Cecelia Johnson was an artist, cellist, tap dancer, and 22-year-old college student when she was diagnosed with multiple sclerosis in 2001. The disease, in which the bodys immune system attacks the tissue protecting nerves, proceeds at its own pace: Sometimes the deterioration is halting, sometimes it can be delayed, but there is no cure. Johnsons decline was swift.

Six years after her diagnosis, undone by fatigue and pain and often unable to walk, Johnson gave up on conventional medicine. In the spring of 2007 she traveled from her home in Houston to Mexico, where an American doctor gave her an infusion of adult stem cells that were supposed to regenerate her damaged tissue. I thought this guy might be peddling snake oil, says Johnson. But I would have taken snake oil. The procedure cost her $14,000.

Within a few months, she began to feel better. The effects werent lasting, though, and she returned to Mexico every year until the Federal Bureau of Investigation arrested her doctor in December2011. Francisco Morales was accused of conspiracy and fraud: He wasnt a licensed doctor, and he was using umbilical-cord stem cells he bought in the U.S. for treatments that the Food and Drug Administration had not approved. He pleaded guilty in September 2012 and awaits sentencing.

By then, Johnson had learned she could receive infusions of her own stem cells in Houston. An orthopedic surgeon there, Stanley Jones, had recently co-founded Celltex Therapeutics, a company that multiplied and stored adult stem cells. It took Johnson and her mother much of the spring and summer of 2012 to raise the $30,000 fee for the treatment, which was part of a clinical study. A study I have to pay $30,000 for? Sure, Im skeptical, says Johnson. The point is that stem cells are available, I desperately need them, and I will pay for them. In August, Johnson had several hundred thousand stem cells harvested from her abdominal fat.

Photograph by Thomas Prior for Bloomberg BusinessweekEller and Jones founded Celltex in 2011

Jones was not just a doctor, he was also a satisfied customer. He had been treated for autoimmune arthritis with his own adult stem cells through a South Korean company, RNLBio. In March2011, he and Houston businessman David Eller founded Celltex, one of the first commercial stem cell laboratories in the country. They had RNLs technology and eventually some 200 paying patients desperate for relief. One of them was Texas Governor Rick Perry, who suffered from back problems. Together they encouraged the state medical authority to let doctors provide stem cell treatments under its supervision.

Then the FDA got involved: The agency inspected Celltexs lab, found 14 major manufacturing problems, and later warned the company it was illegally marketing an unlicensed drug. Celltex shut down the lab in early October 2012, four days before Johnson was to receive her first batch of cells. It hasnt yet resumed processing stem cells for Johnson or anyone else. In a December letter to patients the company stated: Celltex remains fully committed to advance the most promising new field in human health in decadesregenerative medicine.

Celltexs venture raises some of the most vexing, emotional issues in the business of medicine. Stem cells hold enormous promise, but promise isnt proof, and anecdotal evidence isnt science. Small companies often cant do the research required by the FDA and make money at the same time. Some patients will pay to be part of an experiment, but many doctors and regulators dont think they should. In Texas the science of stem cells has collided with a governors ambitions, a businessmans optimism, a doctors faith, and patients hopes. It seemed too good to be true, Johnson says, and it was. Stem cells, often thought of as the bodys master cells, help form and repair tissue, organs, and blood. There are different types of stem cells, each with their own capabilities. Embryonic stem cells, potentially the most powerful, are the most controversial; George W. Bush restricted federal funding for embryonic stem cell research when he was in office. Induced pluripotent stem cells are adult cells that have been genetically reprogrammed to have some attributes of embryonic stem cells. Adult stem cells are believed to exist in tissue throughout the body. The main function of mesenchymal adult stem cells, the type Celltex works with, is to repair tissue damaged by daily use. They also have anti-inflammatory properties. The cells can be found in special niches in bone marrow, umbilical-cord blood, muscle, and fat. When the body is injured, the cells leave their niche and become more specialized, but they are not, like embryonic stem cells, able to transform into any kind of cell. A blood-forming cell can become a red blood cell; it cant become a brain cell.

Dr. Gary D. Gaugler/PhototakeA blood-forming adult stem cell, found in bone marrow

Hundreds of clinical studies are under way in the U.S. to test the safety and efficacy of stem cells for all sorts of disorders: Alzheimers, Crohns, Epstein-Barr, lymphoma, diabetes, multiple sclerosis, infertility. Scientists say stem cells could help repair the heart or spine, regenerate cartilage, and improve brain function after a stroke. Were formed from stem cells, everything about our body is a stem cell product, says James Willerson, president of the Texas Heart Institute, where about half of the research conducted involves stem cells. I believe the right cells in the right place in the right person will do amazing things. Arnold Caplan, a professor of biology at Case Western Reserve University and founder of two stem cell companies, says: It sounds like stem cells could be the magic elixir for every malady. The answer is that, on a scientific basis, they could be.

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Stem Cell Showdown: Celltex vs. the FDA