In the last three months, the S&P 500 has rallied more than 7% following progress in the housing market and the assurance of quantitative easing in a slow recovery. The market is trading near multi-year highs with strong performance across the board, and one of the best performing under-the-radar industries has been cell therapy. While the market trades higher due to indicators that suggest a safer economy, the cell therapy arena has been affected by strong clinical data and a renewal of support among global economies. In the past, cell therapy was viewed as a false hope, a fairy tale, or something that could never be supported as an approved treatment. But after years of research and discovery, along with the evolution of biotechnology, this is a space that is growing and expanding rapidly.
Last Wednesday, a plan from the Department of Tourism in the Philippines made its way throughout social media sites discussing "medical tourism." The proposed plan aims to have the medical sector put its best foot forward and highlight stem cell therapies as the next generation of treatment in many areas of specialization. This is yet another win for the industry, one that continues to grow in support and value. Over the years, we have seen as various countries turn their focus to stem cell therapies, by promoting their benefits and investing in their research. And as a result, with increased support and funding, stem cell therapy companies have increased in value to a large degree. To better explain, I suggest taking a look at a few of these companies that are leading in performance and are partially responsible for this new-found level of support and excitement.
Market Cap (millions)
In the chart above, you can identify the market leaders in the cell therapy arena. Please note the market capitalization of these companies. Each is a small cap stock and a reflection of the industry. It is a new industry, one with great promise, but still in its early stages. Therefore, stocks are cheap, valuations are attractive, and performance is appealing. This is a good indication of the current state of cell therapy: promising, cheap, and growing. However, it is also volatile, as investors and consumers slowly begin to accept the benefits and explore the possibilities of the space. With that being said, let's take a look at the leaders mentioned to discuss how each company is instrumental in the development of this fast-growing space.
Osiris Therapeutics is the largest company presented, and has grown the most in terms of valuation throughout 2012, adding more than $140 million to its market capitalization in this year alone. Osiris is the first and only company to have an approved product with a cell therapy as the main component, a major breakthrough. Since it has been awarded an approval in both Canada and in New Zealand in 2012, the company is well deserving of its growing valuation, and is a crucial company to the future of cell therapy. Osiris proves that various regulators are accepting of the concept and benefits of cell therapy, and this achievement paves a road for the companies that are seeking regulatory approval in the years that lie ahead. Earlier this year, in June, the company's valuation increased to more than $450 million following the second approval of its cell therapy, Prochymal, in New Zealand, but share price has since fallen and stabilized. The company now seeks additional indications for Prochymal; but regardless of whether or not Prochymal is awarded additional uses, the company remains the current face of cell therapy.
Pluristem Therapeutics is a company that has come to the forefront of cell therapy over the last year with a slew of key developments for its product line. The company's gains have all occurred during the last three months (81%), as they have for most of the companies in this space. The stock has been driven higher in anticipation of its Phase II trial for the treatment of the fast-growing disease, Peripheral Arterial Disease. The company has taken additional measures to ensure the success of its clinical studies by partnering with CPC Clinical Research for services related to enrolling and sustaining clinical sites; the company has also announced a new collaboration with Cato Research as its contract research organization in Germany. The company recently announced a public offering which pushed shares lower, but is now recovering with the support and the abundance of investors who are optimistic regarding this company's future and its PLX cells.
NeoStem has performed well in 2012, is a good representative of the space, and is probably the value play of the industry. The company is a perfect example of how timing is everything for a biotechnology company during a period of financing. Pluristem announced a public offering and lost 10% of its value last year while the market was trading lower. Meanwhile NeoStem lost half of its valuation following a period of financing in March of this year, and the company's shares have been in recovery mode since then. NeoStem is probably the most diversified play in the cell therapy space. The company has a Phase II product, AMR-001, which is continuing as planned after a Data Safety Monitoring Board (DSMB) noted no safety concerns for the treatment of acute myocardial infarction, a largely unmet medical need. The AMR-001 trial is closely watched among cell therapy followers due to the potential revenue of treating this large indication. Along with additional hope through the company's early stage VSEL program, it also has a manufacturing segment with 65,000 square feet of development and manufacturing space that serve its many clients. Its manufacturing space is a fast-growing segment that involves several big name clients and innovative products in which NeoStem is poised to benefit following any approvals. It's a complex business, but large and adds to the company's stability due to the diversity of its presence within the industry. The company recently divested its generic Chinese pharmacy. The sale provided the company with $12.3 million in cash and eliminated $35 million in short and long-term debt obligations, thus making NeoStem a healthier company along with being safe, diversified, and full of upside potential.
Neuralstem and StemCells are the final two companies to discuss as both have appreciated nicely. Neuralstem has traded higher by an incredible 150% during the last month once the company's NSI-566 showed that paralyzed rats regained some motor function after being treated with the company's stem cells. This created interest among investors who believed the company's stem cells could be a breakthrough in human trials, and for the industry as a whole. However, I am a bit more skeptical of the move until more data is presented, as this is an early-stage development (preclinical), but the data does serve to validate the sector's work additionally. It is, however, worth watching and could add even more excitement to the space if proven effective. On the other hand, StemCells' 160% YTD performance is the clear leader due to its preclinical data in patients with Alzheimer's. In a preclinical study, StemCells demonstrated that its human neural stem cells restored memory and enhanced synaptic function in two animal models relevant to Alzheimer's disease. However, much like Neuralstem, the data is still early stage and must be further explored; but if efficient in large human studies, it could indicate a huge win for the future of cell therapy and the company itself.
Each of the companies above has contributed to the excitement that surrounds cell therapy. In the past, there was little research into the possibilities of using stem cells derived from bone marrow, peripheral blood, or from the umbilical cord to treat and cure degenerative diseases. But now we have seen data and have various studies that suggest significant upside in the future of this space, and these companies are among the first to explore its many benefits. Therefore, with so much upside it makes sense that organizations from both the public and private sector would continue to invest in future growth. With more energy being spent on the development of therapies, and the various countries that are electing to invest in their success, this is a space that is not only promising, cheap, and growing, but also very attractive as an investment with large upside potential in the coming weeks, months, and years.