Geron Corp. is farming out its telomerase technology to a virtual company for use in cell lines.

The Menlo Park, Calif.-based company granted to PanCel Corp. a nonexclusive license to use its human telomerase reverse transcriptase (hTERT) technology for the replicative immortalization of human pancreatic islet cells.

The Del Mar, Calif.-based firm uses primary human pancreatic tissue for cell lines capable of detecting glucose and secreting insulin. PanCel will use hTERT to develop immortalized human pancreatic islet cells to treat Type I diabetes.

PanCel, an early stage company founded on technology to genetically engineer pancreatic cell lines developed and patented by Fred Levine at the University of California at San Diego, said the licensed technology would allow it to more quickly develop a cellular therapy for Type I diabetes and contribute its development of a bioartificial endocrine pancreas. Its other founders include Alberto Hayek and Gillian Beattie, both at the Whittier Institute for Diabetes in San Diego.

Levine is conducting research that uses two or more growth-promoting genes to immortalize cell lines, while PanCel President and CEO David McCarty runs the business as its sole employee.

"A lot of the growth-promoting genes are in the public domain, but telomerase is not one of them," McCarty told BioWorld Today. "We have licensed it as part of the development work we're doing to immortalize the pancreatic beta cell line."

PanCel expects to advance its third-generation cell line into large-scale animal safety studies later this year, followed by an application to begin clinical studies. McCarty said prior generations responded to glucose and produced insulin, but improvements make the latest generation more suited for use in humans.

Geron received undisclosed up-front payments of cash and equity in five-year-old PanCel, and would receive a share of proceeds from future product sales. More specific financial details were not disclosed.

Geron is the only equity partner in PanCel by virtue of a licensing arrangement. Its other shareholders include venture capital firms ARCH Venture Partners, of Chicago, White Pines Ventures, of Ann Arbor, Mich., and two undisclosed corporate investors, as well as friends and family who invested initially. To date, the company has raised $2 million in institutional funds, and converted another $1.2 million of debt into Series A preferred stock. McCarty said PanCel expects to raise an additional $1 million by the end of this quarter to close out its Series A round.

Geron, which focuses on therapeutic and diagnostic products for oncology and regenerative medicine, maintains its portfolio of patent rights in the telomerase field, including U.S. Patent No. 6,261,836, which covers cells that have been immortalized with the cloned hTERT gene. Geron said it cloned the gene-encoding hTERT - the catalytic protein component of the telomerase enzyme - in 1997 during a collaboration with the University of Colorado.

Geron officials could not be reached for comment. Its product development programs are based on three core technologies: telomerase, human embryonic stem cells and nuclear transfer.

Geron's stock (NASDAQ:GERN) fell 6 cents Thursday to close at $1.67.