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Novocell Snaps Up Second Stem Cell Patent, New CEO Pursues “Next Big Field” of Biotech

Xconomy San Diego — 

San Diego-based Novocell has nailed down a second important patent on a valuable type of cell derived from human embryonic stem cells, which could end up forcing a lot of researchers to license technology from the company on Torrey Pines Mesa.

The company is announcing today it has secured a U.S. patent that protects its invention for a method of using endoderm cells for research when derived from human embryonic stem cells. A couple of months earlier, Novocell nailed down protection for a composition of matter patent on endoderm cells, a type of cell with wide-ranging potential. Endoderm cells can become pancreatic cells for use in diabetes therapies, or be turned into other tissues that make up the lungs, intestines, liver, thymus, and thyroid.

“This meets a long-standing need of major pharmaceuticals for human cells,” said Novocell CEO John West, in a statement.

Patents are a sensitive subject in the field of stem cell research—just ask the Wisconsin Alumni Research Foundation, which has taken heat for what some scientists consider onerous licensing terms for the right to use human embryonic stem cells developed at the University of Wisconsin. Yet exactly how Novocell’s patents might translate into revenue for the company, which is still at the earliest stages of research and development of new therapies, is hard to tell. It stands to reason that collecting licensing fees on patents like these would be part of its revenue model, since Novocell is still at least a couple years away from the valuation-building stages of bringing its first stem cell therapy for diabetes into human clinical trials.

West, who joined as CEO just a month ago, told me in an interview shortly after he started that the strength of the company’s intellectual property is one of the things that attracted him to Novocell. He definitely gave it a close look, especially since he’s someone who could probably have his pick of a lot of jobs, after he sold his last company, Solexa, a maker of gene sequencing machines, to San Diego-based Illumina for more than $600 million in 2007.

“It’s similar to Solexa, in that it has very promising scientific breadth, and now the question is how you take it commercial,” West says. There are still big hurdles that need to be cleared before Novocell can enter clinical trials, but he was drawn to the company because he was looking for the “next big area in biology,” a place that was ripe for someone with his background in biotech product development.

Novocell lost its previous CEO in November, when Alan Lewis left to become CEO of the New York-based Juvenile Diabetes Research Foundation. The company has had a few good breaks since then, winning a $5.4 million grant from the California Institute for Regenerative Medicine, forming a research collaboration with Japanese stem cell researcher Shinya Yamanaka, and securing a partnership to help supply stem cells to Pfizer, the world’s largest drug maker, for use in research.

As I reported back in November, Novocell has been pushing forward for years in its diabetes stem cell research, much of which has been published in top scientific journals. It made a breakthrough in 2005, when it was able to coax human embryonic stem cells to become endoderm cells in their first two weeks of development. Building on that, the company used genetically engineered proteins to turn those cells into pancreatic progenitor cells. Now Novocell has shown it can go much further, by developing fully functioning pancreatic beta cells that secrete insulin. When it injects mice with these regenerative, insulin-producing cells, they can function as well as mice with normal insulin-producing cells for two to three months, Novocell chief scientist Ed Baetge told me.

Novocell certainly hopes that investors will be encouraged enough by this progress to put in more funding, West says. The company has 40 employees, and its products are at least two years from entering clinical trials, so it will take more than a trivial amount of cash to get to that point. If Novocell can catch a lucky break, it will ride the coattails of Geron, the Menlo Park, CA-based biotech that pioneered the first clinical trial to use a therapy derived from human embryonic stem cells.

Novocell is pursuing a different therapeutic use—diabetes as opposed to Geron’s spinal cord regeneration-which it hopes will have more commercial potential, West says. “We are the No. 1 players in the diabetes space with stem cell therapy,” West says. “Our expertise is in differentiating pancreatic cells for diabetes.”

When I tried to pin him down a couple weeks ago on the company’s commercial strategy, in particular how he hoped to exploit the first patent on the composition of matter of endoderm cells, he declined to be specific (in fairness, it was his first week on the job).

“We’re interested in taking this technology to market,” West says. “There are many more opportunities than diabetes out there, and we can’t do them all. We want to see good proposals to get the technology used.”

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