Challenges faced by stem cell therapy make VCs wary

Dr Prescott will also tell academic and business delegates at the White Rose Bioscience Forum in York today (31 October), that whilst venture capitalists (VCs) have their eye on the potential high returns of such an emergent market, they will remain wary of investing until key broader issues such as legal, regulatory and intellectual property complexities have been resolved.

For young companies, a major hurdle is a lack of support from the pharmaceutical industry for cell-based therapeutic product development. “Traditionally, pharma have supported products coming through the biotech industry through licensing and partnering, providing support for clinical trials, financing and expertise,” says Dr Prescott. “But this is generally not the case here; they are tending to support enabling technologies and research-based reagents and tools instead.”

According to Dr Prescott, the reticence to support cell-based therapy development is because the end product will usually be tailored to the individual patient, with delivery within a clinical setting, administered by specialists. “This requires a very different business model from that of traditional high volume distribution of drugs routinely available to the patient,” she says.

She continues: “If that crucial support is not there from the pharma industry, young companies need to think very hard about whether they realistically have the expertise to take a product to market on their own.”

There’s not much good news in terms of funding available to young companies either, says Dr Prescott: “There’s simply less seed and early stage money to go round at the moment. Investment trends across Europe show a general decline in VC activity, and of the money invested, the majority of it is used to continue to support the more mature biotech companies. In addition, this may also impact on the ability of early stage companies to raise match funding required by many Government grant schemes.”

For VCs, patent issues are also a major cause for concern with dominating patents already granted covering methods of isolating, cultivating, differentiating and delivering stem cell lines. “Young companies need to be very careful that they have the freedom to operate, and where they need to buy-in technology, commercial licenses can cost as much as $100k, which is out of the range of most younger biotech companies, “ says Dr Prescott.

“VCs are also wary that for the embryonic stem cell-based products, the European market may remain fragmented despite the proposal for an EU-wide regulatory framework for advanced stem cell therapies published by the Commission for EU Communities. The proposal respects national confidence on the use of stem cells. This means that a product approved for launch in the UK may need work to be approved in other EU countries, which impacts on cost and time.” she explains.

“I appreciate that this is a hard message, but it’s a tough climate. The most pragmatic advice I can give to young companies is to show venture capitalists that they have anticipated, understood and determined a route forward to resolve key hurdles facing them,” she says. “This will underpin the success of UK biotech companies whose technology expertise lies in stem cell therapeutics.”