With Funding Ban Lifted, Stem Cell Index Soars

by: Mike Havrilla

The accompanying table includes statistics for the 40 companies in the ETF Innovators Global Stem Cell and Regenerative Medicine Index, which is down 14.2% at a value of 3,387 from a 2/22/09 inception date value of 3,928. Most of the stocks got a major boost today from the widely anticipated executive order from President Obama to eliminate the restrictions on federal funding of stem cell research enacted in 2001 under President George W. Bush.

The move allows federally funded researchers to use hundreds of new embryonic stem cell lines for what remains long-term but very promising research which has the potential to cure a wide variety of conditions, including diabetes, paralysis, Parkinson's disease, and many others.

On a year-to-date basis (YTD), the stem cell index is up 39% on an equal-weight basis, thanks to major gains in many of the smallest companies in the index with the companies listed in the table in descending order by their YTD stock price changes. The stem cell index performance compares favorably to losses of 17.6% for the Healthcare Sector SPDR (NYSEARCA:XLV), 16.9% for iShares Nasdaq Biotech (NASDAQ:IBB), 18.2% for SPDR S&P Biotech (NYSEARCA:XBI), 19.6% for PowerShares Biotech & Genome (NYSEARCA:PBE), and 24.5% for the S&P 500 SPDR (NYSEARCA:SPY).

Osiris Therapeutics (NASDAQ:OSIR) has taken over the top position in terms of market cap at $587, with former leader Integra LifeSciences (NASDAQ:IART) losing nearly half of its market value on a YTD basis. OSIR formed a major collaboration with Genzyme (GENZ) last October and will report pivotal Phase 3 results during 2Q09 for Prochymal as part of a rolling BLA submission, which will represent the first stem cell product submitted for regulatory approval.

Last Friday, Cytori Therapeutics (NASDAQ:CYTX) completed enrollment in the APOLLO trial to evaluate the safety and feasibility of adipose (fat) derived stem cells processed with its Celution System for the treatment of severe heart attacks. No safety issues were raised in the trial and the oversight committee recommended that a pivotal study be conducted to further evaluate efficacy. CYTX plans to report results on the primary six month follow up period for the APOLLO trial in late 2009.

CYTX also reported 4Q and FY08 results last Friday, which includes a near-term outlook for a cash burn rate of $1M per month and a $30M net loss for 2008, resulting in a year-end cash balance of $12.6M. The Company is currently engaged in discussions to raise additional capital to fund operations, which may include strategic partners such as GE Healthcare (NYSE:GE) or Olympus Corp. (OTCPK:OCPNY) based on the terms of previous financing agreements.

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For 2009, CYTX expects $10M in product revenue, including Celution System and StemSource cell banking sales, which will benefit from an expanded global distribution network in Europe and the Asia-Pacific region. CYTX also expects to complete enrollment of RESTORE II (breast reconstruction clinical trial utilizing Celution System output of patient-derived adipose/fat regenerative and stem cells) during 2Q09 and report preliminary RESTORE II results as early as 4Q09 on patients who have been followed for six months at the time of analysis.

The RESTORE II results will be used to expand reimbursement for breast reconstruction procedures in Europe, as CYTX also looks to expand the Celution System product claims to include cosmetic medicine applications for general and plastic surgery procedures. During 3Q09, CYTX plans to introduce cosmetic and reconstructive surgery products and finalize its regulatory strategy in the U.S. market.

Isolagen (ILE) submitted a BLA today for Isolagen Therapy, which is a novel cell-based therapy for the treatment of wrinkles. Isolagen Therapy would represent a new class of treatment in the facial aesthetic market as patients would receive their own cells to repair the skin if the FDA grants approval. Additionally, the company noted that it recently completed a Phase 2/3 trial for the treatment of acne scars with statistically significant efficacy results.