Big Pharma's $100 Million Spending Plan for the Golden State

Big Pharma is going to be spending $100 million in California this year for a special effort, but none of the cash will be going for stem cells or, for that matter, any research purpose whatsoever.

The target of the spending is a ballot measure, the same sort of initiative that created the California stem cell agency. In this case, however, the proposal on the November ballot would limit prices that state agencies can spend for prescription drugs.

Writing in the Los Angeles Times this weekend, columnist Michael Hiltzik explored a bit of the ins and outs of the measure, He said,

"The so-called California Drug Price Relief Act would cap the price any state agency or healthcare program could spend on prescription drugs at the level paid by the U.S. Dept. of Veterans Affairs, which customarily receives the largest discounts of any government agency. Turning the VA’s prices into a benchmark for California could cost Big Pharma billions of dollars a year in profits, especially if the discounts were later demanded by other states or even private insurers."

Hiltzik reported that as of April 29, the opposition to the measure has amassed $68 million -- six months before the election. He said that experts estimate that at least $100 million will be spent to defeat the proposal. That could make the campaign among the most expensive in California history.

Fueling the debate are the skyrocketing prices of some drugs. The issue has surfaced in the presidential campaigns with both Donald Trump and Hillary Clinton taking on the drug industry. Trump even talked about squeezing "$300 billion" out of Big Pharma. All of which means that the California battle is likely to attract considerable national attention.

Meanwhile the hooha has helped to dampen the outlook for the industry this year, which does not necessarily bode well for some of California's ambitious plans to push stem cell therapies into the marketplace. Expectations of lower revenues may well suppress industry's enthusiasm for such things as the stem cell agency's proposal to create a $150-million, public-private stem cell "powerhouse."

The Hard Business of Stem Cell Economics and Patient Needs

Premature clinical trial shutdown?

Implications for California stem cell agency

The vagaries of Big Pharma and development of stem cell therapies -- plus the frustrations of a prominent Stanford researcher -- were the topic this week in a major California newspaper.

Irv Weissman, Stanford photo

The researcher is Irv Weissman, head of the stem cell program at the Palo Alto university. The companies are Sandoz Pharma, Ciba-Geigy and Novartis. The story also includes a $392 million deal involving Weissman.

The basic storyline, as reported June 14 by Lisa Krieger of the San Jose Mercury News, is that years ago Weissman developed a “unique way to grow and deliver blood stem cells to desperate patients with aggressive cancers, boosting survival rates.”

According to Krieger, Weissman in effect sold the potential stem cell therapy to Sandoz in 1991 for $392 million in an effort to place “his innovation into the hands of a company large and prosperous enough to accelerate research.”

Sandoz then “merged with Ciba-Geigy and became Novartis, which bought the remainder of Weissman's company (Systemix) for $76 million in 1997 -- and, with it, all patents,” according to Krieger.

Novartis shut down the trials in 2000 along with Weissman’s company. Krieger reported that the firm “ended the program because it couldn't produce blood stem cells in large enough numbers to develop a commercial market -- and it was not in the business of producing personalized ‘custom-made’ therapies.”

Krieger continued,

Karuna Jaggar, BCA photo

"'Well before the launch of the War on Cancer, the corporate profit motive has driven the cancer research agenda,' said Karuna Jaggar, executive director of the Breast Cancer Action, a San Francisco-based patient advocacy group. 'Time and again, history has shown that it is not only the possibility of saving lives but the potential of making money that has steered the research agenda toward some areas -- and away from others.

"'As long we have a health care system that puts profits before patients we will always be at the mercy of corporations looking to make profits. Any new innovation needs to be evidence-based and proven safe and effective no matter what money is to or is not to be made,' she said.”

Krieger wrote,

“Now, a quarter-century after it was conceived, the technique is finally back in Weissman's hands at Stanford -- although Novartis still holds the patent.” 

She reported that Weissman hopes to take the potential therapy forward in a non-profit setting.

Krieger has much more in her story, which offers considerable food for thought, particularly in connection with California’s $3 billion effort to bring a stem cell therapy into widespread use. It has not done so yet after nearly 11 years of trying and the expenditure of roughly $1.9 billion.  The agency also suffered a significant blow at the hands of one company, Geron, that dropped -- for financial reasons -- the first-ever clinical trial  for a hESC stem cell therapy, which the agency had backed with a $25 millon loan. 

The agency is currently revising its strategic plan. Randy Mills, president of the agency, says he is serious about developing a solid plan that will be followed assiduously with measurable benchmarks along the way.  

Our view: One important element in the new plan should focus on avoiding situations such as those involving Geron (see here and here) and the morass that Weissman fell into.

Whether one likes it or not, the facts of life in the biomedical world – pleasant or unpleasant – mean that business must be firmly engaged if a stem cell therapy is to be widely available to the public. Government agencies, however, often fall short in their dealings with private firms. For the stem cell agency, that means it needs a keen eye and clear goals when it deals with Big Pharma and stem cell firms. And if the California’s stem cell agency is to deliver on the promises made to the people of California, it must be willing to walk away from a deal if the terms aren’t right.

A Nature Post Mortem on the Scripps-USC deal and Faculty Rebellion

The journal Nature took a look this week at the vicissitudes at The Scripps Research Institute, including its now defunct, $600 million merger with USC as well as the Scripps faculty uprising.

The July 15 piece was written by Erika Check Hayden, who reported,

“Scripps faculty members…felt that the (USC) deal sold them short. In interviews, they noted Scripps’ coveted ocean-front location: La Jolla is one of the priciest zip codes in the United States. The $15-million annual payments over 40 years offered by USC would be the equivalent of a $250-million mortgage, they say. That would not even cover one year of the institute’s operating expenses, which were $400 million in 2013.

“’It didn’t make a lot of sense financially,’ (Scripps researcher Martin) Friedlander says  ‘You can’t ignore a $20-million deficit, but there are many other creative ways of addressing the financial shortfall. We certainly do not have our backs against the wall.’”

The nearly done deal with USC came about because of Scripps’ financial plight. The faculty took umbrage when they learned about it late in the game and called for the removal of President Michael Marletta. The deal then collapsed, and Scripps said it is going to look at unspecified alternatives.

Hayden has interviews with a number of folks, including both from within and without Scripps. She concluded,

“Marletta has said that he is seeking more donations for Scripps, but is disadvantaged by being a relatively recent arrival; he was chair of the chemistry department at the University of California, Berkeley, until 2010.

“’Philanthropy is about long-term relationships with your donors; it’s not something where you just turn the spigot and say, ‘OK, we’ll go out and raise a billion dollars’,’ says Salk president William Brody, who initiated his institute’s fund-raising campaign soon after arriving in 2009.

“Still, Brody and other observers say that Scripps should be able to find a way out of its current dilemma that does not involve dissolution or losing its independence.

“’If they can stick to their knitting and stay the course, they will be successful,’ Brody predicts.”

Scripps-USC Update: $21 Million Scripps Deficit, Talks at Standstill

The San Diego U-T today reported that The Scripps Research Institute is running a $21 million annual deficit, a key reason that it is discussing a partnership with USC although those talks have apparently hit a wall.

“Deep freeze” is the term quoted by Bradley Fikes and Gary Robbins in their latest article concerning a possible hookup between the two institutions.

Michael Marletta
Scripps photo

Robbins and Fikes quoted from the minutes of a meeting Monday involving a handful of faculty and administrators at Scripps, which is located in La Jolla, Ca.. They also carried remarks from an email today from Michael Marletta, who became president of Scripps in 2011.  Marletta said,

"The institute has on hand enough funds to continue operating with no changes in its operations and without disposing of any real estate or other property for the foreseeable future. We are, however, being proactive about the future economic environment with a process in place and commitment to addressing the operating deficit — this financial picture would be the envy of many biomedical institutes."

Marletta continued,

"The market forces affecting The Scripps Research Institute are being felt by all independent biomedical research institutes, universities and medical schools across the country. Specifically, these include declines in National Institutes of Health funding and a downturn in basic research support from the pharmaceutical and biotechnology industries."

USC, which is located in Los Angeles, has sent a nonbinding letter to Scripps stating that it would pay $600 million over a 40 year period to take over Scripps. Fikes and Robbins wrote,

“USC is trying to improve its modest standing in chemistry and biology, areas where Scripps Research is a world leader.”

The Fikes-Robbins story carries the full text of two Q&A email exchanges between Marletta, Scripps and the two reporters.  At one point, Marletta said,

“We are in no danger of financial collapse. If we did nothing we would likely reach a tenuous point in about five years. However, doing nothing is not an option and not our plan. There are both short-term and long-term options to consider that will keep Scripps and its outstanding scientific programs here for a very long time.”

The text of the minutes of Monday’s meeting is also carried on the San Diego U-T site. The meeting was of a group of faculty and administrators recently formed to improve communications about Scripps’ status and to build support for changes.

Richard Gephardt
Gephardt Government Affairs photo

The group is chaired by Richard Gephardt, the former House majority leader who twice unsuccessfully sought the Democratic nomination for president. He now runs a Washington lobbying firm bearing his name and is chairman of the Scripps board.

Wikipedia reports,

“Gephardt has also been significantly involved with the pharmaceutical industry. In addition to a large lobbying contract with the Medicines Company,^[30] Gephardt serves as chair of the Council for American Medical Innovation (CAMI), formed by and affiliated with PhRMA. In this capacity he hired his own firm to lobby for the organization, to push to extend patents and block generic drugs from the market.^[31]”

Conflict of Interest Alleged: Cedars-Sinai Scientist Appeals Rejection of $13 Million for Heart Research

The director of the Cedars-Sinai Heart Institute today asked the governing board of the California stem cell agency to approve his application for $13 million for heart research, declaring that the agency's review of the proposal was tainted by a conflict of interest.

Eduardo Marban
Cedars-Sinai photo

In a letter, Eduardo Marban contested the findings of a CIRM staff review of the conflict allegations. He said,

“The initial review was tainted by conflict of interest concerns. The re-review was conducted by staff in a peremptory manner without the usual CIRM due process: no patient advocates were involved, no comparator grants were evaluated, and no formal review reports have been provided. Only a pithy, dismissive summary by CIRM staff has appeared, and that only yesterday.”

Marban's application was the subject of an article on the California Stem Cell Report yesterday, which discussed the lack of transparency in the agency's grant review process, particularly in relationship to conflicts of interest. The application was quietly removed from CIRM board consideration in December and has been placed on the board's agenda for action tomorrow in Burlingame, Ca.

The agency withheld Marban's name, the names of reviewers and the nature of the conflict charges. Marban did not go into specifics concerning the conflict in his letter today. We have emailed him, seeking details.

Marban has previously received $7 million for research from the agency. Capricor, a company he founded, has received $20 million. The company is scheduled to be highlighted in tomorrow's CIRM governing board meeting as one of its success stories.

In his letter, Marban noted his previous research along with the latest proposal and its clinical potential, an increasingly important consideration for the CIRM board. Marban wrote,

“The commercial potential of (the earlier funded product) has been validated by a collaborative/option agreement between Capricor (the company I founded to develop regenerative therapeutics) and Janssen, an arm of the pharmaceutical giant Johnson and Johnson. This represents the first time that 'big pharma' has partnered with a regenerative medicine biotech to develop a product.”

Marban also said,

“The present proposal (DYNAMIC) is ready to go into patients immediately; it is FDA and IRB approved. In fact, we have a list of 30+ patients who are waiting to be screened for enrollment, as soon as funds are available. These patients are ill, with a mortality exceeding that of many cancers. Indeed, several eligible patients have died in the interlude between the last ICOC meeting, when this proposal might have been funded, and the present.

“DYNAMIC would be the first study in the CIRM portfolio to target hard clinical endpoints (mortality and re-hospitalization) in a very high-risk population (that of advanced heart failure). The population to be studied is very different, and much sicker, than in the ALLSTAR trial.”

Big Sangamo Deal for California Stem Cell Agency with an Asterisk

It was a $20 million deal -- possibly as much as $300 million --for Sangamo BioSciences, and its president told the California stem cell agency,

“We wouldn't be where we are today without you.”

The $3 billion agency has pumped $5.4 million into the publicly traded Richmond, Ca., firm for HIV/AIDS research and another $6.4 million last May for a phase one clinical trial dealing with beta-thalassemia, a genetic blood disease.

Last week Sangamo announced that Biogen Idec of Cambridge, Mass., would buy into its research related to beta-thalassemia as well as sickle cell anemia. The announcement said Biogen Idec will also reimburse Sangamo for “its internal and external research and development program-related costs.” Payments of up to another $300 million could come Sangamo's way if it meets certain goals.

Kevin McCormack, CIRM's senior director of public communications,wrote on the agency's blog that it has been “a very good start” in 2014 for CIRM. He noted that the Sangamo announcement followed similar good news from Capricor, another CIRM grant recipient that has announced funding from Big Pharma.

He quoted Ellen Feigal, senior vice president at the agency, as showing how “important the funding we provide is in helping companies like Sangamo get their research to a point where big pharmaceutical companies stand up and take notice, and invest.” 

McCormack wrote that Edward Lanphier, president of Sangamo, sent an email to CIRM in connection with the announcement that said,

"Thank you for ALL of your support over the past several years. We wouldn't be where we are today without you."

The Sangamo deal, however, has an asterisk. In May 2012, a “special advisor” to the stem cell agency, Saira Ramasastry, was nominated to the seven-member Sangamo board of directors. Following an item in the California StemCell Report, the agency announced that her contract was not being renewed. CIRM said she was not involved in a decision-making role and was not required to file a statement of economic interests with the agency. Ramasastry subsequently was elected to the Sangamo board where she still holds a seat.

Sangamo's stock closed at $19.84 today, up 46 cents. Its 52 week high is $20.33 and its low $6.86.

Our take: The investment in Sangamo is a healthy sign of expanding interest from larger firms in stem cell therapies. However, it is darkened by the "revolving door" situation involving Ramasastry. CIRM does not require public disclosures of the financial interests of its consultants. Nor does it restrict revolving door arrangements with them that permit later employment at CIRM-connected firms. At the same time, the agency is moving aggressively to engage industry ever more closely and to generate results that will resonate with the public. The agency would do well to heed the conflict-of-interest study from the prestigious Institute of Medicine in 2009. Bernie Lo of UCSF was one of the editors of the study. He wrote that medical research and the private sector have sharply divergent priorities and sometimes irreconcilable differences. The stem cell agency should act to ensure that both the appearance and reality of cronyism, insider dealings and conflicts-of-interest do not blemish its scientific track record.

Collapse of Big Pharma Deal Involving California Stem Cell Agency

A ballyhooed deal has blown apart that would have hooked up – for the first time – Big Pharma and the $3 billion California stem cell agency.

The breakdown of the arrangement was quietly disclosed yesterday in background material prepared for the Dec. 12 meeting of the stem cell agency's governing board.

The deal was first announced Oct. 25 when Viacyte, Inc., of San Diego, received a $10.1 million award to help finance a clinical trial for a diabetes treatment involving Viacyte and GlaxoSmithKline.

The CIRM background memo said this week, however,

“We have recently been informed that GSK was not able to obtain the final approval required due to business reasons in the context of GSK's overall research and development portfolio and investment needs and not as a result of any scientific or technical assessment of ViaCyte's program.”

The memo gave no further details about the Glaxo decision.

CIRM staff proposed that Viacyte, which has received $36 million from CIRM, be given another $3 million because Glaxo has exited the trial.

The arrangement involving Glaxo, Viacyte and CIRM was trumpeted in October, when Viacyte was awarded the $10 million. Officials of the stem cell agency said the award was a “watershed” for CIRM. Jason Gardner, head of the Glaxo stem cell unit and who attended the meeting, told the California Stem Cell Report that the arrangement was a partnership and that the company intended to develop a sustainable pipeline.

It was the second significant business-connected deal that has collapsed for the $3 billion agency within the last 13 months. In November 2011, Geron abandoned its clinical trial for spinal injuries. CIRM had loaned Geron $25 million for the trial just three months earlier. The company paid the money back with interest.

CIRM staff said that advisors to the agency remain “extremely positive” about the Viacyte research and “strongly recommended” that the company receive the additional $3 million. The memo said that trial has a “strong potential” to be commercialized.

California Stem Cell Agency First: Big Pharma Hook Up

BURLINGAME, Ca. – For the first time, a Big Pharma company has hooked into the $3 billion California stem cell agency, a move that the agency described as a “watershed” in its efforts to commercialize stem cell research.

The involvement of GlaxoSmithKline comes via a partnership with ViaCyte, Inc., of San Diego, Ca., in a clinical trial, partially financed with a $10.1 million grant today from the stem cell agency. The trial involves a human embryonic stem cell product that has “the potential to essentially cure patients with type 1 diabetes and provide a powerful new treatment for those with type 2 disease,” ViaCyte said. Scientific reviewers for the agency, formally known as the California Institute for Regenerative Medicine(CIRM),  “characterized the goal of the proposed therapy as as the 'holy grail' of diabetes treatments.”

CIRM Director Jeff Sheehy, who is co vice chair of the agency's grant review group, said the ViaCyte product could be manufactured on a large scale and basically involves “taking (small) pouches and popping them into patients.”

The stem cell agency's award triggered arrangements between ViaCyte and Glaxo that will bring in financial and other support from Glaxo. The exact amount of cash was not disclosed. CIRM said Glaxo will “co-fund and, assuming success, conduct the pivotal trial and commercialize the product.” Under the terms of the grant, Glaxo and ViaCyte will have to meet CIRM milestones in order to secure continued funding. 

Following board approval, Jason Gardner, head of the Glaxo stem cell unit, characterized the arrangement as a partnership. He told the board that the company intends to develop a “sustainable pipeline.”

Gardner credited CIRM President Alan Trounson with being instrumental in helping to put the arrangement together, beginning with their first meeting three years ago. Trounson said the deal will resonate not only in California but throughout the world.

Paul Laikind, president of ViaCyte, also addressed the board, stressing the importance of CIRM's financial support for his company over past years. It has received $26.3 million (not including the latest grant) from California taxpayers at a time when stem cell funding was nearly dried up. He noted that small companies such as ViaCyte do not have the resources to carry a product through the final stages of clinical trials and subsequent production. Gardner also said,

“When the commercial funding avenues have become much more risk averse, CIRM support (has ensured) that promising, innovative cell therapy technologies are fully explored.”

In comments to the California Stem Cell Report, Elona Baum, CIRM's general counsel and vice president for business development, described the award as a “watershed” for the eight-year-old agency, linking the agency with Big Phama for the first time. Much of CIRM's current efforts are aimed at stimulating financial commitments from large companies, which are necessary to commercialize stem cell research.

Arrangements between Big Pharma and small companies are not unusual and can vanish quickly. However, the CIRM-ViaCyte-Glaxo deal sends a message to other Big Pharma companies and smaller ones, perhaps clearing away concerns that have hindered other deals that could involve the stem cell agency.

The stem cell agency is pushing hard to fulfill the promises of the 2004 ballot campaign that created CIRM. Voters were led to believe that stem cell cures were virtually around the corner. None have been developed to date.