StreetTalk: Will Venture Capital Firms Turn Their Backs on Stem-Cell Research?

Korea-gate has proven to be a huge scandal, not only in science, but in finance, where investors who thought Suk was on to something potentially significant in stem-cell research, were left with empty promises . . .
Feb 01, 2006
Volume 19, Issue 2

Brian O'Connell
Like a snowball rolling down Mt. Everest, stem- cell research was gaining momentum, not only in political and medical arenas, but on Wall Street, too.

Don't get me wrong. Few people in finance have humanitarian motives when it comes to riding potentially profitable trends, even if those trends offer the hope of saving lives and freeing people from crippling pain.

The only pain Wall Street knows is the kind that occurs when a sure winner turns out to be a big loser.

I'm not saying that's the case for stem-cell research — yet. But the news last December that South Korean stem cell researcher Hwang Woo Suk committed fraud when he claimed that he created 11 tailor-made stem-cell colonies — he later admitted they never existed — doesn't bode well for stem-cell investment. Before Suk was exposed, the life sciences world touted his work as history-making — the first creation of human embryonic stem cells matched to patients who might benefit from them.

Korea-gate has proven to be a huge scandal, not only in science, but in finance, where investors who thought Suk was on to something potentially significant in stem-cell research were left with nothing but empty promises and no solid research.

Investors, like many cultural observers, saw stem-cell research as a possible cure for serious illnesses like Parkinson's disease, diabetes, and spinal cord conditions. Researchers have been working to create tissues from stem cells that can be transplanted into people with ailing organs. Without cells that are genetically matched to a patient, the odds that stem cells will be rejected by the patient's immune system rise significantly.

Venture capital investors were particularly stunned by Hwang's admission. Many had pinned their hopes — and their dollars — on the research he was conducting on custom-made stem cells. But when Science, the highly respected journal, retracted Suk's article — the scientific equivalent of a US army officer having his stripes ripped off on the field of battle — venture capitalists became, understandably, a bit skittish about funding stem-cell research.

"Unfortunately, the damage Hwang did can't be undone," said Robert Lanza of Advanced Cell Technology in Worcester, MA, a life sciences firm that was at the head of the pack in stem-cell study, but saw its venture funding eliminated when Dr. Suk's article retraction was made public. "It can't be undone for us, and it can't be undone for the thousands of people who may die in the future because this research has been unnecessarily held up while Hwang played his games and traveled around the world like a rock star."

Obviously, that's the most significant fallout from the Korea scandal. The time lost in getting real, proven research done that could save lives is paramount — and now that time is lost forever.


Now stem-cell researchers may see their funding dry up, which is hardly good news to a scientific community that gets its life blood, so to speak, from venture capital money (although the federal government is a big contributor, as well.)

When scandals like this one flare up, they threaten the confidence investors need in order to pony up the money necessary to bring laboratory research to commercial fruition, and save lives in the process.

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