We have developed and validated two human ES cell clones that have the BLA reporter correctly targeted into the CYP3A4 gene. In addition, we have made major improvements to the hepatocyte differentiation protocols, resulting in cultures with greater than 85% hepatocytes, which express significant levels of mature hepatocyte proteins and drug metabolizing enzymes, including albumin, CYP1A2 and CYP3A4. Furthermore, these cultures demonstrate CYP1A2-dependent metabolism of acetaminophen, which is approximately 20% of the activity, on a per cell basis, seen from primary human hepatocytes. This is significantly more than we have seen with any other protocols. We expect to use these cells in our drug development programs as screening assays for liver metabolism and toxicity studies.