San Diego Session On Sharing Stem Cell Swag

After hearing some cold economic realities last month, officials of the California stem cell move to San Diego Thursday to advance their attempts to formulate an intellectual property policy for businesses that receive CIRM funding.

The agenda posted on the Web by the IP Task Force is vague with no indication of who is going to testify or exactly what is expected to be accomplished. But the group is still digging into the basics and is not likely to come up with recommendations until next fall. At least one more meeting is in the works, this one probably in Sacramento.

It's an appropriate location, given that lawmakers are considering legislation to require as much as 50 percent royalties from businesses, under certain circumstances. By contrast, testimony at last month's hearing indicated that such a requirement is a non-starter for most businesses.

The March IP session triggered as many questions as answers. It led to requests to hear directly from stem cell companies and venture capitalists, none of whom appeared in March. Task force members wanted to know more about policies in other states and Singapore. And they wanted to hear from Big Pharma and the California Healthcare Institute, which represents the biomedical industry.

Ed Penhoet, chair of the task force, said last month's hearing raised some fundamental questions.

"What are we really attempting to do? Are we trying to drive therapies as rapidly as possible? Are we trying to stimulate business in California? Do we want to grow small companies? There (is) a whole set of potentially conflicting aims," Penhoet said.

The message from business is not likely to change much during this week's session.

One executive from Genentech, which has only a peripheral stem cell interest, told the task force that it takes something like $1 billion to push a product to market. He said that for every dollar in research, another $5 is need for development. And the odds of developing a successful product once it starts clinical testing on humans range from one in three to one in five.

According to the transcript of the session, Stephen Juelsgaard, executive vice president of Genentech(who noted that he was not speaking on behalf of his company), said,

"Biology is hard, and it's getting harder. I think we've got most of the easy biology out of the way. and so the new problems that we're dealing with are ones that really require a fair amount of effort and just a lot of hard work. And so the idea that there are going to be quick, easy fixes that come out of this, I hope people understand (is) not likely to be true.

"There are going to be a lot of failures along the way. There are going to be some very long times involved in bringing new therapies to the marketplace, and it's going to be a very expensive proposition....The amount of support that this organization might provide along the way is probably going to be, as I put it, the proverbial drop in the bucket, compared to all the costs that have to be identified, to really be successful."

His point has a certain validity. If it takes $1 billion to create a product, CIRM could fund only three if it cannot leverage its investments. Of course, it has never considered completely funding a product to market. And one of the points of the IP hearings is to find ways to build CIRM funding leverage.

Brad Margus, CEO of Perlegen Sciences of Mountain View, Ca., told the task force that if CIRM wants to be an agent that produces the next big thing in stem cells, it needs to minimize nonfinancial restrictions and heavy royalties.

"When you ask what is the primary purpose of this shot in the arm of the $3 billion," he said, "other than what it does for California and all that, I would hope that it's to make something happen that otherwise wouldn't happen....(Y)ou want to encourage the best-in-class participators to participate, not just the needy ones. When it comes to your own kids, it's perfectly fine if the one kid isn't quite that sharp; you want to help him out, equalize things, that's fine. But when we're talking about this life or death matter and really making a difference, I think you should only go with the companies that can make it happen the fastest.....

"I'd like California to try to do it differently ....and think a little smarter. If there really is a company out there that has the next thing that you need in stem cell research to happen, and your objective scientific advisors say this is what we want, you should be really, really aggressive in getting it. And I'm concerned that some of these things that we're throwing out there, like revenue sharing or the capping what a company (can earn), will only defeat that purpose."

The California stem cell agency is in a difficult place on IP issues, which really boil down to who gets the money. But the money is not there yet. No one knows how much will be there, if any, and how soon. The agency needs to make reasonable efforts to satisfy its public interest constituencies, such as the legislature and watchdog groups. If not, they can make considerable mischief for CIRM and stem cell research in general. At the same time, to be successful in bringing therapies to patients, CIRM must assist in finding alluring opportunities for businesses and research. CIRM is aided by the paucity of funding for embryonic stem cell research, but its munificence can carry it only so far.

At this stage, the main actor in this juggling act is Ed Penhoet, businessman, academician and philanthropist. The role will require all of his considerable skills.
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Thursday's session can be heard remotely at locations in Chico, Irvine, Los Angeles and San Carlos. See the agenda for details.

Greed, Giveaways and the Public

An exchange at CIRM' s Intellectual Property Task Force meeting last month illustrated some of the conundrums facing the agency as it tries to deal with public perceptions and the marketplace.

The following question was posed by Jeannie Fontana, who serves as alternate member of the stem cell Oversight Committee. It was directed to and answered by Brad Margus, CEO of Perlegen Sciences of Mountain View, Ca.

Fontana: "As a patient advocate, you appeal to my sense of urgency and efficiency by which you try to come up with therapies. I'm curious, though, as you talk about what CIRM should be concerned about, appealing to companies' greed, trying to pull in the No. 1 draft choice, how do you think CIRM should handle the public's perception of taxpayer dollars going to a for-profit company that may be the most efficient way of developing a therapy, but for some reason that's perceived as giving away money, hard-earned taxpayer dollars away to the greedy pharmaceutical industry. How would you suggest we approach that?"

Margus: "Perception is really tough because people can construe it and twist it to sound like another Big Pharma is going to get rich off of the discovery. If tomorrow we had something ready for clinic -- I make that as an important milestone because that's when the dollars really go up and you really need a lot of expertise that isn't usually done in academic settings -- if tomorrow we had a stem cell treatment ready for the clinic, there are two roads you can go if you're CIRM. One would be to somehow have the infrastructure at CIRM to use CRO's and bid them out and have the CRO's do it. I think you want a party involved to partner with CIRM that's going to take it forward that knows how to do this in their sleep and can get it there.
"I think I could convey that to the public that, again, if it's been credible all along that your objective here is to move as quickly as possible, if the selection of that partner to take the research forward, in whatever company it was, was a very objective process with clear criteria, I don't think you would be castigated that much."

Fontana: "I wish that were the case. It doesn't seem to be that way."

Click here to go to the full transcript of the hearing.

Stem Cell Advocate Apologizes

California stem cell advocate Don C. Reed has apologized for his Web column criticizing a member of the Oversight Committee of the California stem cell agency for a poor performance before unfriendly legislators.

We wrote last week about Reed's column. He offered an eyewitness view of the proceedings, which were not covered by any media.

Reed used the pseudonym "Sam" when he referred to the Oversight Committee member, who is Jeff Sheehy. In his apology, Reed said he was frustrated by the legislative action on the bill to tighten controls on the stem cell agency.

Reed is a plain-spoken fellow. His columns are forthright – no verbal sleight-of-hand, no sophistry. But he provides interesting observations and insights on the stem cell scene.

Speaking of observations, our item last week on Reed's column probably confused some readers. We described him as a "competent reporter," leading some to think he performed the same sort of tasks as reporters for the Los Angeles Times or Sacramento Bee. He does not. He is unabashed activist. A better choice of words would have been "competent observer."

And his latest column observes quite accurately that nothing he or Sheehy could say would have changed the outcome on SB401 last week.

California vs. Wisconsin: Dangerous Monopoly?

An op-ed piece recently in the Los Angeles Times ripped into the hold that the Wisconsin Alumni Research Organization has on stem cell patents, saying that the organization"may exert a dangerous monopoly."

The article by Jennifer Washburn, author of "University , Inc.: The Corporate Corruption of Higher Education, says the patents pose a "new and potentially even more worrisome challenge" to the California stem cell agency than its difficulties since January of last year.

WARF has already served notice that it wants cash from California. This blog was the first medium to publish that news March 14.

Washburn's predictions, however, have been challenged by Lawrence Ebert, an intellectual property attorney in New Jersey. "There may be a visceral reaction to lash out against patents perceived to be overbroad," Ebert wrote, but he said negotiation and a "research safe harbor" in federal law could protect California from being ravaged by WARF.

Sailing and Blogging

For those of you interested in the mechanics of such things, this blog is now being filed via Internet cafes in Mexico. We can plug in our laptop to an ethernet DSL connection and peck away happily. But it is a 40-mile roundtrip to the Internet cafes, so we log on only a couple of times a week. The blockage issue that we reported earlier seems to have vanished. We are experimenting with a link to a wireless hub that is tied to a satellite. It is located at a closer, tiny beach community that consists largely of gringo-owned palapas. The community, however, does not have electricity; their power comes only from generators, solar panels and batteries, so the link is not always up. Palapas are open-air, palm covered structures often tied to a trailer or a small, concrete block structure.

Since we live on a sailboat, we move about from time to time. That means we will have to forage anew for an Internet link when we hoist anchor and sail off to a another port.

Social Justice Stem Cell Conference at UC San Diego

The University of California, San Diego, is sponsoring a conference on May 13 called Social Justice and Stem Cell Research. Scheduled speakers are Larry Goldstein, UCSD professor of cellular and molecular medicine; Wesley Smith, a senior fellow with the Discovery Institute in Seattle; John Evans, UCSD associate professor of sociology and Alta Charo, professor of law and bioethics at the University of Wisconsin. Advance registration is required for the session, which is free but has limited seating. See http://ethicscenter.net.

CIRM Fends Off Legal Challenge; Round Two Coming Up

As expected, the California stem cell agency won the first round in its legal battle against fundamentalist and conservative foes who claim it is unconstitutional.

The decision attracted news coverage internationally and is likely to enhance efforts by CIRM to sell unprecedented state notes to finance its activities. The legal action against the agency has blocked its financing until the appeals are concluded, perhaps in 12 months or so.

CIRM has scratched hard to keep going without its voter-authorized funding, including a plans for a controversial $1 million gala fundraiser.

Coverage of the decision was straight-forward with few surprises. Here is how the largest circulation paper in the state, the Los Angeles Times, reported the decision in a piece by Lee Romney:

"(Judge Bonnie) Sabraw forcefully rejected the challengers' key contention: that the Stem Cell Research and Cures Act violated the state Constitution by creating a publicly funded entity that was not "under the exclusive management and control" of the state.

"'Plaintiffs did not present any evidence that the state is appropriating funds for any purpose or benefit other than a public purpose — the public purpose declared in Prop. 71 of fighting disease and promoting the general economy of the state," she wrote.

"She also concluded that the institute and its oversight board 'are operating in the same fashion as other state agencies,' with adequate state oversight.

"Sabraw also systematically rejected all other claims by the plaintiffs — People's Advocate, the National Tax Limitation Foundation and the California Family Bioethics Council. Among those: that the stem cell institute's board is plagued by conflicts of interest and that voters were misled.

"Hank Greely, a law professor and chairman of the Stanford Center for Biomedical Ethics, called the opinion 'long and careful' but not surprising. 'I thought the cases were very weak to begin with. I think the judge's opinion bears that out,' he said.

"Greely added that the ruling could give more confidence to investors whom (stem cell chairman Robert) Klein is soliciting to purchase bond-anticipation notes to help fund the institute and its work during the litigation. Buyers of the never-before-issued state bonds would be repaid only if the litigation is resolved in the state's favor and general obligation bonds are issued."

Klein said in a press release:

"CIRM’s first grants equaled 50 percent of the entire national funding of the NIH for embryonic stem cell research for last year. Stem cell research in California has officially begun. We will win in this fight against a small and politically motivated minority, step by step. They will not keep medical research from improving the lives of millions of people. We owe it to the voters, we owe it to patients, we owe it to the families of California."

Here are links to other stories on the decision: The Associated Press (the New York Times carried the AP story, which was also distributed worldwide), The Sacramento Bee, San Francisco Chronicle, San Diego Union-Tribune, San Jose Mercury News, Oakland Tribune, Bloomberg, Contra Costa Times and Reuters.

Here are links to various press releases reacting to the decision: Foundation for Taxpayer and Consumer Rights, Alliance for Stem Cell Research and Stanford University.

If you would like a complete copy of the decision, please email djensen@californiastemcellreport.com. It will take several days to respond because of the nature of Internet availability here in Mexico.

Klein's Exercise in Stem Cell Sophistry

California stem cell Chairman Robert Klein says he has no control over the $1 million gala to raise funds for the California Institute of Regenerative Medicine.

Balderdash. If Klein gave the word, the fundraiser would be called off tomorrow. The sponsoring agency, the San Francisco Foundation, would not make this effort without the full support of CIRM.

Klein's sophistry does not serve CIRM well. The agency is strapped. It needs money to perform its legitimate activities. It is legal for it to participate in fundraising efforts such as the gala. So why not say so from the start and offer to disclose the names of all the donors.

California voters approved the creation of CIRM, an unprecedented agency with built-in conflicts of interest outside of the usual control of either the legislative or executive branches of government. Its budget, for example, is untouchable by either the governor or the legislature. No other state department enjoys that position.

Like it or not, California must live with the reality of its stem cell creation. Sure there are ethical questions about raising funds from potential beneficiaries of CIRM grants, but state government is riddled with such conflicts to a greater or lesser degree. The chief example is campaign fundraising by officeholders from the governor down. Other than trusting the good judgment of the governor, senators and others, the only way to be sure the public interest is protected is let the sun shine on governmental affairs, particularly those of CIRM. In a word, disclosure.

Klein wrote about the fundraiser in a letter to the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., which is mightily disturbed by the gala and which protested the involvement of Klein and two other CIRM officials as honorary chairmen of the fundraiser.

Klein said,

"I would like to clarify that Dr. Hall, Dr. Penhoet, nor I have any fiscal responsibility, control or decision-making authority over the gala event."

The response did not satisfy John M. Simpson, stem cell project director for the foundation. He replied to Klein,

"You have placed yourselves in an unseemly position that undermines CIRM's integriy and troubles all of us who believe in stem cell research and good government.
"The three of you shold resign from the gala committee. There should be no 'private scientific briefings.' The names of the donors and amounts of donations must be released publicly before CIRM accepts money from the gala. In addition, fundraising activities need to be fully discussed in public at ICOC meetings when they are proposed. You will find that a number of ICOC members share my concern about this fundraising event."

Simpson asks a great deal. But that is his job. Now it is CIRM's job to do something to remove the taint on the event and the public agency itself.

Here is the link to Klein's letter and the Foundation's.
 

Stem Cell Hard Ball Under the Dome

Working the halls of the California Capitol can be bruising. Just how bruising is illustrated in an article concerning the appearance by Jeff Sheehy, a member of the Oversight Committee of the California stem cell agency, before a legislative group.

Written by Laura Mecoy, the piece deals with the Assembly Health Committee hearing on SB401, which is aimed at tightening oversight of the stem cell agency. Sheehy, who testified against the measure, owes his position on the Oversight Committee to an appointment by a former leader of the state Senate, now out of office.

Mecoy quotes Sheehy as saying saying Senate staffers tried to intimidate him into not testifying. He says he feels his position on the Oversight Committee is "at risk," although there is apparently no way for the Senate to remove him.

"They said, 'Don't come. We're going to shove this down your throat,'" Sheehy was quoted as saying.

Sen. Deborah Ortiz said she did not ask the particular staffer in question to speak to Sheehy, but she did say that she that she asked another staffer to speak to him concerning "inappropriate" behavior following the hearing.

Sheehy said that after the hearing he threatened to campaign against her in San Francisco in her bid for the Democratic nomination for secretary of state.
Mecoy wrote:

"'He has the right to oppose me for whatever reason,' (Ortiz) said. 'But you do not make the connection between a piece of legislation and an election.'

"Sheehy said he wouldn't normally have made such a connection. But he said he believes Ortiz is pursuing the Senate bill to help her secretary of state campaign."

More Disclosure Needed in $1 Million CIRM Gala

One good rule in life is to avoid unnecessary pain.

Sometimes CIRM has difficulty with that. The latest example is the $1 million fundraiser next month to benefit the agency.

It is a unique effort for a unique agency. But it has kicked up a bit of a ruckus. Fundraisers are commonly used by politicians to attract campaign funds from donors who seek to influence or gain access. In this case, financially strapped CIRM is involved in an enterprise that could see biotech businesses – ultimate beneficiaries of CIRM's program – giving tens of thousands of dollars to the agency that they later may approach for million dollar grants.

All of this is going on presumably without the disclosure of the names of the donors as is required for political campaigns.

Already the gala fundraiser, which showcases Julie Andrews, has generated sharp criticism from The Sacramento Bee, which said the situation is "analogous to what might happen if Caltrans started seeking private donations to build a new San Francisco Bay Bridge.

"Funding for the bridge is stymied, so 'Friends of Caltrans' hold a gala fundraiser. Out of self interest, bridge contractors rush to buy tickets. Those contributing hope they will get special status when bridge contracts are awarded, and possibly they will."

The Foundation for Taxpayer and Consumer Rights said the event puts CIRM "up for sale." It would not be surprising to see more criticism and pain for CIRM as the visibility of the event increases.

Some of this pain could have been avoided if CIRM itself had announced that it was participating in the fundraiser. If this is an event that CIRM is proud of, it should have been the first to disclose it. Instead news of the event oozed out, creating a less than savory impression. The way the announcement was handled raises questions about the role of the Edelman PR firm, which has a hefty contract with CIRM. Edelman should have known about the fundraiser and should have advised CIRM about how to avoid some of the negative publicity. If Edelman did not know about the event, it is either not doing its job or information is being withheld by CIRM from Edelman.

As for the propriety of the event, Robert M. Stern, president of the Center for Governmental Studies in Los Angeles, told us,

"My primary concern is the lack of disclosure. I am not as upset as some of those who are quoted about the actual fundraising itself."

He noted that the University of Californa and the state college system accept contributions. He added that the Fair Political Practices Commission, also a financially troubled agency, has the authority to do similar fundraising but never has as far he knows.

We believe disclosure of the names of all the donors to the fundraiser would be a good first step for CIRM in complying with its pledges to adhere to the highest standards of openness and transparency.

We recognize CIRM's financial realities and the unique nature of its private-public bureaucractic DNA, so to speak. To deal with those realities, perhaps CIRM should consider another type of fundraising that would leverage its base of support. CIRM officials repeatedly point to the 59 percent approval of Prop. 71 as justifying many of their actions. Why not tap that base for mom-and-pop size contributions as political campaigns did so successfully in 2004? Thousands or tens of thousands of grassroots contributions, ranging from $10 and up, do not carry the onus of hefty sums from the biotech industry. Such a mechanism could easily be built into CIRM's website, which is currently being redesigned by Zoomedia of San Francisco – a gratis contribution by Zoomedia as part of San Francisco's successful bid for the CIRM headquarters.

Eyewitness Legislative View from Stem Cell Advocate

Stem cell advocate Don Reed attended the hearing Tuesday on legislation to tighten up oversight of the California stem cell agency and posted an account of the proceedings.

Reed is firm supporter of CIRM, as you will see from his account on his blog. But he is also a competent reporter who provides information that you will not find elsewhere.

Following the presentation by Sen. Deborah Ortiz, Reed wrote that:

"We now had our two opportunities to respond. A member of the ICOC spoke first. Let’s call him Sam. He is a great guy, and on the ICOC board he is an effective speaker because he has essentially no time limits, and can take as long as he wants to gather his thoughts. But this was a different situation, far more structured."

On Ortiz' presentation, Reed wrote in part:

"Naturally, every point was slanted to her benefit, but if you did not know what was going on, she was absolutely convincing. This is an old pro at the height of her powers, a genuinely great advocate for her cause—I just wish we were on the same side.

"She framed the lawsuits issue completely out of whack: as if our side implied she was responsible for the current lawsuits! 'Frankly, I think they would have sued, no matter what,' she said with a smile and a tilt of her head. (This was, of course, not the issue at all; rather the additional lawsuits which her new law would make likely.)"

One thing about "Sam," in all fairness, it is tough to compete on unfriendly turf, something some critics of CIRM have learned when they appear before that agency.

There is more interesting commentary from Reed. Check it out.

Effort Advances to Beef Up Royalties and Oversight of CIRM

Legislation to tighten oversight of California's $6 billion stem cell research program moved forward Tuesday despite opposition from the state's stem cell agency.

The measure by Sen. Deborah Ortiz, D-Sacramento, cleared the Assembly Health Committee on a 9-2 vote. It now goes to the Assembly Appropriations Committee.

As we reported last week, Ortiz' wide-ranging proposal, SB401, would require more openness in meetings of the California stem cell agency, require divestiture of investments by Oversight Committee members in some cases and increase the state's share of royalties.

The action was not covered by any newspapers as far as we can tell. The legislative staff analysis said the only opposition to the bill, at the time the analysis was written, came from CIRM and the California Healthcare Institute, an industry group. The analysis said,

"The California Healthcare Institute (CHI) maintains that this bill limits the effectiveness of CIRM. In addition, CHI states that while this bill seeks to apply licensing and other conditions to its grants and loans that are in the best interest of the state, its provisions may discourage industry participation and points out that the state's share of financial return should be proportionate to its contribution, not a fixed percentage of total revenues similar to the percentages contained in this bill."

Ortiz' office released background information on the bill that said:

"As editorial boards across the state have noted, while the promise of stem cell research is great, Prop. 71 omits several important protections to ensure public accountability and transparency of funding decisions. For example, the initiative exempts its working groups, which make important recommendations on what projects to fund, from state open meeting and public records requirements. It similarly omits requirements for working group members to disclose interests they have in entities engaged in stem cell research. Finally, the initiative is unclear on the question of how the state is to achieve an economic return on its investment in stem cell research."

The measure was amended in committee to ensure that it would be placed on the November statewide ballot.

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.