This April, scientists and executives met to discuss the hurdles between coming up with an idea and using it to generate an income. The meeting was organized by the University of California along with the Canadian Consulate and UK Foreign and Commonwealth Office in San Francisco.

A trek to the clinic

Jane Lebkowski, CSO of Geron, enumerated the challenges of getting an embryonic stem cell product into clinical trials for spinal cord injury.

To start were political and social challenges, she said. With federal government funding out of the game, Geron was funding its own academic research and ethics advisory board in order to even acquire the cells in the first place.

Next were manufacturing challenges. “When we first got the cells from James Thomson, they were clumps of cells growing on feeder cells. We had to learn how to expand these cells, bank and store these cells so that [they were] compatible with human therapeutic use,” she explained. That meant examining and tracking every reagent the cells were exposed to. Next, she said, “we had to take differentiation procedures and make them work not just once in a while but reproducibly, and homogenously”. Geron scientists had to develop assays to detect both the desired and the undesired cells and had to determine what level of impurity would be tolerable.

Another challenge was preclinical testing. “We had to show that these progenitor cells had some capacity and ability to migrate. We had to show that when we implanted [them] into an animal model, they were efficacious and they were safe,” Lebkowski said. A huge challenge was the problem of assaying a human-cell product in an animal model. Geron used rats because they were able to study almost 2,000 of them. Primates, she said, could not have been studied in large enough quantities. Most studies were conducted under the code known as good laboratory practice, which drove costs to multiple millions of dollars.

Finally, there were regulatory changes. “This was mostly because it was novel,” said Lebkowski. “It was something no regulatory body had dealt with before.” No one knew what the burden of proof would be. Another issue is that spinal cord injury patients are “not condemned to a very short lifespan”, meaning that that if the experimental treatment caused harm or death, people would die much sooner (or live much longer with a treatment-caused injury) than would patients who have only a short time to live. She said Geron worked collaboratively with the Food and Drug Administration (FDA) over “numerous conference calls” that discussed technical issues such as how and whether cells migrate from the injection site. Geron received approval from the FDA in February this year to proceed with clinical trials, over a decade after they initiated the program. They expect to dose their first patient in July.

Too many companies are making too many patents and not enough money

Gregory Bonfiglio, partner at Proteus Ventures, a venture capital (VC) firm specializing in regenerative medicine, gave a quick course in Entrepreneurship 101, tailored to stem cells. First he provided a bit of venture capitalist folk wisdom known as the Gartner Hype Cycle. This is a graph representing attitudes toward a new technology. It rises sharply up through a period of hype and hope during which a new technology is pumped full of media attention and venture funding. Then reality sets in and disappointment drives the line into the “trough of disillusionment” in which everyone “thinks the technology is a piece of junk”. Finally, researchers work out the bugs and figure out which limitations are intrinsic and which can be overcome. Then, the line begins a slow climb up the “slope of enlightenment”.

Bonfiglio thinks stem cell and tissue engineering technologies hit the peak in 2000, with 3,300 jobs, 73 firms and at least one prominent newsmagazine cover. The descent began with Bush's announcement in August 2001 banning new embryonic stem cell lines from federal funding and continued down as skin-repair company Organogenesis filed for bankruptcy in 2002.

The beginning of the slope of enlightenment began in 2003, with the passage of Proposition 71 in California, in which voters pledged $3 billion for stem cell research. Today, by very broad definitions, Bonfiglio said there are 900 clinical trials going on, as well as some 400 products on the market (most of these products are for use in the lab rather than on patients). He also said that there were 600 products in development and nearly 700 regenerative medicine companies worldwide, with the majority working in skin and orthopaedics. What's more, research and development is promising better solutions, particularly in cell manufacturing.

But then came the bad news. He described the current financial situation as “the worst economic environment that we've seen”. That means that perfectly good companies will start going belly-up simply because they are in the wrong phase of the funding cycle. Typically, companies plan on funding events every 18 months, so companies that need to come back for more funds now may have to go without. “Government grants might help”, Bonfiglio said, but some well-run companies with good technology are going under through no fault of their managers.

“Development costs are in excess of investment,” said Paul Kemp, CEO of Intercytex, a regenerative medicine company focusing on skin and hair. In other words, the amount of money needed to create a product is more than investors, or even the government, are currently willing to spend. The government is funding numerous university projects, creating an imbalance in which a lot of funds are going to universities whereas very little are going to industry. Indeed, he described “a very strange situation” in which a university was actually funding a company to do some work developing retinal pigment epithelium cells.

Bonfiglio agreed, saying there was “tremendous horsepower” behind academic projects, “but they're looking to publish”. Translational research, like technologies to minimize variability or expand a cell line, is not something that people publish, he said.

The problem is that all this work is necessary but does not effectively boost the value of a company, said Bonfiglio. “Value creation is flat from research to IND” from a VC's perspective, he said. The value curve gets steeper once a company files its investigational new drug (IND) application.

If the funding drought wasn't bad enough, companies are also facing a minefield of intellectual property (IP). The “IP landscape is treacherous”, Bonfiglio said. “At the time the patents were filed, we didn't understand the [stem] cells well enough.” He compared the situation to the tale of blind men describing an elephant — everyone files on a different aspect of what is actually a single entity. The resulting fragmented ownership and inconsistent patents will provide “enough fodder to keep armies of lawyers employed for quite a while”, he says.

In fact, Bonfiglio predicted that the field would soon see a lot of mergers and acquisitions motivated mainly by the need to roll up or consolidate IP. The industry can't support as many companies as currently exist, he said.

But despite the harsh words, much of the panel's advice seemed quite appropriate for those who might have come to San Francisco expecting gentle people with flowers in their hair. The key to starting a business, it seems, is starting conversations. Darin Weber of the Biologics Consulting Group advised therapy companies to talk to the FDA as soon as they could, always offering their own ideas of how they might prove the safety and efficacy of their product. The same principle applies to reagent companies, according to Fergus McKenzie, program manager of ITI Life Sciences, a funding agency in Scotland. He advised entrepreneurs to get out and talk to customers very early, as any of their products would have to be good enough to supplant existing protocols. “Don't just guess what they want.”

“The person across the table is not your enemy, he's your ally,” concluded Bonfiglio. “People competing for publications are collaborating to bring things to the market.”

My initial reaction to Bonfiglio's statement was that it was too sweet to be true, yet just this April we've seen iZumi sign a deal with Shinya Yamanaka to share intellectual property over induced pluripotent stem cells. And small companies Fate Therapeutics and Stemgent have just announced a collaboration called Catalyst that brings together the induced pluripotency stem cell scientists Rudolf Jaenisch and Sheng Ding.

The 15 April meeting was organized by the University of California System-Wide Technology Transfer Forum in partnership with the British Consulate-General, San Francisco, and the Consulate General of Canada, San Francisco. About 300 people attended.