Stem cell stocks up ahead of decision
By Ted Griffith, CBS.MarketWatch.com
Last Update: 1:34 PM ET Aug. 9, 2001
NEW YORK (CBS.MW) -- Shares of companies involved with stem cell
research moved sharply higher Thursday ahead of President Bush's
scheduled announcement on whether he'll allow federal funding for the
promising -- but controversial -- research.
It's not known yet what the president's position will
be, but some biotechnology analysts and portfolio
managers were speculating the president would stop
short of imposing the stringent rules that, as a
candidate, Bush had said he favored.
"I wouldn't be surprised if he settled on a
middle-of-the-road compromise and set up a
commission to study the issue further," said Joe
Duarte, president of River Willow Capital
Management, a Dallas-based money management
firm. "My guess, and it's only a guess, is that he will
give a little on this."
Some investors, betting Bush's decision will be
favorable to the emerging field, scooped up shares of
companies with any ties to stem cell research.
Shares of StemCells Inc. (STEM: news, chart, profile)
surged $1.23, or 26 percent, to $5.96 and shares of
Geron (GERN: news, chart, profile) rose 78 cents, or
6 percent, to $13.68. Shares of Aastrom Biosciences
(ASTM: news, chart, profile) posted the biggest percentage gain, rising 58
cents, or 32.4 percent, to $2.37 in recent trading.
Last year, then-President Clinton settled on a measure that allowed scientists
receiving federal funds to perform research on embryonic stem cells. Under
Clinton's plan, federally funded researchers could harvest stem cells from
embryos that would otherwise be discarded by fertility clinics.
During the campaign, Bush had said he would ban altogether the use of federal
dollars for embryonic stem cell research. But Bush has spent recent months
studying the issue further, meeting with both supporters and opponents, and
some observers believe he'll settle on a compromise that leaves an opening for
scientists receiving federal funding to continue with the research. Bush is set to
announce the highly anticipated decision in a nationally televised address from
his Texas ranch at 9 p.m. Eastern time.
But experts cautioned Bush could still choose to adopt an all-out federal funding
ban, which would be seen as a major blow to the field and companies working
with stem cells.
Stem cells are immature cells that have the potential to develop into any type of
tissue. Theoretically, scientists could use the cells to restore damaged organs
and reverse diseases such as diabetes and Parkinson's. Stem cell research is,
however, only in its early stages and there is no guarantee it will lead to new
disease treatments.
The embryonic research is also highly controversial because it involves
destroying human embryos to get the stem cells.
While anticipating a compromise, fund manager Duarte said investors should
understand that it's possible Bush could still opt for an outright ban.
"These stem cell stocks could get hurt badly if the decision is seen as being
negative for the field," said Duarte, a physician by training and the author of a
book on biotech investing.
Bennett Weintraub, vice president with Btech Investor, a biotech investment and
consulting firm, said investors should also realize that stem cell research will not
immediately yield breakthroughs in the treatment of disease. He called the field
"promising" but said the medical benefits are years away.
Weintraub also noted that there are questions about how the stem cell
companies will earn profits from their work.
"It's a different kind of business model," he said. "It's untested."
Weintraub said investors may want to spread out their buying among several
stem cell stocks, but he warned against betting heavily on any one company in
the field.
"It's not clear which company is going to be the winner," Weintraub said.
Ted Griffith is a reporter for CBS.MarketWatch.co
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