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Cell magazine   stem cell biotech (feb 2008)
Cell magazine   stem cell biotech (feb 2008)
Cell magazine   stem cell biotech (feb 2008)
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Cell magazine stem cell biotech (feb 2008)

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  • 1. Leading EdgeAnalysisStem Cell Biotech:Seeking a Piece of the ActionVenture capital groups and big pharma have largely held back from investing in biotech companiesfocused on regenerative medicine. Will it take a clinical bull’s eye to bring venture capitalists andbig pharma into the cell therapy arena?Four years ago, when Gregory Bonfiglio Chris Mason, Director of the Stem Cell are medically valuable and cost effective.was writing a business plan for a venture and Regenerative Medicine Bioprocess “I think everyone is sitting on the fencecapital group dedicated to companies pur- Group at University College London, waiting for something good to happen,”suing stem cell therapies and regenerative remarks how things have changed since says Lutz Giebel, Managing Partner ofmedicine, “there were less than 100 that the first wave of cell-and-tissue compa- SV Life Sciences Advisers and formercould be legitimately called regenerative nies came and went between 1985 and cofounder and CEO of Cythera, nowor stem cell companies,” Bonfiglio notes. 2002, an era he refers to as RegenMed part of the stem cell engineering firmToday, the newly established Proteus 1.0. “We’ve seen this expansion before,” Novocell. “Quite frankly, every diseaseVenture Partners, where Bonfiglio is the he notes, “but back then, companies were a mouse could possibly get has beenManaging Partner, is tracking about 1000 so busy doing basic science, they had cured by various stem cell biotechnolo-companies in over ten countries. While at no solid business plans.” About 70 tissue gies, but the biggest problem is that littleleast half of these, he acknowledges, are engineering companies failed to live up to has materialized in the clinic that showsmid-sized to large pharma companies with their early promise including Advanced these approaches are successful.” Giebelmultifold interests, “300 to 400 are focused Tissue Sciences (ATS), which at one point compares it to the early days of monoclo-solely on regenerative medicine.” had a market cap in excess of one billion nal antibody translational research, which Cell therapy companies range from dollars, with $600 million raised from ven- people knew eventually would make a dif-those developing therapies using human ture capital and public markets. ATS and ference in drug development. “Investorsembryonic stem (ES) cells, like Geron and Organogenesis, another pioneer, stirred up who invested early lost money. InvestorsAdvanced Cell Technology (ACT), to com- excitement, only to eventually file Chapter who invested when the time was rightpanies like Mesoblast and Cytori that are 11 in late 2002. Curis, Ortec International, made good money.”pursuing treatments derived from adult Genzyme Tissue Repair, and others simi- Ed Field, the President and COO of Ald-stem cells and their precursors. There larly closed, reorganized, or merged, while agen, similarly believes that the biggestare also tissue engineering firms such as regulatory and other problems kept most boost for regenerative medicine biotechTengion, which just announced a phase II products of this era from reaching the companies would be a few significanttrial for NeoBladder made from a patient’s marketplace. clinical bull’s eyes. “What my companyown bladder epithelial cells. Tool compa- Now as we enter “RegenMed 2.0,” com- needs most,” more than even money ornies represent a third category. Some, like mercialization is much more of a priority technology, “is to show in well designedVistaGen, produce cells for drug discovery for cell therapy businesses. “The univer- clinical trials that our products are effica-and toxicity testing, whereas others make sities are doing great research on regen- cious in humans, and for others to showthe instruments and devices, “the picks erative medicine science, and this allows theirs are.” Such clinical successes mightand shovels,” as Bonfiglio calls them, that the companies to do great translation/ better earn the trust of venture capital-will help to manufacture cell therapies. commercialization. We’re beginning to see ists and pharmaceutical companies, whoExamples include StemCor Systems, innovative companies with strong busi- largely have hung back from bankrollingwhich received approval from the US Food ness plans spring up all over the world, stem cell companies, although in the caseand Drug Administration (FDA) several and this time around it’s moved from being of Aldagen, the record shows that if youmonths ago to market its new device for an American sport to being a global sport,” have what investors like, venture capitalextracting bone marrow, and Novathera, says Mason. need not be elusive. Since its establish-which has designed a bioreactor that ment in 2001, this Durham, North Caro-allows the three-dimensional culture of Where’s the Beef? lina company has received $45 millionstem and progenitor cells. Finally, there are The sobering reality is, however, that for from venture backers. Three Aldagencompanies that concentrate principally on many stem cell biotechs, the future will products comprising progenitor and adultbioaesthetics, such as Organogenesis and depend on making the leap from start-up stem cells derived from bone marrow andits skin rejuvenation and repair products funds to the large cash infusions that can peripheral blood are currently in clinicaland Intercytex, whose hair regeneration propel their products through clinical tri- trials for treating heart failure and limbprocedure depends on expanding cells als. For this to happen, they will have to ischemia and for improving cord-bloodfrom human hair follicles in culture. prove as best they can that their therapies transplantation. Cell 132, February 22, 2008 ©2008 Elsevier Inc.  511
  • 2. Some contend that the field is getting of the biology has to be elucidated before (STTR) program. A portion of the annualclose to scoring a winner. For example, a clinical trial can take place? The Inves- budgets of eleven federal departments andOsiris, based in Columbia, Maryland, has tigational New Drug (IND) application that agencies are put aside for SBIR grants,three therapies based on a proprietary Geron expects to file this year to test neu- which in turn go to small businesses withmesenchymal stem cell product derived ral stem cells for treating spinal-cord injury innovative and technical merit. Five fed-from adult bone marrow. The product is will be between 20,000 and 30,000 pages eral groups similarly save funds for STTRformulated differently according to the in length, testimony to the very high bar programs, which are meant to kindle part-disorder: Prochymal is delivered intra- required for moving cell therapy products nerships between small businesses andvenously; OsteoCel, one of the field’s into clinical trials, especially those involv- prominent research institutions. Adminis-earliest approved products, is for bone ing the nervous system. tered by the US Small Business Adminis-matrix; and Chondrogen is an injectible Despite the length of time it can take to tration, the SBIR program was launched infor treating knee injuries. Phase III trials prove that a particular cell therapy has a 1983, and the STTR program in 1992.have received fast-track status by the desired effect—and not just once but time Four-year-old Arteriocyte, which ini-FDA for testing Prochymal in patients with after time—examples exist of biological tially focused on using several typesacute Graft versus Host Disease (GVHD) advances being made and investments of stem cells to grow blood vessels forand the intestinal disorder Crohn’s dis- following. At Novocell in San Diego, years reestablishing cardiac function, startedease. And last month, the US Department of experiments to efficiently differentiate with $250,000 of venture seed funds fromof Defense awarded a $224.7 million con- human ES cells into pancreatic endocrine Case Western Reserve University; sincetract to Osiris to advance Prochymal as a cells are starting to pay off, according to then it has received federal, state, andtherapy for treating gastrointestinal injury Chief Scientific Officer (CSO) Emmanuel local grants, including three SBIR-STTRdue to radiation exposure. Baetge. Complex culture conditions are grants. Consequently, this Cleveland, Meanwhile, Chris Mason points to the required first to turn human ES cells into Ohio-based company has been able tosuccess of a tissue-engineered bilayered definitive endoderm (as opposed to extra- expand to developing four cell-basedskin product called Apligraf, manufactured embryonic endoderm), then posterior products derived from adult bone marrowby Organogenesis. Comprising a layer of foregut (and not anterior foregut), then for treating ischemic diseases and acutecollagen and neonatal fibroblasts over- pancreatic endoderm (as opposed to gas- and chronic wounds, thus enlarging itslain with living keratinocytes, Apligraf has tric or intestinal endoderm), then endocrine future chances for revenue.been used to treat venous leg ulcers and precursor cells, then finally the pancreatic “Since the market rolled over in 2001,diabetic foot ulcers in 200,000 patients islet beta cells that produce insulin. As venture capitalists are delaying theirsince it received FDA approval 9 years for multiplying a small batch of cells into investments until a technology is at phaseago. “When Organogenesis emerged from billions, “No one has mastered that yet,” II or later. There’s more watchful waitingChapter 11, it came out very strongly, and says Baetge. “While differentiation strat- going on,” observes Arteriocyte CEOhas prospered by strongly focusing on its egies are making good progress, scaling Donald Brown. “That’s why non-dilutiveskin products,” Mason notes. Organogen- up the cells will depend on defining cell grant mechanisms like SBIRs and STTRsesis, in Mason’s opinion, exemplifies the purification procedures for clinically rel- are so valuable to start-ups.” StemCells,three factors that will help ensure a com- evant patient populations” to ensure safe Inc., Athersys, MacroPore (now a divisionpany’s success in this new era of commer- transplants. A proprietary technology that of Cytori Therapeutics), Osiris, and othercialization: “expert business management, coats islet cells and protects them from stem cell businesses have also receivedsimpler but superior products, and scal- immune attack is one of two technologies these federal infusions of funds.ability of manufacture.” In a similar vein, in Novocell’s portfolio that keeps the com- State grants and venture fundingAdvanced Tissue Sciences, after rescue pany pushing forward and attracting fund- helped to launch Cellular Dynamics Inter-from Chapter 11, was sold to Advanced ing. Last July, Novocell raised another $25 national (CDI) and Stem Cell ProductsBioHealing, which relaunched ATS’s prod- million in venture capital, its total to date (SCP), started by James Thomson of theuct Dermagraft, a wound-healing dermal being $60 million, according to Baetge. University of Wisconsin and colleaguessubstitute derived from newborn foreskin. in 2005 and 2006, respectively. CDI pro- A Helping Hand at the Start duces ES cell-derived cardiomyocytesOvercoming Hurdles For start-up companies, a diversity of fund- for testing the effects of drugs on heartCell therapy companies have the twin hard- ing sources in the $1 to $5 million range electrophysiology. The models routinelyships of showing that a cell therapy is effi- exists, especially in the United States. The used “are Purkinje fibers from the heartcacious in humans and demonstrating by funds come from university-sponsored of the dog or guinea pig,” says Nicho-phase III how the product will be produced start-up funds, state grants and bonds, las Seay, COO of both companies. “Weaccording to Good Manufacturing Practice patient advocacy groups, family founda- think cells from human would be a better(GMP) regulations. Given this, it is not sur- tions, individual angel donors and venture model, because the animals don’t haveprising that investors remain wary. Making capital, DARPA and other federal agen- the same electrophysiological responsea chemical drug as opposed to develop- cies, as well as less traditional fare such as the human heart.” Meanwhile, SCP hasing a cell therapy “is a lot easier because as grants from the US Small Business the more complex goal of steering humanit’s a chemical…and not a complex thing Innovation Research (SBIR) program and ES cells down the hematopoietic differen-like a cell,” notes Giebel. Just how much the Small Business Technology Transfer tiation pathway to form platelets and red512  Cell 132, February 22, 2008 ©2008 Elsevier Inc.
  • 3. blood cells, products that in the future “holding the bag,” he notes. Cell therapies give you a complete haplotype match forcould do away with the need for blood that have come to market—Genzyme’s fifty percent of the population.” Thosedonations. “We’re actually pretty good Epicel and Carticel and Osiris’s Osteo- cell lines could be produced throughat making platelets and red blood cells,” Cel—are used by small patient popula- somatic cell nuclear transfer or by repro-says Thomson, although the company so tions and generate only modest revenues. gramming adult somatic cells, but untilfar can turn out only very small quanti- OsteoCel’s 2006 sales, for instance, were such a bank of cell lines exists, immuneties. The “non-trivial exercise” ahead, reportedly $8.3 million. rejection will continue to be a problem.says Seay, is to ramp up the production Oxford Bioscience Partners has been ACT will soon file an IND to test its ESprocess by several orders of magnitude actively scrutinizing stem cell companies cell-derived retinal cells for treating mac-while holding down costs. Seay sees an but has yet to invest in one. What does ular degeneration; in this case, immuneautomated future where robots “would be it take to convince venture capitalists? rejection is less likely because the eye isculturing cells and automating a process Fambrough says that, along with a strong an immunoprivileged site.to produce differentiated cells.” medical need, a savvy management team Although big pharma has not yet shown Generating immense numbers of cells and intellectual property that lets you pro- major interest in stem cell biotech com-for the eventual treatment of large patient tect your position; “speaking personally, I panies, some onlookers believe there arepopulations is one of the toughest tasks need to see all the dots connected. I need increasing signs of partnering. AstraZen-that companies face. Most people working to see that what you’ve got today can eca, for instance, has joined EpiStem towith adult stem cells “can generate only a turn into a product used by physicians.” study how a physiological link between hairlimited amount of cells,” says John Sinden, He feels that with ES cell companies, in follicles and intestinal stem cells can beCSO of ReNeuron, a UK-based cell ther- particular, the dots are hard to connect, used to assess the side effects of certainapy company. ReNeuron has the goal of such as the ability to “reproducibly differ- cancer drugs. Meanwhile, Roche Ventureusing neural stem cells from fetal tissue to entiate cells to precisely the mature cell Fund and Novartis Venture Fund enteredtreat stroke patients with chronic disabili- you want, in an irreversible fashion.” With a multi-million-dollar round of financing forties. Because “we’re a research and devel- companies that are developing autolo- Cellerix, a Spanish company that has clini-opment engine and not ourselves geared gous therapies, neither does he grasp cal trials underway for cell therapies thatup to do clinical manufacture,” notes how cells can be efficiently extracted, treat fistulas and skin disorders; and John-Sinden, ReNeuron collaborates with the expanded, differentiated in vitro, and then son & Johnson Development CorporationUK’s two leading contract manufacturing delivered back into the patient. “We don’t (the venture capital subsidiary of J&J) ledorganizations—Angel Biotechnology and have a commercial medical delivery infra- Novocell’s latest round of venture financ-BioReliance. Cells from the biotech’s small structure that does that.” ing. Cytori has a joint venture with thecell bank are transferred to these process- Some investors maintain that autolo- Japanese medical device maker Olympusing facilities, where they are expanded and gous cell therapies will be less commer- Corporation to commercialize its Celutionthen stored in a master cell bank, ready cially viable than allogeneic therapies. “You System, a medical device that processesfor transplant. “We ourselves aren’t big have to bring in the patient and harvest the adipose tissue stem cells from patientsenough to do anything more than proof cells, expand them, and then bring the for autologous transplant. And severalof concept in patients beyond Phase II,” patient back in for transplantation,” notes months ago, Arteriocyte’s medical sys-points out Sinden. “We’d be looking for Giebel. “For a pharmaceutical company tems division formed a partnership witha larger biotech or pharma to carry this and its profit margins, it would be much Medtronic, acquiring its Magellan System,f­orward.” better if you can mass manufacture one a technology for separating platelets from product-fits-all.” But allogeneic therapies peripheral blood that will be “the idealThe Next Billion? also have problems because transplanting delivery vehicle for our stem cell therapiesA make-it-or-break-it question for a bio- cells from one person to another runs the into damaged tissue,” according to Arte-tech company focused on stem cell ther- risk of immune rejection of the cell trans- riocyte CEO Donald Brown.apies is where, after receiving its initial plant. Bonfiglio, meanwhile, takes a dif-millions, will the company’s next billion ferent view, predicting that “a substantial The Road Aheadcome from? Douglas Fambrough, a gen- number of therapies developed will likely Some say that a confluence of forces iseral partner with the venture capital firm be autologous, which will require you have driving regenerative medicine forward,Oxford Bioscience Partners, suggests some sort of cell processing device at the from the push of innovative technologiesthat public market investors are not likely point of care or cell-therapy centers.” coming out of universities, to the pull of theto support earlier clinical stage research, Robert Lanza, CSO of ACT, believes marketplace brought on by big pharma’snor are pharmaceutical companies, that the field is closing in on solutions growing need for effective new treatments.who “don’t yet care about cell therapy” for allogeneic treatments and immune Only time will tell if “RegenMed 2.0” willbecause no cell product has generated rejection. “If you look at tissue types in indeed prevail or whether it will go the way$500 million. That leaves venture capital the U.S., you find that 100 lines would of RegenMed 1.0. Ann B. Parson1 South Dartmouth, MA 1 A.B.P. is a shareholder of Geron and Osiris. DOI 10.1016/j.cell.2008.02.004 Cell 132, February 22, 2008 ©2008 Elsevier Inc.  513

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