NEW YORK (Dow Jones--The Food and Drug Administration's clearing
the way for Geron Corp. (GERN) to conduct the first human trial of
an embryonic stem cell treatment is just the beginning of a long
journey for the company and the entire field of stem cell
research.
The move signals that such therapies are moving forward, easing
investor concerns about political resistance and lifting shares of
Geron - by more than 50% Friday - and other stem cell companies.
However, the realization of such therapies and their hoped-for
regenerative properties still will take years, if not decades, and
face a tough road to get to the market.
"We view this as a significant achievement for Geron and believe
it will prove to be a major catalyst to stem cell research," said
Lazard Capital Markets analyst Joel Sendak.
Geron shares recently rose $2.72, or 52%, to $7.93 on heavy
volume. Other stem cell-related companies are getting a boost, too,
including Stemcells Inc. (STEM) shares up 54 cents, or 25%, to
$2.69, Neuralstem Inc. (CUR) up 17 cents, or 12%, to $1.60 and
Aastrom Biosciences Inc. (ASTM) up 14 cents, or 28%, to 66
cents.
Despite rallying on indications of a friendlier regulatory
environment, those other stem cell companies may not necessarily
gain a direct benefit from the FDA's decision.
"You can't copy off of other people's homework," Needham &
Co. analyst Mark Monane said, noting that those companies will have
to work with the agency in getting products into trials.
Embryonic stem cells are building-block cells that differentiate
into more specific cells, and their use is hoped to regenerate
cells that can't be replaced because of injury or disease.
Geron's drug, called GRNOPC1, contains living cells that help
restore nerve fibers and myelin, which is a protective sheath that
protects nerves in the central nervous system. Repairing the nerves
could lead to restoration of sensory function or use of
extremities.
To be sure, Geron's treatment is still in the very early stages
and has many hurdles before reaching the market or even being
proven effective.
The Phase I study is intended to study the safety of the drug in
humans and will be given to eight to 10 patients with recent severe
spinal cord injuries. As a secondary measure, the data will measure
effectiveness of the drug, which has shown effectiveness in
rats.
In a conference call Friday, Geron said it hopes to add one
patient per month, beginning in the early summer.
"The clinical development is tough. It is going to be a very
long course to go forward," said Monane, who upgraded the stock to
buy with a $9 price target. He believes that Geron's preclinical
research is strong, but that the company won't be able to conduct
early pivotal trials that allow for application of marketing
approval, because it is an entirely new class of treatment.
"Now it is an execution story," he said, noting that Geron's
platform is the type of technology that could attract the interests
of a large pharmaceutical company.
Thomas Okarma, president and chief executive of Geron, said the
company is always in conversations with potential partners but
stressed it isn't interested in partnering its products prematurely
before their clinical value is fully demonstrated.
In the call, Okarma said the FDA's move likely surprised many in
the industry, specifically pointing to larger pharmaceutical
companies, who thought that human testing was five or six years
away.
He said that those same companies also were slow to realize that
monoclonal antibodies - which are antibodies mass-produced in the
lab to recognize an individual molecular target - could be a
marketed therapy.
Such drugs, including Genentech Inc.'s (DNA) Avastin and Eli
Lilly & Co.'s (LLY) Erbitux, which both fight cancer, have
proven to be blockbusters in recent years.
The FDA's decision also was surprising because Geron's
application was put on clinical hold in May.
Rodman and Renshaw analyst Ren Benjamin said the quick
resolution of the hold is a "testimony to Geron's expertise in the
field of embryonic stem cells and highlights the company's close
working relationship with the FDA."
He notes that both factors will be helpful in moving such a
pioneering therapy through the clinic and getting cleared by
regulators. Benjamin also upgraded Geron to outperform with a $9
price target.
WBB Securities analyst Stephen Brozak believes the previous
clinical hold was driven by influence of the Bush administration,
though the company asserts that the timing is only
coincidental.
Congress banned the use of federal funds to create or destroy
human embryos solely for research purposes since 1996. In 2001,
President Bush loosened the restriction slightly by allowing
federal funds to be used for research on a few then-existing
stem-cell lines. Those limits were still viewed as restrictive to
research by many in the field.
Brozak expected the new administration would create a regulatory
environment more conducive to Geron.
"Though we anticipated that a new presidential administration
would reverse the FDA obstruction of [embryonic stem cell]
therapies, we never imagined the decision would come within three
days of the presidential inauguration," Brozak said.
Being first has its advantages for Geron, but it also has its
pitfalls.
"It is a two-edged sword," Monane said. "It is a new
opportunity, a new platform, but on the other hand the rules are
being written as they are going along, and that is the challenge
going forward."
-Thomas Gryta; Dow Jones Newswires; 201-938-2053;
thomas.gryta@dowjones.com
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