24 Nov Cellular Dynamics closed on $18 million in financing, will merge companies
Madison, Wis. – In a rare piece of encouraging economic news, Cellular Dynamics International, a Madison biotechnology company co-founded by stem cell research pioneer James Thomson, has announced that it will receive $18 million in a financing round led by Tactics II Stem Cell Ventures, a Wisconsin venture capital fund.
Cellular Dynamics also announced that two sister companies co-founded by Thomson have merged with CDI. They are iPS Cells, Inc., which was formed to industrialize the reprogramming of human skin cells into pluripotent stem cells, and Stem Cell Products, Inc., which was developing processes to make blood products from human embryonic stem cells. The merged entity will continue to operate at Cellular Dynamics International.
CDI also said it is establishing a stem cell bio-bank to industrialize the production of human cell types for research and to create a repository of individual stem cells.
In addition to Tactics II Stem Cell Ventures, Tactics II Ventures, LP, a Wisconsin-based venture capital firm, and the Wisconsin Alumni Research Foundation, the patent and licensing arm of the University of Wisconsin-Madison, also took part in the Series A financing round.
The financing and merger come on the heels of a Small Business Innovation Research grant worth $499,796 from the National Institutes of Health, which was awarded to CDI to develop stem-cell derived heart cells for clinical studies.
David Snyder, chief financial officer for CDI, said the funding round was closed in early October, which was no small feat given that the extent of the nation’s financial market troubles were just beginning to be understood.
“Closing a venture round in early October was truly remarkable, Snyder said in a statement released by CDI. “Even during a major financial market downturn, business leaders in Milwaukee as well as WARF continue to provide the critical financial backing for our efforts to build a world-leading stem cell company.”
Cellular Dynamics, which employs about 60 people at its University Research Park facility, was founded in 2004 by Thomson and and fellow UW-Madison researchers Craig January, Timothy Kamp, and Igor Slukvin, and by Tactics II Ventures. Bob Palay, a principal in Tactics II Ventures, serves as chairman and CEO of Cellular Dynamics.
CDI is using pluripotent stem cells, which have the ability to become any cell in the human body, to develop new tools for drug discovery, screening, and predictive toxicology. Among the products the company is marketing to medical health researchers are heart cells derived from stem cells, called human cardiomyocytes.
The founders believe these heart cells hold the promise of providing a more predictive model to determine cardio toxicity in the early stages of drug development. Thomson said CDI’s stem cell based tools offer an unprecedented opportunity for pharmaceutical companies to have access to cell types that previously were impossible to obtain.
“The true value of these cell types is in their ability to enable safer drug development,” Thomson said.
This first use of CDI’s technology by pharmaceutical and academic research customers, including the likes of pharmaceutical giants like Roche, could serve a market estimated to be more than $1 billion anually, Palay said.
CDI’s bio-bank will rely on the stem cell reprogramming to demonstrate the value of banking individual stem cell lines for future use, and that value includes the ability to provide both genetically diverse and – eventually – personalized cell lines for drug testing and therapeutic purposes.
Thomson is among the scientists that developed the reprogramming of adult stem cells, also called induced Pluripotent Stem Cells (iPS), to act as embryonic stem cells. The cells are remarkably similar to human embryonic stem cells in that researchers can make as many of them as they want, and they can become any type of cell in the human body.
Palay said the company is building the commercial capacity and manufacturing infrastructure to become a leader in personalized stem cell research, which it expects to become a high-growth industry. He said the company’s core technology now is the ability to take stem cells from adults and apply it in the emerging field of personalized health, and opens the ddoor to personalized medicine and cell therapy without the social controversy invovled with embryonic stem cell research.
While the initial applications involve testing drugs compounds, future applicaitons could involve using a person’s own adult stem cells for therapeutic purposes like cartilage replenishment, Palay said.
“The important thing to remember is that the ethical debate about stem cells is over,” Palay stated. “We’re basing our products on adult cells.”
Commenting on the Wisconsin Alumni Research Foundation’s decision to invest in Cellular Dynamics, WARF Managing Director Carl Gulbrandsen noted the foundation has supported Thomson’s research for more than a decade and called CDI the type of company Wisconsin needs to “move stem cell research from the lab to the marketplace.”
This fall, the state has observed the 10th anniversary of Thomson’s discovery that human embryonic stem cells could be isolated and cultured for research purposes. WARF holds several related stem cell patents, three of which have been challenged and upheld before the U.S. Patent and Trademark Office.
Counter cyclical business?
Grady Frenchick, a patent attorney with Whyte Hirschboeck Dudek in Madison, said despite the sorry state of the U.S. and global economies, this could be a good time for CDI to ramp up its business. He noted that President-elect Barack Obama is prepared to overturn the Bush policy that limits federal funding to existing human embryonic stem cell lines, and money is finally being dispersed for stem cell research in California under Proposition 71. This means that despite the contracting economy, CDI and other stem cell products companies could still find new customers for their products, Frenchick said.