Chicago Tribune - September 19, 2004
Andrew Leckey, Tribune Media Services columnist

But here's a return that's already in and counted: The topic is emerging as a powerful striking point that pits scientific potential against beliefs about the beginnings of life.

On the investment side, the fledgling stem cell companies, their executives and potential investors have a lot at stake in this heated public debate.

They've seen once-obscure biotechnology firms use their research to reduce AIDS from a certain death sentence to a chronic disease. In the process, companies such as Gilead Sciences Inc. (GILD), whose half-dozen products include Viread and Emtriva for HIV treatment, have richly rewarded investors willing to take a chance.

Fall is traditionally a prime time to put money in biotech because there are industry conferences where companies present their therapeutic portfolios. This increases investor interest and can boost prices.

Nonetheless, stem cell research has a long way to go to approach the payback of some other biotech categories. Its prospects in 2004 remain blurred on every level--politics, ethics, science and profits--and certain to produce more long-term losers than winners. That's what speculation with a small portion of money is all about.

The most highly publicized publicly traded company doing research in embryonic stem cell technology, California-based Geron Corp. (GERN), focuses on developing anti-cancer therapy.

This has been the ride for investors: Geron shares two years ago jumped to $15 from $2 and later slid back to $6. At that point, the Rodman & Renshaw investment house recommended the stock and it exceeded the firm's expectations of $10 a share. It now rates Geron, back to around $6, as a market performer.

"If John Kerry is elected president, it will be good for stem cell stocks because people believe these companies will then have more access to federal funding and stock prices will appreciate, at least short-term," said Reni Benjamin, senior biotech analyst with Rodman & Renshaw (www.rodmanandrenshaw.com) in New York.

Even then it won't be a sure thing. He added: "There's tons of risk."

There are many types of stem cells, but those from embryos are preferred by scientists because they can develop into any type of tissue in the adult body, and a single batch can divide indefinitely in the laboratory. There is hope such stem cells can be programmed to reverse or cure diseases such as Alzheimer's or Parkinson's and treat spinal cord and brain diseases.

However, in order to create them, human embryos must be destroyed. Opponents of this practice say it is immoral. President Bush's policy announced in 2001, which Kerry wants to see lifted, limits federally funded embryonic stem cell research to a few existing cell lines.

Some scientists contend these restrictions may be delaying treatments or cures. Defenders of the policy say researchers can seek out private funding.

"We used to recommend the stock of StemCells Inc. (STEM), which uses adult stem cells derived from organs, but while it has some patents, it still really hasn't done anything yet," said John McCamant, editor of the Medical Technology Stock Letter (www.bioinvest.com) in Berkeley, Calif. "There's no question that stem cell research has been significantly stifled here in the U.S."

Other publicly traded stem cell companies that carry investment risk include Aastrom Biosciences (ASTM), which uses bone marrow and umbilical cord cells; BioTransplant (BTRN), which focuses on embryonic and adult stem cells; and Cryo-Cell International (CCEL), which uses umbilical cord cells. Additional research in this new industry is being done by private companies.

"The technology in early stage biotechnology such as stem cell is complex, and competition is fierce among professional investors," cautioned Eric Schmidt, biotechnology analyst with SG Cowen Securities in New York. "I would dissuade any common investor from buying anything but a basket or index of early stage biotech companies."

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Biotech strategy: Some old, new

To balance out a biotech portfolio that includes young companies with no actual products, experts in the field recommend you also include more established biotechs.

For example, Genentech Inc. (DNA), an established biotech that manufactures and sells 13 products, is recommended by all three of those quoted in this report. Amgen Inc. (AMGN), a global biotech specializing in human therapeutics based on advances in cellular and molecular biology, is recommended by Benjamin and Schmidt.

Other Schmidt biotech recommendations are Cell Genesys Inc. (CEGE), developing cell-based cancer vaccines and virus therapies to treat different forms of cancer, and Onyx Pharmaceuticals Inc. (ONXX), whose therapies include small-molecule, orally available drugs that are changing the way cancer is treated.

Favorites of McCamant include Incyte Crop. (INCY), whose AIDS drug Sastiva is one of the world's leading products in that field. It has an advanced product candidate in Reverset, a one-a-day oral therapy for use by AIDS patients in combination with other antiviral drugs.

He also recommends Chiron Corp. (CHIR), which develops products for cancer and infectious diseases, including more than 30 vaccines for flu, and NPS Pharmaceuticals Inc. (NPSP), with a diversified portfolio of product candidates, such as compounds in late-stage clinical development for treating overactive bladder, anxiety disorders and stroke.

"Just never bet any money on biotech stocks that in the end you can't afford to lose," Schmidt concluded.

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