International Stem Cell Corp. (ISCO): Post Unavailable Additional Informati...

Burrhead1 · 2013-11-22T14:29:26.6600000Z

International Stem Cell Corp.: Great Things To Come Friday, November 22, 9:16 AM ET | About: ISCO Kingmaker Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks. Earnings season occurs four times per year and usually uncovers some very favorable risk/reward investment opportunities. Most of the time, the strongest opportunities occur in the small cap names which were previously undiscovered. One company that garnered significant investor enthusiasm over the past week is International Stem Cell Corporation (OTC:ISCO). Company Background International Stem Cell Corporation is a biotechnology company that has developed a promising new stem cell technology based on a natural process called parthenogenesis. In parthenogenesis, stem cells are derived from unfertilized human eggs. The technique can create what's called HLA homozygous stem cells, which are stem cells meaning that are much less likely to be rejected. This is a property called histocompatibility. Parthenogenetic Advantages Along with parthenogenetic stem cells, there are three other types: embryonic, somatic, and induced pluripotent stem cells. For use in therapeutic applications, i.e. deriving cells to implant to treat diseases, the following criteria are essential: Pluripotency: Can the stem cell be used to replace any cell in the body? Immune Matching: Do the cells have the ability to avoid graft vs. host and provide a source of cells for many people? Proliferation: How easy are the cells to create and expand in culture? Genetic Diseases: Are the cells free of the genetic mutation that may be the origin of the disease? (click to enlarge) For each criterion, ISCO's parthenogenetic stem cells demonstrate superiority. Embryonic stem cells come close but lack the ability to immune match which means that treatments with those types of cells also require the use of immune-suppression drugs to prevent tissue or cells from being rejected by the recipient. When it comes to the science, it's hard to argue with the approach taken by International Stem Cell Corporation. In addition to the science, investors should also consider the ethical ramifications of stem cells. Stem cell opponents typically voice their concerns regarding the creation and/or destruction of embryos. In parthenogenesis (the approach taken by ISCO), the eggs are not fertilized and thus no embryo is created or destroyed. So International Stem Cell Corporation's technology eliminates any ethical concerns that may arise. Record Third Quarter Financial Results Given that the company appears to be on track with its science, investors are likely wondering if they should invest now. I believe the answer is a resounding yes. On Wednesday, November 13, International Stem Cell Corporation announced record results for the third quarter of 2013. ISCO reported record revenues of $1.67 million, a year-over-year increase of 41%. Sales for Lifeline Skin Care were up 54% while sales for Lifeline Cell Technology were also up a remarkable 30%. Perhaps even more impressive is that even during a period of record breaking revenues, the company did so while lowering their general and administrative expenses by approximately 13%. Additionally, ISCO ended the quarter with approximately $1.8 million in available cash and cash equivalents. This includes the public offering that the company completed in July. ISCO was able to raise $3 million which can be used to fund the company's research and development going forward. Parkinson's Clinical Trials - Projected IND Filing While the company is pursuing potential treatments in three areas, the area that is garnering the most investor enthusiasm is the company's potential treatment for Parkinson's. Earlier this year, ISCO entered into a master clinical research agreement with Duke University to conduct clinical trials research in Parkinson's disease using the company's neural stem cell product. These pre-clinical studies set the stage for the eventual filing of the Investigational New Drug Filing (IND). ISCO expects to complete the pre-clinical studies approximately 6-8 months from now and consequently file the IND soon after. Historically, biotechnology stocks typically see a very favorable price move after an IND is accepted. Given the market potential for Parkinson's, I expect International Stem Cell Corporation to experience a similar reaction. Method of Treatment - The Dual Mechanisms of Action International Stem Cell Corp. plans to treat the disease by implanting stem cell derived neural stem cells directly into a patient's brain. The goal is two-fold: Direct Cell Replacement Mechanism: The newly implanted cells will replace the dead and dying cells in the critical region of the brain. In turn, this will restore functionality to that part of the brain. Neuroprotective Mechanism of Action: The newly implanted cells will provide positive benefits to the location where they are implanted. The company believes that this will prevent more cells from dying and consequently will prevent the disease from progressing further. Duke University is assisting International Stem Corporation with assembling the neurosurgical implantation procedures for the studies. In the meantime, investors can look to the research published thus far that indicates a strong possibility of success. International Stem Cell Corporation recently published research indicating that its neural stem cells can reduce the inflammatory response in the brain caused by the implantation surgery. Full research on this is expected to be published by the end of 2013 and should serve as a strong catalyst for share prices. Market Potential Parkinson's is the 2nd most common neurodegenerative disease. Currently, there are 7-10 million people world-wide that suffer from the deadly disease with approximately 60,000 new cases diagnosed each year. Although there are no effective treatments to the disease, the current products on the market generated approximately $2.5 billion in sales during 2012. The current medications only address the symptoms of Parkinson's. Unfortunately, nothing on the market is able to address the root problem. Consequently, the disease will continue to get worse over time. The current patients, and their families, are hoping that International Stem Cell Corporation can be the first company to successfully bring a product to market that actually eliminates the disease. Risks Investors should of course keep in mind the risks associated with small-cap biotechnology stocks. The first risk has to do with trial failure. Once the company files the IND, all attention will shift to the eventual Phase 1 trial that the company will begin. Although data from that trial is still a few years away, early investors thinking about holding to an eventual approval should understand that a Phase 1 setback can occur and would likely send the shares significantly lower. A second risk, and a probable one, is that ISCO will need to issue additional shares to raise more funds. Funding research and conducting trials is an expensive endeavor. One advantage the company has is the current revenue generation from its Lifeline Skin Care products and Lifeline Cell Technology. The company's revenue continues to generate systematic increases, quarter after quarter. If the trend continues, the need to sell additional shares may be minimal. Conclusion As the biotechnology bull market rages on, investors are likely looking for the next niche that can take off. Despite a lot of controversy, I believe that stem cells are that next area to advance medicine to heights never thought possible. International Stem Cell Corporation is quickly gaining recognition with both the medical and investing communities. With several catalysts occurring over the next 12-18 months, investors should get in early before it's too late. Disclosure: I am long OTC:ISCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Share this AnalysisComments(0) Add Your Comment