Volatile issue, risky business

There are perils of chasing healthy returns in stem cell stocks


Your Money

September 19, 2004|By Andrew Leckey

Whether stem cell research will be a determining issue in the presidential election remains to be seen. But hereM-Fs a return thatM-Fs 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.

TheyM-Fve seen once-obscure biotechnology companies 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 M-y politics, ethics, science and profits M-y and is certain to produce more long-term losers than winners. ThatM-Fs 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, Californiabased 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 firmM-Fs expectations of $10 a share. It now rates Geron, back to around $6, as a market performer.

M-tIf 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,M-v said Reni Benjamin, senior biotech analyst with Rodman & Renshaw (www.rodmanandrenshaw. com) in New York.

Even then, it wonM-Ft be a sure thing. He added: M-tThereM-Fs tons of risk.M-v

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 AlzheimerM-Fs or ParkinsonM-Fs 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 BushM-Fs 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.

M-tWe 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 hasnM-Ft done anything yet,M-v said John McCamant, editor of the Medical Technology Stock Letter (www.bioinvest. com) in Berkeley, Calif. M-tThereM-Fs no question that stem cell research has been significantly stifled here in the U.S.M-v

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.

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

Andrew Leckey is a Tribune Media Services columnist.

Established biotechs are just what the doctor ordered

To balance out a biotechnology portfolio that includes young companies with no actual products, experts in the field recommend that 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 story. Amgen Inc. (AMGN), a global biotech specializing in human therapeutics based on advances in cellular and molecular biology, is recommended by Reni Benjamin, senior biotech analyst with Rodman & Renshaw, and Eric Schmidt, biotechnology analyst with SG Cowen Securities.

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