It's rare for drug companies to eagerly await an FDA-panel meeting; one of the panel's roles is to evaluate drugs the FDA is on the fence about approving. But I'll bet stem-cell companies were champing at the bit to get into last week's panel hearing.

You see, companies such as StemCells (Nasdaq: STEM) and Cytori Therapeutics (Nasdaq: CYTX) that have been working on stem cell therapies have been in limbo while they've waited for the agency to give them a blueprint for how they should run their trials. Last week during a two-day FDA panel meeting, the agency finally got the ball rolling.

Safety, safety -- and more safety
The FDA has two concerns with any drug -- whether it works and whether it's safe. For stem cell therapies, at this point, it's pretty much all about the latter.

The same characteristic that gives stem cells the potential to be a great therapy -- the cells' ability to grow almost indefinitely and become different types of cells -- also gives them the potential for deadly side effects. Instead of just replacing the missing or damaged cells in the patient, some of the cells could start growing uncontrollably and lead to a tumor.

So far, animal models have suggested that the therapies don't lead to the growth of tumors. That data should be enough to get the trials started, but humans live longer than most laboratory animals do, so the FDA will probably want to see long-term studies before it'll approve the therapies. My best guess is that the agency will require something along the lines that drug-eluting stent manufacturers such as Johnson & Johnson (NYSE: JNJ) and Abbott Laboratories (NYSE: ABT) will be required to do in the future -- two years of clinical trials, plus at least five years of post-marketing requirements.

A tiny bit of efficacy
Although the FDA is all about safety when it comes to stem cells, the unknown risks may affect the efficacy bar. How severe a drug's side effects can be is generally related to what disease the drug treats. For instance, the FDA will tolerate much more severe side effects for drugs treating a life-threatening cancer than for drugs treating headaches.

With the unknown long-term risks involved with implanting stem cells, the FDA may require any stem-cell treatments seeking approval to be extraordinarily better than the currently available treatments. Fortunately, the stem-cell companies seem to have seen this coming, as many of the treatments, such as Geron's (Nasdaq: GERN) treatment to regenerate spinal cords, are for illnesses that aren't curable with current treatments.

With a little bit of political worry
The FDA is supposed to be a separate government entity where science, not politics, rules. But in reality, everything in the government is intertwined. With President Bush opposed to the development of new embryonic stem cells, companies going that route have a legitimate reason for concern.

Whether politics will play a role -- and whether the embryonic stem-cell disdain will carry over to all stem cell research -- is anyone's guess. I certainly hope not, but investors should keep the possibility in the back of their minds.

Long-term mind-set
The FDA will take the panel's views into consideration as it develops guidelines for companies to develop stem-cell clinical trials. Geron is hoping to submit its application to begin human trials this summer, and other companies such as Novocell and Advanced Cell Technology aren't that much farther behind.

Of course, the start of clinical trials is only the beginning. The companies will have to show that the therapies actually work -- and it will be many years before any revenues from stem-cell treatments start rolling in.

Investors in stem-cell companies -- even those with currently available products containing some stem-cells, such as Osiris Therapeutics' (Nasdaq: OSIR) Osteocel -- should take a long-term approach to investing in this relatively unproven technology. If you're willing to wait, the long-term prospects are there -- as long as the FDA cooperates.

Regenerate with this Foolishness:

Rule Breakers is always on the hunt for hot drug stocks and other cutting-edge picks. You can see all our latest discoveries with a free, 30-day trial subscription.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a selection of the Income Investor newsletter. The Fool has a disclosure policy.