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When it comes to healthcare, one of the most dynamic and new arenas is the use of stem cells. This sector has yet to even get off the ground, but forecasts for the market are pretty impressive. One recent analysis forecasts the market to reach US$63.8 billion by 2015 from an estimated value of US$21.5 billion in 2010. This would be a 300% growth rate during a 5 year time period. The major application for the use of stem cells can be broken down into many of the medical disciplines, but the near term market is focused on neurology and ocular treatments. This focus is due to the fact that the FDA has only granted two companies the approval to begin stem cell related trials. These two companies are Geron (GERN) and Advanced Cell Technology (OTCQB:ACTC).

Geron (GERN)
Geron, the larger of the two companies, is developing biopharmaceuticals for the treatment of cancer and chronic degenerative diseases. The company has multiple Phase 2 trials dealing with cancer therapies, but the real show stopper is the Phase 1 clinical trial dealing with treatment of spinal cord injuries. The initial trial started over seven months ago and the test subject has not shown any adverse effects from the treatment. As the first study is purely based upon safety, it is still too early to tell if the subject had any improvement in sensation or muscle control. In May 2011 the study added a second subject as part of the trail. This subject will complete their rehabilitation at the Rehabilitation Institute of Chicago after receiving an injection of stem cells at Northwestern Memorial Hospital.
As GERN investors are aware, the length of this trial will be extensive as the company is trying to map uncharted territory in this kind of medical discipline. If GERN finally proves to be successful and the patients have some sensation and mobility restored, it will be a major win for the company. Until such time though, GERN will be posting net losses on their financial statements for the foreseeable future. Geron posted a loss of 20 cents per share for the first quarter of 2011, while generating revenue of only $1.5 million. The company's total operating expenses was $25.9 million for the same time period. Clearly GERN is living on its hoard of cash until such time that they produce a steady revenue stream. The company had current assets of $200 million which should buy them some time as their various trials move forward.

Advanced Cell Technology (OTCQB:ACTC)
Advanced Cell Technology has taken a different approach in their stem cell playbook. Unlike Geron, whose trials are dealing with the very complex aspect of spinal cord injuries, ACTC has elected to enact their trials dealing with the eye and macular degeneration. The company selected this because they feel it represents “the low hanging fruit” and would be easier to be successful as the eye tends to be imunosuppressed making testing much less complex. Currently there are no treatments available to reverse macular degeneration and as the population ages the growth rate of the condition continues to increase.
Although reversal of the condition is not possible, there are still some treatments to hold the condition in check. Two drugs (Lucentis and Avastin) sold by Genentech, a unit of Roche (OTCQX:RHHBY), and Novartis (NVS) are the most used in this area. Lucentis sales grew to $2.9 billion in 2010 and look to be on track to repeat similar numbers. Avastin is actual a cancer drug, but has also worked well in the macular degeneration arena. Smaller players in the space are working with a drug called Macugen. It was discovered by Gilead Sciences (GILD) and licensed to OSI Pharmaceuticals in 2000 for marketing in the United States. Outside the US, the drug is marketed by Pfizer (PFE). The macular degeneration market is said to be a market opportunity of $25-$30 billion for the US and Europe. If ACTC is successful in the trials then all of these drugs used for macular degeneration will be shelved as the usage of stem cells will render them obsolete.
The actual Phase I/II trials should begin at the end of June 2011 and investors should hear of the results by October. Unlike GERN’s trials, the results of the initial testing will be determined very quickly. The first two locations for the tests are Casey Eye Institute [CEI] at Oregon Health & Science University and Jules Stein Institute at the University of California. Much like GERN though, ACTC is living off their cash and have no real revenue to speak of. The Company ended the 2011 first quarter with cash and cash equivalents of $13.7 million, compared to $15.9 million as of December 31, 2010. The goal is for the company to successfully finish their trails and negotiate a partnership or joint venture to help move their funding along. Once funded, ACTC has many other projects in the pipeline the will help generate more revenue at a later date. Lastly, ACTC does hold one special attribute in their Blastomere Program. This process lets the company generate embryonic stem cells using a method that does not harm or destroy the embryos. This puts ACTC on the moral high ground and helps to address some of the religious/political concerns.

In conclusion, if both companies were to successfully complete their trials, the end result would be the introduction of a new phase of medicine. Needless to say, larger pharmaceutical companies would be more than eager to partner with or buyout these two entities.
Disclosure: I am long OTCQB:ACTC.
Source: The Dawn of Stem Cell Medicine With Geron and Advanced Cell Technology