California Stem Cell Agency Set to Fund $182 Million in Research in Next Six Months

Click on the above to see a recording of today's online meeting of the CIRM Science Committee

California's newly rejuvenated stem cell program today kicked off its fresh spending plans with a $182 million effort that focuses heavily on awards that could lead more quickly to actual treatments.

The plan was approved by the Science Committee of the governing board of the California Institute for Regenerative Medicine (CIRM), as the $12 billion agency is formally known. CIRM was running out of money until voters this fall approved Proposition 14 and rescued the agency from financial oblivion. 

The $182 million plan for the first half of next year represents CIRM's first major dip into its new, $5.5 billion bucket that was created by narrow voter approval of Proposition 14. The full board is expected to approve the new research budget at its Dec. 21 meeting. 

The program allots $100 million for possibly 10 clinical awards in the next six months. Translational research will receive $60 million (11 awards). "Quest" research is allotted $22 million for 15 awards. Quest awards involve early stage, basic research while translational research involves attempts to move basic research into the clinical level. 

Clinical trials are the last hurdle to clear before a treatment can be approved by the federal government for widespread use. No CIRM-financed stem cell treatments have yet received that approval since the agency began its work 16 years ago. CIRM, however, has helped to fund 68 ongoing clinical trials. 

The Science Committee has 10 members, at least six of whom are linked to institutions or businesses that could apply for CIRM funding.  While members of the 35-member CIRM board can vote on the overall research budget and also "concept" plans for such things as Quest and clinical research, they are barred from voting on specific applications from institutions that they are connected to.  

The Science Committee also approved changes aimed at increasing diversity in CIRM-related research and requiring greater data sharing by scientists. The committee strengthened the staff-proposed diversity language by also proposing scoring applications on how they beef up diversity among researchers. Details on that are yet to be worked out and will be presented to the full board on Dec. 21. 

A call for more diversity among researchers was aired last month at a meeting of the only state entity charged with reviewing CIRM's financial affairs. 

The data-sharing requirement triggered some concern about whether it would be a disincentive to some researchers who feared losing control over their intellectual property.  However, CIRM CEO Maria Millan said the agency was treading carefully to take those concerns into consideration. 

Researchers will be able to apply for the awards shortly after Jan. 1 when detailed program announcements will be released by CIRM. 

Here are links to the changes approved for the Quest program, the translational program and the clinical programs. 

$5.5 Billion California Stem Cell Measure Holding Steady for Approval; Stem Cell Agency Set Today to Give Away $24 Million

 As directors of the $3 billion California stem cell agency are scheduled to meet later this morning, narrow voter approval of a ballot measure aimed at saving the agency's financial life is nearing a conclusion. 

The latest count by state election officials  at 8:18 a.m. PDT today continues to show Proposition 14 holding steady with 51.1 percent of the vote, a figure that has been virtually unchanged since last week. The percentage translates to 7.9 million votes. 

Negative votes are running at 48.9 percent or 7.6 million. State election officials are estimating that "unprocessed" ballots are running at 1.5 million. The figure is the latest from the state. H however, it is old, dating back to Tuesday at 6 p.m. PDT.

The agency is running out of the $3 billion originally provided by voters in 2004. Proposition 14 would provide the agency with $5.5 billion more over the next 10 to 15 years and make major changes in the agency, including a significant expansion in what it can fund.  The money would be borrowed by the state. No provision for funding the agency is provided after the money runs out again. 

The new ballot measure will not go into effect until after it is officially certified, which may not happen for another 28 days.

The meeting of the stem cell agency's board begins at 10 a.m. PDT today and is open to the public, including questions. Its agenda includes the award of as much as $21.7 million in clinical level grants and $2.5 million for basic research.  Several researchers have sent letters to the board appealing rejection of their applications by reviewers, who make the de facto decisions on the awards.

The meeting agenda also includes a proposal involving a possible loan to Viacyte, Inc., of San Diego. The agency has already pumped $52 million into the firm. Information on the meeting agenda concerning the loan is a bit laconic. The California Stem Cell Report has queried the agency for more details. 

Inside California Stem Cell IP: A Look at the Royalty Money Trail

The $4.9 billion purchase last week of a California immunology firm is a rich deal for Forty Seven, Inc., but it is no immediate cash cow for the state's stem cell agency, which backed the firm's "don't-eat-me" research with upwards of $45 million.

CIRM's intellectual property (IP) regulations, which have received little public attention, are key to determining who gets what out of the arrangement. However, at this point, nobody knows how much or when any cash will come back to the state. 

The IP rules are currently aimed at financing more research and production of  therapies as opposed to generating the most income possible for the state. It is a balancing act, according to CIRM. 

At the request of the California Stem Cell Report, the agency last week answered a number of questions concerning some of the details that come into play in cases such as Forty Seven. The upshot is that a grant, which is what Forty Seven received, can be converted to a loan, paid off and thus end any obligation to pay royalties. 

Here is how the agency's intellectual property rules work, starting with the sale of Forty Seven. 

The per share price to be paid for Forty Seven is $95.50, up 1,600 percent since last October's low of $5.53. The agency does not share in that run-up. State agencies are barred by the State Constitution from owning stock. 

The stem cell agency has awarded Forty Seven directly $15 million for its cancer-fighting trials. Noted Stanford researcher Irv Weissman separately has received $30 million from the agency, much of which went for the basic research behind Forty Seven. Weissman, who co-founded the firm and is on its board of directors, stands to gain $191 million. Stanford is set to receive $67 million.

Any payout for the agency, known formally as the California Institute for Regenerative Medicine (CIRM), is down the road. If a profitable treatment ultimately emerges, the state -- not the agency -- might get some royalties through the company or Stanford.  In that case, state lawmakers could spend the funds for anything from salaries at the Department of Motor Vehicles to purchase of office furniture. 

Or Gilead Sciences, Inc., the new owner of Forty Seven, could convert the CIRM grant to a loan, which then could be paid off with interest, ending the possibility of extended royalties from the company. In that case, the payoff would go to CIRM for research purposes -- not the state's general fund. 

In 2015, when CIRM directors approved the loan conversion provision, Randy Mills, then president of the agency, said the mission of the agency is to produce therapies -- not to generate large profits. He said loan conversions would recycle CIRM cash with interest into more research faster than royalties. 

Here is the text of our questions and CIRM's responses concerning IP rules,  with more details on how it all works.  

California Stem Cell Report: Can you refresh me on the date of the changes in the IP rules related to the loan conversion and the justification? .... My recollection is that conversions were authorized because of pressures from grantees. 

CIRM: The interim loan conversion policy was implemented in May 2015. Our then President and CEO Randy Mills recommended the changes, and the CIRM Board approved them, to try and bring in more for-profit applications. He felt the existing policy added complications on the commercial development path for therapies, making it less attractive for for-profit companies to apply to us for funding. Engaging with for-profit companies is key to delivering on our mission so we made the changes, not because of pressure from existing grantees or anyone else. 

Transcript of Intellectual Property Subcommittee May 19, 2015

and

Transcript of CIRM governing board meeting May 21, 2015 
(The meetings involved approval of the current IP regulations.)

California Stem Cell Report: Is it accurate to say that a company can escape any obligation to pay royalties by unilaterally converting a grant to a loan? Can CIRM do anything to prevent the company from such a conversion? (See here for language from an federal document filed by Forty Seven.)

CIRM: Our goal is to always give every project we fund the greatest chance of success and that often means creating the easiest path for companies we fund to partner with other commercialization partners that have the capital to successfully bring the program through the necessary steps to move the given therapeutics to market and to patients. If a project is successful, and clearly that’s why CIRM was created, the company is still obligated to repay the funding we provided it but it has the option of doing so in a lump sum or to allow that repayment through potential, but still uncertain, future royalties.

As these policies were discussed and approved by our Board it does not make sense for us to try and prevent a company from following our rules.

California Stem Cell Report: Does the proposed new initiative do anything to prevent that from occurring or affect it in any way? 

CIRM: The new initiative does not address this issue. Our Board has, as it always has had, the flexibility to change the IP policy if it so chooses.

California Stem Cell Report: Can you please clarify the language concerning the interest rate on the loan? Does the interest take effect retroactively beginning with the date of the award? In other words, let's say the award was made in 2016. The company converts to a loan in 2026. Does it have to pay interest for all of those 10 years? 

CIRM: Yes, the interest takes effect retroactively but only to the date of each individual payment. Since the grant is paid out over the life of the Award, each payment is treated individually in determining the compounded interest up the conversion date. The specific interest rates are determined by the stage of clinical development at the time of election.

California Stem Cell Report:  Can you also clarify the following language from the SEC document related to how the total interest amount is calculated. It raises a possibility that interest could be as much as 30 percent in year in some cases. The phrase I am referring is "plus zero to 30% per annum that varies depending on the stage of the research and the stage of development at the time the election is made."

CIRM: The election point at the time of conversion as well as the starting point of the CIRM-Funded Project affects the return. Please see page 29 of the CIRM GAP linked here for the chart.

California Stem Cell Report: If a unilateral conversion is allowed, doesn't that adversely affect the interests of the state of California by providing a relatively inexpensive way to avoid paying potentially many more millions to the state?

CIRM: There is a balancing act between the CIRM’s mission - accelerating stem cell therapies to patients with unmet medical needs - and a financial return back to the State. In the interests of funding for-profits, who are generally better prepared to advance clinical projects to cure patients, this loan conversion policy was adopted by the CIRM Board. Since it is a loan, the money returns to CIRM for further reinvestment in other projects. Indeed, without the adoption of the conversion option by our Board it is possible that companies like Forty Seven Inc. might not have applied to CIRM for funding. Before these new regulations were introduced CIRM had few for-profit companies applying for our funding.

Bloomberg News: $191 Million Payout for Stanford Researcher in Immunotherapy Deal

Renowned stem cell scientist Irv Weissman of Stanford University stands to gain $191 million from the sale of a Menlo Park, Ca., immunotherapy firm that he co-founded to develop a cancer treatment, Bloomberg News reported this afternoon.

The firm is Forty Seven, Inc., whose scientific underpinnings were developed in Weissman's lab. Gilead Sciences, Inc., of Foster City, Ca., announced Monday that it is buying Forty Seven for $4.9 billion which amounts to a price of $95.50 a share.

Weissman serves on the company's board and holds 4.2 percent of the company's stock, according to the article.

Weissman was not immediately available for comment on the report.

The article by Devon Pendleton said,

"Stanford’s payout from the sale is $67.1 million. Other winners from the deal include billionaire Stanley Druckenmiller’s Duquesne Family Office and the Rockefeller family’s venture capital firm Venrock Associates. The entities, which own stakes of 0.8% and 1.2%, respectively, acquired their holdings in the last quarter of 2019, filings show, when the shares traded for as low as $5.53 and as high as $45.39."

Pendleton wrote that Weissman "credits the support of the nonprofit Ludwig Institute for Cancer Research and the state-funded California Institute for Regenerative Medicine (CIRM) with funding Forty Seven’s early clinical research and development."

CIRM, commonly known as the state stem cell agency, awarded Forty Seven directly and Weissman $30 million for earlier research. The agency does not stand to benefit from the sale unless the proposed therapies reach the marketplace and generate a profit. That could trigger royalties to the state.  However, the agency has said that the deal validates its efforts to successfully stimulate research that leads to a product and fills an unmet medical need.

Bloomberg said,

"Biotechs saw it as too dicey to invest in at an early stage, Weissman said. So he and (Ravindra) Majeti formed Forty Seven, with Stanford getting an equity stake and future royalties that it agreed to share with the state."

Majeti is a professor of medicine at Stanford, a director of Forty Seven and also held stock. The Bloomberg piece did not identify his gain.

(A slightly earlier version of this story attributed the initial report to the Los Angeles Times. It was a Bloomberg News story that was picked up by the Los Angeles Times.) 

Tentacles, Railroads and California Stem Cell Finances: Looking for Greater Returns

The tentacles of railroad greed were the subject of many a political
cartoon in 19th and early 20th century California. 

California's $3 billion stem cell agency owes a "debt," you might say, to the Golden State's railroad, robber barons of the 19th century. 

The railroads were regarded as an evil "octopus," preying on helpless Californians. And the long-ago, railroad power over the state and its economy was a key reason behind a provision in the state Constitution that bars the state and its stem cell agency from owning stock in companies. 

The rationale was that buying railroad stock with taxpayer dollars amounted to unnecessary and most likely corrupt financial assistance to the "octopus" -- the old quid-pro-quo thing. 

Today the prohibition on owning stock in companies rankles some directors of the California Institute for Regenerative Medicine (CIRM), as the stem cell agency is formally known.

The matter revolves around the desire to secure a better financial return on CIRM's investment in companies such as Forty Seven, Inc., whose stock has skyrocketed in the last four months. 

The agency has pumped many millions into Forty Seven, which is testing an "eat me" immune therapy aimed at destroying cancer cells. The state could realize a return on royalties at some point --  if an "eat me" treatment ever makes a profit. But meanwhile, other private investors in the company are enjoying a handsome return, if they bought Forty Seven stock at the right time and sell at the right time. 

CIRM Director Jeff Sheehy has long been concerned about finding a way to generate better financial returns on CIRM's financial support of stem cell companies, along with the basic research that that the agency backs. 

In response to a query last week, Sheehy said in an email to the California Stem Cell Report, 

"You're asking the right question...and a central one as voters consider more funding for CIRM. Clearly in this instance (Forty Seven's stock price hike), a lot of money will be made off research funded by CIRM. 

"What exactly is the state's cut?  Will the state see any money if (the purchase of Forty Seven by) Gilead goes through and if not, why?

 "If the problem is the inability of the state via CIRM to hold equity, why doesn't the new measure fix this so that the investment by state realizes a fair return to our taxpayers? 

"I note that Stanford will make out like a bandit on this deal, and it's ironic that the (stem cell agency) board had to force Stanford to fulfill its commitment to co-fund another project with a similar product, that btw, is also licensed to Forty Seven.  

"Stanford has received about 12.5% of CIRM's funds. With the next measure, the same percentage going to this institution will mean that Stanford will have received over $1 billion from the state.  Should we not guarantee that the state receives its full share so it can fund healthcare, schools, teachers, community colleges, mental health needs, ending homelessness etc?"

The new measure that Sheehy refers to is a proposed ballot initiative to give the agency an additional $5.5 billion. CIRM is running out of money and will begin closing its doors if voters do not approve the proposal next November. 

While the complex measure significantly broadens the scope of CIRM operations, it does not alter the state Constitution. Doing so would require more signatures to qualify the measure for the ballot (meaning more cost to the initiative backers). 

A major constitutional change could also open a significant, new opportunity to attack the stem cell program and imperil passage of the current proposal.

During its 15-year history, CIRM has not conducted a major public examination of removing the ban to generate a better payoff for the state. The fact that the ban has been around for a century may testify to the political difficulties of such a task.

As for Stanford, it is the No. 1 recipient of CIRM awards with a total of $338 million and has had a representative on the CIRM board since its inception, a situation not uncommon with other recipient institutions. The agency has rules in place to prevent legal conflicts of interest. But about 90 percent of CIRM funding has gone to institutions with board representation, according to an accounting by the California Stem Cell Report. 

Leland Stanford, Wikipedia image

A final note of irony: Stanford University was founded by Leland Stanford, one of the four robber barons of California. He and his colleagues initially earned their reputation by building the western half of the transcontinental railroad with government funding. They were paid for each mile of track they laid, generating a hasty process that did not encourage quality work. 

Wikipedia adds,

"In 1975 the student body of Stanford University voted to use 'Robber Barons' as the nickname for their sports teams. However, school administrators disallowed it, saying it was disrespectful to the school's founder."

Counting the Stem Cell Beans: Inside California's First Stem Cell Royalty Check

Readers who really want to dig into the numbers involving the first royalty check generated by  research funded by the $3 billion California stem cell agency have a special treat.

Below is a look at how the royalty payment by the City of Hope was calculated. The royalties grew out of an arrangement with Mustang Bio, Inc. of New York City.

 First Royalty Payment Generated by California  State Stem Cell Agency by DavidJensen on Scribd

California Stem Cell Agency's First Royalty Payment: Beginning of a $1 Billion Flood? No One is Saying

The check is in the mail for California's $3 billion stem cell research effort. But it is something of a secret.

So reports Ron Leuty of the San Francisco Business Times concerning the expectation that the agency, formally known as the California Institute for Regenerative Medicine (CIRM), would generate $1 billion in royalties. In an article online yesterday afternoon, Leuty said,

"We are expecting the first check to be delivered to the state very soon," CIRM spokesman Kevin McCormack said in an email.

"Yet even as a public state agency, CIRM officials are holding tight to key information about the first royalty check: How large (or small) is the check? When will the check actually be forwarded to the general fund? And from which CIRM-funded project did it spring?

"'The royalty check is something that is still being worked out so it’s premature to say anything at the moment,' McCormack said in a followup email. 'Sorry to sound so secretive but it is a big deal, the first of what we hope will be many such repayments for the state’s investment.'"

During the ballot initiative campaign that led voters in 2004 to create the stem cell agency, supporters said that the agency's research could generate up to $1.1 billion in royalties. None have yet surfaced. And at least one description of the royalty promise has called it a "cynical ruse."

Clarifying the Path to Cash: California Looking for Money from Its Stem Cell Investments

CIRM chart

The $3 billion California stem cell agency is moving to revise its rules for royalties and revenues that may be derived from its research, simplifying them while focusing more sharply on likely cash-generating products.

The proposal comes before the agency's Intellectual Property  (IP) Subcommittee Thursday at a 10 a.m. meeting that has a number of locations throughout California where the public can participate.

A document prepared for the meeting said the complexity of the existing IP regulations has led to disagreements, created an excessive administrative burden and treated for-profit and non-profit enterprises differently.

John M. Simpson of Consumer Watchdog in Santa Monica, Ca., who participated extensively in the early development of the IP rules, praised the proposed changes.

Responding to an inquiry from the California Stem Cell Report, he said:

"The proposed changes in the IP regulations should simplify oversight for CIRM and make expectations for all awardees clearer.  It puts nonprofit and commercial entities on the same footing with regard to their revenue sharing responsibilities. Most importantly the new rules will emphasize getting revenue for the state  from  companies who actually commercialize the results of CIRM-funded research.  That’s exactly as it should be. 

“Nonetheless, despite the overblown promises of Prop. 71 campaigners, the state as yet to realize any revenue from research CIRM has funded.  There could be a little money this year."

"This change in the IP rules makes sense and is the best way forward,  but realistically I doubt the state will ever see significant revenue from the research it has funded."

Proposition 71 created the California stem cell effort, known officially as the California Institute for Regenerative Medicine or CIRM. One of the promises of the 2004 campaign was that it would lead to as much as $1.1 billion in revenues to the state. No royalties have yet been announced. 

Telephonic locations for the public exist in Irvine, Napa, South San Francisco, San Diego and San Francisco in addition to the agency's headquarters in Oakland. Specific addresses can be found on the agenda, which also includes directions for a listen-only audiocast.
 

The Royalty/IP Angle on California's Proposed $150 Million Stem Cell Powerhouse

California's stem cell agency was born in 2004 with promises to voters of up $1.1 billion in royalties from new, effective and lucrative therapies. At the time, however, creation of a unique, $150 million, public-private stem cell company was not even a gleam in anybody's eye.

This Friday, the agency is scheduled to act on details of the financing structure for such a company with the hope of luring industry into a deal with the Oakland-based agency. The bold and risky proposal -- dubbed ATP3 -- has raised questions, including some from readers of this report, about how the intellectual property (IP) and royalty provisions would work.

The California Stem Cell Report last week queried the California Institute for Regenerative Medicine (CIRM), as the agency is formally known, and again this week about the matter, which is a tad complicated but very important indeed. To be clear from the start, CIRM does not own any IP, just the rights to some royalties which would flow to the state's overall budget.

Here is what Kevin McCormick, senior director of communications, told us today via email:

"It is very complex as its something completely new.  

"For the royalties that the (research) grantees negotiate with ATP3, the (state's) general fund will take a percentage of the licensing revenue that the grantees received.  All revenue-sharing fees go to the general fund. 

"If the ATP3 Newco (the hypothetical company) “takes over” a current CIRM grant and becomes the grantee of record, it has the same rights as any other grantee.  For CIRM 2.0 awards, there is an option right to convert the grant to a loan.  Under a loan, the payback of the loan returns to CIRM.  For CIRM 1.0 awards, no such conversion right exists.
If the ATP3 convertible note is sold, the proceeds of such sale will return to CIRM. (The agency plans to use $75 million in convertible notes to help finance the company). In such a case, the grantees’ revenue-sharing obligations will still exist.

"Here is an example:

"Grantee X has a cell therapy which was developed under a closed Disease Team 1 grant and is in Phase I clinical trial under a current CIRM 2.0 CLINI grant.  NEWCO licenses the cell therapy IP and data from Grantee X.

"A)  If Newco decides to take over the current CLINI grant, it will become the Grantee of record for the CLINI grant and have revenue-sharing obligations to the General Fund for that grant (which may be converted to a loan).  Grantee X will have a separate revenue-sharing obligation to the General Fund for the closed Disease Team 1 grant.  In this scenario, the General Fund may have two sources of revenue from the two different grants.

"B)  If Newco decides not to take over the current grant, then Grantee X will have revenue sharing obligations under both of the grants back to the general fund."

Last week McCormick also addressed some of the issues involving what might be considered the "yield" on the state's proposed $75 million investment with a partner that would also put up $75 million to create the company. He said,

"In addition to the state general fund, David, we would also identify CIRM, potential grantee/researchers and developers, academic institutions in the state, and more broadly the citizens of California.  CIRM will benefit in the event the program is successful, ensuring additional funds are available to CIRM to leverage CIRM research programs across the spectrum.  Existing and future grantees, researchers and institutions will benefit by opening up commercialization opportunities and providing a path forward for development of CIRM-funded research. As for the general fund, by providing an avenue for commercial exploitation of existing CIRM-funded IP (which are subject to existing revenue sharing rules under CIRM’s IP policies), the general fund will benefit by the commercial success of these projects that might not otherwise occur."

Royalties and California Stem Cell Research: $1.1 Billion Promise Still to be Fulfilled

California’s 11-year-old stem cell research effort was born with the extravagant promise that it would generate something like  $1.1 billion in royalties that would flow into the Golden State’s coffers.

None of that bonanza has yet surfaced, but there is no doubt that scientific research generally has the potential to generate economic value for state entities. A case in point was news this morning in the Los Angeles Times that the sale of drug rights (intellectual property or IP) held by UCLA will generate “hundreds of millions of dollars.”

The story by Teresa Watanabe said the deal involved a prostate cancer drug developed at the campus. She reported,

“Royal Pharma, a New York-based pharmaceutical company, paid $1.14 billion for royalty rights to the drug known as Xtandi. It was the largest-ever technology transfer deal involving a University of California invention.”

 California’s $3 billion stem cell agency is not involved in the UCLA-Royal Pharma arrangement. However, the agency, known formally as the California Institute for Regenerative Medicine (CIRM), has acquired other bits and pieces of IP as the result of the $1.9 billion that it has given to researchers over the last decade.

So far the agency has not been able to turn that IP into cash largely because no therapies have reached the marketplace, although the agency has a number of clinical trials underway.

Back in 2005, the royalty promises made during the ballot campaign that created the stem cell agency came under fire as the result of actions by the man who headed the campaign, Robert Klein. He also served as the agency’s first chairman.

Bernadette Tansey, writing in the San Francisco Chronicle, reported,

“The billion dollars in royalties that voters were told could flow to the state if they passed California's $3 billion stem cell research funding initiative in 2004 may turn into an empty promise.”

Stuart Leavenworth, then editor of The Sacramento Bee’s editorial pages, wrote,

“In marketing this initiative, proponents said the state would receive not only miracle cures and reduced medical costs, but also up to $1.1 billion in royalties from new stem cell innovations.

“Now we are learning that this promise, at best, was misleading. At worst, it was a cynical ruse.”

The issue turned on whether tax-exempt bonds would be used to finance the agency, which depends solely on state borrowing. Federal tax laws restrict the use of such bonds. To date, however, no tax-exempt bonds have been used to support CIRM, according to last report.

The use of taxable bonds, however, raises the cost of borrowing and the cost of the research. Estimates in 2004 were that that the total cost of the agency would exceed $6 billion, including the interest on the borrowed $3 billion. No revised, upward estimate has been made public, if it exists.

The issue of the agency’s IP, its possible value and protection has surfaced only intermittently over the years. The most recent mention came last November in the agency’s plan for spending its last $900 million. (The agency expects to run out of cash for new awards in less than four years.)

The agency’s five-year plan said that it would “demand creation (from universities)  for the out-licensing of CIRM-funded technologies with a greater opportunity to achieve a financial return.” Aligned with that is a $75 million proposal to partner with specific enterprises and give them pick of the agency’s best research that does not currently have a partner. (See here and here.)

Relationships with universities can be touchy at the agency because its governing board includes top executives from virtually all of the major, academic stem cell research centers in California. Sometimes those board members can be protective of the interest of their institutions, which have received hundreds of millions of dollars in agency cash over the years.

For those who want to dig more deeply into CIRM’s IP policy, the regulations can be found here and here.

Big Money and Big Science: The Battle Over CRISPR

CRISPR: It’s simply a billion dollar matter of learning more or earning more. At least that’s the view of a Pulitzer Prize-winning columnist at the Los Angeles Times.

“A case of big money shaping science” said the headline on Michael Hiltzik’s piece on the website of California’s largest circulation newspaper. He said the tussle over the patent may be the 21st century’s “era-defining patent fight.”

Hiltzik wrote:

“The contestants are the University of California and the Broad Institute, a Harvard- and MIT-affiliated research foundation endowed by Los Angeles billionaire Eli Broad. At stake are the rights to a breakthrough gene-editing technology known as CRISPR — and more precisely, to billions of dollars in royalties and license fees likely to flow to whichever claimant prevails before the U.S. Patent and Trademark Office (and in the almost inevitable appeals in court).”

CRISPR is a new technique that allows relatively easy editing of human genes. Its potential use, with the possibility of permanent changes in the human race, has triggered an international hooha. Many leading scientists are calling for a moratorium until all the ramifications are fully explored.

The $3 billion California stem cell agency last Thursday held a day-long conference on the issue and announced it would hold a series of hearings into the matter, raising the likelihood of changes in research standards for California stem cell researchers.

The patent dispute, replete with the use of what Hiltzik notes are “outdated legal standards,” involves who was first with CRISPR -- Jennifer Doudna of UC Berkeley or Feng Zhang from Broad.

Both researchers say the patent fight is a distraction. But Hiltzik also wrote,

“Other scientists see the battle as a distasteful example of the influence of big money — and the race for Nobel credit — on basic research. ‘Having prizes and patents involved has transformed what should be one of the greatest success stories for basic research into this nasty, catty fight in which people are behaving poorly,’ says Berkeley biologist Michael Eisen, a colleague of Doudna's and the head of a lab that stands to gain resources if UC wins the patent fight.

“He added on his blog: ‘Neither Berkeley nor MIT should have patents on CRISPR, since it is a disservice to science and the public for academic scientists to ever claim intellectual property in their work.’ Indeed, neither the Doudna nor Zhang teams were the first to identify CRISPR or to use it; the history dates back as far as 1987 and involves researchers in Japan, Spain, Chicago, Quebec and other places’”

Hiltzik, author of the well-received book, "Big Science," said the real question involving CRISPR is whether "the future of the technology will be guided by the need to learn more or the opportunity to earn more."

Hiltzik’s column illuminated the enormous financial imperatives involved in the use of the CRISPR, which are publicly largely a side issue at sessions involving such agencies as California’s stem cell research effort and some international groups. However, the National Academy of Sciences is holding a session next Wednesday that includes a panel devoted to the CRISPR industry. Alta Charo, chair of the academy meeting, told the stem cell agency last week that she hopes that the scope of the market and its financial implications will be explored in more detail at the session, which will be webcast live.

Charo said she hopes for recommendations from her group by the end of the year concerning genetic modification of human embryos. The stem cell agency appears to be moving at the same sort of speed. All of which is a good thing since the lure of huge revenues will certainly stimulate even faster action by profit-hungry companies.

California Stem Cell Audit: Praise for Mills but More Work Needed on IP, Conflicts of Interest

The California stem cell agency this week received good marks for changes made by its new president, but it is also being told that it needs to improve how it tracks potential royalties and how it prevents grant reviewer conflicts of interest.

A "performance audit" by Moss-Adams, a Seattle business consulting firm, made 12 recommendations for the $3 billion research enterprise. One of the 12 was to implement the unfulfilled recommendations made by Moss-Adams three years ago.  Seven of the 24 from that audit still need more action, the firm said.

On Thursday, the agency's governing board is scheduled to discuss the latest audit at a meeting in Berkeley.  The study is required by state law every three years. The agency's scientific performance, however,  is specifically excluded from being examined. Moss-Adams is scheduled to receive $230,000 from the agency for the audit, which was for the 2013-14 year.

On Sunday, the California Stem Cell Report covered the deficiencies involving disclosures of the financial interests of grant reviewers.

Other areas of concern included the need for better tracking of intellectual property that could mean royalties for the state, more timely review of progress reports from grantees, more timely, formal evaluation of employees and keeping up-to-date on technology related to grant management and agency efficiency.

Under the subject of "commendations," Moss-Adams said that CIRM had "many strengths."  The consultant said the agency has made "significant strides" in three areas: the grant management system, grants process improvements and "organizational culture."

The grants process comment referred to CIRM 2.0, the fast-track funding program initiated by Randy Mills since he became president a year ago. The organizational culture commendation also involved Mills' efforts, but touched indirectly and delicately on the resignation of Robert Klein as chairman and the election of Jonathan Thomas to replace him in June of 2011. 

Moss-Adams reported "enhanced seamlessness" between the president's and chairman's offices. Proposition 71, which created the agency, dictated a controversial dual executive situation that has troubled the agency since its inception.

The audit found significant deficiencies involving the treatment of CIRM employees, some of which have been addressed in a positive way already by Mills. One example cited by the audit involved performance evaluations that are tied to pay increases. It said that evaluations that were scheduled to occur in 2013-14 did not actually take place until January of this year.  

Moss-Adams said the agency also needs to do better in monitoring and protecting its intellectual property (IP), which could generate royalties. Without tight tracking of the IP and inventions funded by CIRM research, the state could lose out on revenue. Backers of Proposition 71 told voters in 2004 that the state could receive more than $1 billion in royalties from CIRM research. So far, none has resulted. 

Moss-Adams said that royalties are now more possible because the agency is backing late stage research that is more likely to make it into the market place. 

Moss-Adams said more work was needed on implementing the seven recommendations from three years ago, including those involving IP, the transition plan to deal with the possible demise of the agency and a grants outcome database. 

WARF, Oatmeal and the Patenting of Life

The battle over the WARF patent on human embryonic stem cells caught the attention of the Los Angeles Times last week, which added some oatmeal and history to the tale.

Michael Hiltzik, a business columnist with the largest circulation newspaper in the Golden State, reported on the challenge by Consumer Watchdog of Santa Monica, Ca., Jeanne Loring, head of the stem cell program at Scripps, and the Public Patent Foundation of New York.

The trio on Friday asked the U.S. Supreme Court to intervene and affirm their right to sue(See here and here.).  Hiltzik said, 

“The group has challenged the patent on two grounds: first, that the work covered wasn't novel or original, and second, that the Supreme Court has ruled that a ‘product of nature’ can't be patented.   

“All this is happening, researchers say, because WARF (Wisconsin Alumni Research Foundation) made exceptionally broad claims for its patent rights and exercised them very aggressively. This is, in fact, WARF's business; the nonprofit foundation was formed in the 1920s to exploit a patent issued to a University of Wisconsin professor on fortifying food with vitamin D, which it promptly licensed to Quaker Oats. By 1930, the deal was producing $1,000 a day. WARF also owns the rights to the drug Warfarin, which is named after the foundation.”

Hiltzik continued,

“The foundation demanded steep licensing fees of $5,000 a year from academic researchers and as much as $400,000 from commercial firms, plus royalties from product sales. 

“Eventually this backfired. When San Diego researcher Jeanne Loring was confronted by a demand for $75,000 a year from her start-up company—‘that's a lot, when your entire budget is $75,000,’ she told me--she looked closely at the patents only to conclude that they should never have been issued. 

“The key to (Wisconsin researcher Jamie) Thomson's success, she contends, was that he was able to get his hands on human embryos at a time when other researchers could not; the techniques he used had been applied to embryos of other species and shown to be effective. ‘Had I or any other stem cell scientist been given human embryos and sufficient funding, we could have made the same accomplishment, because the science...was obvious at the time,’ Loring says in a court declaration.  

“WARF disagrees. Thomson's success, it says in its own legal filings, ‘was anything but routine....He identified the critical steps needed to generate and culture these cells....No prior art reference taught these insights.’"

WARF Stem Cell Challenge: Appeal Says Patent Involves Cells Not 'Markedly Different' Than Found in Human Body

The battle over whether excessive protection of stem cell IP stifles research that can lead to cures was engaged once more today with a broadside against the powerful Wisconsin Alumni Research Foundation(WARF).

The attack came from California’s Consumer Watchdog organization and New York’s Public Patent Foundation which have been tussling with WARF for seven years. The dispute over intellectual property (IP) centers on a patent on human embryonic stem cells held by WARF and which the other organizations are challenging in a federal appellate court in Washington, D.C.

More specifically, the patent involves research by Jamie Thomson of the University of Wisconsin, and now also of UC Santa Barbara, in which he isolated human embryonic stem cells.

Consumer Watchdog of Santa Monica, Ca., this morning issued a news release concerning the organizations’ appellate brief that was filed last week. It cited the U.S. Supreme Court ruling earlier this year that said genes cannot be patented because they exist in nature.  The lead attorney in that successful case, Dan Ravicher of the Public Patent Foundation, is also handling the challenge to WARF.

The news release said that Thomson deserved credit for being first to isolate and maintain human embryonic stem cells, but “his achievement was not the result of his having created a patentable invention.” The brief said that the work involved was “obvious.” One of the main reasons for Thomson’s achievement, the news release said, was that “he had access to human embryos and financial support that other researchers did not have.”

The brief said,

“The claims at issue here cover human embryonic stem (hES) cells that are not markedly different from those in our bodies. Thus, the claims are invalid under 35 U.S.C. § 101 for covering ineligible subject matter, an issue the Court may and, as a matter of judicial economy and public policy, should address.”

The challenge to the WARF patent has drawn impressive support in the scientific community, including  Jeanne Loring, now director of the Center for Regenerative Medicine at The Scripps Research Institute, who was involved from the start. In 2007, Loring wrote in Nature that she became involved in the case because “scientists have an obligation not only to perform research but to make sure that our research can benefit the society that supports it.”

The news release said,

“Later in the case Dr. Alan Trounson, then of Australia’s Monash University and now president of the California Institute for Regenerative Medicine, Dr. Douglas Melton of Harvard and Dr. Chad Cowan of Harvard filed affidavits supporting the challenge.”

Here is a link to legal documents and other material in the case.

California Stem Cell Agency on Lacks: Informed Consent Cannot Remove All Questions

(Photo and caption from the stem cell agency blog item this morning.)

The $3 billion California stem cell agency today weighed in on the Henrietta Lacks-NIH arrangement restricting the use of her cell lines in research.

Writing on the agency's blog, Geoff Lomax, the agency's senior officer for its standards group, noted that the DNA sequence of her cell line was published without the knowledge of her descendants. Lomax said,

“The family was understandably upset by the lack of consultation and in response the research team removed the genome data from public access.”

Lomax continued,

“CIRM has benefited from these efforts. We are currently supporting an initiative to collect tissue samples from thousands of people with a range of incurable diseases and create reprogrammed iPS cells from those tissues (here's more about that initiative). These cells will be a resource for scientists worldwide working to understand and treat diseases. Part of this initiative includes a consent process to make sure people who donate fully understand how their cells will be used. (This process is formally called informed consent.) 

“The informed consent process includes a form that identifies the purposes of the research and describes the way cells will be used. We are also developing education materials that will help potential donors quickly and easily understand the basic aspects of research that will be conducted with those cells. The end result of this collaboration with our grantees will be a process that is truly informative to donors.

“The informed consent process can’t entirely eliminate all future questions on the part of the donor, but it does ensure that donors have a chance to understand how their cells will be used and what information will be made public—something Henrietta Lacks and her family never had.”  

Skloots, Collins and More on Henrietta Lacks' Cell Line Deal

More details about the unprecedented arrangement involving Henrietta Lacks' cell line emerged today in a wide range of publications, including a Nature journal piece that said it was not a precedent.

The article was co-authored by Francis Collins, head of the NIH, and Kathy Hudson, deputy director for science, outreach and policy at the NIH.

“It is important to note, however, that we are responding to an extraordinary situation here, not setting a precedent for research with previously stored, de-identified specimens. The approach we have developed through working with the Lacks family is unique because HeLa cells were taken and used without consent, and gave rise to the most widely used human cell line in the world, and because the family members are known by name to millions of people.”

The restrictions on use of the cell lines came about after a flap erupted about their recent use without the knowledge of her descendants. (The California Stem Cell Report carried a commentary on it yesterday.) Rebecca Skloots, author of the best-seller, “The Immortal Life of Henrietta Lacks,” wrote about the controversy in a March 23 op-ed piece in the New York Times. She said,

In the article, Skloots said,

“Imagine if someone secretly sent samples of your DNA to one of many companies that promise to tell you what your genes say about you. That report would list the good news (you’ll probably live to be 100) and the not-so-good news (you’ll most likely develop Alzheimer’s, bipolar disorder and maybe alcoholism). Now imagine they posted your genetic information online, with your name on it. Some people may not mind. But I assure you, many do: genetic information can be stigmatizing, and while it’s illegal for employers or health insurance providers to discriminate based on that information, this is not true for life insurance, disability coverage or long-term care.

“'That is private family information,” said Jeri Lacks-Whye, Lacks’s granddaughter. “It shouldn’t have been published without our consent.'”

Nature also carried a Q&A with Collins in which he said,

“This has wrapped in it science, scientific history, ethical concerns, the bringing together of people of very different cultures, a family with all the complications that families have.”

In the Wall Street Journal this morning, Ron Winslow described the arrangement with the NIH like this.

“Under the pact, two descendants of Ms. Lacks will serve on a six-member panel with scientists to review proposals from researchers seeking to sequence the DNA of cell lines derived from her tumor or to use DNA profiles of such cells in their research. That gives family members a highly unusual voice in who gets access to personal health information.

Terms call for controlled access to the genomic data and credit to the Lacks family in papers and scientific presentations based on the research done with the DNA data.”

In an interview in The Scientist, Skloots, who was involved in the Lacks-NIH negotiations, said the Lacks family asked for her participation.

“The only reason I was involved in this is because scientists did this without the family’s consent and then it got all of this press coverage, and no one asked the question, 'Did the family give consent?' So I sort of waded back in.”

She continued, 

“That OpEd that I wrote was the first time I’d ever publicly expressed an opinion, which was, 'Really?!? Are we going to continue to not ask the Lacks family questions?' I was kind of shocked in a sense that nobody thought to raise that issue.”

The Henrietta Lacks Story and Eggs, Money and Motherhood

The legacy of Henrietta Lacks popped up again today in a piece in the New York Times that should resonate among stem cell researchers and within the stem cell industry.

It even has a current hook involving California legislation to permit women to sell their eggs for the purposes of scientific research – a bill that is now on the desk of Gov. Jerry Brown.

The issues in the Lacks saga involve ownership of human cells, trafficking in them and informed consent, all of which surface in one form or another in the state legislation.

But first a refresher on Henrietta Lacks. She was an African-American woman who died in 1951 of cervical cancer at the age of 31. Shortly before her death, physicians removed some of her tumor cells, and, as recounted in today's NYTimes article by Carl Zimmer,

“They later discovered that the cells could thrive in a lab, a feat no human cells had achieved before.

"Soon the cells — nicknamed HeLa cells — were being shipped from Baltimore around the world. In the 62 years since — twice as long as Ms. Lacks’s own brief life — her cells have been the subject of more than 74,000 studies, many of which have yielded profound insights into cell biology, vaccines, in vitro fertilization and cancer.”

But Lacks never consented to her cells' being studied, a situation not uncommon at the time, nor did her family know about the situation until 1973. The complete story was chronicled in 2010 in a best-selling book, “The Immortal Life of Henrietta Lacks," by Rebecca Skloot.

Zimmer noted in today's article,

“For 62 years, (Lacks') family has been left out of the decision-making about that research. Now, over the past four months, the National Institutes of Health has come to an agreement with the Lacks family to grant them control over how Henrietta Lacks’s genome is used.”

The particulars involving her genome are in Zimmer's story. But the article implicitly raises anew questions that make many scientists uncomfortable. Often they contend that the situation involving Lacks could not occur today because of higher ethical standards. Standards ARE higher today. But problems continue to arise in the scientific community, including the sale a few years ago of willed body parts at UCLA for $1.5 million to private medical companies.

Development of products based on human stem cells promises even greater rewards, with billion-dollar blockbuster therapies not out of the range of possibilities. Profit and the desire to record a stunning research triumph are powerful motivators. They can lead to short cuts and dubious practices, such as seen in the Korean stem cell scandals of 2006.

So we come to whether women who donate their eggs for stem cell research can give truly informed consent when they surrender all rights to whatever products may result from parts of their bodies, as is common on such consent agreements. Or for that matter, what about the men who give up adult cells for reprogramming to a pluripotent state? Can they really understand the likelihood of a billion dollar product being generated with the help of their contribution? On the other hand, can the donors also truly understand that they are probably more likely to be struck by lightning than have their body parts result in a medical blockbuster?

These considerations may seem insignificant to some in science. But to grasp their full implications, one only has to read a few of the nearly 200 reader comments today on Zimmer's article today. Here is a sample.

From Frank Spencer-Molloy in Connecticut:

“(T)the Lacks family was robbed. Scores of companies profited to the tune of tens of millions of dollars from products they made derived from Henrietta Lacks' cancerous cells. Maybe this will provide some impetus to a wider consideration of the rights patients are entitled to when their tissues are cloned and disseminated to other researchers and ultimately put to use in profit-making ventures.”

From Robbie in New York City:

“At the very least, this family needs to be financially compensated for the anguish of their discovery and for the time and energy they've put into pursuing their rights. In my opinion, they also deserve a portion of any commercial gain that's been made using the HeLa cells. It is only through having to give away money that the powerful learn manners.”

From Julia Himmel in New York City:

“It is absolutely true that scientists have had a blind spot when it came to the human element of the HeLa cells.”

The pay-for-eggs legislation (AB926) now before Gov. Brown requires informed consent from those who provide eggs. Opponents of the measure, however, argue that truly informed consent from some women could be actually impossible because of economic pressures felt by the women. Writing in The Sacramento Bee last month, Diane Tober and Nancy Scheper-Hughes said,

“Allowing a market in eggs for research would reach beyond the current pool to target women who may be motivated by dire need. How many low-income women might consider selling their eggs, multiple times, to feed their children or pay the rent?”

Even the fertility industry group sponsoring the legislation acknowledges that informed consent can be problematic. A 2012 news release from the American Society for Reproductive Medicine said, 

“Prospective egg donors must assimilate a great deal of information in the informed consent process, yet it remains difficult to determine the extent of their actual understanding of egg donation and its potential risks.”

The story of the treatment of Henrietta Lacks and her descendants is a poor commentary on science and medicine. Yet it resonates with the public, which is keenly sensitive to scientific and medical abuses, even in situations that did not appear to be abuses at the time.

Stem cell research already is burdened by its own particular moral and religious baggage. With commercialization of new, pluripotent stem cell therapies coming ever closer, the last thing the field needs is contemporary version of the Lacks affair. It would behoove researchers and the stem cell industry to walk with more than normal care as they manipulate products that are tied inextricably to visions of both motherhood and money.