Disruptive technologies, however, are always opposed by the status quo. Opposition comes not only from businesses that are replaced and disrupted. Elements of the public itself are threatened psychologically by major change. We see this in the active resistance to even clearly beneficial technologies. Genetically modified food crops are a prime example. Though modified varieties of rice and grains dramatically improve lives in the Third World, they are virulently opposed by parts of the environmental movement that view genetic engineering as a crime against nature.

Regenerative medicine also has its opponents. They are more likely to have religious than environmental grounds for their opposition. We have seen this, unfortunately, in the administration’s general pressure on various executive agencies to discourage stem cell research.

The FDA’s recent refusal to allow stem cell company Geron to proceed with trials of its spinal cord therapy is just one example, but its impact has been enormous. This is not the time for transformational investors to flee regenerative medicine, though. More than ever, it is critical that you make stem cells part of your diversified portfolio of breakthrough stocks. As I’ve said many times, we can afford to lose on some of these as long as we hold the winners. Transformational stocks show profits in the tens of thousands of percent, not the single-digit averages that most successful portfolios boast.

Remember, the great transformational investors have always bought when the public has given up hope. This is one of those times. Nevertheless, I’ll admit that I’m more than irritated by the FDA’s decision. There is no shortage of spinal cord injury patients willing to risk side effects to move the science forward.

The FDA’s justification for preventing their treatment is that Geron’s cells are not proven to be pure. Even if true, it’s unlikely that the consequences would be as severe as paralysis. Quadriplegia is usually an early death sentence, and the U.S. spends over $5 billion per year caring for sufferers.

This is a good time to review the transformational tech cycle. Many economists have addressed this pattern. Here, though, is the version used by tech-consulting research giant Gartner:

On Gartner’s chart, we’re on the rising “slope of enlightenment.” Evidence comes from the sixth annual meeting of the International Society for Stem Cell Research that took place in Philadelphia this June. In the short history of the event, everything about it has changed. Attendance has gone from a few hundred to thousands of working scientists from around the world. More importantly, the mood and outlook of stem cell researchers has wholly changed. The reason is the flood of breakthroughs since last year’s ISSCR meeting. Let’s recap.

Last year, three different research groups reprogrammed normal mouse skin cells to an embryonic state. Though the use of viruses made the technique unacceptable for humans, some of these cells were used to produce healthy mouse clones. This proved that stem cells can be derived from adult cells. Skeptics, however, pointed out that rodent cells are very unlike human cells.

Then, researchers at the Oregon National Primate Research Center produced a new stem cell line using adult monkey cells. This muted most of the doubters. Then, in November, two separate groups announced the creation of completely programmable stem cells from adult human cells.

Just this February, completely programmable pluripotent stem cells were created using cells from an adult mouse’s liver and stomach. Unlike mice born from embryos in the previous experiments, those created with these cells were much more likely to be healthy. The techniques solved some of the health risks associated with human therapies and have spurred further research.

I’ve talked personally in recent months to a number of stem cell researchers, including the leading lights. Most believe we’re closing in on a solution to the large and growing problem of heart failure. Specifically, the solution is growing new muscle cells (recapitulating embryonic myogenesis) within the heart (cardiomyoplasty) via stem cells.

This would, in effect, deliver a brand-new heart. At the same time, this will reline the vascular tree to repair endothelial dysfunction, such as that seen in coronary disease and stroke. Leading researchers expect a breakthrough to occur in the next five years, even if they’re not going on the record.

Until next time, here’s to transformational profits.

Patrick Cox
July 30, 2008

P.S.: I just got word from HQ up in Baltimore that we are launching my brand-new alert service, Breakthrough Technology Alert, over the weekend. You have no idea how excited I am. Currently, I’m sitting on seven big money ideas. Any one of them could end up being the next Google or Pfizer. So be sure to check your inbox this weekend. We’ll be sure to let you know when it’s all set.

Investing in Stem Cell Technology was originally featured in the Penny Sleuth.