Fortune Magazine on California Stem Cell Agency: Warm, Personal and Favorable

California's $3 billion stem cell research effort today garnered a handsome dollop of favorable national news coverage– a lengthy piece in Fortune magazine that spoke of looming stem cell cures and the leading role of the state stem cell agency.

The article led the Fortune web page online at one point this morning and likely will be read by tens of thousands of persons, although it was not the cover story on the print product. 

Written by a former senior editor of the magazine, Jeffrey O'Brien of Mill Valley, Ca., the piece was warm and personal. He began with the story of his 95-year-old grandmother and her health issues, ranging from arthritis to macular degeneration. And he wrote,

“The citizens of California have spoken. If my grandmother and I had the power to get the rest of the country to follow, we would.”

O'Brien also discussed the science and finances of the stem cell business. He said,

“To be clear, the earliest stem cell therapies are almost certainly years from distribution. But so much progress has been made at venerable research institutions that it now seems possible to honestly discuss the possibility of a new medical paradigm emerging within a generation. Working primarily with rodents in preclinical trials, MDs and Ph.D.s are making the paralyzed walk and the impotent virile. A stem cell therapy for two types of macular degeneration recently restored the vision of two women. Once they were blind. Now they see!

“Some experts assert that AMD could be eradicated within a decade. Other scientists are heralding a drug-free fix for HIV/AIDS. Various forms of cancer, Parkinson's, diabetes, heart disease, stroke, and ALS have already been eradicated in mice. If such work translates to humans, it will represent the type of platform advancement that comes along in medicine only once in a lifetime or two. The effect on the economy would be substantial. Champions of stem cell research say it would be on the order of the Internet or even the transistor.”

O'Brien continued,

“The obstacles along the road from lab rat to human patients are many, of course, but the biggest by far is money. With the dramatic events in the lab, you might think that a gold rush would be under way. That's far from true. Long time horizons, regulatory hurdles, huge R&D costs, public sentiment, and political headwinds have all scared financiers. Wall Street isn't interested in financing this particular dream. Most stem cell companies that have dared go public are trading down 90% or more from their IPOs. Sand Hill Road is AWOL. The National Venture Capital Association doesn't even have a category to track stem cell investments.”

As for the California stem cell agency itself, the article contained remarks from its Chairman J.T.Thomas, President Alan Trounson and former chairman Robert Klein about the origins and progress of the California Institute for Regenerative Medicine (CIRM).

O'Brien wrote, 

“The $1.7 billion awarded so far has made one obvious mark on the state: a dozen gleaming research institutions. CIRM has proved adept at getting billionaires to donate funds to the cause.”

O'Brien interviewed a several prominent businessmen who have contributed tens of millions of dollars to stem cell research “about the prospects of a legitimate industry emerging.” One was “bond genius” Bill Gross, who has contributed to UC Irvine. Gross replied.

“Goodness, you're talking to the wrong guy. Our donation had nothing to do with business.”

Eli Broad, another big stem cell donor, said pretty much the same thing. And Andy Grove, the former chairman of Intel, was “surprisingly full of doom and gloom.” O'Brien wrote,

“For close to two hours, Grove argues passionately about how the FDA is enabling predatory offshore industries by impeding progress and the many reasons financiers want no part of stem cells. "VCs aren't interested because it's a shitty business," he says. Big Pharma? Forget it. CIRM? "There are gleaming fucking buildings everywhere. That wasn't necessary." When I press him to be constructive, he wearily offers one possible solution. Rather than courting billionaires to put their names on buildings, we need a system of targeted philanthropy in which the 99% can sponsor the individual stem cell lines that matter to them.”

O'Brien said, however,

“It was clear during our talk that Grove wants an economic model for stem cell research and development to emerge, even if he's not willing to bet money on its happening. And that puts him in good company.”

While the Fortune article has its negative points about stem cell research, it is about as laudatory as it is going to get at this point for the California stem cell agency. The piece recognizes and even celebrates much of the work of the agency. The article clearly details the void in financing for commercialization of stem cell research, bolstering support for efforts like those in California. Importantly, it also helps to push the activities of the stem cell agency more fully into the national discussion of stem cell research and its future. That should pay off again and again in future news coverage and also benefit the stem cell agency as it explores the possibility of additional funding – either private or public – after the cash for new awards runs out in 2017.

(The story is in the Oct. 8, 2012, edition of Fortune.)

StemCells, Inc., Wins Another $20 Million From California Stem Cell Agency

Following a second impassioned pitch by its former chairman, Robert Klein, the governing board of the California stem cell agency approved a $20 million award to a financially strapped biotech firm, StemCells, Inc., of Newark, Ca.

Approval came on a 7-5 vote with the condition that the company demonstrate it has access to $20 million in matching funds prior to funding.  It is the second $20 million award that the company has received in the disease team round, which now totals $214 million. Another disease team application has been tabled and will not be considered until October.

The current CIRM chairman, J.T. Thomas, a Los Angeles bond financier, asked for the financial proof because he said some concerns were expressed during an executive session that CIRM would now "account for such a large part of the assets of the company." Martin McGlynn, CEO of StemCells, Inc., also told the board that the company might have to drop its Alzheimer's research if it did not receive the CIRM award.

The StemCells, Inc., application was rejected twice by reviewers. The original rejection came before the July meeting at which Klein first appeared (see here and here). The proposal was then sent back for re-review, during which it was rejected again.

However, the 29-member board narrowly approved the application following discussion tonight and following its rejection of another Alzheimer's research proposal from USC. Both applicants produced a number of witnesses, including patients, on behalf of their appeals.

The re-review on the StemCells, Inc., application said in reference to a statement by Klein to board in July,

“The reviewers did not feel there was compelling data for neuron migration in the submitted manuscript. This is the manuscript specifically referenced at the ICOC (CIRM governing board) meeting (in July) that prompted the call for additional analysis. The manuscript is not yet accepted, it is 'potentially acceptable' but requires 'major revisions' according to the journal editor note. In addition, however, the studies in this manuscript used mouse NSCs, not the human NSCs proposed for the disease team award....”

In July, Klein said, “....(W)e have brand-new data that demonstrates and totally contradicts the key weakness on which it was downgraded.” 

A footnote: The CIRM staff said that as a result of two StemCells application, a proposal is being prepared to limit applications to one per entity in later rounds.

Riding the Stem Cell Financial Wave in Newark

The stock price of StemCells, Inc., of Newark, Ca., has more than doubled this month following the publication of several “good news” stories about the company, including the virtual certainty that it will receive a $20 million loan tomorrow from the state of California.

The company also could well receive $20 million more if its appeal on another award from the California stem cell agency is successful.

StemCells, Inc., founded by Stanford researcher Irv Weissman, has seen its stock plummet as low as 59 cents during the last 12 months. On July 16, its price stood at 88 cents. On July 17, it jumped to $1.80. Today it is running about $2.28 at the time of this writing. (The latest stock price can be found here.)

All of which is to the benefit of Weissman, who acquired 15,433 shares of StemCells, Inc., on July 2 at no cost. According to SEC filings, the stock was given by the company to Weissman as a quarterly retainer for his services on the firm's scientific advisory board. Weissman also serves on the board of directors and currently holds 88,612 shares of the company.

Most of the good news about the company focused on its research into an Alzheimer's therapy. The California Stem Cell Report also reported on July 18 that the company was in line for a $20 million award from CIRM for its spinal cord injury therapy. CIRM's grant reviewers rejected the company's bid for $20 million for an Alzheimer's treatment but the firm is appealing that decision to the full board. (See here and here.)

Here are links to recent stories on StemCells, Inc.

Seeking Alpha by Chris Katje – July 17

California Stem Cell Report by David Jensen – July 18

First public report that StemCells, Inc. was in line for a $20 million loan from CIRM development of human neural stem cells to treat chronic cervical spinal cord injury

Technology Review by Susan Young – July 24

Tech24 – July 24

StreetInsider.com -- July 24

CIRM Moving to Fund Clinical Trials

Directors of the California stem cell agency meet in San Francisco Feb. 3-4 to take up a proposal to begin funding enormously expensive clinical trials in some form or another.

No details are available yet on just what is being proposed, but clinical trials can run into hundreds of millions of dollars. And there is no assurance that a viable product will result. Only one out of five drugs that enter human testing make it to market, according to one estimate.

CIRM has already approved $1 billion in grants and loans, leaving $2 billion until its funding capacity runs out.

The agenda item for the clinical trials is terse and says only,

“Consideration of concept proposal for clinical trial funding and/or concept proposal for program funding to facilitate reaching clinical trial approvals within 12 months.”

CIRM's strategic plan, approved last fall, says that the agency will develop proposals

“...to support clinical trials that would be expected to include partnerships with biotechnology and pharmaceutical companies, private investment, and other sources of financial support that are appropriate. This is an area of developmental responsibility for the vice president of R&D(yet to be hired). CIRM expects that its contributions would be proportionally smaller than other contributions from companies and other financial institutions but would remain meaningful and would ensure reasonable patient access to the new therapeutics that are developed."

The plan continues,

“The program of clinical trials will be developed in partnership with other funding sources as a special interest of the VP R&D. The program will be focused on the delivery of research arising from the work in California on stem cells and related technologies and ensures the continuation and delivery of discoveries in basic stem cell biology into the clinic.”

Also on tap are unspecified, proposed changes in CIRM's $500 million biotech loan program, which anticipates default rates as high as 50 percent.

Normally biotech firms, with a handful of exceptions, are notable for their absence at CIRM board meetings. However, it would behoove any firms interested in either clinical trials or loans to be in attendance. They can comment on the proposals and learn more about the cash that is likely to be available.

The Silence of the Scientists

Consumer Watchdog, the Santa Monica, Ca., group that has spent more time and money than any other organization monitoring California stem cell matters, today chastized a trio of major researchers for their failure to speak out on an issue that some contend is holding back not only the science but the industry.

Writing on his organization's blog, John M. Simpson, stem cell project director for the group, discussed the dispute that involves Irv Weissman of Stanford, Fred Gage of the Salk Institute and David Anderson of Caltech and indirectly their institutions.

StemCells Inc. of Palo Alto, Ca., which was founded by the three researchers, is "thwarting noncommercial neural stem cell research" at Children's Hospital of Orange County as part of the company's zealous protection of its patents, Simpson said.

The springboard for Simpson's latest commentary was an article about the matter by Michael Hiltzik in the Los Angeles Times. It pointed out that some experts believe that over-protection of IP is hampering stem cell science and even the high tech industry.

Simpson's piece was headlined "A deafening -- and embarassing -- $ilence" and substituted a "$" for the "S" in silence.

Simpson wrote,

"This is a situation that should have been settled easily in a month, if not a week. After a two-year stalemate the silence is deafening."

The three researchers have not responded to requests for comments from Hiltzik nor from earlier ones from the California Stem Cell Report. We are renewing our queries and have promised the men that we will carry their comments verbatim.

You can read our earlier item on the Hiltzik piece here.

Stem Cell Patent Flap Gains Wide Media Exposure

Three of the top names in California stem cell research – not to mention the world – surfaced during the weekend in a piece in the Los Angeles Times about a matter that is at the heart of the field – money.

Michael Hiltzik, a columnist at California's largest newspaper, brought up the scientists in connection with a patent imbroglio in Orange County that reaches into Stanford, the Salk Institute and Caltech via the researchers, who are Irv Weismann, Fred Gage and David Anderson, respectively of the three institutions.

Generally, such disputes put the general public to sleep. But Hiltzik wrote today,

"...(T)he penetration of private investment concerns into what used to be largely academic pastures threatens to hobble, rather than hasten, the march of science. The harvest may be secrecy, delay and the directing of research only toward developments that promise quick financial returns."

The matter pits researcher Philip Schwartz of the Children's Hospital of Orange County against StemCells, Inc., of Palo Alto, Ca., which was founded by Weissman, Gage and Anderson. Schwartz has spent six years providing academic researchers with neural stem cells cultured by a method he helped to invent at Salk, Hiltzik wrote.

But StemCells Inc. has effectively put a halt to Schwartz' distribution. That occurred after the firm wrote a letter to Children's Hospital warning that Schwartz' efforts infringed on its patents in the neural stem cell field and that it wanted to discuss a licensing arrangement.

This all started two years ago, but nothing has been resolved, although little apparent conflict exists between the “core clienteles” of StemCells Inc. and Children's Hospital. Hiltzik said,

"...(I)n the biotech world, where millions or even billions of dollars in profits beckon to those who can assert ownership of important discoveries, good intentions and purely scientific goals don't matter like they used to. Access by basic researchers to the essential building blocks of biomedical advances has been shrinking for years, thanks to a land rush by entrepreneurs wielding patent portfolios."

Hiltzik reported that the conflict between research and business has gone beyond biotech. He noted that Andy Grove, the fabled former CEO of Intel, this month warned of the evil effects of over zealous protection of IP.

The problem has become more serious, however, in stem cell science, according to Gregory Graff, a patent expert at Colorado State University.

According to Hiltzik,

"Graff says this phenomenon is becoming especially pronounced in stem cell science, which is especially dependent on collaboration but is already being cordoned off by commercial entities claiming property rights to essential research. The best solution, he says, may be for academic institutions -- where 45 percent of all stem cell research is performed -- to create collaborative patent pools so they can more freely disseminate information and technology without giving up all their potentially lucrative patent rights."

The issues raised by the Children's Hospital-StemCells, Inc., flap were first publicly reported April 15 by John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca. We carried a follow-up on April 16, noting that Harvard business professor and biotech industry consultant Gary Pisano warned in 2006 about the harmful impact of the "monetization of IP" on the biotech business. Our item triggered a robust exchange of comments that are attached at the end of the piece.

We asked Weissman, Gage and Anderson for comment a couple of times over the last several weeks. They did not respond to our queries. Nor they did respond to Hiltzik.

UC Sounds Cautionary Note on Stem Cell Therapy Amid 'Guarded Optimism'

Rays of economic hope were scattered through two stem cell/biotech conferences this week in the San Francisco Bay Area – one focusing on industry and one more oriented towards academe.

The BayBio industry group sponsored one meeting in South San Francisco that attracted 700 participants, according to David Morill's account on InsideBayArea.com, a Web site for six daily newspapers in that area.

While acknowledging the difficult economic times, Morrill quoted Matt Gardner, president of BayBio, as saying,

"We've had a couple of companies shut down, but overall there is definitely a guarded optimism here. There is a lot of focus this year on partnering and venture marketing."

No one from the mainstream media wrote about the other affair so the University of California presented its version online in an article by an unnamed author.

UC reported that 320 researchers, biotech execs and money folks attended the April 15 meeting hosted by the UC Office of Technology Transfer and the British and Canadian consulates. One speaker, Gregory Bonfiglio of Proteus Venture Partners, said the commercial market in regenerative medicine will grow to $118 billion next year compared to $3.6 billion last year.

UC took pride in pointing out that it has snagged $420 million out of the $694 million that CIRM has handed out in research and construction grants. The university did not mention that 11 of the 29 members of the CIRM board of directors, which sets both the rules for grants and awards them, have links to the University of California.

UC also fired a shot in the debate about CIRM's push into clinical trials vs. basic research. And given that the article came from the Office of the President, it carries some considerable weight. Here is what it said,

"The biggest contribution UC is making to this new stem cell economy is in advancing basic research and training, said Steven Beckwith, vice president of research and graduate studies in the UC office of the President, who delivered one of the keynote speeches at the forum.

"'There are now avenues where stem cells can be used for therapeutic remedies, but they're limited,' Beckwith said. The real potential won't be realized until we understand the fundamental mechanisms behind these cells. That's the strength of university research.'"

Business Snags $5.3 Million from CIRM

IRVINE, Ca. -- Six California companies snapped up $5.3 million last week in grants from the California stem cell agency, marking the first major industry funding from the $3 billion state research enterprise.

Up until the latest round of grants, only one company, Novocell Inc. of San Diego, had won a grant and that was for only $50,000.

However, the CIRM board did not approve business applications at the same rate as those from the nonprofit sector. Only one out of seven business proposals (41 in all) won approval last week compared to one out five nonprofit pitches(77 in all).

(The board put off action until next month on some grants so the figures could change when final action is taken.)

The six companies snagged about 26 percent of the nearly $20 million in grants for developing research tools and technology. The six also represented about 26 percent of the 23 grants that were approved.

CIRM President Alan Trounson said,

"These awards represent the entry of the biotechnology industry into CIRM-funded initiatives to accelerate progress."

Nonetheless, other companies appeared at the CIRM board meeting here to complain about the fairness of the review process, which they said was tilted towards academia. One company, DNAmicroarray Inc. of San Diego, suggested changes in definitions for "principal investigator" on grant applications that would reflect differences between business and the nonprofit sector.

Here are the companies and their awards:

VistaGen Therapeutics of South San Francisco, $971,558, PI Kristina Bonham; Fluidigm Corp. also of South San Francisco, $749, 520, PI Marc Unger; Gamma Medica-Ideas of Northridge, Ca., $949,748, PI Douglas Jay Wagenaar; Novocell Inc.of San Diego, $827,072, PI Evert Johan Kroon; Invitrogen of Carlsbad, $869,262, PI Ying Liu, and Vala Sciences of San Diego, $906,629, PI Patrick McDonough.

As of this morning, only one of the companies had generated a press releases about its CIRM grant, while at least some of the academic grant recipients were online as early as Wednesday with their good news. The release by Vala said, among other things, that its grant will be executed in close collaboration with laboratories at the Burnham Institute for Medical Research led by Vincent Chen and Mark Mercola.

Last week's meeting also marked the first time that CIRM directors allowed "extraordinary petitions" to challenge negative decisions on applications by the Grants Working Group. Three were received in time to be considered. Three others were also received but not by the deadline for consideration by CIRM staff and the board. The deadline falls five working days before the board meeting..

In each of the three cases, CIRM President Trounson said he could not find "compelling evidence" to change the score of the application or the decision of the working group. The full board can bring up petitions for public discussion but did not choose to do so.

Two petitions were filed by private businesses, International Stem Cell Corp. of Oceanside and DNAmicroarray Inc. of San Diego and one by the Salk Institute of La Jolla. Here are links to the petitions: International Stem Cell (filed by Jeffrey Janus, president, and William Adams, CFO), DNAmicroarray (filed by Babak Esmaeli-Azad, president) and Salk (filed by Juan Carlos Izpisua Belmonte, professor, Gene Expression Laboratory).

Adams also appeared before the CIRM board, citing "fundamental problems" involving the way business applications were treated. Some members of the board have expressed sympathy with the view that there is a tilt towards academia in the review process. CIRM is attempting to find more grant reviewers with a business background.

Reporter Terri Somers of the San Diego Union-Tribune wrote a story on the business grants. Bruce Bigelow of Xconomy.com also had a brief item, declaring that CIRM had "opened its spigot for funding business ventures."

Differing Views on the Future of the Stem Cell Industry

The headline in the San Francisco Chronicle this morning read: "Drastic cuts among some biotech companies."

But just the day before, the Chronicle reported that "many in the stem cell field have a buoyant air these days."

The Chronicle is not alone in posing apparently contradictory views. Monya Baker carried links to some on her Nature magazine blog, The Niche. And here is the "good news" version of the stem cell biz from Midwest: "Why stem cell companies in Wisconsin and beyond will finally catch the eye of investors."

A couple of things are at work here. One is the optimism spurred by the Obama administration and its plans to ease restrictions on human embryonic stem cell research. A superficial assessment of that move generates an unrealistic, but rosy outlook for the stem cell business. The other factor involves the perennial optimism of the entrepreneur. They are a class given to always seeing the glass as half-full. What better time to invest in stem cells? Values are down. Bargains are waiting to be snatched up.

Indeed, financial bottom-feeders with strong stomachs and patience may do well. But the financial vulture business is tough. All the bad economic news has not yet sifted out. Realistically, it would seem to be a good time to be cautious about the prospects of any individual stem cell company.

We all should remember as well that the history of the biotech industry is littered with far more money-losing enterprises than successes.

Novocell Chief Joins JDRF

The head of the only company to win a grant from the California stem cell agency is leaving his business to become the chief executive of the Juvenile Diabetes Research Foundation.

The departure of Alan Lewis is a bit of an illustration of the small world of stem cell research. His company, Novocell, won a $50,000 grant from CIRM, whose chairman is Robert Klein, who is also a member of the board of directors of the JDRF.

The foundation itself is significant provider of research funding. It has awarded more than $1.3 billion in grants since 1970, including more than $156 million in this fiscal year.

Could it be that JDRF and CIRM might collaborate on a funding effort? Possibly. CIRM has ambitious plans for collaboration. They already involve Canada, Japan, Great Britain and the state of Victoria in Australia.

WSJ: No Magic Stem Cell Funding Cure From Feds

Alan Trounson, president of the $3 billion California stem cell agency, is minimizing the impact of President-elect Obama's plan to ease federal restrictions on human embryonic stem cell research.

Trounson (see photo) was quoted today in a piece in the Wall Street Journal by Gautam Naik and Robert Lee Hotz. The article was headlined "Obama's Promise on Stem Cell Doesn't Ensure New War on Diease." This morning the story appeared prominently on the main page of the WSJ web site but on page A9 of the print publication.

Trounson's remarks dealt both with the impact of California's research effort, now the world's largest source of funding for hESC science, and Obama's stem cell plans.

Concerning the Golden State, Trounson said,

"We are at such a high pace and we have so much funding ourselves that there will be no real competition to our leadership."

Trounson also said,

"The incremental money from NIH will be relatively small because of the economy."

The WSJ piece said that "two big questions" must be answered at the federal level.

"How much federal money will be made available for the research? And how quickly can America's major science-funding agency, the National Institutes of Health, take on a leadership role in a field where it has only modest experience and whose funding efforts have lagged behind several state initiatives.

"'To make stem-cell science take off, it needs something equivalent to Nixon's war on cancer,' says James Thomson, a stem-cell scientist at the University of Wisconsin who created the first human embryonic-stem-cell line in 1998. 'But because of today's economic realities, it's not going to happen for at least a couple of years.'"

The WSJ story may be limited to subscribers only. If you would like a copy, please email me at djensen@californiastemcellreport.com

The Hunt for Stem Cell Gold

The California stem cell agency next week will provide tips to scientists and others prospecting for some of the $3 billion in research funding that the state is handing out.

Two days of briefings are planned – one in San Francisco on Sept. 11 and the other in San Diego on Sept. 12.

The sessions are targeted at private businesses but are likely to be useful for academicians as well. CIRM says it will "discuss ways to increase chances of successfully submitting a grant to CIRM." It will also discuss the agency's intellectual property regulations and explain them for private sector attorneys, executives and scientists.

These are must-attend meetings if you want to be serious about securing a CIRM grant.

California Stem Cell Cash – Last Resort for Business?

Revolutionaries, uncertainties and big California bucks are all part of a piece in IP Law & Business magazine this month dealing with the state's $3 billion stem cell research agency.

Written by Joe Mullin, the cover piece explored the world of IP at CIRM, including comments from Robert Klein, chairman of the agency, and concerns from biotech businesses.

Klein was described as maintaining "the rhetoric and stance of a combative underdog." Mullin wrote that Klein spoke to a group of stem cell activists last spring, firing them up for the fray.

"'How many people do you think it takes to start a revolution?' he asked the crowd. 'I can tell you, it's many less than the people in this room.'"

Mullin noted the importance of California's $3 billion for research at both academic institutions and businesses. But he said that the fact that California has called for payback on some of its investment is troubling to some in industry. He wrote:

"...(If) California is any guide, state funding may usher in long periods of uncertainty, and new demands for a much larger share of the proceeds from any discoveries than what the life science industry has seen before."

Mullin continued:

"By contrast (to the federal government), California's stem cell agency is still an unknown quantity, and that spooks the biotech industry. 'There is an oft-repeated concern that IP will need to be shared with competitors,' says (Paul) De Stefano(a Fish & Richardson partner and former chief corporate counsel for Genentech Inc.). 'Whether that's a legitimate fear or not, I've heard literally dozens of investors talk about it,' he adds.

"BioTime Inc., for instance, had considered applying for a small CIRM grant-only about $300,000-but has decided to look elsewhere for now. The company's CEO, Michael West, says he still might apply for a CIRM grant, but he'll keep the money away from BioTime's core business so as not to burden the company with what he calls 'completely unrealistic' state royalty rates."

Mullin wrote:

"The fact that CIRM is considering changes to the IP policies is 'disquieting, to say the least,' says Palo Alto-based StemCells, Inc. general counsel Kenneth Stratton. His company, which along with Geron is well-established by industry standards, won't say whether it is applying for a CIRM grant. But like West at BioTime, Stratton says that the requirements make CIRM money expensive and less attractive than other options. The agency is at risk of becoming a 'funder of last resort,' says Stratton."

However, Mullin quoted CIRM officials as saying it is currently processing 50 grant applications from businesses. That number undoubtedly will rise as more requests for applications are forthcoming from CIRM.

Our comment: Klein is inclined to flourishes that are keyed to his different audiences. On one hand, he fires up activists with rhetoric unsettling to businesses. On the other hand, he assuages industry anxiety at sessions involving his generous $500 million biotech loan proposal. Business concerns about uncertainty are financially quite legitimate and to be expected. However, those concerns will never be completely alleviated, and California has a big bundle of cash previously unavailable to industry. CIRM has an obligation to cut the best deal possible for the people of California.

(Access to the IP Law & Business article requires free registration, although it calls the process a "subscription.")

Cashing in on California: Opportunities for Non-State Businesses

The California stem cell agency is offering another round of grants that is open to firms headquartered outside the state – a $20 million program aimed at developing tools and technology for stem cell research.

And this time, a non-California firm can submit up to four applications for grants.

The latest proposal comes as some in the California biotech industry and state lawmakers are attempting to compel CIRM to follow through on the Prop. 71 requirement to give preferential treatment to California businesses.

The grant program and the California supplier issue are operating on different tracks but both affect state businesses by either restricting or increasing competition from non-state firms.

First the new tools and tech proposal. It is open to both education and research institutions in California as well as businesses.

The key catch for businesses is that a research site must exist in California at the time the grant application is submitted, which may or may not be on application deadline July 10.

If CIRM holds to past practice, it will not check on whether the research site exists until after the grants are approved, in this case next December or even later. Nor does CIRM define what it means by research site. So there is plenty of time to pick up some likely property in California and prepare it for use.

The application does, however, require a short description of facilities in which the work will be done and the major equipment and resources available.

The grant proposal came up after CIRM was pressured in March to follow through on the Prop. 71 requirement to give preferential treatment to California firms.

Assemblyman Gene Mullin, D-San Mateo, is carrying a bill to define the term "California supplier" as it applies to CIRM. His legislation, AB 2381, has already passed the Assembly 75-0 and is now before the Senate Health Committee.

Under the push from legislators and industry, CIRM directors have moved ahead on their own regulatory definition of California supplier. It is more open than Mullin's proposed law to enterprises from out-of-state and declares that a California supplier is any that employs at least one-third of its employees, with a minimum of 100, in the state.

Or, a California supplier could also be one that "produces, builds, or manufactures a product or products in California for the specific product or products which are used by CIRM grantees."

At the CIRM directors meeting earlier this month, Duane Roth, one of the directors who helped draw up the language, said that the wording is intended to deal "with a product that's manufactured in California, but the headquarters of the company who owns them is not in California. That product would qualify as a, quote, California supplier, just that product, not the company, but the product."

Tony Lakavage of Beckman Dickinson, a global medical technology company with operations in San Jose, Ca., spoke on the supplier issue at the directors meeting. He said the firm has 1,500 employees in the state but 30,000 worldwide. He said that products made in California by his firm would apparently qualify for purchase but other global companies might have difficulty qualifying.

He urged a definition that relied on the economic impact of a company in California, according to the transcript of the meeting.

James Harrison, outside counsel to CIRM, presented the California supplier issue to the directors. Alan Trounson, who is in his fifth month as president of CIRM, told directors that neither he or the CIRM staff had seen the definition proposed by Harrison and that "there are issues we would have with this." CIRM Chairman Robert Klein apologized to Trounson for not bringing the matter to him.

CIRM directors indicated that more work needed to be done on the definition as it moves through the regulatory process.

While the application deadline for the tools and tech grants is July 10, potential applicants must file letters of intent by June 11. Otherwise, they will not be considered. Actual funding is scheduled for no sooner than March of next year.

The first round of grants open to out-of-state firms was a $25 million offering on new cell line proposals. Those grants are scheduled to be approved late in June.

CIRM Creates FDA Committee

Gern Talk, a web site devoted to discussions of matters related to Geron, has picked up a recent piece by patient advocate Don Reed along with our report, "Harsher Realities," on the FDA hold on Geron's clinical trials.

Reed raised his previous concerns regarding the most recent FDA action. But he also had a note about a discussion involving the FDA hearings last month dealing with clinical trials and stem cells.

That discussion occurred at the meeting of the board of directors of the California stem cell agency. Reed said that Robert Klein, chairman of the California stem cell agency "expressed concern" about

"...a possibility that the FDA might put in a condition that embryonic stem cell trials might only be allowed for dying patients. This would be a disaster, meaning that human trials for embryonic stem cells to heal blindness as well as paralysis and other non-life-threatening conditions could not go forward. He asked for volunteers on the board to be on a special FDA committee. Board members Jeff Sheehy and Leeza Gibbons very kindly volunteered for the chore!

"But the overall response from almost everyone (and these are supporters of the research, good people, whose opinions I respect) was that the situation would be handled on the basis of scientific merit, and the safety of the patients, nothing more. Again and again people said, no, no, everything is fine, don’t worry."

Jesse Reynolds of the Center for Genetics and Society also had something to say on the Biopolitical Times on Geron:

"Those of us who support embryonic stem cell research should urge caution, not haste. A botched clinical trial will set the field back years, if not decades."

The Harsher Reality of the FDA Hold on Geron

At least one analyst is minimizing the impact of the FDA's hold on Geron's clinical trials for its human embryonic stem cell product.

Ren Benjamin, an analyst with Rodman & Renshaw in New York, told Bloomberg News earlier this week said that he thinks the company will "be able to work through the issues with the FDA."

However, the reality is likely to be a tad harsher. The hold is the second pronounced signal in two months from the FDA that it wants to proceed with extreme caution on hESC trials. And the action has stirred some concerns in the patient advocate community, which has pressed for more speed on the research.

Even prior to the Geron hold, Don Reed, vice president for public policy for Americans for Cures, worried about the FDA posture on his blog, stemcellbattles.com. He wrote on May 6,

"The FDA hearings on embryonic stem cells have been (in my view) deeply politicized, setting the stage to block human trials, an enormous setback."

He continued,

"A laundry list of new conditions may send...Geron, Advanced Cell Technology, and Novocell, and the entire embryonic stem cell research field back to the drawing board, conceivably for
decades."

Reed referred to the FDA hearings last month during which the bugaboo of teratomas was raised by the FDA. Monya Baker of Nature's Niche stem cell blog covered the meeting. On April 11, she wrote that the consensus from attendees at the meeting was that the FDA "seems cautious about moving forward, but not spooked."

But then came the FDA hold this week. It had to be a bitter pill for Geron. Thomas Okarma, CEO of the company, said that the company had spent four years working with the FDA and amassed 21,000 pages of documents to alleviate the agency's concerns.

Geron's stock took a big hit on the day the hold was announced, dropping to a 52-week low of $3.76. It stood at $3.97 at the time of this writing, compared to a 52-week high of $9.85.

Geron has been mum since Okarma's statement along with Novocell and Advanced Cell Technology, although we have asked for comments from all three. We are likely to hear more from Geron after it receives the FDA's written concerns.

As for analyst Benjamin's somewhat optimistic position, his firm is a market maker in Geron stock, which means that it has a stake in the company's well-being.

Complete Okarma Statement on FDA Hold

Here is the full text of the statement by Geron CEO Thomas Okarma(pictured) on the FDA's "verbal" hold on the firm's proposed clinical trials.

"We have not yet received a letter from the FDA explaining the decision to place the submission on hold, so we are unable to comment specifically. Once we have the letter and have had a discussion with the agency, we will communicate our findings and our thinking to shareholders. We are disappointed with this action given the interactions we had with the FDA over four years leading to the filing, and the breadth and depth of the submission, some 21,000 pages, predicated on those discussions with the agency."

The company's entire four-paragraph press release can be found here.

FDA Says Whoa to Geron

The FDA slammed on the brakes today on Geron, which had been hoping to launch clinical trials this year on a treatment for persons with spinal injuries.

News reports said it was unclear why the FDA imposed the clinical hold on the test, but it is good bet that the action could be linked to the FDA's hearings last month on stem cell clinical trials. Cautionary notes seemed to be the order of the day at the session.

Geron said it was disappointed in the action. The company's stock plummeted nearly 20 percent following the news, closing $3.94.

Steve Johnson of the San Jose Mercury News and Monya Baker of the Niche blog for Nature magazine both wrote today about the FDA action.

Baker covered the FDA hearings last month and produced the most comprehensive reports on the proceedings. She has links to all her coverage in her Geron item today, plus a link to her interview with the Marie Csete, chief scientific officer for the California stem cell agency, concerning the issues involved in placing stem cells in persons.

California Governor Says Invitrogen and Biotech Leading The Way

California Gov. Arnold Schwarzenegger was out plumping for the biotech industry this week during a visit to Invitrogen, a stem cell firm located near San Diego.

The firm was Arnold's poster child Monday for growth in a time of increasing talk about recession and lack of jobs. Invitrogen has added 200 new employees to its staff of 4,300 at a time when economists worry about rising unemployment in the Golden State

In some ways, the Schwarzenegger appearance is the flip side of the piece on Monday in the Boston Globe that offered a more jaundiced view of stem cell economic activity in California.

The governor cited the $3 billion stem cell agency and its three-year-old grant program, the largest research effort for human embryonic stem cell research in the world.

"The rest of the world is somewhat jealous," he said.

Schwarzenegger added, "It's all about job creation."

His office mounted an impressive array of biotech industry statistics on the governor's web site, along with a video of a portion of his Invitrogen visit.

Missing, however, from the statistics is an important figure: the size of the California workforce, 18.4 million persons. Adding a relative handful of jobs here and here is going to do little to ease immediately the problems of a lack of economic growth. Even the total biotech workforce – 235,000 – is relatively small potatoes. That said, building economic growth is a brick-by-brick endeavor. No magic solutions exist. But hyping the stem or biotech industry can backfire, as CIRM well knows. California's stem cell agency is still feeling the blowback from the excessive rhetoric of the Prop. 71 campaign.

The governor is a powerful media draw. He noted that six cameras filmed his visit, although he attributed that to interest in Invitrogen and stem cell research. Reporter Terri Somers of the San Diego Union-Tribune was also there. You can read her report here.

Readers from overseas and out-of-state may well learn something from watching the Arnold video. It conveys some of the enthusiasm, energy and commitment to California's stem cell research effort.

Biotech Loans: Industry Reaction, 30-40 Percent Failures, IP Qualms

The California stem cell agency's ambitious program to loan as much as $750 million to stem cell companies is the subject of a lengthy feature today by Terri Somers in the San Diego Union-Tribune.

The story is new to her readers so she covered a lot of ground familiar to readers of this blog, but she reported some additional details and comments from several biotech executives. Her story also carried some caveats from one watchdog and a member of the CIRM Oversight Committee.

Comments from industry were generally favorable. William Adams, chief financial officer of International Stem Cells in Oceanside, said,

"From our perspective, if we can pick up a loan for $2 million to $5 million, that helps us get a product into (clinical trials) and helps push us along to commercialization."

Also quoted were Samuel Woods, president of Stemagen in La Jolla, Alan Lewis, chief executive of Novocell, a San Diego-based embryonic stem cell company, and William Caldwell, chief executive of Advanced Cell Technology, now headquartered in Los Angeles.

John M. Simpson of the Foundation for Taxpayer and Consumers Rights, however, was critical of initial suggestions that loans would not carry the same affordability and access requirements as grants.

He said,

"This is an end run around that carefully deliberated policy and that is outrageous."

Jeff Sheehy, a member of the CIRM Oversight Committee, said he was concerned about the ability of the 26-person CIRM staff to administer a loan program.

"I don't think we have the capacity to evaluate and manage these kinds of things."

The loan program is the brainchild of Robert Klein, chairman of the agency. He downplayed concerns about administering the program.

"So we could do the scientific review, but have a delegated underwriter who essentially can, in fact, be in a risk sharing position. Under a risk sharing agreement, for example, that delegated underwriter might get a part of the upside on the repayment of the loan, including a part of the interest revenues."

Somers' report on the Internet carried one skeptical comment from a reader, "Gary63," who wondered about predicted loan failure rates of 30 to 40 percent. He said,

"Stay glued to this story...and follow the taxpayers' money."