Novocell Aims to Coax Stem Cells to Fight Diabetes, One Step at a Time

Xconomy San Diego — 

Ed Baetge’s dream is that his company, San Diego-based Novocell, will someday make human embryonic stem cells that will manage to produce all the insulin patients need to control their blood sugar. If things break right for Novocell, this treatment will navigate a thicket of animal tests over the next three to four years, demonstrate repeated safety, and enter its first clinical trial.

I spoke with Baetge, the company’s chief scientific officer, a few weeks ago on a sunny early morning at his office in the General Atomics complex at Torrey Pines Mesa. Baetge’s team has had a string of papers published in Nature over the last few years, and I was curious to learn how Novocell plans to commercialize their advances in basic stem cell research. Novocell has 40 employees, backed with investment from Johnson & Johnson Development Corporation, Asset Management Company (led by “Pitch” Johnson, a co-founder of Amgen) and Sanderling Ventures’ Fred Middleton, who was the third member of the management team at Genentech.

Novocell is working on some very tough problems. Human embryonic stem cells are exciting to scientists because of their potential to morph into any cell in the body, raising the potential for regenerative medicine. For example, such cells could replace dying or malfunctioning cells in the pancreas of diabetic patients. But Novacell faces a host of problems: how to control the differentiation of these cells so they only turn into the cell type you want; how to prevent them from forming benign or malignant tumor cells; how to deliver these effectively into human beings; how to insure they don’t spark the immune system to reject them, just to name a few. No one has even started the first human clinical trial of an embryonic stem cell therapy yet, although Menlo, Park, CA-based Geron (NASDAQ: GERN) wants to start what would be a landmark study for spinal cord injury.

“Regenerative medicine is just about the most complex thing you could ever do,” Baetge says.

The way Baetge describes it, Novocell is taking a methodical step-by-step approach. One big step forward happened in 2005, when company scientists took human embryonic stem cells and coaxed them in their first two weeks of development to form what are called endoderm cells that give rise to organs like the lungs, pancreas, gut, and thyroid. Another big one happened when Novocell was able to use genetically engineered proteins to turn stem cells into pancreatic progenitor cells with the potential to eventually develop into cells that secrete important hormones like insulin.

The problem was that first group of cells, in 2006, wasn’t fully mature, Baetge says. That meant they didn’t release insulin in response to exposure to blood sugar, like healthy human pancreatic beta cells do. It took until this past February to develop fully functioning pancreatic beta cells that secrete insulin. Now Novocell has shown that when it injects these regenerative insulin-producing cells into mice, they can function as well as normal insulin-producing cells after two to three months, Baetge says. “We are the only people in the world who have done this,” he says. “It closely mirrors what you find in a human pancreas.”

Still, about 15 percent of animals got teratomas in Novocell’s studies, and that’s something the company will have to prevent in future work. “We’ve got to prove it’s safe,” Baetge says.

The company’s financial future depends in part on its ability to win grants from the California Institute for Regenerative Medicine, the agency set up to dole out $3 billion of state taxpayer money for stem cell research. Novocell has applied for about $20 million in state funding to support it work, but it’s not assured it will get any, Baetge says. “The VC’s are not interested in putting more money into this at this time,” he says. If Novocell can win some state grants and put them to good use, then the VC’s or a pharmaceutical partner may want to get on board, but probably not until Novocell gets into clinical trials, he says.

“We just need to keep innovating,” Baetge says.