Osiris and Aastrom: the Best Stem Cell Plays

by Andrew Vaino

I’ve resisted recommending stem cell stocks. While I’m still not a huge fan of them, I think it might be worth owning at least one as part of a diversified biotech portfolio. With all the media hype surrounding stem cells, I have no doubt everyone is aware that they are cells that have yet to acquire specific characteristics. Theoretically, stem cells could be used to regenerate any tissue. That would be pretty powerful.

I think there are some parallels between stem cell companies and companies engaging in RNAi drug discovery. That is, the idea is great, but implementation still remains elusive. I wrote in September that I thought RNAi discovery company Alnylam Pharmaceuticals (ALNY) was trading too high, and that the price was being buoyed by hype. The Market, however, disagreed, and has pushed the stock up over 50% since then (I did recommend waiting until ALNY’s technicals degraded, which they haven’t, before shorting). I remain convinced I’ll be right on ALNY this year. In the meantime, buying into some stem cell hype is probably a smart move.

In my opinion, the best stem cell company right now is Osiris Therapeutics (OSIR). They went public just last year, and the stock price has doubled since. They are looking at three different products in clinical trials, and have a product, Osteocel, on the market to aid in bone regeneration. As I mentioned, I think this is the best of the stem cell companies, but would not recommend buying until the price retraces a bit.

Other stem cell companies include Viacell (VIAC), StemCells (STEM), and Aastrom (ASTM). While none of these companies is going to the profitable any time soon, they are likely to trade higher based on hype.

Of the smaller stem cell stocks I think Aastrom has the best pipeline. They will soon announce results of a one year follow up on a Phase 1/2 clinical trial for bone regeneration, have an ongoing Phase 1/2 study underway for spinal fusion, and completed a small trial in Spain for patients required bone regeneration prior to dental implantation.

So, I think OSIR is the best of breed stem cell company, but am a bit concerned it’s trading too high. At less than $1.50 I think ASTM (which is looking to close the week off 10%) is a good, highly speculative, stem cell play. This is certainly not a long term investment, and I would look to cash out when the stock takes an inevitable bump on hype in the next couple of months.

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