Growing a new organ

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(FORTUNE Small Business) -- Some 15,000 Americans are on a waiting list for a liver transplant, and it is a grueling - and ghoulish - vigil. Most organs available for transplant come from someone who has died in an accident. And more than 6,000 patients will die waiting for a transplant each year.

That's why a small company called Vital Therapies is working on an artificial liver, similar to kidney dialysis machines, to help keep patients alive - and give their livers a chance to regenerate.

The device, called an Extracorporeal Liver Assist Device, or ELAD, was originally developed at the Baylor College of Medicine in Houston. It uses human tumor cells, encased in cartridges so that they can't enter the body. Though creepy to contemplate, these cells feast on toxins in the bloodstream, and like all well-fed cancers, never die.

As the patient's blood flows through the device, the tumor cells metabolize toxins and remove waste products while delivering essential proteins, such as urea, into the plasma. Filters prevent the tumor cells from escaping the cartridge and getting into the patient's bloodstream.

Two companies have tried to bring the ELAD to market before. Both ran out of cash before they could complete FDA trials. Vital caught a break when a group of Chinese liver specialists came to visit - and asked to run clinical trials.

The group was led by Dr. Duan Zhong-Ping, a hepatologist (a specialist in liver disease) and vice president of Beijing Youan Hospital. Desperate for additional treatments to treat an epidemic of liver disease, Duan and his colleagues made their mission to San Diego after reading about Vital's device in a medical journal.

China is a major potential market for Vital. Liver disease afflicts two million Chinese and kills 400,000 of them a year. Moreover, 160 million people are infected with hepatitis B and C, which can lead to liver disease. The 45 patients in Vital's trial in Beijing last year were all expected to die within 60 days. Thanks to the ELAD, 20 are still alive one year later.

Doctors found the device helped patients by giving their livers the opportunity to rest and regenerate. (The liver is one of the few internal organs with the ability to regenerate; an entirely new liver can be grown from as little as a quarter of the organ.)

"We're encouraged," says Terry Winters, a British-born biochemist and the CEO of Vital. "The market will be limited, but China is working to improve its medical care rapidly."

Winters is a former venture capitalist, and holds a Ph.D. in organic chemistry from the University of Wales. A founding general partner in Columbine Venture Fund, he specialized in creating medical device and pharmaceutical companies based on life-science technology developed by universities. He is currently a special limited partner of Valley Ventures, which purchased the assets of an earlier company that had tried - and failed - to develop the artificial liver device.

Investors have poured $112 million to date into developing and testing the ELAD. The group included Versant Ventures and Delphi Ventures, both heavy-hitters in medical device investing. Testing a drug or a device in China is generally one-tenth the cost of a trial in the U.S. or Europe, according to industry experts. Indeed, Vital says it spent $2 million testing the ELAD in China; a U.S. trial would cost $20 million.

Vital has applied to Chinese health authorities for permission to market the ELAD, and Winters aims for $20 million in revenue by 2010. And with a new $28 million round of funding in hand, Vital finally has an FDA trial in its sights, possibly as early as next year.

In the meantime, Winters says, the company intends to ask the FDA for permission to offer the device to a limited number of patients under the agency's "compassionate use" program. That's a program which allows the sick access to unapproved but promising new drugs and devices in circumstances when standard therapies haven't helped them.

"There is a pressing need for this kind of therapy," says Dr. Peter Linden, a liver transplant specialist at the University of Pittsburgh Medical Center.

So look out: a life-saving, cancer cell-powered artificial liver could be coming to a hospital near you.