Biomedical Sciences Blog

Stem cell breakthroughs too early-stage to shake-up venture capital investing from Big Pharma, analysts say.

NEW YORK (CNNMoney.com) -- The recent breakthroughs in stem cell research, where adult cells were "reprogrammed" to act like embryonic stem cells, are too early-stage to have much influence on Big Pharma's venture capital investments, experts say.

"[The new studies] are really early-stage so I don't think it's really changing the landscape," said Eun Yang, biotech analyst for Jefferies & Co. "I doubt that it's going to chase away a lot of the Big Pharma money. But I'm not sure that people are going to start pouring money into this venture."

Two separate teams of researchers, one from the University of Wisconsin in Madison and the other from Kyoto University in Japan, said on Tuesday that they discovered how to reprogram adult cells to mimic the activity of embryonic stem cells.

If this new technology continues to work in later-stage studies, it could theoretically sidestep the controversial use of human embryonic stem cells, which have attracted the ire of the pro-life lobby. In 2001, President Bush limited federal funding for human embryonic stem cell research to only those lines that existed at the time, and in June of 2007 he vetoed a Congressional effort to lift these restrictions.

Biotech stocks were volatile in Tuesday trading, after the researchers published their findings in Science and Cell. The stock for Geron Corp., (Charts) the only publicly-traded company that works with human embryonic stem cells, dropped 6 percent. But stock activity was mixed among those biotechs that use stem cells from adult human tissue: Cytori Therapeutics' (Charts) stock went up;Osiris Therapeutics (Charts) and Stemcells Inc. (Charts) went down.

But this stock reaction isn't going to mirror the activities of Big Pharma venture capital investors, analysts say. So far, Novocell Inc., a privately-held biotech specializing in human embryonic stem cells, is one of the biggest recipients of venture capital investment, to the tune of $25 million from Johnson & Johnson (Charts, Fortune 500) in July.

"[Novocell] would make an interesting acquisition target if J&J wanted to rapidly enter the sector," said Dr. Cathy Prescott, director of the biotech consulting company Biolatris, in an email to CNNMoney.com. "[If Novocell's experiments] make good progress in the clinic then I would predict that the company would be able to raise future capital."

Source: Aaron Smith, CNNMoney.com