Stem Cell Sciences, the pioneering Edinburgh University spin-out whose technology has put Scotland on the global front line of medical and pharmaceutical research, is to quit the country after its rent was hiked by almost 50%.

The Alternative Investment Market-listed firm yesterday announced a "comprehensive restructuring programme" aimed at improving financial growth and increasing its focus on commercialisation efforts. That programme includes the closure of its Edinburgh site, as well as the consolidation of its operations and senior management into facilities in Cambridge.

The move, which will involve a number of redundancies among the staff in Edinburgh, will be regarded as a major blow to Scotland's life sciences industry - a sector, which now contributes more than £2.8bn a year to the economy north of the border and is one of the key areas targeted by the Scottish Government.

Stem Cell Sciences had been one of Scotland's big hopes in the pioneering world of stem cells, which are the building blocks of other cells. Researchers believe they can be coaxed and grown into any type of cell in the human body.

The company's technology is now beginning to be taken by pharmaceutical companies for the testing and screening of novel treatments for a range of degenerative disorders.

Ultimately, the firm aims to create the technology for stem cells to be implanted directly into the body to repair the damage caused by a range of degenerative disorders, and eventually to play a major role in curing diabetes, Aids, multiple sclerosis, Parkinson's and Alzheimer's, as well as helping patients who have suffered strokes and spinal injuries.

Under the changes, company co-founder and executive director Dr Peter Mountford, and chief operations officer Hugh Ilyine, have opted not to move to Cambridge, although Mountford will remain a non-executive director. Sue Furber, the finance director, has also decided not to move.

Apart from the rent hike, Alastair Riddle, the company's recently appointed chief executive, also cited as one of the primary factors behind the decision to quit Scotland the fact that its principal scientist and co-founder Professor Austin Smith was now operating out of the Cambridge lab.

In a telephone interview with The Herald yesterday, Riddell said: "As the company's new chief appointed last year, I was asked to do a big inspection of our two UK operations.

"I looked at the situation in Edinburgh, and what I found was that we were in cramped conditions with the rent about to go up from £24 a square foot to £35 a square foot, a rise of almost 50%.

"I also found there was considerable difficulty communicating between Edinburgh and Cambridge. Obviously there are hundreds of miles between the two places.

"Add to this fact that our main scientific collaborator, Austin Smith, is now working from Cambridge, and that while scientific excellence is equally good in both place, Cambridge is probably slightly better for recruiting people, because of the established bioscience cluster there.

"The rent is also considerably less expensive in Cambridge and it is far more suited to our needs.

"I understand what the Scottish scientific community will feel about this decision, but I have a business to run. This is not a question of country, it's a question of business."

Asked about the redundancies, Riddell added: "I would like all the staff to relocate to Cambridge, but I understand that won't be possible for everyone."

Stem Cell Sciences was founded in 1994 to commercialise the research of Smith and Mountford at the Institute of Stem Cell Research in Edinburgh and Monash University in Melbourne.

The company has operated out of Edinburgh University's King's Buildings, at a facility run by the Edinburgh Technology Transfer Centre, which bills itself as "well established as a crucial hub for the commercial exploitation of the world-class technology emerging from the laboratories of the University of Edinburgh".

Asked about the rent rise, Grant Williams, head of company incubation at ETTC, said: "They are a listed company, not exactly at the sharp end of incubation. However, we have kept our rents constant now since 2003.

"We've had a lot of discussion with them, and in the end they decided to relocate - but there are clearly other factors at play apart from the rent. Of course, I am disappointed. They are a great company."

Meanwhile, a Scottish Enterprise spokesman added: "We are disappointed by the company's decision.

"However, as Edinburgh and Scotland continue to attract large-scale investment, and with the ongoing expansion of Scottish life sciences companies, we are confident that any staff that accept redundancy will be able to find work elsewhere in the sector."