The Microsoft of the stem cell age could be in the making at the Menlo Park offices of the Geron Corp., a 65-employee biopharmaceutical firm that got its start in cancer drug research.
The company's aggressive patenting of embryonic stem cells has given it the early lead in an infant industry that promises to grow substantially over the next decade as California spends up to $3 billion on stem cell research.
At the same time, Geron's emergence fuels skepticism among opponents of the massive state-funded program about lavishing public funds on an enterprise in which one company claims to have a controlling reach.
Since 1996, Geron has invested more than $90 million pioneering the field of human embryonic stem cell research and plans to test its first embryonic stem cell therapy on humans in 2006.
"For the first time," Geron chief executive Thomas Okarma told Wall Street investors in late November, "we have the ability to have a cell therapy product-based business model, where we manufacture, store ... and ship cells for off-the-shelf use."
Proposition 71, passed by 59 percent of voters on Nov. 2, creates the nation's largest stem cell research fund. The vote helped build momentum for Geron, which followed the election with the announcement of a $40 million stock sale, while hailing the publication of studies about the unique potential of its technologies.
Company officials and industry analysts say Geron has few peers worldwide, although competitors are expected to spring up a few years after money from Proposition 71 starts to flow.
"There really isn't much of a stem cell industry," said Joe Panetta, president of BIOCOM, San Diego's biomedical trade group. "It's kind of a stem cell itself."
Human embryonic stem cells have the ability to create healthy new cells and tissues for every part of the body. Supporters say they could help provide cures for such feared ailments as cancer, heart disease and severe burns. The business possibilities are enormous, eventually reaching tens of billions of dollars.
Eighty-two companies worldwide are involved in development of stem cell technologies, according to a 2002 report by the business research firm Kalorama Information.
California firms with at least some stake in stem cells include VistaGen Therapeutics Inc. of Burlingame, StemCells Inc. of Palo Alto, MacroPore Biosurgery Inc. of San Diego and Invitrogen Corp. of Carlsbad.
Kalorama's report said 13 companies were in the best position to capitalize on the emerging technology, but singled out one front-runner: "Geron Corp. is currently the dominant organization in the field," it said.
Geron, first funded in 1992, says only a handful of companies worldwide are doing advanced research on human embryonic stem cells. Other companies mostly are looking at adult stem cells or developing research-related products.
Main Geron competitors have emerged in China, Singapore, Israel and South Korea while the U.S. government discouraged the use of human embryonic stem cells because of ethical concerns: Embryos are destroyed in the process of gathering them.
Industry insiders predict that stem cell business growth over the next five years largely will consist of companies that support Proposition 71 research - for instance, firms that aid the study of stem cells. Once scientists report breakthroughs, look for the formation of more therapeutics outfits.
Exactly how the industry unfolds will be determined partly by the oversight panel governing Proposition 71 money; the panel met for the first time Friday. Among the questions the panel will wrestle with in the coming months include how much of the money will be spent on basic research typically done at universities vs. applied research often handled by companies.
Wayne Johnson, a consultant for the Proposition 71 opposition campaign, said Geron is one of the most likely companies to profit from what he calls "the biggest heist of public funds, probably in the history of the country."
Said Johnson, "This initiative was written very carefully to funnel the money into very specific ... lines of research that are very beneficial to the people who own these patents."
Company President Okarma said before the election that Geron was staying clear of Proposition 71 fund raising. Secretary of state files don't show contributions to the Proposition 71 campaign from Geron, top company officers or its largest stockholders.
Geron's stem cell story started in 1995, when it began funding research into human embryonic stem cells at the University of Wisconsin, Madison, and later at Johns Hopkins University and the University of California, San Francisco.
While federal debates raged about the ethics of stem cell research, Geron kept working - it sponsored the development of the world's first embryonic stem cell colonies - and securing the legal rights to as many of its discoveries as possible.
The company, which also continues to develop anti-cancer drugs, has lost money every year for a total of $255.7 million at the end of 2003 - not an uncommon position in the research-intensive world of biotechnology.
Its investment has generated at least 19 patents worldwide on human embryonic stem cells with 177 pending, the company reported earlier this year. That is believed to be the most extensive intellectual property collection in the industry, covering cells for the liver, heart, bone and nerves.
Today, Okarma says his company is building an intellectual property "fortress" that he hopes will allow Geron to make money whenever and wherever stem cell-based therapies are commercialized.
But Geron's chief financial officer, David Greenwood, said the company isn't trying to stifle competition. To the contrary, he said, Geron aims to stimulate a broad stem cell industry in California.
His approach comes off much softer than Okarma's public statements about the company's "broad, dominating patent estates" and its commitment to "filing of oppositions and interferences against competitors' patents."
Greenwood said Geron is offering its technology free to California university researchers, a common way of getting scientists interested in technologies they otherwise couldn't afford.
But Greenwood also said Geron won't force researchers funded by Proposition 71 money to commercialize new Geron-based products with the company.
Geron still would expect royalties, of course, but Greenwood said researchers could take products to market however they want. "We are quite willing to take this IP (intellectual property) estate and enable others to get into the field," Greenwood said. "I don't spend a lot of time worrying about competitors. I view them as potential partners."
It's the kind of self-help philanthropy the company seems able to afford while its prospects are looking up.
The big break would be if Geron can be the first company to market a stem cell therapy. The company plans human tests of its first stem cell-based product, a treatment for spinal cord injuries, starting in 18 months.
The therapy has proved successful in treating acute spinal cord injuries in rats, which "recover significant motor function" after injection of therapeutic cells, Geron documents say.
At least some Wall Street analysts like Geron's odds. New York investment bank Rodman & Renshaw said in October that it was "pleasantly surprised" that "Geron has made significant strides."
That kind of confidence makes it easier to secure investment for the long road to market. Geron reports having $130 million in cash, but it will have to spend a big chunk of that over the next few years to prove its stem cell therapies work.
GERON CORP.
Headquarters: Menlo Park
President and CEO: Thomas Okarma
Employees: 65
Main business lines: Research-stage cancer and human embryonic stem cell therapies
First funded: 1992
Net loss (2003): $29.9 million
Nasdaq stock ticker: GERN
52-week range: $5.15 to $12.44
