In August 2005, scientists at Edinburgh University's Institute for Stem Cell Research (ISCR) along with the University of Milan unveiled a pioneering technique to cultivate pure brain stem cells.

It was another major breakthrough for UK biotechnology.

Stem cells: the potential revolution

As 'master' cells, with the potential to develop into any type of human tissue, stem cells have already revolutionised drug testing.

Researchers hope the new cells may even eventually help regenerate malformed or damaged tissue.

A platform for the next generation

"Stem cells are the really hot platform technology," says Mike Ward of biotech business consultancy, Critical I.

"They are as fundamental to the future as the silicon chip was thirty years ago."

Academic strength is key

The UK boasts some of the world's leading stem cell research centres.

It's one of the factors that last year prompted the Australian industry leader, Stem Cell Sciences (SCS), to relocate its headquarters to Edinburgh.

"The UK is the strongest and best place to have a stem cell company," says the company's CEO, Dr Peter Mountford; "the academic base is fantastic and, of course, we have direct access to the EU industry."

New centre of excellence prompts company expansion

After Mountford completed his postdoctoral research at Edinburgh University, SCS collaborated closely with the ISCR's Professor Austin Smith.

The company's next UK branch will be in Cambridge, where Professor Smith is to become Director Of Biology at a new centre of excellence, the Cambridge Stem Cell Institute.

The UK's regulatory advantages

Another major factor influencing SCS's relocation is the UK's regulatory system.

"To us, the UK regulatory environment is as important as the quality of the science," says Dr Mountford.

A pragmatic approach

The main body regulating embryonic stem cell research is the Human Fertilisation and Embryology Authority.

"Since it first allowed embryo research in 1990, the HFEA's overall approach has been a pragmatic one, which strikes a balance between medical benefit and the moral concerns," Dr Mountford adds.

"The system is tightly enforced, but is stable and predictable - something that both the scientists and companies really appreciate."

Finance: the third key factor

The combination of scientific excellence and a stable regulation is, by itself, no guarantee of success.

Access to finance is also key.

Public funds are generally available for academic scientists involved in early stage research.

VC investment difficult to find

But, for companies seeking to commercialise promising discoveries, raising finance remains a challenge.

Venture capitalist (VC) firms have thus far been reluctant to risk their funds on pre-clinical research.

Market flotation an option, but no panacea

SCS and fellow UK firm Reneuron both circumvented this problem by floating on the London's Alternative Investment Market during the summer.

However, Dr Mountford conceded the £6 million raised by his firm was "a little less than we had hoped for."

The will to succeed

So could the fledgling industry fall victim to investors' caution?

Almost certainly not.

Evidence this year suggests that there is a strong political, commercial and scientific will to keep the UK a world leader in stem cell technology.

A new foundation...

In February a group of prominent scientists and entrepreneurs announced the formation of the UK Stem Cell Foundation to fund research and development.

Led by Professor Sir Christopher Evans of VC firm Merlin Biosciences, the Foundation aims to raise £100 million from private and public sources.

...And a major government initiative

The following month Chancellor of the Exchequer Gordon Brown announced the UK Stem Cell Initiative, a new body which will develop a ten-year research and funding strategy.

"The Foundation should certainly help fill the funding gap and, hopefully, in the longer term, so will the Chancellor's initiative," says Michael Hunt, CEO of Reneuron.

"The omens for the future look good."