Human embryonic stem (hES) cells are widely known for their capacity to branch into all of the cell types in the human body. This unprecedented potentiality has spurred a new industry called “regenerative medicine” in anticipation of a time when medicine can offer many therapies not possible today. Many have also heard that these cells also have the unusual property of being able to proliferate without limit (without aging), though perhaps most people have not quite known what that really means or its implications for this emerging industry. It is my view that these twin properties of hES cells (i.e. their pluripotentiality and their ability to replicate without limit) will make it possible to standardize foundational master cell banks of these cells that could be a continuous source of a wide array of human clinical grade products around the globe and for many years to come. For industry, the remaining question is: “What is the best strategic business model for a company to take given the unprecedented potential of these cells?”
The story on stem cell banking begins in the years following the first isolation of hES cells (1998). Almost immediately, governments from around the world recognized that the technology could be used to improve health care and reduce health care costs associated with expensive chronic degenerative diseases such as those associated with an aging population. The Government of Singapore became one such leader in the field of embryonic stem cell research. The Economic Development Board of Singapore had the vision to fund a commercial effort centered in ES Cell International (ESI), a company that eventually became the first to generate a bank of six clinical grade human embryonic stem cell lines. These cell lines were the first such lines produced under conditions consistent with Good Manufacturing Practices (GMP) in that the donors were carefully screened for medical history, and every step and component used in the production of the lines was carefully documented in an effort to comply with guidelines provided by the U.S. FDA Center for Biologics Evaluation and Research regarding human cell-based products (HCT/Ps).
Another step forward occurred in November 2004 when the people of California adopted Proposition 71 (the California Stem Cell Research and Cures Act) to fund $3 billion worth of stem cell research and development in California. The resulting California Institute for Regenerative Medicine (CIRM) was given the mission to determine where funds should be distributed in order to accelerate stem cell based research into the development of vital cures and the treatment of debilitating injuries.
On April 29, 2010 BioTime announced the acquisition of ESI. Our primary interest in this transaction was to make ESI’s GMP-compliant hES cell bank foundational not only for BioTime’s product development, but also for as much of the rest of the world as possible. Therefore, today BioTime and CIRM announced a collaborative agreement whereby five of the six clinical grade lines will be shared with California-based researchers (one of the lines is being reserved for a potential commercial relationship). In the agreement, BioTime agrees to initially provide research grade versions of the lines for research use only (not commercial use) to California-based researchers. These will be offered for free within California until April 30, 2011. This could streamline the process for California-based scientists by allowing them to use the same cell line in their research that will later potentially be used in the clinic. Within a year of the signing of the agreement, BioTime agrees to make the actual GMP grade lines available to the CIRM grantees and California researchers requesting the lines at a price approximating BioTime’s cost of producing and supplying the cell lines.
In the coming years of grant funding as potential products emerge for various applications in medicine, BioTime agrees to negotiate in good faith with the relevant parties to provide the GMP cell lines for use in manufacturing commercial products with a royalty on net sales not to exceed 2% (or 1.5% if other royalties are owed). The pre-negotiation of terms will serve to help accelerate research by eliminating protracted negotiations. The nature of therapeutic products emerging from the $3 billion CIRM program and the potential revenues from such products remains to be determined. However, several reports are available online that make projections of potential return on investment for California citizens.
And so, in an attempt to answer the question I posed at the start about the optimum business strategy, we have chosen a plan of making our ESI cGMP-compliant cell lines widely available to researchers. By taking this path, BioTime intends to both facilitate the development of life-saving therapies around the world, and to standardize the ESI lines as one of the best-characterized master cell banks from which to manufacture human cell-based therapies. If we can succeed in these aims, we have the potential in future years to simultaneously benefit BioTime shareholders and patients in need of these new therapies.