Saturday September 1 11:36 PM ET
Profits Could Be Elusive for Stem-Cell Owners
By Toni Clarke

NEW YORK (Reuters) - With only 10 organizations controlling the 64 stem cell lines allowed to be used in federally funded research in the U.S., some industry experts have predicted big payoffs ahead for the owners.

However, profits from licensing stem cell lines could be more elusive than originally thought.

``I think prices will be kept low to encourage research,'' said Rinat Ariely, an analyst with Frost & Sullivan, a market research company. ``It's in the interest of the industry as a whole to keep those prices down.''

The U.S. government last week named the organizations that own stem cell lines that qualify for federal funding. These lines are colonies of self-replicating embryonic cells that scientists believe can be manipulated to form any cell in the body and thus be useful in treating diseased organs.

Now, though, scientists are wondering how many of the 64 cell lines discovered by government researchers are viable, how many will be made available to outsiders, and if made available, on what terms.

``What we don't know is whether these lines will be made available, or if they are of a quality that's viable,'' said Alan Walton, general partner at Oxford Bioscience Partners, a biotechnology investment company.

Such is the fragility of many stem cell lines (they require constant feeding, pruning, and maintenance) that some scientists fear the supply will be neither steady nor sufficient to meet demand. Some contend that scarcity could push up their cost.

``I would think the cost of accessing these lines will go through the roof,'' said Walton.

ON THE OTHER HAND ...

Many disagree, however, and point to the Wisconsin Alumni Research Foundation, a unit of the University of Wisconsin, which holds the rights to five cell lines and has said it will charge just $5,000 for a license to use its cells.

``I think the cell lines themselves will be commoditized,'' said Albert Rauch, an investment analyst at Ladenburg Thalmann. ''The value-added will be how to take these cell lines and commercialize them.''

Arthur Klausner, a general partner at Domain Associates, a venture capital company focused on life sciences, said he expects most owners of stem cell lines to try to maximize revenue by licensing broadly and cheaply rather than narrowly and expensively.

``It could be that some cell lines may command a premium because of their quality and purity of line,'' Klausner said. ''One can imagine that certain lines are going to be more productive.''

The limits on the size of federal grants will also reign in the amount stem cell owners can charge for their licenses.

``The market can only bear so much and there could be moral questions about charging a lot for fetal stem cells,'' said Stefan Loren, an analyst at Legg Mason. ``It's likely, though, that the 64 government-approved lines will be hotter commodities, and more expensive, than any new lines that are developed because of the government grants you can get with them.''

SHARE AND SHARE ALIKE?

While existing stem cell lines may be cheap to access, those that own them -- such as biotechnology companies Geron Corp. of the U.S. and Australia's BresaGen Ltd. -- will likely exclude outsiders when it comes to sharing profits from the commercial products derived from them.

Geron has exclusive rights to the profits from six types of cells derived from the cell lines developed by the Wisconsin Alumni Research Foundation. It's trying to secure rights to 12 more cell types.

This doesn't sit well with researchers. Douglas Melton, an outspoken professor of molecular and cellular biology at Harvard University, has denounced the proposed arrangements, stating that he has no intention of becoming, in effect, an unpaid worker for companies such as Geron.

Academic institutions that own cell lines, such as the Goteborg University in Sweden, the Technion-Israel Institute of Technology in Israel, and the University of California in San Francisco, could fail to benefit from their cell lines because they are not set up as businesses.

``The people who have established cell lines make up a very eclectic group,'' said Daniel Omstead, chief executive of Hambrecht & Quist Capital Management, a health care fund management company. ``In order to make a profit from these cells, there are a number of factors involved, including intellectual property, cell quality and the ability of the owners to make a business out of them.

``Not all of these institutions have a history of making a profit.''