The Cautionary Tale of Advanced Tissue Sciences
How a pioneering biotech company revolutionized tissue engineering but failed commercially, offering crucial lessons for regenerative medicine.
Explore the StoryImagine a future where doctors could repair severe burns with lab-grown skin or heal diabetic wounds with living tissue substitutes. This wasn't science fiction in the 1990s—it was the revolutionary work of Advanced Tissue Sciences (ATS), a pioneering biotech company that stood at the forefront of regenerative medicine.
Total Investment
Employees at Peak
Company Liquidated
Yet despite its groundbreaking technology and over $300 million in investment, ATS met a devastating end, liquidated in 2003 without ever turning a profit 1 6 . Their story represents one of biotechnology's most compelling paradoxes: how brilliant science can fail commercially, and what these failures teach us about the delicate balance between innovation and sustainability.
Founded in 1987 and headquartered in San Diego, California, Advanced Tissue Sciences emerged during biotechnology's golden age, fueled by growing understanding of cell biology and tissue development 2 .
Under the leadership of founder Gail Naughton, the company focused on a revolutionary concept: growing human tissues in the laboratory that could repair and restore function in the body 6 7 .
ATS's flagship technology centered on creating three-dimensional human tissues outside the body. Unlike conventional approaches that used synthetic materials, ATS's method harnessed living human cells to create biologically active tissues.
Human skin cells responsible for producing collagen and structural proteins
Mesh structures providing framework for tissue growth
Specialized containers simulating physiological conditions
While ATS developed multiple products, the most scientifically detailed was Dermagraft, a living, human-based skin substitute designed for diabetic foot ulcers—a serious complication that affects millions and often leads to amputation 6 .
Fibroblasts were obtained from human foreskin tissue following newborn circumcisions 6 . These young cells had robust growth potential and could be carefully screened for pathogens.
A biodegradable polyglactin mesh (the same material used in dissolvable sutures) was cut into appropriate sizes and sterilized 6 .
The fibroblasts were seeded onto the scaffold and placed in specialized bioreactors that maintained optimal temperature, pH, and nutrient conditions 6 .
The finished Dermagraft products were tested for viability and sterility before being cryopreserved for shipment to medical facilities 6 .
| Component | Description | Function |
|---|---|---|
| Human Fibroblasts | Cells derived from human foreskin | Produce collagen, matrix proteins, and growth factors |
| Extracellular Matrix | Natural proteins secreted by fibroblasts | Provides structural support and biological signals |
| Polyglactin Mesh | Synthetic, biodegradable scaffold | Temporary framework that dissolves after implantation |
| Growth Factors | Natural proteins including cytokines | Stimulate angiogenesis and wound healing |
The work at Advanced Tissue Sciences relied on a sophisticated combination of biological and material components.
| Reagent/Material | Function | Example in ATS Technology |
|---|---|---|
| Human fibroblast cells | Produce extracellular matrix and growth factors | Primary cells from human foreskin tissue |
| Biodegradable scaffolds | Provide 3D structure for tissue development | Polyglactin mesh scaffold |
| Cell culture media | Supply nutrients for cell growth and maintenance | Proprietary nutrient solutions |
| Growth factors | Stimulate cell proliferation and tissue development | Naturally produced by fibroblasts in Dermagraft |
| Cryopreservation agents | Enable tissue storage and transportation | Dimethyl sulfoxide (DMSO) or similar compounds |
ATS's journey through the FDA approval process proved tumultuous. While the company received approval for Dermagraft-TC as a temporary covering for burns in 1997 6 , the more commercially promising application for diabetic foot ulcers hit a major obstacle in 1998 when the FDA issued a non-approvable letter, requesting additional clinical data 6 .
This decision came despite prior support from an FDA panel, sending ATS's stock plummeting nearly 50% 7 .
Manufacturing living tissue products proved enormously complex and expensive. A 1999 FDA audit resulted in a Class II recall and warning letter citing concerns about environmental monitoring and sterility 6 , highlighting the difficulties in scaling up laboratory processes to commercial manufacturing.
| Year | Scientific/Regulatory Progress | Business/Financial Events |
|---|---|---|
| 1987 | Company founded with focus on tissue engineering | Initial funding secured |
| 1997 | FDA approval of Dermagraft-TC for burns 6 | Temporary stock boost |
| 1998 | FDA issues non-approvable letter for diabetic foot ulcer indication 6 | Stock loses nearly half its value 7 |
| 1999 | FDA audit leads to Class II recall 6 | Stock enters downward spiral |
| 2000 | Positive preclinical data for angiogenesis | Stock rockets 69% in one day 7 |
| 2002 | Files for Chapter 11 bankruptcy 6 | Begins liquidation process |
| 2003 | Company assets liquidated 1 | Over $300 million in investments lost 1 |
| 2006 | Dermagraft rights acquired by Advanced BioHealing 6 | Product continues with different company |
In a surprising turn, ATS's technology outlived the company itself. After the liquidation, the Dermagraft rights and manufacturing facilities were eventually acquired by Advanced BioHealing in 2006 6 .
Under new management and with different business strategies, the very same product that failed under ATS reportedly generated approximately $130 million in annual revenue by 2010 6 .
Groundbreaking science cannot survive without careful financial planning and cost management 1 . The enormous expenses of R&D and clinical trials must be balanced against realistic revenue projections.
Limited resources should be concentrated on achievable milestones rather than dispersed across multiple applications 1 .
Laboratory success does not guarantee commercial viability. Developing scalable, cost-effective manufacturing processes is as important as the underlying science 6 .
The volatile nature of biotech development requires investors who understand the lengthy timelines and regulatory hurdles 1 .
The story of Advanced Tissue Sciences represents both the extraordinary promise and sobering realities of regenerative medicine.
While the company ultimately failed, its foundational work in tissue engineering paved the way for subsequent successes in the field. The same Dermagraft product that contributed to ATS's downfall eventually found commercial success under different management, healing patients and generating substantial revenue 6 .
Scientific brilliance must be coupled with sound business strategy
Complex approval pathways require careful planning
Lab success must translate to commercial production
Today, as regenerative medicine continues to advance with new technologies like stem cell therapies and organoids, the lessons from ATS remain profoundly relevant. The field still grapples with the same fundamental challenges of balancing scientific innovation with commercial viability, navigating complex regulatory pathways, and developing sustainable business models for revolutionary medical technologies.