Viacell chose SEPAX

Well, it wouldn't be fair that other automated systems aren't discussed on this blog.

A burning question you must all have is:

What systems are all the other cord blood stem cell companies using?

Well, last year, Viacell announced in a short brief that they were integrating automation into its existing closed processing system using the SEPAX system, designed and manufactured by BioSafe, a Swiss rival of Thermogenesis.

The announcement stated that:

"SEPAX is the only FDA cleared cord blood processing system. Biosafe received FDA clearance in January 2007 and European CE mark approval in 2001."


THE SEPAX MACHINE: WHAT IS IT?

The SEPAX automated processing system is an all-in-one machine which is achieves a similar outcome of stem cell separation through an in-built centrifugal technology. It is approximately 14 Kg in weight (2 year old baby) and reminds me somewhat of a large square automated rice cooker (the newer Sanyo versions, that is).

The separation of stem cells from other blood components is achieved in a central core which spins the blood at high speed and through an optical reader, squeezes the separated components into the various compartments until the process is complete (watch the Quicktime animated demo). SEPAX kits are single use (just like AXP) and come with an option of storage bags, although it is rumoured that the kits will soon only come with a single compartment bag as Thermogenesis is revoking permission for the dual compartment design use (business as usual for public banks but potential consumer's angst in private banks).


THE PROS AND THE CONS

Let's start with the Pros.

1) The machine does away entirely with a centrifuge (no Beckmann or Sorvall)
2) One unit processed at a time
3) Portable
4) Closed system
5) Single disposable kit
6) No requirement for clean room
7) Used and endorsed by major european cord blood banks affiliated with Netcord*

The Cons.

1) Each unit takes approx 40 mins to process
2) One machine processes one unit at one time
(i.e. if you have 1 machines and 10 units, it will take you approx 5+ hours to complete the lot, more machines = more costs)
3) Possible breakdown of light detector (replacement downtime?)
4) Limitation of single compartmented storage systems
5) Technical oversight to ensure that the initial connections are placed correctly
6) Price (the euro has been incredibly expensive since last year)
7) Service when things go wrong (specialized engineer required from Switzerland)

CONSIDERATIONS FROM THE USER'S PERSPECTIVE

Both the AXP and the SEPAX have their pros and cons, and as a potential user, I'm interested in knowing the breakdown rates and other problems banks have in using the system. These are usually not disclosed and the user takes on the risk to find out. Unlike public banks which can afford to discard units which don't turn out right, private stem cell facilities have zero tolerance for error as every single one hurts both the client and the company's balance sheet. Additionally, if the system does not work out for the company for whatever reason, the expensive asset has to be written off (may cost millions) which would be an extremely painful decision to make.However, unlike the AXP system, the SEPAX system has been in use for a while and has not released any public recalls of their product. Hence, the only reason that I can think of for its slow uptake in the rest of the world is that unlike Europe, which promotes public banking largely for blood cancer use, America and the rest of the world is promoting cord blood stem cells for regenerative use- hence the need for a multi-compartmented bag- which is a different concept entirely.


PROFIT & LOSS

Certainly all companies selling the automated systems would stand to profit greatly from entering the cord blood stem cell market. Cord blood stem cell banks can still use generic products on the market, making it relatively affordable to bank as long as the team is technically competent. Now, automated systems will increase general standards of quality for those with less well trained staff (its a matter of practice and the total experience) but it also pushes prices up for the consumer or makes it less profitable for smaller operators. Public banks will also need to campaign for more funds in order to buy new systems and costs of processing will need to be revised from previous proposals.

For now, the small number of options in automated systems commands a forced loyalty as each system only accepts their own product. Many of the stem cell banking services that face the consumer directly will await the day that there is a generic design of standard quality which can be used with any machine, which will be more open to price transparency. Of course, that day may still be far away until either governments have budget surpluses to devote to a huge volume of public banking (when it takes precedence in funding over other healthcare priorities) or legislate to provide a conducive environment for the public to exercise their choice to bank privately should they wish to.

KNOW WHAT YOU'RE PAYING FOR

There is no doubt in my mind that automation is inevitable at some point but let's not forget that this is still version 1 with potential to move to version 2. In the meantime, I'd like to see who and how the AXP system and SEPAX system is used in private hands, and whether it is used according to manufacturer's recommendation** to achieve the desired result.


*Prof. Eliane Gluckman's - the first cord blood stem cell transplanter- facility Eurocord uses the SEPAX system, in direct rivalry with AXP whose public endorser is the New York Cord Blood Bank led by Dr. Pablo Rubenstein who developed cord blood storage procedures in the US.

**Manufacturers recommend certain minimum volumes and maximum volumes to be used with their system. Any deviation of this will not result in the promised outcomes, hence clients who are paying more for the promise of this system but don't meet the criteria will still ultimately be getting manual processing (which works well in a competent facility but not in one where the practice is limited).

The point of these systems is also to provide a "functionally closed" system of processing and there certainly wouldn't be any point in using the automated system if you had to transfer the cells from the final bag into a different storage method (e.g. vials) at the end, which would break it into a "functionally open" one instead.

Viacell Acquired by Perkin Elmer

Now that PerkinElmer (PE) has purchased Viacell, the company best known to me for its PCR machines* now owns the distribution arm of Viacell's cord blood stem cell storage unit- Viacord. The announcement of Viacell's takeover, valued at USD 300 million (approx 960 million MYR) was certainly a whole lot more than what Celgene paid for LifebankUSA which was closer to USD 60 million a few years ago.

Viacell had several subsidiaries; one focusing on R&D for cord blood expansion and differentiation; one focusing on therapeutics; another focusing on freezing and storing women's eggs (Viacyte) and its most well known backbone cord blood stem cell banking service Viacord.

PE's intention is essentially to sell off Viacell's stem cell therapeutic business, the Viacyte service, probably wind down the R&D aspects of the business and to ride on Viacord's cord blood banking strengths.


WHY ACQUIRE A CORD BLOOD COLLECTION SERVICE?

PE acquired two companies last year namely Macri Technologies and NTD Laboratories, the former developed a genetic screening kit called Ultrascreen and the latter company offers the screening test at their facilities. In the latest addition to its stable, PE's acquisition of Viacord is to develop an end-to-end package for prospective parents who are shopping for cord blood storage and will also be provided the option of having their babies screened for freeBeta hCG (a peptide hormone indicative of first trimester down syndrome prenatal risk assessment). The chairman and CEO of PE indicated that the acquisitions represent the next steps in their initiative to build a comprehensive screening and diagnostics capability in maternal healthcare.

PE also intends to expand their genetic screening tools that test the cord blood collected for any conditions which are potentially treatable with stem cells. PE also plans to take advantage of Viacell's established distribution consumer network which is doesn't have- allowing it direct access to patients and clients instead of having to rely on doctors and hospitals to sell their product.


GROWTH IN THE MARKET

According to the Boston Globe, Viacord expects to generate less than USD 70 million in sales but Perkin Elmer believes that the cord blood banking market could reach more than USD 1 billion within the next five years. Additionally, PE's CEO also said that the genetics screening business is expected to account for more than 10% of PE's annual sales which totals USD 1.7 billion, and is growing faster than PE's business as a whole.


DRUG GIANTS ARE IN

PE plans to sell Viacyte (egg freezing and storage technology) to EMD Serono which is part of Merck Serono and Viacell's therapeutic business to another drug giant- possibly Amgen.


The CEO of PE Gregory Summe said that Viacord would continue to run independently of PE but that PE may provide additional funding and resources to accelerate Viacord's growth. With PE's generous offer of USD 7.25 per share, I wonder if the management team have decided to retire and let PE's management takeover the day to day operations of the company. Will PE succeed in this latest corporate move? It remains to be seen how the acquisition of Viacord's network can integrate with the screening services. In direct comparison, Celgene's acquisition of LifebankUSA hasn't enabled it to boost its position to No. 1 in the US yet.


*PerkinElmer's PCR machines were the most loved of the lot in the research lab where I used to work. There were long queues for the machine as it was known to give beautiful amplification sequences at high yield. Despite its bulky shape, the best labs still insist on having at least one version of the machine.

Viacell ABANDONS Cord Blood Stem Cell Expansion Program

IS IT ENOUGH?

Whilst many cord blood banks rather unscrupulously hype up the possibilities of stem cell expansion (in order to get clients to store whatever they have and believe in their technology), I've always asked the StemLife team to take a very careful view of the science and the practical realities*.

[As a side note, here in Malaysia cord blood banks claiming to compete with us - operate on the cheap using non-FDA approved storage systems- promote the usage of vials as a storage medium on the pretext that cells can be selectively taken one vial at a time for future expansion. Read on to see why this is a disingenuous marketing ploy...]


THE CHALLENGES OF EXPANSION

The reason why StemLife has taken a cautious approach towards the expansion technology are three fold.

Firstly, in order to expand stem cells, you'll need enough cells -the more the better- in the first place. As a crude analogy, you'll need enough lactobacilli to make yoghurt (too little and it will take too long, allowing other bacteria to destroy the process).

Secondly, sterile technique is absolutely critical; when you're growing the cells, you have to make sure that it contains only the cells that you're growing and nothing else. This requires not only human precision, expensive facilities and sterile reagents, but most importantly, the money to maintain everything in exactly this pristine sterile condition (many, many zeros in any currency).

Thirdly, knowledge of cellular morphology and function is also very important. No one I know would like to risk having cells injected into the heart forming liver or kidney tissue instead. This means identifying the cells and providing the assurance that the cells are indeed stem cells and nothing else.

Hence, any organization, private or public has to be prepared to have deep pockets and a lot of patience when venturing into this technology.


HOW DEEP ARE YOUR POCKETS?

I've been following Viacell's (VIAC) progress in this area for some time, not only because they were one of the first stem cell companies to announce their sincere interest and demonstrate their financial committment in this area, but also because I was kindly shown around their big and beautiful facilities two years ago in Boston.

It is unfortunate therefore to see this press release by Viacell on their decision to terminate the cord blood stem cell expansion project CB001 despite its apparent reported success but on the grounds that the process and product was unaffordable and commercially inviable due to other alternatives.

"What's the alternative?" I hear you ask. The reason why Viacell made the tough commercial decision to cut their losses was that the preferred methodology by transplanters in the US is a dual cord stem cell transplant (using 2 cord blood stem cell units instead of just 1). The results of the expanded product were as good as and in some ways slightly better in the initial trial, but I suspect that the cost did not justify only small improved outcomes. I would say that it was a wise commercial decision by Viacell, and an acknowledgement that what scientists dream and love to do, is not always feasible for clinical practice.

I learned this a long time ago when I was still in research, that what looks good on paper does not necessarily transform into a money spinner despite the winning ideas and long hours of toil.


A GOOD CEO KNOWS WHEN TO QUIT

By cutting the budget for this research and focusing on service improvements, Viacell expects to finally achieve profitability in 2008 for the first time since their listing a few years ago (this is probably also true of many of the other cord blood banks which have committed much of their funding to very costly research, sacrificing their bottom line).


"Given these results and the shift in the treatment paradigm in transplant medicine from single cord to two cord transplants, ViaCell has made the decision not to advance CB001 in future clinical trials. As a result of the reduced clinical and development costs related to CB001, along with anticipated continued growth in its operating business, ViaCell expects to become cash flow positive in the first half of 2008."


Now, Viacell intend to focus on cord blood stem cells for cardiac applications, which I think is probably more interesting and may pose less life-threatening consequences for patients.


"We are committed to continuing to grow our operating business, advancing ViaCyte(SM) through a pivotal clinical trial, which, if successfully developed, will leverage our sales and marketing infrastructure, and working to advance our cord blood-derived cardiac program," said Mr. Beer. "We are already generating cash flow within our ViaCord business and we anticipate continued growth in 2007. As a result, given our reduction in clinical and development costs related to CB001, we expect ViaCord's contributions to the overall operation will allow us to turn cash flow positive in the first half of 2008."


So if you are specifically told by any stem cell company that stem cell expansion technology is available today, they aren't lying, but don't forget to ASK them whether:

1. Your unit baby's cord blood unit has sufficient stem cells to be expanded,

2. Who's offering the service (full due diligence here) and how successful the treatments outcomes have been and what assurances they provide otherwise;

3. And, specifically at what cost.


STEMLIFE BELIEVES IN CHOICES

The way I read the cord blood stem cell tea leaves, if you banked a unit of stem cells and it is not enough, seek other matching units to combine with your own or consider joining StemLife's adult stem cell banking program.

We believe in continually providing affordable and accessible options to our clients... and making stem cell banking a more than once in a lifetime opportunity. :)



*We do not turn away clients who express their wish to proceed but provide them with a cautious advisory to indicate if the stem cell counts are below what we would normally expect. StemLife also provides a full refund for those clients who decide not to proceed to store, and we usually ask them to let us know when they'll be having the next baby (success second time round).

StemLife has a joint research project with the National University of Singapore at very initial stages which differs from Viacell's approach, you can read more about it here.