General Electric Co is teaming up with U.S. biotech company Geron Corp to use stem cells to develop products that could give drug developers an early warning of whether new medicines are toxic.

The venture is the largest U.S. conglomerate's most direct attempt to make a commercial products from human embryonic stem cells. Scientists say the cells hold great medical promise, but their use has been highly controversial in the United States.

Embryonic stem cells are the body's master cells and can grow into various types of human tissue, such as skin or internal organs.

GE and Geron aim to use an existing batch of stem cells to develop sample human cells that drug companies could use to test the toxicity of new drugs early in the development process, before they are ready for animal testing or human clinical trials.

The venture would not sell actual stem cells, but rather heart or liver cells derived from stem cells, said Konstantin Fiedler, general manager of cell technologies at GE Healthcare.

This could replace, to a large extent, animal trials, Fiedler said in a telephone interview. Once you have human cells and you can get them in a standardized way, like you get right now your lab rats in a standardized way, you can actually do those experiments on those cells.

Fiedler emphasized the products are still in an early development stage. GE estimated it would have the first commercial cells ready next year.

Geron shares surged 15 percent after the news of its deal with the Fairfield, Connecticut-based company, which has made expanding its healthcare operation a major push this year.

POTENTIAL, CONTROVERSY

Scientists say that research on embryonic stem cells, which are the most malleable, has enormous potential to develop treatments for cancer and other diseases.

But using stem cells derived from days-old human embryos has been controversial in the United States, where opponents say the destruction of any embryo is wrong. The Obama administration in March lifted a Bush-era decision that had forbidden federally funded researchers to work with the embryonic cells.

GE's stepping up its presence in stem cell research could boost the field's standing, advocates said.

What I read this to be is validation that human embryonic stem cell research is moving through the pipeline as it should be and what once were promising theoretical ideas are now getting closer and closer to being ideas in practice, said Amy Comstock Rick, president of the Coalition for the Advancement of Medical Research, a group that advocates stem-cell research.

GE will fund the research and manufacturing and sell any resulting products, while Menlo Park, California-based Geron will open up to GE its extensive database covering the growth of and differentiation of existing human embryonic stem cells.

The companies did not disclose the financial terms of the arrangement. Fiedler said it was too early to estimate the revenue the project might generate.

Needham analyst Mark Monane, who follows Geron, wrote in a note to clients that the financial terms were likely modest, but added: The value of the opportunity lies in the quality of the partner.

In May, GE reached a deal with Cytori Therapeutics Inc to commercialize that company's StemSource product.

GE has had since 2005 a policy to do research on stem cells, while following all U.S. and applicable laws, but had not tried to commercialize a product from them, Fiedler said.

Geron shares rose 98 cents to close at $7.67 on the Nasdaq, while GE closed down 4 cents at $11.72 on the New York Stock Exchange.

Smaller U.S. companies including StemCells Inc and Aastrom Biosciences Inc and Osiris Therapeutics Inc have focused on stem-cell research, although the technology has also caught the attention of drug giants such as No. 1 Pfizer Inc, which last year quietly launched a stem cell initiative.