cell device would "spur an R&D war the likes of which biotechnology has not seen before."

Osiris (down $0.29 to $18.47, Charts), based in Columbus, Maryland, currently has the only stem cell-based product that's been approved by the FDA. OsteoCell, which stimulates bone growth and is already on the U.S. market, is actually considered an implant rather than a drug or device.

But Osiris also has a potential stem cell drug in its pipeline - Prochymal - that CEO Randal Mills wants to launch into the U.S. market, possibly by 2008.

"We want to be the first company to get a stem cell drug approved by the FDA," said Mills. He said that Prochymal, a potential treatment for acute Graft vs. Host Disease (also known as GVHD) and Crohn's disease, is in late-stage trials. GVHD is an immune condition affecting cancer survivors with bone marrow transplants, while Crohn's causes inflammation of the intestinal tract.

The stem cell arena, which also includes companies like StemCells Inc., (up $0.21 to $2.97, Charts) Aastrom Biosciences (up $0.09 to $1.58, Charts), and Thermogenesis, is tiny. The industry's sole product, Osiris' OsteoCell, had 2006 sales of just $8 million.

But analysts believe the market will swell to immense proportions. Robin Young, analyst for the orthopedics research firm RRY Publications, projects that the stem cell market will grow to $8.5 billion by 2016. Young envisions stem cell therapeutics in the areas of orthopedics, diabetes, anti-inflammatory or autoimmune diseases, nerve repair and heart disease.

WBB Securities analyst Brozak thinks that the most lucrative market for stem cell treatments will be heart disease.

"The Holy Grail that you're looking at on the stem cell side are indications that have to deal with heart damage," said Brozak. "One of the most successful stem cell applications could be rebuilding damaged hearts, because heart disease is the number one killer in America and the market for treating it is huge."

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