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The San Jose Mercury News, CA Posted on Sun, Mar. 30, 2003 Sweden forging ahead on stem cells RESEARCH COULD TREAT A MYRIAD OF DISEASES By Dan Lee Mercury News GOTEBORG, Sweden -- Scientists and venture capitalists in this Nordic nation are forging ahead with plans to commercialize academic stem cell research, a push many in the United States approach with the caution of a driver on an icy road. The Swedes are hoping to use their nation's highly regarded medical institutions as a springboard to form start-ups that could develop treatments for some of humanity's most dreaded conditions. Sweden's political establishment has largely embraced controversial research on human embryos to produce stem cells, but these fledgling biotech companies still face sizable financial, scientific, ethical and intellectual property concerns. Researchers contend that stem cells could eventually offer treatments for ailments including cancer, diabetes, Parkinson's disease, heart disease and spinal-cord injuries. Although the United States is a world leader in stem cell research, most U.S. venture capitalists and investors are holding off for now. In Sweden, that wariness is embraced as an opportunity. ``Just as it was exaggerated euphoria, now there is exaggerated skepticism,'' Swedish venture capitalist Gunnar Fernström said of the climate for stem cell investment in the United States. His firm, Innovations Kapital, holds a 14 percent stake in Cell Therapeutics Scandinavia, a tiny company that owns the profit potential for Göteborg University's 19 lines of embryonic stem cells on the U.S. National Institutes of Health registry, more such lines than any institution worldwide. In this nation of 8.9 million people, about 300 scientists at 33 research groups at nine universities are studying stem cells. In Sweden, the researchers themselves hold the patents on their discoveries, not their institutions, providing a huge incentive for would-be entrepreneurs. Swedish institutions -- the Göteborg lines along with six at Stockholm's Karolinska Institute -- account for almost a third of the 78 embryonic stem cell lines worldwide on the NIH list unveiled in 2001. That August, President Bush ruled that U.S. research money may be used only on existing lines of embryonic stem cells. Opponents say such research is immoral because the human embryo is destroyed to extract the stem cells. Many U.S. investors have other concerns. ``Both the pharmaceutical/biotech industry and the venture capital community have turned their back on stem cell funding,'' said Nina Kjellson, a principal in Menlo Park venture capital firm InterWest Partners. ``There are still a lot of very basic questions being asked about stem cells.'' Kjellson sees a complex puzzle when it comes to stem cells: an ongoing ethical debate, a potential morass of intellectual property disputes as researchers collaborate, and an unproven and expensive therapy with potential health risks. ``It really is a holy grail,'' she said of stem cell's potential impact on medicine, ``but it is a long way away still.'' Scientists are primarily working with two kinds of stem cells: embryonic and adult. Embryonic stem cells -- which are derived from leftover embryos from fertility treatments -- are particularly fascinating to researchers because these early-stage cells could potentially form various specialized cells including blood, nerve, muscle or connective tissue cells -- the building blocks for the body. Years of research ahead But scientists face years of heavy research to figure how to culture these cells and to steer the cells to differentiate into the types of cells desired, such as insulin-producing cells to treat diabetes or heart-muscle cells to treat heart disease, according to Dr. Harriet Wallberg-Henriksson, secretary-general of medicine for the Swedish Research Council, which oversees the nation's medical research. Swedish scientists estimate clinical trials for stem cell therapies could come within five years. Potential dangers include unwanted tumor growth once these cells could be injected, or the spread of an undetected virus, Wallberg-Henriksson said. Cell Therapeutics -- which has no association with a Seattle company with a similar name -- has no revenue, no approved treatments and just a few employees. It has received or has commitments for about $11 million in funding. The company's headquarters sit on a hillside in an anonymous, nondescript building wedged between the main hospital and the dental school at Göteborg University's Sahlgrenska medical center. Cell Therapeutics Chief Executive Boo Edgar compared the commercialization of stem cells to digging for gold: ``The gold is the therapeutics,'' he said, referring to the potential to use stem cells to form heart tissue to treat patients in need of heart transplants, for example. Edgar pointed out of his office window toward a nearby hospital helicopter-landing pad. ``I see all of the transplanted hearts and everything,'' he said of the hope of someday treating such patients. But the rest of the dirt in the shovel contains other useful nuggets, he said. That includes potential revenue from developing better systems for culturing stem cells or using the cells for screening new drugs. ``We have a promising industry that is something that lies in front of us, and we have a business that is very near term,'' Edgar said. In the shorter term, stem cells could be used to screen new drugs, said Dr. Anders Lindahl, a professor in the Department of Clinical Chemistry and Transfusion Medicine at Sahlgrenska University Hospital who also works with Cell Therapeutics. He said such screenings could be used to determine whether a treatment is worth a costly clinical trial, and could also result in safer drugs than testing in mice. ``Developing therapies, you need a lot of money. I think it will take quite a long time,'' Lindahl said. ``But screening, I think, there is a lot of immediate need. I don't think that is really appreciated.'' The company now has 21 lines of embryonic stem cells at Sahlgrenska hospital. Of the 19 approved by the NIH for U.S. funding, three are considered established -- shown to be able to differentiate into various types of tissue. Fernström said he expects the company to have revenue this year and positive cash flow by 2006. While Cell Therapeutics studies both adult and embryonic stem cells, Stockholm-based NeuroNova is focusing on adult cells to treat Parkinson's and eventually other disorders of the central nervous system such as Alzheimer's, and stroke and spinal-cord injuries. The company is working on methods to culture and differentiate adult stem cells and then inject them directly into the brains of patients. Venture capital firm Scandinavian Life Science Ventures has invested about $2.5 million in two rounds for a 20 percent stake in NeuroNova, which it considers one of its ``high-risk'' portfolio companies, according to Dr. Thomas Brodin, a senior partner at the firm. Hurdles to profit Like Cell Therapeutics, NeuroNova has no revenue and just a handful of employees. Brodin said the company, founded in 1998 from research at Karolinska Institute, would most likely be sold to a large pharmaceutical company. Yet Swedish entrepreneurs face substantial hurdles in turning their ideas into profits, according to Björn Sjöholm of Connect Vast, an agency that works with start-ups. More outside funding, primarily from the United States, is needed, he said. ``There are a lot of patents in Sweden,'' he added. ``This should mean that there are a lot of new companies, but there are not.'' Sjöholm also is critical of Swedish venture capitalists for not exerting more pressure on their portfolio companies. U.S. venture capitalists tend to invest more money, push for more control and bail out if the deal starts to go bad, he said. ``We haven't got the strategy here yet. We are very good in stem cells,'' he said. ``Let's go to the U.S. and make them understand how good we are and get them to invest here.'' Sweden's stem cell start-ups offer scientists freedom from the pressures of a public company but also a challenge, said David Greenwood, chief financial officer for U.S. stem cell pioneer Geron of Menlo Park. ``They could stay virtual companies and sort of house the intellectual property, or they could morph and evolve into a real company like Geron. The latter requires an awful lot of capital,'' Greenwood said. ``If you're going to try to become a company, you have to find a lot of capital, and that is as scarce in Sweden as it is here.'' While Greenwood sees a broad array of potential revenue from stem cells, he said companies must have more narrow objectives simply because the research and development is so expensive. ``Most companies know that they absolutely cannot pursue all of the above,'' he said. The important thing for today, he said, is that research is shared between researchers, through licensing arrangements or eventually mergers. Those working with stem cells in Sweden and the United States maintained that public funding would be key in these early years -- money that they say has been in short supply in both nations. To date, only 10 of the 78 lines of embryonic stem cells on the NIH registry are available for shipment to researchers, with none of those from Sweden, according to the NIH. Despite a potentially rough road, Sahlgrenska researcher Lindahl sees a long, fruitful journey ahead for patients and investors. ``If you look at the embryonic stem cell, I think that rather small amounts compared to what was put into other businesses can actually make the difference,'' Lindahl said. ``The critical thing for the investor is to find smaller companies with the promising ideas.'' - A grant from the German Marshall Fund of the United States funded travel for this article. Contact Dan Lee at [log in to unmask] or (408) 920- 5425. SOURCE: The San Jose Mercury News, CA http://www.bayarea.com/mld/mercurynews/business/5517520.htm * * * ---------------------------------------------------------------------- To sign-off Parkinsn send a message to: mailto:[log in to unmask] In the body of the message put: signoff parkinsn