4 examples of how pharma hopes to save big using stem cells to test drugs for dangerous side effects long before costly human trials are needed

Discovering late in the game that a promising new drug has side effects in humans is a frustrating and expensive pitfall for pharmaceutical companies.  That kind of setback sends scientists back to the lab—or even prompts a company to shut down a multimillion-dollar drug development program.

Researchers at many companies – big and small – hope to use human tissue created from stem cells to reduce such mishaps, according to BusinessWeek.

For years, stem cells have been hailed as potential treatments for Parkinson's disease, spinal cord injuries, and diabetes. Even though these may be years away, pharma has begun using the cells to help identify potentially dangerous side effects of drugs in development before they undergo expensive human trials.

(The stem cells being employed by drugmakers don't come from embryos, thereby avoiding an ethical and political controversy that's dogged the technology. Instead they were created using a method that allows scientists to transform ordinary skin cells into another type of stem cell known as induced pluripotent stem, or IPS, cells as versatile as embryonic cells.)

Here are four views of company approaches to R&D with stem cells:

1. Roche

Earlier this year, Roche scientists used heart tissue made from stem cells to test an antiviral drug it had abandoned two years earlier because it caused irregular heartbeats in rodents and rabbits. The same adverse effects were seen in the lab using the stem cell-generated heart cells. The finding is important to drug researchers because it showed that human tissue grown from stem cells can mimic the body's reaction to medicines, helping spot side effects early. And that matters greatly in an industry that can spend upward of $4 billion to produce a new drug. Had stem-cell-derived heart tissue been available two years ago, Roche could have pulled the plug earlier on its antiviral drug, saving millions, says Kyle Kolaja, Roche's global head of predictive toxicology screens and emerging technologies.

2. iPierian

A drug study in mice alone can cost about $3 million, says Michael C. Venuti, chief executive officer at iPierian, which is developing drugs using stem cells. iPierian is making cells from people with heart disorders, diabetes, and neurological ailments to develop drugs that threat these disorders. Founded by venture capitalists at Kleiner Perkins Caufield & Byers in Menlo Park, Calif., the company was built on the work of Shinya Yamanaka of Kyoto University in Japan, who turned skin cells into IPS cells back in 2006. It has since raised $60 million including money most recently from the venture arms of Google, Glaxo, and Biogen Idec. IPierian has made IPS cells from the skin of children with spinal muscular atrophy, a deadly muscle-wasting condition. Morphing the stem cells into neurons that carry the disease, they've identified drug candidates that may help motor neurons to survive, said Venuti, iPierian's CEO. The company also used the neurons to test 15 drugs that previously failed in clinical trials, said Corey Goodman, iPierian's chairman. The signs of failure were evident in each case, he said. "IPS technology gives you the opportunity to screen out a lot of things that are going to fail," said Goodman, who formerly was head of Pfizer's biotechnology unit. "That saves money, emotion, and testing."

3. Glaxo

A drug that's found to cause cardiac damage only after it has advanced to large, late-stage human studies might cost a company $1 billion or more, says Jason Gardner, a Glaxo vice-president who heads its stem cell drug performance unit. "There is a real need to more accurately model human physiology," he says.

4. Cellular Dynamics International

This company was founded in 2004 by James Thomson, the University of Wisconsin scientist who first isolated human embryonic stem cells in 1998, made the heart cells used by Roche and also being tested by Glaxo and Pfizer. Cellular Dynamics International is now producing more than 7 billion heart cells a month made from skin and blood, says Robert Palay, CDI's chief executive. Next year, the company plans to start selling liver and nerve cells as well. "Others are talking about the promise of stem cells, we are delivering today," Palay says. Cellular Dynamics is backed by $70 million from private equity groups including Sam Zell's Equity Group Investments and Palay's Tactics II Stem Cell Partners.