BioWorld International Correspondent

DUSSELDORF, Germany - The market for stem cell therapies is still some 10 to 15 years out, but stem cells companies are starting to build value chains based on selling their cell lines for use as tools in drug discovery.

However, the international patchwork of laws pertaining to research in the field remains a huge difficulty, making venture capitalists shy of investing, and cluttering regulatory pathways.

Those are some of the conclusions from a workshop on routes to commercializing stem cell technologies held at the 12th annual BIO-Europe International Partnering Conference held in Dusseldorf last week.

"Our immortalized cell lines and stem cells can now be produced at scale and in the right format for the industry: We can now provide things of value and interest to pharma - [our cells] are useful for toxicology and screening" said Hugh Ilyine, vice president of operations at Stem Cell Sciences plc, of Edinburgh, UK.

Another revenue-generating avenue pursued by the company is the development of serum-free, completely defined media. "It's a bit like getting the printer for free, and then finding the ink costs a fortune. Everyone's got cell lines, but who has got the media?" Ilyine asked.

Similarly, Cellartis AB, of Gothenburg, Sweden, is developing embryonic stem cell-derived hepatocytes and cardiomyocytes for use as drug discovery tools while a focus on scale-up and quality ensures that the company's cell lines could go forward to formal clinical development in the future. In total, Cellartis has developed 30 cell lines and claims to be the world's largest single source of defined human embryonic stem cell lines.

"Stem cells are developing a value chain," said Kristina Runeberg, vice president of business development at Cellartis. "We are providing model systems with high human relevance, at a time when there is a great need for improved systems in drug discovery."

Both those companies are pursuing the same model of partnering with academics that are supported by government research grants to make their own research funding go further, while developing cell lines as tools, to generate revenues. At the same time, they are careful to ensure that the lines they generate would be suitable for use in the clinic.

In the case of Stem Cell Sciences, one-third of the company's money comes from grants, one-third from sales and the rest from venture capital and institutional investors.

Ian Wisenberg, chief financial officer of BIOCOM, a regional trade body that represents biotech companies in California, said that even though the Proposition 71 $3 billion funding for stem cell research has not been released yet, the ecosystem is maturing in the stem cell field. "There is a technology push, with the number of academic research programs proliferating, and there is a market pull, with big pharma becoming re-engaged. At the same time, the political risk is declining because public support is growing."

While revenues slowly are emerging, the disparate policy landscape for stem cell research remains a problem. Peter Homberg, a lawyer at the multinational law firm Jones Day, said that internationally, the legal landscape is complex, and in some countries, there are restrictions on using embryonic stem cells even as discovery tools. "We are spending a lot of time advising clients in research how they can interact with other clients in research, for example, manufacturers of devices and reagents, particularly in Germany, where there are multiple restrictions," he said.

Companies in Germany have to comply with two pieces of legislation, the Embryo Protection Act, which prohibits the generation of any embryonic stem cell lines, and the Stem Cell Act, which bans the import of any stem cell lines apart from the so-called Presidential lines, generated before January 2004. Taken together, Homberg said, this means Germany has the strictest of laws of any country.

Runeberg said the legal position in Germany has led many stem cell researchers to move abroad. "Cellartis has got quite a large number of German scientists who come across the Baltic Sea because they can't do their research at home."

Another area of concern is ownership of intellectual property. Wisenberg pointed out the issue of who will own the IP that arises from research funded through Proposition 71 is unclear. "I don't know if anyone has worked out where IP and revenue sharing goes, but as a taxpayer in California, I want to make sure I get a return," he said.

Ilyine noted that the IP situation is much clearer in European Union-funded research. "The great thing is that the IP position has to be sorted out before the start of a project, both in terms of what IP is contributed at the start and what comes out. This saves considerable time. A neural cell line we are developing now was a discovery coming out of a four-year collaboration that is still running, and we are already commercializing it."

Runeberg agreed. "Cellartis is involved in six EU projects where the party that generates the IP owns it. From that perspective, EU projects are an IP pump, and mean we will be able to access IP from across Europe," she said.

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