Edinburgh University stem cell spin-out sold in knock down deal

Acquisition

Stem Cell Sciences plc was snapped up by Nasdaq-quoted StemCells Inc in a deal valuing the UK’s oldest company in the field at $4.85 million. The payment consists of waiving a $715,000 loan and the issue of 2.65 million StemCells Inc shares. In a very unfortunate bit of timing, the headline value of the deal, based on the $1.56 closing price of StemCells’ shares on 27 February, was reduced in value by $1 million following Monday’s sharp fall in the markets.

Alistair Riddell, CEO of Stem Cell Sciences, said the deal should be viewed from the perspective that Stem Cell Sciences has no money and couldn’t raise any more from its bank or its shareholders. “We couldn’t get working capital. Given that the alternatives were to go into administration in which case the company is wound up and people lose their jobs, or finding a trade buyer and selling the company as a going concern, this has to be a good outcome.”

Riddell has been involved in the UK biotech sector for more than two decades, raising a total of £150 million for the companies he worked for. Times have never been leaner, he says, “This is the worst 18 months I can remember in 25 years. We have top management, experienced staff, good IP and good products, but it was impossible to raise more cash.”

The board of the Cambridge-based Stem Cell Sciences and owners of over 30 per cent of the shares have agreed to the deal, which gives StemCells Inc ownership of one of the most significant intellectual property portfolios in this field of research. The 20-plus patent families cover embryonic stem cells, induced pluripotent stem cells and adult stem cells.

Stem Cell Sciences has attempted to commercialise this research through the development of drug discovery services, and the intellectual property comes along with expertise and infrastructure for discovery and screening, including automated robotic production and manipulation of stem and progenitor cells, and a range of cell free-media and reagents.

The company has existing business and licensing deals with companies including Pfizer, Merck, Millipore, and others.

Stem Cells Sciences was founded in 1994 to commercialize work carried out at Edinburgh University by founding CEO Peter Mountford and Austin Smith. The two were the inventors on the infamous Edinburgh patent, relating to methods of selecting and isolating stem cells, which was contested in Europe for 14 years.

Mountford initially ran Stem Cell Sciences as a virtual company, but in 2003 established its headquarters in Edinburgh. After raising £10 million from government grants and private investors, Stem Cell Sciences listed on London’s Alternative investment Market in July 2005, raising £6 million.

A second listing was added in April 2007 when the company joined the Australian Stock Exchange raising AS$12 million (approximately £5.2 million at November 2007 exchange rates) in an oversubscribed offering. Not long after, in November 2007, Mountford left to return to his native Australia, and the company, under Riddell, moved its headquarters to Cambridge.

Stem Cell Sciences always had ambitions to develop stem cells as therapies, but never had the resources to do so. Another of the UK’s embryonic stem cell specialists, Sheffield University spin-out Axordia was also acquired recently, by tissue therapy specialist Intercytex plc. The fate of Axordia’s technology is now in doubt after the failure of Intercytex’s lead product forced the company to consider its options.