Stem Cell Therapy—Breakthrough in Health Paradigm

By Sharmistha Banerjee - September 25, 2012 | Tickers: NBS, OSIR, PSTI | 0 Comments

Sharmistha is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

Far-reaching accomplishments in the biotechnology sector meet its most ambitious expectations, stem cell therapy. The birth of this new industry has boosted the enthusiasm and energy of investors and has brought unprecedented capability and optimistic predictions. New developments in regenerative medicine are bringing about exciting, novel approaches to create therapies for hard to treat diseases. The biotechnology industry has been soaring in 2012 as companies both large and small have shown impressive growth.

The cell therapy space has seen relatively small companies making strides in the right direction with increased government support. Osiris Therapeutics (NASDAQ: OSIR) a leading stem cell company is currently the only company with an approved cell therapy. The approval is more of a first step in a long walk for Osiris. Reuters reported that shares of Osiris Therapeutics rose 15% on May 30, 2012, after U.S. health regulators said the stem cell technology company's wound treatment was eligible for reimbursement when used in hospitals in out-patient settings or in ambulances. The company carries over a $300 million market capitalization and trades at $9.50 per share, primarily on the strength of a recent Canadian approval for its stem cell drug for graft-versus-host disease. Osiris Therapeutics has a 1-year low of $4.12 and a 1-year high of $14.46. The company has a market cap of $311.3 million and a price-to-earnings ratio of 90.98. Investors are impressed and optimistic with Osiris progress in cell-based therapies. They currently have a $9.75 target price on the stock. Despite having to negotiate a more challenging regulation process the company has continued to show investors strong gains in 2012.With a current ratio of 8.51 and debt equity of (0.00%) the company boasts of a financially secure position in the market.

Pluristem Therapeutics (NASDAQ: PSTI) a small firm with a market cap of less than $180 million has been concentrating on its placenta-based cell therapies, is considered one of the more advanced in the cell therapy arena, and unlike OSIR, its lead candidates treat diseases that could potentially return significant revenue. The upside for PSTI is lower costs, quicker healing time, ease of administration, and most importantly, it can grow vessels and provide the possibility of a cure, which has led to optimism surrounding the stock. Shares of Pluristem Therapeutics are up over 3.98% and most likely headed higher in the days ahead. It has traded higher by 85% during the last three months and is now valued at $200 million. Pluristem may actually beat OSIR in the race to become the first U.S. approved cell therapy with its bone marrow therapy, in which it has recently applied for approval. Pluristem is a company that I think is showing great promise. From the stock's action in the last several months, it is clear investors recognize that Pluristem's unique platform technology has the potential for tremendous value in a lucrative range of medical markets both the very large and the very small. The company wins both ways. Its clinical segment is creating candidates with large revenue potential, with analysts projecting peak sales of $700 million for AMR-001, which treats patients following acute myocardial infarction. The company is reasonably well funded with around $42 million in cash and cash equivalents.

NeoStem (NYSEMKT: NBS) is by far the leader in regards to the manufacturing business, and no other company comes close. In addition, its stock has returned the most over in the last three months, with a 100% gain. NeoStem stocks looks promising as a biotechnology investment. First, the company is focusing on several promising areas of new stem cell treatment development. Second, its contract manufacturing business brings in revenues to offset some of its drug development expenditures. Third, the contract manufacturing business could earn substantial royalties if any of the products on which it works with customers proves to be a commercial success. NeoStem's manufacturing segment which is also known as PCT, is well positioned to return larger gains over the next 24 months with several late stage candidates under development. a $110 million company that has increased in value by 70% during the last three months, In addition to the PCT business, NeoStem's most promising therapy is aimed at preventing major cardiac problems following acute myocardial infarction (AMI), an area that is potentially a multibillion-dollar business. NeoStem's therapy is meeting endpoints never before reached,

The three companies discussed above are showing much potential for growth and each present a significant upward shift in the current stock prices while contributing greatly to the advances of cell therapy.

Osiris is the closest to generating substantial revenue by already having two approvals, and is currently testing its therapy on other diseases, thereby leaving open the possibility of future gains. Pluristem has candidates to treat diseases in potentially large markets, and is expanding with its manufacturing facility. Although Stem Cells is in the early phases of development, it still has a very innovating therapy that, if proven effective, could advance the space even further. NeoStem possesses all the benefits of an innovating technology, a diversified pipeline, and is a candidate with significant revenue potential.

At this point, it appears that the entire space is moving forward and has lifted observers' expectations by making rapid progress. It makes sense that these three stocks would trade with such considerable gains, as investors can now identify the benefits of cell therapies. And as more approvals occur, it could be a space that trades considerably higher regardless of the market's indecisiveness. With the sector growing and maturing, investing in biotech stocks seems a promising choice in future.

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Stem Cell Therapy—Breakthrough in Health Paradigm