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(Editor's Note: This article covers a stock trading at less than $1 per share. Please be aware of the risks associated with these stocks.)

Executive summary:

  • A recent paper published in the scientific journal Nature calls into question the value of ACTC's iPSC patents.
  • The process for inducing pluripotency is most likely applicable to human stem cells.
  • Although this does not affect the outcome of Advanced Cell Technology's ongoing trials, it will affect the cost of commercialization and thus certainly impacts the company's future plans and value.

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If you follow stem cell science at all, then you're mostly likely already aware of a paper published in the prestigious scientific journal Nature. The paper describes a surprisingly simple means of inducing pluripotency in cells taken from adult mice, thus turning them into stem cells. The results are so shocking, in fact, that the lab which did the research was originally ridiculed for publishing them. This finding has direct bearing on the value of Advanced Cell Technology's (ACTC) intellectual property and the company's future projects.

Advanced Cell Technology has been building a patent portfolio around induced pluripotent stem cells (iPSCs) for almost a decade and had derived precious income by licensing some of its portfolio. The new finding could virtually eradicate any future value of ACT's patents in this area. Furthermore, the company had announced very interesting plans to use their iPSC technology to make human blood platelets. While such a plan would still be possible, the new findings indicate that ACT's technology would not be the most efficient means to this end. I confirmed this with a PhD in Stem Cell Biology who has done extensive research in the field. My contact further commented:

"I think the result will be replicated in human cells. In fact, I can think of at least 3 groups who have already done this, and been thrown out of scientific meetings for looking crazy."

It's important to note that iPSCs are not relevant to the medical success of Advanced Cell Technology's ongoing trials for Retinal Degeneration. Those use retinal pigment epithelium cells derived from embryonic stem cells, which are still the "gold standard" rather than induced ones. The original purpose of the Phase 1 trail was simply to test the safety of using these cells, but early success reports and the fact that there currently are no available treatments have investors hoping for accelerated regulatory approval, such as "breakthrough therapy" designation.

Regardless of whether that happens or not, ACT is in no financial position to bring any treatment to market on its own, let alone a stem cell therapy. A full history of the financial problems associated with ACTC would merit an article unto itself. To summarize briefly, Advanced Cell Technology estimates the total addressable market for Retinal Degeneration to be $25-$30 billion. The company currently has a whopping 2.6 billion shares outstanding and ALL of them are shown as floating. It survives by issuing more shares to Lincoln Park Capital as needed, thereby diluting current shareholders. Profitable commercialization of stem cell treatment of any kind, including the ACT's current trial, is likely to be a quagmire of patent litigation and cross-licensing, which brings us back to the value of the patent portfolio.

It's very clear that ACT will need to collaborate with a deep-pocketed pharmaceutical company in order to bring any treatment to market. The terms of such a collaboration will depend mainly on compelling results from the ongoing clinical trials, but also on the cost of commercializing the treatment. The degradation of Advanced Cell Technology's ability to cross license its patent portfolio is a small, but undeniably negative development that affects both the company's long-term plans and its immediate prospects.

Source: Advanced Cell Technology's Intellectual Property Takes A Hit