How much potential is contained in the ability to generate an essentially unlimited number of stem cells without regular donors?
Quite a lot, according to shareholders in Cynata Therapeutics Ltd (ASX: CYP), whose avid purchasing sent the stock up more than 80% yesterday, and 173% in the last month alone.
What could have sparked so much interest?
Cynata announced yesterday that its patented 'Cymerus' process has been validated as suitable for production for therapeutic purposes by Waisman Biomanufacturing in the USA.
According to the announcement, the Cymerus process can develop an effectively infinite number of mesynchmal stem cells for therapeutic use from an 'induced pluripotent stem cell' (iPSC) bank – derived from a single blood donation – which means there will be no need to repeatedly source, screen and test new donors and tissues.
This will dramatically lower costs compared to existing methods, and there should also be significant financial advantage to owning a 'world first' stem cell manufacturing process.
However investors should beware of getting too excited, since the actual effectiveness of MSC cells in treatment has yet to be fully validated, and clinical trials are only in the early stages of planning.
Phase 1 clinical trials – out of a potential three time consuming and expensive Phases – are only in the planning stage, and the full evaluation of any new treatment generally takes several years from Phase 1 to full regulatory approval.
Management at Cynata announced that it will move to manufacture its Cymerus stem cells – hopefully generating some cash flow in the process – whilst expediting clinical trial and collaboration programs.
Fortunately for investors, Cynata has a relatively small number of shares on issue (~66 million) and a reasonably good cash balance (~$4.7 million at the end of October).
Fewer shares on issue means any profits earned from sales or licensing (such as from Cymerus) will have a more meaningful impact on share prices, while the current cash balance will fund clinical activities at least for some time.
It's tough to say where share prices will go from here, but based on the performance of other companies developing revolutionary therapies, I wouldn't be surprised if prices gradually declined over the next few months as the excitement wears off.
Investors should also be aware of the potential for future capital raisings or other fundraising activities, as I find it unlikely that Cynata will be able to fund full development of its product from its existing cash balance.
