German stem cell law change won’t affect VC behaviour

After a long and agonising debate the Parliament voted to allow German scientists access to embryonic stem cell lines from overseas sources created up to 1 May, 2007, instead of the current cut-off point of 1 January 2002.

Delegates chose the most moderate of all the alternatives on offer: they declined to take the more radical step advocated by the Free Democratic Party of removing all restrictions on stem cell research, but resisted the CDU/CSU’s call to forbid stem cell research altogether.

So while the law forbidding scientists from using domestic human embryos still stands, they will have the opportunity to carry out research on the significant number of embryonic stem cell lines derived elsewhere in the world between 2002 and 2007. During that time, for example, the UK set up a national stem cell bank, which currently holds eight human embryonic stem cell lines that researchers in any country can apply to use.

VCs cautious

While eyeing the ruling with interest, German VCs say they don’t see a huge immediate impact on their business, however.  

“I don’t think it will influence us much,” says Christian Schneider, of FiveLakes Venture Partners, the biotech spin-out fund of Munich-based PolyTechnos Ventures. Schneider says stem cells from embryonic sources are so controversial that his firm avoids them. He believes that enough alternatives have developed in the meantime.  “There are more and more technologies out there that create stem cells without embryos,” he says.

For example, FiveLakes expects to invest shortly in a US company that has developed a product enabling doctors generate adult stem cells more rapidly. These could be used in liver transplants or for skin grafts.

Schneider said, however, that VCs are hard-pressed to find stem cell-based research companies today able to reap profits any time soon.

Axel Polack, of TVM Capital in Munich, agrees. “We don’t view any of the embryonic stem cell approaches out there as being mature enough for commercialisation,” he says. With the controversy surrounding stem cells so prevalent in the Western world, he expects more advances, when they do arise, to come out of Asia.

Research implications

Nonetheless, the change in the law is positive for the competitiveness of German researchers. The German Research Foundation (DFG), the government-owned organisation that promotes research at universities and other publicly-financed research institutions, greeted the change. “This is a good and important step forward for science in Germany and for German stem cell researchers,” the Foundation said in a statement.

In particular, it welcomed the decriminalisation of German researchers who chose to carry out human embryonic stem cell research overseas. Under the previous law they faced possible imprisonment – something of a deterrent for young researchers that wanted to study abroad.  

“German scientists should not be treated differently from their colleagues in Sweden or Scotland,” agrees Rainer Strohmenger, managing director with the biotech team at Wellington Partners in Munich. “Otherwise relevant research, inventions and creation of companies will happen somewhere else. And no investor will fund a company doing research which is at risk being regarded illegal.”  

The DFG has long been urging that the law be liberalised, arguing that German researchers were only being given access to inferior products, making it impossible for them to compete in this field. According to the Foundation, up to 40 percent of stem cell research in progress currently uses newer stem cell lines.

German researchers have also been banned from taking part in EU projects such as the European Research Council’s stem cell research programme, and the country was unable to attract top stem cell researchers from abroad due to its draconian laws.

Researchers told the Parliament that far fewer stem cell projects are taking place in Germany than elsewhere. Only 29 such projects have been approved since 2002, far below the level in other countries, according to the Central Ethics Committee for Stem Cell Research, part of the government-owned Robert Koch Institute, whose job it is to review all proposals for the import and use of human embryo stem cells in Germany.  

And while it is true that important advances are being made in developing stem cell lines without using embryos, DFG-Vice president Professor Jörg Hinrich-Hacker argues they are still needed for basic research. New applications, such as the reprogramming of skin cells into stem cells, for example, still require embryonic stem cells as a basis with which to compare the cells.   

Human embryonic stem cell research is of course controversial in many countries, as harvesting the cells destroy the embryo. In Germany, religious leaders and others have argued that allowing such research violates the Embryo Protection Law, which means there is little likelihood all restrictions on such research will be lifted.

Still, researchers would have preferred that the law be removed altogether. Creating an arbitrary cut off for what is a legal, and what is an illegal, human embryonic stem cell, is merely postponing the discussion for several years, they say.