Stem-cell therapy is an intervention strategy that introduces new adult stem cells into damaged tissue in order to treat disease or injury. Medical researchers believe that stem-cell treatments can change the face of human disease and alleviate suffering. The ability of stem cells to self-renew can generate tissues that can replace damaged areas. Breakthroughs in this field led to outperformance of a number of cell therapy companies.
Cell therapy stocks clearly outperformed the market in 2012. Thus, StemCells, Inc. (STEM) rose by 108%, NeoStem Inc. (NBS) by 19.6%, and Osiris Therapeutics (OSIR) by 73.7%. Osiris obtained the approval of its product Prochymal in New Zealand and Canada, with a cell therapy as the main component for children with graft-versus-host disease (GVHD). This is a major accomplishment because it sets the stage for other cell therapy approvals in the future. The stock has since bolstered to a market cap of $300 million based on increasing sales, over $2 million in revenue per quarter, lower R&D costs, and 40 million in assets.
Cell therapy stocks also made impressive gains in 2013: Athersys (ATHX), by 12.3%, and Advanced Cell Technology Inc. (ACTC.OB), by 33.3%. The latter company at the end of the third quarter made a $35 million stock purchase agreement with Lincoln Park Capital and in January 2013 reached a settlement with CAMOFI and CAMZHN Master LDC resolving a lawsuit in the Supreme Court of New York.
In December 2010, the best outperformer StemCells received approval from Swissmedic, the Swiss regulatory agency, for clinical trial at Phase I/II of its proprietary HuThus, CNS-SC (purified human neural stem cells) for the treatment of chronic spinal cord injuries. The trial was initiated at the University of Zurich in March 2011 and September 2012 data demonstrated beneficial clinical effect of neural stem cells. In addition, in July 2012 StemCells was awarded a $20 million grant from the California Institute for Regenerative Medicine. The company's goal is to file an Investigational New Drug (IND) Application in the next four years. Another application of HuCNS-SC cells for the treatment of dry age-related macular degeneration also reached Phase I/II clinical trial. StemCells pipeline includes Phase I of the HuCNS-SC clinical trial for the treatment of Pelizeaus-Merzbacher disease, a fatal brain disorder. Since early summer the StemCells stock rose 3 times to its current value of $1.77.
Shares of NeoStem rose following an upgrade by RedChip Research. At the beginning of January, it made the agreement with Hackensack University Medical Center - a Northeast leader in cell research. NeoStem has also discovered a therapeutic dose for its Phase II cell therapy product that treats acute myocardial infarction. In addition, the company made remarkable progress in the development of very small embryonic-like stem cells (VSEL) technology that creates cellular regeneration product line.
At the end of the third quarter, NeoStem had just $7.9 million in cash. However, in November the company divested its generic pharmacy that added $12.3 million in cash and eliminated $33 million in debt. Furthermore, NeoStem is the only one of cell therapy companies that produces sizable revenue, through its manufacturing segment. The company's revenues of $4.43M in third quarter showed growth of more than 100%; this growth should continue in 2013.
Diseases associated with protein misfolding are dealt with by the promising cell therapy company Amarantus BioSciences Inc. (AMBS.OB) centered around its patented therapeutic protein Mesencephalic Astrocyte-derived Neurotrophic Factor (MANF). This naturally-occurring protein corrects protein misfolding, one of the major causes of apoptosis (Programmed Cell Death). By manufacturing MANF and administering it to the body, Amarantus uses a regenerative medicine approach. Amarantus is the primary holder of intellectual property for MANF which demonstrated its superiority in treatment of Parkinson's disease. Any drug that is truly effective against Parkinson's disease will be a huge hit. Other applications of MANF include myocardial infarction, traumatic brain injury and rare orphan diseases.
The company also owns an inventory of 88 cell lines referred to as "PhenoGuard Cell Lines" that can be the source of additional therapeutic proteins in addition to MANF. Its stock jumped in November 2012 from $0.01 to $0.1 currently after announcement that Amarantus BioSciences Appoints Amgen Co-Founder Dr. Joseph Rubinfeld to Advisory Board. This announcement followed the release: Amarantus BioSciences Explores Orphan Drug Strategy Based on MANF Protein Folding. FDA Orphan Drug Act status would loosen regulatory hurdles to bring the drug to market. Getting orphan drug status can give a company several advantages and Amarantus would tremendously enhance its prospects if it obtains Orphan Drug Status on MANF.
But one of the most underappreciated companies is Athersys, Inc., a small cap biotech stock that has the potential for blockbuster returns. The company has a deep pipeline in multiple markets where each of them can generate billions. At the current price of $1.25, the company's market cap is $66M with $30M in cash. The company's burn rate is $4M per quarter, so the current cash position should be sufficient for two more years. Thus, Athersys pipeline is valued at $36M. Is Athersys undervalued?
First, Athersys has a $111M partnership with Pfizer (PFE) to use Athersys' multi-stem platform for treatment of ulcerative colitis (affecting 2.4 million people in the West) that has the potential to generate billions. Phase II data are due mid-2013.
Third, Athersys uses its multi-stem platform for the ongoing Phase II study of ischemic stroke with results expected within the next 12 months. This is another billion dollar market with 2M people suffering from stroke annually in the U.S., Europe and Japan.
Fourth, Athersys 5HT2c receptor - the key for assisting the brain in regulating appetite - is effective for the treatment of obesity and diabetes.
Fifth, Athersys was granted orphan drug status for Hematopoietic Stem Cell Transplant / GVHD in April 2012. Phase I was completed in early 2012 for patients suffering from leukemia. In the highest single dose group "no cases of severe GVHD were observed". There is a huge unmet clinical need for this platform and results were very favorable.
Sixth, Athersys got all rights on multi-stem platform for acute myocardial infarction, and FDA has already approved their Phase II study. This platform has the potential to treat other neurological disorders and injuries such as traumatic brain injuries, spinal cord injury and multiple sclerosis. Athersys also received orphan drug status for Hurler's Syndrome.
Athersys has a high risk, but it also carries with it a high reward. With only 50M shares in the float, even $5 stock price would only give Athersys a $250M market cap for a company pursuing at least 8 market opportunities with each of them worth billions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.