Stem cells: Time to make good on promises

MADISON, WIS. - If a mathematical equation could demonstrate the commercial vitality of stem cells, it would probably look something like this: Hype/Reality=Anxiety.

For all of the ooohs and ahhhs on display at last week's World Stem Cell Summit, there was also a prevailing sense among some investors and industry officials that all of this great technology must soon put up -- or shut up.

"We have to hit milestones with the public in order to sustain our momentum," said Linda Powers, co-founder and managing director of Toucan Capital in Bethesda, Md., a venture capital firm that invests in stem-cell start-ups. "This is a relatively young discipline, but there is a [large] amount of hype and expectations. When will the public's expectations expire?"

Despite tantalizing chatter about treatments and even cures of diseases such as Parkinson's, cancer and heart failure, the prospect of a stem-cell company actually selling real products and making real profits has never seemed so distant. Amid high development costs, lengthy approval times and skeptical investors, a sobering reality emerges.

Commercialization is "excruciatingly slow," said Michael Haider, CEO of BioE Inc., a St. Paul company that extracts stem cells from blood in human umbilical cords. "I'm not aware of a successful stem-cell company. If you thought gene therapy was difficult, then [stem cells] are astronomically difficult."

Cutting-edge technology, of course, takes time to develop. Stem cells' enormous potential, however, is well worth the wait, some investors say. Drug-coated stents and implantable cardioverter defibrillators once seemed like the stuff of medical science fiction but today are multibillion-dollar businesses.

In Minnesota, research institutions such as the University of Minnesota and Mayo Clinic are developing stem cells that can repair damaged heart tissue and thus prevent total heart failure. Major medical device makers such as Medtronic are developing ways to best deliver the stem cells into the body.

Stem cells carry their own unique possibilities -- and baggage. The cells form the basis of regenerative medicine, an emerging field in which science can help the body heal itself.

A blank slate of sorts, stem cells can continuously replenish themselves and, under the right conditions, grow into specialized cells that instruct the heart to beat or the pancreas to produce insulin. Scientists, for instance, are coaxing stem cells to grow into dopamine-producing neurons, a key strategy in treating neurological disorders such as Parkinson's.

Controversy a distraction

Stem cells can be harvested from adults and embryos, and the latter case has attracted enormous controversy. Those who view embryos as human life object to the destruction of the embryos to cull stem cells. In 2001, President Bush issued guidelines that limited federal funding to embryonic stem cell lines already in existence.

For stem-cell advocates, the controversy has become a distraction because some people, including those in the industry, continue to lump together adult and embryonic stem cells.

"The biggest disappointment from the summit is that stem cells automatically equals embryonic stem cells," Haider said. "This makes it more difficult for the rest of the industry. Stem cell has become a word like Kleenex, a brand name for everything. We spend great deals of time educating people, getting their heads to turn back."

Dale Wahlstrom, a former Medtronic executive who now leads the BioBusiness Alliance of Minnesota, said major companies such as Medtronic are working on stem-cell research but prefer to keep the work quiet because of political sensitivities.

Beyond the controversy, stem cells face significant technical challenges, experts say. Companies still need to manufacture stem cells in large quantities and maintain consistency and quality. Haider of BioE also says it's unclear whether a patient's body will accept stem cells harvested from another person.

Stem-cell advocates also blame overcautious regulators for unnecessarily delaying the technology.

"People on Capitol Hill are obsessed with ... safety," said Michael Werner, president of the Werner Group, a Washington, D.C.-based consulting and lobbying firm. "There is a real sense of risk aversion. Patients have been waiting for this work to be commercialized. We don't need additional hurdles."

There are unknowns, risks

Said Powers of Toucan Capital: "There is a race to meet public expectations. The expectation times get smaller but the development time gets longer. Something's wrong here. We have lost sight of the [fact] that when something is new, there are unknowns, there are risks."

So far, wary investors have been reluctant to place large bets on stem-cell technology, especially during today's tough economic climate. From 1995 to 2007, venture capital firms have invested $1.1 billion in companies performing stem-cell work, an annual average of $85 million (modest by VC standards), according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Financial.

"Doctors are conservative," said Jonathan Gertler, head of biopharma investment banking at Leerink Swann & Co. in Boston. "Most investments are based on obvious incremental improvements. Cell therapy suffers from the lack of confidence in the investor community. Venture capitalists are under huge pressure to return capital to their investors."

Despite the roadblocks, some investors say the breakthrough treatments offered by stem-cell science are just too good to pass up. The University of Minnesota, led by Dr. Doris Taylor, is using stem-cell technology to grow replacement organs such as hearts, kidneys and livers. The Minneapolis Heart Institute is conducting a clinical trial to test whether stem cells can repair diseased heart tissue. The technology, developed by Angioblast Systems Inc. and Abbott Labs, aims to prevent total heart failure.

"We are looking for innovative technologies, the next thing," said Michael Ott, managing partner of Minneapolis-based Somerset Asset Management, which is looking to invest in the stem-cell industry. "People make money as investors seeing something ahead of everyone else. If we wait for complete certainty, then the opportunity might not be as good. It could be a terrific win or we could go to zero."

Thomas Lee • 612-673-7744