Sunday 3 November 2013

Biotech Buzz Post No. 24 - ISCO

International Stem Cell (ISCO.OB) has devised another method for harnessing the power of stem cells without the ethical issues.            

International Stem Cell (ISCO.OB) – Something for the movers and shakers

'When a man says “I cannot”, he has made a suggestion to himself. He has weakened his power of accomplishing that which otherwise could have been accomplished'Muhammad Ali (1942 -    ), US boxer and famous Parkinson’s patient.


One of the things I love about biotechnology investing is that companies you’ve never heard of trading at next-to-nothing can get a few things go right in terms of their technological and clinical development, and suddenly get a massive re-rating. Down here in Australia it happened not long ago to a Central Nervous System (CNS) drug developer called Neuren Pharmaceuticals (ASX: NEU). Last year at Bioshares, the premier meeting for biotech investing in our region, I sat on an analyst panel where I named Neuren as my top pick for the next twelve months. The stock was 2.2 cents at the time, capitalising the company at A$26m. A year later, at Bioshares 2013, the stock had made it to 7.6 cents. It’s since been as high as 13.5 and now it’s 11 cents. If you want to know what’s gone right for Neuren, check out what I consider to be an important paper on that company’s web site. If you want to learn about a US company that’s about as cheap today as Neuren was 15 months ago and also has CNS potential, read on.

The first thing to like about International Stem Cell Corporation is the name.  This obscure biotech company from the affluent San Diego locality of Carlsbad isn’t just any stem cell company, it’s an international stem cell company. Clearly whoever picked that out-sized name has ambition and a bit of chutzpah given that the stock trades over-the-counter and is only capitalised at US$20m. However rebranding tricks like this have actually worked in the past, such as when a fellow named Watson changed the name of his company from Computing Tabulating Recording Company to one you’ve probably heard of - International Business Machines. That said, in order to keep a straight face I will now refrain from the use of the word international and just call the subject of today’s Blog post ‘ISCO’. In case you're wondering, Carlsbad, Ca. got its name in the 19th Century when the water was found to be equivalent to that available at its namesake Bohemian spa town, now called Karlovy Vary. 

But I digress. The second thing to like about ISCO is what the company is working on - a proprietary type of pluripotent stem cell called a ‘parthenogenetic’ stem cell. Pluripotent stem cells are the kind that can give rise to all tissue types rather than just a few, which is what multipotent stem cells can do. Traditionally scientists looked to human embryos in order to get stem cells with pluripotentcy, something social conservatives like me aren’t crazy about. The story of the last decade or so in the stem cell world has been the search for pluripotent stem cells that don’t involve embryo destruction. I looked in this Blog at one such successful approach from a company called Advanced Cell (ACTC.OB) on 4 September. ISCO has another non-embryo approach, and the ‘partheno’ part of the name gives it away. Parthenos is the Greek word for virgin (eg the Parthenon in Athens is so-called because it was sacred to the virgin goddess Athena) and parthenogenetic stem cells are egg cells that have been activated to be pluripotent without their having been fertilised. Literally, they have a virgin birth.

ISCO unveiled its human parthenogenetic stem cells (hpSCs) in 2007 and 2008 in two papers in the journal Cloning & Stem Cells (click here and here), now called Cellular Reprogramming. In a sense, the activation part of the ISCO technology was nothing new. We’ve known since the 1930s that at the moment of conception when spermatozoon fertilises oocyte (ie sperm penetrates egg) the result is oscillations in the intracellular concentration of calcium to be found in the oocyte. These oscillations help activate the oocyte so that it is capable of the multiple cell divisions required to create an embryo. In the mid-1970s scientists figured out that oocyte activation could be induced using calcium ‘ionophores’ designed to carry calcium ions across the cell membrane (click here), and this approach is sometimes used in IVF treatment today. What ISCO founder Dr Elena Revazova and her colleagues (mostly of Russian origins), were able to do several years ago was perfect a proprietary oocyte activation process (click here) that would allow blastocysts from the resulting ‘parthenotes’ to be harvested and embryonic stem cell lines derived therefrom. You could say they were embryonic stem cells even if they didn’t come from embryos because they had the typical morphology and pluripotency markers of such cells.

The really important thing to take notice of regarding ISCO’s method of creating parthenogenetic stem cell lines is that you can get lines that are ‘homozygous’. For transplant purposes people can be considered a genetic match if they have the same suite of Human Leukocyte Antigens on Chromosome 6. We all carry around two sets of HLA ‘haplotypes’, and each of our offspring gets one haplotype from us and one from the other parent. If you receive the same haplotype from each parent you’re considered to be ‘HLA homozygous’ while people with different haplotypes from each parent are ‘HLA heterozygous’. HLA homozygous individuals make the best tissue donors because you only have to match one haplotype between donor and recipient to get a match. Since parthenogenetic stem cells are fatherless, they are HLA homozygous.  As of earlier this year ISCO had a collection of fifteen human parthenogenetic stem cell lines, three of which were created under cGMP conditions. Between these lines there were enough haplotypes to implant the majority of the US population and not get serious immune reactions. This means that ISCO has, theoretically, the makings of a serious stem cell therapy – cells that are pluripotent, inexpensive to make, ethically uncompromised and easy to administer once some basic tissue typing has been done.

ISCO is looking at the use of its hpSCs in liver and eye disease, but the most advanced work involves hpSC-derived neuronal cells for the treatment of Parkinson’s Disease, where ISCO hopes to file an IND and start clinical work next year. Parkinson’s is a lucrative market for anyone that can get anything to work. There’s over a million Parkinson’s patients in the US alone. There’s no cure, and symptomatic treatments like levodopa and the dopamine agonists stop working after a while, leaving only expensive Deep Brain Stimulation for the worst affected patients. Stem cells seem an obvious solution because it’s the dying out of the dopamine-producing neurons in the part of the brain called the substantia nigra that cause the disease in the first place. ISCO has shown, in a January 2012 paper in the journal Regenerative Medicine, that its parthenogenetic stem cells can differentiate into functional neurons (click here). The company believes that its cells can treat Parkinson’s, not just by differentiating into dopamine-producing neurons, but also by pumping out neurotrophic factors like GDNF and BDNF. So far the in vivo evidence is encouraging. In February 2012 ISCO announced that its cells had performed well in the standard 6-OHDA model of Parkinson’s and in March the company presented data at American Academy of Neurology Annual Meeting in San Diego on the beneficial effect of their cells in monkeys in terms of dopamine levels in the brain. At the American Neurological Association's 2013 Annual Meeting in New Orleans last month ISCO presented further monkey data showing that its cells could migrate to the substantia nigra from a substantial distance, and that they were differentiating there into the required neurons. Encouragingly, the immune response to the cells seemed to be low in the monkeys compared to other cell types.

Which begs the question as to why ISCO is only a US$20m company today. I would attribute this to the fact that the CNS has historically been a difficult field in which to do drug development, and clinical data is still a while away for ISCO. Also, the critics will point to the fact that if you put parthenogenetic stem cells into immune deficient mice you get tumour formation, which is what regular embryonic stem cells will do as well (click here). The cancer issue doesn't bother me too much because you wouldn't put a cellular therapy like this into immune-deficient people. I suspect, however, that the FDA is going to want to explore the issue at length in various in vivo models before any IND is cleared.

Another historical issue I see with ISCO is the lack of coherence in the story. I first looked at it this company in 2009 when I was researching Mesoblast comparables. I thought the ISCO web site in those days looked like it came straight out of 1995, and I had found, in working through the site, that pages about parthenogenetic stem cells tended to be overshadowed by pages about skin care (the company has a small business in this field called Lifeline). All this made it hard to say exactly what the company stood for.  When I met Dr Simon Craw, ISCO’s EVP of Business Development, at the Rodman conference in New York back in September, I tried to explain this to him. Craw disagreed that the story had been incoherent and I told him I would listen carefully to his presentation at the meeting. I’m happy to say that ISCO improved on closer inspection in terms of Craw having a straightforward story to tell.

Back in the day, like, December 2010, ISCO made it to US$2.29 per share in a post Global Financial Crisis bull run. Now the stock is 15 cents, having trended steadily back ever since.  If ISCO manages to recover the old ground with the help of good clinical data, I’m happy for Australia to take some credit. Craw, an Englishman, did postdoctoral work at the University of Sydney after obtaining his PhD in Chemistry at Manchester. The best of Australian luck to you, Simon. Like any CNS drug developer today, you’re going to need it.






Stuart Roberts, Australian biotechnology analyst, with global focus
+61 (0)447 247 909
Twitter @Biotech_buzz

About Stuart Roberts. I started as an equities analyst at the Sydney-based Southern Cross Equities in April 2001, focused on the Life Sciences sector from February 2002. Southern Cross Equities was acquired by Bell Financial Group (ASX: BFG) in 2008 and I continued at Bell Potter Securities until June 2013. I joined Baillieu Holst in October 2013. Over the last twelve years I have built a reputation as one of Australia's leading biotech analysts. Before joining Southern Cross Equities I wrote for The Intelligent Investor, probably the most readable investment publication in Australia. I have a Masters Degree in Finance from Finsia. My hobbies are jazz, cinema, US politics and reading patent applications filed by biotechnology and medical device companies.

Previous Australian Biotechnology Buzz posts:
Acorda Therapeutics (Nasdaq: ACOR), 10 October 2013.
Advanced Cell Technology (OTCBB: ACTC), 4 September 2013
Alcobra Pharma (Nasdaq: ADHD), 17 September 2013
Amicus Therapeutics (Nasdaq: FOLD), 22 September 2013
Aradigm (OTCBB: ARDM), 8 September 2013
BioSpecifics Technologies (Nasdaq: BSTC), 26 September 2013
Celldex Therapeutics (Nasdaq: CLDX), 9 November 2013
Cellular Dyamics (Nasdaq: ICEL), 3 September 2013
Exelixis (Nasdaq: EXEL), 17 October 2013
ImmunoCellular Therapeutics (NYSE MKT: IMUC), 27 August 2013
Immunomedics (Nasdaq: IMMU), 21 August 2013
Inovio Pharmaceuticals (NYSE MKT: INO), 24 August 2013
International Stem Cells (OTCQB: ISCO), 3 November 2013
Intrexon (Nasdaq: XON), 24 August 2013
Merrimack Pharmcaceuticals (Nasdaq: MACK), 26 August 2013
Novavax (Nasdaq: NVAX), 3 October 2013
Oncolytics Biotech (Nasdaq: ONCY),  22 August 2013
Pharmacyclics (Nasdaq: PCYC), 2 September 2013
Regulus Therapeutics (Nasdaq: RGLS), 23 August 2013
SIGA Technologies (Nasdaq: SIGA) - 30 September 2013
Sunshine Heart (Nasdaq: SSH), 28 August 2013
Synta Pharmaceuticals (Nasdaq: SNTA), 1 September 2013
TrovaGene (Nasdaq: TROV), 15 September 2013
Verastem (Nasdaq: VSTM), 5 September 2013

Disclaimer. This is commentary, not investment research. If you buy the stock of any biotech company in Australia, the US or wherever you need to do your own homework, and I mean, do your own homework. I'm not responsible if you lose money.


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