With private investors apparently unwilling to back its efforts to bring a product to the clinic, Singapore's flagship stem cell company has ditched its cell-therapy programs in favor of other applications of stem cell technology, including licensing human embryonic stem (hES) cell lines created under clinical manufacturing standards and using hES cells to develop screening assays for drug development. The move by ES Cell International (ESI) also suggests a shift in biotech development in Singapore generally, toward lower-risk research support programs.

“Because products and profits are a long way off, the cell-therapy aspect of stem cell commercialization is a very hard sell with savvy investors,” explains former CEO Alan Colman, who, along with some two-thirds of ESI's scientists, will move to new labs within 100 meters of ESI, where he will run the Singapore Stem Cell Consortium, which is being supported by Singapore's Agency for Science, Technology and Research (A*STAR). The new strategy, on the other hand, is “pretty much assured of medium-term revenue,” he says. “We might have made a mistake in not including it in part of the [investment] plan.” ESI was founded in 2000 with funds from the Singapore government as part of a larger venture to make that country into a biotech hub. Colman, a member of the team that cloned Dolly the sheep, was recruited to head the company with much fanfare in 2002.

Steve Brozak, of WBB Securities in San Diego, believes that drug screening is likely to be one of the first successful commercial applications of stem-cell technology. After all, therapeutic programs using ES cells first aim to use the flexible cells to create more-differentiated cells like neurons, cardiomyocytes or precursor cells, which would ultimately be transplanted to patients. Before such techniques are ready for therapy, they could be used to supply human cells for drug testing. “It would be a natural bridge,” says Brozak.

But neither of two leading embryonic stem cell companies—Geron of Menlo Park, California, or Advanced Cell Technology (ACT) in Alameda, California—have announced plans to pursue such offerings alongside their preclinical programs. ACT's vice president of research and scientific development, Robert Lanza, doubts his company's investors would countenance that option. “If they're going to put in high-risk money, they want product; they want you in the clinic.” He thinks ESI was “overambitious” when it decided to pursue diabetes and cardiovascular disease. Responsive insulin-producing cells are hard to make, and so is getting cardiomyocytes to functionally integrate into heart muscle. Applications in those areas are many years off, he says. “Without investors willing to ride that out, they didn't have a chance, no matter how capable they were.” Advanced Cell Technology is working on cell therapies for eye diseases like macular degeneration; not only can retinal epithelium pigment cells be generated very reliably, says Lanza, but also transplanted cells face less risk of rejection in the eye.

That said, other companies are taking the research-tool route. Cellartis in Göteborg, Sweden, ReproCell in Tokyo and Stem Cell Sciences in Edinburgh all promote services or license stem cell lines. In June, research-tool giant Invitrogen in Carlsbad, California, launched an engineered hES cell line that uses green fluorescent protein to indicate expression of POU5F1, a gene necessary to maintain the cells' flexibility. Of those companies, only Stem Cell Sciences proclaims therapeutic goals. Even Novocell, in San Diego, which already has a clinical program in diabetes using cells from cadavers, plans to offer its stem-cell media through Invitrogen. “It would be narrow minded to think that embryonic stem cells will only provide cell-based therapies,” says CEO Alan Lewis.

“Drug discovery is a much more obvious application with less risk,” says Norio Nakatsuji, a founding scientist of ReproCell, which uses monkey and human ES cells to produce cardiomyocytes for small-molecule screening and has no intention of pursuing clinical programs. And stem-cell companies pursuing assays might also have an easier time dealing with intellectual property.

Colman says ESI has already started licensing patents necessary to allow others to work. For example, negotiations are underway with ReproCell for technology to generate cardiomyocytes from hES cells more efficiently. Nakatsuji says collaborating with other stem-cell companies makes sense at this point, particularly since ReproCell can work best with firms in Japan, and ESI with those in Singapore.

These products don't have the revenue potential of therapies. Colman himself describes the assays as “more like a service model.” More lucrative deals with milestones and royalties would provide more incentives. In February, Stem Cell Sciences licensed neural stem cell technology to Merck, of Whitehouse Station, New Jersey, for identifying and validating targets. The deal gave the stem cell company a signing fee and milestone payments, but specific financial terms were not disclosed.

That's not the kind of talk that drives venture capitalists wild. “Research assays tend to be incremental,” says Ken Haas, of venture capital firm Abingworth. “We don't want technology that would move ES cells generically forward.” In his opinion, most of the applications for stem cells are still in the “science-project stage,” and so are too early to interest today's venture capitalists.

Neither Haas nor Brozak think ESI's decision to abandon stem cell therapies will make much of a difference with the investor community, but there's no question that raising money is not easy. Lanza says there was a point at ACT when the phones got turned off. In an unconventional move, Geron in March granted a license for some of its anticancer molecules to Asia Biotech, which plans to use them in nonprescription dietary food supplements, nutraceuticals and cosmetics.

While developing assays requires less time and money than developing therapies, assays still have a way to go. Colin Pouton, Monash University

And although developing assays requires less time and money than developing therapies, assays still have a way to go, says Colin Pouton, a pharmaceutical scientist at Monash University in Melbourne, Australia. He believes more stem cell companies have screening assays “on the radar” but are not yet investing much time and money in them. These assays still need to demonstrate that they correlate well with accepted animal-testing models, he says, and the populations of cells created by differentiating embryonic stem cells are still too heterogeneous for reliable results. Colman readily admits that he's not sure how validated the assays are yet, but says at least one big pharmaceutical company kept ESI's cardiomyocytes for six months, then approached the company for five more projects. That "made us feel that the cardiomyocytes are interesting to big pharma," he says.

Now, preparing for his new job, Colman believes Singapore has deprioritized supporting small, local startups in favor of persuading established companies to put satellite research offices in Singapore. Training a sophisticated biomedical workforce in government labs is part of the plan. Though the presence of large companies in Singapore is most obvious in manufacturing, both Eli Lilly, of Indianapolis, and GlaxoSmithKline, of London, recently expanded research operations in the country. And Merck, of Whitehouse Station, New Jersey, has opened its regional headquarters in Singapore. Swee-Yeok Chu, CEO of Bio*One Capital says the investment arm of the Singapore Economic Development Board has not changed its overall strategy, which encompasses both large and small companies. Of fifteen small, “key investees” companies, at least six are drug or vaccine companies with research operations in Singapore. One of the requirements for funding is maintaining certain levels of employment in the country.