Stem Cell Research and the VC Community

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[Editor's note: This is an article I wrote several years back, but the issue is still at work in the Senate today. Several speakers have emerged as experts on this topic and are speaking at events all around the US]

With the presidential election looming over the next couple of days, both Republicans and Democrats are searching for last minute “wedge” issues to highlight their candidate’s distinctive policy agendas for the next four years. Despite their efforts, neither party has had much success in their attempts to exploit such “wedge” issues. While the media’s focus on the details of the candidates’ past, especially their military service records, has played a part, external events have also limited the scope of the policy debate. Whether you think Bushy or Kerry would be a better leader or would be more honest with the American people, the bottom line is that whoever wins on Tuesday will have a hell of job cleaning up Iraq, getting every American healthcare benefits, and cutting back on the deficit, and that the differences between what these two candidates probably aren’t as great as both sides would like you to believe. As the campaigns enter the home stretch and until the ballots are fully counted, “wedge” issues are likely to assume greater importance.

One such issue that has gathered steam in recent years is whether the government should fund embryonic stem cell research. Embryonic stem cells are “master cells” that form during the early days after conception. What makes these cells unique, and of special interest to researchers, is their ability to turn into any tissue in the body. Many scientists hope to one day harness embryonic stem cells to grow replacement tissues that can treat and potentially cure diseases such as Diabetes, Parkinson’s, and Alzheimer’s. Such research remains controversial, however, as many political conservatives and religious groups, including the Catholic Church, worry about the ethical and moral questions raised by experiments that effectively destroy days-old embryos.

While the issue has grown in public notoriety over the past several years, polls show that the public is not as well informed about the issue as it would like. For example, over 20% of respondents in a Fox News online poll claimed they did not know enough about the issue to form an opinion. While the general public may only now be studying the issue, venture capitalists have been discussing the potential benefits and opportunities of stem cell research for some time. More recently, they have begun to educate the public and encourage others within the community to take a more active role in the debate.

As an initial point, it is important to recognize that there are currently no federal regulatory limitations on embryonic stem cell research in the United States, only limitations on federal funding of certain kinds of research. In fact, President Bush has approved $25 million to spend on stem cell lines coming from surplus in vitro embryos that were in existence on or before August 9th, 2001, which amounts to roughly 19 lines of available stem cells. (Stem cell lines are not an amount of stem cells, but rather describe different types or “models” of stem cells that share the same genetic characteristics). This move was widely regarded as a political compromise between conservative religious groups and the scientific community. Choosing to emphasize the potential benefits of the research, many scientists are grateful for the President’s limited funding initiative. Nonetheless, many also feel that potential discoveries are being delayed and hindered by the limitations on the kinds of cells available for use in federally funded research. In a recent editorial in the New England Journal of Medicine, Dr. George Q. Daley, a leading stem cell researcher, said that research has clearly struggled without unrestricted federal funds. Further exacerbating the problem, the private equity business community considers the field too immature, and the benefits too distant, to make it an attractive investment opportunity at this time. Biotech venture capital firms are also wary of investing substantial capital, due to the uncertainty surrounding congressional efforts to further regulate, or even ban, such research.

Desiring a more favorable environment to invest in stem cell technology, venture capitalists have spoken out with their pocketbooks, giving strong support to California’s “Proposition 71”, or the “California Stem Cell Initiative.” The proposition, which will be voted on by California voters this November, was drafted by a coterie of stem cell research enthusiasts seeking to bypass federal limitations. If it passes in November, the bond measure will give $295 million per year, over the next ten years, to stem cell researchers working in California. The venture capital community, leveraging its strong presence in California, has actively campaigned for its passage. Joseph Lacob, John Doerr, Joe Lacob, and Brook Byers, of Kleiner Perkins Caufield and Byers, have all contributed significant amounts to the campaign. George Rathman, James Rooney, and William Rutter – executives of Crossroads portfolio companies Nuvelo, Gilead Science, and Chiron, respectively – have also pledged financial support to the initiative. Even Bill Gates has thrown some $400,000 into the mix.

Regardless of what stance a particular individual in the venture capital community takes on the issue of embryonic stem cell research, most venture capitalists agree that the private sector will be responsible for the development of therapies that will actually effect patient communities. These patient therapies could be a boon for VC firms and the economy, as venture capital investors predict the market for these treatments will be in the billions of dollars. So what obstacles are standing in the way of these therapies and their economic and societal potential? Aside from ethical questions regarding the research, there are a few fundamental questions that must be answered first. According to Jeffrey Ferrell, a Vice President of Lehman Brothers’ Healthcare Venture Capital Group, two of the basic questions include: how do embryonic stem cells differentiate into the desired cells that researchers would like to create? And how would these new cells interact and function with the body’s old cells? Ferrell states that, without the aid of federal funding, the search for answers to these questions could be significantly delayed.

Even with federal funding, the VC Community will have to take a long-term perspective on developing product therapies. “Commercial product therapies [from embryonic stem cells] will be at least ten years away,” says Ferrell. “And most likely the early therapies will be basic tissue replacement, such as bone implants, blood cell transfusions, and nerve and tissue grafts for burn victims. The time frame for potential therapies treating Diabetes and Alzheimer’s would be much further away.” While some companies are trying to get an early lead on the competition, there are relatively few companies who are currently exploring the technologies.

Whether you believe that Bush is a moron for hindering this research, or that Kerry is the devil incarnate for wanting to save life by destroying it, you must realize that this issue is not quite that simple. It is irresponsible to have the opinion that moral and ethical considerations are irrelevant in the light of a potential breakthrough technology. There is a purpose to man’s life. It is what separates us from other living things and why we cannot and should not treat it with a cavalier attitude. But It is also ignorant and unreasonable to believe that it is not possible to potentially help our loved ones in need, especially if we could.. Just wait until it is your father, mother, husband, wife, sister, or brother that has Parkinson’s or Diabetes. It won’t take much for you to want to do whatever is in your power, and to say a prayer for things that are not within your power, to try to help them. While we may not be in that position currently, we should strive to be sensitive to any of those that may. Michael J. Fox’s wife might view this issue in a different light that she would have seven or eight years ago. So too we should completely understand why this issue is so important to some. So let the scientific research continue to take place. Let’s even expedite the process and use government dollars to do it. Let’s just be reasonable. I believe that there are reverent ways to go about conducting science in order to find the answers to questions that hinder therapies while simultaneously showing respect towards human life. It might be hard work, and but it can be done. But let us not be naïve -- whether government dollars are spent to move this technology along or not – we must collectively guard against the agenda and propoganda of many scientists and venture capitalists. They, along with the pharmaceutical companies (and not you, I or the government), will be the ones that financially benefit from this technology. Another challenge I give: get educated on this.

http://www.researchmatters.harvard.edu/topic.php?topic_id=295

We are at the forefront of this breakthrough technology that could potentially change our lives and the lives of our loved ones. The conversation is just getting started. Join in and find your opinion about this issue, lest we leave it to the two extremes that might not understand that this delicate issue must be deeply examined.

While the political debate regarding embryonic stem cell research may reach its crescendo in November, the venture capital community will continue to engage the issue, supporting research efforts and fostering further discussions for many years to come.