Further Update on BTIM's new deal. Market has problems with Greece.

May 5 – SM

BioTime Acquires Important Asian SC Com -- Plus, Patent Ruling Changes Stem Cell Landscape... Again

Dear Breakthrough Technology Reader,

Last week, I said that I intended to cover the macro picture a bit in my next issue if events did not intervene. Specifically, I wanted to tell you why I expect dramatic tumult in the stock market to continue. Additionally, I planned to explain again why transformational, disruptive technologies are the surest way to exploit the confusion and avoid the consequences of the ongoing stupidity at the heart of this mess.

To this end, my colleague Ray Blanco and I arranged a private videoconference seminar with one of the best economists working today, Jeff Scott of Cognilytics. It was an extremely interesting discussion that yielded new insights into the role that technological change played in the housing crisis that, in turn, led to the implosion of the global financial system. More accurately, it was the inability of the financial elite to recognize and accept that technological change, but I'll have to tell you about it another time.

Events have, in fact, intervened. Another patent ruling has shaken the stem cell industry. This ruling, of course, is close on the heels of the court decision that just overturned patents on human genes. That decision is not final yet and may end up in the Supreme Court. It could, however, overturn the important telomerase gene patent owned by Geron Corp. (NASDAQ: GERN).

The ruling I'm going to discuss today could also impact Geron's IP library and its future. Specifically, on April 28, 2010, the U.S. Patent and Trademark Office effectively voided U.S. Patent No. 7,029,913, owned by scientific IP powerhouse the Wisconsin Alumni Research Foundation (WARF). The decision reversed an earlier determination by a USPTO examiner and, like the gene patent decision, will almost certainly be appealed.

The patent in question broadly covers the use of human embryonic stem cells. It was issued on April 18, 2006, and set to expire in 2016. The point, however, is that Geron bought exclusive rights to the eSC patent from WARF. This is why Geron's own press release simultaneously plays down the ruling and emphasizes that it may be reestablished in review.

I'm not saying, however, that the company's IP is completely unprotected without patent 7,029,913. This broad central eSC patent has been bolstered by many other patents. These are known as “picket fence” patents that cover various details of the implementation of the major patent.

Even without Patent No. 7,029,913, Geron has significant patent protections regarding use of eSCs and probably, more importantly, induced pluripotent SCs. Its press release, in fact, points out that “For example, we hold method patents covering processes used to produce differentiated, functional cells, and composition patents that cover the differentiated cells themselves. Our patent portfolio is substantial today, and it will continue to grow in parallel with our technical development work, providing Geron with long-term protection for our stem cell products.”

This is a typical biotech IP strategy. First you go for the broad patent based on the big idea. Then you bolster it with as many method or “picket fence” patents as possible. Then, if the broad concept patent doesn't stand, you can still protect your technology with myriad patents on specific techniques developed by the company to exploit the larger concept.

So I'm not yet giving the sell signal on Geron. Besides these “picket fence” patents that impact critically important induced pluripotent stem cells, many legal analysts expect that it will win its appeal and maintain ownership of the telomerase gene. On the other hand, I do want to tell you why the ruling against WARF could be extremely good news for BioTime Inc. (AMEX: BTIM).

BioTime Acquires ES Cell International Pte Ltd.

ES Cell International is an important stem cell company, based in Singapore, and its acquisition by BioTime is a big deal. The company holds significant stem cell IP applicable both in the U.S. and elsewhere. The ES Cell scientific team is among the very best in the world and they are world leaders in current Good Manufacturing Practice (cGMP) stem cell production. The importance of cGMP is that it is required by various regulatory agencies for any products used in human therapies. This is true both in the United States and anywhere else in the world where you would want to undergo clinical procedures.

Remember, BioTime Asia was launched in large part to accelerate the company's research and development of SC therapies. The reason is that Asia is playing catch-up to the American medical industries. Whereas our FDA often acts to protect established pharma interests, Asian authorities are consciously attempting to establish new medical industries to compete with American companies and technologies.  

As I explained some time ago, BioTime's presence in China is enormously meaningful because CEO Dr. Michael West has formed an alliance with Asia's leader in the use of stem cells for bone marrow transplants. Bone marrow transplants, as you know, are used to reboot the immune system. Currently, however, the trauma of rebuilding bone marrow from the patient's own blood stem cells ages the immune system by about 10 years. (We can measure the effects of the procedure, by the way, by counting lost telomeres in immune system cells.)

West, however, proved recently in a peer-reviewed journal article that he can take a donor's cell and rejuvenate it to youthful status. Simultaneously, he has made enormous progress on programming stem cells to become immune system cells. This means that an immune system reboot would give the recipient the immunological potency of a healthy child. He has also stated publicly that he continues to target the cardiovascular system for reboot. When these two therapies arrive, almost certainly through his Asian subsidiaries first, it will deliver a dramatic increase in healthy life spans.

However, there is another impact of ES Cell International. It is due to the fact that ES Cell holds over 49% of the shares of Cell Cure Neurosciences Ltd. This is an important Israel-based biotech that has a cross-licensing agreement with Geron.

This means that if WARF's challenge to the patent ruling fails, BioTime wins big because it will have rights to important Geron “picket fence” patents. The cross-licensing, by the way, specifically covers neurological cells. While our recent pick Neuralstem (AMEX: CRU) is the clear leader in the use of these cells in the U.S., BioTime may win the race in Asia. This is why we have a portfolio of stem cell stocks.

Incidentally, I think I know why the day traders were lying in wait for a Neuralstem spike. Last week, CNN's Sanjay Gupta highlighted the company. I'll have more on that later. I've taken enough of your time today.

For transformation profits,

Patrick Cox