September 13, 2011 / 9:00 PM / 8 years ago

StemCells eyes asset sale to raise cash

(Reuters) - Cash-strapped U.S. biotechnology firm StemCells Inc STEM.O is looking to sell some of its real estate and other non-core assets to buy time until it has more conclusive data from initial trials of its innovative therapy.

The company has been at the forefront of stem-cell research but a number of failures and the collapse of some major drug development deals over the years have hammered its stock and forced it look for ways to boost its cash reserves.

“We might realize $2-3 million from our efforts to monetize the non-core assets,” StemCells’ finance chief Rodney Young told Reuters in an interview.

StemCells is also trying to get a disease team research grant from the California Institute of Regenerative Medicine that could pay out up to $20 million over four years per disease team.

The company, which has a market value of about $33 million, hopes to earn the award for its development of an Alzheimers’ cure.

Stem cells, basic building blocks that can grow into several different types of tissue, have long been seen as a potential cure for a host of degenerative diseases and injury.

The company’s technology uses human neural stem cells that are purified and cultured before being transplanted intravenouslyinto patients.

While the company has yet to begin testing its stem-cell therapy for a type of retinal disease, it expects this trial to yield data even before it gets results from its ongoing studies on treating spinal cord injury and a fatal myelin disorder in children.

“Although (the retinal) trial is going to start last, of the three that we are talking about, it may actually have the best chance to give us a read on the effect of the cells the quickest,” Young said, pointing to the relative ease of finding patients with the eye disease.

The company expects to file with U.S. health regulators for permission to start testing the therapy in humans with age-related macular degeneration (AMD) — a leading cause of blindness — by the end of this year.

About 11 million Americans show some signs of AMD.

Enrolling patients in studies that aim to test a drug or therapy in rare conditions — like spinal injury and myelin disorder — can often prove time consuming and expensive.

Rival stem-cell firm Geron Corp (GERN.O), which is also in early trials for patients with severe spinal cord injury, has been able to dose only two patients since the trial went live last year.

StemCells, which started trial in the spinal injury indication in March, will be dosing its first patient before the end of this year, CFO Young said.

The Newark, California-based company’s shares have lost nearly 80 percent of their value since the beginning of this year, as the market turned skeptical of its ability to raise cash to fund expensive research.

In a recent note, WBB Securities analyst Stephen Brozak said the company had valid technology, capable leadership and an impressive patent portfolio, but thought these insufficient without the ability to raise significant ongoing capital resources.

StemCells, formerly known as CytoTherapeutics, has attracted immense investor interest over its 20-year public life on novel but so far unsuccessful treatments like its implantable stem-cell remedies for diabetes, chronic pain and Parkinson’s.

The stock, which reached a high of $188 soon after a successful IPO in 1992, now trades at around $2.50.

StemCells had $15.7 million in cash as of June 30 and is trying to maintain a monthly cash burn rate of about $1.5 million, which should let it fund operations till next April.

“At the end of the day, I think we will have to go back to the capital markets for the larger amount,” Young said.

Reporting by Esha Dey in Bangalore; Editing by Viraj Nair

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