By Matthew Willett

Staff Writer

Biotech stocks jumped last week on the heels of a final draft of National Institutes of Health guidelines that may open funding to research on stem cells harvested from embryonic or fetal tissue, but even as the sector climbed, representatives from stem cell start-up MorphoGen Pharmaceuticals Inc. said the technology it plans to exploit could render the debate around stem cell origins moot.

MorphoGen, officially funded into existence last week with a "seven-figure" seed investment led by Connect Capital Partners, of New York, seeks to exploit pluripotent stem cells (PSCs) harvested through a minimally invasive technique from adult patients instead of cells taken from fetal or embryonic tissue.

MorphoGen officials said they couldn't comment on the amount of the financing beyond confirming that it ran into the millions, or about who the investors Connect Capital Partners represent, except to confirm that one unnamed investor offered a majority of the financing.

President and Chief Operating Officer Terry Ryusaki and Chairman and CEO John Wong would say, however, that the San Diego-based company sees its proprietary technique for isolating, purifying and proliferating PSCs acting as an "operating system" for stem cell therapy in the future.

"What we believe, and our research demonstrates such, is that these cells reside in most tissue compartments in your body," Wong said. "The reason why they're there is to repair normal tissue that wears down in the life cycle of humans, as well as to provide a reservoir of cells during trauma or injury."

Wong said it's the purification and proliferation stage that sets his company apart from others, a system that could be looked at as an operating system for producing PSCs in the same way word processing software produces text documents.

"Our initial business model is to use analogous tissue, and we get it from a less-invasive technique, from the derma or the muscle, to isolate the cells, expand them in culture in an undifferentiated native state, to expand and purify and then re-implant them back into the damaged tissue site," Wong said. "They, in turn, go back and differentiate back into the tissue that's been damaged. The damaged tissue activates the cell, which receives a signal from the microenvironment."

He added that the company, founded in 1994 as a "virtual" corporation dependent on university research for preclinical evaluation of its stem cell technology, is ready to move its top candidate into Phase I trials next year. Within four years, he said, MorphoGen should be ready to seek FDA approval to market its PSCs.

"Our first product should be ready sometime next year. It's CartRegen ASC, which stands for autologous stem cells, and the real key here is that we have stem cells that are truly PSCs that come from adult cells and are implanted back into adults. That gets rid of a lot of problems with fetal tissue computability."

He said the company's financing last week should fund research into the clinic. Beyond that, he said, other funding could come from a variety of sources.

"We're now in the process of raising some additional capital, and we're in preliminary discussing with a number of potential corporate partners as well as two corporations we're currently partnering with," Wong said.

He added that he couldn't expand on the partnerships in existence due to the extreme competitive nature of the young field.

"There are a few companies we know are working on it, and a lot more research going on," Wong said. "The competitive environment is extremely high, but I think other companies lack the ability to purify and proliferate the cells, which is what we're able to do with the research we've done on stem cells. Nobody's been able to clone cells and proliferate them like this."

That proliferation technique, based on MorphoGen proprietary technology, could translate the company's research into a broad pipeline of products.

"We're looking for tissue regeneration products, bone repair products, products for repairing muscle damage, ligament repair, disc repair for the back," he said. "Further downstream we're looking at implants for Parkinsonian defects, and we're looking at using these cells in a possible way for stroke indications. We're looking at cells as a possible basis for entering the cardiovascular market and looking at the drug discovery procedure for the oncology market."

Currently, however, he said the uproar over the origin of harvested stem cells, though a temporary share price boost for stem cell companies (stem cell stocks began to drop gains made earlier in the week early Friday afternoon), is a point his company already has dismissed.

"We've been here in the background while all the noise was going on, and there's been a pressure on us to provide a solution," Wong said. "We believe we've provided that solution. The technology has just moved beyond stem cells from embryonic tissue."