Stem cell companies have attracted considerable interest in 2009, following Barack Obama’s lifting of George Bush's ban on embryonic stem cell funding, raising speculation that venture dollars will pick up in the sector.
Recent months have already seen a spate of stem-cell fundings. According to VentureWire archives, the following stem cell startups raised venture capital:
- Stemina Biomarker Discovery Inc. of Madison, Wis., raised $1.1 million of a possible $3 million Series A in November
- Promethera Biosciences SA/NV of Louvain-la-Neuve, Belgium, raised a EUR5.3 million Series A in November
- EndGenitor Technologies Inc. of Indianapolis, raised $2.5 million in Series C financing in July.
Hadar Ron, managing partner at Israel HealthCare Ventures, and his firm have already been involved in the space since leading the $16 million Series D round for Gamida Cell Ltd. of Jerusalem in 2006. Gamida is using cord-derived blood cells as bone marrow grafts for patients with leukemia and may become one of the first stem cell companies to reach the market.
Yael Margolin, chief executive of Gamida, said that it can be a challenge for companies to operate in the space, where the technology is newer and less proven than other life science sectors, but he believes the recent policy change in the U.S. will help it shine.
Ron, whose firm last raised a $140 million second fund in 2006, and Margolin provided answers to a few questions on the state of the stem cell market.
What are the differences between adult stem cell treatments and embryonic ones? Which one is further advanced?
Margolin: Embryonic stem cells are a very interesting field, but it’s still a very early stage. But with adult stem cells, we expect several products to come in to the market soon, including Gamida. So with adult stem cells, it is not futuristic anymore. Our product, StemEx, we plan to launch in 2011.
Ron: At the end of the day, what we are really focused on as investors is science that can turn into real treatments for patients. With the involvement of science, stem cell therapies are becoming a real source of treatments.
What is the funding environment like for stem cell therapy companies? And what sets Gamida Cell apart from other stem cell start-ups?
Margolin: I think the funding in this industry is a challenge, but at least in Israel the government is quite generous to early-stage companies. As for cell therapy, it is still considered a higher risk by investors than, say, small molecules.
Ron: Compared to technologies where you feel more on terra firma, when you talk about cell therapies, investors are unclear on what path it’s going to take. At least with bone marrow, the science is understood, so there is a balance.
Margolin: Scientists have been using bone marrow for 60 years, cord blood has been used clinically for 20 years. There is a lot less risk here. What Gamida Cell is doing is an option for using cord blood for adults. What we are developing is an alternative for bone marrow transplants, and we are the only company in that space in advanced clinical trials.
Even though the Bush-era ban only affected U.S. government funding on embryonic stem cells, it clearly hampered stem cell research in general. How do you think the Obama administration’s new policy will affect stem cell investing, especially in companies like Gamida?
Margolin: There has never been a total ban on research or stem cells in the U.S. or anywhere. But in terms of the atmosphere, the fact that the Obama administration changed the regulations has created a renewed hype in the field.
Ron: I agree. I think there will be a change in atmosphere. I also think investors often don’t see the difference between embryonic and adult stem cells.
Margolin: Yes, I think a lot of investors are not very educated on the various subtleties in stem cells.
Will you continue to look at stem cell companies?
Ron: We’ve already done one deal in the space, and it is doing well. Of course we will look at more.
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COMMENTARY:
For the uninitiated, adult stem cells are undifferentiated cells, found throughout the body after embryonic development, that multiply by cell division to replenish dying cells and regenerate damaged tissues. Also known as somatic stem cells (from Greek Σωματικóς, meaning of the body), they can be found in juvenile as well as adult animals and humans.
Scientific interest in adult stem cells has centered on their ability to divide or self-renew indefinitely, and generate all the cell types of the organ from which they originate, potentially regenerating the entire organ from a few cells. Unlike embryonic stem cells, the use of adult stem cells in research and therapy is not considered to be controversial as they are derived from adult tissue samples rather than destroyed human embryos.
Here's a great video produced by NOVA for PBS on the subject of breakthroughs in stem cell research. Well worth viewing.
I am glad that the Obama administration has lifted stem cell restrictions, which were driven by religious beliefs rather than science. I was appalled when research on embryonic stem cells was nearly halted during the Bush administration, because this effectively dried-up funding for stem cell research startups and setback the US' llead in this sector by at least a decade. Stem cell research scientists went overseas, where they were able to conduct stem cell research free of restrictions.
Breakthrough in stem cell research include repairing spinal cord injuries and regenerating heart muscle tissues. Stem cell research is till in the very early stages, but the potential is unlimited.
Wikipedia has an excellent post on the topic of stem cells.
Courtesy of an article dated December 29, 2009 appearing in The Wall Street Journal Blogs' Venture Capital Dispatch
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