the dominant source that pharmaceutical companies can count on to deliver these cells at industrial consistency. Prices depend on the cell type, but Cellular Dynamics generally ships its custom-manufactured cells to commercial customers for $1,500 a vial on average, for a 96-well plate, CEO Robert Palay says. Those cells tend to last about two weeks in the lab, before the customer needs to place another order if they want to run another experiment.
“Manufacturing human cells is hard,” Palay says. “It’s very hard to do in the quality and quantity we do. You have to understand the conditions and keep them under control. The heat, light, moisture, media, reagents all have to be right. What we do that no one else does is manufacture cells in quality and volume that’s really unprecedented.”
Leroy Hood, the president of the Seattle-based Institute for Systems Biology and a scientific advisor to Cellular Dynamics, dismissed any threat to the business from academic labs. “Academics cannot even begin to mimic these scales of operation—or in general purity,” Hood says.
While competition isn’t much of a concern, the more pertinent question about Cellular Dynamics is about the market. What types of customers will get on the Cellular Dynamics bandwagon first? What will it take to convince customers in certain markets that they must have these cells, or else operate at a disadvantage? How long will it take to prove that these cells save time and money in drug development? Will they ever reduce the risk of clinical trials by providing more accurate lab models?
Palay, when I visited his office last fall, told me the same thing he said on the IPO road show. He envisions a $10 billion market that Cellular Dynamics can tap into over time. Here’s how Cellular Dynamics arrives at that calculation, according to its IPO prospectus:
Our products are currently sold into the $3.5 billion market for cells for in vitro experiments, as well as the $1.3 billion stem cell banking market. Our products position us well to participate in the growing $5.0 billion global human stem cell, tissue and organ therapy market, first as a provider of cells for research, then as a provider of cells for therapeutic trials and potentially for therapeutic use on a collaborative basis. We believe our products will contribute to the growth of our target markets.
It should be noted that Cellular Dynamics is still talking in quite futuristic, and cautious, terms about that last half of the market that you could call “regenerative medicine.” When it talks about cell therapy, it talks about being “a provider of cells” to some other company that would take most of the risk to develop the cell therapy. So there are a few leaps of logic to get to the $10 billion figure.
Still, this is a market in its infancy, and the early sales trends are moving in the right direction, said Tycho Peterson, an analyst with JP Morgan, in a note to clients Nov. 13. “Our investment thesis on ICEL remains unchanged; with first-mover advantage in industrial stem cell manufacturing, a focused pipeline and leading industry position, we see increasing customer adoption, revenue ramp, and margin expansion in the future,” Peterson wrote.
I asked Hood, the prominent biotech entrepreneur, where he thinks the big opportunities might be for Cellular Dynamics. If the human cells the company makes are so great, I wondered, might they be good enough to someday replace animal models and seamlessly enable drug companies to one day go straight from the lab to test their drugs in clinical trials?
That’s no obvious thing, because a human cell in a lab dish is in a different environment than a human cell that’s operating in a live human being. If someone came up with truly predictive human cell models in the lab, it would be an enormous catalyst for the pharmaceutical industry, which wastes years and billions of dollars on drugs that ultimately fail in clinical trials and could have been weeded out earlier.
The business opportunity for such a thing would be huge, maybe even bigger than regenerative medicine itself.
Here’s what Hood said about the opportunities:
I think CDI will create new markets. 1) homogeneous cell types for pharmaceutical assays and 2) eventually large number of cells for cellular therapy (this is a ways off obviously). With regard to animal models–I have the following thoughts. I believe that CDI will create the ability to study the development of virtually any human cell type in an environment where these changes can be followed using systems approaches (this is what we are doing with CDI). One can either look at normal development or what disease genes do to development. What CDI can do is different from what mouse models can do. The question with mouse models is ‘do they really resemble their human counterpart diseases?’ Most do not. With CDI, one is using human cells–and the question is whether the lack of spatial organization makes a difference (and it certainly does–but one can do many exciting things that will mimic biological reality).
It’s impossible to say whether any of those ideas about human cell models, or regenerative medicine, will come to fruition. The Cellular Dynamics business isn’t the most glamorous thing going today in biotech. But there’s no denying that the company has put one proverbial foot in front of the other to give itself a chance to do bigger things. Its long-term success will depend on just how successful it can make its customers.
“I want to enable my customers to do their experiments,” Palay says. “Our cells empower your discovery.”
