Uncertainty and the Ostensible Stem Cell Swag

How can California share the wealth from inventions created by California businesses that receive funding from the state's stem cell agency?

Ed Penhoet, a multimillionaire businessman and vice chair of CIRM, will offer some thoughts on the subject next Friday at a meeting of the agency's Oversight Committee.

Penhoet is chair of CIRM's Task Force on Intellectual Property, which has held two hearings in the past few months on the matter of splitting up the ostensible booty. Businesses, industry organizations, economic developers and nonprofit groups have testified. At least one more hearing is scheduled. Given the complex and difficult nature of the subject, that may not be enough.

Penhoet's role so far seems primarily as a facilitator. If he has specific approaches he favors strongly, they are not readily apparent, based on an examination of the transcripts. The closest he has come to staking out a position may be a comment in the April 27 meeting. He said that there should be a return to the state if the technology is successful. He also said it should be capped, which helps deal with businesses' uncertainty about the size of their ultimate payouts.

Uncertainty is one of the themes underlying the entire IP issue. No certainty exists, for example, that any CIRM-funded inventions will generate significant amounts of cash, despite grandiose assumptions by some. As Duane Roth, one of the newer members of the Oversight Committee and CEO of Alliance Pharmaceutical Corp., said, "100 percent of nothing is nothing."

At the April 27 meeting, Roth laid out a framework for any IP policy:

"What I think you're trying to do with intellectual property for start-up companies is create an environment where you can leverage financing and try to get people to invest in an idea, a dream. and they aren't going to do that unless they think, if they go through all this work and expense and risk, that there in the end is return. That's the first thing IP needs to do.

"The second is you want that IP to lead to products that actually get to people. and from our standpoint, you start these things, and that's what it's all about, getting products to patients. Taking good science and develop products and get them to the people that need them.

"The third consideration, and an important one, is royalty. If there is a contribution to the intellectual property that eventually leads to a product, which is a rare occasion, then there should be a sharing of the profits that are derived from that."

Roth's view was one of many expressed during the IP hearings. John M. Simpson, stem cell project director of the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., advocated state ownership of patents on CIRM-funded inventions by businesses, 25 percent royalties, low cost access to the therapies, patent pools and designation of the state attorney general as the enforcer of IP agreements. Simpson prepared a position paper for CIRM which said,

"Already some biotech executives have said the industry will decline CIRM money if the companies must share the rewards of Proposition 71 stem cell research grants with California taxpayers who put up $6 billion to finance the research. Too many biotech companies act like committed socialists when it comes to taxpayers and the government bearing the risk of drug development. But they are greedy capitalists when it's time to parcel out the profits."

"Ignore the bluff and blustering threats of picking up the Petri dishes and going home if they don't get their way. Any attempt to grab 'free money' without equitable public benefit requirements for biotech won't work. First-class companies understand that with the acceptance of taxpayer dollars comes the responsibility of public benefit. And with $3 billion on the table, there will be plenty of top-flight firms and researchers ready to play by fair rules like those outlined here to search for cures.

Julie Meier Wright, CEO of the San Diego Regional Economic Development Corp., said 25 percent was unrealistic, suggesting other figures that were as low as one percent.

"Three billion dollars in California sounds like a lot of money, but it will be spread over ten years and over a broad array of investments for many worthwhile endeavors. so even if CIRM makes what for it would be a significant investment in a for-profit company developing new therapies, this investment will likely be a small percentage of the total investment required to bring these therapies to commercial success," she said.

"So if you assumed a $10 million investment, and I don't know what your threshold for investment is going to be, but a $10 million investment in a young company that ultimately requires $500 million before commercial success, CIRM's investment is 2 percent. So my question is how does a 2-percent investment warrant onerous royalties or IP requirements?"

She continued,

"The framework that you've developed for not-for-profit institutions was the 25-percent royalty payment would truly be a disincentive on the private side to attracting private capital. and I think most private investors would tell you that they don't expect more than 1- or 2-percent royalties on therapeutics and maybe 5 percent or so on medical devices. so you could have the unintended consequence of discouraging private sector investment with some things that would be very good, and it could prevent CIRM from really being a catalyst for the best ideas and the best science at a really critical time in the life cycle of a for-profit company."

She and others focused on indirect but unquantified benefits to California, such as enhancement of the biotech industry, which in turn will generate business and income taxes and lead to related economic growth. Again, projections filled with uncertainty.

Representing the biomedical industry was John Gollaher, president of the California Health Care Institute, who emphasized what business can bring to stem cell therapies.

"CIRM should discount any claim that stem cell science can benefit patient groups without aggressive participation of commercial companies. The fact is that we live in a market-based, market driven economy, and the theory that most commercial companies operate on is the theory of capitalism And the best distribution of goods and services happens through the active participation of the market and of commercial enterprise. and, again, any of us who spent significant time in academic institutions or within government institutions, I think, have a low level of confidence in the ability of those organizations to quickly move technology through the widest possible allocations for the greatest public benefit.

"Finally, CIRM should discount attempts to regulate commercial transactions in ways that discourage participation of the best companies and entrepreneurs. I think the concern that we've heard more than once is that the more strenuous conditions, royalties, caveats that are attached to technology transfer relationships, the more reluctant commercial participants are to capitalize on those relationships and those technologies. So I think from CHI's point of view, guiding principles for CIRM with respect to commercial IP policy should be, first, maximum acceleration of the best science. And whether that science as technology exists in a commercial company or in an academic institution, CIRM should be rigorous and thoughtful in making investments behind the best science. CIRM has collected an astonishingly good set of expert scientific reviewers, and the ability of CIRM to make intelligent judgments with respect to where the best science is and where funding opportunities lie, I think, is superb and should be applauded."

Joydeep Goswami, vice president, stem cell and regenerative medicine, Invitrogen Corp., Carlsbad, Ca., discussed motivations for companies to seek financial assistance from agencies such as CIRM. He said CIRM grants might back research that a company could not currently fund or research that "doesn't make economic sense to fund immediately."

In the case of his publicly traded company, Goswami said,

"There are some very serious conditions of the kinds of risk profile of investments we make and the research we conduct. So having public funds or government funds sometimes allows us to take on risk profiles and projects that the market would not, frankly, like us to take...but it could have rewards for the research community and others."

Allan Robins, vice president and chief technical officer of Novocell, an embryonic stem cell company in Irvine, Ca., spoke about his company's experience with the Juvenile Diabetes Research Foundation, an organization whose research funding program was viewed favorably by several of the IP Task Force members. Robins said the foundation's contracts are individually negotiated, which he recommended that CIRM emulate. He also said the foundation's contract with his firm did not require royalties. Rather it asked for repayment of three times of the total, depending on product sales. Robins also objected to Simpson's 25 percent royalty figure as too high.

Here are links to the full transcript of the April 27 hearing and the Power Point presentations by Simpson, Gollaher, Robins, Wright and Goswami. See "swag" and "greed" for discussion of the earlier meeting this spring. Closely related to the IP discussions is the strategic planning process now underway at CIRM. You can find more on that by clicking here.

WARF: Onerous and Outrageous

The friendly folks at WARF were thrashed thoroughly at last month's meeting of the California stem cell agency group looking into who gets the money from stem cell inventions.

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., led off the April 27 session of CIRM's Intellectual Property Tax Force with a statement of some vigor. "Really outrageous" is how he described the WARF stem cell patents.

We have presented Simpson's position before so we will offer up the thoughts of others at the April 27 meeting, but first a comment from Ed Penhoet, chair of the IP Task Force. His statement came late in the meeting after he listened to much of what you will read below.

Penhoet said,

"There is a thread in these conversations: Patents are extremely important...except the ones they don't like.... You can't have it both ways. So hopefully the field as a whole can reach some sensible accommodation to WARF for the pioneering work that they did do, but at the same time not stop the entire field from going forward. It's a hard problem actually."

Penhoet also said that WARF has been invited to make a presentation before the IP Task Force.

Penhoet's comments, however, do little to minimize the deep seated antipathy to WARF's position as reflected in the comments below. One might imagine that WARF might be concerned that potential customers are so distressed.

Joydeep Goswami, vice president, stem cells and regenerative medicine, Invitrogen Corp., Carlsbad, Ca., was asked whether the WARF patents are "a significant obstacle to private investment."

His reply:

"I think they are....I know a lot of you know about the WARF policy for not-for-profit research tends to be somewhat, well, somewhat generous, although many scientists that we have spoken to are quite taken aback at some of the restrictions that are put on academic institutions in terms of collaborating with companies such as us.

"For private institutions, I think it is a big disincentive because what WARF does is it looks at the size of the institution or the company that wants to license this product and wants to charge an upfront payment, which is very steep in any licensing terms, and then, of course, royalties obligations which are twofold. one, a direct royalty obligation which depends on products directly produced using stem cells, human embryonic or primate embryonic stem cells, but they also have a reach-through royalty clause where they say anything you've invented remotely by using human embryonic stem cells will now have a royalty obligation back to WARF. So, for instance, even if you had a treatment that was somehow brought to the market that has touched an embryonic stem cell in the United States, you will have to pay a royalty back to WARF. I think this is particularly onerous....

"Let's say we make a discovery of a tool using at some point a human embryonic stem cell. They want a royalty back on that particular product. and not only do they want a royalty back on sales of that product to the embryonic stem cell market, but any market that we touch, they want a royalty back on that particular tool. So it is quite onerous."

Francisco Prieto, a member of the task force, then asked, "Even markets outside the United States?"

Goswami:

"Yes. In general they would. See, the other part is...if you look at companies in the United States versus outside...which is actually even more interesting. Let's say there's a company in India....For anything they do with respect to human embryonic stem cell research, they owe no royalties to WARF. They do not have an obligation to WARF in any manner, way, shape, or form, and they can develop exactly the same therapies companies in the United States are trying to develop without any kind of restrictions or obligation to WARF. So from that point of view, setting up a company to do stem cell therapy in the United states, I think, is a major disincentive, and people are not realizing this business issue....The issue is not whether the patent is legitimate or not, but there are serious business implications of the patent in making cures available to the public here."

Later, Allan Robins, vice presidennt and chief technology officer for Novocell Corp. of Irvine, Ca., said,

"I thought Francisco (Prieto) brought up a very good point. and, Joydeep, I just wanted to add a little bit to your answer.....If a company in the field or the United Kingdom or Singapore develops a product or human embryonic stem cells and that product is different from the human embryonic stem cell, that product can be imported into the U.S.A. and sold here, and that would not infringe the (WARF patent) line. and so you really are putting companies that operate in the U.S. at a disadvantage."

Goswami:

"That's a great point."

Prieto:

"That was sort of what I was starting to glean from this that as they currently operate, that these patents are a disincentive to the research in the United States."

Goswami:

"It is enormous. And the patents only, as Allan rightly points out, are to the composition of matter of the primate embryonic stem cell and the method of derivation. So absolutely."

Later Goswami said:

"The (WARF) licensing model is...is huge upfront payments for a field that is, you know, pardon the pun, but embryonic. Just from a business point of view, it makes very little sense. and that's why maybe CIRM could help in enabling that particular patent because it will be used by almost everybody that is engaged in this form of research in the state of California."

We should note that the WARF issue was only part of the IP discussions. The full text of the session can be found by clicking here.

Looking at Legislation to Aid Biotech Biz

"Investors' disinterest" in California biotechnology came up for examination in a recent piece in the Vacaville Reporter, the daily newspaper for the community that lies between San Francisco and Sacramento.

The article by business writer Amanda Janis focused on the "realities of the manufacturing side of biotech." It was of interest to Vacaville readers because of the area's efforts to land biotech manufacturing facilities. But the piece also has interest to California as a whole.

Janis wrote:

"Industry leader Genentech chose to build its new $250 million facility in Oregon, where corporate income tax structures are more favorable. Then there was the start-up firm that passed on Vacaville in order to capitalize on biotech tax breaks offered in Washington. And most recently Chiron parent Novartis announced it would build a $400 million vaccine plant in the United States, but not in California."

She touched on state legislation aimed at helping the biotech business.

"Proposed bills include changing the corporate income tax structure with a four-year phase-in of single sales apportionment tax (an issue Genentech calls its primary legislative concern); sales and use tax exemption on manufacturing equipment; extension of research and development tax credits; and the allowance for companies to sell their net operating losses to other companies, which would gain a tax credit.

"The latter proposal, which has found success in states like New Jersey, has some of the greatest potential impact because of the loss-operating nature of the biotech industry, according to Matt Gardner, president of trade organization BayBio.

"'It takes 15 years for us to get a product,' he noted.

"Another proposed bill in California would help level the playing field, he said, because it would allow for designated "shovel-ready" land, or land that has been pre-zoned, with environmental impact reviews completed."

Legislation to help out the biotech industry has received little notice. But it is likely to become increasingly important to the industry as the CIRM investments ramp up.

WARF to CIRM: Don't Mess With Us

The Wisconsin Alumni Research Foundation has served notice that it is going to slug it out with the California stem cell agency on the matter of stem cell patents.

Referring to comments in California concerning WARF's position on the Wisconsin patents, Andrew Cohn, government and public relations manager for the organization, said, "These folks are absolutely going off the deep end. If it wasn't for WiCell and for the University of Wisconsin, they wouldn't have anything to spend the $3 billion on in the first place."

Cohn was quoted in a piece by Joe Vanden Plas on the Wisconsin Technology Network. Vanden Plas said the patent dispute between California and Wisconsin "promises to be an intense fight." Cohn's pugnacious language certainly seemed to confirm that. His rhetoric was definitely more aggressive than comments made by WARF General Counsel Elizabeth Donley earlier this year.

The Wisconsin article noted that WARF this month was awarded $1 million in a case against Xenon Pharmaceuticals. Cohn said, "WARF has proven over and over again that it will enforce its patents and its contracts. This company [Xenon] made a very, very bad tactical decision by trying to get out of, or trying to ignore the contract they made with us. They are now paying for it dearly."

The starting point for Vanden Plas' article was a statement by the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., that said a recent U.S. Supreme Court decision means that WARF has less power to assert "dubious patent claims to control all human embryonic stem cells in the United States."

Stem Cell Snippets: Swells, Scholars and Door Knockers

Here are links to recent, interesting news stories, press releases or information connected to California stem cell issues.

CIRM Gala – Aldrich Tan writing on sanfranciscosentinel.com – Possibly the only coverage of the event, includes many photos with the headline "Swells turn out in force to support CIRM fundraising event."

CIRM Scholars – San Francisco Business Times -- "Demand for fellowships funded by the California Institute for Regenerative Medicine's training grants are far outstripping available spaces, according to Bay Area institutions awarded funding."

Q&A with Alan Lewis, new CEO of Novocell, of Irvine, Ca. – Written by Terri Somers in the San Diego Union-Tribune – Lewis, who is fond of "photographing old door knockers," says, "We expect to be the only company to provide a cell therapy for all insulin-requiring diabetics -- approximately 6.5 million patients in the U.S. alone. We also expect to generate an unlimited source of insulin-producing cells that we can encapsulate to deliver under the skin to this group of patients and hopefully change their lives by reducing dramatically their need for insulin shots as well as the many diagnostic procedures they face each day."

The Chronicle Calls for SB401 Compromise

The San Francisco Chronicle is telling the California stem cell agency and the state legislature's most influential stem cell advocate to settle their differences and move on with stem cell research efforts.

In an editorial, the Chronicle said that it would be better to avoid a ballot measure on the stem cell agency, which would be required by legislation – SB401 – authored by Sen. Deborah Ortiz, D-Sacramento, chair of the Senate Health Committee.

The Chronicle said,

"Ortiz has helped open a dialogue with the CIRM that will prove immensely useful to the public as their money is spent over the next decade. In her bill, she has prodded CIRM to adopt intellectual-property standards that would require for-profit companies using Prop. 71-funded research to return some revenue to the state, and the agency has agreed. She has also asked the board to take publicly available financial conflict-of-interest statements for the scientists who will review grant applications -- and it's still resisting."

The Chronicle continued,

"Far better would be for Ortiz and CIRM to work out their differences -- which, from where we sit, don't look too daunting -- outside of legislation. Ortiz is reasonable and flexible -- last week she agreed not to push SB401 for the November ballot. In recent months, CIRM has made an exemplary effort in trying to balance the concerns of industry, taxpayers and scientists as it proposed high governing standards. Ortiz's move allows not just her, but also a host of other interests, a tremendous opportunity to engage CIRM as it firms up a set of guidelines that take into account what's best for everyone in California.

"The key will be to lock in these regulations so that promises of transparency and checks against conflicts of interest are not dependent on the whims of whoever happens to be in charge of the stem-cell program at any given moment."

There is a bit of a rub in the "lock-in" requirement proposed by the Chronicle. The only way to do that is with a ballot measure. Indeed Proposition 71 is perhaps the best example of locking in matters bettered suited for regulation or legislation. If CIRM were not "locked in" the state constitution, it could have avoided some of the problems that have beleaguered it. Others, however, may well have arisen.

Regulations enacted by CIRM can be changed by CIRM. But Ortiz last year was satisfied with other regulations approved by the stem cell agency. And she may well be satisfied with them again.

Legislation, Budget and More on Oversight Committee Table June 2

CIRM's Oversight Committee is scheduled next week to take up sweeping legislation that would make major changes in the operations of the California stem cell agency.

Also on the table at the June 2 meeting in La Jolla are conflict of interest regulations for CIRM working groups, one of the issues involved in the legislation, SB401 by state Sen. Deborah Ortiz, D-Sacramento. Last week Ortiz said she would modify her bill substantially to mollify critics, including removing a provision that would have placed it on the November ballot.

She has indicated that she is not wedded necessarily to a legislative or electoral answer to her concerns. It may well be that the Oversight Committee may find some common ground at its meeting.

Also on the agenda are a report on the efforts to define an intellectual property policy in connection with grants to businesses, the strategic plan, regulations on human stem cell research and the agency's 2006-2007 budget.

Some of the background documents are available on CIRM's Web site, largely ones that have been previously posted for subcommittee meetings. The report from the legislative subcommittee is not yet available nor is the the 2006-2007 budget or additional information on the the conflict of interest regulations.

San Diego Paper Had It First

A national story earlier this month involving the resumption of the human embryo cloning at UC San Francisco is a good example of how the media works – or doesn't work.

The case in point was a piece in the Wall Street Journal that said UC San Francisco was going to restart its program. The story was a follow on a story in the San Francisco Chronicle, which is obviously read by Journal reporters.

What neither story pointed out was that it was a bit of old news. Reporter Terri Somers of the San Diego Union-Tribune actually had it on Jan. 11, but the San Diego paper is not one that is regularly examined by reporters and editors of national publications or for that matter the San Francisco Chronicle. Her story said,

"California scientists are planning to jump into the field of cloning human embryonic stem cells now that a South Korean scientist who claimed to have mastered the technique has been exposed as a fake."

She focused primarily on research efforts in San Diego, which is a hot bed of stem cell research, mentioning the San Francisco effort deep in her story.

The episode is a good illustration of the tunnel vision of national news gathering organizations -- not just the WSJ -- which rarely detect what is happening outside of what they perceive as the major news centers.

The California Stem Cell Report carried an item in January on Somers' story but also failed to note specifically the UC San Francisco effort. We thank patent attorney Lawrence Ebert for pointing out Somers' work to us.

Devising a Plan for a Multi-Billion Dollar Project: The CIRM Approach

If you are interested in how the California stem cell agency plans to give away $3 billion, check out the agency's Web page on its strategic planning activities.

It is a useful step in the process with information ranging from meeting schedules to biographies of some of the important players.

One of the more interesting items is a summary of a meeting earlier this month by the Strategic Planning Advisory Committee. It itemizes ideas that were broached at the session, ranging from cord blood research to the harvesting of tissue from cadavers. The ideas are just that; the agency cautions that none are endorsed at this stage by CIRM. Nonetheless they provide some idea of what is being seriously discussed.

The document also indicates some concern about CIRM's outreach to researchers. For example, it said,

"CIRM needs to find more aggressive ways to engage and inform scientists about stem cell funding opportunities than sending out grant requests through the CIRM web site or the standard Request for Application (RFA) process. A newsletter might be a one way to accomplish this; to keep the 'buzz' alive and to distribute information."

The Internet postings on strategic planning are a good start on the buzz. One of the notices announces a daylong conference at Caltech on Thursday. The topic is "Funding Structures to Advance Stem Cell Research and Therapy."

Here are the speakers and topics: Michael Rudnicki, M.D., Ph.D., University of Ottawa, Canada, the Canadian stem cell network; Michael Amos, Ph.D., National Institute of Science and Technology, The Advanced Technology Program: Innovative Technology Solutions Through Industry-led Public-Private Partnerships; Ethan Signer, Ph.D., High Q Foundation, Managing the Search for Huntington Disease Therapy; Richard Insel, M.D., Juvenile Diabetes Research Foundation,Research Strategy and Funding Programs of the Juvenile Diabetes Research Foundation, and Jonathan Shestack, Cure Autism Now Foundation, who is also a member of the CIRM Oversight Committee, no topic announced.

The calendar also shows that the Strategic Planning Advisory Committee will meet in San Francisco next Monday at noon. Included will be a report on the Caltech session as well as discussion of funding mechanisms for the private sector and whether new ESC lines should be a focus for early funding.

Another strategic planning meeting involving the CIRM Oversight Committee will come the evening of June 1 in La Jolla. The panel is scheduled to act on a proposed mission statement and objectives.

It is not too early to think about a daylong meeting on July 13 in San Francisco on the topic of "The Scientific Challenge: From Basic Science to the Clinic." Confirmed speakers are: Stuart Orkin, M.D., Harvard Medical School; Joan Samuelson, Esq., Parkinson’s Action Network and a member of the CIRM Oversight Committee, and Allen M. Spiegel, M.D., Albert Einstein College of Medicine.

CIRM also provides an email address for those who want to comment on the plan or make suggestions: scientificstratplan@cirm.ca.gov.

Stem Cell Snippets: Liberal Folly, WARF and SB401

Here are links to some recent, interesting news stories, press releases or other items connected to California stem cell issues.

Problematic payoff on stem cell research – Daniel Callahan in Bioethics Forum -- "The California stem cell initiative had a super-rich real estate tycoon leading the charge, lots of money from the biotechnology industry, the support of celebrities, and that best of American mixes, the possibility of saving millions of lives while making millions of dollars.... We may or may not ever see a payoff from stem cell research, but that’s where the action is, and with the blessing of liberals. This is not a proud moment for us."

WARF not helped by U.S. Supreme Court – Press release from Foundation for Taxpayer and Consumer Rights -- "A ruling by the U.S. Supreme Court this week involving online auction giant eBay means an affiliate of the University of Wisconsin has less power to assert its dubious patent claims to control all human embryonic stem cells in the United States."

San Diego Union-Tribune endorses SB401 – Editorial written prior to Ortiz' proposed changes in the bill -- "Increased accountability and openness from the institute and its oversight board are needed....Instead of fighting the Legislature and those concerned about openness and accountability, the institute's leaders should continue to work closely with lawmakers and reach agreement on what needs to be done. That would be a better outcome than legislation that may, in some places, be too restrictive."

CIRM Meeting Documents Posted in Timely Fashion

The California Stem Cell Report has repeatedly noted that the California stem cell agency regularly falls short of its oft-repeated goal of adhering to the highest standards of openness and transparency.

The chief example is the extreme delay in posting on the Web background material for meetings. Even members of the Oversight Committee have complained about not receiving the material in a timely fashion. The laggardly posting shows in their meetings when it is clear that some members of the committee have not read the material. Of course, they just may not be doing their homework.

This week, a notable and praiseworthy exception occurred concerning the background material. The documents for the Governance Subcommittee meeting Friday were posted about a week ago. That allows the public, interested parties and Oversight Committee members ample time to review the documents. The timely postings also permit individuals to make decisions on whether they want to testify on a particular point.

Among the items on the agenda is a report on contracts, including the $400,000 agreement with PricewaterhouseCoopers to work on the strategic plan, and compensation for CIRM employees. Another item involves discussion and changes in CIRM's gift policies, which may trigger a discussion of the $1 million gala fundraiser next Monday for CIRM.

The meeting can be heard at multiple locations throughout the state, including Stanford University, La Jolla, Carlsbad, Sacramento, San Francisco and Irvine. Persons attending can also comment from those locations. For details, see the agenda.

Ortiz Drops Critical Elements from CIRM Oversight Bill

Major changes will be made in legislation to tighten oversight of the California stem cell agency, including the elimination of provisions that could have required royalties as high as 50 percent on inventions financed with state funds.

The moves may well be an initial step in a compromise on the sweeping legislation by California State Sen. Deborah Ortiz, D-Sacramento, who is the leading legislative voice on stem cell issues. Her decision to strip significant provisions from SB401 makes it clear that CIRM needs to address the other issues in the legislation. Ortiz has made it known for some time that she is not wedded to a ballot measure or legislation to ensure accountability and openness.

Her office indicated late Wednesday that the measure will be amended before it comes up again in the Assembly Appropriations Committee, which is its last stop before it goes to the Assembly floor. The committee Wednesday delayed action on the bill until late next week.

According to Hallye Jordan, director of communications for Ortiz, the senator told the committee that she intends to address critics' concerns that "the bill’s intellectual property provisions are inflexible and will discourage industry participation in stem cell research and that she is carrying the bill for political purposes."

Here is most of Jordan's statement on Ortiz' appearance Wednesday:

"She told committee members that she intends to amend the bill's IP provisions so that they mirror the regulations that the Independent Citizen’s Oversight Committee and the California Institute for Regenerative Medicine (ICOC/CIRM) have already adopted and which are currently under review by the Office of Administrative Law, per the Administrative Procedure Act. In doing so, she noted she is giving up the ability to get a higher share of royalties and better prices that might have been achieved under the original provision of SB401.

"She also said she will amend the bill to make it clear that it will not go on the ballot until after the November 2006 election.

"These amendments are expected to go a long way in addressing critics’ concerns, leaving, perhaps, only the argument that opponents don’t want to have stem cell research back on the ballot. Senator Ortiz and other legislators believe voters have a right to determine whether SB401 will provide public accountability and the appropriate protection of the state’s $3 billion-$7 billion taxpayer-funded investment into stem cell research.

"SB401 is important to ensure that the CIRM, ICOC and working group members are subject to public accountability, and hold meetings in public, make their records public and disclose of their financial interests as required of all public officials.

"SB401 includes exceptions so that the working group members may conduct scientific peer review and protect proprietary or scientific prepublication information when appropriate. The Senator and other SB 401supporters believe the ICOC/CIRM proposed regulations allowing the ICOC president to waive the conflict of interest provisions in 'exceptional' circumstances, do not provide clear, defined criteria as to what constitutes 'exceptional' circumstances. They also are concerned with ICOC/CIRM provisions that exempt from open meeting discussions and public record disclosures 'critical mission' matters, which also are vague and overly broad.

"Senator Ortiz also pointed out that there is no guarantee that the ICOC/CIRM regulations that have been submitted to the Office of Administrative Law will remain intact after the public comment period.

"SB401 is supported by Californians Aware and California Common Cause," Jordan concluded.

The Appropriations Committee staff analysis, prepared by Scott Bain, said the bill's requirement that the Department of Justice review CIRM intellectual property agreements would likely cost around $150,000 annually. The department currently does not have IP expertise. Cost of the state auditing function in the bill was estimated at least than $20,000. Cost of placing the measure on the ballot would be $330,000. Legislation that has a price tag of $150,000 or more is being held for consideration next week as lawmakers wrestle with state budget matters.

Listed in the staff analysis as opposing the bill were CIRM, the Juvenile Diabetes Research Foundation and the Coalition for Advancement for Medical Research. Both groups contend the bill "will have the effect of unnecessarily impeding the research program," according to the analysis.

Under the topic of "concerns," the analysis said,

"The California Healthcare Institute (CHI) expresses concern that this bill applies licensing and other conditions to CIRM grants and loans that are in the best interest of the state, but these provisions may discourage industry participation. The California Institute of Technology, Stanford University, the University of California and the University of Southern California write that they believe CIRM's intellectual property policy should be given a chance to work and be tested before either codifying in statute or making significant changes."

On Tuesday, CIRM's legislative subcommittee met for "consideration" of SB401 and a number of other stem cell-related bills. We have queried CIRM about what action was taken at the meeting, but are still awaiting a definitive response.

Coming Up

Later today we expect to carry the results of today's California legislative hearing on SB401 by California State Sen. Deborah Ortiz. The measure would tighten oversight of CIRM and ensure a return on the state's $6 billion stem cell investment.

Stem Cell Snippets: Eggs, Cloning, David Baltimore

Here are links to some recent, interesting news stories or other items related to California stem cell issues.

Hwang and Prop. 71 – Patent attorney Lawrence Ebert in Ezine.com -- "Eggs will be needed to carry out embryonic stem cell research, and the potential for abuse, and disregard of that abuse, in obtaining eggs is a major, foreseeable, problem. Because the abuse in Korea occurred in the face of strong laws, the assertion that CIRM has adopted strong standards as to egg donation is not the final answer to this issue. Pressure on researchers to obtain significant results can lead to fraud. The Hwang matter involved independent frauds by at least two researchers, and does not fit neatly into the 'one bad apple' box."

Orange County stem cell lines – Writer Gary Robbins in the Orange County Register -- UC Irvine and West Coast Fertility Clinics are teaming up in a $100,000 annual effort "to create at least five new lines of human embryonic stem cells, becoming one of the few groups in the country to try to produce fresh lines for the study of everything from spinal cord injuries to Parkinson's disease."

David Baltimore and stem cell climate – Writer David Epstein in Insidehighered.com – A look at the Washington, D.C., environment for federal stem cell research. CIRM Oversight Committee member Baltimore quoted on the need for a change.

Human embryo cloning – Emily Singer in Technology Review – Overview of human embryo cloning including look at California. "Scientists who had planned to collaborate with Hwang had spent months thinking seriously about what they could do with cloned stem cells, from creating new tools to shed light on the diseases they had studied for decades to investigating new treatments. The excitement those possibilities aroused, along with new influxes of cash from state and private sources, made many unwilling to wait on the sidelines any longer. (Evan) Snyder, a (California) pediatric neurologist and neonatologist who wants to develop new treatments for his patients, is now considering starting his own cloning program."

CGS Criticizes CIRM Fundraising

The Center for Genetics and Society of Oakland, Ca., is pointing out some of the difficulties involved with the unusual – for state government agencies – funding methods of the California stem cell agency.

In its latest newsletter, the center says,

"With the CIRM's ability to issue bonds still hampered by legal challenge, it has turned to novel methods of funding. It has not requested support from the state, a move that would likely open the door to legislative oversight. Instead, CIRM has turned to private sources for donations and below-market rate loans, an approach that increases the likelihood of undue private influence on the agency, and reinforces the perception that CIRM acts more like a private firm than a state body. After months of hints and speculation, CIRM board chair Robert Klein announced that five private foundations will loan $14 million to the cash-strapped agency via risky loans at below-market interest rates. Although it is not surprising that the lenders who agreed to this arrangement are people who have shown past support for biomedical research, the nature of their support reveals a likely interest in how the CIRM will later allocate its $3 billion in grants.

"For example, the foundation established by the founder of the biotechnology firm Amgen, William Bowes, loaned CIRM $2 million. A recent report by a venture capital firm described Amgen as a "stem cell company." Another $2 million came from the foundation created by John Doerr, a prominent venture capitalist who has investments in numerous biotechnology corporations. And Eli Broad, who previously donated $25 million to the University of Southern California for a stem cell research center, also loaned $2 million to the CIRM. It would not be surprising if he was especially eager to see CIRM research funds going to USC."

Big Week Ahead for Legislative Move to Tighten Stem Cell Oversight

Efforts to tighten oversight of the California stem cell agency and ensure that the state benefits from its $6 billion investment come up Wednesday in a key state legislative committee.

If SB401 clears the Assembly Appropriations Committee it goes to the Assembly floor. Then its only other normal legislative stop is the floor of the Senate.

The day before the committee session, CIRM is scheduled to discuss the measure by Sen. Deborah Ortiz, D-Sacramento, during its own committee hearing. Presumably that session is aimed at drumming up opposition to the proposal, which the Oversight Committee has already opposed as premature.

The public is not likely to see most of the important action taking place on the bill. Opponents and supporters will be meeting privately with lawmakers to explain their position. Email and letter-writing campaigns undoubtedly are already underway. Both sides will be asking key opinion leaders and behind-the-scenes operators to contact legislators on behalf of their positions.

Part of the backdrop to the maneuvering is Ortiz' campaign for the Democratic nomination for California secretary of state. She is in a tight contest with many undecided voters. Favorable action and publicity on the bill could help her campaign. The campaign will also color the positions of other lawmakers, who may find themselves making decisions on the electoral impact of the measure – not on its merits.

Here are links to the latest version of the bill and the analysis. Here is a link to more on the bill from the California Stem Cell Report.

Stem Cell Snippets

Here are links to recent, interesting stories, press releases or other items on California stem cell issues.

Dolby gives $16 Million more to stem cell research – Paul Elias of The Associated Press – "Sound pioneer Ray Dolby and his wife gave $16 million to the University of California, San Francisco to start a stem cell center that will perform research without federal funds." Dolby has the institute renamed to replace stem cell with "regeneration;" Dolby says "stem cell" gives bad vibes.


Tougher rules needed for CIRM nonprofit IP -- Press release from Foundation for Taxpayer and Consumer Rights -- "Proposed regulations governing the ownership of discoveries resulting from Proposition 71-funded stem cell research must be strengthened to allow the California Attorney General to intervene if the drugs or cures are unreasonably priced."

Overview of current CIRM controversies – Writer Michelle Chen on the NewStandard website. "Groups that support stem-cell research are warning that the state's massive research-funding plan is not immune to narrow interest groups that could undermine the potential public-health benefits."

Comment on Los Angeles Times editiorial – Patent attorney Lawrence Ebert takes Times to task for simplistic thinking. "To be helpful to Proposition 71, the Los Angeles Times needs to get a fuller grasp of 'where' CIRM currently is and 'what issues' it needs to resolve, especially in the intellectual property area."

Video of Prop. 71 ad – Posted by one of the persons in the ad, who says, "This is a 30-second TV commercial I was featured in with my brother for California's Proposition 71 in 2004 about stem cells' potential to treat cerebral palsy."

Mary Poppins' Latest Position on CIRM Gala

On May 2, we reported that we had queried CIRM on the question of whether it would accept donations at the $1 million gala fundraiser from executives of biotech firms. The agency has responded and says it will accept funds from those executives. And it will not disclose their employer affiliation, although it is not clear whether that information is being gathered. We presume not, but perhaps we are wrong.

The agency has said it will disclose only the names of the donors, a position which pays mere lip service to the principle of disclosure. We are retracting our earlier assertion that Mary Poppins would approve of CIRM's feeble nod in the direction of good and open government. See "gala disclosure" for more on this.

ACT Reports its Cloning Efforts

Advanced Cell Technology today issued a press release on its plans to attempt to clone human embryos and identified members of its Institutional Review Board.

The firm said:"The IRB is chaired by Judith A. Frazier, RN, M.Ed. Ms. Frazier is the Manager of the Metabolic Research Unit at the Jean Mayer Human Nutrition Research Center on Aging (HNRCA) at Tufts University. The Metabolic Research Unit recruits approximately 3,000 adult subjects every year for population, longitudinal, metabolic and free-living nutrition studies. She is also a Vice-Chair of the Tufts-University-New England Medical Center Institutional Review Board. Renee Landers, J.D., serves as Vice-Chair. Ms. Landers is an Associate Professor of Law at the Suffolk University Law School where she focused on Health Law and Administrative Law. The IRB recently held several meetings and has approved the Company’s SCNT program.

"The IRB carefully reviewed the Company’s plan to solicit volunteer donors of embryos and oocytes for the SCNT program. In accordance with California and Massachusetts law and the guidelines set out by the National Academy of Sciences, such volunteer donors will receive no compensation other than the reimbursement of certain permitted expenses and will be required to acknowledge and execute a detailed donor consent form. The Company recognizes that the progress of this program is dependent upon identifying volunteer donors and hopes that the public will recognize the promise of this research for millions of patients and respond accordingly."

Chron First on Embryo Cloning Story

The San Francisco Chronicle was the first to report on the UC San Francisco efforts on cloning of human embryos, a story that the Wall Street Journal carried today.

Reporter Carl Hall wrote a piece on Saturday that said:

"UCSF's project is the only one of its kind on the West Coast, although this type of work also is being pursued by researchers in San Diego and is expected to be a key priority of the California Proposition 71 program.

"The first stage of the work at UCSF is being backed by private donations, and the experimental protocol has passed all the necessary ethical approvals. The research team is led by Renee Reijo Pera, a UCSF associate professor of obstetrics, gynecology and reproductive sciences. She also is co-director of the UCSF Human Embryonic Stem Cell Center."

Hall's piece also contains greater detail on the San Francisco work than reported by the Journal.

Gala Disclosure Mere Lip Service

Years ago, government in California and the United States did not have the laws that now tell us who is giving millions of dollars to lawmakers and political candidates. We did not know what lobbyists were spending and what corporations were backing them.

Today's disclosure laws recognize that the public has a right to know who is attempting to influence the public's business. This month CIRM, which is engaged in $6 billion worth of public business, is also involved in a $1 million fundraiser, probably the first such effort involving a state government agency. CIRM has pledged to disclose the names of donors to the gala, but little else.

The public will not know whether, for example, the Jane Smith who coughs up $10,000 for CIRM is a top executive of Geron, the San Francisco Bay area stem cell firm. Nor will we know whether the John Smith who ponies up $5,000 is a venture capitalist with a $2 million investment in Advanced Cell Technology, of Alameda, Ca.

The names are not real. But neither is the disclosure promised by CIRM. It is better than nothing and to be commended. But it amounts to little more than lip service to the principle of disclosure. We realize that most donors to charities are not normally identified and that there are issues of privacy. But the overriding obligation is to the public – not the donors.

With considerable work, nonprofit watchdog groups such as the Center for Genetics and Society and the Foundation for Taxpayer and Consumer Rights will be able to dig up the economic connections of at least some of the donors. The result will be unpleasant publicity for CIRM. Better that the agency identify donors up front than appear to be concealing information about individuals or enterprises whose economic interests could be affected by CIRM.

While we are on the subject of disclosure, some at the stem cell agency have raised questions about the financial links of the two watchdog groups. Their logic is that if CIRM is compelled to disclose such information, so too should the two groups. However, CIRM is a government agency – not a business or a nonprofit. Nonetheless, nonprofits do enjoy special legal treatment. A good case can be made that they too should disclose the details of their financial backing. We would also argue that news outlets and many of their employees should do the same, a position that almost raised major hackles when we advanced it to a former employer.

For a disclosure from the California Stem Cell Report, see this item.

WSJ Reports on Embryo Cloning in California

The Wall Street Journal reported today that UC San Francisco and Advanced Cell Technology of Alameda, Ca., are resuming a "controversial medical endeavor"-- the effort to clone human embryos.

While the news may not seem surprising to those who have followed California's stem cell efforts, the article may trigger unforeseen and possibly negative public reactions, given the Journal's reach.

Reporters Antonio Regalado and David P. Hamilton wrote:

"Officials at the University of California, San Francisco said Friday that they would immediately resume a cloning program, with the goal of creating new stem-cell lines that can be used to model genetic diseases.

"Separately, executives with Advanced Cell Technology Inc., of Alameda, Calif., said they plan to announce their cloning plans soon. Advanced Cell's vice president of research, Robert Lanza, said the company is recruiting female egg donors and is interested in creating tailored transplant treatments."

The article also said:

"Cloning programs are moving forward thanks to state laws put in place to protect and regulate the research. In California, voters also approved a ballot measure designed to provide as much as $3 billion in stem-cell funding over 10 years.

"UCSF began its cloning effort in 1999, but the program ran into trouble in 2001 after UCSF lost its top stem-cell researcher, Roger Pedersen, who took a job in the United Kingdom, citing a hostile atmosphere in the U.S. Advanced Cell's cloning effort was last active in 2003, Dr. Lanza said, and stopped because of political pressures and because the company lost its source of human eggs."

Filling the Ethics Void

"A lot of scientists don't really see ethics as part of their job." -- Mildred Cho, bioethicist at Stanford University.

We found the quote from her on the blog of the editors of The American Journal of Biotethics.

Cho's comment is interesting in more ways than one. First, she is at Stanford, where some very advanced stem cell research is underway. Second, it seems at odds with the apparent position of some who seem to think that scientists know best, and outsiders should not meddle in research. The comment also speaks to a whole range of CIRM policy issues.

But let's focus on CIRM's position that the scientists making recommendations on grant applications should not make public disclosures of their economic interests. If what Cho says is correct, it seems imperative that public disclosure should be required.

Members of the Oversight Committee have remarked that many of their initial policies are works in progress and could well be changed as circumstances warrant. It is time for a re-examination of the disclosure policy, particularly in the wake of legislation that would require more openness and transparency at CIRM.

California Stem Cell News Links

Here are links to some interesting, recent stories or press releases involving California stem cell issues.

Legislation to tighten oversight of CIRM — stem cell advocate Don C. Reed wrote an opinion piece in the Oakland Tribune. "The bill attempts to override the will of the California voters, micro-managing and changing the new program before it has a chance to get started. It contains unfunded expenses and threatens the program's success," he says. In The Sacramento Bee, three patient advocates said the measure is "untimely and uncalled for."

WARF patents – Emily Singer wrote in the Technology Review. "CIRM is facing a troubling prospect: a set of broad patents covering embryonic stem cells could substantially inhibit industry from investing and partnering in the research."

New Novocell exec – company press release on the hiring of Alan Lewis, formerly of Signal Pharmaceuticals, as CEO of Novocell of Irvine, Ca.

California Newspapers Opine on CIRM and Trial Decision

Three major California newspapers have weighed in with editorials in the wake of the court decision upholding the legality of the California stem cell agency. The Los Angeles Times threw more support to CIRM while The Sacramento Bee remained more critical. Also writing was the San Jose Mercury News.

The Times called on the legislature to reject a measure to tighten controls over the California stem cell agency, although the Times says CIRM needs to do more on its conflict-of-interest regulations.

Here are some excerpts:

"It may have taken more protest and rancor than it should have to get the governing committee to make its dealings transparent, ensure that any future treatments are accessible to the state's poor and provide the public with a fair share of profits made from medical discoveries. But in recent months, the agency has addressed these concerns. It also has adopted top-notch standards for research ethics and the protection of potential egg donors.

"That's why another effort to rein in the stem cell agency's work, in the Legislature, should be rejected as well. Senate Bill 401 would put on the ballot a measure to set up various rigid and picayune regulations on the institute. The agency's board already has adopted key elements of these proposed regulations. But by carving the rules into stone now, the measure would take away any flexibility the board might need as this fledgling research unfolds.

"The bill's author, state Sen. Deborah Ortiz (D-Sacramento) has been one of those forces pushing the agency in the right direction, but her measure is at best premature. The stem cell committee could still stand to make some improvements, of course; for instance, it resists making financial conflict-of-interest statements public for the scientists who will review grant applications. But the agency is on the right track. It should be given the chance to work out its rules and begin its important research before the Legislature starts micromanaging every aspect of its work."

The Bee, which has had the most active voice among California newspapers on CIRM, said:

"While we could quibble with a few of Sabraw's conclusions, they will get a full review from a state appeals court if plaintiffs take their concerns to the next level. Regardless, it is far from certain that the stem cell institute, despite the paranoid nature of Proposition 71, is incapable of operating like a normal state agency. Partly because of public pressure, the institute has opened up the deliberations of some of its advisory groups and established intellectual property policies that try to satisfy competing needs.

"Has it settled all outstanding issues? Not by a long shot. For reasons unclear, the institute continues to shield its advisers - prestigious scientists from out-of-state universities who will be making recommendations on multimillion-dollar grants - from disclosing their outside income. Some of that income comes from industries that hope to profit from stem cell research.

"Imagine the outcry if Caltrans set up an advisory group to advise it on building bridges, yet the public was unable to find out if bridge contractors were serving on the panel.

'Stem cell research could be a bridge to the future, and because of this potential, the institute's oversight board should require its advisers to publicly disclose their outside income. Anything less will leave lingering doubts about this freshly certified public agency."

The San Jose Mercury News said:

"The state has already awarded $14 million in grants with money raised from private investors. That may seem like peanuts next to the $300 million that the state will issue annually over the next 10 years. But it will permit California to hire more than 150 scientists to conduct stem cell research. That amount already equals 50 percent of the grants for stem cell research nationwide by the National Institutes of Health.

"Californians must learn to be patient with the progress of stem cell research. The majority of medical breakthroughs have occurred incrementally. The accumulated work of many hands over many years creates an environment in which someone can make an historic advancement."

A Look at a Key CIRM Planning Document

From "educated ignorance" to "transformative thinking," the California stem cell agency has it all in a report aimed at "charting new directions" in its quest to finance $3 billion in stem cell research.

The 98-page document is one of the fundamental references used in CIRM's strategic planning process. It came out of a two-day international stem cell conference last fall that cost CIRM $128,489.

The report is primarily scientific but is worth reading even if you miss some of the scientific nuances. It points to possible CIRM funding directions that top scientists think would be worth pursuing. Some of scientists voiced opinions that CIRM highlighted. They even turned a phrase or two. Here are some excerpts from the report, which can be found on the CIRM Web site.

"With cell replacement therapy, we are 'at the stage of educated ignorance. We know what we don't know.' – Paul Berg(Nobel laureate from Stanford University)."

"The field of stem cell research 'needs more transformative thinking....Think of Eric Lander and the genome project....California is in a position to do something transformative.' – George Daley(head of Harvard University's stem cell effort and who also now serves on the advisory committee for CIRM strategic plan)."

"'If your goal is to advance medical knowledge, you have to push just as hard as you can at the edge … and that includes making chimeras. Pushing at the edge is what CIRM should be about.' – Irving Weissman(of Stanford University, Stem Cells Inc. and Cellerant)."

"'You can't separate basic research from therapy. '"— Nissim Benvenisty( of the Hebrew University of Jerusalem)."

"Bench-to-bedside is a two-way street." – Arlene Chiu(director of scientific activities at CIRM)."

"If preclinical studies represent a bridge between the bench and bedside, then it is important to remember that the bridge runs in both directions. Although clinical trials often fail on the first try, new knowledge from both successful and unsuccessful trials can be brought back to the laboratory and used to design experiments that re-examine and extend basic premises. This process will lead to refined hypotheses and improved protocols for subsequent preclinical and clinical testing. In this way, basic, preclinical, and clinical research form a partnership that facilitates the development of well-designed, successful clinical trials and, ultimately, efficacious treatments for patients."

"The session revealed that stem cell research will benefit greatly from the development of critical tools, reagents and techniques. Few individual laboratories or institutions however are able to bear the financial burden of creating these tools alone. One recurrent suggestion is that CIRM could create central facilities or cores where new technology and tools for stem cell research would be developed and/or made available to researchers in California."

"Although stem cells are frequently associated with cell replacement therapies, the first practical uses of stem cells may be in applications such as drug discovery, toxicity testing and the development of diagnostics. Session 6 entitled Stem Cells as Tools for Disease Research and Therapy focused on research in which ESCs serve as novel tools for the molecular dissection of genetic-based diseases and for discovering new therapies, rather than for cellular transplantation. It is these tools which may offer the most significant near term rewards from stem cell research."

Egg Donor Protection Advances in State Senate

As expected, legislation to protect women who donate eggs for stem cell research in California has advanced to the Senate Appropriations Committee.

The bill, SB1260, by State Sen. Deborah Ortiz, D-Sacramento, easily cleared the Senate Health Committee on a 9-0 vote last month, which she chairs. The measure does not affect the rules adopted earlier this year by the California stem cell agency, which only affect research funded by CIRM.

The staff of the Health Committee prepared a detailed analysis of the measure, including comparisons to the CIRM rules and listed no opposition to the legislation.

Readers Write: Commentary on the Legal 'Charade'

The following was offered by L. Stephen Coles, co-founder
Los Angeles Gerontology Research Group.

"After spending two hours, I have now read through all 48 pages of Alameda County Superior Court Judge Bonnie Sabraw's April 21st ruling, and I must confess that it was quite tedious reading, in which each paragraph seemed to represent a jig-saw-puzzle piece for a large, complex puzzle. Yet, each paragraph from the Judge was systematically of the form...'The plaintiffs claim that the ICOC is unconstitutional because of reason 'x', but they did not provide sufficient evidence 'y' to support their reasoning. In fact, the very opposite could be argued by looking at the following case law 'z' from our data-base of legal precedents(s) (z = 'so-and-so' vs. 'what's-his-name'; California, 1942).'where x, y, and z are variables instanciated with appropriate items taken from the original complaint and all of which would be meaningless unless one went to Law School and then passed the Bar.

"The plaintiffs didn't seem to trust that their chief complaint would be sufficient to 'bring home the bacon,' so they decided on a 'shot gun' tactic and hope that even if their primary objection was insufficient, somehow one of the lesser charges might stick, and they would win-the-day using a strategy of assembling a concatenation of some of the most frivolous objections imaginable. In law, I belive that this is referred to as a meretricious filing, which is transparently foolish but takes up the Court's time and energy. For example, one of objections was that the ICOC hired private (expensive) lawyers at tax-payer expense to contest the present lawsuit (that seeks to destroy them) and that this is illegal according to their own Proposition 71 (sic). In other words, only our side is allowed to employ lawyers to eliminate the other side, which is prohibited, in principle, from hiring its own lawyers.

"Curiously, there was no clue in the Judge's ruling that the underlying motivation of at least some of the plaintiffs was religious and not technical, and that their funding came from an out-of-state religious organization (based in Colorado), as though we're not allowed, according to the rules of this particular parlor game, to mention the elephant standing over in the corner of the room. If all you had to go by was the text of this ruling, one could not appreciate why one side would spend hundreds of thousands of dollars to defeat something that they didn't like, forcing their adversaries to do likewise, when their case was so weak to begin with. However, it makes more sense, if you see it as a 'delaying tactic' in which 'the law' is being exploited for an ulterior (surreptitious) motive of crippling or exhausting one's adversaries rather than prevailing on merit.

"The best metaphor for reading this document that I can think of is studying the chess analysis of a game between two Masters by a Grand Master, who not only tells you the moves that were made, but why certain moves were particularly good (or, conversely, were particularly bad) in light of his knowledge of a large archive of historical championship games between other Grand Masters (both of whom may now be dead) in which similar positions emerged and one side crushed his adversary. Occasionally, he may explain why a particular move that intuitively looks good to an amateur was not made by one opponent or another, since, say, it leads to a checkmate in every possible variation past a simple planning horizon of only two-moves ahead. This parenthetical 'going down the garden path,' so to speak, obviously takes up time for the serious reader, but for didactic purposes, it is highly instructive for those willing to slog through to the end to find out whether the loser deserved to lose while the winner deserved to win (and maybe even win a prize for brilliancy in the process!), even though in ordinary games this may not always be the case. For example, even Former World Champion Bobby Fischer once committed an oversight in a real contest (in which he was presumably down on time) by moving a bishop into a position of subsequent suffocation by his enemy's pawn in the next move, which caused him to lose an otherwise won game (Sigh!).

"If it weren't so important, this lawsuit charade could be considered the ludicrous preoccupation of compulsive, self-indulgent minds and could be safely ignored by any reasonable person. On the other hand, this particular lawsuit cannot be safely ignored, and after the expenditure of even more hundreds of thousands of dollars, we shall finally prevail in the California Supreme Court in Sacramento in 2007 (the venue for the next and final anticipated appeal process and then begin the process of selling unencumbered bonds in the bond market, to fund embryonic stem-cell research grants up and down the state of California at universities and institutes, and our state will emerge in a leadership position for the rest of the country and further as a role model for the rest of the world."

Gala Donor Names to be Disclosed; Mary Poppins Would Approve

The California stem cell agency plans to disclose the names of all donors to the San Francisco gala aimed at raising $1 million for the fiscally strapped institute.

CIRM said it does not plan to give private scientific briefings to large donors at the benefit, which will feature actress Julie Andrews, among others. It also will not accept donations from biotech or pharmaceutical companies.

Disclosure of CIRM's position was made today by the Foundation for Taxpayer and Consumer Rights. John M. Simpson, stem cell project director, said CIRM's position was clarified in a letter from CIRM President Zach Hall. Simpson said the letter was welcome news, although he said the involvement of Hall and the chair and vice chair of the agency as honorary chairs of the gala was still "troublesome."

Hall's letter to Simpson said,

"First, as I stated in my telephone call to you, there has never been at CIRM any discussion of, or knowledge of, 'private scientific briefings that...will involve senior CIRM staff' for top level donors. The first we heard of this was from your letters and press releases. Such private briefings by CIRM staff would be improper and we have not, and would not, consider such an arrangement. We ask that you acknowledge that this charge is incorrect and that you correct inaccurate information on your web site. My understanding from the organizers of the gala is that donors are to be invited to briefings and tours at UCSF and Stanford University."

Simpson responded on the question of the involvement of CIRM staff:

"As I explained, representatives of the black-tie gala told me -- in writing via e-mail, copies of which are attached -- that CIRM scientific staff would provide the briefs to people buying tickets for $5,000 or $10,000."

Hall's letter did not deal with the question of whether donations would be accepted from executives or other employees of biotech or pharmaceutical companies. We have asked CIRM about that practice and are awaiting a response. In political campaigns where corporate contributions are banned, numbers of executives from individual firms sometimes buy tickets to fundraisers. Companies have also formed political action committees to make contributions where direct corporate giving is barred.

Both FTCR and the California Stem Cell Report have called for disclosure of donor names. CIRM's decision to make the names public is a good one and in keeping with its pledges of transparency and openness. It is likely to disourage some persons from purchasing tickets, but CIRM's first responsibility is to maintain its credibility and avoid the appearance of impropriety.

CIRM's decision is one that would meet the standards of the British nanny, Mary Poppins, who was portrayed so famously by Julie Andrews.

Here is a link to Simpson's and Hall's letter.

Leveraging a $3 Billion Stem Cell Giveaway

California stem cell President Zach Hall and his troops Monday formally begin a seven-month slog in search of a plan on how to give away $3 billion.

Along the way, they plan to spend something close to $500,000 with advice from a star-studded committee, including two Nobel laureates. Their goal is come up with a proposal for the Oversight Committee on how to best leverage California's stem cell investment. That panel will hear reports on the progress of the effort several times, making changes, giving direction and revising along the way before it makes the final judgment on the effort in December.

Stem cell chairman Robert Klein earlier summarized some of the issues at stake:

"Do we want to focus...our portfolio into high risk ventures for major breakthroughs? Do we want to focus (on) goldplated research that will help us incrementally in advancing existing therapies? Do we want, in terms of values, to have a diversification with many grants distributed broadly over large areas of disease research? Or do we want a number of blockbuster grants with high collaboration, focusing and drawing most of the money together?"

The strategic planning effort is not without controversy. Oversight Committee members spent hours haggling over the process in December. It triggered a tussle at another meeting in February. More contentiousness is likely.

At the Oversight Committee meeting in April, members probed the justification for the involvement of Pricewaterhousecooper as consultants in the process at a cost that could run as high as $250,000(original estimates from the firm ran as high as $550,000). Hall said the firm's help was needed to provide planning support, personnel and speed.

Oversight Committee member Claire Pomeroy, dean of the UC Davis Medical School, said,

"If you thought about hiring the personnel to do all of this, if you think about the costs of the public meetings, if you think about the urgency that we have to do this, I think my bottom conclusion is that it would be irresponsible not to do this starting today and with excellent facilitation. So remember, this is $500,000 to decide from scratch how we're going to spend $3 billion. and to me that's an appropriate investment."

Hall and Klein promised plenty of public access in the process. Hall said developments would be posted regularly on CIRM's Web site. However, that effort began shakily with a cryptic agenda item for the Monday session that offered meager fodder for those who might be considering testifying at the session or even sending a statement to CIRM. However, if you want to dig into the process of the strategic plan, you can read what Hall and others have to say about it in the transcript from the April Oversight Committee meeting beginning on page 15. Discussion of the Pricewaterhousecooper contract begins on page 78. You can see more about the plan in a report by Hall. Even more can be found in the March transcript of the Governance Subcommittee beginning on page 94. Also retrievable is the report on the agency's scientific conference last fall that will serve as a key reference during planning.

Aside from the roughly $250,000 for Pricewaterhousecooper, much of the rest of the estimated $500,000 for the plan will go for meetings. Hall has noted that Oversight Committee meetings average about $20,000 each. One working group meeting last year cost $55,000.

The advisory committee on the planning process includes David Baltimore and Paul Berg, both Nobel laureates; George Daley, who heads Harvard's stem cell effort; William Rastetter, retired CEO of Biogen Idec, a Massachusetts biotech firm with research facilities in San Diego, Steve Forman of the City of Hope and Oversight Committee members Jeff Sheehy, Sherry Lansing, Ed Penhoet and Klein. Hall is chair of the group, which expects to meet every three to four weeks in public sessions.

Monday's meeting will be in the CIRM headquarters in San Francisco. Remote access is not available.

Wisconsin Pushing Hard on Stem Cell Research

The cheeseheads are working quietly out in Wisconsin and have "built a critical mass of scientists" that amounts to a "tight-knit (stem cell) research hub unlike any other institution in the world."

So say Susanne Rust and Kathleen Gallagher in a three-part series in the Milwaukee Journal Sentinel. The articles name players and companies involved in the effort, which is partly funded by WARF, the group that holds the key patents on embryonic stem cells.

WARF recently said it wants the California stem cell agency to cough up cash when its research uses Wisconsin science. No reciprocal state-to-state courtesy here, just plain old business.

The Gallagher-Rust pieces provide good overview of the more stem cell recent stem cell efforts in Wisconsin, including involvement of a host of disciplines.

For those mystified by the word "cheesehead," it refers to residents of Wisconsin, once the nation's top cheese-producing state. But that title now belongs to California, as I recall. Nonetheless cheese ripples through the veins of Wisconsin residents. Evidence is available on national television each fall when fans of the Green Bay Packers wear hats shaped like wedges of cheese. One final note and official disclosure from yours truly at the California Stem Cell Report: My mother was born in Milwaukee, but the finest legal experts say that poses only a minor conflict of interest when I write about the Badger State.

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.