Investor's Business Daily, March 2nd, 2007
A California appeals court last week ruled that the state's $3 billion program for embryonic stem cell research is legal. If the state Supreme Court upholds the ruling, funds can start flowing to scientists.
With the controversy over embryonic stem cells dominating headlines, work on other types of stem cell therapy has gone largely unnoticed. A few small companies are leading the way toward commercializing non-embryonic stem cell technology. One is Baltimore-based Osiris Therapeutics OSIR.
In January, Osiris got fast-track status from European regulators for a stem cell-based drug to stop rejection in bone marrow transplant recipients. Osiris already had fast-track status in the U.S. from the Food and Drug Administration for the product.
Stem cells can develop into many different cell types. They can make repairs and perhaps regenerate organs. Firms that work in the sector are outperforming the projections of experts like Robin Young, a medical industry analyst and president of Robin Young Consulting Group.
He recently spoke with IBD.
IBD: How much revenue from new stem cell technology have you calculated?
Young: I had estimated (U.S.) sales of $7 million in 2006. The number actually came in at $16.4 million. I've increased my forecast for 2007 to $35 million.
When I refer to stem cell business, I'm talking about real products -- living, viable stem cells that are implanted. These are cells that have not transformed into any other tissue and are waiting for a signal to become something. They're adult, not embyronic.
IBD: Which companies are in the lead with what products?
Young: Osiris introduced their product over a year ago. They use stem cells from cadavers. These are allograft (donated) stem cells. They're processed by Osiris, and frozen and shipped to surgeons. The products are used to help stimulate bone growth in spinal fusion and fracture cases.
Others I would call leading, pure stem cell companies are Aastrom Biosciences ASTM, Cytori Therapeutics CYTX, Geron GERN and Advanced Cell Technologies.
IBD: Noticeable by their absence are the names of bigger biopharma companies.
Young: There are some big-name companies. Genzyme GENZ, Johnson & Johnson JNJ, Medtronic MDT and Amgen AMGN all have stem cell programs. But I think they're stymied trying to come up with business models. They continue to do research and continue to track what's going on.
Frankly, they're waiting for the smaller, entrepreneurial companies to figure out how to market the products. There's a clear line of demarcation between firms that were founded 20 years ago, when stem cells first burst on the scene, and the newer companies.
The young ones are finding faster ways to market, and therefore hoping to generate better returns for their investors.
IBD: You say stem cells have been around for years. For what uses?
Young: One misconception about stem cells is that they are a new technology. In fact, stem cells have been employed by surgeons for about 20 years. Probably the best example is in ophthalmology. Surgeons harvest stem cells from the edge of the cornea and transplant into the other damaged eye.
The technique of using lasers to punch holes in the heart is another mechanism to call forth the body's own ability to generate stem cells and heal.
When a surgeon uses a burr in knee surgery, he's creating a bloody bed which has the effect of calling forth the body's own stem cells and growth factors to speed healing.
So while surgeons have been using stem cells for two decades, those are the patient's own cells, called autologous stem cells.
Now comes the more refined version, allograft cells from someone else, processed and sold for advanced procedures. The safety record with these allograft stem cells has been excellent.
IBD: What role do embryonic stem cells play in commercialization?
Young: It's important to note that adult stem cells differ from embryonic in their capabilities. Embryonic stem cells can actually create organs and more complex structures. Adult stem cells are better suited to single-cell applications: bone, muscle, islet cells for diabetes.
But the adult cells will create the markets for the embryonic cells in 10 or 15 years. The markets will develop rapidly because the safety profile has been so good. There's no harm being caused, and there's potential upside.
IBD: Ten years from now, what stem cell products will we see?
Young: In 10 years, diabetes will likely have been the disease most affected by stem cell therapies. Orthopedics, currently the largest medical sector in terms of patients and numbers of companies, will be the second-largest sector.
Regarding diabetes, stem cells are especially well-suited for creating the islet cells that produce insulin.
In 10 to 20 years, stem cells will, I think, disrupt every medical sector. In the 25 years I've been a medical technology analyst, this is the single most potentially disruptive technology I've seen.
IBD: How big is the world market?
Young: My forecast for 10 years from now is $8.5 billion. I'm being conservative. That represents less than a 1% penetration of some of the big disease markets.
Copyright 2007 Investor's Business Daily, Inc.
