Monday, April 04, 2016

Excerpts from the Birth of ATP3: California's $150 Million Plan for a Stem Cell Company

Here are excerpts from the transcript of the California stem cell agency meeting Dec. 17, 2015, at which its directors approved the concept for a $150 million public-private partnership. The concept was part of the agency's spending plan for the next five years. Details of the financing and term sheet were disclosed last week and are scheduled to be approved a meeting on Friday.

Randy Mills, president of California Institute for Regenerative Medicine (CIRM), as the agency is formally known:

"We have a lot of things in this (strategic) plan that are new for a funding agency to attempt, but this one (ATP3) stands out even for this plan. Here the concept is that we have a whole bunch of technology. We have 300 or so different programs at CIRM. As we said, only 8 percent of our academic programs currently have industry partners. So how do we fix that? 

"We thought about a number of different ways, but one of the ways is just to go directly and do it. We thought, well, what would happen if we put out a call for basically the creation of a new entity or a new company that would be a California-based company that could take these technologies and aggregate them and focus on developing and commercializing stem cell-specific technologies?

"So the idea is here we would put out a call that would require a successful applicant to put together a business plan that would describe what types of technologies from our portfolio that they would like to aggregate and the synergies associated with those, a great management team that could actually make that happen in a successful way, and then, very importantly, a tremendous amount of upfront capital that they're going to commit.  

"I think we had in this concept $75 million in upfront capital that they're going to commit into taking these technologies and driving them forward. Then we would then partner with them on actually a very efficient basis to help fund some of that research going forward. Again, the idea being what we would have at the end is an entity, basically a powerhouse in the state of California that have these technologies that they're actively commercializing. It would be an outflow for new technologies that are coming out of CIRM that need an industry home and obviously create jobs and expand the tax base for California. And then, lastly, but most importantly, be a vehicle for getting the final span of this bridge where we go from late stage research actually through commercialization so patients can benefit from them. Again, Dr. Millan is going to talk more about this. I don't want to completely steal her thunder, but it's a cool part.”

Maria Millan, senior director of medical affairs, who spoke later:
“We have identified and we know as a field that there is a lack of industry pull for stem cell therapeutics. Although CIRM has invested approximately $2 billion so far in developing a portfolio of approximately 300 technologies, we know that only 6 percent of CIRM's academic projects have been licensed by industry. And in discussions with the University of California system, we know that of the 3,400 technologies being marketed, we're not even talking about all technologies, but just those that are being actively marketed, less than 2 percent of those are stem cell programs.

"So we are proposing to the board today an initiative, the ATP3 initiative, as a means of engaging industry by creating an opportunity for top-tiered leadership and management teams to come in and competitively be evaluated in their ability to form an entity which would aggregate CIRM's most promising technologies. By aggregation, it would offer multiple shots on goal on these product development candidates which increases the probability of success, so called de-risking the proposition. And what we anticipate is this would make it more significantly palatable and actually incentivize industry to come in in partnership. In addition, what's baked into this initiative is that CIRM would leverage its capacities in terms of administrative review structure and advisors to help this entity come up with the best possible portfolio. And CIRM would continue to be involved by funding the development of these in-licensed technologies.

"So as a general structure, the accelerating therapies to public private partnership, ATP3, the major goal of this is to get the CIRM-funded stem cell technology candidates to the patients, get the technologies to the patients, and how do we do that? We pull industry in, we get a private partner through this competitive process who will in-license, develop and drive toward commercialization the aggregated portfolio. And as I just stated, CIRM will be actively involved in this and choosing and enabling the licensing and in helping to fund these program's developments.

"In addition, the researchers would have continued funding for the advancements of their project. just to back up a bit, when these in-licensed programs come in, they come in with current funding for these programs to go to a certain value inflection point. if they're chosen by CIRM and by the ATP3 awardee to come into their portfolio, then the project would get additional funding. For universities, by design of this initiative, there would be a demand creation for out-licensing cirm-funded technologies and, therefore, a greater opportunity for financial return which then could go on to fund future projects and efforts. And for citizens of California, as Dr. Mills stated, this is an opportunity to create a therapeutic powerhouse that increases the likelihood of getting stem cell therapeutics to the patients.

"The private partner or the awardee, the applicant, could be an established company, a spin-off, or a new company altogether that's formed by a team of professionals that have come out of either pharma, biotech, or could be investors. They will be judged on and will propose an exceptional business plan to aggregate these technologies, give the rationale for this, propose how this will create value and bring return to the stakeholders. And they would come in with a leadership team that would be judged on their track record and their strength that they bring to the initiative and the likelihood they'll be able to execute on the business plan and bring about the goals of this initiative. The entity will be required to come in with significant investment upfront and utilize this to execute on the business plan while CIRM will fund the support of the development of the in-licensed projects.

"The CIRM award is anticipated to be approximately $75 million of funding over a five-year period. It could be in the form of a loan, but the applicant, the awardee, would be required to match the total award amount, regardless of how much of the loan they take on, dollar for dollar upfront. The awardee would also be required to comply with the pricing access and march-in provisions of CIRM's IP regulations and to provide the licensor of the CIRM projects with the right of first refusal should they decide to shelf or cease development of that particular technology." 

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