Monday, September 15, 2008

Biotech Loan Proposal: Questions About Affordable Access

The proposal to create a massive biotech lending program – funded by the state of California – came under additional scrutiny at last month's meeting of the board of directors of the state's stem cell agency.

One director and an outside observer raised questions about the strength of the commitment to provide affordable access to any therapies resulting from the program, which could run $500 million or so. That figure and larger ones have been voiced by CIRM Chairman Robert Klein, who originated the loan plan concept. However, directors have yet to determine actual size of the program.. Klein also in August mentioned loans as large as $30 million but again directors have not yet set loan size ranges.

Those issues could likely come up at Saturday's meeting of the CIRM Finance Subcommittee.

In August, CIRM Director Duane Roth, chairman of the Biotech Loan Task Force, reviewed the program for his fellow directors, According to the transcript, he said the loans will target "funding gaps " where "there's virtually no alternative capital available to invest."

Roth, chairman and CEO of Alliance Pharmaceutical Corp., said,
"These are very, very open terms that no bank or no venture capitalist would offer....But that's part of fulfilling our mission, to fund those things that are very difficult and make it easy."
CIRM Director Jeff Sheehy, a communications director at UC San Francisco, raised questions about the strength of the "covenants" in the biotech proposal to provide affordable access to therapies.

He said,
"These are reasonable things to ask from industry if they're going to get our money."
Other directors, including Vice Chairman Ed Penhoet, assured Sheehy the commitment is genuine.

Penhoet, co-founder of Chiron, said the "covenants are real." He added,
"I certainly don't take what's in front of us here in the loan policy as (something) we're soft on."
John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., also raised a cautionary note, based on CIRM letters to the Legislature concerning a measure (SB1565) aimed at ensuring affordable access. He noted that CIRM has repeatedly referred to the need for "flexibility" in requiring affordable access.

He said,
"The plea for flexibility comes across to me as, well, when push comes to shove, we're going to cave and give in to biotech."
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