Is California Turning Stem Cells Into Dollars or Debts?

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By Joyce E. Cutler

California received its first royalty check on $3 billion in bonds sold to support stem cell research.

Now, debate is kicking up on whether a $190,346 check is enough of a return on investment to get voters’ OK for billions more to fund the state stem cell agency, the California Institute for Regenerative Medicine (CIRM).

The payment from City of Hope, a Los Angeles County-based research center, comes as supporters of CIRM gear up for a 2020 voter initiative to fund another series of billion-dollar bond sales. The current authority to sell bonds ends in 2019.

Connecticut, Maryland, New Jersey, and New York also are among the states publicly funding stem cell research, though none to the extent of California in issuing billions of dollars in bonds.

In the aggregate, CIRM has awarded $2.48 billion to fund stem cell research, including infrastructure such as lab construction at Stanford University and University of California campuses, since voters approved Proposition 71 creating the agency in 2004.

“The royalty check from City of Hope is less than a drop in the bucket,” Marcy Darnovsky, executive director of the watchdog Center for Genetics and Society, said in a statement to reporters. “It’s almost as if you loaned someone $3,000 (at your own expense) because they promised to do some good work and pay you back $1,000. Years later, they haven’t finished the work but they are offering you 20 cents instead of $1,000, and asking for thousands more.”

The City of Hope’s Beckman Research Institute paid the state $190,346 according to a CIRM royalty formula when the agency awarded the institute $5.125 million to develop stem cell therapies for glioblastoma, an aggressive form of brain cancer. The payment was announced Feb. 12.

The 2012 City of Hope award led to two clinical trials and a number of offshoot inventions subsequently licensed to a Mustang Bio, a subsidiary of Fortress Biotech Inc., CIRM spokesman Kevin McCormack said in a blog post.

“It’s the first of what we hope will be many such checks, helping repay, not just the investment the state made in the field, but also the trust the voters of California showed when they created CIRM,” McCormack said.

Twice Burned?

“It sounded too good to be true: ‘Give us $3 billion and we will create thousands of new jobs, miracle cures, and return up to $1.1 billion in royalties from new stem cell innovations,’” Bernard Munos, senior fellow at the Washington, D.C.-based think tank FasterCures, told Bloomberg Law.

“As the original funding is about to run out, the promoters of CIRM are out with a new scheme to get another $5 billion from California taxpayers to create version 2.0 of the same cornucopia of jobs, cures, and rich returns,” Munos said in a Feb. 15 email.

The $3 billion in bonds were estimated to cost the state $5.5 billion to $6 billion in interest and principal over their 30-year life.

“It’s not a good return on investment, and of course the institute has been plagued by controversy since day 1,” Howard Jarvis Taxpayers Association President Jon Coupal told Bloomberg Law Feb. 15.

CIRM battled lawsuits over Prop. 71’s validity that hindered California’s ability to sell bonds and defended against complaints about built-in conflicts for the initiative requiring disease advocates and researchers sit on the governing board.

Human, State Benefits

Robert Klein, Prop. 71 backer and first chairman of the agency’s oversight board, the Independent Citizens’ Oversight Committee, is proposing a ballot initiative to continue funding the agency’s mission. The ICOC in December tacitly approved the proposal.

CIRM has funded 60 human trials that are “demonstrating the life-restoring potential of stem cell therapies for chronic diseases,” Klein told Bloomberg Law.

“Initial royalties, after only 10 years of funding, are positive; but, 93 percent of the promised benefits are with rebuilding the quality of life for patients and their families, while saving the state and the families from the terrible cost of chronic disease and injury,” Klein said in a Feb. 15 email.

“California voters put their faith in California scientists and physicians when they approved Proposition 71, and we have been rewarded. Patients are getting better. More trials await,” Mary Bass, the former executive director of nonprofit advocacy organization Americans for Cures Foundation, told Bloomberg Law in a Feb. 15 email.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at jcutler@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

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