With stem-cell research on the congressional agenda, companies specializing in the field have recaptured the attention of investors. If you believe the hype on the science, you could take a long shot on four companies whose business revolves almost entirely around stem cells.
Some background: Stem cells are unspecialized and could one day be used to repair damaged parts of the body. Stem cells obtained from embryonic tissue can divide and renew themselves for long periods and have the far-off potential to replace any type of cell, such as the insulin-producing cells of the pancreas. Another form of stem cells, those derived from umbilical cords, is easier to use and have far fewer ethical and technical issues but show less promise.
Late last month, the House of Representatives passed a bill that would loosen current federal funding restrictions on embryonic stem-cell research, mandated by President George W. Bush in 2001. The Senate is expected to vote on a companion bill by the end of July.
The legislation has an uphill climb. If it makes it through the Senate, the President has threatened a veto, one that the House vote tally suggests couldn’t be overcome. Of course, that wouldn’t put a stop to stem-cell research. U.S. states and foreign countries are moving ahead with their own programs, looking to cash in on what might be the next big thing.
The private sector is doing the same. While a number of biotech and drug companies conduct some stem-cell research, just four companies trading on a leading exchange are considered pure plays. Just remember that trading in such stocks is highly volatile, with shares moving wildly on regulatory developments and political news.
One of the less controversial companies: ViaCell (nasdaq: VIAC – news – people ), of Cambridge, Mass. For one, the company has the backing of big-name biotechs Amgen (nasdaq: AMGN – news – people ) and Genzyme (nasdaq: GENZ – news – people ). It also has a bread-and-butter business, allowing parents to store blood from their children’s umbilical cords for later use. This high-margin service is helping to pay the bills while ViaCell develops stem-cell-derived treatments.
Of those treatments, ViaCell has a promising one in CB001. The stem-cell product, taken from umbilical cords, has potential for use in bone-marrow transplants. Credit Suisse First Boston analyst Mark Augustine noted in a March report that sales from CB001 blood cell transplant solution could eventually dwarf ViaCell’s blood bank business.
Another notable is Geron (nasdaq: GERN – news – people ), one of the pioneers in embryonic stem-cell research. The company has an early-stage cancer vaccine program and a spinal-cord-injury program that’s in Phase I clinical trials. Geron has close ties with the University of Wisconsin, whose scientists isolated the first human embryonic stem cells in 1998.
Last January, biotech analyst Mark Monane of Needham & Co. praised Geron’s management team, financial resources and science. But with a “hold” rating on the stock, he’s no big bull. “From a product point of view, Geron’s programs are in early stage and thus have a development course ahead that could be lengthy,” cautions Monane.
Stock Focus Peter Kang