Stem cells: A sure bet in the '08 race

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NEW YORK (CNNMoney.com) -- Whoever wins the White House, stem cell biotechs stand to reap the benefit from an incoming leader who is friendlier to stem cell researchers than President Bush, and that could lift stocks for the entire sector, experts say.

"Any candidate is going to have a better policy on stem cells than our current president," said Ren Benjamin, biotech analyst for Rodman & Renshaw. "If that's the case, then it will be good news not only for the companies working in the space, but for the space in general."

The three leading presidential candidates - Sen. John McCain, a Republican from Arizona, and Democratic Sens. Hillary Clinton of New York and Barak Obama of Illinois - have all come out in support of expanded federal funding of human embryonic stem cell research.

Stem cells taken from human embryos, created primarily through in vitro fertilization, are favored by many scientists for their ability to regenerate and to morph into different types of tissue. In theory, stem cell-based therapies could repair traumatic injuries like severed spines and brain damage, or reverse the affects of debilitating diseases including Alzheimer's and Parkinson's. So far, these types of therapies are in the earliest stages of experimentation.

President Bush created federal funding for human embryonic stem cell research back in 2001, but he limited support to only those cell lines that existed at the time in order to "not encourage the destruction of embryos." But these limits are likely to be lifted under a new regime.

"The next president can expand [funding] and remove the road blocks," said Stephen Brozak, biotech analyst for WBB Securities. "It removes the stigma from Bush."

Bush has twice vetoed legislative attempts to expand the funding, including those backed by McCain, Clinton and Obama. In reference to Bush's policies, Obama has said, "Stymieing embryonic stem cell research is a step in the wrong direction." Clinton has called for funding for "additional cell lines in order to pursue the promising avenues for research." McCain has said "stem cell research has the potential to give us a better understanding of deadly diseases and spinal cord injuries affecting millions of Americans."

Following his second veto in 2007, Bush said the legislation "would compel American taxpayers - for the first time in our history - to support the deliberate destruction of human embryos." Instead, the president touted the therapeutic potential of stem cells taken from adult tissue.

But proponents of embryonic stem cell research - including the presidential candidates - have emphasized that only those stem cells slated for destruction as medical waste would be used. In his support for stem cell research funding in 2006, McCain said the legislation provides funding only for "scientists who use embryos originally created for reproductive purposes" and those that are "now frozen or slated for destruction by in vitro fertilization clinics."

Many of the stem cell biotechs, like Aastrom (ASTM), Cytori Therapeutics (CYTX), Stemcells (STEM) and Osiris Therapeutics (OSIR), are buffered from the controversy because they use stem cells taken from adult tissue, such as organs, skin, or umbilical cords. But other biotechs, like Geron (GERN), Advanced Cell Technology, Novocell and Neuralstem (CUR), derive stem cells from human embryos. Many of these companies are showcasing their technologies at the 3rd annual Stem Cell Summit in New York on Tuesday.

Neuralstem, Geron and Advanced Cell Technology all plan to begin testing in humans this year. In theory, they have the most to gain from a president who's friendlier to the use of embryonic stem cells.

But since investors don't often distinguish the nuances between the various stem cell companies, however controversial they may be, a rising tide may lift all boats.

"I think that all these names are going to do well going into the election," said Benjamin of Rodman & Renshaw. "The entire stem cell space is likely to benefit with the additional funding, because you're likely to see a spillover effect."