The stem cell debate brings out inexorable differences between people of different religions. But one thing the stem cell business community can agree upon is the difficulty in funding research and development.

Experts discussed how to deal with the problem on Tuesday at The Stem Cell Meeting in San Francisco, a conference organized by life science venture capital and merchant banking firm Burrill & Company.

Proposition 71 was passed in California in the fall of 2004 to help fund stem cell research through state-backed bonds. The measure put aside $3 billion over a decade, with no more than $350 million in any single year.

It is the largest pot of money established for stem cell research. The Golden State will actually pay about $6 billion over three decades to cover the principal and the interest on the bonds. Still, there are concerns.

“[With Proposition 71,] we don’t know from where the money is available or when, or if any of the money is available for small private companies,” said Fred Middleton, managing director of Sanderling Ventures.

It’s even more difficult for promising startups to identify other sources of funding. “I would say the venture community has more or less abandoned this area over the last five years,” said Ralph Snodgrass, a stem cell scientist since the 1980s and president and CEO of VistaGen Therapeutics.

VistaGen, based in Burlingame, California, is using embryonic stem cell technologies to discover and develop potential drugs to treat diseases such as diabetes.

“Venture capitalists are willing to take financial risks, market risks, management risks, but the one thing they are not happy to do is to take political risks,” added William M. Caldwell IV, CEO of human embryonic stem cell company, Advanced Cell Technology, in Worcester, Massachusetts.

His company recently opened a 15,000-square foot facility in Alameda, an island on the east side of San Francisco Bay.

Aside from the practical difficulties with Proposition 71, most agree that as an endorsement of public enthusiasm for the technology, it does suggest the public equity markets could provide a promising source of financing for a field where the U.S. National Institutes of Health fears to tread.

Fast-developing Technology

Despite the financing challenges, CEOs at the meeting were optimistic about the time-horizon of the new technologies.

The field of stem cells, as with many early-stage areas of bioscience, is often compared to the progress of monoclonal antibodies. Monoclonal antibodies had a 20-odd year development cycle which included a rush of enthusiasm early on and then sequential safety problems.

But today they make up many of the list of best-selling cancer drugs available, including Genentech’s Avastin and Herceptin.

“Unlike the paradigm of monoclonal antibodies—those technologies were spurned worldwide in academic labs and it wasn’t until that technology became palpable that it was picked up by industry—stem cells are the opposite,” said Geron CEO Thomas B. Okarma (see Stem Cells: US May Lose Lead).

“From the very first day the cells came to Menlo Park in 1999, they had development written all over them,” he added.

Time Horizon

Dr. Okarma estimates that human embryonic stem cell treatments could receive clinical validation in five years, and could potentially be looking at a five to seven year market horizon. Others, however, were more skeptical.

“I think we really need to be responsible when we talk about the time frame of the technologies, such as saying they will be available in five years, because people will use it to discredit you, particularly after what’s happened in Korea,” said Angela McNab, chief executive of the U.K.’s Human Fertilization and Embryology Authority (see Stem Cells: U.K. Leads Europe).

South Korean stem cell scientist Hwang Woo Suk published two papers containing false data in the journal Science. One claimed his laboratory was the first to clone a human embryo. The other described the creation of 11 stem cell lines from nine people with spinal cord injuries, juvenile diabetes, and an immune disorder.

These findings were initially celebrated as they demonstrated that embryonic stem cell lines could be matched to particular patients, male and female and of various ages (see Korean Cloning Data Faked).

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