Fame-courting biotech running short of cash

For the past decade, Advanced Cell Technology Inc. has claimed one spectacular success after another.

The Worcester biotech firm said it was the first to clone an endangered species, an Asian bovine. Executives said they pioneered research that could one day be used to reverse the aging process and grow replacement body parts. And ACT said it cloned the first human embryo, a discovery that sparked headlines worldwide.

But all the publicity likely backfired. Former chief executive Michael West was compared in news reports to famed circus promoter P.T. Barnum. Some scientists said some of ACT's claims were overstated. And a former ACT executive said the company's work in controversial areas such as stem cell research and cloning scared away pharmaceutical firms and life sciences investors that traditionally fund young promising biotech companies.

Now, ACT could be on the verge of shutting down. In a Securities and Exchange Commission filing Tuesday, the company warned that it doesn't have cash to continue operating after July 31 without raising additional money or drastically slashing operations. It reported $17 million in current liabilities, but only $1 million in cash and other current assets, an indication it could be forced to file for bankruptcy protection. And ACT's stock, which was as high as $8 per share three years ago, closed yesterday at 2.5 cents a share.

"They may have had some useful technologies, but people in the biotech community have learned not to make wild claims," said Una Ryan, a veteran biotech executive and former chairwoman of the Massachusetts Biotechnology Council. "People want to know you are not just full of fluff and that you are going to deliver."

Much of the criticism has been aimed at former chief executive West, a veteran biotech executive who became CEO in 1998 and soon made bold statements about how the company's research could potentially address a wide range of problems from aging to growing organs for transplants.

West was also very public - profiled in several publications and coauthoring an eight-page spread on the "First Human Clone" in Scientific American. In 2003, he wrote a book, "The Immortal Cell: One Scientist's Quest to Solve the Mystery of Human Aging." West, though, said he doesn't think he overstated any of the company's work.

"I have indeed heard that criticism of me, but think it's flat wrong," he said.

To be sure, it's never been easy to turn a profit in biotech. The Tufts Center for the Study of Drug Development in Boston estimates it takes an average of $1.2 billion to develop a drug. Typically, much of that funding has come from pharmaceutical firms such as Pfizer and Novartis, which are hoping to find the next blockbuster medicine to fill their pipelines.

But ACT has been dogged by complaints that it over-hyped its research, which may have hurt its ability to sign deals with drug companies and attract investors.

One of its most high profile claims came in late 2000, when ACT said it was the first biotechnology firm to clone an endangered species, creating a gaur named Noah at an Iowa research center. Gaurs, which come from southeast Asia, look like a cross between a common domestic cow and a water buffalo. And ACT said it had an agreement with the Spanish government to clone an extinct Spanish mountain goat called the burcardo, using cells taken from a dead animal, like something from the film "Jurassic Park." But the gaur died two days after birth from an infection, which ACT says was unrelated to the cloning. And ACT never cloned the goat.

A year later, three scientists resigned from the editorial board of the online scientific journal e-biomed after it reported ACT's claim to have successfully cloned the first human embryo. Critics said the experiment was actually a failure. The most advanced embryo had divided to just six cells in five days, while normal cells generally divide 50 to 100 times in that span.

ACT's claim set off a firestorm of controversy about the ethics of human cloning. It didn't seem to matter that West, then CEO, insisted the company never planned to actually create a cloned person, but rather the purpose of the research was to develop new drugs. Soon, West was testifying before Congress and appearing on "Meet the Press" to talk about the ethics of human cloning research.

"The science has been pretty sound," said George Seidel Jr., a Colorado State University professor known for his cloning research. But "in some cases, it was oversold or over-interpreted."

Like most scientific research, Seidel said, ACT's work was largely incremental, taking tiny steps to push the research forward. But Seidel said the cascade of media stories gave some people the mistaken impression that ACT had made a series of game-changing breakthroughs.

Besides its claims, ACT's research may have just been premature. Most biotech companies leave basic research for academics, steering clear of even the most promising technologies until they are closer to being developed into drugs or other commercial products. Otherwise, corporate researchers could spend years chasing tantalizing leads that never turn into marketable products or take so long the company runs out of money. But ACT bucked the trend, focusing on cutting-edge stem cell and cloning research.

"That's so outside the mainstream," said Kurt von Emster, a portfolio manager for MPM Capital, an investment firm with offices in San Francisco and Boston. "The whole area of regenerative medicine has been problematic" for most investors.

Indeed, the company didn't go public through a traditional initial public offering, where companies need backing from investment banks and institutional investors. Instead, it completed a reverse merger with a dormant Utah company that formerly marketed Native American figurines in 2005.

ACT also has other problems, including an exodus of executives. West himself left in October to join BioTime Inc., an Alameda, Calif., company that plans to develop medical products using stem cell technology. The company's general counsel, Jonathan Atzen, resigned March 7. And the company's chief accounting officer, Ivan Wolkind, quit March 17. The company still had four dozen employees as of March.

And ACT now faces legal action. In January, West filed for arbitration claiming the company owes him $26,250 in unpaid consulting fees, plus interest and attorney fees. In May, the company's former chief development officer, Pedro Huertas, filed an arbitration claim saying the company owes him a year's severance pay and wrongfully fired him after he refused to fire a woman who said she was sexually harassed. He is seeking $340,000, plus attorney's fees. And a former landlord, Alexandria Real Estate, is seeking back rent and other damages.

But ACT says it isn't giving up. The current chief executive, William Caldwell, didn't return calls seeking comment. But the company said in its filing Tuesday it is trying to raise money to stay alive. It is trying to sign licensing deals, including one with West's new company. And it is trying to find ways to speed up the development of its products.

But ACT's filing with the SEC did not give any indication it was close to raising the money it needs. "There continues to be substantial doubt about the company's ability to continue as a going concern," the company wrote.

Todd Wallack can be reached at twallack@globe.com.