Stem cells: the most exciting opportunity in penny shares...
Dear Reader,News that scientists have created human sperm from stem cells has raised all sorts of ethical questions. But it is also an illustration of the extraordinary potential that stem cells offer to medicine.
UK penny share benefits from Obama’s stimulus package
- LED lighting specialist, Dialight (ticker: DIA), is to supply the state of New Mexico with over 8,000 individual LED Traffic Signals, in a programme funded by the US federal government’s Recovery and Reinvestment stimulus package. br>
- Dialight’s signals lighting deliver energy savings of over 90% compared to the traditional incandescent bulbs, so the state expects to save $500,000 per year in electricity costs.
- LED lighting is a certain growth industry of the future and shares in Dialight trade on just twelve times earnings and yield 5%. The shares are up 5% on the day, following the New Mexico contract win.
We are at the start of a very exciting, if controversial, trend here. And, as usual, many of the companies at the frontiers of scientific innovation are found amongst the stock market’s penny shares.
The whole purpose of investing into penny shares is to get into areas of very rapid growth at an early stage. While other investors are agonizing about the future of staggering giants such as British Airways or the Royal Bank of Scotland, I am far more interested in a future in which stem cell research looms large.
Already in Red Hot Penny Shares I have identified two very promising companies. The first is involved in the storage of stem cells. The second makes devices used by stem cell researchers. Both offer relatively low-risk ways of participating in this exciting field of human endeavour.
High risk and potential high reward for bold investors
But the companies at the real cutting edge of stem cell research are those that are actually trying to develop new therapies using stem cells. These are very high-risk, have the potential to deliver very high rewards for the gutsy investor.
It was one of these that I visited last week down at Guildford’s Surrey Research Park. This was ReNeuron (ticker: RENE) a company that, as chief executive Michael Hunt candidly admitted, gets more than its fair share of publicity.
With a stock market value of under £20m and a track record that included a ‘near death experience in 2002’ this is not the type of company that would normally hit the headlines. However, it happens to be the only quoted UK company that is focussed entirely upon producing adult stem cell therapies for defined medical conditions, and in commercial quantity.
The challenges can hardly be overestimated. The very fact that our use of stem cells is so recent makes health regulators understandably cautious. There is no body of prior knowledge upon which the authorities can base their medical and ethical judgements.
The use of foetal stem cells is especially contentious, but still President Obama’s decision to overturn the restrictions placed on stem cell research by George Bush, have invigorated the industry. In just two instances of the great interest in this field, Pfizer has established a $60m stem cell therapy research centre in Cambridge, while GlaxoSmithKline has joined with the Harvard Stem Cell Institute to put up $25m for the sponsorship of stem cell research.
Regulators are now starting to give the green light to medical trials. In January the U.S. Food and Drug Administration cleared the way for the first-ever human trial of a medical treatment derived from embryonic stem cells. This allowed the Californian-based Geron Corporation to commence a study of its stem-cell treatment for spinal cord injuries on a group of severely disabled patients who have lost the use of their legs. And in the same month ReNeuron received approval for a clinical trial on patients suffering from the after effects of a stroke.
The experiment that all biotech investors will be watching
Each year 130,000 people in the UK suffer a stroke, and about one third die as a result. Even of those who survive, about one half are left permanently disabled, costing the NHS £5bn per year for their care. In a forthcoming trial to be conducted by Dr Keith Muir at Glasgow’s Southern General Hospital, ReNeuron’s ReN001 non-embryonic stem cells will be injected into the brain of twelve severely disabled stroke patients. The hope is that these stem cells will stimulate existing cells to repair and revive.
The results will not become clear for at least two years, but ReNeuron has a second therapy that could prove itself more quickly. Coded ReN009, this is designed for a particularly unpleasant side effect of diabetes. Owing to a loss of circulation peripheral limbs, especially the feet, can become black and swollen, leading to amputation. Experiments on rats have demonstrated that ReN009 can stimulate the tissues of the foot such that the blood starts to circulate once more.
These are the type of breakthrough upon which scientists are working, and the reason why stem cell research has such great potential. Development of new medical treatment is fraught with pitfalls, and Hunt admits that either ReNeuron will succeed and make a lot of money or else it will fail altogether.
This is certainly a sector of the stock market for the bold. But for sure we are at the start of something very exciting and, as well as transforming medicine, stem cell therapy will make several people very rich. My aim is for Red Hot Penny Shares readers to have a chance to be amongst them.
Good investing,
Tom Bulford
For The Penny Sleuth
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.
