A Fall for Stem Cells

Aug. 27, 2010— -- This fall could be an historic season for stem cells. Public debate on government funding of embryonic stem cell research and significant advances in adult stem cell technology will cause the press to shine a light on the technology.

Stem cells are the most promising pharmaceutical or biotechnology prospect since the discovery of antibiotics. Several companies that are developing stem cell-based medical treatments are poised for major breakthroughs in treatment of life-threatening events, such as heart attacks, strokes and spinal cord injury. Other treatments for a wide range of medical problems are in earlier stages of development.

The summer is hardly over and the story has already begun to unfold. On Monday, a Washington, DC district judge, issued a temporary injunction halting all federal funding for basic research into embryonic stem cell technology. The injunction states there is a legitimate basis for arguing the matter in court. A full hearing will soon decide the final outcome.

Basic research is the first domino in the line that leads to medical breakthroughs, and until that first domino falls they all stand. If upheld, the decision to withhold federal funds could choke off virtually all embryonic stem cell research in the U.S. because basic research advances the science that leads to development that produces medical breakthroughs.

Judge Lamberth's decision was more about public consensus than science. It was another attempt to decide the appropriate and acceptable direction for research and development in the embryonic stem cell arena.

This is not a unique kind of controversy. Science is always implemented and advanced based on public consensus. Think of any scientifically-based program that has been implemented in recent times – nuclear power, pollution control, seat belts, health warnings on tobacco products – these significant changes only were implemented when the majority of our population agreed they were needed.

The judge's ruling reflects the lack of awareness in the U.S. around research and development of embryonic stem cells. There are two basic classes of stem cells, based on where they originate. Adult stem cells come from various parts of a fully-developed human. Embryonic stem cells are harvested from the earliest stage of fetal development.

Lack of Understanding Impacts Stem Cell Investments

Public consensus has been reached on advancing adult stem cell technology. Most people believe it is ethical and permissible. Public consensus has not yet reached about whether it is ethical to advance embryonic stem cell technology. The sad fact is that many people who have a position on the matter, and even many sophisticated investors, have little understanding of the difference between the two.

Adult stem cell companies have made great progress toward developing significant medical therapies. They should be unaffected by this controversy. Access to federal funding, financing, clinical programs and investment should continue without interruption. Whether they come from bone marrow, adipose tissue (fat) or umbilical cords, these cells have been a rich resource of new medical promise.

The financial markets have yet to recognize the full potential of these companies. Venture capital is hard to come by. Initial public offerings and secondary offerings by companies with solid technology have floundered.

Following Judge Lamberth's ruling, we saw a drop in stock prices for all stem cell companies, and then a slight recovery. We believe that investors pulled out of stem cells in general because they couldn't differentiate between adult and embryonic cell companies.

For those investors who have knowledge of the stem cell arena, we believe that now is the time to invest because prices are attractive and visibility of advances can be expected as soon as this autumn. Such advances, along with articles in peer-reviewed publications, clinical trial reports and third-party verifications, will pave the way for a more appropriate reckoning of stem cell stocks in the financial markets.

At some point, possibly in the near future, a breakthrough stem cell medical treatment for a severe condition will be reported. When that happens, those who invested wisely today will be the cover story for financial magazines tomorrow.

Stephen Brozak is president of WBB Securities, an independent broker-dealer and investment bank specializing in biotechnology, medical devices and pharmaceutical research. Dr. Lawrence Jindra is director of research for WBB Securities.