Stem cell company Advanced Cell Technology Inc. is struggling with a battered reputation as it tries to raise cash to pay bills and keep paying for research projects that include plans to clone human embryos.

Executives had hoped its recent announcement that company scientists have discovered a new way to produce human embryonic stem cells without destroying embryos would convince a large drug maker or biotechnology company to invest in the financially struggling company.

Now those claims have been called into question.   Supplemental data submitted with the paper revealed that the company’s team did not fully use the approach the mass media reported - it just extrapolated from less ambitious experiments.

Last week,  two senators who strongly support human embryonic stem cell research lashed out at the scientist responsible for those claims and said the scientist and his company have harmed the struggling field by overstating their results.

"It's a big black eye if scientists are making false and inaccurate representations," a combative Sen. Arlen Specter (R-Pa.) said during a hearing of the Senate Appropriations labor, health and human services subcommittee, which he chairs.

Robert Lanza of Advanced Cell Technology defended his work and the company's statements.

"Our paper is 100 percent correct," said the visibly shaken scientist, referring to the highly publicized article that appeared in the Aug. 24 issue of the journal Nature.

“You’re on the ropes,” Specter  retorted, capping one of several exchanges in which he and Sen. Tom Harkin (D-Iowa), a fellow advocate of stem cell research, repeatedly interrupted and scolded Lanza.

At issue was the initial publicity and media coverage of ACT's widely reported experiment, which showed that a single cell taken from a human embryo can be coaxed to become a colony of stem cells.

Embryonic stem cells are prized for their medical and research potential, and until Lanza's experiment they had been grown only by methods that necessitated the destruction of an embryo.

Because the removal of a single cell from an early embryo is widely regarded as harmless (hundreds of apparently healthy children began as fertility clinic embryos that first had a cell or two removed for testing purposes), ACT characterized the technique as a way to make stem cells without destroying embryos.

But opponents of the research, most prominently representatives of the Roman Catholic Church, quickly attacked that claim as bordering on fraudulent. They noted that, in ACT's experiments, the scientists destroyed the embryos to get as many single cells as possible to work with.

While that fact was clear in the Nature report, it was less than clear in media reports.

Specter and Harkin focused on what they said was the main reason for the confusion: the company's news release, which said the team had derived stem cells "using an approach that does not harm embryos."

The approach, removing single cells, may be harmless when only one cell is removed, the senators agreed. But in this case, it did harm embryos because the scientists, wanting to make the most of the few embryos donated for the work, took many cells from each.

Similarly, the release quoted Lanza as saying: "We have demonstrated, for the first time, that human embryonic stem cells can be generated without interfering with the embryo's potential for life."

Ronald M. Green, a Dartmouth University ethicist who was among several who approved the experimental protocol, told the senators they were wrong to belittle the findings or the way they were reported.

"We're speaking here of an enormous breakthrough in American medicine," said Green, who said his only financial link to the company was the approximately $200 per day he was paid — more than a year ago — for attending a handful of meetings to review the research.

The lay media weren't the only ones who may have misunderstood. Nature, the prestigious international journal that published the paper, initially issued a news release that declared Lanza's team had made embryonic stem-cell colonies "while leaving the embryo intact." The journal since has issued two "clarifications."

The company is hoping to begin testing a human embryonic stem cell therapy next year on patients with macular degeneration, an eye disease.

The company also recently announced plans to raise up to $11.3 million in additional financing,.

Political uncertainty, a skittish investment community and the company’s near-term outlook have kept Advanced Cell’s stock depressed on the Over the Counter Bulletin Board market where it trades.     Last week it was trading at 69 cents a share. 

Analysts predict any real breakthrough could be worth billions in annual sales, but the field has been politically charged almost since 1997, when University of Wisconsin scientist Jamie Thomson became the first to isolate the cells that create the entire human body. That’s because embryos are destroyed during research. Many conservatives, including President Bush, argue that life begins at conception and say the work is immoral.

Chairman and CEO William Caldwell IV said the political clouds hanging over the work have kept larger, cash-rich companies from investing in Advanced Cell, which employs about 27 workers.

Caldwell hopes the company’s prospects will lure deep-pocketed corporate partners who can help get experimental drugs to market, an expensive proposition.

An average of $850 million and 15 years are spent developing a single drug, according to Tufts University drug economists.

“Big pharma and the big biotechnology companies haven’t publicly got involved because of the ethical concerns,” Caldwell said. “That’s one of the reasons we pursued this research.”

Whether the new technique alleviates ethical concerns and is commercially viable are still open questions, analysts said.

“The political overhang isn’t holding anyone back,” said Ren Benjamin, an analyst with Rodman & Renshaw. “What’s holding back alliances is the early stage of the research.”

Benjamin and others also said stem cell products are still at least five years from market. No human embryonic stem cell-based drugs have been tested on patients.

Investor interest in the sector waned soon after President Bush severely limited federal funding of stem cell research in August 2001, and Advanced Cell has lurched from one cash crunch to the next. In 2003, ImClone Systems Inc. wrote off a $1 million loan to the company as a bad investment and Advanced Cell sold its promising animal cloning business to stay afloat.

The company, which was racing to develop cloned human embryos as a stem cell source, teetered on the brink of insolvency after South Korean scientist Hwang Woo-suk stunned the scientific world in 2004 with his claim to be the first to clone human embryos. Hwang has since been exposed as a fraud and his work a sham, which helped breathe a new round of venture capital investment into the company.

The company last year relocated its headquarters from Worcester, Mass. to Alameda, Calif. after California voters established a state agency dedicated to doling out $3 billion in stem cell grants. But lawsuits and intellectual property issues have limited the California Institute for Regenerative Medicine to making grants to nonprofit labs and hampered the agency’s ability to award grants to corporations like Advanced Cell.