Stem Cells and Peptides in the "Land of Oz"
For anybody wondering about the above header, any reference to the timeless fantasy classic, "The Wizard of Oz", is entirely intentional. Young Dorothy would find life in the present day world as bizarre as it was in the fantasy world of Oz. Science and technology has progressed to such a level that things that would have been considered outlandish or downright impossible even a few decades earlier are fast becoming a reality. Let us consider the science of biotechnology with a focus on stem cell research. And while doing that, we will also look at an associated topic. Despite all the innovation and changes, some things always remain the same. How else would a single individual amass so much power and influence over his fellow humans? So much so that simply associating oneself with the image of that person (Dr. Oz here, of course) can swing the fortunes of a company or product in the market.
Stem Cell Research: Weathering the storm of controversy and taboo
Stem cell research has been a hotly contested political issue because of the implications involved in extracting human embryonic stem cells. A cursory look at the history of stem cell research and the official stance towards it shows a topsy-turvy ride that seems to go on like clockwork. Successive presidencies have enacted and repealed bans on federal funding for the field, depending on whether they are Republican or Democratic. Under the current Obama administration, the sun seems to be shining on the industry again, which had been starved of federal funding for quite some time now. Nevertheless, this historical uncertainty and controversy has so far kept all but the most daring of investors away from investing in stem cell research companies.
A paradigm shift around the corner?
However, there is hope at hand. The main stigma associated with stem cell research among conservative sections is the destruction of what they perceive as life (in the form of human embryos) for extracting embryonic stem cells (ESCs), which seem to have infinitesimal potential in medical science. But the latest research into the field has been directed at sidestepping this crucial impediment by working on adult stem cells (ASCs) and trying to artificially induce ESCs' special qualities in them. While ASCs lack the special potential of ESCs, they can be safely harvested from any adult human being. The research into plant stem cell research is also holding a lot of promise. Accord is undeniable that much of stem cell research holds a lot of promise for the future as more and more breakthroughs are made in the field.
The "now" of what has been hailed the "technology of the future"
As of now, stem cells are a field of cutting edge research, and we will not be seeing realistic treatments and cures for human in many fields like Parkinson's disease or HIV in the short term. But pioneering firms like Advanced Cell Technology (ACTC.OB) claim to be hard at work conducting advanced clinical trials of its cure for macular degeneration (a leading cause of blindness in the West). And the early results are somewhat promising, if not spectacular. In the human trials of its stem cell treatments for advanced macular degeneration and Stargardt's macular dystrophy, the company has already tasted success. Two patients undergoing treatment using its retinal pigment epithelium (RPE) cells have already shown unprecedented improvement in vision. But it is still early days, as the company plans to complete comprehensive clinical trials using several groups of 12 patients each to establish some definitive results. It should have those completed before the end of 2013. Another area that shows great promise is the use of active ingredients and stem cell extracts. These include those from the natural world as evidenced by advanced cosmeceutical research firms like SkinPro, whose CEO we spoke to when researching a recent stem cell article. Adding stem cells from natural sources known for longevity has the effect of stimulating stem cell production in our body. This works quite well in skin care and anti-aging treatments.
The magic-man cometh: The "Oz Effect"
You must have been wondering what America's favorite physician has to do with it all. Well, we all know that stem cells are a buzzword right now, denoting something highly advanced, even if it is controversial, and there are always a lot of companies just looking to hitch a ride on the latest buzzword for a quick buck. But then, there are also serious and dedicated companies doing their proper research and homework to bring a great product to consumers. By and large through his immensely popular TV show produced by Sony Entertainment (SNE), Dr. Mehmet Oz wields significant influence over his millions of rabidly loyal viewers. Products or active ingredients that have featured on his show have gone on to be overnight sensations. Some, like Arigireline, the peptide that he called a "Botox alternative," have generated sustained high sales over extended periods of time, even leading to a sale of the parent company to Warren Buffet's Lubrizol. Two recent supplements that have also generated a lot of hype are the weight reduction wonder drugs in the form of raspberry ketones and green coffee bean extracts. Both of these products are facing acute shortage on the market because of unprecedented demand. It has also triggered a mushrooming effect, with many brands popping up overnight to cash in on the demand. Having a product promoted by Dr. Oz is not only an extremely expensive proposition, but the holy grail of any savvy marketing department. When the Doctor talks, America listens.
The Doctor's prognosis on stem cells
During a recent episode of the Doctor Oz Show, Dr. Oz had a special segment devoted to the field, with guests that included Oprah Winfrey and Michael J. Fox. Dr. Oz has always had a lot of faith in stem cell research, if any of his past comments on the subject on TV are anything to go by. He first created waves on TV, even before he had his own show, while appearing as a guest on the Oprah Winfrey show in 2009. On that episode, he stated that in his opinion, the stem cell debate is dead and buried because of the latest and exciting research breakthrough in the field of induced pluripotent stem cells, which are basically adult stem cells that have been programmed by scientists to behave like the embryonic stem cells.
While Dr. Oz is a daytime TV personality, he is also a top surgeon and a leading figure in the American physicians community. His endorsement of the field of stem cell research surely has an impact on popular consciousness and public opinion. And he did not stop with the Oprah show comments. Most recently in a special episode devoted to breast cancer research, Dr. Oz was talking about the benefits of stem cell therapy for breast reconstruction. His endorsement of the field of stem cell research has had a great impact on public consciousness, especially since he highlighted scientific breakthroughs that had the potential to end the controversy surrounding embryonic stem cells. And he keeps bringing what many have considered to be a taboo or controversial subject into mainstream debate. The trend may be changing right before our eyes.
Why should investors care?
In the past, if an investor asked about stem cell companies, the usual advice they received was to keep their distance if at all possible. But as you have seen, things are changing fast. The more conservative sections may grumble about it as much as they like, but stem cells are the future of medical treatments. Now, the jury is still out whether we can do away with embryonic stem cells or not. But if influential people in the know like Dr. Oz can be trusted, a positive answer seems not too far off in the future. But with the positive political climate and availability of Federal funds, there is plenty of research going on at breakneck pace in the United States. Investors could surely start taking a second look at some previously written off for dead stem cell research companies like Advanced Cell Technology, Pluristem (PSTI), Osiris (OSIR), StemCells Inc (STEM) and even Geron (GERN). These micro-cap biotech companies are known as much for their business woes as their path-breaking advances in the laboratory. However, with the tide slowly but surely turning for the stem cell companies and the industry in general, investment in this sector represents an exciting medium- or long-term proposition that is priced basically like a call option.
Some words of caution
Always check out the finances of a company before investing, particularly with micro-cap biotech companies. If they are in the habit of burning up too much cash each quarter and looking for fresh capital inflows, you might want to reconsider your investment thesis. You do not want to get your shares progressively diluted as newer shareholders keep coming in. Also, never take your eyes off the FDA status of the drug or treatment the company is developing. A company might have the next wonder drug that will cure humanity's troubles with heart disease, but all the billions in potential profits will mean nothing if the drug fails to get approved due to safety reasons. So get an idea of the potential for success based on the progress so far in terms of clinical trials and all before putting your cash in. And last but not least, this is the oldest advice in the book: Don't put all your eggs in one basket. For this reason, I can't recommend any one name in particular, as they are all super high risk on their own merit. However, laying a small bet on this group as a whole and filing it away and not looking back for a few years can put an investor on the right side of a rapidly growing trend that is literally on the cusp of explosion. This investment has potentially a very significant upside with very little downside exposure from the current beaten-down levels. I still would urge caution and not bet more than you can afford to lose, as a total loss is always a very distinct possibility when dealing with a technology that has so far not been fully adopted by Main Street.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.