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.

Each year thousands of babies in the U.S. alone are born with defective heart valves. Now, doctors at the University Hospital of Munich are growing new heart valves from adult stem cells derived from umbilical cord blood which are designated ultimately for the replacement of such defective heart valves in the earliest stages of a newborn’s life.

From umbilical cord blood that was collected at the time of birth, cardiac surgeon Ralf Sodian and his colleagues in Munich were able to isolate those stem cells that are known to differentiate into cardiac tissue. The stem cells were then frozen and stored for 12 weeks, after which they were seeded and expanded upon a biodegradable polymer scaffold in the laboratory, from which eight new heart valves were grown. Preliminary examination with electron microscopy revealed that the stem cells had integrated into the pores of the scaffolding and not only had differentiated into cardiac tissue but also exhibited characteristics of the extracellular matrix as well. The newly engineered valves were shown to contain a wide array of proteins which included 78% as much collagen as heart valves which are formed from pulmonary tissue, 67% as much elastin, and 85% as much glycosaminoglycan, which is a carbohydrate found in connective tissue. The polymer scaffolds, which provide the architectural blueprints for the structural template of the heart valves on which the stem cells are guided in their differentiation, are designed to dissolve over time, thereby leaving behind nothing but the fully formed valve, each of which was tested for functional efficacy according to variations in blood flow volume and pressure, and all of which were found to mimic naturally occurring healthy valves. The next step, which will begin in 2009, will involve implantation of the bioengineered valves into young lambs to test how the valves change in growth and function over several years. If the valves are proven to be capable of growing as the young lambs mature and age, Dr. Sodian then expects to begin offering transplantation of these heart valves into human babies who are born with heart valve defects, using autologous (in which the donor and recipient are the same person) stem cells derived from the umbilical cord blood of each newborn.

Of all congenital heart defects, valve abnormalities are among the most common. With valves that are too narrow or do not close completely with each beat of the heart, “regurgitation” of the blood can cause a number of systemic physiological problems, depending upon the severity of the defect. In extreme cases, when a valve cannot be surgically repaired, complete valve replacement is the only solution, although valves that are transplanted into babies and children typically do not grow over time as the child grows, thereby necessitating repeated operations throughout the individual’s life. Additionally, replacement valves in the past have been fashioned either from human, animal or artificial material, all of which also pose a number of risks, not the least of which is immune rejection.

As Dr. Sodian explains, “The problem is, if you have to do surgery on a child, you have a relatively small heart valve and the child grows out of it, which means you have to do the surgery many times. The basic idea is to implant something living, functional, from your own cells which will integrate into the surrounding tissue with the potential to grow. Imagine you had a child with congenital heart disease and this child has to be operated on every 2 to 3 years. It’s very hard for children and parents. The goal is to do surgery once that would last a lifetime. If we replace a valve in a child, they will need surgery several times in their lifetime, because they will grow out of the device, so the ultimate goal is to have a construct which is able to grow with the child and only have to do the surgery once. Earlier is better, if possible.”

The field of tissue engineering in general and of heart valves in particular is still in its infancy, with various research teams around the world exploring options for growing new heart valves not only from stem cells but also from bone marrow and amniotic fluid. Within this context, the innovation and novelty of Dr. Sodian’s procedure is in and of itself worthy of attention. According to AHA (American Heart Association) spokesman Dr. Russel V. Luepker, the Mayo Professor of Epidemiology and Community Health at the University of Minnesota in Minneapolis, “The whole idea of building a scaffold is a unique idea. We generally put progenitor cells in the heart and try to get them to grow muscle cells, and they’re sitting in the middle of other cells. But to build a scaffold that looks like a heart valve, then hope and anticipate that the cord blood cells will take that hint and differentiate, I think is very innovative.” He cautiously adds, however, “I don’t think anyone has any idea if the valves would grow. One may not know until it is put into a child, and the child grows. There are obviously a lot of hurdles to overcome.”

In regard to the physiological importance of even the tiniest of heart valves, Dr. Leupker explains, “The stresses on a heart valve are enormous. They have to hold the blood back with each beat. The wear and tear on them which we see with metal and plastic valves is an issue, and those are fairly hard substances.” As Dr. Sodian adds, “Tissue engineering provides the prospect of an ideal heart valve substitute that lasts throughout the patient’s lifetime and has the potential to grow with the recipient and to change shape as needed. We showed that it is possible to do this with human cells.”

Stem cells derived from umbilical cord blood are known to be among the most versatile of all adult stem cells, having already been demonstrated to differentiate into a wide variety of tissue types, including cardiac tissue which is one of the most highly specialized and complex of all human bodily tissues since it is both muscular and electrical in nature. Additionally, stem cells derived from umbilical cord blood are ethically noncontroversial, since the destruction of an embryo is not required for the derivation of such stem cells.

In what is known as a concept study, Dr. Sodian and his colleagues reported the results of their newly pioneered procedure today at the annual meeting of the American Heart Association in New Orleans.

In a further sign of the increasing investment opportunities that are springing up throughout the stem cell industry, big pharma has now decided to capitalize upon stem cell research. According to Pfizer spokeswoman Ruth McKernan, the world’s largest drugmaker has allocated a budget of $100 million to be directed over the next five years toward developing stem cell products that will specifically target the treatment of diseases that are typically associated with aging, such as heart disease, diabetes, vision loss and hearing loss, among other ailments. While such stem cell research and development is already underway in smaller companies such as Geron and Novocell, this marks the first time that a major pharmaceutical organization has entered the field. Although its headquarters are in New York, Pfizer is dedicating its laboratories in Cambridge, Massachusetts and Cambridge, England to the development of drugs that will stimulate adult stem cells that already exist in the human body to heal injury and disease. According to Corey Goodman, president of Pfizer’s Biotherapeutics and Bioinnovation Center, the U.S. lab will focus on heart disease, cancer and diabetes, while the UK lab will research therapies for vision and hearing. Pfizer is planning to hire 70 new scientists by the end of 2009 to staff laboratories at the two locations. Although embryonic stem cells will constitute part of the research, the primary emphasis will be on stimulating the body’s own adult stem cells for self-repair, thereby slowing or possibly even reversing the aging process.

According to Alan Trounson, president of the California Institute of Regenerative Medicine, the state agency that funds stem cell research in California, “The major pharma companies are moving into the field and taking a very strong position. We feel they’re like big ships coming together with us. It’s starting to be an armada.”

Biotech companies have not been entirely immune to the recent global financial crisis, with Pfizer’s stock losing 28% this past year, most recently falling 45 cents, or 2.7%, in one day, to $16.28 where it settled at 4:15 p.m. yesterday on the New York Stock Exchange composite trading. Nevertheless, the decision to join the stem cell bandwagon offers Pfizer greater protection from economic vicissitudes than the company might otherwise enjoy.

Embryonic stem cells are believed to be capable, at least theoretically, of differentiating into all 210 cell types of the human body, although this has never actually been demonstrated. By contrast, each type of adult stem cell is more limited in its “potency”, but taken altogether, all the various types of adult stem cells can also differentiate into all 210 cell types of the human body. Additionally, adult stem cells have thus far proven to be safer and more effective than embryonic stem cells, since embryonic stem cells still remain extremely problematic in the laboratory and consequently have never advanced to the clinical stage. Purely as an area of scientific interest, however, if not yet as a candidate for clinical therapy, embryonic stem cells are attracting the curiosity of more and more pharmaceutical companies, who also recognize the more immediate benefits of adult stem cell therapies, and who are therefore allocating research funding to both fields. Indeed, other major drugmakers besides Pfizer are also taking an increasingly active interest in both types of stem cell research and technology. The Swiss pharmaceutical companies Novartis AG and Roch Holding AG, for example, as well as Johnson & Johnson of the United States, and the London-based company GlaxoSmithKline, which is the world’s second largest pharmaceutical company, second only to Pfizer, have all initiated new investments in or partnerships with other biotech companies that are developing stem cell therapies. In 2007 Novartis and Roche helped fund the Spanish company Cellerix in the use of adult stem cells from subcutaneous fat for the treatment of patients with rare skin disorders, while in July of this year Glaxo announced a four-year, $25 million stem cell project with Harvard University. Similarly, J&J’s venture capital arm took an equity interest in the U.S. company Tengion, which is growing various organs such as bladders from adult stem cells in the laboratory, and J&J also led a $25 million round of funding for Novocell, which is involved in researching possible diabetes therapies from embryonic stem cells. According to Reinhard Ambros, executive director of the Novartis Venture Fund which invests in corporations involved in the life sciences, “There will be more companies coming with good technologies that will raise more interest from venture capital people.” However, Pfizer is the first big pharma company to dedicate an entire program exclusively to stem cell research, as pointed out by John McNeish, the director of Pfizer’s Massachusetts division. According to Corey Goodman, in order to enter the stem cell field, Pfizer first underwent a major change in corporate policy which was subjected to detailed reassessment and authorization by CEO Jeffrey Kindler.

Pfizer’s approach to their new stem cell research project is based in large part upon the work of Dr. Sheng Ding of the Scripps Research Institute in California, who explains that, “People might not know that stem cells are everywhere in the body and play a role in disease. Awakening stem cells already present in the body might be very attractive for therapeutic intervention to achieve healing and repair.” In 2007, Dr. Ding cofounded the San Diego-based company Fate Therapeutics, which is collaborating with Pfizer in developing novel pharmaceutical agents that can activate and mobilize endogenous dormant adult stem cells already residing in the hearts and other organs of people, so that such stem cells will be triggered to repair tissue that is damaged by injury or disease. According to Dr. McNeish, “Most people and scientists do believe that cells will be medicines in the near future.” Dr. Brock Reeve, executive director of the Harvard Stem Cell Institute, adds, “Originally, pharma stayed away because of the timeline, knowing that [embryonic] stem cell-based therapies will be years down the road. Where things have changed in the last year is that we can now create cells of interest in particular diseases,” referring specifically to the newly developed laboratory technologies that have made the news headlines over the past year, such as the technique pioneered by Dr. Shinya Yamanaka of Kyoto University in which iPS (induced pluripotent stem) cells are created by reprogramming ordinary adult, non-stem cell, somatic cells to behave with a pluripotency seemingly equivalent to that of embryonic stem cells.

As more and more venture capital funding and for-profit companies enter the stem cell field, thereby adding to the diversification and competition of marketable products, stem cells are no longer limited to the realm of university laboratories and academia, but instead represent a growing industrial sector of the world’s stock markets.

Representatives of the adult stem cell company Mesoblast announced today that they have been awarded the 2008 Frost & Sullivan United States Stem Cell Market Technology Innovation of the Year Award. Although the company is based in Australia, the award also recognizes Mesoblast’s U.S.-based counterpart, Angioblast Systems, Inc., for its success and contribution to the stem cell industry. The selection of an award winner is based upon a number of factors which include market analysis and interviews, all of which combine to determine one company with the top industry rank.

According to Katheryn Symank, Frost & Sullivan’s industry analyst, “Angioblast’s proprietary technology has several attractive attributes that set it apart from other stem cell products, including very accurate identification and isolation. This technology allows for a cell population with up to 1000-fold greater concentration of stem cells compared to other conventional sorting methods. Moreover, due to the non-immunogenic nature of the cells, Angioblast’s highly concentrated and pure population of stem cells can provide a well-regulated, consistent batched product with stringent release criteria akin to small molecule pharmaceuticals.”

Symank adds, “Since Angioblast’s proprietary technology allows for a very pure, potent and homogenous cell population, we view the recent pharmaceutical partnering activity in the stem cell space as a major validation of Angioblast’s approach. This underscores the company’s prospects for significant commercial transactions.”

Dr. Silviu Itescu, the founder of the company, responded by stating, “We are honoured to be recognized with this prestigious award from Frost & Sullivan. We will continue to optimize and progress our innovative technology in order to produce novel therapies for major cardiac, vascular, eye and orthopedic indications with unmet clinical needs.”

Mesoblast Ltd., is an Australian biotechnology company the focus of which is the development of novel treatments for orthopedic conditions via the rapid commercialization of unique adult stem cell technologies, especially those involving mesenchymal precursor cells (MPC), which are specifically aimed at the regeneration and repair of bone and cartilage. Mesoblast has acquired a substantial interest in the U.S.-based company Angioblast Systems which is developing the platform MPC technology for the treatment of cardiovascular diseases, including but not limited to the repair and regeneration of blood vessels and heart muscle. Mesoblast and Angioblast Systems already hold a number of patents in the field.