General Electric Co. (NYSE: GE) is no stranger to expanding its business by branching out into new territory, anymore than it is to controversy. Over 100 years of business will make any company familiar with just about anything. So after taking on the world of broadcasting, banking, renewable energy and the tech world, it shouldn’t be any surprise that the behemoth should want to expand again.
This time, it’s into the healthcare sector - again - and more specifically into the highly controversial field of embryonic stem cell research. GE’s healthcare unit has already made a name for itself through its advanced imaging systems such as CT-scan machines, but just like the larger company itself, it isn’t content to stop there.
Now joining forces with Geron Corp. (Nasdaq: GERN), it hopes to help make that big breakthrough to cure cancer and other major killers worldwide.
Profitably speaking, there are only three problems with their scheme:
Problem #1: Controversy
Because the tests rely on using human embryonic stem cells - in other words, fertilized human eggs and therefore human embryos, which if left to grow, turn into globally recognized human infants - it’s a highly controversial move, and one that could cost the company a few investors along the way. According to ResearchAmerica.org, a pro-embryonic stem cell research organization, in 2007, 37% of Americans opposed Federal funding for the tests, up from 27% just two years before.
Problem #2: Harmful Results
According to scholars and scientists such as Massachusetts Institute of Technology (MIT) associate professor of biological engineering Dr. James Sherley, the cells in questions "cannot be used directly to treat mature tissues and organs." That was back in 2005, but as recently as Feb. 17, 2009, a young child subjected to injections of embryonic stem cells grew tumors on his brain and spinal cord.
Problem #3: Lack Of Conclusive Evidence
Despite high hopes and conjecture, no diseases have been proven cured by embryonic stem cells at this point. Without any definitive proof, any tests - even after Federal funding - can prove more a drain on finances than a boost. The speculation could pay off in the end, in which case GE would rake in a hefty revenue, but should the coin fall on its other side, the company would pour millions of dollars into a fruitless search.
As evidenced by it’s latest partnership, all three are risks that General Electric is willing to take. Now investors are watching - and betting themselves - on whether it will pay off.
by Jeannette Di Louie
