Stem cell stock run may be short after elections
14:53 ET, Fri 27 Oct 2006
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By Bill Berkrot
NEW YORK, Oct 27 (Reuters) - Investor optimism that U.S. embryonic stem cell research restrictions may ease if Democrats win control of Congress in the upcoming elections is boosting shares of companies that specialize in the controversial technology.
But health industry analysts caution that any price rise following the vote may be short-lived as investors find that marketable products, such as cures for neurological diseases or spinal injuries, may be years away.
Wall Street analysts expect an immediate and pronounced bump to already surging stem cell stocks, such as Geron Corp. and StemCells Inc., and others in the field if Democrats regain control of the U.S. Congress.
"The entire stem cell space will benefit from the easing of restrictions, primarily because the stem cell potential will be in the media and there will be news flow," Rodman & Renshaw analyst Ren Benjamin said.
Benjamin was referring to companies working with adult or cord blood stem cells as well as those dealing with the embryonic cells associated with the fierce anti-abortion debate.
The furor was revived when popular actor Michael J. Fox, who suffers from Parkinson's Disease, starred in a controversial ad supporting candidates who favor stem cell research.
Conservative and religious groups, meanwhile, are working hard to rally their flocks to oppose both laws that would lift federal restrictions and candidates who favor stem cell research.
Groups opposed to the technology may still be able to count on U.S. President George W. Bush to stall new initiatives into embryonic cell research. The only veto of his administration has been against a bill expanding federal funding for research in the field.
Steve Brozak, an analyst for WBB Securities who made an unsuccessful run for Congress in 2004, agreed that shares of any company associated with stem cell research, whether embryonic or not, stand to gain in the short term from an election in which Democrats win back power in Washington.
"People will say, 'Well, it's a stem cell company, so let me invest,'" Brozak said.
Some companies involved in stem cell research have already seen their shares rise this month.
Geron, whose shares have gone up 28 percent since Oct. 2, would be the clear and immediate corporate beneficiary of the lifting of embryonic cell research restrictions, analysts said.
"They are the ones that have the preponderance of intellectual property, which provides you freedom to operate, and they have the know-how in the field, which gives you the ability to realize commercial applications," Brozak said.
Benjamin, the analyst, also mentioned tiny Advanced Cell Technology as a likely winner from renewed funding in embryonic stem cell research.
Analysts said companies involved in other types of stem cell research that could see an influx of investor money include ThermoGenesis Corp., which harvests adult and cord blood stem cells, Cytori Therapeutics Inc., which also works with adult stem cells, and Osiris Therapeutics Inc., which began publicly trading in August.
Others small players that stand to gain from a lifting of restrictions include Aastrom Biosciences Inc., StemCells Inc. and ViaCell Inc., Benjamin said.
"I would say there would probably be an initial rush of excitement from investors and then a cooling-off period," Benjamin predicted.
He said there would likely be another surge in investments if research funding dollars start to get distributed.
"Even if they get some grant money, that doesn't automatically translate into a product," Benjamin cautioned. "That's going to take some time."
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