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."