Stem cell breakthrough a bust on Wall Street

NEW YORK (CNNMoney.com) -- A breakthrough in stem cell research involving mice has stirred up excitement in the scientific community but not on Wall Street, where some stocks in the sector slumped Thursday.

Investors seem to realize that the study results, while promising, are still years away from potential treatments.

"This is all necessary to move the stem cell space forward, but this is still extremely early in development," said Ren Benjamin, analyst for Rodman & Renshaw. "The results that were published yesterday may take years to adequately develop so that one day the technology could be used to develop a therapeutic."

As a result, stocks of firms specializing in stem cell research were mixed Thursday. Cytori Therapeutics (Charts) tumbled about 7 percent while Geron Corp. (Charts) slid about 3 percent. Aastrom Biosciences (down $0.03 to $1.38, Charts) slipped about 2 percent as the Nasdaq itself slipped about 1 percent.

Steven Brozak, analyst for WBB Securities, said Cytori's stock is losing steam after gaining more than 40 percent since mid-March, prior to Thursday.

Other stem cell stocks fared better. The stock for Osiris Therapeutics (Charts), which announced plans to sell $20 million worth of stock on Wednesday, jumped about 4 percent, while StemCells Inc. (Charts) gained less than 1 percent.

Also on Thursday afternoon, the House passed a bill to lift President Bush's 2001 restrictions on federal funding for research involving the use of embryonic stem cells. The potential impact on stock prices remains to be seen. This is the last step before the bill is sent to the White House, and Bush has threatened a veto.

Benjamin called the results of the studies in mice "an incremental positive in the stem cell space" and added, "Most investors will have to stay tuned to see if and when these therapies translate into some sort of clinical therapy."

But no one seems to dispute the importance of the findings, however early-stage and speculative they may be.

The new findings are "extremely important" and "extremely exciting," said B.D. Colen, spokesman for the Harvard Stem Cell Institute, where much of the research was conducted. "It's been a goal for decades and decades in biology to reset the clock in cells."

Shinya Yamanaka, professor at Kyoto University's Department of Stem Cell Biology in Japan, discovered a way to insert genes into the adult cells of genetically engineered mice, causing the cells to revert to an embryonic state. He published the findings of his study in the esteemed scientific journal Nature.

In theory, stem cell technology could be used to heal traumatic injuries, like severed spinal columns and brain damage, or debilitating diseases, like Parkinson's and Alzheimer's. But potential treatments are years away.

The scientists Konrad Hochedlinger of the Harvard Stem Cell Institute, and Rudolf Jaenisch of the Whitehead Institute for Biomedical Research, both in Cambridge, Mass., made similar discoveries in follow-up studies. Hochedlinger published his findings in the first issue of the scientific journal Cell Stem Cell.

In separate study published in Nature Wednesday, Kevin Eggan of the Harvard Stem Cell Institute demonstrated that stem cells can be created in the previously frozen fertilized eggs of mice, by swapping the chromosomes from the eggs with chromosomes from a donor cell.

The importance these findings cannot be overstated. If scientists are able to duplicate this science in humans, it might allow doctors to produce embryonic stem cells with adult cells, instead of the current method using fertilized human eggs.

The current method is opposed by some on ethical grounds, including President Bush.

"There are numerous roadblocks," said Colen of the Harvard Stem Cell Institute, noting that some mice in the studies had developed cancerous tumors. "We have no idea how quickly or how long it will [take to work] in humans, if at all."

Likewise, Benjamin of Rodman & Renshaw said it is "too early to make the conclusion that one may be able to sidestep" the ethical debate over creating embryonic stem cells in fertilized eggs.

The analysts interviewed do not own stock in the companies mentioned. WBB acted as financial consultant to Cytori in a fundraising and Rodman & Renshaw did business with Geron and Aastrom more than a year ago.