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SCS Signs Licensing Deal With Merck for Newly Launched 'Cells in Wells' Business

Stem Cell Sciences, a global biotech company with a focus on stem cell technology, has signed on Merck as its first customer for its SC Services business, which produces custom stem cells for use in high-throughput drug screening.
SC Services, which SCS launched in December, is the company’s fourth business unit and represents an expansion of SCS’ near-term revenue potential as the firm keeps its eye on its long-term goal of developing stem cell-based drugs.
Under the terms of the Merck agreement, disclosed this week, SCS has licensed its mouse neural stem cell technology for research use. The deal includes a “substantial” upfront payment along with milestone payments “at different key points along the way,” according to David Dodd, chairman of SCS’ board.
He declined to provide additional terms of the agreement.
SCS is not the only firm who sees the commercial promise of stem cells for high-throughput screening. Another stem cell biology firm, Stem Cell Innovations, told CBA News last week that it is using human stem cells to develop heart, lung, and other cells for its ACTIVTox screening platform, which is currently based on a proprietary liver cell line [CBA News 02-16-06].
But SCS does appear to be farther ahead in its development, and the deal with Merck — which it signed within three months of the launch of SC Services — appears to be a sign that SCS is on the right track.
In addition, Dodd said that the company is in discussions with “numerous other highly identifiable companies” regarding the offering.
‘Cells in Wells’
SC Services joins Stem Cell Sciences’ SC Proven and SC Licensing business units as engines for near-term revenue to support longer-term therapeutic development activities that it conducts under its SC Therapies group.  
SC Proven provides cell culture media and reagents via a distribution agreement with Chemicon (now Millipore) signed in late 2005, while SC Licensing is responsible for outlicensing the company’s stem cell IP to biotech and pharmaceutical firms.
Customers for this business include Deltagen and Lexicon, which use the technology to develop knockout mice. The two Stem Cell Sciences business units together generated £742,000 ($1.45 million) in revenues in 2006.  
SC Services is housed in a cell-production facility at the Babraham Research Campus in Cambridge, UK. The group develops stem-cell-based drug screens and assays using robotic cell culture equipment that can produce multiple cell lines in parallel.
According to the company’s preliminary financial statement for 2006, the “significant investment” that SCS made in the facility “is central to the company's near-term revenue flow and longer-term business strategy. … By upscaling cell based screening capability for the drug discovery industry, SCS also enhances its ability to identify the regulatory molecules which underpin the company's core competency — stem cell regulation.”
Dodd told Cell-Based Assay News that the SC Services group’s motto is “putting cells in wells.”
Dodd said that while the firm’s long-term goal is to develop stem cell-based therapeutics, he noted that “these aren’t going to happen in the next five years or 10 years.”
In the meantime, he said, “our business model has been to bring value from stem cell biology today.”
Dodd said that the drug-discovery tool sector “is just now starting to be impacted by the application of stem cell biology, and we expect to be the leader in that application area.”
He noted that public opinion of stem cell research tends to lean toward therapeutic applications. “Right now when people think about it they think, ‘Oh, someday the crippled man is going to walk, the blind man is going to see, and that’s the promise of stem cells,’” he said.
“But I would really emphasize that it’s the application of stem cell biology, both in the current term as a research tool and in the understanding that will lead to therapeutics, regardless of what the basis of those therapeutics will be,” he said.
Medium Milestones
The Merck announcement comes on the heels of a milestone for the company’s SC Proven group: the launch of its HEScGRO serum-free cell culture medium for human embryonic stem cell research, which is being manufactured and marketed through Millipore [CBA News 02-02-07].
According to SCS, HEScGRO “is the first commercially available animal component-free medium in the industry” and enables cells to propagate without differentiating.
The HEScGRO launch followed the release of the company’s first commercial product, the ESGRO Complete medium for the growth of murine embryonic stem cells, last year [CBA News 03-03-06].

“By upscaling cell based screening capability for the drug discovery industry, SCS also enhances its ability to identify the regulatory molecules which underpin the company's core competency: stem cell regulation.”

SCS estimates that the current worldwide market for cell culture media and reagents is around $950 million, with the potential of rising to $1.8 billion by 2010. While stem cell media products “represent a small component of this market,” SCS said in its preliminary earnings report, “this is expected to grow as research in this relatively new area of science expands through increasing government research investment.”
All of the SC Proven division’s products are marketed by Millipore — an agreement that Dodd actually helped facilitate as CEO of Chemicon parent company Serologicals, which was acquired by Millipore last July [CBA News 07-21-06]. 
“I was on the other side” of that agreement, Dodd said. “I was CEO of Serologicals, so I led putting that deal together and that’s how I got to know these guys, and that led to why I was interested in being on their board.”
Dodd joined SCS as a non-executive director last October and became chairman on Jan. 1.
While the distribution agreement with Millipore has been successful so far, Dodd said that SCS opted to go it alone when it came to marketing the SC Services business. “If you think of the number of target companies, right now, we felt that it makes sense in defining ourselves and who we are and building our own brand as a company to go and have specialists who sell into the drug-discovery market,” he said.
“We’re right now handling that,” he said, but added, “whether we ultimately partner with someone else who can bring more people to the customer development process, time will tell.”
Dodd said that the company is currently developing a line of human embryonic stem cells for the SC Service business that should be commercially available before the end of the year. Human cells are expected to appeal to drug-discovery researchers because they will replace animal cell surrogates.
“This will give them, theoretically, much better assurance — and certainly predictability — in terms of the results they’re getting,” Dodd said.
In addition, Dodd said that the firm has longer-term plans to expand its SC Services business to the United States via a cGMP facility that would enable customers to file data generated with its technology as part of investigational new drug filings with the FDA.
“We would like to be at the stage where we have a cGMP-compliant facility,” he said. “It would just put us ahead of others.”  
Last year, the company established a US subsidiary in San Francisco that is focused on “building sustainable academic and commercial collaborations throughout North America,” SCS said in a statement.

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