They intend to combine it with their expertise in cell technology to clone patients' cells for transplant.

If successful, this would enable "spare parts" to be used to treat diseases such as strokes, Alzheimer's disease and muscular dystrophy.

Geron has bought Roslin Bio-Med, a research company set up in 1998 by the public-sector Roslin Institute in Edinburgh to commercialise its cloning research.

Geron now has a world-leading position in this field

Roslin Bio-Med shareholders will swap their shares for 2.1 million newly-issued Geron shares, worth about �17m ($27m). The agreement also includes �12.5m in research funding for the Roslin Institute over the next six years.

Medical advances

The deal brings together three key technologies at the cutting edge of biotechnology - stem cells, telomerase and nuclear transfer cloning - and the powerful combination holds the promise of significant medical advances.

Geron-funded researchers announced last year that they had grown human embryonic stem cells, which have the potential to become any kind of cell in the human body.

Geron has also been involved in investigating telomerase, an enzyme that appears to control the lifespan of a cell. Roslin's nuclear transfer technology can be used to grow cells genetically-identical to the patient.

"Stem cells give us the ability to create new cells," said Geron Chief Executive Ronald Eastman. "By using telomerase, we can take a normal cell and convert it into one having an infinite capacity to regenerate. By adding the cloning technology used to create Dolly, we can eliminate the threat of rejection."

New heart

The combined technology could be used, therefore, to create replacement human tissue which has no problems of immune system rejection.

Heart muscle cells for heart-attack patients are one example given by Geron. Others relate to degenerative diseases, including cancer, osteoporosis or even spinal cord injuries.

However, the application of this approach remains "more than a few years out" said Mr Eastman.

Ian Wilmut, the Roslin Institute scientist whose research led to the creation of Dolly said: "Individually, human stem cells, telomerase expression and nuclear transfer have the potential to significantly improve our ability to treat and even cure many diseases. Together, that potential is enhanced dramatically."

Dr Wilmut will gain over �500,000 worth of Geron shares.

No human reproductive cloning

The only applications Geron cannot use the cloning technology for are human reproductive cloning, banned on ethical grounds, and the production of drugs in the milk of animals, the rights to which have already been given to PPL Therapeutics.

Professor Grahame Bulfield, director of the Roslin Institute, said: "This deal will ensure that UK scientists will play a key part in developing therapies that are potentially amongst the most exciting in human medicine."

Professor Ray Baker, of the UK Biotechnology and Biological Sciences Research Council which supports the Roslin Institute, added: "UK science is often criticised for not capitalising on its inventions.