Biotechs in flux after cell breakthrough

NEW YORK (CNNMoney.com) -- Biotech stocks were volatile Tuesday after separate teams of researchers said they have "reprogrammed" adult cells to mimic the properties of human embryonic stem cells - side-stepping the controversy associated with their use in the search for cures of many diseases and afflictions.

"I believe that these results, while they don't eliminate the controversy, are probably the beginning of the end of the controversy," said Dr. James Thomson of the University of Wisconsin in Madison, a pioneer in the research of human embryonic stem cells and a co-author in one of the new studies.

The stock for Geron Corp. (Charts) plunged nearly 8 percent on the news. The biotech is one of the few companies working with embryonic stem cells, and hopes to begin the first human trials next year.

The news sparked volatile trading among other biotechs, though there was no clear pattern in the movement. Cytori Therapeutics (Charts), a biotech that uses stem cells from adult tissue instead of embryos, rose 3 percent. But Osiris Therapeutics (Charts), which also uses adult tissue, dropped 7 percent. Stemcells Inc., (Charts) another adult tissue company, slipped 2 percent.

Stephen Brozak, biotech analyst for WBB Securities, said that none of the stock activity is grounded in reality, because the results of the studies are at an "embryonic stage" and are too early to have any bearing on the marketplace.

"At such an early stage, this has absolutely no bearing on Geron [or other companies,]" said Brozak. "Anyone reading financially into this space is just making a mistake. People think they're adding two and two, but they're coming up with three."

Thomson's study, led by Dr. Junying Yu of the University of Wisconsin, discovered a way to change cells in adult skin tissue to become "undifferentiated" and "to exhibit the essential characteristics of embryonic stem cells," according to the report, which was published in the journal Science.

In other words, the reprogrammed skin cells could morph into other types of cells, such as the heart or nerves. Theoretically, their fast-healing and stem cell-like properties could be used to treat injuries and diseases to different organs.

"The idea of cells becoming things they don't normally become is very viable now," said Thomson, speaking in a teleconference with reporters. "Embryonic stem cells are cells that can divide forever."

Another study, led by Dr. Shinya Yamanaka at the Institute for Frontier Medical Sciences at Kyoto University in Japan, found similar "embryonic-like" results when reprogramming mouse and human cells. The study results were published in the journal Cell.

Dr. James Thomson, who in the 1990s became the first scientist to isolate human embryonic stem cells, said that reprogramming could eventually phase out the need for this type of cell and the controversy associated with it.

Stem cells from human embryos are often touted by researchers for their fast-healing properties and their ability to morph into many different types. But because they use human embryos, their use has been opposed on ethical grounds by those who oppose abortion rights - including President Bush.

Researchers insist that they only use human embryos that would otherwise be discarded as medical waste. Nonetheless, Bush in 2001 limited federal research funding to the use of human embryonic stem cells that existed at that time. In 2007, he vetoed a Congressional effort to eliminate his funding restrictions.

There are many biotechs that use stem cells in their research, but only Geron and the privately held companies Advanced Cell Technology and Novocell Inc. use stem cells from human embryos.