Who Will Benefit From Renewed Stem Cell Push

January 23, 2009

Coinciding with President Obama's election, the FDA lifted restrictions put in place during the Bush years on human embryonic stem cell therapy.

Stem cells are classified based on their ability to regenerate and their potency through cell division. Most multi-cellular organisms have stem cells.

The ethical debate over stem cell studies has garnered significant attention over the years. The scientific community has, for the most part, trumpeted potential benefits that could be garnered from further development of stem cell research.

The primary impediment to funding embryonic stem cell research has been the right to life movement. Pro-lifers site the requirement for an embryo to be destroyed in order to start a stem cell line amongst their grievances.

Former President George Bush was an advocate of restraining embryonic stem cell research, a stark contrast to newly-elected President Obama. Prior to the Bush years, in 1993, President Clinton gave the National Institute of Health the right to provide federal funding for embryo research.

Obama's election sets the stage for stem cell research companies like Geron Corp (GERN), a silicon valley-based biotech firm, to reap the benefits of a policy shift. Geron could be one of the only publicly traded firms with access to federal funding for stem cell lines. Reagent supplier Life Technologies (LIFE) could benefit as well.

Big name drug makers like Pfizer (PFE), Merck (MRK), Amgen (AMGN), and GlaxoSmithKline (GSK) could enter the stem cell market through limited partnerships after clinical trials show promise.

The more likely destination, as opposed to public or privately traded companies, for federal grants of stem cell research funds will be universities and central institutions.

To Wall Street's chagrin, the bulk of federal funding will probably not flow directly into the hands of public or private firms. Over the next several years, there may be a growth in partnerships between health care sector companies and the academic community.

But the tenuous link between bottom line performances for companies partnering with universities might not pay immediate dividends for investors hoping to get an Obama-boost for stocks that operate in the stem cell segment.