Greed, fear and stem cells

Have you heard about California's stem cell gold rush?

Some venture capitalists have and they are not necessarily ecstatic – not that their public statements mean much. On the other hand, one stem cell company is publicly quivering with excitement.

Here is its testimony from a piece in Wired News by Kristen Philipkoski.

"'With the passage of Prop. 71 there's been an influx of interest in stem cells,' said Robert Lanza, vice president of medical and scientific development at Advanced Cell Technology in Worcester, Mass.
'We're in a whole new world. We're flush with cash, and just months ago we were struggling as a private company to even make payroll and to keep the phones on.'"

On the other hand, Philipkoski wrote:

"'Some of this stuff still looks like science experiments,' said Ken Haas of Abingworth Management, a venture capital firm specializing in life science biomedical companies.

"Haas gave a bleak outlook for stem-cell companies hopes for venture funding at the International Society for Stem Cell Research annual meeting last month in San Francisco.

"Big pharmaceutical companies aren't funding early research, he said. And VCs have higher expectations in general from biotech firms because they perceive the industry as having graduated from its freshman status. The investment necessary to bring a company public has doubled, Haas said, and the returns have diminished.

"All of these factors combined create a chilly climate for embryonic stem-cell companies, Haas said."

Haas' comments recall a point made to me by a venture capitalist some years ago. He said that VCs make an investment when their greed overwhelms their fear.

Then there is this from a Geron, which raised $40 million in the weeks following the passage of
Prop. 71, is better positioned than many stem-cell firms that don't have deep pockets or profitable partnerships with large pharmaceutical companies. More typical is Burlingame-based VistaGen Therapeutics, a 10-person research firm founded in 1998. CEO Ralph Snodgrass says that the company is using stem cells as a research tool to develop a treatment for a variety of illnesses rather than as the basis for a specific medicine or therapeutic.

"'We want to expand our research efforts, but we are a small firm,' he says. 'We have been contacted by bigger companies, but what is holding us back is our size. We will ramp up as Prop. 71 money becomes available. The effects of these funds across the industry should be dramatic.'"