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January 26, 2005

Stem Cell Sanity?

Sarah Lacy

On Monday, I noticed that a company related to stem cell research went public, just as news broke that one of the federally-approved embryonic stem cell lines is contaminated. Before checking out the stock price I thought, "Well, ViaCell, welcome to life as a public company in the most news-driven, volatile niche of biotech.' Imagine my surprise when I saw the stock was up 5%.

Before you start sending emails, I know, ViaCell Inc. stores blood from newborns' umbilical cords for later use—not exactly at the center of controversial embryonic stem cell research. The company was funded by MPM Asset Management, Amgen, TullisDickerson & Co, Zero Stage Capital and others, for more on what they do and the IPO go here. But take it from existing public companies Aastrom Biosciences, Geron and StemCells—such distinctions don't really matter.

There's not another area of biotech that has so much promise, so much controversy and so little understanding as stem cell research. Stem cells are young cells that haven't yet become, say a liver cell or blood cell. When taken from human embryos they can become nearly any kind of cell in the body and reproduce indefinitely. Adult stem cells, usually taken from bone marrow, have similar qualities, but both characteristics are limited.

The plus is adult stem cells have been used in certain medical procedures for decades and are generally not controversial. Embryonic stem cells are scientifically unknown quantities and have been at center of a Christian right firestorm for much of the Bush Administration. But the hope is great: Helping the body regenerate itself, providing real treatments for diseases like spinal chord injury, Alzeimer's and Parkinson's.

During the election frenzy last year, the future of embryonic stem cell research was also voted on, nationally (with President George W. Bush opposing it) and in California with the monstrous Proposition 71 which passed and green lighted $3 billion to be invested primarily in embryonic stem cell research. All the while, stocks of Aastrom, Geron, and StemCells were going nuts. This, even though Aastrom and StemCells are working with adult stem cells.

I wrote a piece for BusinessWeek Online about this in the election aftermath and got more angry mail than anything I've written before…yes that includes, articles on Apple with its notoriously rabid fan base. They were all across the map: from people saying I shouldn't write anything to affect the stock price when these companies are trying to save lives to people decrying that my article focused too much on embryonic stem cell research. My takeaway? This is a hot button industry for more than just ethical reasons.

So back to ViaCell. On Monday, Aastrom and StemCells dove along with Geron, even though, again, they don't do work with embryonic stem cells and shouldn’t have been impacted by the news. How did young, little ViaCell break the trend?

My guess is it was basking in the afterglow of an IPO that in hindsight, was priced too low at $7 per share. Either that or they aren't yet associated with stem cells in investors' minds. Either way it was a free pass this time. My advice? Buckle up, investors. Until some of the realities of all the stem cell promise and controversy start to shake out volatile days are still ahead.

02:44 PM

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