The Massachusetts company condemned by the Bush administration for its efforts to clone a human embryo received a federal grant last month to conduct biotechnology research.
Advanced Cell Technology's human cloning experiments set off a national controversy last week that is renewing demands that Congress ban all cloning of human cells.
But even before the cloning experiment was disclosed, the company was awarded $1.8 million under a Commerce Department program intended to accelerate research and development in private companies, according to Michael Baum, a Commerce spokesman.
The company on Wednesday said the grant would not be used for any human cloning research. Rather, the money is to fund experiments into reprogramming adult human cells in an effort to develop therapies for diseases.
The funding represents an important capital infusion for the small company, which derives much of its revenues from cloning cows.
But researchers and industry officials say that administering such grants and keeping salaries, equipment and other expenses separate is a difficult accounting chore. It is one reason why some universities that receive federal funds have moved embryonic research off campus, avoiding any potential for conflicts with allowable work under federal grants.
The Commerce Department issued the grant under its Advanced Technology Program. Baum said the terms of the grant specifically forbids the company from using the federal money to conduct research on human cloning, according Baum said.
"We have audit procedures in place to make sure that doesn't happen," Baum said.
The biotechnology start-up reignited a furor over cloning this week when an online science journal published an account of the company's experiment. The article in e-Biomed: The Journal of Regenerative Medicine said the company created just a handful of clones and that all died and none consisted of more than six cells.
President Bush condemned the experiment, and Sen. Sam Brownback, R-Kan., vowed to push for a six-month ban on human cloning while lawmakers consider legislation calling for a total ban. The House passed legislation banning human cloning in July, but it moved to the back burner after Sept. 11 terrorist attacks.
As a privately held company, Advanced Cell has disclosed little about its finances. According to information posted on its Internet site, it has $6 million available for agricultural research. Also, the company disclosed in 1997 a five-year, $10 million collaboration with Genzyme Transgenics, a biotechnology company.
But within the last six months, Advanced Cell sold a New York biotechnology company an approximate 7 percent stake for $1 million. The deal with Imclone Systems, which includes a research collaboration, gives Advanced Cell an estimated market value of $14.3 million.
ImClone Chief Executive Sam Waskal said Advanced Cell, like many start up companies, sold ImClone convertible preferred stock because it needed investment capital. "This is significant to them," he said.
Advanced Cell wouldn't comment on its finances. Michael West, president and chief executive was in meetings and not available, a spokeswoman said. A vice president said he could not provide details, but reiterated that only private funds from venture capitalists and individual investors are used to support human cloning projects.
"There were no research grants at all on this, obviously," said Dr. Robert Lanza, vice president for medical and scientific development. Details of the federal grant are posted on the Internet sites of the Commerce Department and Advanced Cell, but have attracted little notice.
Founded in 1994, Advanced Cell is a spinoff of a chicken-breeding operation called Avian Farms. The company had hoped to bioengineer chickens using cloning techniques developed at the University of Massachusetts.
West, who joined Advanced Cell in 1998, and New York venture capitalist Miller Quarles took control of the company last year, after a Boston bank initiated foreclosure proceedings against some Avian Farms properties to collect a $3 million debt. Terms of the transaction weren't disclosed.
Under West's leadership, the company has pushed itself to the forefront of human cloning, but animal cloning remains its chief business--though it has produced few, if any, profits.
In April, the company purchased a Pennsylvania company that specialized in breeding dairy cows. Advanced Cell plans to use EmTrans facility to breed cloned cattle, a nascent business that so far shows little promise.
One large cattle breeder that worked with Advanced Cell, Iowa-based Trans Ova, has pulled out of the business due to low demand. Dave Faber, an executive who runs Trans Ova's genetics division, said no more than 100 cloned calves will be born this year.
Few farmers are willing to pay the standard $25,000 fee per calf, particularly since consumers have questions about genetically altered food, Faber said. The technique has a low success rate; on average only 3 percent to 5 percent of cloned cattle survive. Indeed, in a paper published this month in Science, Advanced Cell claimed a 6 percent success rate.
"At the high end of the range, it is break even," he said.
Advanced Cell, through its cattle cloning division, Cyagra, recently slashed its price to $12,500 as a promotion, according to vice president Lanza. He did not have figures, but acknowledged that the business is probably only breaking even.
"It is not a profitable business," said Steven Stice, a founder of Advanced Cell and now an executive at its animal cloning rival, Georgia-based Prolinia.
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