Is Big Pharma tiptoeing into embryonic stem cells?

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Encapsulated islet cellsFor what appears to be the first time, a major drug company has plunked down a significant equity investment in embryonic stem cells.

Earlier today, VentureWire reported (sub required) that Novocell, an early-stage San Diego biotech that aims to treat diabetes with the embryonic cells, is hoping to raise $35 million in a third round of funding. The interesting thing, however, isn’t so much the money as the identity of the lead investor: Johnson & Johnson Development Corp., the venture arm of pharmaceutical giant J&J.

The news grabbed my attention because to date, Big Pharma has shown relatively little interest in the smaller biotechs working on embryonic stem-cell therapeutics, with the standard explanation that the field is too young and in need of some solid clinical success before the big guys can get involved. Political controversy over the destruction of embryos — necessary to derive the stem cells — probably also inclines the naturally cautious pharmas to move even more carefully. (Novacell intends to make new insulin-producing islet cells from embryonic cells, then transplant them into diabetics.)

Here are some snippets from the VentureWire piece:

The funding, which the company revealed in a Form D filing with the Securities and Exchange commission, came into the company last month. Johnson & Johnson Development Corp. led the funding, alongside the participation of Asset Management Partners and Sanderling Venture Partners. […]

The investment from Johnson & Johnson’s venture capital arm brings the company on as a strategic investor, [Novocell Chief Executive Alan] Lewis said, giving them “a major ownership in the company.”

As it turns out, I’m not aware of any other Big Pharma equity investment or development partnership involving embryonic stem cells. Jennifer Van Brunt, a biotech-data maven and editor of Recombinant Capital‘s Signals Magazine, says her databases don’t show any, either. The only remotely similar deal I was able to turn up after some searching was another J&J venture investment in Tengion, a Pennsylvania biotech that wants to grow new organs such as bladders. Tengion’s technology, however, would use a patient’s own stem cells, not ones derived from embryos.

Stem-cell proponents have long complained that Big Pharma and venture capitalists alike have failed to step up to the plate with support for embryonic stem-cell work, effectively slowing scientific and commercial progress in the field. If J&J’s investment is a sign that regenerative medicine is quickening pulses in at the big drug companies, things could get interesting.

Unfortunately, that’s mostly just speculation at this point. A J&J spokesman confirmed the investment, which is part of $20 million Novocell has raised so far in this round, but had no comment about the company’s strategic plans. If anyone knows of other pharmas who have dipped their toes into the embryonic stem-cell field in a similar fashion, I’m all ears. Tell us about it in comments and I’ll update as necessary.

[Editor’s note: David Hamilton is a contributing author on VentureBeat. If you have a biotech story tip for him, let us know via the “story tip” link above.]