Friday, October 16, 2009

ISCO Eyes See Path to Huge Profits by Patrick Cox

The attached article appeared recently in an independent journal, Agora Financial ( and we thought you would be interested. The author, Patrick Cox, is a very astute follower of the regenerative medicine field.

Dear Breakthrough Technology Reader,

The important Nobel Prize news last week was the recognition of three American scientists for their role in the discovery of telomerase. More attention was garnered by the rather puzzling Peace Prize award, but that has become routine. The five Norwegians who pick the Peace Prize winners are specifically selected, it seems, by Norway's liberal parliament primarily to comment on and meddle in American politics.

Regardless, the prize for medicine this year is extremely significant. Telomerase, as you know, is the “immortalizing enzyme,” produced by stem cells. When administered to adult cells, telomerase adds life-extending telomeres to the ends of a cell's DNA. There has been no more important discovery in the history of medicine.

The list of scientists credited with the discovery is sorely short, having ignored the contributions of Dr. Michael West, the CEO of BioTime (BTIM: OTCBB), and other critical researchers who have made crucial contributions to the current state of the science. I'm glad, however, that the award will help bring attention to regenerative medicine.

As more people learn what regenerative medicine can do, it will attract additional capital and accelerate progress. It will also, of course, push up the value of companies that hold important patents covering telomerase and other stem cell technologies.

The most important patents associated with telomerase and stem cells are already in our portfolio. Geron (GERN: NASDAQ) is the most obvious, with specific patent rights to telomerase. It's not the only company with critical IP in this area, however. This week, I'd like to update you on recent developments with another of our extremely important stem cell companies: International Stem Cell Corporation (ISCO: OTCBB). Once again, this is a longer alert than the usual weekly update, but ISCO is one of our most important stocks and it warrants a little extra attention.

ISCO's Parthenogenic Patent Strength

International Stem Cell, as I've explained before, holds all the major patents regarding parthenogenic stem cells (hpSCs). This alone makes the company worthy of investors' attention. Virtually every other stem cell company will share some future revenues, at least, with the Wisconsin Alumni Research Foundation, holder of certain basic SC patents. Moreover, ISCO already has an established laboratory supply business, Lifeline Cell Technology, that is on track to cover the expenses for the entire company. This is NOT a struggling company.

The big deal about ISCO, however, is its parthenogenic stem cell technology. These cells are derived from unfertilized ovum. They have only half the normal DNA and are, therefore, much, much easier to HLA match to minimize or eliminate immune reactions. They also have a huge near-term marketing advantage in that these cells have nothing to do with embryos and are, therefore, more acceptable to consumers who have ethical objections to the use of cells that could theoretically become embryos.

Of course, with the rise of iPS technologies, virtually any cell in your body could be transformed into an embryo. That, however, is a story I don't have the time or space to deal with today, though it is a fascinating story.

HLA, incidentally, is the acronym for human leukocyte antigens. These antigens determine how your body will respond to transplanted tissue. A close HLA match with a donor assures that transplants are well tolerated. A poor match can result in rejection or require significant immune system suppression, which has all kinds of undesirable side effects.

I think that induced pluripotent stem (iPS) cells are destined to be the “Cadillac” of stem cell treatments. A little of your blood can be used to produce stem cells that exactly match your body, provoking no immune reaction. For some time, however, iPS cells will be high-end therapies and relatively expensive.

The advantage that hpSCs have is that they hold the promise of cheap “off-the-shelf” therapies for a wide range of critical medical conditions. ISCO is working on hpSCs for renal failure, macular degeneration and severe diabetes. The company expects to enter clinical testing for macular degeneration soon. In the long term, they it also plans to produce cells for more dramatic therapies such as heart and vascular tree rejuvenation.

The genius of hpSC technology is that scientists believe it is possible to HLA match 99% of the world's population with a limited number of cell donors. Between 50-100 donors could provide the raw materials that would allow the mass production of incredibly powerful stem cell therapies that require little or no immune suppression. Even when iPS cell technology is developed and automated, in fact, I believe the market for these mass-market SC therapies will remain huge for decades.

Clearly, we're not quite there yet. ISCO needs more time, money and FDA approval. In the short run, however, the company has developed several important strategies for continuing growth.

One, as I mentioned above, is Lifeline. Another product, which has produced huge enthusiasm, is a skin stem cell growth media that ISCO scientists accidentally discovered to be an incredibly effective “cosmeceutical.” To the disappointment of many, ISCO has slowed the development process of this product to assure its safety and efficacy, but CEO Ken Aldrich tells me he expects to see it sold to clinics, at least, by Q1 next year.

Now, ISCO has announced another potential near- to midterm revenue blockbuster. As I've told you before, ISCO can already grow perfectly formed human corneas in petri dishes. Eventually, these corneas should provide hundreds of millions in revenues from the international market, where there are desperate shortages of transplant corneas.

ISCO is on track to filling another huge eye-related market. I'm talking about live animal drug and cosmetics testing.

As you probably know, many drugs and cosmetics are safety tested on the eyes of live animals. This is not only an incredibly expensive process, requiring facilities for breeding and taking care of animals, but it is extremely unpopular with consumers. While necessary, no one likes to think about the bunnies in bondage having potentially dangerous, damaging and painful chemicals put in their eyes. Neither, in fact, do the technicians who actually perform the tests.

ISCO's alternative is to provide actual human eye cells. These artificial eyes would not only have more accurate responses to substances than rabbits and other non-human subjects, they are far less expensive and experience no pain. The company is collaborating with a major provider of biological assay system, Absorption Systems, to get its artificial hpSC corneas pre-approved by the FDA and ready for market.

According to the press release, “The collaboration between the companies is focused on using Absorption Systems’ know-how in creating assay systems to develop superior preclinical methods of testing drugs. Such methods can also reduce the use of laboratory animals currently necessary for other tests, including the very large global commercial need for a reliable and reproducible non-animal method for eye safety testing of consumer products.

“In the past, researchers have grown corneal cells in the laboratory, but ISCO is believed to be the only company to grow a self-assembling corneal construct from parthenogenetic stem cells that is suitable for toxicity testing and possibly suitable for corneal transplants. ISCO’s corneal constructs include cell layers and structures normally found in a human cornea, as confirmed by an independent third-party laboratory.”

Let me be clear. This testing market is worth hundreds of millions of dollars. ISCO is not predicting how long it will take to get its alternative to live animal testing validated by the FDA, but I can't believe the administration will resist this product. I really don't think it will take “years,” simply because of the politics involved. Even the providers of live animals want an alternative to the current technology, because of consumer disapproval of their current testing methods.

If the FDA dared drag its feet on this issue, a phone call to PETA could turn this story into a high-profile political issue that no administration would want to deal with. I consider ISCO's decision to pursue this short-term product more evidence that this brilliantly run company will thrive until it can offer the really revolutionary products, including off-the-shelf SC injections that cure pancreatic, liver and heart disease.

Best of all, ISCO's stock prices have dipped recently, and for no detectable reason. This is a perfect opportunity for people who failed to buy when I first recommended the stock.

For transformational profits,

Patrick Cox
To read the article on the Agora Financial Website, please visit here

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