Thursday, May 14, 2015

Business-friendly Changes in California's $500 Million Stem Cell Loan Program

The California stem cell agency is set to overhaul its $500 million loan program, acknowledging that it has been far less than successful.

The change would allow companies to accept a multimillion dollar grant and then convert it to a loan. The process would enable a firm to escape paying royalties on a lucrative product that might be developed partially as a result of CIRM funding. Royalties are required under the terms of a grant but not on a loan.

Backers of Proposition 71, the ballot measure that created the Callifornia stem cell program, touted the promise of royalties to help convince voters to approve the measure.

A memo by James Harrison, general counsel to the agency, said the loan program failed to meet its objectives. Only two loans are currently outstanding. They are to Viacyte of San Diego and Capricor of Beverly Hills.

The original intent of the 2008 program was to generate additional cash through interest on the loans to help with research funding.

Harrison said,
"Under this proposal, recipients of CIRM’s clinical stage project awards (PA 15-01, 15-02 and 15-03) would have the option to elect to convert their award from a grant to a loan within the earlier of marketing approval by the Food and Drug Administration or seven years from the effective date of the award. Unless the parties agreed to different terms, the awardee would be required to repay the loan balance within ten days of making the election to convert from a grant to a loan at a rate that would escalate based on the date of repayment. Conversion from a grant to a loan would become final only after the awardee has satisfied the terms of the conversion."

The proposal is scheduled to be heard Monday by the agency's intellectual property subcommittee and finalized May 21 by its full board.

Here is the link to the subcommittee agenda where Harrison's full memo can be found. It also shows locations in San Francisco, San Diego, Irvine, Napa and Redwood City where interested parties can listen in and participate in the proceedings.

Here is a link to an item about the history of the program, which was originally scheduled for change in March.

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