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Cellular Dynamics getting $2 million in Wisconsin financing

Madison, Wis. - A company co-founded by acclaimed stem cell researcher James Thomson will receive $2 million in state financing, Gov. Jim Doyle announced Monday.

The company, Cellular Dynamics International (CDI), will receive a $1 million technology development grant and a $1 million technology development loan through the state Department of Commerce, the governor said in announcing updates to his Grow Wisconsin agenda. Doyle said the money would leverage $4 million in other investments in CDI.

"I am please the state can make this investment to help further the important research going on here at Cellular Dynamics, expand the biotechnology industry in Wisconsin, and create high-end jobs," Doyle said.

Thomson founded the company earlier this year with Craig January and Timothy Kamp, other noted UW-Madison researchers, and with equity investment funding from Tactics II Ventures, a venture capital firm that has made other Wisconsin investments.

The company will use the $2 million in state investment to further sustain itself in its start-up stage and to prepare to go to market with its first product in January, said Nick Seay, executive vice president and chief operating officer of the company.
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CDI will focus its research effort on utilizing stem cells to develop cells for use in drug development and screening, Seay said. He noted that currently, many human cell types, such as heart cells, liver cells and nerve cells, do not survive well or reproduce outside a living human, making it impractical to use human cells to screen drug candidates in a laboratory. To subsitute, testing is done on live animals or animal cells, even though animal cells do not always react to drug candidates in the same way human cells react.

Allow for drug testing on human cells


CDI's first technologies will, for the first time, provide researchers with the opportunity to test new drug candidates on live human cells, Thomson said.

Its first lines of screening services will center on improving the cardiac safety of new drugs, Seay said, focusing on commecializing technology developed by Thomson and Kamp. The two researchers have developed a technique to direct embryonic stem cells to differentiate into actual human heart cells, known as cardiomyocytes. The new technique makes it possible to use human cardiomyocytes to screen drug candidates for both safety and effectiveness in a laboratory environment, Seay said.

CDI plans to launch cardiac safety screening services in January, or sometime in the first quarter of 2006, using HEK cells for hERG screening. HEK cells are derived from kidney cells that have been modified to hve some of the electrical conductivity properties of human heart cells.

Market demand exists


Seay said the has determined sufficient market demand for the service, while Thomson predicted the company would be the first to be profitable off of stem cell technology.

According to January, "In the last several years, biotechnology-based cell screening methods have assumed much greater importance. These methods have allowed for the early recognition of potential cardiac side-effects of new drug candidates. One direct result of that thousands of patients' lives have been saved. CDI's services will be focused on such life saving technologies."

While the company will start with its focus on the heart cells, it could branch off to other cells, Thomson said.

Bob Palay, managing member of Tactics II Ventures and chairman of CDI, lauded the state for its investment in the company, and pointed to at least one other success with such state investing - NimbleGen Systems Inc. of Madison, which the state supported with a $500,000 technology development loan in 2000.

Besides CDI and NimbleGen, Tactics II Ventures has also invested in Genetics Assemblies in Madison.

Noting how NimbleGen has grown in stature, Palay said, "these financing programs work and pay off for the state in increased tax revenue and economic development."

CDI currently has four employees and anticipates having up to 20 sometime next year, Seay said.

Doyle launches next phase of Grow Wisconsin


Doyle used the CDI financing announcement to launch his Grow Wisconsin - The 2005 Agenda, building off the original Grow Wisconsin plan of 2003.

Included in the 2005 plan are:

• Deploy $30 million to support business incubators

• Create incentives for businesses to locate in distressed areas, with up to $170 million in additional tax credits

• Expedite venture capital and angel investor tax credit expenditures

• Invest in electronic patient record medical technology, creating, by executive order, a new board on Health Care Quality and Patient Safety

• Create a Manufacturing Competitiveness Council and provide $1.5 million to help manufacturers become more competitive

• Provide a sales tax exemption for inputs in bio-manufacturing, which currently does not meet the definition of manufacturing for such exemptions.

More information on the governor's agenda can be found on his website.

• See previous WTN coverage of Cellular Dynamics:
Cellular Dynamics hits market with UW research heavyweights

David Niles is senior contributing editor for WTN. He can be reached at dniles@wistechnology.com.

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