California Stem Cell Agency Shifts Focus to Clinical Treatments

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licensing CIRM-funded discoveries. Proposition 71 allows CIRM to require grantees to pay royalties to the state on marketed products, and provide access to therapies to low-income Californians.

Scopa, of MPM Capital, says startup companies might look for alternatives to CIRM funding for amounts in the range of $3 million. But when CIRM is offering as much as $10 million, many companies will probably find a way to work with the agency because other sources of financing are so pinched, he says.

But Scopa says the royalty requirement could later restrict a young company’s opportunities to be acquired by a larger business or to license its drug candidates. The problem could arise if commercializing the product would require payment of a stack of royalties, not only to California, but also to other entities whose technologies would also have to be licensed, he says.

Thomas says CIRM’s working groups and board will be reviewing a range of policies in response to the Institute of Medicine report. The agency had already planned to form an advisory panel that would include industry representatives, and it has programs in place to seek partnerships with companies that might augment CIRM’s funding of clinical programs.

However, the changes proposed by Thomas fall far short of meeting the Institute of Medicine’s recommendations. The IOM panel said CIRM’s governing board should restrict its role to setting strategic directions for the agency, while leaving the actual choice of grant recipients to its professional staff and the independent outside reviewers who belong to CIRM’s various Working Groups.

The legislature could modify CIRM’s structure, but under the terms of Proposition 71 it would have to muster a vote of 70 percent of both houses.

As to the future, CIRM’s leadership has not yet laid out how, as a state agency, it might persuade private donors to replenish its pool of grant funding once its bond funding is spent. Potential donors would include private individuals, charitable foundations, disease foundations, and venture philanthropy investors, Thomas says.

But such donors often want to determine for themselves how their money will be allocated. Whether they would chip into a large state fund controlled by the CIRM board remains to be seen. And if CIRM were spending private money rather than state funds, could it still reserve its grants for California companies and research centers? Could it require that grantees pay royalties to the state? Also, would setting up a charitable fund or venture philanthropy enterprise dictate a different governance structure for CIRM?

“These are all great questions,” Thomas says. But the agency has not yet begun to delve into such details, he says. At the time when it chooses a plan for sustainability, CIRM hopes to be able to point to effective stem cell therapies and other advances that have flowed from the institute’s support. The progress of its clinical programs would be a factor in the timing of a second ballot initiative, if CIRM chooses that route, Thomas says. The agency could aim for 2014, or wait for the November 2016 election.

Scopa says he wouldn’t rule out a successful ballot measure, despite the state’s recent budget woes. But he says voters will want to see that their first $3 billion was well spent.

“It probably will require some successful stories to tell between now and 2016,” Scopa says.

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