Cell Therapy HiLites 2008-11-21

This is a week in which 2 of GEN's top 7 News of the Week stories were about regenerative medicine and they weren't even the two big financing events. Not bad.

Good news for Tissue Genesis Inc and their Commercialization Consortium partners Bioheart and VetStem. Effective immediately, the Tissue Genesis Cell Isolation System will be available to the European marketplace.

In a piece about biotech survival, Luke Timmerman, now of Xconomy.com, reports that according to an October report by Eun Yang, an analyst with Jeffries & Co., "about half of the 248 unprofitable biotechs that are publicly traded have less than a year’s worth of cash on hand".

Dr. Michael D. West announced an open letter to President-Elect Obama signed by 22 scientists and economists (including 19 Nobel laureates), urging the new Administration to make regenerative medicine, specifically, the cure of human disease, a national priority, similar in scope to the Kennedy Administration’s commitment to land a man on the moon within that decade.

Aldagen announced positive phase 1/2 results for ALD-301 (an autologous, bone marrow-derived stem cell population expressing high levels of ALDH) for critical limb ischemia.

The story everyone loved this week was the new trachea built from autologous stem cells and effectively transplanted in Spain. Chalk one up for more proof-of-principle but more consternation on the "business models" side of things. Researchers and surgeons from Britain, Italy and Spain collaborated to grow tissue from Ms Castillo’s own bone marrow stem cells, using them to fashion the new bronchus – a branch of the windpipe. Details of the transplant, performed by Paolo Macchiarini, at the Hospital Clinic of Barcelona, are published online in The Lancet and discussed in accompanying commentary. First a section of trachea was taken from a donor and stripped of cells that could cause an immune reaction, leaving a grey trunk of connective tissue. Stem cells were then taken from Ms Castillo’s bone marrow and grown in Professor Birchall’s laboratory to cover the 7cm graft. It was then “seeded” with the new cells using a process developed in Milan. Finally the trachea, covered in cartilage and lined with epithelial cells, was cut to shape and fitted. The researchers said that the surgery could help some patients in Britain but admitted that the procedure was too expensive to be widely available. They are seeking EU funding and commercial sponsors for trials to create and transplant a larynx, an operation that could be more cost-effective.

The two stories I loved the most this week were finance-related.

Last week Stem Cells Inc. announced its intention to raise $20M gross and this week it closed the deal netting $18.5 million from institutional investors.

Not to be outdone, Tengion raised $21 million in a second close of its Series C adding Safeguard Scientific to its heady roster of investors.

What money does exist for investing in cell therapies appears to be increasingly focused on a handful of companies that have demonstrated a somewhat mysterious capability to ease money from investors. Stem Cells, Inc and Tengion are two of the best along with MolMed in Italy which netted around $76M in an IPO earlier this year. Osiris has also done well on the public markets but also through the undying commitment of Peter Friedli and timely deal-making. Notable mention should also go to Aldagen (despite them having to recently pull a planned ~$80M IPO), Novocell, Geron, and Dendreon who all have done well in the past with investors.

This trend for capital congregation is nothing new. It certainly supports popular notions that either investors all think the same or they are lemming-like in their movements. It certainly does not bode well for the plethora of companies out there that are on the brink of burnout despite having seemingly strong management and data but do not seem to have that same type of investor-attracting charisma as the likes of Weissman/McGlynn, Nichtberger, Bordignon, Mills, Lewis, Okarma, or Gold.

At the end of the day, a company's success almost always comes down to its rainmaker. This is not a "if-you-build-it-they-will-come" type of industry. Great science, technical prowess, manufacturing experience, or even business acumen will not get companies over the threshold without that someone with that somewhat magic prowess to relieve investors of their money. Many cell therapy companies are now learning that lesson.

In the interim, from a mere objective point-of-view I could argue it's not a bad thing that investors focus precious resources on a few companies' products, get them approved, and get some fresh upticks in the "precedent" column for cell therapies and the new therapeutics and business models they represent. Like lawyers - and perhaps its because there are so many law degrees in the halls of VC firms - nothing makes them more comfortable than precendent.

That's just the way I saw cell therapy this week...