If you're seeking an investment with potentially large returns in an industry that is significantly undervalued, then you might want to take a moment and explore the highly speculative, yet promising, cell therapy space. The industry is large, innovating, complex and evolving. There are advanced companies of all sizes that focus on new therapies to treat large unmet medical needs, and have late stage candidates and attractive valuations. It is an interesting space with constant debate over what is ethical and non-ethical, what is science and what is quackery, and finally, what is a therapy and what is a procedure. If you can decipher the information and answer these questions, then you might find opportunity in a space with the potential for unprecedented gains.
The cell therapy arena has been a controversial space. One reason is because of the overwhelming number of physicians, clinics, and companies that are taking advantage of patients with serious conditions, and providing them with false hope of curing an often untreatable disease. These facilities charge patients thousands of dollars for "stem cell therapies" that have recently been identified as being neither a drug nor involved with any actual stem cells.
A purported cell therapy to treat autism has received a lot of attention from some of the pioneers in the space. This is in regards to a Chinese trial performed on autistic children by Sutter Neuroscience Institute-- a study which prominent groups and analysts believe is unethical due to a lack of plausibility and preclinical evidence. Some have even questioned whether this cell therapy for autism is actually a cell therapy at all, leaving several questions regarding the component of the therapy. At this point, there is no cell therapy to allow the brain to regenerate or repair the impaired parts and make it "normal" (to read the story click here). This is becoming a significant problem within the space, as clinics promising "cutting edge" treatments for a long list of fatal and currently-incurable diseases such as ALS, spinal cord injury, seizures, strokes, autism, Parkinson's disease, etc. all claim to have approved cell therapies that will cure these diseases, but in reality do not.
The problem is that these therapies are not approved and have little in clinical evidence to support the claims of diseases being cured. In an article on sciencebasedmedicine.org, the writer explains that these clinics seem to be deliberately targeting affluent Westerners with hope by providing testimonials rather than published research; meanwhile they charge exorbitant fees for treatment procedures. According to a physician who has researched into this problem, patients or parents and family of patients, sometime attest to seeing progress, due to wishful thinking and their desperate search for a cure. This despite there being no clinical evidence to suggest a cure nor does a cell therapy based treatment for neurological disorders exist. It doesn't mean that neurological disorders couldn't be treated in the future with a cell therapy, but at this time there is nothing in development with clinical proof of being effective that could be marketed as "FDA approved" or as being "effective".
The sad fact with fake cell therapy is that it's not only clinics, but also companies, that are selling this false hope to investors. The easy way to assess whether or not a company falls under this category is to look at the disease which it is attempting to treat, as cell therapies have not reached the point to where they can cure certain (incurable) diseases of the brain, and may not for many years to come. However, cell therapies have shown incredible results and are more than effective at treating musculoskeletal and cardiovascular degenerative diseases, which is far from neurological disorders. There are certain cell therapies with clinical data, journals, and other research to suggest that it in theory they could be effective at treating, or curing, a large number of degenerative diseases with unmet medical needs. If we look at the current development of cell therapy, I believe there are four companies that stand apart from the rest. These four companies have recently increased in value by drastic margins and are effectively treating diseases using the stem cell therapy approach.
Osiris Therapeutics (NASDAQ:OSIR) is a $310 million company and is the first to have a product with a cell therapy (at least as the main component) approved in both Canada and in New Zealand for children with graft-vs-host disease. Prochymal, the therapy approved, will most likely not be a commercial success seeing as GvHD is a rare, but very deadly, disease with mortality rates around 85%. Prochymal had good results in its clinical studies and is preparing to seek approval in the U.S. The treatment is also being tested on a number of diseases (as most effective cell therapies have been tied to many injuries and diseases), including Crohn's disease, seeing as how the therapy reduces inflammation and promotes crypt regeneration in the damaged intestine. Yet, regardless if Prochymal is approved for GvHD in the U.S., or if it's ever approved for other indications, it's already taken a huge step in the right direction towards gaining the acceptance and trust of the medical community. This earned validity defines the separation of what's effective and what's not effective in the space.
Pluristem Therapeutics (NASDAQ:PSTI) has traded higher by 85% during the last three months and is now valued at $200 million. Pluristem may actually beat OSIR in the race to become the first U.S. approved cell therapy with its bone marrow therapy, in which PSTI recently applied for approval. The company is regenerative medicine at its best, using PLX cells for bone marrow failure, which is yet another large unmet medical need with large revenue potential. The possible approval will be highly significant for the company as it is also seeking the FDA's Orphan Drug designation for the treatment. This designation would provide multiple benefits, including an expedited regulatory process, possible grant money, tax credits, and seven years of market exclusivity (no real, direct competition).
NeoStem (NBS), a $110 million company that has increased in value by 70% during the last three months, and Baxter (NYSE:BAX), an all-purpose diversified biotechnology company, are making the most progress with cardiovascular regenerative therapies, achieving endpoints never before reached. Baxter's cell therapy is a Phase 3 candidate that has already shown the ability to increase exercise capacity and reduce angina episodes due to chronic myocardial ischemia-- a cell therapy to strengthen the heart. NeoStem's AMR-001 treats patients on a different spectrum, following a heart attack; thus, the therapy does not strengthen the heart, but rather rebuild the damaged heart. Both candidates have an excellent chance of gaining an approval, as there are countless scientific journals, trials, and research that proves the ability for cell therapies to be efficient in degenerative cardiovascular disorders. In regard to NBS and BAX, both are treating diseases with massive sales potential and large unmet medical needs that could open the door for cell therapy as a common form of treatment in the U.S.
Cell therapy is an industry that is currently a black and white space, with very few shades of grey. There are those who are legitimately following the guidelines of the FDA and are making progress in curing serious diseases. There are also those selling false hope of a cure for diseases that lack any sufficient evidence of efficacy, and sometimes even lack a cell therapy as a component. The problem is determining which companies fall into the "good" category. As an investor, a good place to start is by looking for clinical evidence of a candidate's efficiency, and also to identify what condition it's treating. With cell therapy still being in its infancy, there are only certain trials being monitored in cardiovascular and musculoskeletal degenerative disorders that are deemed safe and effective for patients; and these are the companies that may be worth your due diligence and investment.
There is no doubt that the healthcare industry in the U.S. has evolved with great new therapies over the last decade, and many more in clinical trials. However, there are still many conditions that lack efficient treatments. I believe we will see FDA approvals for stem cell therapies in this space; and most likely, it will be from the four companies above. Therefore, these companies are possibly the best investments in the space. However, the problem of unethical "stem cell" procedures still exists and has created a lot of negative energy surrounding the space.
The recent crackdown on ineffective therapies, that may or may not even be cell therapies, is encouraging. In time, this will force clinics and companies with questionable cell therapy procedures to adhere to FDA regulations in order to practice in the U.S. It's a big step in the right direction, but still an area that must be monitored. Stem cell therapy is promising, but the judicial system, the healthcare sector, investors, and patients should all be aware that there are those with bad intentions who are profiting from the ill-placed hopes of others. Fortunately, there are legitimate cell therapies that, in time, will change perception and earn FDA approvals. As an investor, if you're interested in the space, you want to make sure you're on the right side of the trade. As the FDA and other regulators crackdown on inappropriate practices, there are many companies that could be closing their doors-- and others that are poised to benefit in an industry that is changing and growing rapidly.
Disclosure: I am long NBS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.