Fame-courting biotech running short of cash
By Todd Wallack
Globe Staff / July 17, 2008
For the past decade, Advanced Cell Technology Inc. has claimed one
spectacular success after another.
The Worcester biotech firm said it was the first to clone an
endangered species, an Asian bovine. Executives said they pioneered
research that could one day be used to reverse the aging process and
grow replacement body parts. And ACT said it cloned the first human
embryo, a discovery that sparked headlines worldwide.
But all the publicity likely backfired. Former chief executive
Michael West was compared in news reports to famed circus promoter
P.T. Barnum. Some scientists said some of ACT's claims were
overstated. And a former ACT executive said the company's work in
controversial areas such as stem cell research and cloning scared
away pharmaceutical firms and life sciences investors that
traditionally fund young promising biotech companies.
Now, ACT could be on the verge of shutting down. In a Securities and
Exchange Commission filing Tuesday, the company warned that it
doesn't have cash to continue operating after July 31 without raising
additional money or drastically slashing operations. It reported $17
million in current liabilities, but only $1 million in cash and other
current assets, an indication it could be forced to file for
bankruptcy protection. And ACT's stock, which was as high as $8 per
share three years ago, closed yesterday at 2.5 cents a share.
"They may have had some useful technologies, but people in the
biotech community have learned not to make wild claims," said Una
Ryan, a veteran biotech executive and former chairwoman of the
Massachusetts Biotechnology Council. "People want to know you are not
just full of fluff and that you are going to deliver."
Much of the criticism has been aimed at former chief executive West,
a veteran biotech executive who became CEO in 1998 and soon made bold
statements about how the company's research could potentially address
a wide range of problems from aging to growing organs for transplants.
West was also very public - profiled in several publications and
coauthoring an eight-page spread on the "First Human Clone" in
Scientific American. In 2003, he wrote a book, "The Immortal Cell:
One Scientist's Quest to Solve the Mystery of Human Aging." West,
though, said he doesn't think he overstated any of the company's work.
"I have indeed heard that criticism of me, but think it's flat
wrong," he said.
To be sure, it's never been easy to turn a profit in biotech. The
Tufts Center for the Study of Drug Development in Boston estimates it
takes an average of $1.2 billion to develop a drug. Typically, much
of that funding has come from pharmaceutical firms such as Pfizer and
Novartis, which are hoping to find the next blockbuster medicine to
fill their pipelines.
But ACT has been dogged by complaints that it over-hyped its
research, which may have hurt its ability to sign deals with drug
companies and attract investors.
(Reuters/Alex Wong/Meet the Press)
Dr. Michael West, President and CEO of Advanced Cell Technology,
spoke about the world's first cloned human embryo on NBC's 'Meet the
Press' during a taping November 25, 2001.
One of its most high profile claims came in late 2000, when ACT said
it was the first biotechnology firm to clone an endangered species,
creating a gaur named Noah at an Iowa research center. Gaurs, which
come from southeast Asia, look like a cross between a common domestic
cow and a water buffalo. And ACT said it had an agreement with the
Spanish government to clone an extinct Spanish mountain goat called
the burcardo, using cells taken from a dead animal, like something
from the film "Jurassic Park." But the gaur died two days after birth
from an infection, which ACT says was unrelated to the cloning. And
ACT never cloned the goat.
A year later, three scientists resigned from the editorial board of
the online scientific journal e-biomed after it reported ACT's claim
to have successfully cloned the first human embryo. Critics said the
experiment was actually a failure. The most advanced embryo had
divided to just six cells in five days, while normal cells generally
divide 50 to 100 times in that span.
ACT's claim set off a firestorm of controversy about the ethics of
human cloning. It didn't seem to matter that West, then CEO, insisted
the company never planned to actually create a cloned person, but
rather the purpose of the research was to develop new drugs. Soon,
West was testifying before Congress and appearing on "Meet the Press"
to talk about the ethics of human cloning research.
"The science has been pretty sound," said George Seidel Jr., a
Colorado State University professor known for his cloning research.
But "in some cases, it was oversold or over-interpreted.
Like most scientific research, Seidel said, ACT's work was largely
incremental, taking tiny steps to push the research forward. But
Seidel said the cascade of media stories gave some people the
mistaken impression that ACT had made a series of game-changing
breakthroughs.
Besides its claims, ACT's research may have just been premature. Most
biotech companies leave basic research for academics, steering clear
of even the most promising technologies until they are closer to
being developed into drugs or other commercial products. Otherwise,
corporate researchers could spend years chasing tantalizing leads
that never turn into marketable products or take so long the company
runs out of money. But ACT bucked the trend, focusing on cutting-edge
stem cell and cloning research.
"That's so outside the mainstream," said Kurt von Emster, a portfolio
manager for MPM Capital, an investment firm with offices in San
Francisco and Boston. "The whole area of regenerative medicine has
been problematic" for most investors.
Indeed, the company didn't go public through a traditional initial
public offering, where companies need backing from investment banks
and institutional investors. Instead, it completed a reverse merger
with a dormant Utah company that formerly marketed Native American
figurines in 2005.
ACT also has other problems, including an exodus of executives. West
himself left in October to join BioTime Inc., an Alameda, Calif.,
company that plans to develop medical products using stem cell
technology. The company's general counsel, Jonathan Atzen, resigned
March 7. And the company's chief accounting officer, Ivan Wolkind,
quit March 17. The company still had four dozen employees as of March.
And ACT now faces legal action. In January, West filed for
arbitration claiming the company owes him $26,250 in unpaid
consulting fees, plus interest and attorney fees. In May, the
company's former chief development officer, Pedro Huertas, filed an
arbitration claim saying the company owes him a year's severance pay
and wrongfully fired him after he refused to fire a woman who said
she was sexually harassed. He is seeking $340,000, plus attorney's
fees. And a former landlord, Alexandria Real Estate, is seeking back
rent and other damages.
But ACT says it isn't giving up. The current chief executive, William
Caldwell, didn't return calls seeking comment. But the company said
in its filing Tuesday it is trying to raise money to stay alive. It
is trying to sign licensing deals, including one with West's new
company. And it is trying to find ways to speed up the development of
its products.
But ACT's filing with the SEC did not give any indication it was
close to raising the money it needs. "There continues to be
substantial doubt about the company's ability to continue as a going
concern," the company wrote.
Todd Wallack can be reached at twallack@globe.
© Copyright 2008 Globe Newspaper Company.
http://www.boston.
rting_biotech_
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StemCells subscribers may also be interested in these sites:
Children's Neurobiological Solutions
http://www.CNSfoundation.org/
Cord Blood Registry
http://www.CordBlood.com/at.cgi?a=150123
The CNS Healing Group
http://groups.yahoo.com/group/CNS_Healing
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