Cellular Dynamics, Seizing the Present, Turns Stem Cells into Cash

2/27/14Follow @xconomy

Stories like Cellular Dynamics don’t grab venture capitalists in Boston or the San Francisco Bay Area. Stem cell biology as the basis for a low-margin laboratory “services” business? Borrrring. Most of the big thinkers and the big moneymen are more excited about stem cells as “regenerative medicines” that would cost a fortune and could potentially help paralyzed people get up and walk.

People around Wisconsin, and all over the world, have been hearing about stem cell promise for years. Regenerative medicine has been the ultimate dream ever since James Thomson, the University of Wisconsin biologist, derived the first human embryonic stem cell line in 1998.

Thomson watched that story play out unhappily at the company that first sought to fulfill the stem-cells-as-regenerative-medicine dream—Menlo Park, CA-based Geron (NASDAQ: GERN). By the time Thomson’s work advanced in the mid-2000s, he and others wanted to create a better business model to apply what they had, other than hype and hope. In 2007, Thomson and others learned how to reprogram adult cells into an embryonic-like state, making what are known as induced pluripotent stem cells (iPS).

Not only did these cells sidestep the long-running ethical debate about destroying embryos for research, but they paved the way for biologists to isolate specific, pure, human cells for research, like neurons or heart cells. Often, if scientists want to test a new drug for a neurological disorder, they’d have to use animals, human cadaver cells, or tumor cells. You could try to harvest human cells for use in the lab, but they’d usually degrade fast and be of little use, providing a poor simulation of how a drug might perform in a live human being. But with the new techniques, Cellular Dynamics saw a potentially better lab model, by creating pure human neurons that could be consistently manufactured.

Suddenly, Madison, WI-based Cellular Dynamics International (NASDAQ: ICEL) imagined it could reach academic and pharmaceutical labs all over and make a profit in the foreseeable future on those cells as lab tools. Then maybe, years later, it could be turned into one of those incredible-sounding regenerative medicines.

Cellular Dynamics's scientific advisors. From left to right: George Church of Harvard, James Thomson of the University of Wisconsin-Madison, and Leroy Hood of the Institute for Systems Biology. Photo courtesy of Cellular Dynamics.

Cellular Dynamics’s scientific advisors. From left to right: George Church of Harvard, James Thomson of the University of Wisconsin-Madison, and Leroy Hood of the Institute for Systems Biology. Photo courtesy of Cellular Dynamics.

So, while the story may not have had the cachet of regenerative medicine, the prudent stem cells-as-a-lab-tool-you’ve-gotta-have concept has caught on. In classic understated Midwestern style, Cellular Dynamics has grown to more than 100 employees, went public last year, and saw its revenues double to $10.7 million in the most recent 12-month period. The company isn’t profitable, but it’s worth a respectable $250 million. It has gotten enough momentum to start thinking a bit bigger.

Here’s how Thomson described the company’s strategy in a recent note to Xconomy:

Our plan has always been to establish a solid industrial base for the large scale manufacture of human pluripotent stem cells and their derivatives, and to use the tools market to generate revenue initially. Since we now have established the infrastructure and expertise to generate clinically relevant cell types at scale, pursuing therapeutic targets is a more realistic option now. When CDI was founded back in 2004, I did not personally think a company would be able to survive long enough to create a therapy based on these cells, as the field was too immature and the timeline too long.  However, the field has matured a lot since then, and I believe the therapeutic opportunities are now increasing.

Cellular Dynamics has carved out its initial niche by providing four specific types of cells to researchers: human neurons, cardiomyocytes (heart cells), hepatocytes (liver cells), and endothelial cells (those that line the blood vessels). Each has a clear purpose in pharmaceuticals. Neurons are useful if you’re testing a new compound in a petri dish against something like Parkinson’s disease, or Alzheimer’s. Drugmakers also want to know, the earlier the better, whether any drug candidate is going to be toxic to the heart. Many drugs get metabolized via the liver, so it’s helpful to see how drugs perform there too. And so on.

Plenty of academic labs around the world have worked feverishly in recent years to figure out how to best take an ordinary skin or blood cell, and reprogram it into an induced pluripotent state, and then coax it into becoming one of these specific kinds of useful cells. But Cellular Dynamics is the one seeking to be … Next Page »

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