Biotech Loan Program Slated for March Approval

The biotech loan task force of the California stem cell agency began work Tuesday on a plan to loan perhaps as much as $750 million to struggling stem cell companies and possibly nonprofit institutions.

Duane Roth, chairman of the task force, said he expected to present the proposal to the directors of the $3 billion agency in March. Between now and then, Roth(see photo) and the other members of the task force identified a number of issues that needed to be explored. They included legal questions, concerns about staffing at CIRM, defaults in the lending effort and even the name of the program.

Roth suggested the program should be aimed at filling the financial gap between research grant funding and venture or financial angel capital – the so-called "valley of death" where promising research dies for lack of economic support.

Roth noted that the targeted participants in the loan program cannot find normal financing so credit-worthiness should not be an issue. "Banks don't make loans to these type of companies," he said.

Roth predicted that while default rates on loans could be above what a normal lending program would suffer, they should not be high.

Nonetheless, payback on the loans was a topic on which several members of the task force expressed a concern. But like other issues raised at the meeting, solutions await more work by the task force.

Roth also said, "Let's not create a bureaucratic nightmare for the staff." It was a sentiment echoed by others. CIRM Chairman Robert Klein suggested that outside firms would be needed to administer the program.

Roth said he will be seeking from outside firms to develop the loan program, including creating a financial model that would help determine risk levels. He said two meetings will be held to seek the thoughts of industry and the financial sector.

As for the name of the program, Roth suggested it should be called something like the "product development loan program." A decision on that was deferred after a brief discussion.

The meeting in Los Angeles with two teleconferencing sites in the San Francisco Bay area attracted some attention from business. Representatives from Geron, Advanced Cell Technology, PriceWaterHouseCoopers, Capricor and DNAmicroarray were present along with a business development official from the British Consulate in Los Angeles.