Sunday August 26 08:54 AM EDT
"The Promise in Selling Stem Cells"
The Promise in Selling Stem Cells
By ANDREW POLLACK
The New York Times
President Bush (news - web sites)'s decision on stem cell research helped put Geron Corporation (GERN - news) at the center of the stem cell universe. Now the company needs to find a product.
MENLO PARK, Calif. For a man who is supposed to be sitting on top of the world, Thomas B. Okarma can be a bit prickly. "I may sound offensive, but we are being invaded here," he said recently, reflecting the strain of giving many interviews.
Dr. Okarma is the chief executive of the Geron Corporation, which controls many of the rights to human embryonic stem cells because it financed the first isolation of such cells, which occurred in 1998 at the University of Wisconsin. Stem cells might someday be used to grow new heart, liver or brain tissue for people whose own organs are damaged, allowing the body to repair itself.
On Aug. 9, President Bush said he would allow federal funds to be used for research on human embryonic stem cells, which could help scientists to accelerate the development of disease treatments that would mean income for Geron in the long run. The president's decision to restrict federally financed research to cell lines that already exist, some scientists say, will virtually force them to use cells for which Geron controls the commercial rights.
"This is where the center of the universe is in stem cells," Dr. Okarma said.
But the center of this universe is not exactly an easy position to be in right now. Academic scientists are already asserting that Geron has a stranglehold on patent rights and that this could retard research that might lead to treatments for diabetes, Parkinson's disease and other maladies.
Geron is now embroiled in a federal lawsuit with its own partner, a University of Wisconsin foundation, over whether the company has the right to other uses of the technology.
Those who view stem cell work as immoral, meanwhile, are criticizing the company. Desperate people with incurable diseases are beseeching the company for treatments, though none will be ready for years if ever. And news organizations have bombarded the company with requests for interviews.
But the greatest challenge may be on the business side. Wall Street appears to believe that Geron, far from being a rapacious profiteer, may never even earn a profit. The company, they say, is much better at coming up with scientific discoveries than at turning them into viable businesses.
Few companies have stirred such headline-making scientific excitement as has Geron, which started life with the intriguing mission of fighting aging. Besides its role in stem cells, Geron has isolated the genes for telomerase, an enzyme that has been described, with some exaggeration, as an elixir of youth because it may play crucial roles in both aging and cancer-cell growth. Geron also acquired the company with the commercial rights to the technology used to create Dolly the sheep, the first cloned mammal, in 1996.
"It's the most valuable patent estate in all of biotechnology," said Lissa Morgenthaler, manager of the Monterey Murphy New World Biotechnology fund.
Yet no analysts at major Wall Street brokerage firms follow the company, and few institutions invest in it. That is partly because Geron, which has lost about $150 million since its inception in 1990, is years from making money. It lost $45.8 million last year, on revenue of $6.6 million.
"I'm not interested in investing on hype," said Lowell Sears of Sears Capital Management in Los Altos, Calif. "I'd like to see it worked through a little more." Mr. Sears, the former chief financial officer of Amgen, the biotechnology company, said he sold most of his Geron holdings last year because the telomerase program had fallen behind schedule and it was unclear whether stem cells would become a viable business.
So perhaps it is not surprising that Dr. Okarma, a physician turned entrepreneur, is a little prickly. But in a wide-ranging two-hour interview at Geron's headquarters in this suburban Silicon Valley city, Dr. Okarma vowed to turn the company's scientific assets into cures and profits.
"This company is going to dominate regenerative medicine," he said, using the term for treatments that allow the body to repair itself. "That is what I came here to do."
He said Wall Street had just not looked closely enough at the company, which employs 130 people. "If anybody would pick up our annual report and read what's in there, you wouldn't see technology, you'd see products," he said.
Dr. Okarma, 55, said Geron had already figured out how to turn human stem cells into heart cells that he says "beat" in a laboratory dish, into brain cells and into liver cells, with the next challenge being to manufacture in large quantities. He predicted that the company could start transplanting its first cells into patients in three years, far sooner than many scientists think that such therapy will be ready for clinical trials. He would not say what cell type would be first, but the company is looking closely at treating Parkinson's disease.
The patent on the human embryonic stem cell is held by a foundation affiliated with the University of Wisconsin, which is providing cells to researchers elsewhere. But Geron has the exclusive rights to commercialize treatments using six different cell types derived from the stem cells, like neural cells and liver cells. It wants to exercise options for the rights to 12 other cell types, but Wisconsin is suing to prevent that, saying it would be better if the technology were spread around.
Dr. Okarma said Geron did not want to impede others from doing research on stem cells or developing treatments. But if someone, were to figure out, say, how to turn stem cells into insulin-producing pancreatic cells to treat diabetes, Geron would demand royalties on sales of treatments.
"If there are 10 companies out there doing that for diabetes that's great for Geron because that's 10 royalties," he said. That could work both ways. If Geron wanted to sell its own diabetes treatment, it might have to license technology for turning stem cells into pancreas cells from other companies.
Dr. Okarma says Geron collaborates with many academic scientists. The company boasts a blue- chip roster of scientific advisers including James Watson, a discoverer of the structure of DNA, and Ian Wilmut, who cloned Dolly.
While some scientists say Geron is easy to work with, others say it demands too many rights to discoveries or imposes too many restrictions. Ali Brivanlou, a professor at Rockefeller University, said he could not collaborate with Geron on stem cells because the company's proposed agreement would have severely restricted his ability to talk about his work with colleagues, something essential for scientific progress. "They sent something that was not only hostile but was, in the words of the tech transfer officer here, punitive," he said.
Dr. Okarma disputed the contention that President Bush's limits on stem cell research would play into Geron's hands. He said that the Wisconsin patent was so fundamental that even if the president allowed new stem cell lines to be created with federal money, those lines would all infringe the Wisconsin patent. That, however, has not been tested in court, and some competitors say they think their cells do not infringe.
Dr. Okarma also said that in addition to the rights it already has to the Wisconsin patent, Geron has filed for new patents on techniques for growing stem cells and turning them into particular types of cells that others would have to license.
"It's not our fault that we had two years of running room ahead of everyone else," he said. "We were working to derive these cells before anyone else thought about it. I'm not apologetic for our intellectual property. We paid for it, we earned it and we deserve it."
Dr. Okarma is driven to have Geron succeed for another reason, as well to make up for the failure of his former company, Applied Immune Sciences. That company, which he founded in the 1980's after resigning from the faculty of the Stanford Medical School, took bone marrow or blood cells from patients, then modified, sorted and multiplied them and put them back in to try to treat diseases like cancer and AIDS.
The company went public, began several clinical trials and attracted investment from Rhône-Poulenc Rorer, a unit of the big French drug company now known as Aventis. In 1995, Rhône-Poulenc bought the entire company for $84.4 million, making Dr. Okarma rich and taking him on board as an executive. But then Rhône-Poulenc discontinued the work and none of the treatments reached the market.
"It was a big, colossal flop," said Dr. Okarma, who left Rhône-Poulenc in 1996. "That was a very hard lesson."
The lesson, he said, was that cell therapies tailored to individuals were not economically attractive, especially to big drug companies that like mass production of pills. The failure of Applied Immune Sciences, he said, has given him an appreciation for how hard it will be to turn stem cells into disease treatments.
After leaving Rhône-Poulenc, Dr. Okarma took a year off. He studied business at Stanford, honed his water-skiing skills and considered becoming a venture capitalist.
In exploring that last idea, he talked to Alex Barkas, a venture capitalist who was the chairman of Geron. Dr. Barkas persuaded Dr. Okarma to join the company in 1997 to head its new stem cell business. He was promoted to chief executive in 1999. (Dr. Barkas remains the chairman.)
"I came into this place ambivalent about operating again because I had been burned so badly," Dr. Okarma said.
But he said stem cells, unlike bone marrow cells, could be produced in large quantities, avoiding the problems of developing customized cells for each treatment.
And one of Geron's buildings, he noted, is the same one in which he helped to start Applied Immune Sciences. "It's a marvelous opportunity to finish what I started a long time ago," he said.
Geron's future may be in Dr. Okarma's hands, but its agenda was set by Michael West, a cell biologist who believed that science could combat aging. After earning a Ph.D. from the Baylor College of Medicine in Houston, he incorporated the company in 1990 and dropped out of medical school to pursue his dream in 1992, when the company received financing from some prominent venture capitalists.
Geron named after the Greek word for old man set out to prove a theory about why cells age. It focused on telomeres, stretches of DNA that cap chromosomes like the plastic tips of shoelaces. Every time a cell divides, the telomeres become shorter. When they run out, usually after 20 to 100 cell doublings, the cells stop dividing and start to die.
With collaborators, Geron raced to find the genes to produce telomerase, an enzyme made by some cells that restores telomeres to their full length. When Geron showed in early 1998 that telomerase could expand the life of cells growing in a test tube beyond their normal limits, it caused a fountain-of-youth sensation. "People thought we were going to put telomerase into the drinking water and everyone's going to live for 300 years," Dr. Okarma said. But just because cells can live longer does not mean that an entire body can.
The company is trying to distance itself from its anti-aging focus, even removing the hourglass from its logo. Instead, it is aiming at diseases associated with aging. Geron executives think telomerase can be used to rejuvenate aging cells to speed the healing of wounds. But its main focus has been on turning off telomerase to fight cancer.
Cancer cells produce telomerase, which lets them reproduce out of control. So a drug that turns off telomerase has potential use in treating all kinds of cancers. And because most normal cells in the body do not produce telomerase, such a drug would have little effect on healthy cells.
But it has taken longer than expected to find a drug that shuts off telomerase. Geron, which hoped to begin clinical trials of such a drug around 2000, is still a year or two away. Pharmacia, the big drug company that was financing much of Geron's work in this area, pulled out of the partnership in January.
Moreover, most scientists now say that even if telomerase is turned off, a tumor might still grow substantially before the telomeres in its cells run out and the cells die.
"We can kill it, but before we do it's going to increase tenfold in volume," said Judith Campisi, a scientist at Lawrence Berkeley National Laboratory who collaborates with Geron on telomerase research. "The idea that inhibition of telomerase was going to be a cure for all cancers was oversold, and partly by the media."
But she and others said a telomerase inhibitor could still be important in stopping the tiny tumors that break off a main tumor and spread through the body, causing a recurrence of disease. Dr. Jerry Shay, a professor at the University of Texas Southwestern Medical Center who is collaborating with Geron, said a telomerase inhibitor on which he is working had slowed regrowth of prostate tumors in animals. "If you want to go for a blockbuster win, it takes time," he said.
Geron plans to begin clinical trials for a telomerase vaccine this fall at Duke University, Dr. Okarma said. Some immune system cells will be taken from a patient's body and exposed to telomerase; when they are put back into the body, they will be primed to attack cells that make the enzyme, presumably cancer cells. The company is also working with Roche to develop tests for telomerase that could be used to diagnose cancer.
Still, many investors have apparently written off telomerase. Consider an event this month: Days after President Bush's decision on stem cells, Geron announced that it and its partner, Kyowa Hakko, a Japanese food and drug company, had found a telomerase-inhibiting compound that they would now move toward clinical trials. Geron scheduled an hourlong conference call to discuss the development with investors and analysts. But when Dr. Okarma threw the floor open for questions after his opening remarks, there was dead silence.
Even as he was moving on telomeres, Dr. West went off in search of the next thing stem cells. These primordial cells, isolated from embryos, can turn into any of the body's different cell types. James Thomson, a professor at the University of Wisconsin, had isolated monkey embryonic stem cells but could not get federal financing for work on human cells because of a ban on research that involved destroying embryos.
Geron financed the work on human cells at Wisconsin, as well as similar work at Johns Hopkins University and the University of California at San Francisco.
Dr. West, who was Geron's visionary but did not have a significant operating role, left the company in 1998 as its emphasis on anti-aging work diminished. He is now president of Advanced Cell Technology in Worcester, Mass., a competitor of Geron's that has made its own controversy by proposing to create clones for therapeutic purposes.
In 1999, Dr. Okarma replaced Ronald W. Eastman, a pharmaceutical industry veteran who had been Geron's chief executive since 1993. Mr. Eastman accepted the board's request to step aside because Dr. Okarma had more experience in cell therapy. He left Geron and now heads a company that provides interactive media to hospital patients.
Dr. Okarma, who is married with two grown children, was raised on a dairy farm in New Jersey and earned both a medical degree and a doctorate in molecular pharmacology from Stanford. Those who know him well describe him as highly intelligent and articulate.
"I think Tom is a very highly energetic, intense individual who really wants to make a contribution," said John Walker, a Geron director and chairman of Microcide Pharmaceuticals and Axys Pharmaceuticals.
Ever since the debate over stem cells heated up, Dr. Okarma has been an active advocate for such research. But he has declined to let company scientists be interviewed, saying they needed to focus on their work. "This is not show and tell," he said. "I'm the spokesman for the company, full stop."
He said he sympathized with people who believe that the research is immoral because it involves destroying embryos, which they regard as nascent human life.
"I was raised as a Catholic," he said. "Do you think it's good for me to hear that this stuff is challenged by the pope?"
But Dr. Okarma, who said he abandoned organized religion decades ago, added that the views might change when the benefits of cell therapy were realized.
"What is the objective of religion?" he asked. "To make society better. Isn't that what we're trying to do here?"
At one time, he said, there were religious objections to the use of anesthesia to reduce the pain of childbirth because of a biblical passage saying that Eve was supposed to suffer pain in labor after being cast out of the Garden of Eden.
Geron was one of the first biotech companies to form an ethics advisory committee of academic bioethicists. In 1999, the committee published its conclusions that embryonic stem cell work was ethically sound.
Some other bioethicists, however, said Geron's committee had been formed shortly before Wisconsin scientists announced the successful isolation of the human stem cells, creating the appearance that the committee was merely providing after-the- fact justification.
But Laurie Zoloth, the chairwoman of the committee, said Dr. Okarma, who attends many of its meetings, was sincerely interested in their opinions. "We've had a very much more than window-dressing relationship with them," said Dr. Zoloth, a professor of social ethics and Jewish philosophy at San Francisco State University.
Ethical issues also surround therapeutic cloning. The purpose of such cloning is not to create a baby but to use a patient's own cell to create embryos from which stem cells can be obtained. Such cells would grow into tissue matching that of the patient, so the patient's immune system would not reject transplants.
To obtain the cloning technology, Geron in 1999 acquired Roslin Bio- Med, the commercial spinoff of the Scottish research institute that cloned Dolly. That completed a triumvirate of technologies stem cells, telomerase to help keep such cells useful, and cloning to help tailor therapies to individuals.
There is a huge obstacle, however. The House of Representatives recently passed a bill that would ban all cloning, including therapeutic cloning. The legislation is pending in the Senate, where its prospects are unclear.
Dr. Okarma said Geron would not be hurt much even if the bill became law, because its work in that area is based in Britain, where such work is allowed.
But he said that in practice, therapeutic cloning would "never, ever fly" because it is individualized cell therapy, not mass production, that is needed for cell therapies to succeed commercially. Geron, he said, wants to create human cloned embryos to learn about how adult cells revert to primordial status. That could allow for development of more economical techniques, like genetically engineering stem cells so that they do not provoke an immune response.
He said he was dead set against cloning to make babies, which he called a "crime against the clone," although st
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