Industry and academia team up;

For the first time in its three-year existence, the state
taxpayer-funded stem cell institute is offering grant money to
biotechnology companies.

Ten companies, including at least two in San Diego, said they
plan to apply for money for so-called disease teams, a cutting-edge
concept of bringing academia and industry together to share expertise
and perhaps speed the lengthy and expensive process of getting new
therapies and diagnostics to market.

The 10 companies, as well as 56 teams from universities and
nonprofit research institutes, have sent letters to the California
Institute for Regenerative Medicine, stating they intend to apply for
grants of up to $55,000. The deadline for applications is the end of
this month.

The stem cell institute wants to issue up to 20 planning grants
to allow prospective disease-team members to hold teleconferences and
travel to meetings around the state with potential collaborators to
work out the details of how their group would function.

The idea is to form a team whose members have expertise in all
areas of developing a drug or diagnostic — from the initial idea to
testing it on animal models, producing enough of it for experiments and
figuring out how it meets the needs of patients.

The planning grants are expected to be awarded in June.

In the second half of 2008, the stem cell institute will offer
large, multiyear grants to disease teams for product development, said
Patricia Olson, the institute’s director of scientific activities.

The size of the research grants has not been determined.
However, the teams will not receive a lump sum. Funding will be spaced
over several years, and vary depending upon the expense for that phase
of research.

The teams will be required to meet certain milestones before they receive each funding installment.

"This is a new and exciting era for CIRM," Olson said. "We are
talking about creating potential therapies and diagnostics that will go
into the clinic."

Novocell, a privately held company in San Diego, and
International Stem Cell Corp., a publicly traded company in Oceanside,
said they have applied for the planning grants.

Novocell is developing a diabetes treatment that would create
insulin-producing islet cells from human embryonic stem cells. It then
would coat those islet cells in a polymer to make the cells invisible
to the body’s immune system, so they would not be rejected or require
the patient to take immune-suppression drugs.

The company plans to be part of two disease teams, Alan Lewis, chief executive, said.

One team, which Novocell would lead, would include scientists
from academia as well as a company from outside San Diego, Lewis said.
That company, which he declined to name, has more expertise in
development than Novocell, which is focused on research. He wouldn’t
name the academic part of the team.

"Obviously we wanted to put the team together on capabilities,
so we didn’t choose a company we felt would be a direct competitor or
that could do what we do," Lewis said.

Novocell also plans to be part of a second team that will focus
on a delivery system for stem cell therapies that would avoid
immune-response problems caused by injecting foreign cells into a
patient, Lewis said. The company’s encapsulation technology and the
research that led to it is of particular interest to this team, which
would be led by the academic researchers, he said.

"It’s very early days in this process, but we feel we could benefit from both of these teams," Lewis said.

Oceanside-based International Stem Cell Corp. has created
corneas using embryonic-like human stem cells derived from an
unfertilized egg.

The company would have liked to create teams for several
diseases, but for this planning grant the stem cell institute limited
companies to being the lead investigator on only one team, said Jeff
Krstich, chief executive.

Nonprofit institutes, including universities, which generally
have researchers with expertise in more areas than a company, can apply
to lead four disease teams.

International Stem Cell’s team is all internal, and plans to
focus first on corneal implants, Krstich said. Last year the company
published a scientific journal article showing that it can create
corneas from embryonic-like stem cells it created from a process known
as parthenogenesis, which involves using an unfertilized egg rather
than an embryo.

Parthenogenesis is attractive to some in the scientific
community because it avoids the destruction of an embryo, which makes
embryonic stem cell research contentious.

Moving forward, the company would like to team with scientists
from the University of California system, including UC Irvine’s Hans
Keirstead, who is receiving financial support from the company for
research, Krstich said.

Stem cell institute leaders would not reveal the other
companies or the academic teams that want the grants. The institute
also would not provide a breakdown of the diseases that the teams plan
to tackle.

The concept of funding disease teams began during the stem cell institute’s process of writing its long-term strategic plan.

A core mission of the institute is to bring new therapies and
diagnostics to market. Its staff and leaders are seeking to do that
through proven development processes, as well as innovative ones.

The disease-team approach seemed like an effective way to
create synergies between companies and academic teams with
complimentary expertise, Olson said.

The disease-team funding does not seek to support basic
research, said Bettina Steffan, a scientific officer at the institute,
but rather aims to help develop existing discoveries to the point of
clinical trials.

Generally, academia makes the initial discoveries and industry
has more expertise in mass-producing drugs for clinical trials, and
getting regulatory approvals for trials.

Private investment, such as venture capital funding, is more
likely to become available in these later stages, when a therapy is
ready for clinical trials.

The goal of the disease-team grants is to get therapies to that point.

Knowing that the stem cell institute has made a long-term
commitment to fund the work should build team loyalty and determination
to stick with it, Steffan said.

Biotechnology companies, which spend enormous amounts of money,
are happy to finally have the institute as a potential funding source.

Novocell’s Lewis said Proposition 71, the voter bond initiative
that created the $3 billion stem cell institute, had generated lots of
attention in the state.

"It would have been a huge disappointment if companies could
not be grant recipients and participants in these program," he said.
"Obviously the likelihood of an academic group developing a therapy is
not high without commercial enterprise behind it."

Before it could begin offering funding to companies, the
institute had to work out its policy for the ownership of discoveries
made with its money. Biotechnology executives from around the state
attended many meetings to discuss how the institute could get some
profit. But the executives were also concerned with not having to pay
so much to the state, that it would not be worth the companies’
investment in a risky drug discovery process.

To have 10 companies from around the state say that they are
interested in seeking funding is validation that they can live with the
institute’s policies, said John Simpson of the Foundation for Taxpayer
and Consumer Rights.

"We weren’t expecting free money from CIRM," said Lewis of
Novocell. "Obviously there needs to be a benefit to the California
taxpayers down the road, when a product is approved."
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Contact the author Terri Somers at: (619) 293-2028;[email protected].