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Biotech Companies, Investors Look to Adult Stem Cell Research

BY Rebecca Jacobson  July 18, 2008 at 6:15 PM EDT

Lab technician Photo Credit: MyFuture.com/Flickr

The company is the latest in a string of recent startups, funded by venture capitalists and other investors, which are aiming to commercialize adult stem cell research.

Federal spending for basic research on embryonic stem cells has faltered since 2001, when the Bush administration blocked funding for research using embryonic stem cell lines developed after 2001. In contrast, spending on adult stem cell research has thrived. In 2006 the National Institutes of Health spent $200 million funding non-embryonic stem cell research, and only $38 million on embryonic stem cells.

Embryonic stem cells are found only in the inner cells of blastocysts — days-old, 150-cell embryos — and are called “pluripotent” because they can develop into every type of cell in the body. The holy grail of stem cell research has long been to use embryonic stem cells to grow cells that could replace damaged cells such as neurons in Parkinson’s disease patients or pancreas cells in diabetes patients.

Adult stem cells, meanwhile, are present in small numbers in many different types of body tissue. Although they can reproduce, adult stem cells can generally only produce the same or similar types of tissue as they’re found in in the body.

Thanks to the federal funding, adult stem cell biotech companies are beginning to emerge from research institutions, all hoping to reach the market with their drugs and therapies. They’re also competing for private-sector funding that’s necessary to move research from the lab to the clinic.

“[Investment firms] are cautious about this. They are just getting their toes in the water,” says Juan Enriquez, chairman and CEO of Biotechonomy, a firm that invests in biotech companies. “If you’re going to invest [in adult stem cells] you have to be sure you’re working with the best of the best.”

One of the most attention-grabbing biotech startups this year is Fate Therapeutics, which has assembled an all-star cast of researchers: Sheng Ding of the Scripps Research Institute, Philip Beachy of Stanford University, Randall Moon of the University of Washington, and David Scadden and Leonard Zon of Harvard.

In November, the scientists announced Fate’s formation with $12 million in funding from venture capital firms Polaris and ARCH Venture Partners. They’re studying a new way to use stem cells: instead of creating neurons or liver cells in the lab to replace damaged ones in the body, they aim to create medicines that will spur the adult stem cells already in the body to repair damaged cells and tissues.

In a separate but related line of research, they’re also working to develop drugs that could “reprogram” adult cells to act like stem cells.

The company’s most promising treatment so far involves enhancing hematopoietic cells — blood-forming cells in bone marrow — which has implications for treating cancers such as leukemia and melanoma.

Paul Grayson, CEO of Fate, said they will be ready to move their clinical treatments into full trial by the end of the year.

Other young companies are also looking beyond tissue regeneration. EyeCyte grew from research that began in 2005 on using stem cells to treat vision loss, by Mohammed El-Kalay and Martin Friedlander of the Scripps Research Institute. The basic research was funded with grants from the National Institutes of Health and the National Eye Institute. In June, Pfizer invested $3 million in the small company.

EyeCyte’s goal is to develop treatments for vision loss using adult stem cells. Their first project is a treatment to repair blood vessels in the retina damaged by diabetes. Someday, using such a treatment, a patient would go to an ophthalmologist and have blood drawn. The blood would be taken to a lab, where the necessary cells would be extracted and then modified to their specific function. Then those cells would be injected into the patient’s eye, where they would repair damaged vessels.

“Think of these treated cells as well-armed firemen. We give these cells the protection they require and then put them back into the patient. They can then go to the damaged areas and extend their protection to those cells,” Friedlander explained. While it would not cure diabetic vision loss, it would slow the progression of the condition.

With $3 million in support from Pfizer, the company can now move into its own facilities and work toward FDA approval, Friedlander said.

“If you were a mouse, I could cure you right now,” says Friedlander. “But it will probably take another two years to reach humans.”

Another adult stem cell startup, OncoMed, is investigating cancer stem cells. Some oncology research suggests that the driving force behind expanding and metastasizing cancers is “cancer stem cells” — cells within a tumor that, like other stem cells, can reproduce, but that do so in a damaging way.

OncoMed, which began four years ago with venture-capital funding, recently made a $1.4 billion licensing agreement with pharmaceutical company GlaxoSmithKline.

“We’re looking for things that we think can actually become therapeutic products that we think could be big,” said Jim Broderick, a partner at the venture capital firm Morgenthaler, an early investor in OncoMed.

OncoMed is developing antibodies to target and destroy the tumor-initiating stem cells. They plan to file for a new drug application in the next two months, and expect a clinical trial this year.

“I believe, as an investor, the first huge commercial opportunities in stem cells will be in treating stem cells that cause cancer, not in tissue regeneration,” Broderick said.

Meanwhile, for El-Kalay, a native of Scotland, EyeCyte’s success is proof of the effectiveness of a particularly American blend of public and private financing of science.

“Nowhere else would we be able to do our research this way and move it forward the way we have. It’s truly an American concept.”