Caroline N. Dealy, Ph.D., University of Connecticut
Director of Research, Chondrogenics, Inc.; Associate Professor, Center for Regenerative Medicine and Skeletal Development, Department of Reconstructive Sciences, Department of Orthopaedic Surgery, University of Connecticut Health Center

Richard Malavarca, GigaCyte, Branford CT
Executive Vice President, Media Development and Production

John McNeish, Ph.D., Consultant
Past executive director for regenerative medicine at Pfizer

Timothy Shannon, M.D., Canaan Partners
Venture Partner

The panel was moderated by Dr. Paul Pescatello of CURE, who was introduced by Peter Longo, president and executive director of Connecticut Innovations.

By way of introduction, Dr. Pescatello said: "From the start,  as we imagined and then drafted our stem cell legislation — legislation to make Connecticut first and foremost a safe haven for stem cell research, as well as put a hundred million dollars behind stem cell research — the most important goal in some sense was commercialization of stem cell research. This is the case because the insights and basic research findings of our universities are turned into therapies and cures only by industry. The hard and difficult work of developing and honing small and large molecule compounds and building and channeling stem cell lines into clinical treatments is in its way as hard and difficult as the basic early stage research about the fundamental mechanisms of stem cell action. So we’re here today to learn about the state of stem cell research, and how close, or perhaps how far we are to new ways to treat and hopefully cure a host of diseases, from cancer to diabetes to Alzheimer's disease."

The panelists briefly explained their connection to stem cell research.

Dr. Shannon: After a career in biopharma research I'm now with a venture capital firm. We are investing other people's money, so we need to provide a return to our investors. We finance a company in its early stages so that later it can be sold to a larger company or, in some cases, issue its own shares in an IPO. Guided by what our investors tell us, in this area we look for at least a threefold return on investment — if we put in $50 million, we hope to get back at least $150 million when we exit.

Mr. Malavarca: GigaCyte is a relatively new company with its laboratory in Branford. Our focus is stem cell models for drug discovery. The clinical outcome from cell based assets in the past has not been that good. What stem cells offer is the ability to create fully functional models that will be more relevant and more predictive.

Dr. Dealy: For the past 20 years I've focused on the molecular signals that control the differentiation of embryonic cells into cartilage. My colleagues and I developed an "instruction manual" that tells human embryonic stem cells and IPS (induced pluripotent stem) cells what to do and how to begin to act like a cartilage cell. We’ve formed a partnership to patent the technology and move it into a company so that we can really, in the fastest way, move this technology towards the marketplace.

Dr. McNeish: With my colleague Marsha Roach, who's now at GigaCyte,  at Pfizer we took an early look at how to differentiate cells so that they could be more functionally predictive tools for drug discovery. We saw that cells in vitro had predictive pharmacology similar to what one would see in animals. A second area I was involved in is what I call targets  — a pharma company wants to create molecules that get to the right tissue types. Finally, there is the area of therapeutics which includes using stem cells as medicine, getting the body to respond in a certain way, as well as actual cell replacement therapy.

Dr. Dealy: I’d like to mention a fourth application for stem cells, and that’s the use of IPS cells as models for human genetic diseases. In this way, for example, a patient with a genetic disease can donate a sample of their skin  Those cells, the somatic cells, can be reprogrammed to stem cells and then differentiated into the appropriate lineage to model their specific disease. For example, chondrodysplasias which are genetic disorders that cause disabling dwarfism and short statue can be modeled using this approach, which is one of our plans at Chondrogenics.

Following are additional excerpts from the panel discussion.

Mr. Malavarca distinguished three different stem cell technologies:

• Embryonic stem cells, which are relatively well understood at this point, are the ultimate "blank slate" capable of becoming any cell in the body.
• IPS cells is a more recent technology, based on the idea that you can take a mature cell, such as a skin cell, and reprogram it such that it begins to behave like an embryonic stem cell.
• Adult stem cells from any given tissue are already predetermined or committed to being one of several cell types, usually the types associated with tissue where they reside.

Panelists pointed out that, from the standpoint of drug discovery, adult stem cells can be less costly to work with: "If one is working with adult cell therapies as opposed to embryonic cell therapies, the safety threshold has pretty much been met already, and so you can start to jump right into phase two trials."

Dr. Pescatello: So what's a good investment? use of stem cells for traditional drug discovery? The creation of cells just for testing drugs — is that a commodity?

Dr. Shannon: Cells as discovery tools, target identification, stem cell therapy  — the capital needs of each type of business are different. Cells as a tool doesn’t require much capital to become a business and to be able to sell those to pharma. So that’s attractive.  On the other side, the upside or the growth is not as large as for therapeutics on the other end.  However, therapeutics is vastly expensive.  I think the most recent numbers, the average drug takes $1.3 billion to develop now. That includes the failures that we all try to avoid, so if we get better at avoiding those it won’t be that costly, but right now, that’s what those cost. My firm typically invests in therapeutics because we’re looking for very large returns, but we will just invest in the first part of that therapeutic window, meaning again from pre-clinical to Phase 1 or Phase 2, looking to put in play $50 million to $75 million from the venture syndicate and then moving on.  We cannot fund the billion dollars that it takes to ultimately get that through Phase 3 and into the marketplace, that’s not what we do.

Dr. Pescatello: Are stem cell therapies going to be cheaper or more expensive than traditional small- or large-molecule drug development?

Dr. McNeish: I think we all like to believe they’re cheaper, but I think that’s probably not realistic. There’s a lot of work to be done here, so there are a lot of advantages I think for these types of therapies. You probably won’t need such large studies as for traditional therapies, it depends on the indication. But I think producing these as drug products is going to be a very labor intense process. You know, drugs all started with chemicals that frankly were rather easy to reproduce and manufacture large amounts to provide to the marketplace. But now we're talking about living things. This is actually a living tissue that you’re trying to turn into a drug.  And to manage a living tissue through a manufacturing process and then out into the marketplace and keep its potency, keep it from getting infected, keep it from doing all the things it needs to do, is a very labor intensive process.  So my guess, as much as I’d like to think otherwise, is that this will be very expensive.

Dr. Dealy: I’d like to comment on the value of embryonic derived stem cells as opposed to adult derived stem cells. There are some critical differences, and there’s enormous potential for human embryonic stem cells and their partner, induced pluripotent stem cells. Although I agree, IPS cells still need to be tested, human embryonic stem cells are still the gold standard.  Remember, human embryonic stem cells and IPS cells have the ability to divide limitlessly.  So they can provide an essentially unlimited source of cells for regenerative medicine, drug discovery, disease modeling, whatever the needs may be. This is opposed to adult stem cells, which generally have a reduced amount of proliferation.

In addition, adult stem cells usually are available as a heterogeneous mix.  In other words, they’re kind of a mixed bag of progenitors of committed cell types. So there’s mixtures in these bone marrow therapies of fat, bone, and cartilage and connective tissue progenitors that are being used to treat a disease which may only have one component of needing that cell type. So provided the protocols and procedures have been developed to direct the differentiation of human embryonic stem cells into the appropriate lineage – in other words, into the appropriate cell type – there is the potential for again a limitless source of cells with potentially a better ability to repair, restore, or model a certain process, because the cell population can be derived to be relatively uniform as opposed to a mixed lineage of cells.

So the use of human embryonic stem cells, IPS cells, in providing these tools and potential therapies should not be pushed aside in favor of the perhaps more available or more readily acceptable at this point in time therapies using adults stem cells. We could perhaps say that  the adult stem cell therapies are helping to pave the way and increase acceptance so that human embryonic derived or IPS cell therapies will be able to then step in and be more facilitated through the FDA regulatory process and into the marketplace.

Dr. Pescatello: So when you're making a pitch to investors. What works and what doesn't?

Mr. Malavarca: Timing is important. In the present climate you have to be further along. To attract investor interest, it was very important that we had developed our models to the point where they were very close to being marketable.

Dr. McNeish: You have to have the data. You have to have the demonstration that the science is applicable. And you have to have a clear business plan. In the adult cell space, you may only need to generate hundreds of millions of cells, which might sound like a lot but it’s not, you know, ten to the eighth, is not so many cells, but you’re using those as a dose, they’re not replacing tissue. And the regulatory process is much more clear-cut.

After taking questions from the audience, Dr. Pescatello asked: "As a quick ending question,  which would be the first disease category – diabetes, cancer, cardiac, Alzheimer's, – to be affected positively by stem cell research?

Dr. Shannon: I would say it’s probably going to be something in the cardiac realm, heart failure.

Mr. Malavarca: I would agree with cardiac. A lot of work has been done in that area. Neural targets are a lot more complicated.

Dr. Dealy: Well, I’d like to say it’s cartilage, it certainly is a huge need, but since the first clinical trials are more along the neural lines, one might think that perhaps that’s going to be the one to develop first.  But certainly there’s broad application and tremendous need in many areas.

Dr. McNeish: I think the first product you see that’s truly registered, a truly registered drug, will be an adult cell, so it will probably be for a small indication to get the drug on the market, and I think it will probably be some sort of bone marrow stem cell for immune modulating indications, such as inflammatory bowel disease.

Dr. Pescatello: Thank you all for attending. This concludes our panel discussion.