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Insight & Intelligence : Jun 1, 2011
Patent Uncertainty and Political Flux Keeping hESC Investors from Seeing Returns
Researchers are exploring other avenues in light of various unknowns.!--h2>
Ten years have passed since the Wisconsin Alumni Research Foundation (WARF) applied for a patent covering purified preparation of primate embryonic stem cells. That patent, issued in 2006, remains under an inter partes re-examination pending before the USPTO.
Half a world away in Luxembourg, the Court of Justice of the European Union is expected later this year to decide whether to side with its advocate general, who termed stem cell patents “contrary to ethics and public policy,” or with Oliver Brüstle, Ph.D., who since 2004 has fought to maintain a 1997 patent covering methods for deriving neural cells from hESCs despite a challenge from Greenpeace. Dr. Brüstle is director of the Institute of Reconstructive Neurobiology at the University of Bonn.
The court case and patent review have complicated efforts to develop intellectual property involving hESC lines and, through it, new treatments for diseases, according to a pioneer of such research. “Patents are supposed to stimulate innovation by providing intellectual property protection to spur investment in actually developing new ideas into new products,” George Q. Daley, M.D., Ph.D., director of the stem cell transplantation program at Boston’s Children’s Hospital and Dana Farber Cancer Institute, told GEN.
“The confusion around patentability of products based on hESCs dissuades commercial investments from biotech and pharma in this new space and will slow translation of the very exciting basic science into the clinic.” Dr. Daley added that “we probably won’t see the patent landscape sorted out until there are industry profits at stake.”
Progenitor's and iPSCs Become the Alternative
“Where’s the investment money today? It’s in processes and equipment that do embryonic stem cell research,” Grady J. Frenchick, an attorney in the intellectual property department of the law firm Whyte Hirschboeck Dudek S.C., told GEN. “All of that is potentially business to be had, and that’s where much of it lies today.”
Frenchick also points to investor interest in “companies and inventions that will essentially be at the next stage of this process.” An example of such a company is Stem Cell Therapeutics (SCT). On May 18, it was awarded a U.S. patent for “platelet-derived growth factor (PDGF)-derived neurospheres define a novel class of progenitor cells.” The patent covers methods of using PDGF to produce neural progenitor populations that can differentiate into neurons and oligodendrocytes but not astrocytes.
Dr. Daley noted, “Harnessing progenitors has considerable practical value. Finding the right recipes for making healthy tissues from pluripotent cells is a major challenge. Progenitors tend to be poised to make disease-relevant tissue, so a focus on deriving progenitors, which typically can be expanded to some degree, is appropriate.”
SCT finished last year with a nearly $4.5 million loss, down $196,791 from 2009’s loss. Its working capital dropped from $4.1 million to $2.6 million but received a $2 million boost when SCT completed an equity offering last month. The patent it won last month can only help it reap more.
Another way stem cell companies are trying to avoid investor jitters about hESC work is by focusing on induced pluripotent stem cells (iPSCs), reasoning that patients’ bodies would be unlikely to reject their own tissue. For example, on April 7, Cellular Dynamics closed on a $30 million series B private equity round. The firm has raised $100 million since 2004.
But iPSCs are still a long way from being widely used in therapeutic development. On May 13, Nature published research by Yang Xu, Ph.D., and a team from University of California, San Diego showing a severe immune rejection in mice after they were implanted with iPSCs derived from their own skin cells. Dr. Xu’s team will study further which cells triggered the reaction, and under what conditions. The work was funded by NIH and CIRM.
Confusion over Federal Dollars
For research into progenitors as well as stem cells, the major source of funding has been the NIH and private foundations. According to NIH’s Estimates of Funding for Various Research, Condition, and Disease Categories, updated March 15, total funding for stem cell research is expected to climb from $1.879 billion in FY 2007 to $2.438 billion in FY 2012, a roughly 30% increase. The projections for FY ’12 and FY ’11 ($2.395 billion) are down from FY ’09 and FY ’10 figures, which were boosted by funds from the $814 billion American Recovery and Reinvestment Act.
NIH’s ability to continue funding hESC research will depend, however, on how courts ultimately decide Sherley et al. v. Sebelius et al. This April the Court of Appeals for the District of Columbia Circuit vacated U.S. District Court Judge Royce Lamberth’s decision granting a preliminary injunction on all federal funding for hESC research. A June 24 deadline for submitting supplemental briefs has been agreed to.
The plaintiffs argued in part that because NIH created and distributed its guidelines with the intent of funding human embryonic stem cell research and without considering alternatives that they believe are scientifically and ethically superior, the guidelines violate the federal Administrative Procedure Act; two of the plaintiffs are adult stem cell researchers.
General stem cell research accounts for about half of NIH’s stem cell funding. Of the remainder, the largest single category of specific NIH stem-cell funding is adult nonhuman stem cells, an area that is expected to see $580 million in agency funds in FY ’12. Next-highest is adult human stem cells, which is expected to rack up $347 million from the agency in FY ’12. By comparison, if the NIH can continue funding hESC research, it projects $125 million in FY ’11 and $128 million in FY ’12, up from $74 million in FY ’07.
“If you were a researcher sitting at your bench, working on your next grant application, I think frankly you’d have to scratch your head real hard and ask, ‘Do I really want to work on embryonic stem cell research?’” said Frenchick. He noted that researchers are likely to think “maybe I should find something else to work on, in the sense of obtaining grants and doing federally funded research. Let’s assume I succeed here in getting the grant money. Do I really want to continue—because the political winds change every few years?”
In the European court case, hESC research faces a threat not to its government funding but its patentability. After Greenpeace challenged Dr. Brüstle’s patent, the Bundespatentgericht (Federal Patent Court, Germany) declared his patent invalid to the extent that it allowed precursor cells to be obtained from hESCs. Dr. Brüstle appealed the ruling, and the European Court will now have to decide if human embryos must be exempt from patenting at all stages of life or are permissible at some stage of development.
Even if the European court rules against patenting hESCs, Frenchick said, the decision is unlikely to spark a similar challenge in the U.S. He noted that American law has no counterpart to European law that forbids patenting claims deemed “immoral and against public order,” which is the basis of Greenpeace’s argument.
Challengers of the WARF patents in the U.S. have nonetheless found a way to take legal action based on a basic tenet of patent law. The Public Patent Foundation and the Foundation for Taxpayer and Consumer Rights (now Consumer Watchdog) are arguing in part that the inventor was not the first to actually derive hESCs and that his work was “neither novel nor nonobvious.”
WARF survived challenges to two of its three stem cell patents, albeit with narrowed claims and after they were initially rejected as well. Last year the USPTO Board of Patent Appeals and Interferences rejected three claims of the 013 patent, siding with challengers’ arguments that the creation of hESC lines was obvious in light of similar research on other species. The patent remains before the appeal board; the loser, whether WARF or the challengers, will likely appeal the decision.
Among companies using WARF’s hESCs is Geron. Its clinical-stage candidate for spinal cord injuries comprises oligodendrocyte progenitor cells derived from hESCs obtained from WARF’s federally approved H1 line. It is one of numerous companies that has licensed patents granted to the Wisconsin group.
The first WARF patents were filed in the late 1990s and cover a 20-year term from when they were first filed. Given the time it takes to bring new biopharma drugs to market, “these early patents will expire long before the money would be made in a commercial sense based upon inventions that came from them,” Frenchick said.
So unlike with many life science discoveries, where stem cells are concerned even a patent is no guarantee of a sizeable return on investment. And with the state of the research in as much flux as the politics driving the issue, it’s fair to say the prospects for making big money from stem cell patents are brightest with a younger generation of researchers and investors.
Alex Philippidis is senior news editor at Genetic Engineering & Biotechnology News.
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