or 
Selling
fat cells
BY ANNE KRISHNAN : The Herald-Sun
akrishnan@heraldsun.com
Dec 8, 2003 : 7:28 pm ET
DURHAM -- Zen-Bio has taken recycling to a new level.
A major component of the Durham biotech's business involves turning leftover fat from cosmetic surgery into cultured cells that researchers can use to study diseases such as diabetes and obesity.
"Nobody's got a real emotional attachment to their fat cells, and we can discover really cool things out of it," said Richard Giersch, the company's chief operations officer.
In addition to selling human cell systems, the company also uses assays it has designed to test whether its customers' drugs have the desired effects on the appropriate cells.
For decades, drug companies have tested their therapies in obese, diabetic rats, but those drugs would fail once they were in human trials, Giersch said. Zen-Bio allows researchers to study their therapies in people's fat cells, "a more logical approach," he said.
Companies conducting their own tests typically use Zen-Bio's cells as a second testing phase after conducting a quick chemical screen of drug candidates. They may end up testing 5,000 to 10,000 different compounds on the company's cells, he said.
A plate containing about 2 million fat cells runs $460, and the same plate of immature fat cells is $350. A researcher can test up to 29 potential drug compounds on a single plate, Giersch said.
Meanwhile, companies hire Zen-Bio to run tests for them because the smaller firm can be more agile and flexible, he said, providing quicker answers typically for less money than it would cost large companies to do it themselves.
"Big Pharma is our customer base, and Big Biotech," Giersch said. "For a small company, we've managed to get the word out."
While Zen-Bio's competitors may sell a larger range of normal human cell types, the smaller firm has 80 to 90 percent of the world market for fat cells, or adipocytes.
"We're the biggest game in town -- in the world," Giersch said. Zen-Bio generated revenue of $1 million in 2002 and has predicted sales in the $1.7 million range this year.
Unlike many of its peers, Zen-Bio uses sales of its products and services to fund its own research. The company isn't backed by venture capital at all, and never has been, Giersch said.
"We're one of the few-and-far-between profitable biotechs in North Carolina," he said. "We're part of a new paradigm for small biotech businesses -- rather than making a splash with one good idea, we bootstrapped our products and we've been growing slower and more organically."
The company may look to venture capital funding in the future, Giersch said.
It is unusual for a startup biotechnology company to become profitable so quickly and without venture backing, said Barry Teater, spokesman for the N.C. Biotechnology Center in Research Triangle Park, which has given Zen-Bio $250,000 in grants.
"Zen-Bio is obviously doing the right things to achieve profitability," he said.
It helps that the company's products are for aiding research and aren't drugs themselves.
"These type of products generally require much less time and money to bring them to market than do therapeutics," Teater said.
Zen-Bio was funded by a small group of experienced angel investors who invested with the intent that the company would be self-sufficient, Giersch said.
The firm began in 1995 when William Wilkison, a senior scientist at Glaxo Wellcome, was interested in purchasing human fat cells for his own research. He couldn't find them anywhere in the world, so he teamed up with colleague Yuan Di Halverson to start the company.
Fat cells were the company's first product. Then Wilkison and Halverson found that some fat cells could be coaxed into becoming other tissues such as bones and muscle, and in 2000 they spun out a new company called Artecel. That company has since closed, a victim of the recent difficult venture capital market.
Meanwhile, a second-generation management team led by CEO Peter Pieraccini has refocused Zen-Bio's efforts around metabolic diseases. The company has slowly added other products beyond fat cells, such as skeletal muscle cells, liver cells and pancreatic islet cells -- all of which are important in doing metabolic disease research, Giersch said.
Zen-Bio's own research compares the genes of non-diabetic people with the genes of Type 2 diabetics. The goals of its research are to help provide good drug targets for next-generation diabetes drugs and better insight into new diagnostic tools, Giersch said.
Once the company has made a discovery, it develops it as far as it can internally, then licenses the idea out to other firms for further development.
The revenue-generating side of its business, however, is sales of subcutaneous fat cells -- the kind that are under the skin. It takes about four weeks for Zen-Bio to prepare the fat from liposuction or tummy tucks for the market.
Zen-Bio picks up the cells from local plastic surgeons' offices and puts them through a washing system to remove impurities and cell byproducts. Employees then apply a series of enzymes to break down the connective tissue between the cells and spin them in a centrifuge to separate the cells from the intercellular waste.
Afterward, the company runs a series of tests to ensure the sterility of the cells.
From 500 milliliters of fat tissue, the company gets a "thumb-sized cell pellet in the bottom of a beaker," Giersch said. The process takes four to six hours and several thousand dollars worth of chemicals.
"It's expensive to do, and there's not a whole lot of profit in it," he said.
The purified cells are then grown into larger quantities, turning 100 to 150 million cells into up to 1 billion cells. Zen-Bio can't continue growing the cells indefinitely, though, because the cells eventually won't resemble the original cells in the body.
The company therefore must return to the plastic surgeons' offices to start the process again. Zen-Bio's muscle cell supply comes from surgery groups within and outside of North Carolina, while its liver cells are a byproduct of another company's research.
The science of human fat cells is still very young, Giersch said. In 20 to 30 years, scientists may be able to take a few cells through liposuction and culture new cartilage for the patient's knee, he suggested.
"We're carrying around our own spare parts in our fat cells," he said.