3 Ways to Invest in Cancer Stem Cells (CSCs)

What are Cancer Stem Cells?

Having only had their existence substantiated in 1997, Cancer Stem Cells (CSCs) were identified when researchers discovered that certain cancer cells harvested from a tumor had the ability to regrow a tumor when transplanted to a new location. These CSCs did so through the stem cell process of self-renewal, thus their given name. Researchers theorize that traditional forms of cancer treatment such as chemotherapy target only differentiated cells that form the bulk of the tumor, however, the cells that actually grow the tumor, CSCs, remain unscathed due in part to inherent defense mechanisms to radiation and chemotherapy. Even one such CSC left may fuel the growth of a new tumor following treatment. An alternative to traditional treatment could be just to target the CSCs as seen below:

CSC_Treatment
Source: University of Rochester

CSCs have been identified in solid tumors affecting the Brain, Breast, Colon, and Prostate among others. Controversy exists around the number of these cells found in a population with estimates ranging from 1 in a million to 1 in 3. There were three companies that had an IPO in 2012/2013 whose core focus is that of developing drug treatments that target CSCs.

Click for company website

Name: Stemline Therapeutics
IPO: Jan 2013
Post IPO Performance: +202%
Ticker: (NASDAQ:STML)
Market Cap:
$463 million
Deficit: $12.6 million (as of March 31, 2013)
Cash and Equivalents: $30.7 million (as of March 31, 2013)
Pipeline: Stemline_Pipeline

Name: Oncomed Pharmaceuticals
IPO: Jul 2013
Post IPO Performance:
-40%
Ticker: (NASDAQ:OMED)
Market Cap: $
451 million
Deficit: $166 million (as of June 30, 2013)
Cash and Equivalents: $139.2 million (post July 2013 IPO)
Pipeline: Oncomed_Pipeline

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Name: Verastem
IPO
: Feb 2012
Post IPO Performance:
+28%
Ticker:
(NASDAQ:VSTM)
Market Cap: $
363 million
Deficit: $65.7 million (as of June 30, 2013)
Cash and Equivalents: $78 million (as of June 30, 2013)
Pipeline:

Verastem_Pipeline

 In an October 2012 Forbes article titled “Cancer Stem Cell Therapy: Real Or Just Hype?” the author of the article made the following statement concerning the investment potential of CSCs:

Bulls believe CSC-based therapies will revolutionize oncology drug development and dramatically improve patient outcomes. Bears argue the data are inconclusive or that expectations are unreasonably high. I think the truth lies somewhere in the middle.

In this same article, the author hosted a panel discussion with the three companies mentioned above and discussed the merits of each company’s potential drug candidates. For those who believe that investing in CSCs makes for a compelling investment thesis, the best approach to take may be to buy equal dollar amounts of each of the above three companies since all three market caps are roughly the same. In this way, some of the company-specific risks are eliminated. While the returns of these companies are likely to be somewhat correlated, if just one company achieves their goals the gains may very well offset any potential losses incurred in the other two companies.

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