From the start of the next decade, Teva Pharmaceuticals (TASE, Nasdaq: TEVA)   will be positioned to launch, each year, a  drug with billion-dollar potential. Today the biggest generic drugs maker in the world, the Israeli company is positioning itself to become a leader in brand drugs as well, including through alliances. And its alliance with Jerusalem-based Gamida Cell could well prove to be another growth driver for Teva, helping to compensate for the day (if and when) generic competition arises for Teva's blockbuster multiple sclerosis therapy Copaxone, which is currently responsible for about 10% of its revenues.

Gamida Cell is developing drugs based on stem-cell research. Stem cells are primordial cells, early in development and non-differentiated. In response to biochemical stimuli (that are not well understood), the stem cells differentiate into specific ones, such as heart, nerve, muscle, epidermis and so on.

The company has developed a unique platform to expand stem cell lines without them differentiating as they proliferate, which has been a serious problem in stem-cell research. It uses this unique technology to develop products for cell- replacement and tissue-rejuvenation therapies, by implanting cells that do not originate from the patient.

It envisions therapies for presently incurable illnesses such as Alzheimer's and Parkinson's, heart disease, and so on.

Its flagship product is StemEx, a therapy under development for leukemia. Gamida Cell is developing StemEx together with Teva through a joint venture. Teva owns 30% of the joint venture at this point and expects to raise its interest to 50%, with another $25 million investment in StemEx.

Gamida Cell CEO Yael margolin explains that StemEx' addresses the problem of the paucity of bone marrow donations, which are desperately needed by 25,000  leukemia patients each year. Without a donation of bone marrow, which is basically tissue that makes new blood cells, their death is certain. Leukemia is essentially a cancer of the bone marrow usually treated with chemotherapy and radiation.

But chemotherapy kills the bone marrow together with the disease, and to survive, the patient needs a transplant to resume making blood cells. Tissue matching is crucial to prevent rejection or attack by the body's immune system.

Because of the matching issue, only 20% of sufferers find suitable donors within the family, and 10% more find from a pool of donors. That leaves 70% with no solution.

Hope arose ten years ago, when it turned out that these patients could be helped by blood collected from the umbilical cord of newborns. But the problem is quantitative: there simply is not enough tissue in the cord blood to help any body weighing more than 30-40 kilos. In short, it would only work for kids, not adults.

Enter Gamida Cell's StemEx, which can take that cord blood, weed out the necessary cells and expand the line without causing the cells to differentiate into specific tissues.

The Gamida Cell-Teva joint venture have received United States Food and Drug Administration approval for the structure of clinical trials, which will enable the company to carry out pivotal clinical trials simultaneously. Margolin believes this can be done by the end of 2008 and a product could be launched in 2009.

She says Gamida Cell has no real competition at this stage. The only company developing a competing solutionis ViaCell (Nasdaq: VIAC), which finished first-phase clinical trials.

"ViaCell is developing a product that may compete with StemEx.  They recently completed Phase I/II and said they will present the data in January," Margolin says.

There are other potential rivals but they aren't at the stage of clinical trials yet.

"When Teva carried out due diligence on Gamida Cell before entering the joint venture, it received an assessment that StemEx could be addressing a billion-dollar market," Margolin relates.