Stem Cell Firms Not Bargaining on IP From Strong Position

Venture capitalists are like cloned sheep. That is one basic reason that embryonic stem cell research is not being funded.

Or so it seems, based on an article by Terri Somers in the San Diego Union-Tribune. Her piece illustrated the weakness of the position of businesses now trying to influence the formulation of intellectual property policies by the California stem cell agency.

Last month, some executives told the agency that it should not expect businesses to come crawling for grants unless the royalty provisions were appropriate – meaning generous. That position belies the reality that venture capitalists and other funding sources, including the federal government, are shying away from stem cell enterprises.

Somers pointed out that out of $5.9 billion invested by venture capital firms in biotech and medical devices last year, only $120 million went to stem cell research, according to Fred Schwartzer, managing director of venture capital firm Charter Life Sciences in Palo Alto, Ca. The federal government provides only about $30 million annually for stem cell research.

Compare that to the $300 million a year that is expected to be pumped out by CIRM. That would make the agency the single largest source of stem cell research funding in the world, unless something changes in the next year or two.

If California stem cell firms take their petri dishes and go home (to borrow a phrase), shunning CIRM's beneficience, they are only likely to damage themselves. And, compared to the meddlesome and harsh demands of some VC firms, CIRM could appear to be a kindly, generous old uncle.

It may be some time before the private investment climate changes for stem cell research, according to Schwartzer. Somers said,

"Once there are some 'big IPOs and big acquisitions' of companies based on stem cell research, (Schwartzer) believes the private investment climate will change.

"'VC are like cloned sheep . . . they will follow,' he said."

Somers' article was based on discussions at the annual BIO convention in Chicago. She also quoted executives with Invitrogen, Stem Cell Sciences and Stem Cell Therapeutics. The piece is worth reading to gain a fuller view of investor thinking about the stem cell business.

Still Time to be Heard on Stem Cell Ethics and Conflict Rules

Some folks in Santa Monica have made an important point that has been largely overlooked by the mainstream media.

That is, the stem cell regulatory opera is not over until the California Office of Administrative Law makes its own special brand of music.

The case in point is conflict of interest regulations for the working groups at the California stem cell agency. The agency has approved the rules, but to have the force of law, they must go through the same regulatory process that all state regulations face.

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, noted recently the regulations are open for public comment until May 29. Other regulations to set ethical standards for CIRM-funded research will have an administrative law public hearing on May 1 in Oakland, the day the comment period on them closes.

Simpson, by the way, does not think much of proposed conflict of interest rules.

"These rules require the members to disclose potential conflicts, but then the information is kept secret and the public has no access. ...We need full public disclosure," he said.

Sen. Deborah Ortiz, D-Sacramento, as well thinks poorly of the conflict of interest rules. Her bill, SB401, would tighten them considerably but not as much as Simpson would like.

Here is a link to the CIRM's Web page on the administrative law proceedings.

Excerpts from Loring's "Daunting" Article

San Diego stem cell researcher Jeanne Loring says control by the Wisconsin Alumni Research Foundation over two key embryonic stem cell patents "may ultimately prove a more daunting barrier to progress in this field" than President Bush's restrictions on federal funding of stem cell research.

Loring, who is with the Burnham Institute, made the statement in a piece in Science magazine that she co-authored with Cathryn Campbell, of the Washington, D.C., law firm of McDermott Will and Emery. Based on news reports, we wrote about the issue on March 25, but thought the matter needed more exploration. At our request, Loring provided a copy of her article, which we are excerpting below.

"In reaction to the (President's) limitations, individual states and private foundations are designating funds to support research on the much larger number of HES lines that were derived after the President’s deadline. Although these funding sources sidestep the strictures of the President’s order, they do not remove what may ultimately prove a more daunting barrier to progress in this field: the intellectual property rights for HES cells."

The article continued:

"These two patents have considerable consequence for HES cell research in the United States, because they have claims to ES cells themselves, not just a method of deriving them. The claims give the patent owner, the Wisconsin Alumni Research Foundation (WARF) the legal right to exclude everyone else in the United States from making, using, selling, offering for sale, or importing any HES cells covered by the claims until 2015. The right of exclusivity is rooted in the U.S. Constitution and was intended to benefit society by encouraging innovation while discouraging secrecy on the part of inventors.
"No other country has allowed HES cells to be so broadly patented, and although the U.S.patent rights can only be enforced within the United States, HES cells made in another country become subject to U.S. patent law if they are imported into the United States."

The article said,

"As a result of an NIH contract to serve as the main distribution center for HES cells in the United States, WARF recently reduced the price of cells to $500 for academic investigators, and opened the possibility of rebates for investigators who had paid $5000 before the contract went into effect. Although the academic price is now less onerous, the situation for commercial biotechnology and pharmaceutical companies remains difficult. First, because the (California) biotechnology company Geron funded the patented HES cell derivations, they received an exclusive license for broad therapeutic use in the United States of HES cell–derived cardiac, nervous system, and pancreatic cells. This means that if a company wishes to develop therapies in these areas, they must negotiate with Geron for fees and royalties.
"But what if a company simply wants to use the ES cells for basic research? Even if the company’s research is noncommercial, WARF still requires a commercial license, which costs an upfront fee (typically $125,000), with $40,000 annual maintenance fees to retain the license. This fee gives commercial entities the same research freedom as academic researchers, and, with negotiated royalty payments, they may commercialize reagents for research. Two companies, Becton-Dickinson and Chemicon, announced that they have obtained research licenses from WARF.
"The research license cost has complicated the situation for start-up biotechnology companies that want to obtain NIH funding for HES cell research. Small companies may find themselves in what we call the “SBIR paradox.” The NIH is willing to fund HES cell research through its Small Business Innovative Research (SBIR) program, but the company is not allowed to use NIH money, usually $100,000 for a phase 1 SBIR, to pay WARF for a commercial research license. Therefore, the company must come up with separate funding of perhaps $125,000 for a license to do the NIH-funded research with the cells. As a result of discussions with the NIH, WARF has offered to take equity instead of cash for a license in some cases."

The article said:

"In December of 2003, a request for interference was filed against the claims to purified stem cell preparations in both the 1998 and 2001 WARF patents. Two patents that are licensed to Plurion (U.S. Patent 5,690,926 and 5,670,372) have issued from a 1992 application claiming methods of deriving pluripotent cells. A pending application with the same priority date claims the isolated pluripotent stem cells themselves. When the PTO indicated that the Plurion composition of matter claims were allowable, the applicant filed a request for interference, asserting that these claims overlap (and predate) the WARF pluripotent stem cell claims. Although no interference has yet been declared, the outcome of this case may have important consequences for ES cell researchers, funding agencies, and companies."

$1 million CIRM Fundraiser Stirs Critics

How could Mary Poppins do this?

But the question some are also asking is how could the California stem cell agency do this? Specifically, participate in an unprecedented $1 million fundraiser for CIRM, probably the first state agency to raise cash for its operations in such a fashion and on such a scale.

Actress Julie Andrews of Mary Poppins fame, among others, is featured in the black-tie gala that will take place in the San Francisco City Hall Rotunda on May 22. Sponsors of the event – called Reach for Tomorrow, Research Today – say it is the "largest event in our country's history to benefit stem cell research."

For $10,000 a head, donors are offered a private tour of Mission Bay (San Francisco not San Diego), Stanford and UC San Francisco stem cell research laboratories, two tickets to a private scientific briefing, a VIP reception prior to dinner and a full page acknowledgement in the event program. Or for $1,500, the buyer receives one ticket to the dinner and "gala performance." Tickets to the performance only go for $35 to $100.

The event carries CIRM's official imprimatur. Its chairman, Robert Klein, vice chair Ed Penhoet, and president, Zach Hall, are honorary co-chairs of the event, sponsored by the San Francisco Foundation, which dealt out $65 million in 2004 in the San Francisco Bay Area.

The fundraiser puts CIRM "up for sale," said John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca.

Simpson said,

"CIRM must not create the appearance that a biotech executive -- or other person wising to curry favor -- can do so and exercise undue influence by writing a big enough check."

He continued,

"Most Californians' comments are limited to three minutes when items are discussed at your public committee meetings and hearings. Now you are offering exclusive private access to those with enough money.

"CIRM must not solicit donations by offering donors benefits not available to the public."

The Sacramento Bee editorialized Sunday on the glittering affair:

"What is wrong with this picture? Plenty, if you think that public stewards of taxpayer money should keep at arm's length from those seeking that money. By agreeing to participate in the fundraiser, Hall, Klein and Penhoet have flunked this test."

In response to our query, Nicole Pagano, spokeswoman for the agency, said:

"The CIRM is not involved in the outreach or soliciting of funds for the gala. We remain grateful to Debra Strobin and her team for their efforts to support this agency."

Organizing the event is Strobin, the wife of Edward Strobin, former Banana Republic chief operating officer who died of cancer in 2000. She said in a press release:

"There is great hope in the knowledge that stem cell research can provide, and I am frustrated by the incredible delays in enabling this research to take hold. I want this event to elevate awareness of stem cell research and its potential value to people like my husband who had very little chance to conquer his form of cancer."

In scientific stem cell circles, sometimes folks refer to stem cell experiments that might generate a "yuck" response. This government experiment is close to reaching that level.

Fundraising is commonplace in political and charity circles. In the case of politics, the persons and firms buying the tickets are required by law to be publicly identified. In the case of this fundraiser, they are not. But it would behoove CIRM to post a list of contributors, including in-kind efforts, on its web site. Such a requirement should be added as well to Sen. Deborah Ortiz' measure, SB401, to tighten oversight over the agency.

The creation of CIRM was a unique blend of private and public affairs. It has built-in conflicts of interest that are legal but troubling to many. The only assurance of integrity is full public disclosure of its affairs, including this fundraiser.

At least that is how Mary Poppins, our proper British nanny, would probably see it.

Release of Stem Cell Cash Generates Generally Positive Coverage

An "exhilirating" flow of dollars has started to fill the coffers of universities and research institutions around California that are the first recipients of CIRM's stem cell research grants.

The cash is aimed at creating a cadre of stem cell scholars, who are generally believed to be in short supply because of President Bush's action restricting federal funding of stem cell research.

The opening of the money spigot triggered a piece in the New York Times, which has visited the agency only infrequently. Its coverage is significant because of the newspaper's stature among decision makers nationally. The brief article by Carolyn Marshall bore the headline: "In End Run Around Legal Challenge, California Gives Out Stem Cell Research Grants." Stem cell Chairman Robert Klein was quoted as saying the funding was "exhilirating," but the article also quoted Jesse Reynolds of the Center for Genetics and Society as saying the funding mechanism raises a "real prospect" that private entities could unduly influence the agency.

Most of the news stories generally had a positive note (giving away money always connotes well-being). Reporter Steve Johnson of the San Jose Mercury News, however, also included information about a swank fundraiser planned to provide $1 million for CIRM at up to $10,000 per plate. That prompted John M. Simpson of the Foundation for Taxpayer and Consumer Rights to worry that the purchase of tickets by stem cell companies could create a potential conflict of interest. Johnson's mention of the fundraiser, which we did not see in other newspaper reports April 11 on the grant funding, certainly seemed appropriate given the agency's fiscal woes.

The CIRM press release on the grants had this to say, among other things:

"'Stem cell researchers around the globe are keeping a close eye on California. I am very pleased for these research institutions,'" said Stuart Orkin, M.D., Chair of the CIRM Research Funding Working Group and the David G. Nathan Professor of Pediatrics at Harvard Medical School. “Even more gratifying is to see the undaunted commitment of Californians who understand the urgency of funding this research.

Reporter Erin Allday of the San Francisco Chronicle wrote:

"Dr. Arnold Kriegstein, who heads the stem cell research program being developed at UCSF, said he's already heard from at least 200 prospective students interested in the 16 training spots that will be made available by the $1.15 million grant the campus is receiving.

"Kriegstein said the UCSF stem cell program has four faculty members, with another two or three expected to join the staff by the end of the year. He hopes classes will start for the grant students early this summer."

The Contra Costa Times editorialized happily about the opening of the money gates, airily dimissing concerns about the built-in conflicts of interest on the CIRM Oversight Committee.

The occasion triggered a spate of press releases from the institutions receiving the cash, which in turn triggered some additional local stories. The press releases, however, mainly speak to the various constituencies of the institutions, who will presumably be favorably impressed that CIRM is giving money to their institutions.

Here are links to other stories on the funding: The Associated Press , The Sacramento Bee, the Los Angeles Times, the San Diego Union-Tribune.

CIRM Backers Are Big Givers

Two of the folks who are helping out CIRM financially are among the 50 most generous philanthropists in the nation.

Business Week (Nov. 28, 2005) provided the list of the top donors. Ranking No. 5 were Eli and Edythe Broad. Ranking No. 22 were Irwin and Joan Jacobs. Both have agreed to purchase bond anticipation notes on behalf of the strapped stem cell agency (See "Greenbacks.").

The Broads have given an estimated $1.8 billion to charities during their lifetimes, which amounts to 33 percent of their remaining net worth, according to Business Week. The Jacobs have ponied up $490 million for charity during their lifetimes, about 29 percent of their remaining net worth.

The list contains many other Californians, who still have billions. Topping that list in terms of net worth is Larry Ellison, the CEO of Oracle, with $17 billion. Business Week says he is interested in research on aging and diseases. Ellison's lifetime giving totals $690 million, only 4 percent of his remaining net worth.

We would suggest Ellison as a target for CIRM fundraisers, but he is undoubtedly already on their list.

Biotech Industry Exec Latest Appointee to CIRM Oversight Committee

The newest addition to the 29-member Oversight Committee of the California stem cell agency is Duane Roth, founder, chairman and chief executive officer of the Alliance Pharmaceutical Corp. of San Diego.

Roth fills a slot vacated by the resignation of the Gayle Wilson, the wife of former California Gov. Pete Wilson.

By law the the position is allotted to a representative a commercial life science entity. Roth easily fills that designation. Alliance describes itself as a "a research and development company focused on transforming innovative scientific discoveries into novel therapeutic and diagnostic agents." He has also served on the boards of directors of theBiotechnology Industry Organization, the California Healthcare Institute and BIOCOM.

California stem cell Chairman Robert Klein said in a press release:"Duane’s leadership as an entrepreneur as well as an economic development proponent in the biotech industry will be a real asset for our effort.  We look forward to his active participation and innovative insight."

Roth said,"In my many years of experience in the biotech field, I have seldom seen such an exciting and promising area of science as stem cell research, and I look forward to the challenges and the successes we encounter as we push this field forward together, here in the great state of California."

The appointment was made by Gov. Schwarzenegger.

Ortiz Pushing CIRM on Conflicts and Openness

The California stem cell agency comes under increased scrutiny next week as the legislature considers two major bills, including one that would dramatically open up the agency's meetings, require tougher economic disclosure by agency officials and require 50 percent royalties on some CIRM-funded inventions.

California Sen. Deborah Ortiz, chair of the Senate Health Committee, is the author of both measures, one of which involves egg donations. The other is SB401, which she quietly amended to tighten up regulation of the stem cell agency. She told stem cell Chairman Robert Klein in a letter that she wanted "push" the agency's own rules further to ensure public transparency and accountability.

Last week, the CIRM Oversight Committee voted to oppose the bill as "unnecessary and premature" although it said it was willing to work with the legislature.

SB401 embodies many of the concepts in Ortiz' proposed constitutional amendment, SCA13, which is on the floor of the state Senate in its "inactive" file. Making SB401 her main vehicle has several advantages. It has already passed the Senate and is now before the Assembly Health Committee, where it will be heard Tuesday. The measure also requires only a majority vote by each house, as opposed to the 2/3 vote for a constitutional amendment. Both measures require voter approval. But SCA13 could go to the ballot without the governor's signature, which is required on SB401.

Here are some of the provisions of the measure.

It would require 50 percent royalties on "net licensing revenues" to the state from grant or loan recipients if the state shares in the expenses of developing and protecting any patent on a CIRM-funded invention. If there is no sharing of such expenses, 25 percent royalties would be required. Higher royalties would be required if taxable bonds are the source of the funding.

The state attorney general would be required to review any proposed intellectual property agreements.

Businesses receiving grants would have to agree to sell CIRM-funded inventions to state and county health programs at the best price available to any purchaser.

Businesses would have to pay royalties to the state that are "consistent with the rates historically received by the University of California" for similar research.

The bill would require Oversight Committee members to place in a blind trust or divest financial holdings of more than $2,000 in entities that apply for funding or contracts with the Oversight Committee or any other organization that has a "substantial interest in stem cell therapy." An organization with a "substantial interest" is defined as one that allocates more than 5 percent of its current annual research budget to stem cell therapy.

The legislation would require that members of working or advisory groups to CIRM disclose to the Oversight Committee any income, real property and investments that they or a close family member have in a California-based academic or nonprofit research institution, a biotech or pharmaceutical company or in real property interests in California. The disclosures would be provided to the state auditor, who would be required to compare the interests to the voting records of the members. The auditor would be required to file an annual report with the Legislature "containing findings on conflicts of interest."

SB401 would extend the state's open meeting laws to include working or advisory groups to Oversight Committee, including the Financial Accountability Oversight Committee, with provisions for closed meetings dealing with confidential matters. Currently such groups do not have to abide by state open meeting rules. The agency has argued that scientists must have their privacy in order to critique applications for state money from other scientists.


The other measure, SB1260 by Ortiz, who is seeking the Democratic nomination for California secretary of state, would ban the sale of human eggs and require that donors be properly informed about the medical risks of the egg extraction. A similar measure was vetoed last year by the governor. The stem cell agency has already adopted policies on egg donations that in many ways are similar to the protections proposed by Ortiz' bill. The legislation would also give the state Department of Health Services oversight responsibilities for the law.

Ortiz' proposal would affect all egg donations in California. The regulations by CIRM only affect eggs used in research funded by CIRM. The bill, which states that it is not an attempt to amend Prop. 71, comes before Ortiz' committee on Wednesday.

The $500,000 Plan to Spend $3 Billion

CIRM President Zach Hall zeroed in on the critical point. How will the California stem cell agency be judged 10 years from now?

“What people will really care about is whether we spent our money well. Did it yield something to improve the quality of life, not just for Californians, but for everyone?”

In a word, results.

Hall's comment came at a meeting of the Oversight Committee of the stem cell agency last week. Not that he is ignoring the other important stuff, such as the best medical and ethical standards in the world, but that will come along as well if the agency is sharply focused, disciplined and diligent.

Development of the plan is expected to take something like six months and cost $500,000. Reporter Terri Somers of the San Diego Union-Tribune wrote a piece that set the matter in perspective.

She said,

"While much about the strategic plan remains amorphous, this much is certain: It won't be a laundry list of diseases to be cured. It will be a plan that allows the best and latest scientific discoveries to influence where the taxpayer money is invested, Hall said.
"And it will be fluid, because in the 10 years California intends to provide funding, scientists will likely make discoveries that catapult some research ahead of others, Hall said."

Based on Somers' story and Hall's proposal, it appears that the public will have ample opportunity to make its voice heard, if it so desires. The planning process and documents are also expected to be available on CIRM's Web site.

In what may be the only story on the meeting, Somers discussed the tension between some of the factions, if you can call them that, on the board, such the patient advocates who have pushed for rapid development of therapies. One of those is Jeff Sheehy, a patient advocate. Somers quoted Sheehy as saying,

“We tend to think of disease advocates as being tied to a specific disease when, really, it is just a mode of operating and thinking.
“My father has Alzheimer's, my mother was diagnosed with ovarian cancer, and I have HIV and my greatest risk factor right now is cardiovascular. If I had to chart today what I want to cure first, this morning, it would be ovarian cancer. My point is that everyone in California is impacted by chronic life-threatening disease. And I don't so much want to cure my disease as I want to cure something.”

The next steps on the strategic plan? CIRM staff will begin interviews with experts and "stakeholders" in the next few days, along with ICOC members as appropriate. A public meeting is expected sometime in May in San Francisco.

Here is a link to the CIRM press release on last week's meeting.

Zoloth Speaking Monday at UC Santa Cruz

Santa Cruz, California, is not exactly the center of the universe but if you are in the area on Monday, you might want to consider taking in a talk by bioethicist Laurie Zoloth.

We heard Zoloth, a professor of medical ethics, humanities and religion at Northwestern, talk at a stem cell conference last month in San Francisco. She is an apt speaker, downright zingy at times. And she has an ability to penetrate the murk.

Her topic on Monday is "May We Make the World? Bioethics, Stem Cells, and the New Biology," followed by a question-and-answer period. The event will take place from 4 to 6 p.m. at the Stevenson Event Center on the UC Santa Cruz campus.

Alliance for Stem Cell Research Beefs Up Web Site

The Alliance for Stem Cell Research has launched a new and much improved Web site as part of its efforts to promote stem cell research in California and nationally.

Susan DeLaurentis, president of the group, told us in an email:

"We have worked hard to present the technical information in a way that can be widely understood, to address both urgent and ongoing issues related to stem cell research, and to give visitors the opportunity to better understand how stem cell research could affect their lives, and the lives of those around them."

She said that the group has promoted the site using names from its database plus personal contacts. They have also asked related groups to direct their readers to the site.

Like the Center for Genetics and Society, the alliance site carries links to news stories. It also has a rundown of stem cell activity state by state.

The Alliance is the non-profit descendant of the key campaign group behind Prop. 71 and once shared Northern California offices with California stem cell chairman Robert Klein. It is now located in Los Angeles.

Useful Stem Cell Newsletter

The Center for Genetics and Society in Oakland, Ca., produces a useful Web newsletter each month that is of interest to those who follow stem cell issues.

If you haven't seen it already, it is worth checking out. The latest edition from March 29 covers everything from a roundup on Hwang to the $38 million-a-year human-egg trade. In the case of Hwang, it provides a useful summary of where things apparently stand, based on news and other Internet reports.

Of course, the center's voice can be heard in the articles, but links are also provided to the original stories. The newsletter allegedly can be automatically delivered by a free subscription. However, I have to report that my efforts to have it delivered by that means have been totally unsuccessful.

CIRM Garners Greenbacks and Flack From Critics

San Francisco Bay Area venture capitalists and a baseball mogul are among the folks who are making $14 million in bridge loans to the fiscally strapped California stem cell agency.

The names of the lenders were disclosed earlier this week at a meeting in Sacramento that approved the initial round of what is promised to be $50 million in bond anticipation notes for CIRM. Currently it cannot float general obligation California bonds because of lawsuits against it. The notes authorized this week will not be paid back if the state loses its case.

Reporters Terri Somers and Bill Ainsworth of the San Diego Union-Tribune made an extra effort to identify the players behind the charities that are buying the first round of the notes.

Here is what they wrote:

"The Jacobs Family Trust, founded by Qualcomm Chairman Irwin Jacobs and his wife, Joan, has agreed to buy $5 million in bond anticipation notes. The Moores Foundation, founded by San Diego Padres owner John Moores, has agreed to buy $2 million.

"Other investors include Blum Capital Partners ($1 million), headed by Richard Blum, husband of (U.S. Democratic)Sen. Dianne Feinstein (of California); the Beneficus Foundation ($2 million); the William K. Bowes Foundation ($2 million); and the Broad Foundation ($2 million). Beneficus was founded by John Doerr, a partner at the large Bay Area venture capital firm Kleiner Perkins Caufield & Byers, which has invested heavily in biotechnology. William Bowes, whose foundation bears his name, is also a Bay Area venture capitalist."

Moores was a catalyst in the creation of an embryonic stem cell consortium in San Diego that is touted as having the potential for being tops in the world.

Broad donated $25 million to USC earlier this year for stem cell research, among other things. CIRM President Zach Hall was a key figure in initiating the Broad effort when Hall was at USC.

Terms of the CIRM loans call for a variable interest rate capped at 5 percent. First year interest costs are estimated at $600,000. Stem cell chairman Robert Klein said the money will be enough to fund the first year of the grants approved last September by the agency.

The funding is a significant step forward for the agency, which appears to be making headway after a shaky start last year. However, not all the critics are happy. And they have a very good point about the lack of transparency that still troubles CIRM despite Klein's repeated promises to adhere to the highest and best standards of openness and transparency.

In an editorial earlier this week, The Sacramento Bee, which is the flagship of the nation's second largest chain of newspapers, said the bridge loan process was "mired in secrecy."

The Bee continued:

"Among other things, Klein's negotiations with these potential lender-donors set a vexing precedent. Never before has a state official spent so much time negotiating with private financiers to keep a public agency running. While Klein says these bridge loans will be a lifesaver for the institute, they also could plunge it into a deeper legal and political thicket.

"Although the fine print of Prop. 71 mentions 'bond anticipation notes,' it is unclear if state officials can legally issue them until the constitutionality of Prop. 71 has been affirmed. One of the lawsuits filed has asked the court to block the issuance of such notes."

The Foundation for Consumer and Taxpayers Rights of Santa Monica, Ca., warned that CIRM's leadership could be undercutting its credibility. John M. Simpson, stem cell project director for the watchdog group, said:

“At first blush it looks as though there are safeguards in place to ensure that purchasers of the notes don’t hold undue sway over the stem cell institute — they, or an affiliated entity, can’t seek a grant, loan or contract from CIRM.

“But what does it say about the institute and the secretive way it persists in doing business when the terms only became clear as the names of the first buyers were released? The stem cell institute may end up in the right place, but too often the leadership undercuts its own credibility by holding everything too close to the vest.

“A completely open, transparent process would better serve everyone. I truly wish they’d see that.”

For the record, while it still has significant transparency weaknesses, CIRM demonstrated above average openness on development of its rules for stem cell research, welcoming, at least publicly, diverse voices that did not always agree with its proposed standards.

Klein hailed the approval of the notes, saying "we've never (before) seen an aggregation of the major foundations throughout the state coming together ... as champions of research in this way," according to reporter Jim Downing of The Sacramento Bee.

A press release by CIRM quoted Eli Broad, founder of The Broad Foundation, as saying:

“California will be America’s leader in stem cell research, which will not only benefit the tremendous need of people suffering from debilitating diseases and conditions but will also help the California economy immeasurably.”

Oddly the press release did not quote any of the other investors.

We cannot provide a direct link to the CIRM press release because it appears that access to CIRM's web site and other California state web sites from this IP address in Mexico is being blocked. Some California web sites, such as the treasurer's, are accessible. We ran into this problem last fall from another location in Mexico. State computer specialists attributed the blockage to security issues and removed the block after we asked them to look into the matter. We have asked them again to make the CIRM site available.

Here are links to The Associated Press and San Francisco Chronicle stories on the bond anticipation notes. The CIRM website is www.cirm.ca.gov. You should be able to find a link on that page to the press release.

Angelides Makes Minor Stem Cell Hay

The latest score on stem cell issues in the Democratic gubernatorial race shows a modest edge for Phil Angelides over his opponent, Steve Westly.

Not that it is a matter of much significance, since both are supporters of the California stem cell agency and embryonic stem cell research. But Westly, California state controller, has launched an Internet advertising campaign on the issue, which means that he figures that there is some gain to be made through exploitation of stem cells.

Angelides, the California state treasurer, however, chalked up plus points as the result of the meeting earlier this week that authorized $14 million in bond anticipation notes for the agency. Angelides was mentioned prominently in most news stories – Westly not at all, although both are members of the committee that approved the notes. In fact, we cannot tell whether Westly attended the meeting, based on the news stories that we have seen.

Of course, Angelides is chairman of the committee, which held its meeting in his offices, making him the natural focus of coverage. Here is a link to Angelides' press release on the subject.

Can Californians Be Cowed?

Last month a stem cell industry executive told the California stem cell agency that it should not expect businesses to come crawling for grants. Another said firms "would not engage" unless the terms of grants fit the requirements of the industry. (See "resists.")

The Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., has taken umbrage at the comments.

John M. Simpson, stem cell project director for the group, focused on the comments of Stephen Juelsgaard, executive vice president of Genentech, who sounded the non-engagement note. Simpson said:

"Your remarks strike me as a blustering attempt to cow Californians into believing that needed stem cell research won't happen unless the game is played by biotech's rules -- otherwise you'll pick up your Petri dishes and go home."

The jousting highlights the stakes in the debate now underway at the California stem cell agency, which is in the process of formulating intellectual property rules for grants to business.

The foundation's comments notwithstanding, it would be naïve to expect stem cell firms to do anything less than push for the most advantageous position. In some fashion, all businesses have a basic responsibility to society. But their fundamental operating responsibilities are to their investors and to their bottom line, at least that is how they perceive it. That means they want as large a share of the take as possible.

On the other hand, CIRM must set firm rules for the unpredictable world of research and medicine and demonstrate that the people of California are likely to benefit from the $3 billion they authorized for stem cell research. CIRM must protect the the interests of the people of California – not just patients, scientists or other groups. Some at the agency believe generous terms for business mean speedy cures. But that could also translate to what could be huge boondoggles.

Juggling those competing demands and needs will be an important element in public confidence in the agency. The rhetoric will be heated. Accusations of greed and bad faith will fly. Egos will be bruised. It is our guess that Juelsgaard probably has not experienced a public attack such as the one leveled by by the foundation, if he is like most businessmen. He and others will need to develop thick skin. All the parties are likely to become disgruntled during the process, which makes it all the more important that hearings be totally open and transparent with ample advance public notice.

Naming Rights: Selling Out to Biotech?

The proposal by the California stem cell agency to sell naming rights to big donors has triggered a bit of concern from a couple of the watchdog groups.

Their objections were reported in a piece by reporter Paul Elias of The Associated Press. He wrote"

"'If they aren't careful, they are going to be seen as selling out to biotech,' said John (M.) Simpson of the Foundation for Taxpayer and Consumer Rights."

Elias continued:

"Jesse Reynolds, a longtime agency critic at the Center for Genetics and Society in Oakland, said even a grants ban wouldn't completely guard against conflicts. He said big donors could still influence how grants are awarded, perhaps pressuring research directed at diseases afflicting family members.

"'The potential for conflicts is there,' Reynolds said.

We should note that the naming proposal was first reported by the California Stem Cell Report – another reason to check into this site regularly.

We should also note that Elias' story carries a correction re the previous assertion by stem cell chairman Robert Klein that he had $50 million in commitments to purchase bond anticipation notes. The correction says that the figure is $45 million and that another $5 million is being negotiated.

The Oversight Committee is scheduled to take up the naming proposal Thursday at its meeting in Los Angeles.

Back to Romantic Old Mexico

The California Stem Cell Report will be posting items less frequently in the coming months, but we encourage all our readers to comment on the issues and send us messages keeping us up-to-date. The reason for the slower pace? We are returning to our sailboat-home in Romantic Old Mexico. Internet availability is a bit more difficult from a boat, particularly in locations where there are no marinas, than in the cities of California. Cheers to all of you and thanks for reading the California Stem Cell Report.

Stem Cell Industry Resists Strings on CIRM Grants

The California stem cell agency received two distinct messages Wednesday at its first meeting on rules for intellectual property for business.

No blank check for biotech was one admonition (see "ownership") from a watchdog group. The other came from industry, which said don't expect us to come crawling to you for money.

Reporter Lee Romney of the Los Angeles Times covered Wednesday's hearing. Here are some excerpts:

"Representatives of private biotech companies made it clear to institute board members Wednesday that major companies with the ability to bring cures to market are unlikely to seek state money if too many strings are attached to those dollars.

"'I don't think you're sitting in a position where all these companies will come on their knees to visit you,'" Brad Margus, chief executive of Mountain View, Calif.-based Perlegen Sciences Inc., warned the institute's intellectual property subcommittee.

"'He said that only second-rate companies would be interested. 'You need to have first-draft picks, not companies who are desperate,' he said.

"Industry's key concerns, Genentech Executive Vice President Stephen Juelsgard told the committee, are that the state will dictate how much companies can charge for new treatments; maintain the right to patent technology, if companies fail to do so; and require companies to share developments they consider proprietary. Major companies 'simply wouldn't engage,' Juelsgard said. 'It's not a risk worth taking.'"

The Times story continued:

"Zach Hall, the institute's president, said he is confident a compromise can be found. 'There is a heightened sense that this is a public project. As part of that there is an expectation that there will be a very tangible return,' Hall said. 'Yet we know that if we are going to have therapies that are widely available … the private sector will have to be involved in a very fundamental way. The trick is to satisfy both of those needs. We don't expect that everybody will be happy."

The Times appears to be the only newspaper this morning with a story on Wednesday's meeting.

Democratic Candidates to Vote on CIRM Funding

So far California's political junkies have been able to just say "no" to matters surrounding the California stem cell agency.

For the most part, CIRM issues have been off the political radar with the exception of an Internet advertising campaign by state Controller Steve Westly.

But next Tuesday that could change a tad. Westly and his rival for the Democratic nomination for governor, state Treasurer Phil Angelides, will share the same platform at a meeting of the CIRM Finance Committee, which is scheduled to considered funding of the agency. Both sit on the committee as the results of the terms of Prop. 71.

One never knows what can happen at a joint appearance of political rivals, so we may see some different sorts of media types and the politically curious attending the session .

There is certain to some political scheming this week by the candidates in connection with the meeting, both to maximize the beneficial electoral impact but also to minimize any possible damage from the rival candidate.

Angelides would seem to be in the most favorable position, given that he is chair of the committee, which is also meeting in his offices.

If you want to see the Democratic duo, you find all the details of the meeting here.

CIRM's Coffers Not Looking So Bare

It is not exactly a case of wheelbarrows of cash rolling in the doors of the California stem cell agency agency.

But next week, the creaky processes of California's governmental bureaucracy will start moving to put money in a pipeline to CIRM.

The main event is a meeting of the Finance Committee of CIRM. It is scheduled to convene next Tuesday afternoon in Sacramento to consider issuing notes to fund CIRM. Stem cell chairman Robert Klein has already said he has commitments for $50 million in what he calls bridge financing. It comes in the form of state bond anticipation notes that will not be repaid if the state loses the lawsuit against the agency. Klein has targeted philanthropic organizations as purchasers of the notes.

Also next Thursday, the Oversight Committee is expected to approve a new policy that will give donors naming rights if their gifts are "substantial." Klein has indicated that he has found a significant interest in donations if naming rights accompany them.

Here are some key features of the proposed policy as it will be heard Thursday before the Governance Subcommittee of CIRM.

"No naming will be considered without a gift of substantial value to CIRM and its programs.

"A gift that requires an initial and/or on-going expenditure will not be considered if the total estimated expenditures will likely equal or exceed the value of the gift.

"No gift will be accepted from an institution, entity, or individual that has applied for CIRM funding or that intends to apply for CIRM funding, except for gifts of the use of government or nonprofit-owned facilities for ICOC, working group, or scientific meetings.

"No gift will be accepted from a biotechnology company that devotes five percent or more of its annual budget to stem cell research."

An Examination of CIRM's Autonomy

California Politics Today is not letting the issue of the independence of CIRM rest.

The question was at the heart of the California stem cell trial during which CIRM foes argued that the agency was unconstitutional because it is not under the exclusive control of the state.

Reporter Marc Strassman's piece includes some history of the agency and Prop. 71 and a feeble response from the governor's office on the matter.

Watchdog Group: No Invention Ownership for Businesses

One of the organizations monitoring the California stem cell agency says the state should own any inventions that businesses create with state-funded research, a proposal that is certain to be resisted by the biotech industry.

"No blank check for biotech" is the anthem of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

John M. Simpson, stem cell project director for the group, said in a letter to CIRM's Intellectual Property Tax Force.

"With biotech firms already lining up to share in the Prop 71 funds, it's disconcerting to hear venture capitalists like Steve Burrill refer to the stem cell institute's grants as 'almost like free money.' Clearly defined IP rules, governing such things as price and accessibility for underserved populations, will ensure that businesses receiving CIRM money will meet fair obligations to the public when they take taxpayer dollars. As you and the task force write IP rules for businesses you should remember that although Californians overwhelmingly approved Prop. 71, they never intended a black check for biotech."

Simpson also wrote:

“If Prop. 71 money funds research, perhaps a clinical trial … California should receive a fair commission when it is finally available on the market. If a patentable discovery results from Prop. 71-funded research by a business, the state should own it and place it in a patent pool so that the research can be as broadly shared as possible.”

CIRM has already adopted IP rules for non-profit institutions that give them ownership of any inventions funded by CIRM, a position the Santa Monica group opposes for businesses.

The IP Task Force is hearing IP recommendations from various groups at a hearing today.

Formulating a Plan to Give Away $3 Billion

Strategic planning can be one of those "yawner" endeavors – a meaningless process that is ignored by all parties hardly before the ink dries on the plan document.

But at CIRM it has been a matter of considerable concern, pitting different interests on the Oversight Committee against each other.(See "clashing interests"). The lack of a coherent plan has also played a role in some of administrative and other problems that have troubled the new agency.

At one point late last year the start-up difficulties prompted Paul Berg, a Nobel laureate from Stanford who fills in on the Oversight Committee, to say, "I liken it to the Iraq thinking - we won the war and didn't know what to do afterward." (See "beleaguered.")

With that backdrop, the latest run at planning the strategic plan kicks off Thursday at a meeting in San Francisco of the governance subcommittee of the Oversight group.

The item in question is a $250,000-plus contract with PriceWaterhouseCoopers to support efforts to develop a strategic plan. The agenda mentions an attached document which is not yet available on the Web, but presumably will tell us more about the latest approach.

One key matter to watch for is the approach to the interests of the patient advocates, who are pressing for speedy development of therapies and seem to be quite concerned about any slower strategy.

Also on the agenda is a policy for peddling naming rights to CIRM programs or property in connection with the receipt of gifts. (See "naming.")

A proposal for a compensation plan at CIRM is up for consideration along with the latest on outside contracts with CIRM. The contracts include $75,000 with Spiegel, Liao and Kagay and $25,000 with Orrick, Herrington & Sutcliffe, both of San Francisco, for work on the California stem cell trial and expected appeal.

The meeting to consider all this will take place in San Francisco at 3:30 p.m. Thursday. Remote locations are available in San Diego, Stanford, Sacramento, Irvine and three different sites in Los Angeles. Details are available on the agenda.

Color the News Stem Cell Green

Sometimes it seems that the California stem cell business is more about deriving dollars rather than therapies from the research. On the other hand, perhaps it actually is.

The news this morning has a strong focus on the monetary matters. And later this week, the California stem cell agency will kick off its hearings into dividing up the booty from any inventions developed by businesses that receive CIRM grants.

Here is quick look at the highlights of the fresh fodder from the mainstream media.

Writing an op-ed piece in the San Francisco Chronicle, John M. Simpson, the stem-cell project director for the Foundation for Taxpayer and Consumer Rights, said:

"The biotech industry is lining up to take Prop. 71 money and wants as few strings as possible attached. Speaking to biotech executives at a conference his firm organized in San Francisco, Steve Burrill, chairman of the venture capital and merchant banking firm Burrill & Co., described the capital funding being provided by taxpayers in California and a few other states as 'almost like free money' compared to commercial venture capital. That phrase is a tipoff to the lack of any sense of obligation. Clearly defined IP rules, governing such things as price and accessibility by underserved populations, will ensure that businesses meet fair obligations to the public when they take the public's 'free money.'"

Reporter Steve Johnson of the San Jose Mercury News wrote:

"Even with California's stem-cell research institute mired in legal challenges that block most of its financing, businesses in the Bay Area and elsewhere are betting their bottom lines that stem cells one day will yield staggering new medical cures and profits.

"About 100 companies in the United States and an equal number in other countries are trying to develop stem cell-based therapies and other products, according to venture capitalist G. Steven Burrill, who hosted a stem-cell conference in San Francisco last week.

"Coaxing commercial blockbusters from stem cells is costly and could take years. Even so, many of the executives and others drawn to the event sounded optimistic, given the progress they and others say is being made."

And reporter Daniel Levine of the San Francisco Business Times has a follow on our earlier report that Wisconsin wants California to cough up royalties for any CIRM-funded research into embryonic stem cell research.

Reporter Marc Strassman of California Politics Today also has three items: One links to a UC San Diego campus newspaper item about conflict of interest involving a member of the stem cell Oversight Committee; a second quotes Phil Angelides on Prop. 71 bonds two days after the measure passed and a third involves a statement from California State Sen. Deborah Ortiz on proceedings in the California stem cell trial.

WARF Under Assault For Excessive Royalties

The latest criticism of Wisconsin's control of patents on embryonic stem cells is well-covered in a piece in the Wisconsin State Journal that comes as California is facing new claims from WARF for a piece of the action in the Golden State.

Earlier this month, WARF's chief counsel told a stem cell conference that she expects to see California pay royalties to her agency. That's because CIRM-approved rules give the state roughly 25 percent royalties on inventions developed by CIRM-funded research at non-profit institutions. CIRM is scheduled to consider IP rules for grants to commercial firms next week.

Reporter Ron Seely of the Wisconsin newspaper wrote the article about patent complaints by Jeanne F. Loring, a stem-cell researcher with the Burnham Institute in San Diego,, and Cathryn Campbell, a patent attorney with McDermott, Will & Emery, a Washington, D.C., law firm.

Their charges were contained in an article in Science magazine that said WARF patents are "a more daunting barrier to progress in the field" than President Bush's restrictions on embryonic stem cell research.

Seely wrote:

"But the authors of the Science article also take issue with how WARF distributes the cells and the fees it charges for their use.

"Initially, WARF charged academic investigators $5,000 for the cells. After an agreement with the National Institutes of Health, which made WARF the main distribution center for the cells, that fee was reduced to $500.

"The price is steeper for private laboratories. WARF charges an upfront fee of up to $125,000 to private commercial labs for the cells, plus an annual maintenance fee of up to $40,000 to retain the license."

Seely quoted Carl Gulbrandsen, executive director of WARF, as saying,

"I'm not embarrassed at all to say that I hope the University of Wisconsin will make a whole lot of money from these patents."

Seely also carried a more detailed defense by Gulbrandsen of his position.

Loring has leveled charges at WARF previously. Nature magazine reported in May 2005 that she said her startup firm collapsed because she could not get access to embryonic stem cells at a reasonable price from WARF. That matter was discussed briefly in an article by Merrill Goozner in February in PLoS Medicine that explored the problem of patent thickets and stem cell research, particularly in California.

(Goozner's article is available without charge, but the piece by Loring in Science and the article in Nature require paid subscriptions. We should also note that Loring is a key figure in creation of the nation's first public embryo bank, which she said will make embryos available to qualified researchers at no cost.)

Seely's piece on Loring's most recent allegations appears to be the most comprehensive one available today. Most of the country and California saw this Associated Press piece.

One interesting sidelight on the patent dispute comes from Kathleen Gallagher of the Milwauke Journal in an article she wrote in 2004. She said,

"Significant discoveries involving stem cells may be 10 years away. Then it could take another five to eight years to get therapies through the U.S. Food and Drug Administration, said Carl R. Clark, director of marketing and licensing for the Medical College of Wisconsin Research Foundation. That means WARF's initial patents could expire before any royalties are generated.

"One of the companies best-positioned to bring stem cell therapies to market is Geron Corp. of Menlo Park, Calif.

"Geron funded much of the early research at the University of Wisconsin-Madison leading to James Thomson's first-ever isolation of human embryonic stem cells in 1998.

"The company has certain rights to develop therapeutic and diagnostic products involving certain stem cells. Geron has said it hopes to be in clinical trials by the end of 2005 or early in 2006 for therapies for spinal cord injuries.

"That makes Geron a fan of WARF's patent.

"'If 50 new companies are spawned in California in the next five years, those are licensing royalties to Madison and Menlo Park,' said Thomas B. Okarma, Geron's president and chief executive officer."

Can WARF Collect Stem Cell Royalties From California?

Earlier this month, we reported on a call by the Wisconsin Alumni Research Foundation for royalties from California-funded stem cell inventions.

The issue was addressed today in IPBIZ, a blog by patent lawyer Lawrence Ebert. He raises questions about WARF's position and includes a number of legal citations. Here are a few excerpts from the item:

"First of all, the information in the (California Stem Cell Report) post is worth consideration by people in California, and in New Jersey, Maryland, Connecticut, and Illinois, about state-financed funding of stem cell research."

He continues:

"My second point is, notwithstanding the significance of WARF's expressed position on March 14, it does not really constitute a threat to the other states. [There may be other things that do constitute a threat, but that's another story.]"

Ebert also says:

"Moreover, there's another reason the folks at WARF ought to be careful. CIRM is a state agency. Accusations of patent infringement against states play out a bit differently than the garden variety suit against a garden variety defendant."

ACT's Caldwell Responds to 'Unease' Item on State Funding of Stem Cell Research

Last week we wrote about how some in the biotech industry preferred federal funding of embryonic stem cell research as opposed to state-funded efforts. We puzzled over the situation and invited those quoted in the item to respond. We promised to carry their responses verbatim. Here is the response from William M. Caldwell, chief executive officer of Advanced Cell Technology, Inc., of Alameda, Ca.

"I appreciate your allowing me to comment on your recent blog of March 16, 2006, "The Big Uneasy." I believe you misrepresented my stand on state funding for stem cell research and welcome the opportunity to correct the impression I believe you gave your readers.

"You are correct that I believe we should see national funding via the National Institutes of Health, especially in my arena of embryonic stem cell research. But I do not regard the state's $3 billion stem cell agency "with unease," as you put it.

"The real issue here is bringing treatments, therapies and cures to the bedside. In an environment where our national government has failed in providing us with the best possible path to this objective, and in fact blocking the ability of science to move forward, California has stepped up and led the nation.

"In August 2001, when President Bush announced a ban on federal funding of all but a limited number of stem cell lines, the states began stepping into this breach by setting out to establish their own stem cell research programs. Bush's restrictive federal policy on this research has given the states a remarkable opportunity, but it also has left them to battle with complex economic, ethical, policy, and moral issues. States are now facing important political and organizational challenges in designing and implementing effective state-financed stem cell programs -- all of which have been institutionalized over decades at the NIH.

"As the CEO of Advanced Cell Technology, a leading biotechnology company focused on developing and commercializing human stem cell technology, I believe our recent moving of the company's headquarters from Massachusetts to California as a direct result of the passage of Prop. 71, is a clear indication that I am a supporter of the California Institute of Regenerative Medicine (CIRM). However, as I said at The Stem Cell Meeting last week, state funding of this research is not the best approach. Embryonic stem cell research should be funded by the National Institutes of Health, the major source of research funding for the life sciences in the United States, not each individual state.

"Having states independently fund and regulate embryonic stem cell research will, I believe, create a disjointed morass of dissimilar bureaucratic procedures, oversight, rules and regulations.

"Because of uniform federal standards and guidelines, the funding recipient has consistency in protocols, processes and applications wherever the research is done in this country. States having different agendas, for whatever reason, will potentially impose immense challenges for the scientific community, which typically will conduct collaborations in diverse geographic areas of this country.

"The lack of federal funding in this field has driven some individual scientists to move abroad to countries that are soliciting expertise in this area and are willing to fund this research. Some universities and other research enterprises have opened up facilities abroad to take advantage of a better regulatory climate. Just look at Singapore and which universities have developed a presence there in the past decade. This is completely unsatisfactory from an American perspective.

"I stand by my statement that State-funded stem cell programs are not the ideal solution, but from a scientist's perspective, in a world where our federal government has turned a blind eye to this promising research, it is the only U.S. alternative available."

CGS On Money, Eggs and Women

Women should not be paid for their eggs, and here is why, according to Jesse Reynolds, Project Director, Biotechnology Accountability, at the Center for Genetics and Society in Oakland, Ca.

Reynolds sent his comment in connection with the "cash larded" item earlier today. If others would like to comment on this matter, you may use the comment function at the end of this item (click on the word comment) or send an email to me at djensen@californiastemcellreport.blogspot.com. Here is Reynolds' full comment.

"I'd like to make two clarifications, and an assertion.

"First, you state that 'One of the working assumptions of stem cell researchers is that IVF will provide a lot of eggs that could be used for science.' However, the assumption has generally been about a surplus of embryos - not eggs - created but not used for IVF. There are negligible surplus eggs in IVF. Because they are difficult to extract and do not store well, eggs are typically the limiting factor in IVF. (There is, however, some recent advances with freezing eggs.) Thus, any eggs for research generally must be designated as such from the start. In the US, there is little discussion of 'mixed donation' - providing eggs for both purposes in one extraction - although the UK is considering this. Egg extraction in the US is generally done as in an 'either/or' context.

"Your post could be interpreted as implying that eggs are needed for stem cell research. But the distinction between typical embryonic stem cell research and that using cloning techniques is often blurred. Almost all human embryonic stem cell research is done with surplus embryos from IVF. Only a tiny fraction of researchers are attempting to make clonal embryos for stem cell lines. This is what requires eggs. Stem cell lines are yet to be successfully derived from clonal embryos. Moreover, some observers and scientists are beginning to question to need for SCNT (a.k.a. research or therapeutic cloning) and thus the need for eggs. For example, see 'Beyond Fraud - Stem-Cell Research Continues' by Evan Snyder and Jeanne Loring and the lead story in our most recent newsletter.

"The Center for Genetics and Society believes that that women should not be paid for their eggs. It is true everyone else in the process gets paid, but they are doing their jobs. As a society, we've generally concluded that people should not risk their health for research in order to make income. That's why we are not allowed to sell organs, such as kidneys. The logic that 'everyone else is paid' would imply that kidney donors should be paid by the highest bidder.

"We conclude that economically vulnerable women should not be financially induced to put their health at risk for research that at this point is speculative and, all too often, hyped."

Stem Cell Research Chain Larded With Cash Except for Women Egg Donors

The Wall Street Journal this morning carried an interesting piece on the risk, pain and money involved in the fertility and egg business.

Written by reporter Sylvia Pagan Westphal, the article offers some perspective on the research and economic issues involved in providing eggs for stem cell research – a subject of current interest in the California legislature and with the California stem cell agency.

Here are the first three paragraphs of the article:

"Nichola Grant underwent five in-vitro fertilization attempts the traditional way. First came weeks of daily hormone shots to stimulate egg production, which painfully bloated her ovaries and stomach. Then doctors inserted a needle through her vaginal wall to remove the eggs -- up to 20 at a time, she says -- from her ovaries. On three occasions fertilized eggs were put back in her womb but failed to lead to a baby.

"That was enough discomfort for Ms. Grant, a 34-year-old nurse in Queens, N.Y. She went to Manhattan fertility doctor John Zhang. There were barely any shots -- mostly pills -- and he removed just three eggs. He implanted one in the womb, and she delivered a baby boy in January. 'It was so easy,' she says. 'It's no comparison.'

"Dr. Zhang doesn't claim his method leads to higher pregnancy rates, but he does assert that Ms. Grant's story represents what's wrong with standard operating procedure at fertility clinics. He says the fertility profession is too concerned with drawing lots of eggs from women. The result, he believes, is more pain, a higher risk of complications and a success rate little improved over gentler approaches."

Westphal's piece continues: "'A lot of people realize we're overdoing it,' adds George Inge, a doctor at the Center for Reproductive Medicine in Mobile, Ala. 'We've got to come out with ways so women are not so beat down.'"

The story reports that the IVF business runs about $3 billion a year, according to Debora Spar, a Harvard Business School professor. More than 120,000 women underwent IVF procedures in 2003.

As for the risk of the procedure, the Journal says:

"One of the most serious complications is ovarian hyperstimulation syndrome, or OHSS, a potentially fatal condition in which ovarian tissue leaks fluid into the body cavity. This makes the blood thicker and increases the risk of stroke. Mild OHSS, which brings discomfort but doesn't require hospitalization, occurs in up to 35% of IVF cycles. Moderate to severe forms take place in up to 6% of cycles."

The piece cited the case of one woman who was admitted to a hospital where doctors drained seven liters of fluid over two days from from her abdominal cavity with a needle. Other sources have cited two deaths in the UK.

One of the working assumptions of stem cell researchers is that IVF will provide a lot of eggs that could be used for science. However, should Zhang's procedures become the market standard, that source would dry up. Which brings us to the question of whether women should be allowed to sell their eggs.

At every stage of the egg gathering process, money is being made except by the woman, who provides the critical material, if we are to follow the CIRM model. The clinics, even nonprofit ones, that extract the eggs maintain a margin in excess of costs. Doctors and nurses and other staff at the clinics earn their livings by harvesting eggs. The eggs then are provided to scientists to perform research. The scientists make their living doing this, receiving grants, being paid salaries, possibly enjoying revenues from inventions that require the use of a woman's eggs. The research institutions' coffers and reputations are enriched as well by the stem cell research that requires the use of eggs from a woman who receives no payment. The commercial enterprises that bring the therapies to market stand to make huge sums based on material that has been derived at no cost from a woman, who may or may not know that at the time of donation that a host of people and enterprises stand to gain economically from her donation.

Prop. 71 bars compensation for eggs, and CIRM has approved rules to ensure that women know some of the economic implications of their donations. But they are unlikely to tell donors that the research chain is larded with folks who will make money on something that they are giving away.

Somehow it doesn't seem quite fair.

CIRM Tackles IP Rules for Private Business March 29

The California stem cell agency will begin to develop its share-the-wealth rules for research grants to private enterprise next week as one expert warns of a "chilling effect" if the state gets too greedy.

The note of caution came from David Mowery, professor at the UC Berkeley Haas School of Business.
A press release last Friday from the school said:

"Should intellectual property and patenting laws be tweaked so that a portion of profits from stem cell research goes back to taxpayers and not just into the coffers of universities and biotech companies? Should the state be able to negotiate low prices on drugs or treatments that are eventually developed with Proposition 71 funds?
"'The direct or near-term benefits from such policies are likely to be very small,' Mowery argues. 'On the other hand, the risk of such policies having a chilling effect on licensee interest in intellectual property is likely to be great.'"

The press release continued:

"'To begin tampering with this legislation on the question of stem cell research in order to set up what amounts to a separate set of laws for this new area of research will dramatically raise overhead costs and serve as a drag on innovation,' he says. 'The relatively small amount of money that will be returned to taxpayers will hardly make it worth it.'"

The size of that return – if any – is likely to be lurking among the subjects at a meeting of CIRM's Intellectual Property Task Force next Wednesday (3-29). The primary item on the agenda? "Informational presentations by representatives of granting agencies and the commercial life sciences sector regarding grants to for-profit entities." At this point, that is the most detailed information available on the Web.

The IP Task Force is on a pretty fast track to develop its regulations, so if you want to have your views considered, it would be wise to touch base with the group. The meeting can be heard at five different locations throughout California, but the San Francisco site is probably where the chairman of the task force, Ed Penhoet, will be located.

Other sites are located in Elk Grove, Chico, Irvine and Stanford. The addresses can be found on the agenda.

Altruism Won't Supply Enough Eggs and Other News From UCLA

California Politics Today is back with another item on the California stem cell agency – this time an interview with a UCLA law professor about his view that the lawsuits against CIRM are frivolous and should have been dismissed long ago.

Reporter Marc Strassman spoke with Russell Korobkin, who has recently written written op-ed articles about the lawsuits.

The plaintiffs in case have argued that CIRM is operating outside the "exclusive" management and control of the state. However, Korobkin told Strassman that the "totality of circumstances" within state government, in fact, brings the agency within the control of the state. He also said it is not unconstitutional for voters to create an agency that has built-in conflicts of interests, as does CIRM.

The 36-minute interview, which can be seen on the Web, covered a great deal of ground. Among other matters, Korobkin said he was "not enough of an expert" to say whether Prop. 71 supporters engaged in a bait-and-switch campaign in the 2004 election. He also said women should be paid for their eggs, although he noted that was prohibited by Prop. 71. Korobkin said altruism is not going to generate the quantity of eggs needed for research.

Strassman prepared a written report on the interview, but did not include in his item some of the material that we extracted from the full video.

A Caveat Emptor on CIRM

The headline reads: "California's Proposition 71 may devolve into 'stem cell civil war.'"

But then again it may not, as my onetime boss, George Skelton, then UPI bureau chief in Sacramento and now political columnist for the Los Angeles Times, used to tell me decades ago concerning the use of the word "may."

The headline in question comes from an article by reporter Marc Strassman on California Politics Today.

Strassman has followed Prop. 71 for a very long time, and we are overdue in providing more information on his news and commentary.

Strassman's site is rich with detail about Prop. 71. Here are two sample headlines from his report:

"'Proposition 71 stem cell quagmire deepens as 'egg recruitment' and 'cellular vampirism' issues receive heightened scrutiny" (California Politics Today, November 17, 2005)

"'Stem Cell Wars, Volume 2, Chapter 2: Human Egg Farming--"Can either the free market or altruistic volunteers provide the human eggs needed for hESC research under Proposition 71, or will some form of coercion be necessary?' (California Politics Today, November 20, 2005)"

One of the unique features of Strassman's site is access to his audio and sometimes video recordings of interviews with many of the stem cell players. Strassman does have a skeptical point of view about the California stem cell agency and produces a report that is as much commentary as reporting.

His latest missive carries the headline mentioned in the first paragraph of this story. Strassman's item concludes with the following:

"Given all that's transpired, and been revealed, since California voters bought the deal proposed to them by Robert Klein and his team of lawyers, economists, and bio-medical researchers (largely ones associated with Stanford University), on November 2, 2004, one can only wonder why the ultra-modern bio-medical technology, cutting-edge legal construction, and beyond state-of-the-art organizational structures instantiated in that initiative measure were not more thoroughly subjected to the more ancient, but still relevant, legal and commercial principle of caveat emptor, 'let the buyer beware.'"

Is CIRM the Big Uneasy?

How do some California stem cell entrepreneurs regard the state's $3 billion stem cell agency?

With unease, at least based on comments at a stem cell conference in San Francisco earlier this week.

Generally, speakers spoke approvingly of the efforts by California and other states to fund stem cell research. But they exhibited a decided preference for national funding via the National Institutes of Health, which, of course, has been cut off by President Bush and is threatened by various legislators. At least in terms of embryonic stem cell research.

William Caldwell, CEO of Advanced Cell Technology, of Alameda, Ca., said state funding of embryonic stem research is "not the way to go." He said the California stem cell research funding effort is "the worst of all evils but it is the evil we've got."

Caldwell did not elaborate on his rather dramatic phrasing, but others echoed it in one form or another. Fred Middleton, managing director of Sanderling Ventures, a biomedical venture capital firm in San Mateo, Ca., did not speak directly to Caldwell's comment. But he said there is "not a clear road map" to CIRM funds.

Perhaps we are a bit dense on this, but Caldwell's position is a little difficult for us to understand. Federal funding for embryonic stem cell research is one-tenth of what is proposed in California. The federal spending is subject to the whims of the president and Congress. Federal stem cell research funding also has to battle a host of other worthy and powerful causes for its share of the federal research pie, which is not likely to expand in the near future.

Contrast that to CIRM, which operates almost totally independently from the legislature and the governor. Its funding comes from $3 billion already approved by voters and is not likely to go away. The money is devoted to stem cell research and is not likely to be tapped by other research efforts. And the agency is emulating many of the processes of the NIH, which are already familiar to biotech industry.

Of course, California's program is new and somewhat unpredictable. It is going beyond NIH standards in some regards. Its intellectual property policies may be tougher for private businesses.

In a perfect world, it would be best to have national standards for stem cell research and unfettered federal funding. But the fetters are not likely to come off during the next two or three years. So what is so problematic about California's approach?

Perhaps Mr. Caldwell, Mr. Middleton or others can enlighten us and the readers of this report. They or you may comment, even anonymously, by clicking on the word "comment" at the end of this item. Or you can send an email directly to me, djensen@californiastemcellreport.com, with your preferences on how your response should be handled.

California Should Expect Modest Royalties From Stem Cell Firms

The California stem cell agency is going to give folks a glimpse later this month at its initial thinking concerning the division of spoils from inventions that come about from its grants to commercial firms.

But we already have a suggestion from one interested party that the state's share be modest. Fred Middleton, managing director of a biomedical venture capital firm in San Mateo, Ca., Sanderling Ventures, suggested minimal royalties – something in the 3 percent to 8 percent range. Ten percent would be too high, he said.

He also said the state should not expect a short-term payback on its investment.

Not that any of this is likely to have a great impact in the near future. CIRM has not yet funded a single grant. And it could be some time before it starts considering grants to businesses. However, it would behoove any commercial California stem cell enterprise to weigh in early as the ground rules are being formulated.

Middleton made his comments at a stem cell conference in San Francisco earlier this week.

Demons, Disease and Stem Cells

Nobel Prize winner Paul Berg says that social conservatives are "actively demonizing" some scientists for stem cell research and other work that offends the critics' sensibilities.

Berg, a Stanford University professor who serves as an alternate member on the California stem cell Oversight Committee, made the comment in a speech at a major stem cell conference in San Francisco earlier this week.

Berg said,

"Perhaps for the first time, the threat looms that certain lines of biomedical research could be forbidden, indeed, criminalized. Currently, legislation passed several times in the House and pending in the Senate threatens criminal penalties of 10 years in prison and a $1 million fine for using a procedure that involves cloning a patient’s genetic information in the form of embryonic stem cells. Never mind that this procedure is intended solely for creating a deeper knowledge of the genetic and cellular roots of disease; and, that the procedure is presently the only means for creating patient-specific embryonic stem cells for the treatment of several debilitating ailments. Even more ludicrous, are the same criminal penalties for providing or receiving any therapy if the development of that therapy involved the nuclear transfer technology. Consider the arrogance of withholding possibly life-saving aid from the American public because some members of the Congress are offended by the technology!"

He continued:

"I am concerned that the quality of the science may no longer be the sole or principal determinant in whether a particular line of research would be permitted; rather, theological and ideological pronouncements parading as fundamental ethical and moral values may increasingly take over. Vocal and organized minorities through their political representatives could become a prominent force in defining the boundaries and even the permissibility of scientific research."

Berg said,

"Presently, social conservatives are actively demonizing scientists conducting research on AIDS, reproductive technologies and fetal and embryo development. The call by social conservatives to limit certain lines of inquiry, as now exists for human embryo research, has been to restrict federal funding for the 'offensive' activity."

Berg also suggested that research is entitled to protection under the First Amendment and discussed legal arguments that support that position. He said,

"Abridging (the) implicit right to unfettered inquiry because it offends someone’s religious beliefs or ethical views is in my view no more justifiable than prohibiting press investigations that offend certain constituencies."

Berg spoke at The Stem Cell Meeting in San Francisco on Monday.

$50 Million for CIRM: All But In The Bag

California stem cell chairman Robert Klein says he now has commitments for the $50 million he has been trying to raise to fund grants approved six months ago by the stem cell agency.

Klein made the disclosure to a stem cell conference in San Francisco earlier this week. The next steps will come from the state treasurer's office to formally approve the bond anticipation notes and do the paperwork. An official in the treasurer's office said that process normally takes only a few weeks.

Of course, that assumes normal proceedings. However, it may also be necessary to arrange for some hoopla to recognize the buyers of the notes and maximize their public impact. State Treasurer Phil Angelides, who is seeking the Democratic nomination for governor, also may want to be sure the proceedings enhance his campaign.

With exception of one purchaser, Klein has not identified the buyers. But he has targeted philanthropic organizations. One reason is that the notes will not be repaid if the state loses the lawsuits against the agency. The risk involved means that the notes will carry a higher interest rate than normal state bonds.

Klein discussed the financing in appearances before The Stem Cell Meeting, sponsored by Burrill and Co., in San Francisco. Burrill is a life sciences merchant bank with more than $500 million under management. The conference drew hundreds of participants from across the nation and internationally.

The End to The Stem Cell Meeting

The following comes to you live from The Stem Cell Meeting in San Francisco.

At the end of the day came rhetoric about the culture of death, bald eagles and their eggs and how we all should be able to get along.

The last meeting of The Stem Cell Meeting in San Francisco concluded with a lively panel on ethics in stem cell research. It was heated at times, humorous and informative. But it did not change the mind of a single person (we think).

Following the final panel, the host of the conference, Steve Burrill, head of the firm bearing his name, told the audience the two-day conference was planned to avoid an event where business people talk only to business people and scientists only talk to scientists. And that it was, an interesting cross section of bureaucrats, executives, scientists, religious folks and so forth. Burrill promised another session the same time next year.

We will have more tomorrow on the events at the meeting.

Wisconsin to CIRM: Cough Up Some Cash

The following is coming live from The Stem Cell Meeting today in San Francisco, sponsored by Burrill and Co.

Wisconsin wants a piece of the California stem cell pie.

That's because the California stem cell agency has decided to give its own state 25 percent royalties on any inventions created with CIRM-funded embryonic stem cell research.

Wisconsin is involved because the Wisconsin Alumni Research Foundation has two patents that broadly cover the preparation of embryonic stem cells. Beth Donley, general counsel, Wisconsin Alumni Research Foundation, said that if CIRM stipulates 25 percent royalties for California that requirement amounts to commercialization. And that means WARF wants a payment from California.

How much would that amount to? Speaking during a panel session at The Stem Cell Meeting in San Francisco today, Donley said that licenses start at fairly low rates and mentioned a bottom figure of $75,000. In February of 2005, Peter Balbus, managing director at Pragmaxis LLC, of Glen Ellyn, Ill., estimated that Wisconsin could receive $200 million for $4 billion in stem cell product revenues. However, it is not clear whether that estimate is still valid.

Donley told industry representatives at the conference, sponsored by Burrill & Co., that she had spoken with CIRM officials on three occasions. The last time was on Monday when she told Robert Klein, California stem cell chairman, that the 25 percent royalty provision meant that CIRM was "trading on (Wisconsin) technology to build a (commercial) program." She said CIRM could provide the royalty in various ways. One would be to provide a stream of revenue from whatever California receives. Another would be to build it into grant arrangements with the nonprofit institutions.

Todd Lorenz, chair, Life Sciences and Health Care, Dorsey & Whitney LLP, another member of the panel, said Donley's statement raised the issue of "suffocation of product." The term refers to excessive layers of royalties of as much of 25 to 30 percent that stifle commercialization of therapies. Donley said Wisconsin was entitled to receive payments for use of its products and that the funds would go for research and education.

Warnings about Overhyping Stem Cell Science

The following is coming live from The Stem Cell Meeting today in San Francisco, sponsored by Burrill and Co.

California stem cell chairman Robert Klein is heading a panel called "Stem Cell Politics: Global Strategies for Supporting Research." Michael Werner of The Werner Group has just told the audience that no state in this country is "talking about the kind of money" that is likely to be available in California. The best prospects for significant stem cell research funding are in New Jersey, Maryland and Illinois. Angela McNab, chief executive of the Human Fertilization and Embryology Authority in the UK, warned that the audience that they cannot take public confidence in stem cell research for granted. She said excessive enthusiasm can lead to overhyping benefits and the speed with which they will be produced. She warned that when results are not forthcoming, opponents "will use the hype to discredit the science."

We will have more on the conference later today.

Coming Up

Today we are attending The Stem Cell Meeting in San Francisco sponsored by Burrill and Co. The conference will be discussing the investment environment for stem cell research along with ethical issues, among other things. Topics include "Where is The Money" and "The Business of Stem Cells." We hope to post items from the conference as it occurs, if the opportunity is available. If not, we will post news from the conference this evening (Pacific Standard Time).

No Teleconferencing for Research Working Group Meeting

Earlier this month we reported that some sort of teleconferencing arrangements were in the works for today's meeting of the research working group of the California agency. However, the reference to those arrangements has been stripped from the agenda posted on the Web. We queried the agency about the matter. They responded that teleconferencing is available only for members of the working groups – not the public.