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The Power of the Stem Cell
Our bodies are made of hundreds of different cells. Neurons, muscles, blood vessels, liver, kidney, etc., each are made of very different cell types. They differ in many respects: in biochemistry, size, shape, capability, and more.
But this was not always so. We all come from just one cell that later turns into an embryo and then a fetus. Every cell in our body contains the entire genetic program to become any cell type. Such cells are called “stem cells”. But once turned into a muscle cell, it can never evolve into a neuron. So, we distinguish 2 types of stem cells:
- Pluripotents: able to turn into any possible tissue.
- Multipotents: able to turn only into a limited number of tissues and cell types.
Because stem cells can become anything, they also have massive therapeutic potential. They could replace damaged tissue after a heart attack. Or neurons degenerating from Alzheimer's disease. Or replace several nerve tissues in a broken spine.
Healing With Stem Cells
This potential has long been known, but a few problems stand in the way:
- Stem cells are rare in the body and require specific conditions to stay alive.
- The host immune system might reject stem cells from someone else, as often happens with organ transplants.
- Turning stem cells into the desired useful differentiated tissue is hard to control.
The first effort tried to replicate the chemical environment of stem cells and their differentiation. It had some limited successes but was not enough.
Like so many things in biotech, the deeper understanding of DNA & RNA allowed real progress.
By understanding what happens in real-time during differentiation, researchers can now control the differentiation process much better. They can also often take tissue cells from a patient and turn them back into un-differentiated stem cells.
Best Therapeutic Field For Stem Cell
Using stem cells for therapy makes the most sense, where healthy tissues are destroyed or made non-functional. In that context, bringing new cells will restore the failing organ to its normal capabilities. So, a few medical conditions are especially pertinent for stem cell therapies:
- Neurological: many neurological diseases come from neurons or nerves dying off. Replacing the missing cell seems like a direct solution, especially with neurons' ability to reconnect to their neighbors, depending on what's needed.
- Cardiovascular: most of the time, a heart attack is a simple way to describe a part of the heart muscle dying. Replacing dead tissue with new cells can help repair the cardiac system.
- Type-1 Diabetes: this form of diabetes is caused by the body's immune system destroying the insulin-producing cells. Replacing these cells could fully cure it.
- Kidney failure: if the kidney tissues are dying, the body loses the ability to filter toxins. Repairing failing kidneys can save patients' lives and avoid hours-long daily dialysis sessions.
- Burns: deeply burned skin needs to be replaced, and freshly grown skin from stem cells is a very good candidate to heal burns
- Arthritis: most articulation and joint diseases involve part of the cartilage that has been destroyed or worn off. Regrowing it would repair what is wrong.
Top 5 Stem Cell Companies
The companies have been ordered by market capitalization at the time of the writing of this article. It does not represent a preference or financial advice.
Vertex is a leader in treating cystic fibrosis (4 approved medicines), which is now actively diversifying in new segments. The company is very R&D focused, with 70% of its operating expenses and 3/5th of its employees working on R&D.
It is working closely with one of the leaders of gene editing, CRISPR Therapeutics. They are working on Sickle cell disease therapy, beta-thalassemia, and a Type-1 diabetes treatment.
Finally, they also have a treatment for pain in phase 3, a $4B market now dominated by opioids. Non-opioid alternatives would command premium pricing and be of interest to the medical profession at large.
Diabetes: The Future Focus Of Vertex
Diabetes is by far the largest potential market for Vertex treatment (2.5 million people just in Europe and North America), and one without any treatment currently. The story of the diabetes treatment development is interesting, as this is clearly one major focus for Vertex. First, they acquired Semma in 2019. Then, they acquired ViaCyte, the competitor of Semma, in 2022. With ViaCyte already in a deal to co-develop their treatment with CRISPR therapeutic, this plays right with the strengths of Vertex. This was followed by an extra agreement between CRISPR and Vertex to keep improving the product and the approval for new clinical trials.
Cystic fibrosis revenue is still growing steadily, from $3B in 2018 to $8.9B in 2022. The company registered an operating income of $635M in 2018, growing to $3.3B in 2022.
Vertex is by far the largest company in this list, but not so large that its stem cell therapy for diabetes would not completely change the company's profile. The painkiller therapy in phase 3 could also move the company forward. So this might be the safest bet in the segment, as even if the stem cell therapies fail, the ongoing cystic fibrosis revenue stream would still make the company valuation reasonable.
Vericel’s approved products are focused on sports medicine and skin burn care.
The cartilage repair treatment, MACI, is growing in use and is the leader in restorative cartilage products. More applications are being tested, including the development of new surgical tools for delivering the articulations of the company's treatment. The total addressable market is estimated at $3B.
The skin burns treatments have been approved in winter 2022 and will be commercialized by mid-2023. The total addressable market is estimated at $600M.
Vericel has $140M in cash in Q4 2022 and no debt. The company has been free cash flow positive since 2020. It also expects a strong revenue growth in the next 3 years, at a yearly +20%.
Vericel is an interesting play for conservative investors looking for positive free cash flow and already-approved products. It has a solid financial position and operates in small but underpenetrated markets with several billion TAM in total.
Current earnings do not yet include the approved skin product, guaranteeing revenue growth in the coming 2-3 years.
The company is both a gene therapy and a stem cell company. Its 2 flagship programs are:
- A hemophilia A gene therapy, in partnership with Pfizer, in clinical trial phase 3. The Biologics License Applications (BLA) is anticipated for the end of 2024.
- The first results have been very positive, with ”Pfizer announced at Q4 earnings that this remains one of their most promising assets.’
- A gene therapy for Fabry disease, in phase 1/2.
Its 2 main stem cell therapies in development are:
- A stem cell therapy to remove the risk of kidney transplant rejection, in phase 1/2.
- A stem cell therapy for sickle cell disease, in phase 1/2.
Genome engineering could be used to solve neurological issues like prions disease (like mad cow disease), Huntington's, etc. These programs are developed in partnership with Pfizer, Novartis, Biogen, and Takeda.
The company has invested heavily in proprietary manufacturing capacities. At the end of 2022, Sangamo had $308M in cash. It is also receiving money from its partners for achieving clinical research milestones, with to date $815 million received. There are up to $3.6B in future milestone payments for cell therapies and potentially more from genome engineering.
Overall, Sangamo is an investment opportunity providing exposition to gene and cell therapy technologies. Its financial position is relatively solid, thanks to non-dilutive partnerships with some of the largest pharmaceutical companies.
Brainstorm is focused on neurological diseases like Multiple Sclerosis, Alzheimer's, Parkinson's, Huntington's Disease, or Autism Spectrum Disorder. The ALS treatment is the only one in phase 3, with hopes to get it approved quickly and preliminary results seemingly indicating it could help if used preventively.
Brainstorm Cell uses its autologous cellular technology platform (NurOwn®): the company takes the patient's bone marrow cells and turns them into neurons and other nerve cells. This is a rather short process, taking only 7 days.
The company seems tight on cash, with just $4M left in cash on December 31, 2022. This is unsettling when compared to $19M in a net loss in the latest quarter. So it is pretty clear it will need to raise more money, from equity and/or debt, to reach commercialization of its ALS treatment and pursue its other R&D programs.
Overall, Brainstorm seems an interesting company from a technology point of view, but with serious financial risks. Risk-taking investors might want to monitor the situation closely and buy after a stock decline caused by these immediate financial concerns.
5. Gamida Cell
Gamida technology is focused on using nicotinamide (NAM) to improve stem cells' therapeutic potential.
The company currently has 2 treatments in development:
- Omidubicel: a stem cell therapy replacing cancerous cells in bone marrow with healthy ones. NAM-enhanced stem cells have been shown to increase survival rate, with a lower risk of dangerous infections.
- Omidubicel PDUFA date is fixed at May 1, 2023, which puts the possible acceptance by the FDA to 6-10 months later.
- GDA-201: a modified white cell therapy for other cancers, like non-Hodgkins lymphoma, myeloma, etc…
Gamida treatment could save thousands of patients who cannot find marrow donors. It also has an already built and inspected manufacturing facility.
In the last quarter (Q3 2022), the company had $62M in current assets. Net loss for the quarter was $17M. The company issued $14M worth of shares in Q3 2022. Some additional dilution is likely due to $72M in convertible debt.
Gamida is a more speculative bet, as it has fewer products in its pipeline and more risk of diluting existing shareholders. Therefore, a cheap enough valuation will be important for good investing returns.
Other Companies Involved with Stem Cell Research
Some other companies are working on stem cell therapies but are so large that it is unclear how important to the company profile these therapies are.
AstraZeneca and Sanofi have advanced stem cell therapy programs and purchased companies in that segment. But with such giant pharmaceutical companies, the core business of blockbuster drugs will likely stay the main driver of future income.