Advances in modern medicine have been significant as scientists fight to prevent and cure the hosts of injuries and diseases plaguing mankind. Universities, government, pharmaceuticals and biotechs lead the way with new and improved mechanisms of countering these problems. Billions of dollars and vast amounts of time have been spent methodically and haphazardly as technology develops often through years of trial and error. Investors willing to tolerate the level of risk in the pharmaceutical field can reap huge rewards with phenomenal upside via publicly traded companies whether in the larger market cap and more stable Big Pharma or the lower market cap and more volatile biotechs. Medical device, chemotherapy, weight-loss, cholesterol lowering, immunotherapy and other technologies offer huge ROI as there are many indications possible and/or huge marketability for a smaller number of indications. Stem cell therapy companies are now beginning to emerge with novel mechanisms to fight any given number of indications. The risk/reward is great for these with failure being costly and success leading to FDA approvals, huge marketability with little competition from within the stem cell sector, likely acquisitions and profitable licensing deals all possible.
The stem cell biotech field is growing more crowded but is a risky venture as the technology is very time and money intensive and drains profits for those actually generating revenue and requires much investor contribution via stock offerings or private placements for those not generating their own revenue. A review of those biotechs leading the way shows varying levels of success, different approaches of creating and applying the stem cell therapies and varied levels of partnership and investor contributions. Following is a review of both known and under the radar stem cell biotechs with good to great upside potential which investors can allocate funds to in order to more fully diversify their biotech portfolio. This is intended for investors contemplating increasing their exposure to one of the most exciting areas of the biotech field today.
Geron Corporation (GERN), with a market capitalization of about $204 million, is a modern day pioneer in the stem cell field with a ground-breaking decision in January of 2009 from the FDA allowing the first trial using the highly-controversial embryonic stem (ES) cells. This approval was for the company's flagship product named GRNOPC1 in which oligodendrocytes derived from human ES cells were transplanted into spinal cord injured subjects. The trial start was initially delayed, however, as the FDA raised concerns over microscopic cysts found in rat models that had been treated with the cells. The hold was ultimately lifted and the trial was initiated in October of 2010. In October of 2011 the company presented data from the trial indicating a favorable safety profile of the therapy with no evidence of tumors or abnormal tissue growth present. At four months after implantation, GRNOPC1 had induced extensive and thick myelin around the formerly chemically denuded axons. Human cells were detected at the lesion site, giving evidence for survival of transplanted GRNOPC1. However, with nothing apparently earth shattering in the results and the Geron seeing more of a future in its oncology program, the company announced in November of 2011 that it was discontinuing its stem cell program and was looking for "partners for these novel assets". Potential catalysts for the security now are updates on their oncology clinicals and a possible sell or licensing of the stem cell program and patents, although offers would likely not be substantial without more convincing clinical data. Additionally, moral and ethical issues may steer many companies away from the ES approach especially as alternatives to the technology are now being developed to allow normal adult (stromal) stem cells to become more pluripotent (capable to differentiating into several different types of tissues, as ES cells are able to do) through a process creating induced pluripotent stem cells (iPSCs). This pioneering biotech, although a good possibility due to its oncology program, can no longer be construed as a legitimate stem cell biotech investment.
The $168 million market cap Advanced Cell Technology (ACTC.OB) is another pioneer in the stem cell field being the second company allowed by the FDA, this time in November 2010, to perform a clinical using ES cell therapy. It was a Phase I/II trial using retinal cells derived from human ES cells to treat patients with Stargardt's Macular Dystrophy, a common form of juvenile macular degeneration. In January 2011, the company had an additional regulatory success with another trial allowed, this time using ES cell therapy to treat age-related macular degeneration. Following up to these two successes was a European approval to use their ES cell therapy also for Stargardt's Macular Dystrophy, the first human embryonic stem cell therapy allowed in Europe. A true stem cell company, ACT appears to be fully focused on stem cell therapy with virtually all of that focus being on ES cell therapy. Although probably not currently used in their pipeline, the company did announce them securing an exciting patent in February 2011 in which they claim to be able to create ES cells without destruction of the embryos. Called a single-blastomere approach, the one-cell biopsy approach is similar to the pre-implantation genetic diagnosis, which is used in the in vitro fertilization process and does not interfere with the embryo's development or require its destruction. The stem cells created from the single-blastomere approach are claimed to be healthy, normal and differentiate into all the cell types of the human body just as the conventionally extracted ES cells. ACT's "embryo-safe" technique, as they tout it, has been published in journals such as Nature and Cell Stem Cell. With this technology at their disposal for their own use and for licensing out to other similar companies and Big Pharma, ACT has become a legitimate player in the field even though primarily focused on ES cell therapy. From an investment perspective, a March 14th announcement by the company notifying shareholders of an April 26 vote for a reverse split of the company's stock should be considered. The vote will be for a 1:20 to 1:80 reverse split, typically a negative event for current shareholders. They also announced an application to the NASDAQ board for an uplisting from their current OTC board which would greatly increase the stock's liquidity as well as make it available to funds and larger investors not willing to work with bulletin board listed stocks. Interest in ACT should only increase in the coming months as trial data is reported and their technology is potentially legitimized for their conventional ES cell therapy as well as news on the newly obtained embryo-safe technology.
Neostem Inc. (NBS), with an undervalued $37 million market cap, had a very active 2011 and looks to be following up with a catalyst-filled 2012. The company started the year off by closing a previously announced merger with Progenitor Cell Therapy on January 20th. Progenitor's acquisition would prove to be a good complement to Neostem's stem cell work and provides the company with direct access to cell therapy manufacturing facilities and cell storage facilities. Not only would this facilitate quicker and cheaper stem cell therapy manufacturing for the company's growing pipeline of stem cell therapy drugs, but it is also proving to be a revenue generator for the company by serving as a third party cell manufacturing facility for several pharmaceutical companies. Recent press releases include a manufacturing contract for a Phase III stem cell therapy being developed by Baxter International (BAX), a manufacturing contract for Islet Sciences' microencapsulated insulin-producing pancreatic islet cells, and an October 2011 announcement by ImmunoCellular Therapeutics (IMUC.OB) that they will use Progenitor as a second manufacturing facility to produce ICT-107, an immunotherapy agent showing early promise to treat glioblastoma multiforme.
On July 14th of 2011, Neostem announced that it had signed a merger agreement to acquire Amorcyte Inc., a cell therapy company focused on treating cardiovascular disease. A month later, they announced an update on Amorcyte's lead drug, AMR-001, for the treatment of acute myocardial infarction (heart attack). AMR-001 is an autologous stem cell treatment and is derived from the patient's own bone marrow, preventing rejection of the cells by the patient's own immunity system. In the update, the company announced that the Phase I clinical supported the continuation of the regulatory process to a Phase II trial which recently initiated enrollment on January 25th, 2012. Progenitor Cell Therapy will support the manufacturing, product supply, and logistics for the trial giving more emphasis to its incorporation into the company. Amorcyte expects to complete enrollment of its 160 patient set for the trial this year with interim data expected with interim data expected six months after the last patient is enrolled. The actual closing of the merger was announced on October 17 and strengthened the company's pipeline to include a therapy intended to target an indication affecting more than 1 million people in the United States annually.
Neostem does have a third subsidiary, Suzhou Erye Pharmaceutical, which it is attempting to sell. A January 3 letter to shareholders mentioned the subsidiary but did not indicate any success with the sell. The last real news on the division, of which Neostem owns 51%, came in June of 2011 with the announcement that Suzhou was "approved by the Chinese SFDA to open its sixth major production line which is responsible for the production of over 20 finished pharmaceutical products, 80% of which are on the National Insurance Drug List. The combined production lines now certified by the SFDA are six of eight planned and were responsible for approximately 99% of Erye's 2010 revenues. In 2010, Erye reported full year sales of close to $70 million, generating approximately $10 million in earnings. Erye reported sales of over $18 million for Q1-2011." The announcement gives an indication of the subsidiary's value and hints at the amount of money that the company could obtain from its divestiture. Another catalyst for the upcoming year, this money could go a long way in securing the company's other two divisions' future and funding.
Although still in pre-clinicals, one of Neostem's most exciting therapies could be coming from its VSEL technology it is developing with the University of Louisville Research Foundation. VSEL, or Very Small Embryonic-Like stem cells, is based on compelling evidence that bone marrow contains a mixture of stem cells that have properties similar to those of the very pluripotent embryonic stem cells. Neostem hopes to use the VSEL technology to generate the target tissue of choice from the VSEL-technology generated cells with none of the ethical issues associate with ES cells while at the same time producing an autologous therapy safe from rejection by the patient's immunity system. Neostem has partnerships and support from a host of entities in its VSEL development including a $1.7 million grant from the U.S. Department of Defense for osteoporosis treatment, $700K from the U.S. Army Medical Research and Materiel Command for traumatic wound healing, a $100K grant from NIH for bone defect repair and even has an exclusive partnership with The Vatican for an adult stem cell research and awareness initiative.
$89 million market cap Aastrom Biosciences (ASTM) is arguably the most well known of the stem cell biotechs. With two indications in their pipeline and good success in both of their lead products, Aastrom has secured itself as a frontrunner in the stem cell biotech field. Both of their lead drugs are autologous (cells are extracted from the patient being treated, processed and then re-injected at the areas of need) meaning a good safety profile with little chance of rejection by the patient and no controversial ES cell utilization whether of a destructive nature for the embryos or not. On November of 2011, Aastrom announced impressive 12-month results in their Phase 2 trial of ixmyelocel-T for patients with Critical Limb Ischemia, a severe form of peripheral arterial disease with no revascularization options. The study met the primary clinical endpoint of no observed safety differences between the treated and control groups. Patients in the treatment arm showed a 62% reduction in risk relative to placebo in the primary efficacy endpoint of time to first occurrence of treatment failure (amputation of the treated leg), all-cause mortality, doubling of wound surface area or de novo gangrene. The trial's derived p-value was an impressive 0.0032 leading to a perceived strong positive correlation of the therapy as a treatment possibility. Final results from the trial were announced on April 5th of this year and are available on the company's website and were equally impressive as seen by the company's stock price action since that date. A Phase III trial, termed REVIVE, was announced for ixmyelocel-T February 29th making it Aastrom's lead product.
Ixmyelocel-T was also evaluated via a Phase II study with 12 month results announced in September of 2011for the treatment of two forms of dilated cardiomyopathy, IDC and ICM, a progressive disease of heart muscle and third most common cause of heart failure. Results indicated that the therapy was well tolerated and efficacy consistent with improved function of impaired myocardium. Efficacy determinations were made by functional and measurable end points including major adverse cardiovascular events, New York Heart Association (NYHA) functional classification, 6-minute walk distance, and septal wall thickening. A Phase III trial could be in the works, however no mention of the therapy for this indication was made in the March 12th company update.
The stem cell therapy field of biotechs is growing as the technology is becoming more perfected and its implications realized. As the above biotechs, with the exception of Geron, continue to grow and develop their own pipelines and secure their patents protecting their intellectual property, stem cell trial data will begin to gain more attention as investors and Big Pharma begin to see the possibilities. The future will likely see more acquisitions and partnerships as the unmet areas of need will be filled and the regulatory process for each of these therapies progresses. Those biotechs with the good fortune of finding a partner or suitor will benefit from the shared expenses and shared resources. However, Aastrom and Neostem are both diversifying and growing not only their pipelines but also their capabilities as they have ample manufacturing capabilities to support their own therapy production to aid them not only in their own clinicals but potentially in manufacturing their own product should they obtain marketing approval in the future. Especially with Neostem, these production capabilities are leading to manufacturing contracts with other companies giving them the added benefit of revenue generation while at the same time advancing through the drug development process. 2012 and beyond will prove to be exciting times for these companies, stem cell therapy advancement and shareholders of the correctly-chosen companies.
Disclosure: I am long NBS.