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Advance Cell
Technology (OTC BB: ACTC); Oversold and Under Appreciated |
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I decided to take another look at
Advanced
Cell this weekend. This stock is absurdly oversold, and could be poised
to bounce off current levels. Overly victimized in the recent market carnage,
it could be easy money for bargain basement shoppers.
The key issue here is Stem Cell
technology. The market has forgotten about Stem Cells in lieu of
all the other headline generators- i.e. War with Iraq, skyrocketing oil
and gold, and inflation (increasing interest rates).
Stem Cells still hold out
the promise to represent true "cures" for the diseases and other health
problems that plague mankind. Human embryonic stem cells are the first
cultured in the laboratory capable of becoming every cell type in the human
body. These little guys don't simply provide therapy to damaged cells-
they have the ability to go in and literally "replace" damaged or diseased
cells with new, healthy ones.
Let's review Advanced Cell's
unique technology:
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 areas because there is unlimited
demand for better therapies, and they have made the most progress in the
clinic in these treatments. They are expected to file their IND with the
FDA for eye disease in just over one year, with the other two IND's to
follow in 2008.
If proven successful, these treatments
won't be new drugs that provide temporary relief or some small measure
of improvement (like a new cancer drug that extends life expectancy by
10%). Stem Cell therapy has the potential to represent real cures.
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
clinic).
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.
Now- here's the part that blew my
mind: Here's how the scientists at ACTC are dealing with compatibility
issues. The blastocyst comes from a human egg. The human egg can be infused
with anyone's DNA, including yours. From there, the scientists can create
a Stem Cell line perfectly matched to your DNA without damaging
the egg. In theory, somewhere down the road, your own fetal stem cells
can be recreated and used to restore any damaged cells in your body, whether
it be disease (i.e. Parkinson's, Alzheimer's, cancer) or accidental (burn
victims, spinal injuries, torn up knees).
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
Here.
This science has multi billion dollar
potential, and for investors who want a piece of the future of Stem
Cells in a microcap stock, this is one of the most exciting situations
you will find. Their science alone is worth far more than the meager $22
million market value the company currently sports.
In my view, it is simply a question
of waiting until the market pendulum swings back to the Stem Cell
sector. Inevitably, it will, since Stem Cell therapy represents
potential breakthroughs unlike any other technology being explored in the
biotech world. Stem Cell companies will probably re-emerge on the
Wall Street radar screens in the Fall in conjunction with the $3 billion
bond offering for funding Stem Cell research in California. It is currently
bogged down in the legal systems, but most observers believe the legal
path should be clear in Q4 of '06.
The chart I've decided to use today
contains a technical measure called a "stochastic". This wave is a good
method for determining if a stock is technically oversold. Historically,
every time the stochastic level has dropped to zero, the stock has rebounded
and moved up.
As covered exhaustively in past editions,
the financiers of this company are awarded $750,000 worth of free trading
shares every month, which leads to fairly predictable sell offs. This month's
"ration" has had an exaggerated effect on the stock price thanks to the
drubbing the market has taken. A kind of "piling on" if you will.
Two of the industries most high profile
pioneers- Dr. Michael West, the founder of Geron (NASDAQ: GERN),
and Dr. Robert Lanza, author of 16 books in his field, direct their
efforts. These guys have pedigrees which lend themselves to companies far
beyond $.85 microcap stocks.
Moreover, this little company's science
has already been covered in two NY Times feature articles. The main stream
press knows about them.
It is a contrarian idea. Stocks are
out of favor, and I haven't heard the phrase "Stem Cells" muttered
on CNBC for months now. This is a multi year idea- one to put in
the long term speculative portfolio and forget about. However, from current
levels, it could be a short term trade as well.
From here, a $.75 SSL (suggested
stop loss) should be considered.
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