Cellular Dynamics International CEO Bob Palay envisions a world where the eyes of a person going blind from macular degeneration can be healed by implanting healthy retinal cells that were engineered from the patient’s own blood or skin.
That scenario will still require at least several years and untold millions of research dollars, but it’s not as far-fetched as it might at first sound. Indeed, Palay believes science is finally on the verge of unlocking the door to regenerative medicine—and he thinks his company’s manufactured cells hold the key.
Until now, Cellular Dynamics (NASDAQ: ICEL) has been solely a provider of cells to use as research tools, but it recently took a small step toward creating a therapy with its first development deal. The emphasis is on “small,” however: the conservative company still prefers to play backup to its research partners—not lead the charge into regenerative medicine. “Our model is to make great cells and put them in the hands of great researchers to do great science,” Palay tells Xconomy.
On this frontier, it’s not surprising CDI is moving deliberately. There are plenty of regulatory hurdles, including a number of “safety pitfalls” that CDI “will have to avoid in their march to clinical application,” says Willy Lensch, executive director of Harvard University’s department of stem cell and regenerative biology.
And there are still many unknowns about what will happen when these cells are implanted in humans, no matter how “cleanly” they’re grown in the lab. (More on that later.)
Madison, WI-based Cellular Dynamics, co-founded in 2004 by University of Wisconsin-Madison professor and stem cell pioneer James Thomson, can manufacture huge batches of a variety of human cells—including heart, liver, and retinal cells—from so-called induced pluripotent stem (iPS) cells. The company says it can make pure cells that meet precise quality standards. “And that’s what opens the door to new biology,” Palay says.
Cellular Dynamics, aka CDI, went public last year and has focused its business on making cells that drug companies and other researchers use to test the toxicity of drugs and other compounds. CDI has also won grants to manufacture stem cells derived from donor tissue samples and amassed in biobanks for researchers worldwide to use.
Many biotech firms start by providing technologies and research tools to others, as CDI does. The big question inevitably arises: Will they graduate into drug developers themselves, a far riskier but potentially more lucrative business? For cell-based regenerative medicine, that business would mean transplanting living cells into humans to treat diseases or regrow missing parts, for example.
CDI’s answer to that question has always been conservative: Its 2013 prospectus for taking the company public, for example, made it clear that it wanted to get into the cell therapy market “on a collaborative basis”—meaning it would make the cells that its partners would try to turn into treatments.
This year, Palay started saying publicly that CDI within a couple of years would have its first deal with a partner to co-develop a cellular therapy.
It came sooner, with a late October announcement of a $1.2 million contract from the National Eye Institute, one of the National Institutes of Health. Taking blood samples from 10 patients, CDI will make stem cells and retinal pigment epithelial cells that a team of federal researchers will use to develop early-stage treatments for dry age-related macular degeneration (AMD), a common cause of blindness.
The deal is a watershed moment for CDI, but it should be noted that the contract is a small one that only covers pre-clinical safety studies, after which NEI researchers would file an investigational new drug application with the U.S. Food and Drug Administration. From there, a drug company would probably be needed to move the research through clinical trials.
If the research makes it to human testing, CDI believes it would be the first U.S. Phase 1 clinical trial using patients’ own cells that have first been coaxed into an embryonic-like state and then re-directed into a specific tissue type. And if those trials lead to an approved product, it would mark the first cell transplant treatment for dry AMD, CDI says.
Palay says it’s “not clear” what a potential agreement would look like if another company took the therapy forward. Theoretically, CDI would earn manufacturing fees, development milestone payments, and royalties if a product reached the market, but that’s all deal making for the future.
For now, Palay says, the NEI deal is “very exciting, and it’s the first of what we hope are many examples of how we’re going to help clinicians, help doctors speed new therapies to people.”
Palay equates it to a software company providing an open-source platform upon which engineers can develop Web and mobile apps, but in this case it’s CDI providing the cells that are the “building blocks” for “everybody else’s innovation.” “This is the beginning of apps for human biology,” he says.
CDI’s competitors include Japan-based Reprocell, but that publicly traded company hasn’t pushed much outside of Japan, says Tycho Peterson, a JPMorgan financial analyst who covers CDI. At this point, Peterson considers CDI the market leader for human cell manufacturing.
But will CDI ever develop its own cell therapies in-house? “There’s more upside potentially, but there’s also more development and regulatory risk,” Peterson says.
Palay doesn’t rule it out, but he says it’s not in the plans for the next few years. Such a move would potentially require a hefty investment—Palay declined to speculate how much—because CDI would need to equip its Madison facility to meet FDA standards for conducting clinical trials, Palay says. “It’s a different set of core competencies than [what] we’ve built,” he says.
Lee Hood, the president of the Seattle-based Institute for Systems Biology and a scientific advisor to CDI, thinks the company “can never say never” when it comes to developing cell therapies on its own. For example, Illumina (NASDAQ: ILMN) executives “swore on a stack of Bibles they were just going to be an instrument company,” Hood says, but the San Diego-based maker of genome sequencing machines has since branched out into other areas, like molecular diagnostics and bioinformatics.
Hood thinks CDI could “very easily move” into the regenerative medicine field “in a big way,” but the company is taking the prudent approach by getting a foot in the door through joint development deals.
“I think they have to be cautious now,” Hood says. “A lot of this is long term. It costs money.”
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