CytoTherapeutics’ stock rises with tide of discovery

CytoTherapeutics got an unexpected boost recently when genetic
researchers on the West Coast announced a possible breakthrough in
scientists’ ability to grow human cells.

Stock of Geron Corp. (Nasdaq: GERN) soared more than 150 percent after a
Nov. 6 report by the Menlo Park, Calif., company that it had funded
research that reproduced human stem cells, or precursors to the mature
cells in organs and tissue. News of the discovery rippled throughout a
segment of the drug and biotech industry, including Lincoln-based
CytoTherapeutics (Nasdaq: CTII).

Stock in that company rose 59 percent that Friday, closing at $1.84 3/8
a share. The following Monday, its stock was up 9/32 at 2-1/8 in midday
trading on a volume of 1.4 million shares – an estimated 10 times its
average trading volume.

Geron’s stock price was helped by front-page articles in weekend
editions of The New York Times, The Wall Street Journal and The Los
Angeles Times. CytoTherapeutics got an indirect plug a day earlier, on
Nov. 6, when CBS Evening News ran a story about natural painkillers. The
piece included work by Dr. Fred Burgess, a Rhode Island Hospital
anesthesiologist who was a clinical investigator during U.S. trials of
CytoTherapeutics’ use of adrenal glands from cows to relieve pain in
late-stage cancer patients. However, the Lincoln company wasn’t
mentioned by name.

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Analysts who track CytoTherapeutics were not surprised by the recent
rally, saying the firm is further along than Geron in developing cells
to replace ones in the brain and spinal cord.

CytoTherapeutics is “way ahead” of Geron, said Jim McCamant, editor of
the Medical Technology Stock Letter in Berkeley, Calif. It could be
years before Geron finds a practical application for its research,
whereas CytoTherapeutics is already on the way.

Both Geron and CytoTherapeutics seek to repair or repopulate tissue
that’s been damaged or lost as a result of disease. The difference is
that CytoTherapeutics has already narrowed its research to neural stem
cells, demonstrating the potential to treat diseases of the brain, like
Parkinson’s or Alzheimer’s, or heal severed spinal cords. Geron has
discovered a derivation of human embryonic stem cells “that could be
made into any cell in the human body,” McCamant said.

Geron “has not yet shown how they’re going to differentiate” the stem
cells – or what function they will have, McCamant said. “That’s where
the difficult research lies ahead.”

Elizabeth Razee, a spokeswoman for CytoTherapeutics, said the company is
in “serious negotiations” with a possible partner to finance and oversee
clinical trials for its stem cell program.

She echoed McCamant, saying her company at this point has a leg up on

Geron’s research is “not new in terms of concept and it’s very
preliminary,” she said. “We have already demonstrated it (our research)
in an animal model.”

Geron and CytoTherapeutics are hardly alone in trying to develop
treatments of this kind. But McCamant said he would put CytoTherapeutics
“at the top of the list.”

“They believe that they have — and it certainly seems that way to me — a
very strong proprietary position in the area,” he said.

The company has more than 50 patents revolving around an encapsulated-
cell technology designed to deliver therapies directly to the site in
the body where they are needed.

Peter Jacavone Jr., a financial advisor with Providence’s Barrett &
Company, said the feeding frenzy around Geron came down to timing.
CytoTherapeutics presented its own findings in the area of stem cells at
the annual Meeting of the Society for Neuroscience in Los Angeles on
Nov. 9 “but obviously the hype was already out,” he said.

Chad White, a stock broker at the same company, echoed his colleague.
CytoTherapeutics “was in the midst of beginning to highlight” its own
findings, he said. “I think Geron had just beaten them to the punch.”

CytoTherapeutics reported a third-quarter loss of about $2.8 million,
compared with a loss of about $12.1 million for the third quarter of

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