CIRM Directors Approve Biotech Loan Policy

Directors of the California stem cell agency Thursday gave the go-ahead to an outline of a far-reaching, $500 million biotech loan program, but many details remain to be worked out.

In apparently the only news story on the subject, Terri Somers of the San Diego Union-Tribune reported this morning:

"Biotechnology companies are expected to rush for the funding because most are perpetually hunting for money from investors. Banks typically won't fund biotech companies because they have little to no revenue, little collateral and a high risk of failure."

She wrote,

"'I am very excited,' said Babak Esmaeli-Azad, chief executive of San Diego-based DNAmicroarray, which is working on stem cell therapies. 'It's a step in the right direction.'

"Stem cell therapies are expected to come to market through companies, not research institutes. The institutes have very little capacity and experience in clinical trials or the process of turning a successful scientific experiment into a pill or injection that might eventually make it to market."

Somers said that companies have become "restless and skeptical" regarding funding from CIRM.

"'We've been waiting for a turning point for (the institute) to become very friendly and accessible by the corporations,' Esmaeli-Azad said. 'This may be that turning point.'"

Under the terms of what was approved by CIRM directors Thursday, Somers said there will be two types of loans:

"One will require the company to pay back the money no matter what happens, including failure of the product or company.

"The second does not require the company to pay the money back unless it has sufficient revenue. This type of loan would have a higher interest rate and give an equity stake to the state, which it would cash out if the product is successful."

The stem cell agency also issued a press release on the biotech loan program. It said that directors had approved a "program" and a "policy" for biotech loans. The news release declared that it was "an integral part of CIRM’s effort to strengthen California’s biotechnology industry and create collateral economic benefits such as high-paying jobs and increased tax revenues."

Somers reported that CIRM plans to "to add further detail to the policy as it receives comments and advice from industry executives, finance experts and the public." One of the key questions involves the use of delegated underwriting a la Fannie Mae as well as administration of the loan program, not to mention conflict of interest issues.

Earlier CIRM said that the plan would not be in place until December, when directors were expected to take final action. An additional hearing on the plan had been announced within the next 60 days by the CIRM Finance Subcommittee.