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Utah Business

Researchers and academics say lust for money has corrupted Utah’s burgeoning stem cell sector. Here's what that means for the industry as a whole.

What Biotech Companies Are Doing With Your Stem Cells

To many mothers, the choice to donate their birthing tissues followed the same no-brainer logic as organ donation. “I just thought it was something that was going to be thrown away anyway,” says Stephanie Denton, a donor who lives in Colorado. If something good could come of it instead, she says, why not?

Charlotte Beierle, from Cedar City, quickly came to the same conclusion when her St. George-area doctor introduced her to the idea. She’d always been an organ donor, she says, and “I feel like if I have something to give someone else that is going to help them out, I would want to do that.”

Both mothers said donating through Utah-based Cellsure was an all-around positive experience.  The company charged them nothing and even sent couriers to their homes to collect blood work and the donated material.

What became of their donations was unclear. Both Denton and Beierle say they believed Cellsure was a nonprofit organization that harvested stem cells from donated birthing materials for medical research or for the treatment of certain conditions. But neither was sure what kind of research, or where the cells would be used.

“That was one of my questions,” Denton says. “Would they sell this tissue? And they said that the cost the families had was minimal.”

Yet according to publicly available company records, Cellsure—actually a low-profit, rather than non-profit organization—is in fact a wholly owned subsidiary of Predictive Technology Group, a Salt Lake City-based company dedicated to developing new biopharmaceutical therapies that has come under fire for high-pressure, misleading sales tactics, and for skirting FDA drug regulations.

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Predictive states that its products are “ethically sourced from donated birthing tissues, such as umbilical cords and placentas from full-term deliveries.” According to a July 2019 report by Hindenburg Research, the distributors that sell Predictive’s products charge between $5,000 and $25,000 per treatment, promising miraculous results. In one conversation with Hindenburg founder Nathan Anderson, a sales associate with Cellsure claimed donated materials could be used to cure autism.

Predictive, however, is far from a one-off. Local and national scholars describe the emerging stem cell industry as rife with corruption, misleading advertising, and in some cases outright fraud and illegality. A University of Utah researcher with ties to stem cell startups suspects that pressure to turn fast profits has led some companies to take unnecessary risks, even at the expense of patients’ safety and scientific integrity.

And regulators, ethicists say, have basically given companies in this arena a free pass to ignore federal drug regulations.

Pursuing profits at risk to patients

At least some of the companies taking fire for questionable business practices started out as scrupulous, research-backed ventures—and there is no shortage of stem cell research in Utah, according to Christof Westenfelder, a professor and medical doctor who heads the nephrology section at the University of Utah’s George E. Wahlen Health Sciences Center.

Westenfelder’s team has focused primarily on using stem cells to treat kidney and renal failure, and to develop a potential cure for Type 1 Diabetes. Other companies, he says, have worked on everything from degenerative spinal conditions to hair loss.

“Stem cell therapy is very popular in Utah… there are lots of people interested in the field,” Westenfelder says. The high level of interest among local researchers, he says, led to the creation of a stem cell interest group at the University of Utah, which is now in the process of establishing a multidisciplinary center for regenerative medicine.

There is also keen interest in commercializing these products.

“There are major sales and purchases taking place in the field,” Westenfelder says. Stem cell development companies are being bought up, one after another, by larger companies in pursuit of their technologies. Some acquisitions have soared into the hundreds of millions of dollars—and that’s not counting the potential for long-term profit off of therapies that can cost thousands of dollars per treatment.

But where the potential to make major money meets medicine, things can and do go awry, Westenfelder says. Developing a new medical product—particularly one that involves harvesting human tissues and injecting them into another person—requires a lengthy regulatory process and multiple tests to demonstrate efficacy. When venture capital gets involved, Westenfelder says, the pressure to make money quickly can result in companies that “short cut, and then end up with a catastrophe.”

Westenfelder should know. In 2008, he helped found AlloCure, a biomedical startup he hoped would take his research on the use of stem cells to treat kidney injury to market. The company quickly raised a $14.5 million Series A, which it used to launch a successful round of clinical trials and garner approval from the FDA to fast-track additional trials. 

But with time, Westenfelder says, the company’s founding team of scientists lost control of the company. Venture capitalists who joined the company’s board appointed a CEO who he says lacked sufficient scientific experience. When presented with the company’s official plan for the second-phase trial, Westenfelder says, the scientific team objected on the grounds that the protocol represented a potential threat to patients—threats that were potentially deadly, in his opinion.

When they protested, Westenfelder says, he and the other scientists were fired, and the company proceeded with trials Westenfelder believes were designed to maximize the company’s profits.

“That is the pattern that is unfortunately found across the country,” he says. “Venture capital leads to the conversion of science into complete quackery.”

Selling a cure without the science to back it up

By 2015, AlloCure’s second round of clinical trials was deemed a failure, having failed to demonstrate any measurable improvement in patients, and the company shut down. But not every stem cell startup abandons its plans for profit when the science doesn’t pan out.

Plenty of the businesses working on stem cells are “legitimate businesses—they’re doing preclinical research or moving onto clinical research,” says Leigh Turner, an associate professor of bioethics at the University of Minnesota who has spent the last several years monitoring the evolution of the stem cell industry. “But then there is this other domain—marketplaces where I spend a lot of my time looking at companies that are involved in advertising purported stem cell companies marketed directly to consumers.”

Westenfelder, Turner, and other experts in the field agree that few, if any, of the stem cell therapies currently on the market have completed the four-step evaluation process required by the FDA for the formal approval of a new drug. That is, none of the products on the market today have been proven effective or even safe.

“The marketplace as a whole is problematic,” Turner says. “That covers sports medicine, orthopedic medicine, pain, immunological conditions. If you talk to a bunch of people, you’ll get different answers—some will say the orthopedic space is more justifiable. But there is much broader agreement when it comes to immunological, respiratory, cardiology, that we’re talking about early-stage clinical research. We are not talking about products that are ready for prime time.”

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Yet there are clinics all around Utah—and throughout the world—selling unproven products to patients to “treat anything that you can imagine,” Westenfelder says.

In 2016, when Turner published his first survey of the global stem cell industry, there were 251 individual business entities marketing stem cell therapies at nearly 600 different clinics.  When he updated his research in 2018, the number of clinics had grown to 716.

Turner is currently working on a third update of his industry survey, and while he cannot release the results of his unpublished paper, he says it’s safe to say there are now more than 1,000 clinics advertising stem cell treatments directly to consumers.

It’s not clear how many patients are seeking these therapies. But based on the number of clinics, Turner says, the number is likely large.

Interest in stem cell therapies is not uniformly distributed across the US, according to Turner’s surveys. There are some states, he says, like Vermont, Maine, and New Hampshire, where you would be hard-pressed to find a clinic offering stem cells. At the other end of the spectrum, clinics are common in states such as Florida, California, and Texas.

Utah falls somewhere in the middle. But while Utahns don’t seem to be major consumers of stem cell therapies, the state stands out in the number of local companies that collect, manufacture, and supply stem cell-based products. And many of these companies, Turner says, end up on his radar time and time again for another reason—accusations of investor fraud among publicly traded corporations headquartered in Utah such as Predictive Technology.

Getting a handle on misleading claims

According to the report by Hindenburg Research, Predictive’s original stakeholders were previously involved in operations charged with securities fraud and false claims. The company’s recent acquisitions, according to Hindeburg’s Anderson, “displays hallmarks of insider dealing,” including the purchase of companies that shared real estate and management with Predictive prior to the acquisition. 

Anderson, who attended a sales seminar held by one of Predictive’s distributors, said the pitch relied heavily on alleged celebrity testimonials and vague, grandiose claims.

Bradley Robinson, president and CEO at the Predictive Technology Group, denies these allegations. Only one of Predictive’s products contain stem cells, and the company does not advertise it as doing so because, he says, if they did, they would be subject to further FDA regulation. The company’s own marketing materials, he says, are strictly compliant with FDA regulations. Similarly, he said Cellsure, as a subsidiary of Predictive, works to ensure donors understand how collected tissues will be used.

However, Robinson says, it’s not possible for Predictive to control everything people say or believe about their products. That some medical practitioners make misleading claims about their products frustrates the company’s leadership, and Robinson was particularly perturbed by reports that their products are resold for thousands of dollars. But it would be inappropriate, he says, for Predictive to tell licensed medical practitioners how to use their products, which to date have not undergone FDA trials and thus come with no claims of efficacy.

“It’s not our position to tell physicians how to practice medicine,” he says. Yet he agrees that it’s inappropriate for “physicians to go out and market these cures, that’s not appropriate to give these miracle cures out and overcharge for them… You shouldn’t go tell a senior citizen that for $50,000 you can make their dementia go away. It’s just wrong.”

He said Predictive supports the efforts of the FDA and other regulators to curb such behavior, which he viewed as hindering Predictive’s goals of making more effective medical care available at prices patients can afford.

While some of Predicitive’s distributors have been hit with FDA warning letters, Predictive itself has a clean record at the FDA and SEC. But a second Utah company, PolarityTE, tendered the resignation of several executives, including the company’s chief research and development officer Dr. Denver Lough, in August 2019 following an SEC disclosure that the company was under investigation. 

A press release forwarded to Utah Business by way of explanation characterized the resignations as part of a restructuring intended to enhance operational efficiency and reduce cash burn. However, the press release was issued months prior to Dr. Lough’s resignation.

Though PolarityTE was once affiliated with Westenfelder’s research group at the University of Utah and is still listed as a partner on the U’s website, Westenfelder said that relationship has recently ended. He indicated that many of the company’s scientific advisors seemed to be cutting ties with the company as a result of a takeover situation similar to what he experienced.

An attempt to make stem cells a viable solution

Typically, if you take cells or tissue from one person, market it as a new product with claims of medical benefits, and inject it into another, you would have to get approval from the FDA. But in many cases, Turner says, these stem cell therapies have not done so. “It’s not just a problem with the evidence,” he says. “They’re also not complying with federal law.”

These aren’t new rules. In fact, the rules that regulate cell and tissue-based products date back to the Clinton administration. But in 20 years of regulation, Turner says, the FDA has done little to enforce its own rules.

The first stem cell therapy clinics, Turner says, emerged in 2009, but activity didn’t really pick up until 2012. By 2014-2015, he says, 100 new businesses were entering the market per year. Turner acknowledged that there were some attempts to rein in these businesses, yet he says at times whole years went by without action or interference by the FDA. Federal regulators have only recently begun issuing warning letters that say, as summarized by Turner, “you are saying you don’t need approval from the FDA, but we are the FDA, and we’re saying you need approval.” 

Turner worries the letters are too little, far too late.

“If a couple businesses violate federal law, the FDA is equipped to deal with that,” Turner says. “They can send inspectors, issue warnings. But the FDA is not really well equipped to deal with a thousand clinics violating federal law.”

There is a window of opportunity, Turner explains, in which it is possible for regulatory bodies to shut down illicit industries—when illegal goods and services first begin to appear on the scene and the businesses peddling them remain small in number. But when regulators don’t act initially, he says, “I think of it as a green light. It says you can get into this dodgy territory, and even if someone does issue a warning, they won’t take away those millions of dollars.”

As a result, Turner says, he hasn’t seen a decrease in new activity in his monitoring efforts. If anything, he says, the industry is still accelerating.

Once something like this grows legs, regulation itself can accelerate the process. Businesses that mean well face a lengthy, expensive process to gain FDA approval, and there’s no guarantee of success. For founders who want to do the right thing, “there’s an excellent chance you will spend a pile of money, and not make any money,” Turner says. And they have to fight established companies that don’t regard regulatory compliance as a necessary hurdle.

This has been a problem for Predictive, the company’s CEO says. The medical manufacturer has every intention of validating the use of its stem cell product via a forthcoming FDA trial testing its efficacy as a treatment for arthritis. But clinical trials are costly, and Robinson wants to avoid venture capital. So the company has relied on smaller investors and the sale of its products to fund the tests. Robinson estimates the company’s products have been used to treat some 50,000 patients.

While deregulation may seem like the easy answer, Turner says, he doesn’t believe it’s the right one at this stage of the game, because it won’t do anything to preexisting scams and predatory activity. At this point, he says, the industry needs a multi-faceted solution, one that will require action by multiple government agencies, by customers and physicians, and by the industry itself.

Physician licensure, for example, is managed at the state level, Turner says. Yet how many states have revoked the licenses of doctors who peddle stem cells? “You can find examples,” he says, “but by and large state medical boards haven’t done a lot in this space.” And many remain loathe to intervene. Utah’s own medical board, for its part, declined to comment on this story.

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Turner also believes medical schools need to reexamine the way doctors are educated and even selected. While many doctors have chosen not to become involved in stem cells despite the lucrative opportunity they present, an increasing number of students enter the medical profession with financial motives. 

Patients, Westenfelder says, need to know that they should only seek medical recommendations from a trusted doctor such as their primary care physician. Doctors, he says, can help them steer clear of questionable clinics and point them toward legitimate clinical trials if they’re interested in stem cell treatments.

And Westenfelder, who hasn’t given up his entrepreneurial aspirations, believes there is a role for businesses, as well. He has started a new company, owned in part by the University of Utah, where he hopes to do things differently. This time around, he’s steered clear of venture capitalists in favor of angel investors willing to take a smaller interest in the company, so as to avoid diluting the power of science in the boardroom. 

Raising capital, he says, can be helpful to a biomedical startup, but researchers must be careful to avoid giving away so much of the company that they lose control entirely. “It’s an unfortunate situation currently,” he says. “We are trying to educate the public and move the entire therapy in the right direction so it’s safe, with no more quackery.”

Emma Penrod is a journalist based in rural Utah who covers science, technology, business and environmental health. She writes a weekly water politics newsletter at pactio.us/host/emma-penrod and Tweets about the latest science and industry news @EmaPen. When she's not writing, reading or researching, she's hunting sagebrush-scented air fresheners.

Comments (3)

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    Reverend Long

    You should research Hindenburg if you want to report on crooked business practices Anna.

    • Avatar

      Reverend Long

      Emma whatever your name is

  • Avatar

    Eye

    Were you paid by Hindenburg Research to put this piece out?

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