Monday, May 07, 2012

Biotech Biz Alert: California Stem Cell Agency Altering Loan Policies

The California stem cell agency is in the midst of making significant changes in its lending regulations, but says it is not part of an effort to transfer a $25 million loan to Geron to another company.

That does not mean, however, that the agency is not going to transfer the loan at some point. CIRM says it already has the authority to do so.

Talk has surfaced from time to time at CIRM meetings about the likelihood of helping to continue with the hESC clinical trial that Geron abruptly abandoned last fall. The surprise termination of Geron's hESC program came only a few months after CIRM and Geron signed a $25 million loan agreement in August. Geron is trying to sell off its hESC business, although Geron's hESC team has already left the company, according to industry reports.

Modification of the CIRM loan regulations has been underway for some time. Tomorrow the CIRM directors' Intellectual Property and Industry Subcommittee will consider the latest proposals.

Some of the changes deal with relinquishment and transfer of loans. The modifications explicitly give CIRM President Alan Trounson the ability to transfer a loan without having to go through additional reviews or seek board approval. Other changes are also designed to clarify and remove ambiguities in the transfer arrangement, which may well be necessary in order to make a transfer acceptable to a buyer of the Geron assets.

Geron paid off the loan last fall but it is not clear whether that action would preclude a transfer. At one point earlier this year, Trounson said he was involved in helping to find a buyer, but it is not clear whether any CIRM official is currently involved. Geron has hired  Stifel Nicolaus & Co. to help peddle the hESC business.

CIRM's loan changes are complex. The agency has not yet put together in one place a straightforward rationale and explanation of all the modifications. Nonetheless, biotech and stem cell firms should pay close attention to the proposals. They could mean the difference between the infusion or loss of millions for a company's research.

The proposals are expected to go before the full CIRM board later this month. Then they will be subject to the state's administrative law process, including a period for public comment.

Tomorrow's meeting has public teleconference locations in San Francisco, Los Angeles, La Jolla and two in Irvine. Specific addresses can be found on the agenda.

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