September 2011

Vol. 5 Issue 11

Inside This Issue

The Worlds First Human Parthenogenetic Stem Cells Road Map to a Liver Disease Cure ISCO Enrolls First American Donors for Cell Bank Portfolio Positions

International Stem Cell Corp.: Mass Marketing Regenerative Medicine

By Patrick Cox
Many of you are already familiar with the company Im covering this month, International Stem Cell Corp. (OTCBB: ISCO). This is an essential company for transformational investors, and Im updating you on some recent developments and issuing, again, a buy recommendation. As many of you know, I had to stop coverage of ISCO due to my publishers concern that regulators would view my relationship with a third-party company as a conflict of interest. Ive terminated that relationship, so I can now restore my coverage of this important company. Ill give you more on this as well as ISCOs background and current status.

From Russia With Love

The story of International Stem Cell Corp. actually began decades ago, when Russia ruled the vast Union of Soviet Socialist Republics, the USSR. In those days, the superpowers Communist leadership lavished resources on projects they believed would increase Soviet prestige and prove the superiority of scientific socialism. Huge sums were spent training the most promising athletes, ballet dancers and, of course, scientists. At the age of 13, a young woman emerged as the top science student in the entire Soviet Union. Her name was Elena Revazova. No expense was spared on the ongoing education of the USSRs most brilliant cell biologist. Eventually, Revazova became both a physician and a research scientist. She was, however, practically unknown outside the Soviet Union. The reason is that she was barred from participating in international conferences or publishing in journals available beyond the Iron Curtain. Revazova was never part of the Communist ruling class, even refusing to join the party. This shouldnt have surprised the Soviets, by the way. Her father, once the head of the Russian film industry, was among the hundreds of thousands who disappeared during Stalins purges. Most of the idealistic Americans who had come to assist in the glorious revolution were also murdered at that time. Though Revazova rejected the agenda of her Communist bosses, she had sufficient motivation to pursue her scientific goals. Her husband, a noted physicist, and her daughter were dying slowly from severe diabetes. The disintegration of the USSR in 1991 and the Yeltsin revolution in 1993 did little to improve Dr. Revazovas situation. The collapse of the USSR left the state-owned scientific research industry bankrupt. Her only reason for staying in Russia, to care for her ailing

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husband and daughter, disappeared with their deaths from diabetes-related complications during an influenza epidemic. Revazova believed that some of her family had survived the purges by fleeing Russia. Though unable to communicate with them due to political danger, she assumed her fathers brother and family would be near Hollywood, as he had been a leading figure in the Russian film industry. So she made her way to Los Angeles. While looking for family, Dr. Revazova volunteered to help in the research labs of the University of California, Los Angeles. The researchers who accepted her offer had no idea who had come among them. That, however, changed. By chance, she found a place in a cell biology research lab at a Virginia hospital. There she came into contact with Dr. Gregory S. Keller. Already an internationally known plastic surgeon with celebrity clients from around the globe, Keller split his time between his private practice in Santa Barbara and cell biology research at UCLA. Eventually, he would become co-director of UCLAs Facial Plastic Surgery, Division of Head and Neck Surgery. Keller recognized Dr. Revazovas importance. Not only was she a brilliant scientist, she carried a singular knowledge of the Eastern European cellular sciences.

The Twain Meet

For more than a century, Eastern European and Western scientists approached cell biology quite differently. Prior to the modern era, this schism was largely a result of distance and language. When modern communications and travel arrived, Cold War secrecy kept the two scientific communities divided. As a result, two approaches to the biological sciences developed more or less independently. With the collapse of the Soviet Union, the two approaches finally began to merge. We continue to reap benefits from that joining. Galectin Therapeutics (OTCBB: GALT), for example, employs a revolutionary carbohydrate drug technology that emerged from research done by top scientists in the Soviet Union. When Dr. Revazova began working with UCLA researchers, two parts of the cell biology puzzle came together. She did not ask for a salary, and the lab had no budget to pay one. Dr. Keller, however, understood her importance and paid her out of his own pocket. Eventually, by the way, she found her lost family, including the uncle who was head of a film studio. Dr. Keller turned to serial entrepreneur Ken Aldrich, whom he had worked with previously. A graduate, with honors, of Harvard University and Harvard Law School, Aldrich had already funded and managed a number of biomedical and technology startups. According to Aldrich, Dr. Keller had come to him talking about a Russian off-the-charts genius he was working with. Aldrich was, naturally, interested in the possibility of fully empowering her in a new company and brought in other investors. Based on Dr. Revazovas intellect and abilities, the group was inclined to found a new biotech company. It was not clear, however, exactly what this new enterprise would actually do. Given Revazovas interest in diabetes research, a consensus developed that they should pursue the creation of artificial pancreatic islet cells. It was known, at the time, that islet of Langerhans cells from cadavers were effective in the treatment of diabetes. Islet cells produce the pancreatic hormones, including insulin, needed for normal metabolic functions. Today, islet cell transplantation is an accepted treatment for severe diabetes. The problem, however, is twofold. First,

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there is a severe shortage of donor islet cells. Healthy donor pancreases, the source of islet cells, are normally used for whole organ transplants. Second, these donor cells provoke a variety of immune reactions in recipients. Immune suppression is usually required, which weakens the patient generally. Over time, the transplanted cells degrade and die. If, however, donor islet cells that did not cause significant immune reactions were available, millions of people suffering from type 1 diabetes could resume normal lives. In many cases, such islet cell transplants would literally save lives and the complications of diabetes.

The Challenge
Dr. Revazova believed that she had the answer in a new form of stem cell. At the time, stem cell scientists were focused on two sorts of stem cells embryonic stem cells and adult stem cells. Dr. Revazova was convinced that adult stem cells, the sort derived from fat and bone marrow, could not become islet cells. Years later, Harvard University researchers verified her early conclusions. Embryonic stem cells, on the other hand, provoke an immune reaction in nearly all cases. Islet cells grown from embryonic stem cells are foreign to recipients. They would require immune suppression, just as do cadaver cells, with its costs and risks. Additionally, ethical issues do not allow some people to accept embryonic therapies. In Europe, embryonic stem cell therapies are utterly banned, seriously limiting market size. Dr. Revazova focused, however, on a theoretical cell type that she would go on to invent: parthenogenic stem cells, sometimes referred to as parthenogenetic or hpSC cells. They had the potential, she was convinced, to cure diabetes, as well as many other diseases, while solving the immune rejection problem.

The Parthenogenic Solution

Parthenogenic stem cells could be derived, she believed, from unfertilized eggs (ova) or even immature ova called oocytes. These are the cells that have shed half of their chromosomes in preparation for fertilization. Oocytes are often discarded during in vitro fertilization procedures and are, therefore, with the appropriate informed consent process, readily available to researchers. Because they come from unfertilized oocytes or ova, parthenogenic (sometimes termed parthenogenetic) stem cells cannot become viable fetuses. While this solves the ethical dilemma for those who believe embryonic stem cells should not be used for therapies, they have a critical scientific advantage as well. Revazova believed that human parthenogenic stem cells (hpSCs) would produce much less immune reaction than donor cells derived from embryonic stem cells. Since then, other leading scientists have confirmed her hypothesis. This is due to the fact that with only maternal chromosomes present, cells have only half of the human leukocyte antigen (HLA) gene variations. Doctors seek to match HLA profiles when doing transplants. If HLA matching is good, little or no immune suppression is required. Good matches normally come from family members. If HLA matching is poor, more immune suppression is needed, which can cause many problems, including susceptibility to disease. In worst cases, no amount of immune suppression will allow transplantation. Because HLA matching is progressive, immune matching with parthenogenic cells is much, much easier. Scientists believe that fewer

Source: International Stem Cell Corp. Demonstrates the first step in the differentiation of parthenogenetic stem cells toward becoming liver cells. Fluorescent staining of these parthenogenetic cells shows cytoskeleton (actin/red and paxillin/green) and blue nuclei.

than 50 cell lines could match a large majority of the human population, much like blood types. While hpSCs were clearly the way to go after diabetes, no one had succeeded in creating the human parthenogenic stem cells. Such stem cells had been produced from animal ova, but human cell biology is far more complex. Many didnt believe that human parthenogenetic stem cells were possible. After two weeks pondering the challenge, Dr. Revazova determined that it could be done. Ken Aldrich and his partners knew that whoever first perfected the process of making human parthenogenetic stem cell lines would have a technology with enormous medical and financial potential. From a business perspective, one particularly compelling aspect of hpSCs is that they would be free of the IP entanglements that embryonic and, now, induced pluripotent stem cells have. Whoever developed parthenogenic stem cells first would own the right to use them completely. This would create the option for ISCO to learn from other stem cell scientists. As new therapies using embryonic stem cells appeared, ISCO could then reverse engineer a parthenogenic equivalent. Today, another form of stem cells has become extremely important, induced pluripotent stem cells (iPSCs), which can be created using blood, skin or other human cells. Advances in iPSC science and therapies present enormous opportunities for ISCO. The company can theoretically develop parallel mass production therapies using the various parthenogenic immune-matching lines. Such therapies would likely be owned entirely by ISCO. Moreover, the ability to immune match most of the worlds population provides true mass-market regenerative medicine. This is the vision that inspired the ISCO team. It became clear, however, that the scientific discovery process would be extraordinarily expensive. Normally, it would have required the kind of resources and expenditure that only Big Pharma could bring to bear. Revazova, though, came up with a solution to the money problem that was unique to that period in history. The Russian economy was in shambles following the collapse of the Soviet system. World-class laboratories were sitting idle. Internationally renowned scientists were working menial jobs just to put groceries in their cupboards. Salaries for even top researchers were a fraction of what they were in the West. Dr. Revazova returned to Moscow, a move that entailed real personal risk those chaotic days. There, she recruited a world-class team of scientists, all more than grateful to participate in the effort to develop human parthenogenic stem cell technologies.

The Clonetics Connection

With Elena Revazova in Russia, the ISCO team realized they needed to bolster the American side of the team to provide the scientific puzzle pieces that werent available in Russia. An ideal match came in the person of Jeffrey Janus, well-known cell biologist and businessman. His background was a perfect match to ISCOs goals. Janus had played a key role in the development of donor hepatic cell transplants for liver disease patients. This gave him particular insight into the development of pancreatic cell transplantation. His expertise, however, went beyond liver cells. Janus was a key founding member of a company, esteemed among researchers to this day, called Clonetics. Clonetics formed in the late 1980s with the goal of providing skin cells to cure burn victims. Formerly, the only way to treat burn victims was to take graft skin from one part of the body to treat the burned area. The procedure, however, had many problems. First, the site where the graft was taken from would be scarred. When possible, of course, the graft would be taken from an inconspicuous area, but this is obviously not an optimal solution. In the case of widespread burns, there can be insufficient skin to repair the most serious injuries. Janus believed that it was possible to take just a few healthy skin cells (keratinocytes) from a patient and expand or clone them. These new cells could then be used to treat even extensive burns, creating a more natural skin appearance
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without the additional scarring from grafts. Ultimately, the Clonetics team would accomplish this goal, though indirectly. Along the way, they had to overcome an enormous number of scientific challenges, learning much about the science of skin cells that was previously unknown. Their discoveries, in fact, contributed directly to the evolution of stem cell science, which also entails the expansion of a few cells into many. It also, coincidentally, made Janus uniquely qualified to develop a stem cell-based skin treatment product, which well get to later. Within a few years of its founding, Clonetics had created many different human cell types. It also became apparent that the small startup could not, on its own, surmount the FDAs enormously expensive regulatory hurdles involved with human therapies. Fortunately, the cells they had created were extremely valuable to other medical researchers. The FDA does not regulate cells used only for research purposes, so Clonetics developed an extremely successful business based on scientific research products. The group developed and sold mammary and prostate cells as well as cell growth media for cancer research. It created and sold muscle cell systems as well as systems for heart and blood vessel cells needed in cardiovascular disease research. Eventually, Clonetics was acquired by Swiss biotech Lonza Corp., which supplies advanced biological products to pharmaceutical and research firms. Today, the Clonetics brand of normal human cell systems remains the leading brand, with the largest market share of human cell products sold. The discoveries that Janus and his team made, and the products they led to, have contributed to a long list of important lifesaving medical therapies. A heart repair therapy came directly from their research using Clonetics products. Clonetics breakthroughs regarding human skin cells also led to the first skin replacement product. When Jeffrey Janus joined ISCO, he was able to contribute significantly to the creation of parthenogenetic stem cells. Other members of the Clonetics group began, as their contractual obligations allowed, to join him. This began the formation of ISCOs subsidiary, Lifeline Cell Technology, an important supplier of cell products to researchers. Today, Lifeline develops, manufactures and markets cells from human skin, cardiovascular system, kidney, prostate, lung as well as stem cells, media and reagents. These cell products are sold to pharmaceutical, academic and government scientists. Lifeline also develops and manufactures custom cells and media.

The Worlds First Human Parthenogenetic Stem Cells

After two years in Russia, Dr. Elena Revazova returned to the United States with the worlds first parthenogenic stem cells and the technology to produce them at will. Already, however, the effort had yielded dividends. Jeffrey Janus had amassed important new research tools and products of real value to the scientific community. The work to produce a cure for diabetes and other stem cell-based therapies had only begun, however. The company turned to the outside researcher, UC Irvines Hans Keirstead, who developed the cells that cured mouse spinal cord damage for Geron. Additionally, Revazovas three top scientists came from Russia to join the American team. Additional collaborations with top university researchers were formed. All these scientists are now focused on creating therapeutic cells to treat a range of degenerative diseases. These therapies will not only prevent suffering and save lives, they will extend healthy life spans to new limits. The targets of ISCO research include retinal degeneration, the most common cause of blindness. Already, animal tests have shown that ISCOs retinal cells can be used to give sight to the blind. An important collaboration with an international eye clinic based in India is under way now to provide artificial retinal and corneal tissues. In the United States and Canada, a donor transplant infrastructure provides most such tissues to those who need them. This is not the case in Asia, where a lack of donors has left millions blind and created an enormous market for the eye products that ISCO is developing. Diabetes remains a target of ISCO research, with real progress being made. Currently, though, the company is much closer to curing liver disease.
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Liver disease is a serious and growing problem as the population ages. Increasingly, baby boomers are discovering that they contracted hepatitis C when they were young, often from blood transfusions. Today, it is the third most common cause of death due to chronic diseases in persons 3564 years old. Liver diseases, including cirrhosis, cost the U.S. health care system alone approximately $100 billion annually. Liver cell transplantation has been shown to treat patients with liver disease. Currently, this procedure requires hepatocyte cells from donated livers. Unfortunately, as with pancreatic and retinal cells, there are far too few of them. Moreover, they can also provoke immune rejection. ISCO research efforts are also aimed at Parkinsons and other neurodegenerative diseases. The company and its collaborators are also working on cures for central nervous system injuries such as spinal cord injuries. A major milestone on that path was reached in February, 2010.

ISCOs cGMP Bio-Production Facility

On Feb. 4, 2010, ISCO unveiled its advanced biotech production facility in Oceanside, Calif. The state-of-the-art facility put ISCO into the elite ranks of the most important biotechs with cGMP (current good manufacturing practice) capabilities. This facility complies with the stringent requirements for clinical-grade products set by the U.S. and other governments.

Source: International Stem Cell Corp. Demonstrates the colony of the parthenogenetic stem cells underwent differentiation toward becoming liver cells; green fluorescent staining of cell nuclei (SOX17) indicates the cells that initiated differentiation program and red fluorescent staining of cell membrane (E-cadherin) demonstrates cells that did not respond to differentiation signaling.

For ISCOs long-term business plans, the Oceanside facility is also important. Obviously, it gives the company a degree of control over their products that is impossible to achieve using outside laboratories. It also accelerates ISCOs development schedule and helps provide critical research to cell scientists internationally. The Oceanside cGMP facility has played a critical role in several other important products. One such product could replace Draize testing, which involves the application of substances into the eyes of live rabbits and other animals. This program, like several other ISCO projects, came about accidentally. While developing corneal tissues to treat blindness, ISCO scientists put corneal stem cells in transparent containers of growth medium. Proving that hpSC cells behave and self-assemble, as do other stem cells, the cells spontaneously formed into eyeball-like spheres. ISCO scientists wondered if these spheres would react to cleaning supplies, cosmetics, drugs and other irritants the same way rabbit eyes do. Testing demonstrated that they do. In fact, they may provide superior testing capabilities, as they are human cells, not rabbit or other animal cells. This creates an enormous and compelling opportunity for ISCO. Its not only animal rights activists who want to end the obsolete practice of Draize testing. Companies forced to test new chemicals want a cheaper and more humane means of safety-testing substances. Companies that bring new and important chemicals to market dont need the protests and public relations problems, as well as occasional terrorism, provoked by Draize testing. Moreover, live animal testing is as expensive as it is controversial. Rabbits must be raised to adult status in controlled environments or they cant be used for testing. It takes many trained personnel to handle the rabbits and do the tests. Then it costs much more to dispose of the animals after testing. The Draize testing industry is so secretive that precise figures about the number of animals sacrificed and the costs involved arent available. Reasonable estimates, however, are that hundreds of millions of dollars are spent every year on Draize testing.

ISCO executives are currently collaborating with an organization that has the expertise to secure government validation of this technology. They believe ISCO can replace animal testing with unfeeling but living parthenogenetic corneal spheres, reducing industry costs significantly in the process. This is not the only important accident to come out of the ISCO labs, however. As stated earlier, ISCOs subsidiary, Lifeline, is run by leading human skin cell scientists. They provide not only skin cells to researchers, but they have also developed various growth mediums that provide optimal growing conditions for skin cells. ISCO uses these growth mediums to grow skin stem cells for sale, as well as for its own research. Parthenogenic stem cells, though incapable of developing into embryos, are as young biologically as an infants skin. ISCO scientists know that stem cells produce messaging growth factors. In the body, messaging proteins communicate with neighboring cells, influencing their development and promoting cellular healing. These proteins are one of the most interesting aspects of stem cell medicine, and companies exist today that use these growth factors, both natural and synthetic, for therapeutic purposes. So when ISCOs skin stem cells are harvested from their growth medium, scientists are left with a fluid filled with the messaging proteins of youthful skin stem cells. Not surprisingly, some of these scientists began to experiment with this leftover fluid. Some applied it to their hands and faces. In time, word spread, and scientists in the lab were using all the available fluid. Initially, the executives of ISCO viewed this phenomenon as interesting, but unimportant. Though it can be argued that they should have been quicker to recognize a huge market potential, ISCOs focus is on far more important research. People working on a cure for liver disease dont usually think in term of cosmetics. In time, however, word of ISCOs discovery leaked outside the lab. Cosmetics companies began to approach ISCO, wanting to buy the enriched growth medium. ISCO chair Ken Aldrich sent me some of this early product (which had to be refrigerated) for my wife. Seeing very positive results, I encouraged the company to exploit this accidental discovery to help finance more-important research. The enriched growth medium could not, however, be sold directly to the cosmetics companies that wanted it. Stem cell growth factors are biological proteins produced by living cells. As such, they would degrade within a few days. Not only would they be useless, these proteins would also smell very bad. Nevertheless, ISCO executives realized the possibility of producing an effective and mass-marketable cosmeceutical skin care product. First, however, they had to solve two difficult problems. They had to develop a technology for extracting the growth factors and proteins that the skin stem cells hadnt yet secreted. Then, they had to devise a way to keep the messaging proteins from degrading. While they were tackling those problems, I put ISCO chair Ken Aldrich in touch with noted financial analyst John Mauldin. Mauldins background in marketing, and his understanding of ISCOs goals made him an excellent adviser. ISCO could have sold their product to a big cosmetics company, but such a move would have had drawbacks. It would have meant giving up a significant portion of revenues and a considerable delay. Big cosmetics companies do nothing inexpensively or quickly. ISCO scientists turned to a leading Japanese nanotechnology research firm. Working together, they found a way to nano-encapsulate the cellular messaging proteins produced by youthful stem cells. These nanovesicles protect the stem cell proteins and assist in their delivery. With this task accomplished, the company finally moved to scale up their ability to grow their cosmeceutical, known as Lifeline Skin Care, at their cGMP facility. Mauldin graciously offered me a share of the proceeds from the marketing efforts that he launched, in return for my efforts. I asked the brass at Agora Financial, who saw no reason not to proceed. Subsequently, however, concern grew that my arrangement would be seen as a conflict of interest by overzealous regulators. Given that I had already entered the arrangement and was disinclined to give it up, I, regretfully, ended coverage of ISCO. I did, however, continue to

write about the company for John Mauldins audience, with full disclosure of my participation.

The Star Scientific Complication

That might have been the end of the story. Then, however, Star Scientific (NASDAQ: CIGX) came to my attention. As you know, I consider Star one of the most important companies in existence today, as I do ISCO. Their technology, a nutraceutical that moderates agerelated autoimmune disorders, is going to have an enormous impact on everything, including average life spans. Moreover, Im convinced that, once double-blind clinical results are published and understood, this company is going to make a lot of people very wealthy. This could happen quite soon, by the way. Very early in my investigations of Star Scientific technology, I had an inkling of possible problems for me personally. As you probably know, scientists at the prestigious Roskamp Institute determined that anatabine citrate, the active ingredient in Anatabloc, moderated the transcription factor NF-kappaB. While searching the scientific literature, I came across studies that show rejuvenation of aged animal skin when NF-kappaB activity is blocked. Apparently, skin aging is caused or exacerbated by inflammation. In animal studies, we see that once inflammation in the epidermis is halted, genuine healing begins to repair damage caused by autoimmune inflammaging of the skin. This is actual rejuvenation. The papers are behind payment firewalls, but heres an article that references one of those studies. Note, however, that the article makes a number of errors. NF-kappaB is not a gene, but a transcription factor.

Source: International Stem Cell Corp. Demonstrates hepatocytes (liver cells) derived from HLA-homozygous parthenogenetic stem cells that carry the most common HLA haplotype found within U.S. population (hpSC line LLC-12ph); red fluorescent staining of cell cytoplasm indicates that cells produce one of the critical fetal liver markers alpha fetoprotein (AFP).

Cosmetics companies are, of course, aware of this research and are seeking an effective means of down-regulating NF-kappaB activity in the skin without side effects. They have not been successful, just as scientists had previously failed to find an effective means of down-regulating NF-kappaB activity in our cells. It was obvious to me that Star Scientific might have an extremely effective cosmeceutical skin care product, assuming that anatabine penetrates the dead outer layer of skin, the stratum corneum. Scientists at Star Scientific are also aware of this research. Moreover, one of Star Scientifics major investors is also an ISCO investor and an enthusiastic user of the Lifeline skin care product. He had already spoken to Stars CEO, Jonnie Williams, about it, and Williams told me that he was thinking about a collaboration. Williams, in fact, gave me samples of a skin cream containing anatabine citrate, the active ingredient in Anatabloc. I began using it on my left hand and forearm. As it turns out, Im actually a very good subject for this kind of experiment. The reason is that I have an allergy to whatever it is that they put in disposable diapers. I didnt discover this, however, until after my youngest child had grown out of the diaper stage. For years, my doctor and I thought that I had a condition like psoriasis. In fact, every time I picked up one of my kids, especially when they were wearing only a diaper, I was prematurely irritating and aging the skin on my hands and forearms. So I was interested to see if the anatabine citrate skin lotion would have any noticeable effect. In fact, it did. Most observable was the relatively rapid fading of age spots, or lentigines, on the treated hand. This efficacy raises, incidentally, the intriguing possibility that anatabine citrate could reverse male pattern baldness, which is also related to inflammaging.

If ISCOs and Stars products work through different mechanisms of action, it is altogether possible that the combination would be much more effective than either product used separately. Separately, they both represent real advances in cosmeceuticals. Together, I suspect they will be amazing. I offered to put Williams in touch with ISCO, and he provided samples of anatabine citrate to the company. Aldrich has confirmed that he is considering the use of anatabine citrate in one of several new skin care products now in development. If this happens, I would have the same potential of conflict of interest with Star that I had with ISCO. In fact, I might have been in that position as soon as the possibility of a collaboration had been seriously considered, so I withdrew from my arrangement marketing ISCOs Lifeline skin care product. Obviously, I cannot stop covering Star Scientific. My charter is to cover the most important scientific breakthroughs of our time. Losing ISCO from the portfolio was bad enough. I confidently believe that ISCO and Star Scientific are both going to make history and a lot of investors rich. So I had no choice but to end my involvement with the marketing effort. John Mauldin will continue to be involved. I have taken neither revenues nor expenses directly from ISCO for my role in assisting the marketing of their skin care product. Though the stem cell skin cream has generated millions in income for ISCO, I received no payment and will receive none in the future from them directly. So with that out of the way, let me return to the ISCO story.

Producing Purified Stem Cell Populations

Since I last wrote about ISCO here, enormous progress has been made both financially and scientifically. I think the last big scientific news that I reported was the successful engrafting of parthenogenic cells in animals. This accomplishment put to rest concerns that hpSCs will not become functional parts of a host organism. Since then, ISCO has accomplished another major milestone. This is the demonstration that the company can produce purified cell populations. As Ive explained in discussions about other stem cell companies, the ability to produce pure cell populations is critical. The FDA is extremely concerned that the introduction of unpurified stem cells might cause inappropriate cell growths, or even cancers. Gerons nonpurified stem cell lines did, in fact, produce microcysts in early tests. For liver or any other SC therapy, therefore, it is critical that the cells used in a therapy are only the type needed for that therapy. While I had little doubt that ISCO would solve this problem, I had no idea what the solution would be. Now we know how they do it, due to the publication of the journal article Derivation of High-Purity Definitive Endoderm From Human Parthenogenetic Stem Cells Using an in Vitro Analog of the Primitive Streak. I spoke to ISCOs Nikolay Turovets, the leading researcher of the article, who helped me understand this breakthrough technology. Essentially, ISCO has discovered how to replicate a feature of early embryonic development that begins the process of cell differentiation. Known as the primitive streak, it is the initial division of undifferentiated embryonic cells into bilateral symmetry. Some bioethicists, in fact, consider this event the ensoulment or beginning of life. Regardless, the primitive streak has unique characteristics that provoke very specific movement of cells within the embryo. To understand further, I suggest reading the linked article, which is available in its entirety online. For our purposes, however, the important thing to know is that ISCO has created artificial primitive streaks. Therefore, they can provoke purified cells to migrate into purified cell populations.

The Road Map to a Liver Disease Cure

In the process, they have also shown that their liver cells are functional, producing human serum albumin, as do nonparthenogenic liver cells. Serum albumin is the most abundant plasma protein, needed to maintain osmotic pressure, among other important functions.

We know that these liver cells engraft, becoming part of healthy host animals. After testing for safety, ISCO will use these cells to treat animals with liver disease to prove efficacy. If successful, as Im predicting, the company will file an IND (Investigational New Drug application) in preparation for human clinical tests. ISCO has also announced recently that it has begun a series of preclinical animal studies of neuronal cells. Studies will determine safety as well as the cells ability to become functioning dopaminergic neuron-like cells. I expect that these cells will reverse Parkinsons and other neural diseases.

Lifeline Continues to Expand

Of great interest to investors is progress made by ISCOs subsidiary, Lifeline. Revenues from Lifeline as well as the cosmetics appears on track to making ISCO the first profitable stem cell company. New cosmetic products are expected to be launched before Christmas. I expect ISCO to reach break-even within one or two years, but I dont consider these revenues the real reason for owning the companys stock. Eventually, I believe, hpSC therapies will provide blockbuster therapies for the company in areas ranging from eyes to livers. This is why the company is in the portfolio. Nevertheless, Lifeline is rapidly expanding revenues, with 30 new products introduced last year. Revenues are up 35% quarter over quarter and are on track to support all of ISCOs research efforts. Well over 200 new customers have been added due to additional products and marketing networks in Japan, India, Taiwan, South Korea and Singapore. Perhaps the most interesting Lifeline product expansion is their FibroLife media, which is being used to cultivate tissueengineered blood vessels by Cytograft Tissue Engineering, of Novato, Calif. Cytografts vessels are designed for various uses, including coronary grafts in bypass surgeries and peripheral grafts needed to prevent lower limb amputations. The Cytograft technology was featured at the American Heart Associations conference on emerging technology and can be viewed on the AHAs Emerging Science Series webinar. If the ongoing phase III clinical trials are successful, ISCO will be in an excellent position to manufacture these vessels at their cGMP facility. There is great interest in the technology, with 200 new researchers investigating therapeutic uses added in the last year alone.

ISCO Enrolls First American Donors for Cell Bank

Last, but not least, ISCO enrolled the first U.S.-based donor in its program to establish the clinical-grade human parthenogenic stem cells capable of immune-matching most humans. The point is not that ISCO has actually begun collecting oocytes. That part is simple. The point is that they have gone through the rigorous bureaucratic and regulatory process to assure that the cells created by these donor cells are acceptable to the FDA. Regulatory approvals were obtained from the Institutional Review Board (IRB) and the Stem Cell Research Oversight (SCRO) Committee. Cell lines have already been collected offshore, but the American side is critical to the companys road map. Let me remind you again that hpSCs are not just effective replacement cells; they are young. People who use these cells for therapies will have organs and tissues with life spans that will extend for as much as a hundred years or more. This will change the nature of medicine as we know it.

Recommendation: Buy International Stem Cell Corp. (OTCBB: ISCO) up to $0.90 using a strict limit order.
Yours for transformational profits,

Patrick Cox
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