The first concerns President Obama. ‘Today,’ he has said, ‘more than ever before, science holds the key to our survival as a planet and our security and prosperity as a nation.’ Translating these sentiments into action he has lifted President Bush’s ban on stem cell research. The second concerns the opening of a new science block at my sons’ school. To celebrate the school arranged a fascinating one day seminar – ‘New Body Parts For Old: Stem Cells and Regenerative Research’.
The third reason is a little more personal. In the last two years I have spent too much time in hospitals and surgeries. This has nothing to do with my own health, but that of three of my close relatives. There is no form of investment research that beats experiencing things for yourself and inevitably my conversations with doctors and the observation of treatment have piqued my interest in medical science.
The greatest hope in medical science is already a reality
Stem cell research is one of the most promising avenues of research. Scientists believe that stem cells can be grown and developed into many different cell types in the body – muscle cells, red blood cells or brain cells. They could be used to repair or regenerate damaged organs or tissues, leading to therapies for conditions such as heart disease, Parkinson’s disease or Alzheimer’s. Scientists also say that by studying stem cells they will learn more about reproductive and cell biology, knowledge that can then be used for drug testing and development.
Stem cell therapy is already a reality. Last year a young mother in Spain, Claudia Castillo, who was suffering from a terminal bronchial disease, was offered the chance of a replacement windpipe grown using her own stem cells. Without this surgeons would have had to remove one of her lungs, a procedure that carries a high mortality rate.
After a five-month wait she received the transplant and because it was grown using her own stem cells, she did not need the large amount of immune-system repressing drugs usually required to ensure that the body does not reject an organ received from another person. ‘I felt better in an instant’, Miss Castillo said and within two months she was able to take a holiday in Ibiza ‘where she danced and swam in the sea.’
So stem cell research offers very exciting possibilities, but progress has so far been stalled by a moral debate. Stem cells come from three sources. Claudio Castillo’s new windpipe was grown from adult stem cells – her own. But stem cells can also be found in blood from the umbilical cord or placenta – the by-products of childbirth. Or they can be ‘Embryonic Stem Cells’, produced from donated embryos from couples undergoing IVF treatment. This is where controversy has arisen because an embryo is simply one stage of the journey from conception to human life. Its diversion into medical research is considered akin to the abortion of an unwanted baby.
Obama has cleared the way for a bull market in stem cell stocks
This is the objection that has been overturned by President Obama. It will release scientists and researchers onto the various challenges that stem cell medicine still faces. How to grow the stem cells into specific organs; how to prevent them from continuing their growth once in the human body and forming tumours; how to ensure that the body does not reject them; how to establish whether adult stem cells can be as effective as foetal or embryonic stem cells.
There is much to do, but an exciting time lies ahead. Controversial or not, Obama has cleared the way for a bull market in stem cell stocks. So what was that announcement that caught my eye last week? It came from Epistem (ticker: EHP), a biotechnology company that is commercializing adult stem cells in the areas of oncology and gastrointestinal diseases.
Last week it signed an agreement with Novartis, under which the pharmaceutical giant will pay it $4m up front, finance two years of research and development, and then pay up $45m in milestone payments for each product that is developed. On top of that Epistem, which is valued at just £20m, will receive royalties in any ultimate product sales.
As broker Equity Development explains, Epistem ‘joins the ranks of a disappointingly elite club, namely profitable biotechnology companies in the UK.’ But it should not be the last. The fortunes of this much derided sector may be turning up at last.
Good investing,
Tom Bulford
For The Penny Sleuth
P.S.: I’ve found a great way to participate in the biotech sector – look out for it in the next issue of Red Hot Penny Shares. We shouldn’t underestimate the impetus President Obama is giving to scientific innovation. Check out my recent recommendations in UK small cap science shares – you’ll receive them by email when you request a trial to Red Hot Penny Shares.
P.P.S. If you want to follow the insights of a small company investor, and uncover the hidden gems of the stock market, find out more about The Penny Sleuth by clicking here.
