3 Contenders To Be The First Profitable Stem Cell Company

Includes: GERN, ISCO, OCAT
by: Ryan Pollack

Every day is a day closer to a disease being treated, or even cured, by a stem cell therapy. The medical field is in a transition with clinical trials that are ongoing using adult, embryonic, and other forms of stem cells derived and differentiated using various laboratory techniques. These three companies have the potential to be the first self-sustaining, profitable regenerative medical companies.

The first company is Advanced Cell Technology (ACTC.OB). In Advanced Cell’s pipeline is the hermagioblast program, which is the creation of blood cells using human embryonic stem cells derived from the company’s embryo friendly single-blastomere technique (The company extracts a single cell from an embryo and can create stem cell lines from that single cell, meanwhile the embryo itself is unharmed). ACTC maintains the rights for North America and their partner CHA Biotech, a Korean based company, has the rights for South Korea and Japan. An IND filing is expected in either the fourth quarter of this year or first quarter of 2012.

The myoblast program, heart cells using adult stem cells, is approved for phase two clinical trials in the U.S. but it is the third program that holds the key to near term promise of profitability. The program is the retinal pigment epithelium (RPE) program, which are retinal cells derived from human embryonic stem cells using the single-blastomere technique. ACTC started two trials using these cells during the summer for Dry AMD and Stargardt’s macular dystrophy. The reason that the trials for Dry AMD and Stargardt's macular dystrophy could be a near term revenue producer is due to the fact that the eye is an immune-privileged site of the body and doctors can see cells and disease progression of the eye in real-time and that there is no current treatment for either disease.

Currently one patient in each trial has been injected at UCLA, and getting more sites online. While ACTC is in a quiet period, we can assume safety is not a concern right now, it recently received the go-ahead to enroll more patients from the DSMB which you can read about here. An official update of the trials is scheduled by year end.

The second company is International Stem Cell Corporation (OTCQB:ISCO). ISCO uses a technique called parthenogenesis, which creates stem cells from unfertilized oocytes. What is interesting and intriguing about ISCO is the strategy it is using. Instead of going after a disease and clinical trials procedure first, ISCO instead is focused on cosmetics, namely a day and night skin cream combo where stem cells are an active ingredient to rejuvenate skin cells. FDA approval is not required for this product and is already on the market in a limited basis.

On the company’s last quarterly conference call it expected to sell a thousand bottles in a limited launch. Instead, the company sold seven thousand bottles. That is the good news. The bad news is that ISCO cannot sell the product again until sometime in the third quarter as it underestimated demand and the cells needed for the product take two to three months to grow. Now that ISCO knows more about the demand to expect for the product, there should hopefully be no more gaps in product production and could turn profitable within the next three to five quarters in my opinion. With a profitable cosmetic line the company then plans to fund therapeutic research and future clinical trials for liver diseases, Parkinson’s and eye diseases.

Last but not least is Geron (NASDAQ:GERN). Geron was the first company to receive FDA approval for an embryonic stem cell treatment which is for spinal injuries. The object of the trial is to rebuild myelin around the spine that was damaged from injury and therefore caused paralysis. With myelin rebuilt, the region that is lower from the injury site should be able to regain the ability to receive electrical impulses again thus reversing paralysis.

So far there are four patients receiving the minimum dose. There have been no side effects or safety concerns in any patient. The company hopes to expand this trial to cervical injuries as the FDA has only given the green light to treat thoracic injuries right now. Cervical injuries are more common than thoracic injuries so Geron hopes by getting the go ahead to treat cervical patients it can enroll more patients at a quicker pace. Geron also believes that the same cells used in this trial have the potential to also treat Alzheimer’s, Canavan Disease, Transverse Myelitis, and Multiple Sclerosis.

Geron is not just a stem cell company. It has a huge oncology program as well that is in phase 2. At a recent conference the company said it will present a robust data package of the entire program in 2012 and look to bring the entire program into phase 3 shortly after the presentation of the phase 2 data which you can listen to here.

In this oncology program, besides the main drug Imetelstat Sodium, which is a telomerase inhibitor, is GRN1005. GRN1005 is used to pass the BBB (blood brain barrier). The brain has natural defenses to keep out unwanted agents. Unfortunately medicine is an unwanted agent to the body. GRN1005 is in a combo phase 1 and 2 trial. So far encouraging results have been seen. There is a 20% response rate using GRN1005 compared to the 2-6% response rate seen from current drugs on the market targeting brain metastases. Since brain cancer treatment is a huge unmet need, the company hopes it can bring this drug as a fast track after phase 2.

Disclosure: I am long GERN, ACTC.OB, OTCQB:ISCO.