Pfizer Takes the Plunge Into Stem-Cell Research

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Hey, Geron (Nasdaq: GERN) and StemCells (Nasdaq: STEM). Do you hear those footsteps? That's giant Pfizer (NYSE: PFE). It's off in the distance, but it's coming for you.

The world's largest drugmaker by market cap announced today that it's forming a unit to focus on stem cells. Small biotechs shouldn't be honing their slingshot skills to take down Goliath quite yet, though: It sounds like there might be gold falling out of the giant's pockets. Pfizer says the new unit will work on "several significant scientific collaborations."

Now may not be the perfect time to jump on the stem-cell bandwagon. It seems to me there are still a lot of details to be worked out before using stem cells as therapies. But Pfizer has to take this risk with the impending loss of Lipitor. GlaxoSmithKline (NYSE: GSK), which has also had rather stale growth lately, recently jumped in as well,  announcing a partnership with the Harvard Stem Cell Institute.

Stem cells should make a more immediate impact as research tools to help drug development. In fact, pharmaceutical companies on both sides of the Atlantic, including Pfizer, Johnson & Johnson (NYSE: JNJ), and Sanofi-Aventis (NYSE: SNY), have joined forces to fund stem-cell initiatives as well as to help set up model systems to determine if drugs are safe before starting clinical trials.

But preventing side effects isn't exactly sexy, and it only has an indirect effect on the bottom line. Pfizer needs to get revenue growing -- especially after the inevitable drop when Lipitor faces generic competition -- and that's what this announcement is really about. When you're as big as Pfizer, you've got to plant a lot of beanstalks and hope that something grows into a blockbuster.

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