Embryologist and Stem Cell Pioneer Forms New Company

Forbes, November 25, 2008

The renowned embryologist, Dr. James Thomson, of the University of Wisconsin at Madison, announced yesterday that he is merging 3 university spinoff companies into a new, single business entity. With $18 million in venture capital cash, Dr. Thomson stated at a news conference on Monday that he believes his new company will become a world leader in stem cell technology.

The three University of Wisconsin spinoffs - Cellular Dynamics, Stem Cell Products and iPS Cells - are being merged into a single new company which will still be based in Madison, Wisconsin and which will retain the name Cellular Dynamics International (CDI). According to CEO Bob Palay, CDI "intends to be the world leader in the industrialization of basic stem cell technology."

Focused specifically on the commercialization of stem cell technology as it applies to drug testing and research, rather than to the discovery of cell-based therapies, CDI's initial work will be centered around the development of new technology which can supply human heart cells to researchers for use in drug testing, especially for the testing of adverse reactions to pharmaceuticals.

One of the popular misconceptions about embryonic stem cells is that they might offer a cure for disease or injury within the near future, whereas nothing could be further from the truth, and this is a point which all of the stem cell authorities, including Dr. Thomson, repeatedly emphasize. As the first person in the world ever to isolate embryonic stem cells, first from a monkey in 1995 and then from a human in 1998, Dr. Thomson is idolized in embryonic stem cell laboratories throughout the world since he is widely recognized as the father of embryonic stem cell science. Additionally, when his lab announced the breakthrough in 2007 with the development of iPS (induced pluripotent stem) cells, once again his name was in newspaper headlines around the globe. Although iPS cells, which were originally transformed from ordinary skin cells, are still extremely problematic for a number of scientific reasons, they are not generally regarded as ethically controversial, as embryonic stem cells are, since the destruction of an embryo is required for the extraction of embryonic stem cells but not for the development of iPS cells. Nevertheless, as Dr. Thomson repeatedly explains, any potential cures either from embryonic stem cells or from iPS cells, for any disease or injury, are still at least another decade away, if not further, due to the numerous scientific problems that are inherent in these cells and which have yet to be resolved. Consequently, Dr. Thomson therefore believes that the greatest benefit to be derived from embryonic stem cells is not from any cure that might be developed from the embryonic stem cells themselves, but rather in the use of the embryonic stem cells for drug testing and development - i.e., in the basic use of these cells to test for adverse reactions from pharmaceuticals in the laboratory, toward the ultimate goal of developing cures from the pharmaceuticals, not from the embryonic stem cells. Currently, side effects from drugs are tested on animal cells, but rarely with great accuracy, with the result that physicians prescribe medication to patients without knowing in advance whether or not an individual patient will have side effects to the medication, and then the patient is monitored to see whether or not side effects will occur. Dr. Thomson's business model now offers a new paradigm, in which adverse reactions to specific medications would be tested on human, not animal, cells, derived from the human embryonic stem cells, prior to prescribing a drug to a patient. As Dr. Thomson explains, "We're very much going to be focused on products rather than long-term promises. There are things that drug companies want today."

By sharp contrast, adult stem cells are neither problematic in the laboratory nor ethically controversial, and have already been used for years in clinical therapies for numerous diseases and injuries. Unlike adult stem cells, however, both embryonic stem cells and iPS cells have numerous biological hurdles to overcome, which include, among other problems, their inherent risk of teratoma formation. Teratomas are a very specific type of tumor and their formation, by definition, is the universal laboratory test for determining whether or not a cell, such as an embryonic stem cell or an iPS cell, is "pluripotent". If a cell forms a teratoma, then it is recognized as being an embryonic stem cell or some other type of pluripotent cell, such as an iPS cell, whereas if a cell does not form a teratoma then it is recognized as not being an embryonic stem cell nor an iPS cell nor any other type of pluripotent cell. Since adult stem cells are multipotent, not pluripotent, they do not form teratomas nor do they exhibit the numerous other problems inherent in embryonic and iPS cells, which is why adult stem cells have already been used as clinical therapies for years in the treatment of real human patients with real diseases, whereas embryonic stem cells have never progressed beyond the laboratory stage and any hope of a clinical cell-based therapy being developed from embryonic stem cells is at least another decade away, if not further, as the pioneers of embryonic stem cell science, such as Dr. Thomson, repeatedly state.

At the news conference yesterday Dr. Thomson also predicted that within the next 20 years all drug testing will include the use of human heart cells, and according to this view he is designing CDI to be a world leader in the supply of human heart cells, developed from embryonic stem cells, which CDI will then sell to pharmaceutical companies. Additionally, CDI will also develop red blood cells and platelets from stem cells to be used in blood transfusions, which would alleviate supply shortages and also hopefully reduce some of the risks associated with human blood donation. As CEO Bob Palay cautioned, however, even for this it will still take at least another decade for these products to be developed and to pass regulatory approval. According to Palay, "For these lifesaving treatments to happen, we have to drive the cost down, quantities and qualities way up and go through the approval process to ensure the safety and effectiveness. Historically, that takes a decade or more."

Currently CDI employs a staff of 50 individuals but is growing rapidly. The $18 million in venture capital funding, which is derived primarily from local Wisconsin investors and from the Wisconsin Alumni Research Foundation, will be used not only for industrializing a production infrastructure within the company by which human cell types are mass produced, but also for the creation of a repository of stem cells which would be a type of bio-bank in which stem cells that are engineered from DNA could be stored and used for testing individual reactions to drugs. Even without the full development of such an infrastructure and without the completion of the repository, however, CDI is already using its proprietary stem cell technology to supply heart cells to Roche and to other pharmaceutical companies. Although the global economic crisis has resulted in declines in most markets, including in most of the other major sectors of the biotech industry, stem cell companies are well positioned for growth as analysts predict that the regenerative medicine industry will constitute a $10 billion market by 2016.

At the moment, the time would appear to be ripe for startups, especially since the road ahead is a long one, at least for any enterprise based upon embryonic stem cells. As CEO Bob Palay acknowledges, the plan to build CDI into a world leader in the industrialization of basic stem cell technology is "an ambitious goal". CDI's stock closed today at $9.87.