A Cautionary Note on Stem Cell Investing

For venture capitalist Lou Bock, stem cell research needs to show a little more promise before he buys in.

"We're interested in it, but I'm not sure I'm ready to make a move yet," says Bock, managing director of Scale Venture Partners. "We'd like to see something in the clinical stage. Drug development is inherently risky in itself."

The government's top scientific research agency Wednesday cleared 13 embryonic stem cell lines, providing federal funding for the first time in almost a decade. The move was made possible after President Obama reversed a Bush Administration ban on embryonic stem cell research that was in place for almost a decade.

Stem-cell research holds promise for treating debilitating diseases like Alzheimer's, researchers say. But the use of embryonic stem cells draws the wrath of religious groups who consider the cells early forms of life.

Even with the change in political leadership, some investors are still cautious about investing in stem cell companies. Bock is among them. Through his Foster City, California-based firm, he invests in drug and health care companies. He says the new government mindset on stem cell research could help draw investors, though he cautions that there's no proof of the science's effectiveness.

"It might open up people's minds for that type of research," Bock says. "That said, these are still very early days and it does have risks."

The former Gilead Sciences Inc. executive has yet to invest in a stem-cell company. There are several publicly traded U.S. companies focused on stem cell research, including Geron Corp. and StemCells Inc. in addition to a number of smaller, early stage companies that are closely held.

Those small, private companies are going to need to convince people like Bock to invest in them.