Cytori Therapeutics - Irresistible Stem Cell Story?

Although the issue is on the back burners of the news these days, remember all the controversy surrounding embryonic stem cells? Is it morally acceptable to use discarded embryos to procure stem cells for the potential treatment of life threatening diseases? Its a tough question embroiled in an emotional tug of war between religious beliefs and the needs of the desperately ill. Well, there is at least one company whose stem cell technology has shown great potential to side step this issue altogether....and its trading at levels that make it a potential 10 bagger (disclosure: I just bought a bunch of shares a few days ago).

I've been following Cytori Therapeutics for a couple of years and believe it is poised to become a big winner. I will provide a simplified summary of my thoughts on Cytori here and provide the links that will allow you do do your own due diligence.

Cytori's main product is a machine called the Celution. The Celution uses adipose tissue (also known as fat tissue) extracted from a patient's body and processes it through centrifugal and proprietary enzyme technology. The end product is a concentrated mixture of the patient's own stem and other regenerative cells that can be put to use to help treat damaged or diseased body parts. It may sound like science fiction but the Celution is already in use in Europe and Japan and is currently before the FDA for approval as a medical device in the U.S. Here are some of the bullet points that get me excited at the potential for this stock:

• THE PLATFORM: The Celution is a platform for the delivery of stem cells where the potential therapeutic applications are only limited in number by the imagination of the medical profession. (Remember the Sirtris Pharmacueticals platform previously mentioned on this blog that lead to a buyout by Glaxo at a 100% premium?) Currently Cytori is sponsoring clinical trials for the treatment of breast reconstruction and heart disease. However, others in the medical field are evaluating Celution derived cells for use in the treatment breast augmentation (bigger breasts without the silicone), periodontal disease (regrowing diseased gums), urinary incontinence (fixing leaky faucets)and other potential treatments are surely on the way. The beauty of this platform is that Cytori provides the technology and the disposables (recurring revenue stream) and the medical field works for Cytori to find the applications that have the most potential.
• HARVEST PATIENT'S OWN STEM CELL'S: Cytori's process uses a patient's own stem and regenerative cells that are extracted DURING the operation for which the stem cells will be used. No ethical issues about destroying embryos. No concerns about compatibility. No concerns about supply other than the patient's own fat level (look at your own stomach...are you a candidate?) IMHO, this is a great sell from a marketing perspective. Less worries about adverse effects or concerns about foreign stem cells.
• FDA APPROVAL PROCESS: The FDA recently determined that the Celution would be evaluated as a medical device. This was an important step in Celution's approval process in the U.S. and represents a quicker path to commercialization as opposed to being evaluated as a drug.
• SMALL MARKET CAP: At current levels (i.e. when I started writing this piece with CYTX at about $3.00), CYTX has a market cap of only $112 million compared to other stem cell stocks like OSIR (Osiris Therapeutics) at $263 million, the precieved leader GERN (Geron) at $656 million and STEM (Stem Cells) at $181 million. Yet, on a price to sales basis, CYTX is cheaper than all of them: CYTX: 7.6 OSIR: 8.7 GERN: 427 STEM: 359. I believe that the lack of publicity of Cytori's story in the U.S. is one of the major factors that have kept Cytori's value below that of its peers.
• GREAT STORY: I love a stock with a great but simple story based upon on American ingenuity. A story that can create excitement once the general public becomes aware of it. A story that is fundamentally easy to understand. The greatest gains in the market, the ones that eventually lead to irrational exuberance and skyrocketing stock prices, are often those stocks with exciting stories that are easily understandable. Cytori fits the bill, IMHO: Extract body fat...put fat into a machine to extract concentrated mixture of stem cells...reinsert cells in your damaged body part. Oprah, are you listening? Gotta love it.

Well there you have it. I only wish I had finished this entry on the day I started it with CYTX still at around $3.00 per share. Like most story stocks it jumped on a news release issued yesterday. There could be more to come. Do your own due diligence.