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).