Cell to buy?
Brainstorm Cell Therapeutics is one of the interesting but highly risky stem cell companies worth watching.
Shlomo Greenberg
Today, I return again to the wonderful world of stem cells. It turns out that WallStreetResearch has conducted an in-depth study on one of the small Israeli companies that have appeared on Wall Street in recent years.
WallStreetResearch examined Brainstorm Cell Therapeutics Ltd. (OTCBB:BCLI), which is traded at $0.45, reflecting a market cap of $10 million. Brainstorm is one of several small Israeli companies that have been trying to develop therapeutic platforms based on stem cells. The uniqueness of stem cells is that they can be turned into the desired type of cell. Unlike liver cells, for example, which are only suitable for liver tissue, stem cells adapt to the tissue into which they are implanted, and this, to put it mildly, creates great hope that stem cells will cure immense medical problems that are presently incurable.
Besides Brainstorm, other small Israeli companies on Nasdaq are trying to turn this dream into a reality. These companies live from hand to mouth, and barely survive from one quarter to the next. They are all financed from repeated issues of shares, convertible bonds, and options, which constantly dilute their shareholders’ stakes. Nevertheless, so long as the dream is alive, there is financing. True, the terms are tougher, but they exist. Why do people hold onto the dream? Because that’s how people are built. Where there’s a dream, there will be people to finance it, and crazy people who will sell their soul to the devil provided that they’re development pioneers.
It should remembered that alongside all these small public companies, extensive stem cell research is being carried out. The bulk of this research is conducted at universities, but a large part is also sponsored by pharmacology and biotechnology companies, as well as mere research companies that pour tons of money into realizing this concept. Brainstorm, for example, had $585,000 in cash at the end of 2005, which is the amount that the company will have to survive on for 2006, 2007, and afterwards. After all, no one expects the company to show a profit in the foreseeable future.
It’s no wonder that WallStreetResearch warned its readers about the high level of speculation in the share. In general, Brainstorm Cell is trying to develop stem cells to treat neurological diseases such as Parkinson’s, ALS (Lou Gehrig’s), and multiple sclerosis. In cooperation with RAMOT - University Authority for Applied Research & Industrial Development Ltd. (Ramot at Tel Aviv University Ltd.), Brainstorm is trying to turn bone marrow cells into brain cells.
The method is derived from research by Prof. Eldad Melamed, chairman of the Deptartment of Neurology, Rabin Medical Center (Beilinson Hospital), and Dr. Daniel Offen, of the Felsenstein Medical Research Center of Tel Aviv University. The research is now at the animal testing stage, in order to determine the risks and effectiveness of NurOwn, the product developed by the two men.
Treatments for neurological disorders had a turnover of $5.7 billion worldwide, including $2.4 billion in the US in 2004, and is projected to exceed $10 billion is the US alone in 2013. There are plenty of competitors, companies large and small, including Israel's Gamida Cell Ltd., a joint venture of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) and Elbit Medical Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT).
WallStreetResearch mentioned Brainstorm Cell interim CEO and COO Yoram Drucker, an experienced businessman with a background in real estate and diamonds, rather than science, who took over the reins of the company in late 2004. Drucker is also a director of Pluristem Life Systems Ltd. (OTCBB:PLRS), another company trying its luck with stem cells.
Early this year, former M-Systems Flash Disk Pioneers Ltd. (Nasdaq: FLSH) corporate controller David Stolick joined Brainstorm Cell as CFO. Dr. Offen, Prof. Melamed and Dr. Avinoam Kadouri, all giants in the field, are science advisors.
Brainstorm Cell’s share reached $3.50 early last year, and not because of any commercial achievements. Investors’ holdings have since been diluted, and, as things stand now, this trend will continue. For someone who did not buy the share at $3.50, is it worthwhile buying it at $0.45? No. This share is worth buying at either $3.50 or at $0.45 only for people who know what they’re getting into. If the company has trouble raising money in the near future, its share might be expensive now. One must be aware that there are great risks.
Published by Globes [online], Israel business news - www.globes.co.il - on March 29, 2006
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