Changing landscape of funding stem cell therapies: not just a venture capitalist’s game

Entrepreneurs and researchers are finding new sources to cross the "valley of death" funding gap.

Neil Littman is the Business Development Officer at CIRM

In February I gave a talk at the Phaciliate Conference in Washington D.C. entitled Bridging the Funding Gap: Non-Profit and Industry Collaborations, CIRM’s Perspective. Phacilitate is an annual conference focused on the cell and gene therapy industry and attracts a variety of attendees from around the country. Beyond showcasing the latest technologies and scientific advancements, one of the major areas of focus of the conference is on raising money, collaborations and industry partnerships. The conference provides a great chance to reflect on the prior year’s activity and discuss the trends that may continue into the upcoming year.

One of the cornerstone pieces of my talk, and a theme I heard repeated throughout the conference, was the shift in the traditional funding continuum. What this means is that traditional sources of capital for early stage life science investments have shifted from venture capitalists to other sources of funding. Many life sciences focused venture funds have had a hard time raising new funds due to lackluster performance of their prior funds. This has served to shrink the available pool of venture capital and also consolidate it into the hands of those that have been able to raise new funds. Entrepreneurs and researchers have, therefore, had to look to other sources of capital to fund their research.

Fortunately, disease foundations have stepped in to help alleviate the funding gap. JDRF (the Juvenile Diabetes Research Foundation), for example, has become a significant source of funding for Type 1 diabetes. Their research funding has grown on an annual basis from a few hundred thousand dollars in the organization’s early years to over an estimated $110 million in 2012. In fact, CIRM has successfully partnered with JDRF to jointly provide over $50 million in funding to ViaCyte, a San Diego-based company developing an embryonic stem cell-derived product for the treatment of Type 1 diabetes.

In addition to disease foundations, venture philanthropists have become increasingly important in funding translational medicine and research. For example, in November 2013 Denny Sanford announced plans to donate $100 million to UC San Diego to accelerate discoveries in human stem cells into drugs and therapies to treat a wide range of diseases, from cancer to Alzheimer’s disease to neurological injury and stroke.

Finally, many large multinational pharmaceutical and biotechnology companies are looking at earlier stage opportunities in an effort to externalize R&D costs as a way to bolster lackluster pipelines beset by a plethora of late stage product failures. For example, Capricor, a CIRM grantee, recently announced a deal with Janssen (a division of Johnson & Johnson) for $12.5 million upfront and up to $300 million of potential milestones. CIRM is partially funding Capricor’s Phase 2 trial for myocardial infarction. Another example is Biogen Idec’s recent deal with another CIRM grantee, Sangamo Biosciences, in which Biogen agreed to pay Sangamo $20 million upfront and up to $300 million of potential milestones for the development of treatments for blood disorders. This includes the beta-thalassemia program funded under CIRM’s Strategic Partnership 2 Award.

It is imperative that CIRM leverage our resources with these other sources of capital in order to bring promising new therapies to patients and bridge the funding gap, often called the “valley of death”. Only by working together will we all be successful in delivering novel therapies to the patients who need them most.

-Neil Littman