Regenerative medicine sector needs more financial support from private investors

One of the most important and innovative pharmaceutical companies in Asia has its headquarters in a busy neighborhood of Seoul, nestled between insurance companies and banks, and not far from Seoul National University.

Medipost Co Ltd, launched in 2000 to research and develop stem cell and regenerative medicine products, has emerged as a leader in the space, both regionally and globally. It took a dozen years for the company to launch its first product commercially: Cartistem used to treat repair cartilages in the knee.

Between its founding and its first product launch, Medipost issued new shares six times and split its stock once. It generated some further revenue, mostly by storing umbilical cord blood, using the blood to transplant stem cells, and later by out-licensing products.

But that income was tiny compared to the cost of developing its drugs. Improbably, it managed to attract enough investors to keep going and growing.

That investment is now starting to pay off. Cartistem is just one of three stem cell products approved for sale in South Korea, and Medipost might be the only public company in the country with global ambitions.

"There are not many companies that can deal with global development in the pharmerging market," said Jay Lee, a senior director at Medipost, speaking at a conference in South Korea last month.

The "pharmerging" markets are the emerging markets for pharmaceutical products. China is possibly the biggest, but there are quite a few of them in the region including South Korea and much of the Association of Southeast Asian Nations.

Even Japan, despite its large economy, is considered an emerging market in some ways because it is often years before drugs developed elsewhere make their way down to patients there due to conservative regulations.

But much is changing in the region, particularly in South Korea and Japan. Both countries are embracing often-controversial research into regenerative medicine, including stem cells.

"There is an exceptional example of a new approach in Japan. They are looking very much, as in South Korea, to develop the stem cell space," says Dianne Jackson-Matthews, an Australia-based director at ERA Consulting Group.

For the time being, government support is driving the growth of this particular industry. Private or institutional investors are not yet convinced that taking a risk on a company developing a drug using science few people understand is worthwhile.

"The institutional investor base in Asia is not very comfortable with biotechnology," says Nam Chul Park, head of Asia-Pacific healthcare research with HSBC. He explains that in South Korean companies, institutional investors account for about 2 percent, a figure that he believes should be at least 20 percent.

"(South) Korean biotech has had a lot of government support and government support is important," Park says.

Globally, the top 15 regenerative medicine products were worth an estimated $1 billion last year, four times more than in 2006. All but one of them are for skin, wound, bone or cartilage repair, like Medipost's product.

In the United States, the first regenerative medicine product hit the market in 1998. By 2011, they had been used to treat 500,000 patients.

But even as the science gets better and more interesting - even making it possible to tackle illnesses like Alzheimer's disease - investors remain wary.

"Investors don't understand the space. They think the cost of goods is too high," says Robert Preti, president and chief scientific officer at PCT Co Ltd, a US company that provides cell therapy services.

Preti is also a member of the executive committee of the Alliance for Regenerative Medicine, which lobbies for reform and tracks the space globally.

And the costs can be high. There are only a handful of regenerative medicine products on the market today. South Korea, which has taken a lead, has just three on the market.

Companies in this area spend years researching drugs, getting them through regulatory approvals and trying to get them to market. All this time, they have not a single bit of revenue coming in.

This is not uncommon in drug development. On average, just one in 10 drugs under development ever makes it to market. The cost of developing a single drug, including putting it through the various trials, could be upward of $1 billion.

To date, only a handful of countries have some kind of funding or regulatory framework for regenerative medicine and Japan, South Korea and Australia are among them.

South Korea, as most other places in Asia, is looking for ways to deal with the rising cost of healthcare. And the biologic drugs that facilitate regenerative medicines, such as stem cell products, have great promise. Biologic drugs are made from biological sources, as opposed to chemically synthesized products.

South Korea spent 7.4 percent of its GDP in 2012 on healthcare, up from 7.1 percent a year earlier and 5 percent a decade ago.

By 2045, South Korea will have the oldest working-age population in the world.

Something similar is happening in most other countries in the region. Population across much of East Asia - China, Japan and some places in ASEAN - is aging and as they age, the healthcare costs go up.

Degenerative diseases like Alzheimer's are much more common among the elderly. So are heart disease, strokes and osteoporosis, to name a few. Treating them is often difficult, if not impossible, and it is always expensive.

Regenerative medicine could help cut down on these costs.

The idea behind regenerative medicine is to replace or regenerate cells, tissue or organs that have been damaged.

In theory, regenerative medicine could someday allow patients to "grow" a new kidney or replace damaged brain cells, treat spinal cord injuries, arterial disease, Parkinson's disease and more.

But despite the vast unexplored potential that regenerative medicine holds, research into the space has long been limited and investment almost impossible to find.

The term "regenerative medicine" itself is just two decades old. Political and ethical issues have combined to create something of a movement, particularly in the US and Europe , against some areas of this type of medicine.

Fears of cloning and concerns over the ethics of using embryonic stem cells have often overshadowed the potential benefits.