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Stem cell firms on edge
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August 9, 2001: 2:39 p.m. ET
Stocks soar as traders anticipate Bush decision on research funding
By Staff Writer Mark Gongloff
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NEW YORK (CNNfn) - When President Bush announces his decision on whether or not to allow federal funding for embryonic stem-cell research Thursday night, his decision could have an immediate impact on the fortunes of a number of biotechnology companies.
Shares of StemCells Inc. (STEM: up $1.65 to $6.38, Research, Estimates) and Aastrom Biosciences Inc. (ASTM: up $0.49 to $2.27, Research, Estimates) jumped about 25 percent in early trading Thursday as Wall Street anticipated Bush's announcement, scheduled for 9 p.m. ET.
Traders apparently expected Bush to approve federal funding of the controversial research, but analysts could not guess what Bush would do.
"There are some pretty high-powered interest groups on both sides, so it's anyone's guess," said Eric Schmidt, biotech analyst with SG Cowen Securities. "He's caught between a rock and a hard place and will likely come up with some compromise."
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StemCells, Aastrom and the other cell-therapy firms whose shares rose Thursday – including Geron Corp. (GERN: up $1.45 to $14.35, Research, Estimates), Nexell Therapeutics Inc. (NEXL: up $0.34 to $2.33, Research, Estimates), Cryo-Cell International Inc. (CCEL: up $1.04 to $9.65, Research, Estimates), and Incara Pharmaceuticals (INCR: up $0.28 to $1.90, Research, Estimates) – might not benefit much from federal funding, since they will be competing with universities, hospitals and government laboratories for grant dollars.
"If I were running a company involved in this research, and I knew I could support that research myself, I'm not sure I'd want the competition of NIH [the National Institutes of Health] and others working in field," Schmidt said.
But Bush's approval of even the idea of stem-cell research could help sway public opinion and possibly lead to more investment in an industry in its very early stages, with powerful enemies and the very real risk of failure.
"I'm hopeful that this will mean additional funding and resources coming into the field of cell therapy," said Dr. Douglas Armstrong, CEO of Aastrom Biosciences.
Though neither Aastrom nor StemCells engage in embryonic stem-cell research, they do use the discoveries of that research to create cell treatments from full-grown sources such as bone marrow and blood.
"The use of cells to treat human diseases is an important direction and needs to be supported," Armstrong said.
Stem cells are "blank" cells that can develop into virtually any kind of cell in the human body. Because it uses "pure" cells that are still growing, embryonic stem-cell research is important to the development of cell therapies its supporters say could be used to treat diseases such as diabetes, Alzheimer's, and Parkinson's.
But because embryos must be destroyed to harvest the stem cells, abortion opponents and other detractors equate the research with the taking of a human life.
While additional funding for stem-cell research likely will lift all boats in the sector, it won't guarantee success for a relatively new industry, analysts said.
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"I personally think stem-cell research is still in the conceptual phase and still has a long way to go before it has commercial applications," said Alidad Mireskandari, portfolio manager with Orbitex Health & Biotech Fund. "It's more of a political and media issue than a technology that's close to making a difference in curing disease."
For this reason, Mireskandari said he had no plans to join Thursday's rush to buy stocks in the sector, which may be 10 years away from actually offering products.
"It has great scientific potential, but there's a difference between good science and a good investment," Mireskandari said. "If anybody can point to a winner in that race, they're much smarter than I am. The race has just begun, and the pack hasn't separated yet." 
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