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Technology (OTC BB: ACTC): The Next Frontier
The more I learn about the potential
for Stem Cells, the more excited I get about the future of medical
therapies. I just hope I live long enough to be treated with Stem Cell
when my heart, liver, eyes, or kidneys fail. Or, perhaps my future holds
the challenges of Parkinson's or Alzheimer's, and Stem Cells hold
out the potential for a cure.
The current generation of new drugs
in the FDA Pipeline offer the promise of extending life for those with
terminal illnesses 10% beyond current therapies. Stem Cells hold
of the promise of a true cure. This is breakthrough medicine.
Stem Cell stocks were all
the rage until the Bush Administration took a rather Draconian view of
what they were willing to support through NIH funding. Adult stem cells
are not controversial. Embryonic stem cells, the far more robust version,
are controversial on moral issues as they are derived from embryos.
New technologies are emerging that
will quiet the fears of all but the very radical right wingers. Embryonic
Stem cells have recently been developed without any harm to the developing
embryo in a mouse model. Embryonic stem cells, blueprinted with your DNA,
are also being extracted from unfertilized eggs- I'm pretty sure even the
most radical right wingers would not object to the use of early stage unfertilized
embryos, often donated from IVF clinics.
At any rate, I don't want today's
idea to turn into a moral debate. I want you to learn about a company with
some of the best cutting edge Stem Cell technology and one of the
strongest scientific management teams in existence today.
And- more importantly- the stock
is cheap, cheap, cheap. It is so blown out it probably has no where to
go but up. Read on.
Medicine: A True "Cure"
I'm going to attempt to take what
should be a very complex 50 page research report and condense it down to
a five minute read anyone can understand. It's the most challenging part
of this work. I'm sure there will be readers who recognize some scientific
faux pas, but the concepts are described soundly.
ACTC is focusing on Stem
Cell therapies for three maladies: 1. Age related eye diseases, 2.
Heart repair and blood disorders, and 3. Dermal repair for burn victims
and skin disease. The company has selected these three arenas because there
is unlimited demand for better therapies, and the scientific research suggests
this is the path of least resistance.
If proven successful, these treatments
will not be new drugs that provide temporary relief or some small measure
of improvement. Stem Cell therapy has the potential to represent
a real cure. Stem Cells have the ability to differentiate into new,
healthy cells, thereby providing the potential to replace the damaged,
non-functioning cells. Hence the term "Regenerative Medicine"- healthy
cells are literally regenerated and replace damaged cells.
Here's a graphic that demonstrates
a simplified version of the ACTC process. It all starts with an
eight cell entity called a "Blastocyst". A Blastocyst can be derived from
any human egg, often donated or obtained from an IVF (invitro fertilization
Scientists at ACTC can extract
pluripotent stem cells from a Blastocyst, and cultivate them. A
pluripotent stem cell can morph into any kind of cell in the human body.
Through "Differentiation" scientists
at ACTC coach Stem Cells to naturally develop into specific
cells to be used as therapies for various specific ailments. The graphic
shows heart cells, liver cells, brain cells, blood cells, and intestinal
Now- here's the part that blew my
mind: Here's how the scientists at ACTC are dealing with potential
rejection or non-compatibilty issues. The human egg can be infused with
anyone's DNA- this is the first step in therapeutic (not human) cloning.
From there the Blastocyst can be developed into a patient specific Stem
Cell line. ACTC can then drive embryonic stem cells and differentiated
cells that are a perfect patient match.
In fact, last year the scientists
at ACTC were able to infuse a mouse's egg with DNA, extract a single
Blastomere, re-implant the egg, and a healthy mouse was born. The event
was covered in a feature article in the NY Times, and you
can access the article and read it by simply Clicking
A very futuristic view of Stem
Cell therapy would include individuals having their own embryonic stem
cells being created from their own DNA, and being stored for use in the
event of illness, accident, or disease.
A more practical view of the future
suggests that 100 to 150 Stem Cell lines could be "banked" and would be
compatible with 80% of the population.
The research at ACTC is being
directed by several of the most high profile names in the Stem Cell
world. Dr. Michael West, a pioneer in the field, and Dr. Robert
Lanza, are two of the real innovators in this industry. Investors can
expect continued media publicity of some sort down the road from this team,
and their staff of scientists. Dr. West was the founder of Geron
Corporation (NASDAQ: GERN), the largest public company in the Stem
Cell arena and was involved in the earliest collaborations that first isolated
the human embryonic stem cell. He served as the senior executive officer
of Geron from 1990 to 1998. Dr. Lanza is perhaps one of the most heavily
published researchers in the stem cell space and recently edited a key
2006 text book “Essentials of Stem Cell Biology”.
Don't Like This One: I Love It Right Now- Here's Why
Here's an 6 month look at the trading
history of ACTC. As of today's close, ACTC is trading
within a few pennies of a new all time low. Can you spell "nowhere to go
but up"? There are reasons the stock is down to this absurdly oversold
level, and once you understand the reasons you may agree the stock is long
overdue for a rebound.
The first noteworthy event on the
chart is the big breakaway a gap and spiky run in the stock last October.
That move happened in conjunction with the publication of the NY Times
article which you can read by referring back to the link above. In light
of the kinds of research going on at ACTC, this is the kind of event
that could easily happen in the future. All this stock needs is more volume
and a larger audience to maintain a much healthier trading pattern.
The next trading event of note I
have circled on the chart is the recent swoon on huge volume. That volume
bar is enormous. It is the highest volume day on the chart. The stock was
hit with a double whammy on that day. First- under Rule 144, shares purchased
directly from the company that have been held for a year were eligible
to trade freely in the open market. Shares issued a year ago at $.85 came
free trading on and around that day. 1/2 million shares were filed for
sale on March 6th alone. This was a one time event.
There was also a second financing
done in September which explains another burst of excess supply. ACTC
raised $18 million. According to the terms of the financing, after a period
of six months, $750,000 must be paid back each month for the foreseeable
future. Every month ACTC has the option to either issue $750,000
worth of free trading stock at the market price, or write a check for $750,000.
Therefore, ACTC investors can expect the market will need to absorb
$750,000 worth of stock each and every month for some time. That's about
$30,000 worth of stock each and every trading day on average. The financiers
in this group can be depended on to sell every single share the moment
they are available. This factor could make for some interesting oversold
opportunities each month depending on volume levels. On the plus side,
is now armed with about $14 million in cash. More capital
will be required to further the research down the road.
Both of these sources of supply hit
at the same time. ACTC's stock price has suffered, and is long
overdue for at least a technical trading bounce in my view. Volume has
dropped considerably, suggesting everyone who wanted to sell has done so.
In the short term, I expect the stock
to bounce nicely. Shareholders might enjoy the occasional spiky surge associated
with publicity. Longer term, I would expect the stock to trade very well
when Wall Street turns its attention back to the Stem Cell companies.
The Bush Administration's policies put a damper on Wall Street's enthusiasm
for these stocks. However, the promise of Stem Cells will overcome
the political climate. Many high profile conservatives including Nancy
Reagan, Orin Hatch (Utah Republican), and Arlen Specter (Pennsylvania Republican)
support Stem Cell research.
The current swing to the right in
US politics appears to be weakening as the war with Iraq drags on. Mid
term elections in the Fall should mark the beginning of a move back towards
the left. California, the world's 12th largest economy and a trend setting
state, voted to support a $3 billion bond for Stem Cell research. Temporarily
tied up in court, most observers feel it will move forward by the end of
the year. That event could be the catalyst that brings Wall Street money
pouring back into these stocks. At that time, all ships will rise with
the tide. You can reserve first class accommodations at bargain basement
Look for a new Blog section
on ACTC soon for comments, questions, and answers.