Artecel Sciences says it hopes to have a deal in place with a large pharmaceutical company for acquisition of its fat-derived stem cell technology or an infusion of cash by the end of the year.

Carolyn Underwood, president and chief executive of Artecel, tells Local Tech Wire, “We’re negotiating with two large U.S. pharmaceutical companies, one in Japan and firms in Korea and Israel trying to find a strategic partner.”

Underwood says the deal could involve either acquisition or a cash infusion.

Founded two years ago, the Zen-Bio spin-off company now employs only Underwood and chief science officer Jeffery Gimble who are working from the Eno River Capital offices in Durham. The company previously employed 17 people.

Eno River led the company’s $3 million first round in late 2000.

Underwood says Artecel is surviving because “we’re burning very little cash. We have to make this deal or wait out the market. But we will continue to be afloat.

“We figured you have to have a business person and the scientist,” Underwood says. “With the two of us here, it will be easy to gear up again when money is in place.”

Artecel holds several patents on its processes for transforming so-called adult stem cells from a person’s own fat into other types of tissue, such as bone or cartilage. The technology has the potential to save lives by helping replace bone marrow destroyed by radiation. It may also help repair bones and cartilage, one area in which Artecel holds a patent. These cells could also be used to plump up facial wrinkles.

Among the benefits of the stem cells-from-fat therapies: using a patient’s own fat as a source eliminates tissue rejection problems, and as Artecel has said, most people have some extra fat they would not mind parting with.

Difficulty raising cash

But the company picked a rough time to try to raise money, says Underwood. It sought a $15 million to $20 million round.

“We started to raise our second round days before Sept. 11 last year. We could not have picked a worse time,” she adds.

Jeffery Gimble, a medical doctor, tells LTW that recent research at Stanford University that casts some doubt on the ability of blood derived stem cells to transform into other types of tissue may be due to scientists trying to do things in different ways.

Sometimes called “lab culture”, the methods one lab uses to do something such as transforming stem cells into a specific type of tissue differs in small ways that can produce large differences in results. The highly respected Journal Nature, where the Stanford research was published, suggested that might be the case.

Gimble says, “I don’t think anyone knows all the answers. Basically, it’s going to take many more experiments to get them.”

Underwood adds, “Our technology has done everything we’ve asked of it. We remain excited because our platform is very strong.”