Stem Cell Therapy Space Worth Review for Investors
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Advances continue to be made in the field of regenerative medicine, with many products and procedures being made possible from stem cell therapy. While large companies are making headway in this area, many small companies are just as active, raising much-needed funds through the capital markets.
The main challenge all of these companies face is convincing naysayers that their research and subsequent results are ethical. There has been much ado about regenerative medicine efforts that involve stem cells. This has especially been the case for research and therapy involving human embryonic stem cells. For this reason, investors who may be bullish about the industry may avoid these stocks.
The stem cell market is expected to grow to be a $5.1 billion industry by 2014. One of the reasons stem cell research is important to these companies is that it can help them grow their pipelines, according to a research report on the industry – “Stem Cells in Regenerative Medicine: Benchmarking Analysis of Big Companies Entering the Market.” Researchers also see stem cell research as a way to find out the effectiveness of therapies without having to use animals for testing.
Let’s take a look at a few of the public companies that have made strides in the stem cell therapy space.
One of the largest pharmaceutical companies active in the stem cell therapy space is Baxter Healthcare (NYSE: BAX). It is in the process of developing stem cell therapy for people who suffer from chronic myocardial ischemia or CMI. The condition stems from coronary artery disease. The company is in the midst of clinical trials to prove that its therapy can repair damaged heart muscles. It’s referred to as stem cell therapy CD34+.
Also noteworthy for Baxter is a purchase it made last year. It bought Synovis Life Technologies, which made a name for its self because of the mechanical and biological products it made to repair soft tissue. The acquisition is expected to help Baxter further expand its offerings in the biosurgery and regenerative treatment.
Osiris Therapeutics (NASDAQ: OSIR) accomplished an important feat in the stem cell space by becoming the first company in the world to be able to market its stem cell therapy called Prochymal. On that news in May, its stock traded 20% higher, indicating that investors have more confidence in stocks in this space when they have some kind of meaningful approval by regulators. This product was approved by Health Canada.
Now the company is embroiled in a battle over Prochymal with a French pharmaceutical company that it partnered with to test the therapy. News that the sides have been unable to resolve their differences sent Osiris’s stock lower this week. At the time of writing, it had lost 5.32% of its value and was trading around $9.
Also of note is the company’s second quarter earnings report in which it said it lost $4.3 million due to research agreements and royalties being lower than anticipated.
A smaller, but up and coming, company in the space is MiMedx Group. At the end of July, it reported that its second quarter revenues had jumped a whopping 153% to $4.9 million compared to the second quarter of 2011. That may sound like small potatoes, but for a company of its size with increasing competition from larger companies, I find it impressive.
Also impressive was its gross margin, which hit a record 77%. Considering so much has to be devoted to research and development, it is interesting that MiMedx was able to achieve such a high margin.
The company’s CEO Parker Petit rightfully boasted that this was the third consecutive quarter in which the company achieved its revenue goals, and “we expect to continue that performance through the end of the year."
During the quarter, spending on clinical trials increased, and through this spending the company will continue to focus heavily on gathering significant amounts of clinical data on its allografts, including EpiFix and AmnioFix. EpiFix is an allograft made from amniotic tissue used to heal wounds, while AmnioFix is a biologic amniotic membrane that combines cleaning, dehydration and sterilization to produce a sterilized tissue.
Earlier this year, it inked a key deal that will increase global exposure of EpiFix. It signed a global distribution agreement with Systagenix Wound Management Ltd.
Investors anxious about stocks in this space because of funding, especially any coming from the government, may take comfort in the moves made at the federal level. President Obama overturned a ruling on a ban on funding for the National Institutes of Health. Those dollars are spent on human embryonic stem cell research.
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