J&J, others back ViaCyte's stem cell therapy for diabetes in $10.6M round

ViaCyte has hauled in more funds to fuel planned clinical development of a stem cell-derived therapy for diabetes. The San Diego startup scored $10.6 million from the sale of stock and warrants to backers such as Johnson & Johnson Development Corporation, Asset Management Company and Sanderling Ventures. The funds match the California Institute for Regenerative Medicine's award to the startup last year.

Based on some promising animal data, ViaCyte plans to embark on a clinical trial of its lead diabetes therapy in early 2014. The candidate, dubbed VC-01, is made of pancreatic precursor cells in a capsule that is implanted under the skin. It's supposed to function like an artificial pancreas, with the cells in the capsule device reacting to glucose in the blood to produce insulin and other hormones that keep blood sugar in check. The startup wants to offer the therapy as a safe and convenient alternative to existing therapies, some of which require regular injections and pose the risk of low blood sugar episodes.

ViaCyte noted the possibility of drawing more investments to the latest round, a Series C financing, which builds on its $10.1 million award from the California Institute for Regenerative Medicine in October. The nonprofit JDRF, which funds research of treatments for childhood diabetes, has also funded work on ViaCyte's stem cell-based therapy. Johnson & Johnson Development Corporation, which is Johnson & Johnson's ($JNJ) venture arm, is one of ViaCyte's largest investors, the startup said.

Diabetes drug research is one of the priciest areas of pharma R&D, with companies facing costs of $500 million or more to take new therapies all the way through clinical trials to an approval. This makes $20.7 million seem like a drop in the bucket, and shows you why biotech startups can only take an experimental diabetes drug so far without the deep pockets of corporate partners and other backers.

"This promising product candidate has the potential to vastly improve the lives of millions of patients who currently require insulin injections to survive," ViaCyte CEO Paul Laikind said in statement.

It's just going to take a ton of money to get there.  

- here's the release