Alan Lewis is president of Signal Research, whose researchers are studying stem cells, primarily from placenta and umbilical cord blood, which show promise for treatment of heart disease, sickle cell anemia, wounds and other ailments. (photo/alandeckerphoto.com)

The frustration that Sophia Khaldoyanidi felt as a pediatrician in her native Russia as she watched children suffer from leukemia was a catalyst — Khaldoyanidi went back to school and earned a research degree, stepping from the clinic into the lab.

Today, Khaldoyanidi is a researcher at the La Jolla Institute for Molecular Medicine, where she seeks to patent a technique that could one day help patients recover more quickly from the side effects of cancer treatment. Her research focuses on hematopoietic stem cells, which are found in the blood and bone marrow and can generate new blood cells. “It’s very exciting to see something you’ve developed in the hood, on the bench, be useful,” Khaldoyanidi says, referring to the equipment in the La Jolla lab where she and her associates have spent hours bent over beakers and microscopes as they test her theories on mouse cells.

Khaldoyanidi has partnered with Howard Birndorf, chief executive and chair of Nanogen Inc., and a well-known figure in San Diego’s biotech community, to launch a start-up called HA Cell Technology, which she hopes one day can turn her discovery into a commercial product.

Partnerships between scientists and entrepreneurs are common in San Diego, which has an abundance of high-profile research institutions and biotech companies. The pace of such activity is sure to accelerate with the rollout of Prop. 71, an initiative approved by California voters last fall that will provide up to $300 million per year for the next 10 years for basic research into embryonic and adult stem cells.

Synergy between scientists and entrepreneurs is a must if stem cells’ promise of providing cures or treatments for diseases such as Alzheimer’s, Parkinson’s, Lou Gehrig’s, diabetes and spinal cord injuries is to be realized, says Duane Roth, executive director of UCSD Connect, which brings researchers, investors and business executives together.

“Profits fuel this whole thing,” says Roth. “Without it, we’re doomed. You want to cure a disease? Make it profitable.” Roth came to his current position after serving as CEO of Alliance Pharmaceuticals, where he helped develop drugs to make blood transfusions safer.

As scientists increase their understanding of how stem cells work and how to control them, business executives are trying to figure out how they can profit from this emerging field of research.

“The question many of us have is, ‘What is the business of stem cells?’” asks Alan Lewis, president of San Diego-based Signal Research, a division of Celgene Corp.

Lewis’ company, which has 78,000 square feet of laboratory and office space in UTC, develops small-molecule drugs to treat cancer and inflammation. Signal’s researchers also are studying stem cells, primarily from placenta and umbilical cord blood, which show promise for treatment of heart disease, sickle cell anemia, wounds and other ailments.

Duane Roth, executive director of UCSD Connect, says entrepreneurs and scientists must work together to realize the benefits of stem cell research. (photo/alandeckerphoto.com)

Signal’s researchers are studying such topics as how many stem cells are needed for a “dose” of treatment and how to create more stem cells for research and treatment. Signal might one day create a bank of stem cells for use in different kinds of treatments, or patent techniques to produce stem cells in the lab.

While Signal has no specific plans for delving into research on embryonic stem cells, Lewis says he and his colleagues do want to submit grants for funding under Prop. 71, which will favor projects involving embryonic cells. He says internal discussions about how to approach such projects are taking place within the company.

As researchers gear up to take advantage of the new source of funding offered by Prop. 71, investors are watching carefully to determine where and when their money can help turn scientific discoveries into groundbreaking — and profitable — therapies.

Drew Senyei, managing director of Enterprise Partners, a La Jolla-based venture capital firm, says his firm is monitoring developments in the field of stem cell research, but has not yet put money into a stem cell business venture.

“I would say we’re at the beginning of the beginning,” says Senyei, an M.D. who specializes in building life sciences companies. “We have not found anything yet that says we are ready to make that investment. However, we are looking diligently at all opportunities that come before us.”

There’s little doubt that stem cells hold “tremendous potential,” Senyei says. But there are many unanswered questions, ranging from debate over the ethics of using embryonic stem cells to the types of regulations that the U.S. Food and Drug Administration will impose on clinical trials and therapies using stem cells.

Senyei says his firm uses the funds of institutional investors such as pension funds and university endowments that want to put a portion of their money into high-risk, high-return investments. The money is used to launch companies that are overseen by Enterprise Partners.

The investment firm looks for “world-class” scientific talent, and then provides management expertise and capital to get those ventures off the ground, moving, Senyei says, from “the bench to the bedside.”

When it comes to stem cells, he says, timing is everything. Too soon, and the technology may not be quite ready. Too late, and the start-up may face competition. “You have to time the rapids of technological innovation very carefully, so you can navigate to a successful outcome,” he says.

Sophia Khaldoyanidi, a researcher at the La Jolla Institute for Molecular Medicine, is seeking to patent a technique that could help patients recover more quickly from the side effects of cancer treatment. (photo/alandeckerphoto.com)

Once stem cell therapies reach the stage of clinical trials, their cost will have to be weighed against the potential benefit they offer, much like any other treatment or drug. “I think it’s healthy to have a debate about the potential, the ethics, the cost-benefits,” says Senyei. “The only way to answer these questions is by scientific inquiry and research.”

Ed Holmes, dean of UC San Diego’s medical school, is one of five San Diegans appointed to the Independent Citizens Oversight Committee, a 29-member panel that will decide which research projects get Prop. 71 funding.

Holmes is optimistic that stem cell research will provide relief for those suffering from many different disorders. But he cautions that it will take time for the seeds of scientific knowledge to bear fruit. “There is tremendous potential in this field of stem cells, but we’re not there yet,” he says offering a scenario in which scientists take the nucleus of a cell from a person with Alzheimer’s or Lou Gehrig’s disease and implant it into a human egg cell, creating an embryonic stem cell with the exact DNA and disease characteristics of the patient.

The process is called “somatic nuclear transfer,” and has been tested with animal cells. If the theory holds out for humans, says Holmes, it would provide a radically new improvement in the study of disease in the laboratory, allowing scientists to test different drugs to see which might slow down or reverse the course of the disease.

That’s where Prop. 71 comes in, says Holmes. The measure’s money will increase availability of embryonic stem cells lines for researchers, which have been restricted under federal funding guidelines.

Applications for Prop. 71 funding first will be scrutinized by stem cell experts to make sure the proposed research projects are scientifically sound, says Holmes, and then the ICOC will make the final funding decisions. He says if there were two projects of equal merit, and one had the potential to move more quickly to the clinic, “people would pay attention to that.” But he says his priority will be funding projects that promise the highest-quality scientific research.

Some of the funding should “go to understanding the basic biology of these cells,” Holmes says, helping scientists understand how to control the cells and direct them to transform into various other types of cells in the human body.

Embryonic stem cells are formed about five to seven days after a human egg is fertilized. The embryonic cells develop into different types of adult stem cells, which in turn can become more specialized cells, such as those found in blood, the brain and other parts of the body.

The use of adult stem cells — such as the hematopoietic cells or neural stem cells found in the brain — is non-controversial, while debate has swirled around the use of embryonic stem cells because of the belief their use in research destroys a potential human life.

Prop. 71 put California at the bull’s-eye of the debate. Khaldoyanidi, the La Jolla researcher, says she is in contact with colleagues around the globe who watched the campaign for Prop. 71, and now keep tabs on the proposition’s rollout.

“Everybody knows about California, everybody talks about California because Prop. 71 passed,” she says, recounting congratulatory e-mails she has received from the East Coast, Russia and Europe.

Roth, of UCSD Connect, and other experts predict that the first gains from stem cell research will come from the use of stem cells to create human disease models that can be used to test traditional drugs and therapies. After that, scientists may come up with ways to regenerate organs by injecting stem cells into the body, from regenerating heart muscle in those who have had heart attacks, to creating brain cells to replace cells that have died from such diseases as Lou Gehrig’s or Alzheimer’s.

Roth describes the process of turning lab discoveries into new treatments as a pyramid with basic research at the bottom, ideas and trials in the middle, and new therapies at the top. Right now, he says, scientists are at the bottom blocks of the pyramid, the level that will be funded by Prop. 71. Private investors will come in at the next two levels, to leverage scientific knowledge into commercial products, he says.

Creating new treatments is very costly, he says, because of the high failure rate — bringing a new drug to the market can cost up to $1 billion, including the cost of the drugs that didn’t make the cut.

“That’s why the one that works has to be very successful,” Roth says. “Otherwise, people would stop putting their money in.”

Prop. 71’s high-profile campaign and the launch of its oversight agency, the California Institute for Regenerative Medicine, have put the spotlight on both the research and biotech communities, and created pressure for the research to show results.

Larry Goldstein, a researcher at UCSD who is focusing on both Alzheimer’s and Lou Gehrig’s disease, was part of a group of advocates around the state who drafted the language for Prop. 71. He says he is still amazed and awed by the proposition’s passage. The law is important, he says, because it opens the door for funding of research involving embryonic stem cells, which are crucial to his research.

His work on Lou Gehrig’s disease, in which cells die that control movement and breathing, would involve the injection of stem cells into the patient’s spinal cord to slow down the progression of the disease. For his Alzheimer’s work, Goldstein says, he would use embryonic stem cells to generate human disease models to test drugs to fight the disease.

He compared the Alzheimer’s research to the investigation of a jet crash. “For Alzheimer’s disease, we’re looking for the black box and these cells help us find it,” he says.

Scientists must continue studying both adult and embryonic stem cells, says Goldstein, although his own research is geared toward embryonic cells, work that he says is “necessary, ethical and appropriate.”

“If what society wants is for us to make progress as rapidly as possible? then, yes, we need all available tools that are reasonable and ethical,” Goldstein says.

Goldstein will apply for Prop. 71 funding, he says. While gratified by the proposition’s passage, he says, with it comes a daunting sense of responsibility. “Now it’s up to us (scientists). We’ve got to do the work, have good ideas and execute. Both are hard,” he says, but he feels confident that progress will come. “If we’re fortunate and things go well, we hope to be able to help some of the people that have these diseases now.”