X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Before the country united in the aftermath of the Sept. 11 terrorist attacks, embryonic stem cell research was one of its most divisive issues. Religious activists see those cells as future babies, while to scientists they are medical magic. President Bush stepped into the fray in August. In a decision disliked by both sides, he approved a limited amount of stem cell research. But outside of this spotlight — and far from the bitter debate over embryos — there is great hope for stem cells taken from another source: mature, or “adult,” tissue. Recent developments suggest that medical fixes born of adult stem cells might be ready for use in as little as three years’ time. At least three such regenerative treatments are being tested on humans right now. The pharmaceutical and medical device industries, along with many diseased and injured people, are keeping careful tabs on these developments. They hope that stem cell treatments will be, as touted, the most effective medicine in the history of humanity, curing such afflictions as Alzheimer’s, diabetes, paralysis, and AIDS — maybe even reversing the effects of aging. And if dreams really do come true, the treatments will be massive moneymakers. “The upside potential is almost unbounded, as cellular therapy should be able to repair any tissue in the body,” says Dan Omstead, the CEO of Hambrecht & Quist Capital Management Inc., a mutual fund that invests in biotechnology. About 20 small enterprises around the globe are racing to produce adult stem cell medicine. With that many pushing forward, predicts Omstead, “a few of them will demonstrate practical commercial utility.” Scientists used to believe that only embryonic stem cells had remarkable abilities. Most cells in the body grow up, reproduce a couple of times, and die. But stem cells taken from embryos turn out copies of themselves over and over, each one as flexible as a blank tile in Scrabble: An embryonic cell can become any kind of cell that the body needs in order to build tissue. So far, embryonic cells have been turned into 110 different cell types. Adult stem cells, buried in fully developed organs and tissues, were believed to have more limited powers. Supposedly, they only grew into the same kind of cells as the organ from whence they came. But in the past 18 months, research journals published a trove of reports showing adult stem cells changing into tissues far different from their source. If adult stem cells can be as flexible as those taken from embryos, then disease researchers can stay far away from fertility clinics’ freezers. And that very well could mean the end to the politically charged debate over stem cell research. Still, most venture capitalists are snubbing the companies working to produce medicine from mature cells. And big drug corporations, Novartis AG among them, growing frustrated with the limited commercial results seen so far, have pulled their money from these projects. As a result, the entrepreneurs on this medical frontier must subsist on federal grants, investments from friends and family, and income from unrelated products. Even if the scrappy companies make it through the winter of their financing, they will have to overcome other formidable hardships. Great uncertainty surrounds their novel patents. And without patents clearly marking out their territory, no sure profits can follow. These businesses also face severe public relations problems that have nothing to do with the embryo debate. How open would you be, for example, to having your brain injected with cells derived from a cancerous testicular tumor? This type of research may make the “Frankenfoods” uproar over bioengineered corn look like a kindergarten spat. Perhaps it’s no surprise that big companies prefer to wait and watch. Eyes are on two industry front-runners that have moved their products into advanced clinical trials. Both companies hope that they will be able to expand beyond their initial goal of targeting one specific disease, to neutralize many other afflictions. From a former tuna can factory on Baltimore’s waterfront, Osiris Therapeutics Inc. plans to regenerate bone cells to fill in gaps caused by cancer and to save limbs damaged by injury. Osiris projects that, ultimately, the bone regeneration business could earn it $400 million. In its Silicon Valley complex, Layton BioScience Inc. is working on restoring lost functions to the three million people debilitated by chronic stroke. Yet this summer both Osiris and Layton nearly ran out of cash. LIVING HAND TO MOUTH In the beginning of May, the husband and wife who lead Osiris were worried. Chief executive Annemarie Moseley, 46, and general counsel Ken Moseley, 45, seemed headed for their second stem cell heartbreak. Their first company had sunk into oblivion because its scientists couldn’t produce enough blood stem cells to revolutionize medical techniques. Osiris has much more commercial potential, they believe. But that didn’t stop Novartis from pulling its $50 million contract with the company in July 1999. Osiris was then forced to lay off 40 of its 120 employees. The Moseleys persevered. And this year, on May 10, inspectors at the Food and Drug Administration sounded amenable to permitting testing on humans with the Osiris stem cells for treating heart disease. Taken from the connective fibers of human bone marrow, these cells had regrown heart muscle in rats. Human clinical trials were the next step. Off-the-shelf mass marketing gleamed on the horizon. Doctors and major medical centers showed so much interest that Osiris’ board of directors made plans to sell shares of the company on European exchanges. But by the time Osiris was ready to take the company public in the summer of 2001, dot-coms had crashed, and investors no longer had a taste for companies hawking unproven products. Osiris’ board canceled the IPO. One member and his friends gave Osiris $6 million, the sum needed to keep the company going until the end of 2001. Osiris scraped together commitments for enough money to make it through next year. After that, all bets are off. Meanwhile, in Silicon Valley, Layton was going through its own near-death experience. The company was pursuing its seventh round of private financing in 10 years. But venture capitalists were slow to bite. The 30-employee business needs roughly $700,000 a month to keep going, says chief executive Gary Snable, a longtime pharmaceutical executive. And it does have some revenue, a projected $2.4 million by the end of 2001. But that money does not come from Layton’s stem cell products. It’s mostly because the company bought the rights to Inversine, a 40-year-old hypertension drug that Merck & Co. Inc. ditched in 1998. The dribble of cash from this drug, along with grants, allowed Layton to hold on through the July payrolls. In August some investor money arrived. Snable says that the company has funds for one year. HOPING AGAINST HOPE History is not on the side of these struggling stem cell companies. Investors know all too well that the great biotechnology hope of 10 years ago, gene therapy, has yet to produce a widespread treatment, never mind a profit for any one company. Besides, stem cells therapies have their own set of impressive obstacles. First, the science: A cell transplanted into a patient needs to be free of infection and a perfect immunological match for the recipient. It needs to grow readily, but predictably. And it needs to be put in the right spot to do its job. Then there’s the problem of getting the product to market. In most test runs so far, cell therapy has been confined to treatments grown from a patient’s own cells. For this business to generate real profits, treatments must come from generic cells and be turned into mass-produced doses that can be kept in stock. “It’s an entirely new thing for pharmaceutical companies. You don’t package [stem cells therapies] into little bottles that you can sell through the same marketing channels as pills,” says Linda Powers, a principal at Toucan Capital Corp., a venture capital fund that invests in Layton and other biotechnology companies. Get the science and distribution right, and stem cell companies still have to deal with laws that haven’t caught up with their technology. “People are saying the intellectual property landscape is so clouded that we don’t know who to invest in,” laments John Wong, the CEO of MorphoGen Pharmaceuticals Inc., a San Diego company that is using adult stem cells to repair cartilage in the busted knees of the sports world. STAKING OUT TERRITORY Because of its sweeping and extensive patents, Osiris may be the best positioned of the adult stem cell businesses. “Our patent estate is comprehensive, broad, and deep,” boasts Ken Moseley, a patent attorney for 20 years. The company’s first patent, issued in 1996, is particularly imposing. It gives Osiris rights to the composition of any stem cell that is the ancestor to cells of bone, muscle, cartilage, fat, and tendons. For any other company working on adult stem cell treatments for arthritis, joint trouble, broken bones, and many other conditions, the Osiris patent is “the big shadow that everybody has to look at and think about,” says John Quisel, a patent agent at Boston’s Foley, Hoag & Eliot. “It’s kind of nerve-racking for everyone, because no one knows what would hold up [in court] if Osiris tried to enforce it.” Despite the odds, the science is moving fast, which may assuage many of the industry’s legal and financial woes. “For most people, this is a ‘Wow!’ ” says Layton’s Snable. “ Everybody crosses their fingers and hopes it’s going to work.” Related charts: Top U.S. Stem Cell Businesses History of the Stem Cell Controversy Company Comparison: Osiris Therapeutics and Layton BioScience

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.