Shares of Stem-Cell Companies Down After Court Ruling

A day after the Federal District Court for Washington, D.C., ruled to block federal funding for research that uses human embryonic stem cells, companies researching and developing medical techniques involving stem cells saw shares tumble across the board Tuesday.

Just last year President Obama signed an order lifting restrictions on federal funding of human embryonic stem cell research. Stem cells are unspecialized cells that can develop into many different cell types in the body and are therefore believed to be useful in treating many conditions, from spinal cord injury to cardiovascular disease. Obama's executive order expanded the number of stem cell lines that the National Institute of Health could federally fund by distinguishing between the creating and destroying of embryos during research.

Ruling Is 'Extremely Unfortunate'

Advanced Cell Technology (ACTC) sank over 9% Tuesday before turning a corner and closing up 6%. The company, which is using a combination of embryonic and adult stem cells to create regenerative technologies, announced in June that its human embryonic stem cell (hESC) line MA135 was approved for federal funding under the expanded lines.

"We think this court ruling is extremely unfortunate for the overall stem cell industry," ACT Chairman and CEO William Caldwell said in an emailed statement. "However, we believe that ACT is well positioned regardless of this ruling," explaining that ACT's Single Blastomere technology does not harm the embryo. "While it is too early to say with certainty, we anticipate that our proprietary technique may fall outside the scope of this ruling." The company's next phase, using hESCs to treat Stargardt's disease is already fully-funded.

Other Companies Hurt

Similarly, Geron (GERN) shares dropped 3.5% Tuesday. The company recently received Food and Drug Administration approval to begin human clinical trials of its experimental human embryonic stem cell-based therapy to heal spinal cord injuries in certain paraplegic patients. But a Geron spokeswoman told DailyFinance that the company "has not received any federal funding for the work on hESCs over the years. The R&D has all been funded using shareholder capital."

Athersys (ATHX) declined some 2.8% Tuesday. Athersys, which has developed a unique off-the-shelf MultiStem platform to treat illnesses including cardiovascular and inflammatory diseases, is using adult stem cells.

Aastrom (ASTM), which develops therapies for use in the treatment of severe cardiovascular diseases, saw its shares fall over 3%. "Aastrom's late-stage clinical development program is based on the use of adult stem cells and does not involve the use of embryonic stem cells. As a result, our development programs are not affected by this decision," the company said in an email.

And StemCells Inc. (STEM), which only recently reported new preclinical data suggesting its proprietary human neural stem cells have the potential to restore lost motor function in older spinal cord injuries, saw its shares drop over 7%.

According to the Wall Street Journal, the government intends to spend about $137 million on human embryonic stem cell research this year and about $126 million next year.