San Diego’s Stem Cell-Induced Business
State politics and a strong science sector in the region are poised to create a surge of novel stem cell therapies to previously uncontrollable diseasesby Joshua Rutenberg, Ph.D.
In 2004, the California electorate voted resoundingly in favor of Proposition 71, the California Stem Cell Research and Cures Act. Along with establishing a constitutional right to study stem cells in California, the act institutionalized the California Institute for Regenerative Medicine (CIRM) to distribute $3 billion to researchers and facilities throughout the state. The purpose was to advance embryonic and adult stem cell research, pursue therapies for unmet medical needs and create jobs.
Despite its majority following, the passing of Proposition 71 was controversial. It was enveloped in concerns about the embryonic sources of the cells as well as the necessity of allocating funds for such research while California was struggling with a $14 billion deficit. Notwithstanding the politics, California’s focus on stem cell research has become a driving force in establishing the Golden State and San Diego in particular, as a stronghold of public research and private companies. These entities are capitalizing on the welcoming environment generated by Proposition 71.
San Diego is home to world-class stem cell research expertise and technology. Four major institutions within walking distance of one another reap their share of money from CIRM: UC San Diego, the Salk Institute, Scripps Research Institute and the Sanford-Burnham Medical Research Institute. The local environment encourages collaboration among academics and commercial entities. It is no wonder San Diego's "biotech beach" boasts one of the densest populations of stem cell businesses and startups in the world. In this article, we will explore how companies exploit the financial and intellectual resources in and around San Diego to develop the next phase of medical and biotechnology businesses based on stem cell technologies.
There is great enthusiasm with respect to stem cell research and business opportunities. In late 2009, companiesandmarkets.com reported global sales in the stem cell market reached $410 million, with conservative estimates predicting a rise to $5.1 billion in 2014. This estimate includes stem cell related therapies, but does not account for sales of the reagents and tools necessary to develop these therapies.
One of the greatest business challenges in biotechnology lies in deciding when the science justifies developing a company. As research drifts from academic pursuits to those more medically relevant or commercial, government funding tends to taper off. At this point, even a successful product or therapy may still be eight to ten years away from commercialization, too distant for venture capital interest. Companies must bridge this gap by using strategic collaborations and partnerships, obtaining small business and technology transfer grants, or obtaining philanthropic donations and sponsorship. The course is difficult, but with strong local talent, one should expect to see many companies rising to the challenge. California took a leap of faith when it instituted CIRM to create an encouraging environment for stem cell companies. Other countries, such as China and Russia, are doing the same in order to lure talent to foreign soil. There is confidence that stem cells have enormous potential; the challenge will be realizing that potential.
What is a stem cell?
A stem cell is defined by two fundamental properties: the ability to reproduce and proliferate, and the ability to differentiate, which is the process of maturing to a distinct cell type. The capacity to replicate is an essential quality for the stem cell and allows it to divide indefinitely, thus maintaining sufficient numbers of identical, immature cells in the body. Importantly, this property may also allow scientists to grow large numbers of these cells for research or business endeavors.
It is the ability to differentiate that seizes the media spotlight for stem cells. This characteristic presents regenerative medicine as an opportunity to develop cell-based therapies to transplant new healthy cells, tissues or organs to patients who cannot otherwise repair damage from disease or trauma. Examples of potential applications include diabetes, Parkinson’s disease, heart disease and spinal cord injury.
Stem Cell Business Models — Regenerative Medicine
Three overlapping business models are employed within the stem cell space. The most recognized, regenerative medicine, has benefited from attention by celebrities such as Michael J. Fox and Christopher Reeve, who promoted embryonic stem (ES) cell research as a means for developing therapies for Parkinson’s disease and spinal cord injury. The goal of regenerative medicine is to isolate and reproduce stem cells to develop new and healthy cells, which can then be transplanted into patients with damaged tissue, such as that arising from diabetes, muscular dystrophy, Lou Gehrig’s disease or heart disease.
Although the first stem cell therapy occurred in 1968 when Dr. Robert Good performed bone marrow transplants to treat patients suffering chemotherapy-induced blood disease, cell therapy still represents the most challenging and long-term application for the use of stem cells. Therapeutic research requires significant investments to bring potential therapies from the laboratory, through clinical trials, to the bedside. These businesses tend to be large, public companies like Geron, in California, or Osiris Therapeutics, in Maryland, that have the funds to pursue risky, yet lucrative markets.
Geron made headlines after obtaining FDA approval for the first human ES cell-based Phase 1 clinical trial. Using ES cells, Geron has produced mass quantities of a type of nervous system cell, called oligodendrocytes, that helps maintain the health of neurons. Geron demonstrated that these oligodendrocytes can restore nerve function in animals with damaged spinal cords. If similar results are reproduced in humans, a new age of regenerative medicine could be established. While Geron is breaking new ground, it is important to note they are doing a fantastic job of managing expectations and working closely with the FDA to set stringent clinical guidelines for ES-based therapies and FDA approval.
A new company gaining prominence in San Diego is Fate Therapeutics. Fate specializes in reprogramming cells obtained from adult sources to acquire the characteristics of ES cells. Fate’s goal is to develop “stem cell modulators” that target and coax populations of naturally occurring adult stem cells to proliferate and differentiate to treat disease. Fate's first stem cell modulator drug, FT1050, is designed to improve stem cell transplants for patients who have leukemia, lymphoma and other blood diseases.
Conventional therapies, such as chemotherapy and radiation, destroy the cancer cells but frequently kill the patient’s own blood cells and immune system. Bone marrow and umbilical cord blood transplantation replenishes the patient’s dwindling or incapacitated blood supply. FT1050 is designed to be incubated with the donor cells before they are transplanted into the patient to improve restoration of the patient's blood and immune system. Fate is currently testing whether umbilical cord blood can be safely treated with FT1050 in a clinical trial. The goal will be to test whether FT1050 treatment supports more efficient replenishment of the patient's blood and immune system following transplantation.
Stem Cell Business Models — Reagents, Tools And Infrastructure
All stem cell research, from academic labs at UC San Diego, to large companies like Osiris and Geron, require specialized reagents, tools and infrastructure to perform their studies. Reflecting the significant growth in research and resources dedicated to stem cell research, a search on PubMed, a database that tracks biomedical publications, reveals that stem cell publications rose from 3,616 papers in 1999 to 10,789 in 2009. Following President Obama’s lift of the ban on stem cell research, doors opened for researchers to acquire federal funding. In fact, the National Institutes of Health (NIH) spent roughly $643 million on stem cell research in 2007 and $1.23 billion in 2009.
The need for novel tools and reagents is greater than ever and demand could grow at double digit rates for the next five to ten years. To serve these needs, an entire business sector materialized, with many companies located in California. The companies providing those reagents vary in size and specialty. Life Technologies in Carlsbad and BD Biosciences in San Jose distribute anything from plastic ware to biological molecules and live cells. Meanwhile, small, one-man startups are propagating to develop single items for stem cell identification. Although attracting less media attention than their business counterparts in regenerative medicine, the revenue possibilities for these companies are no less constrained.
An example of a startup company taking advantage of the growth in the stem cell reagent and tools space is MicroStem Inc., headquartered in San Diego. MicroStem’s mission is to develop and produce human adult cells in large enough quantities to sell to other research laboratories. The company targets cell types that have been difficult to obtain — such as heart muscle cells and neurons. Primary sources of such cells obtained from cadavers or biopsies have limited life spans and tend to be injured during isolation procedures.
MicroStem isolates stem cells by using proprietary reagents to cause them to stick on a glass slide. With the ability to query tens of thousands of combinations on just one slide, the company’s technology offers a significant advantage over traditional technologies to identify conditions that drive stem cells to develop into certain cell types. In addition to developing novel cells for commercial distribution, this technology yields valuable information about cellular physiology that can result in the discovery of therapeutic leads. Moreover, MicroStem is taking a similar approach to develop cancer stem cell lines, which can be used to discover agents that target and destroy malignant cells.
Stem Cell Business Models — Screens
As more previously unavailable adult cells are produced from stem cells, a third class of business is developing means to screen for new pharmaceutical agents to test against those cells. In such cases, stem cells are differentiated in the lab to create the mature adult cell or their immature precursors. The cells are then immersed in solutions containing assorted drug candidates and evaluated for various responses.
Dr. Mark Mercola, director of muscle development and regeneration at the Sanford-Burnham Medical Research Institute, directs research to recreate heart cell progenitors, the cells that develop into heart muscle, in Petri dishes in his lab. His company, Chemregen LLC, is manufacturing small molecules to be applied to these progenitors. Chemregen can test for drug candidates that induce formation of adult heart cells from precursors and may discover drugs that induce specific behaviors, such as heart contraction. Depending on the results, Chemregen could sell the progenitors to other laboratories studying heart development and heart therapy, sell the candidate drugs as reagents to induce heart formation in the lab or even develop the candidates as pharmaceutical agents.
Such pharmacological screening studies represent short-term, attainable goals in stem cell research. Pharmaceutical companies, which have the most experience in drug development are partnering with stem cell companies to tap this potential windfall. For example, GlaxoSmithKline recently funded partners at Harvard University to investigate stem cell technologies for drug screening, while Roche partnered with Cellular Dynamics International to identify similar opportunities. Johnson & Johnson has provided funding for San Diego’s Novocell, which specializes in developing insulin-producing cells for diabetics; and Pfizer recently opened up its own office of regenerative medicine in the U.K. These companies see the potential for stem cell research to generate big returns.
It is clear there is significant potential for the future of stem cell research, therapy and business. The field of stem cell biology is in its infancy and there remain numerous questions regarding utility and function. As evident from publication rates and NIH spending for stem cell research, the promise of novel therapies for previously uncontrollable diseases is generating scientific progress at an unprecedented rate. By exploiting the resources and talent local to life-science hubs such as San Diego, stem cell businesses are poised to make incredible discoveries and strong financial returns.
Joshua Rutenberg, Ph.D. (’11) holds a doctorate in cell and developmental biology. He has over 15 years experience in research focused on stem cell biology and embryonic development. He is currently leveraging his research expertise to perform market research and investigate consumer insight.