UPDATED: J&J goes all in with ViaCyte, hands over BetaLogics assets in hunt for diabetes cure

ViaCyte CEO Paul Laikind

Back in the summer of 2014, J&J ($JNJ) invested $20 million into San Diego-based ViaCyte, picking up an option to acquire its lead therapy for Type 1 diabetes just as it was headed into human testing for the first time. But now, instead of buying it out, the pharma giant is handing over its in-house rival BetaLogics in New Jersey, merging the two operations and their accumulated intellectual property into a single, clinical-stage operation that will take a stab at developing a stem cell cure for diabetes.

The deal gives ViaCyte J&J's 145 patents on the subject, along with rights to another 565 that are pending. ViaCyte also made the point in its statement that it remains independent of its long-standing investor J&J.

ViaCyte has been turning stem cells into pancreatic cells and inserting them with a company-built encapsulation device to avoid an immune system attack, looking to spur a reliable supply of insulin that can functionally cure the disease.

The biotech says that they have gathered positive preliminary results from a small set of patients treated with VC-01 in a Phase I study, but it's obviously still early days in the development process. Regulators typically demand a huge amount of safety data for any new diabetes treatment, and a cutting-edge regenerative technology like this would likely inspire even closer scrutiny. And J&J believes that strategically a merging of efforts like this just makes sense.

J&J's Diego Miralles

"We needed to hedge our bet to make sure that we would be the leaders in this space," says Diego Miralles, J&J's global head of innovation in San Diego. "It's clear that ViaCyte has pulled ahead." The biotech was the first to get into the clinic, making significant progress with regulators. It was logical to combine the effort, while taking a larger stake in the company.

The financial details weren't released with this deal.

Now the transition begins, says Miralles. Some of the J&J staffers in New Jersey will take a role in transferring the technology to ViaCyte, and the rest will begin exploring opportunities in J&J's giant research organization, or outside the company in other companies developing stem cell therapies of their own. J&J declined to say how many staffers are involved.

ViaCyte got started 16 years ago, just as the heyday of stem cell R&D was getting started. The company was founded as Novocell, merged with others, then changed its name to ViaCyte in 2010. The California Institute for Regenerative Medicine has been a key backer over the years as the controversial field inspired hopes for a range of cures involving stem cells. But as is often the case, the initial timelines for advancing the science into the clinic were too ambitious, and the enthusiasm faded in the face of a long, hard slog in the lab.

There's nothing unusual about that, though. Every big new drug R&D advance has started with tremendous excitement, then waned as years of hard work had to be done to test the technology and slowly inch toward human studies, says Miralles. But ViaCyte and J&J have made real progress.

Says Miralles: "We have proven the principle is correct."

"For more than a decade BetaLogics and ViaCyte have been independently working toward a stem cell-derived therapy for diabetes," said ViaCyte CEO Paul Laikind in a statement. "By combining the intellectual property and other assets of BetaLogics with ViaCyte, we will further strengthen our advanced program focused on insulin-dependent diabetes and solidify our leadership in the field."

- here's the release