“There's been a great influx of talent and we'll see a much larger second wave now that the Supreme Court is decided. ”
California's effort to explore new cures and treatments using stem cells cleared a major hurdle this week. The California Supreme Court on Wednesday ended litigation that has dogged the state's $3-billion stem cell institute established by voters in 2004. With the court saying it would not hear an appeal from foes of the institute who challenged its constitutionality, the California Institute for Regenerative Medicine is now free to sell bonds to finance its work.
To date, the institute has been able to cover the grants it's issued through a combination of donations and loans from foundations, individuals and the state. But with its power to issue bonds stymied by the litigation, the institute had been close to running out of money.
Breathing a little easier now is Robert Klein, chairman of the board that oversees the institute (and a member of this publication's editorial advisory board). Klein was a primary author and major financial backer of Proposition 71, which led to the establishment of the institute. A real estate finance expert, Klein's interest in stem cell research grows out of his son's battle with juvenile diabetes.
The Journal of Life Sciences' Daniel S. Levine recently spoke with Klein about the court's recent action, the institute's accomplishments and the challenges that lie ahead. Edited excerpts follow:
Q: The California Supreme Court decision not to hear the case seemed to come faster than expected. Was that a surprise?
A: It did. It came significantly faster. Our statutory priority was taken very seriously by the court. I think the amicus parties had a lot to do with it. We had ten national patient advocacy organizations that joined as amicus parties and ten very prestigious California institutions like USC and Stanford and Cal Tech that joined us as amicus parties.
Q: What does this now mean for the California Institute for Regenerative Medicine and stem cell research in California?
A: As of June 4 or 5, when we approve up to $48 million for shared labs around the state and courses and shared labs for advanced technology for stem cell research, we would have been through $215 million in grant commitments and we would have been out of money, unless we went back to the governor or sought additional bond anticipation notes. We will on August 5 put out probably the largest request for applications in the history of peer-reviewed scientific applications in California—a $222 million request for major facilities. We will, with the benefit of this decision, have accomplished just-in-time financial arrangements and go out with bonds immediately after the awards decisions are made. That $222 million, with matching funds from institutions, will build $450 million to $600 million in new facilities around the state.
Q: How much of an impediment has the litigation been?
A: It clearly cost us a year, but a good part of that year we were constructing the medical and ethical standards with the National Academy of Sciences and putting the agency together. I had hoped we would have been able to put out our first request for grants at an earlier date, but it really did tie us up and cost us some time. There were seven or eight months of that they effective burdened down our structure with massive discovery and depositions and interrogatories that typify a complex litigation of that type.
Q: We're still early in the research, but what you'd say is the impact the institute has had so far?
A: With the National Institutes of Health funding falling, there has been a dramatic focus on stable, long-term funding streams like California's. Our model is being translated across North America with New York committing $600 million for developmental biology and stem cell research. New Jersey is in the range of $370 million. Connecticut is doing $100 million. Maryland is moving ahead with its own program. Wisconsin is doing $750 million. Texas is now processing a bill for $3.6 billion for cancer research that would be bond financed. The province of Ontario has done an appropriation commitment of $350 million over the next five years and a soft commitment to do substantially greater than that in the following five years.
Q: You left off Massachusetts.
A: Massachusetts has a $1-billion plan, right, that's in process. So the model is making dramatic progress across North America.
Q: I take it one of the big payoffs so far has been the talent that has been attracted to California because of the funding?
A: There's been a great influx of talent and we'll see a much larger second wave now that the Supreme Court is decided. There are a number of national leaders being recruited by California who were waiting to be certain that there was a stabilized, long-term source of funding. Knowing there's $3 billion out there gives them the confidence to move from the Northwest or East Coast or Southeast to California. These are dedicated people who realize the history of the federal government is stable in terms of the dollar volume of its commitment, but politically vulnerable.
Q: There's legislation pending now in California that is aimed at ensuring the state gets what legislators consider an adequate financial return from intellectual property that results from research the institute funds. Are you concerned that there's this focus on the hard dollar returns rather than on the bigger returns from this research?
A: The focus on royalties is misplaced. It was clear in the economic projections submitted to the economic analysts with the initiative itself. The analysis showed 85 percent of the potential benefit to the state would come from the possible savings on medical services funded by California for chronic disease. If you just save 2 percent on six out of 70 diseases, that alone would provide a 200 percent payback on the $3 billion in bonds and the $3 billion in interest. So 85 percent of the total money projected would come from improved understanding of disease, new therapy applications and new tools for toxicity testing in very conservative cases. Ten percent would come from new tax revenue generation for the state.
Q: Are you concerned intellectual property rules could threaten the willingness of private sector companies to take grant money?
A: They absolutely can. They can also become a critical threat to getting the right biotech funding and venture funding in the nonprofit research institutions when it gets to the translational stage. Translational medicine for the patients is a key and critical area where we have a lot of work to do. I'm going to be very optimistic that [California Senate Health Committee Chair Shelia] Kuehl and members of the assembly that are addressing these issues are very committed to patients and will work with us to find a solution that doesn't interfere with getting our translational medical applications.
Q: That's important because investment from these companies is going to be critical to taking discoveries and commercializing them?
A: That's right. Even if the White House changes, the NIH doesn't fund pre-clinical work with a few exceptions. We will clearly need to have biotech and venture capital companies move this into commercialization phase and the delivery of therapies to patients.
Q: Do you have timing to name a new president to replace Zach Hall, who stepped down as president of the institute earlier than expected because of health reasons.
A: The current schedule is sometime between June and August.
Q: How short a short list do you have?
A: That's one of the things we can't disclose at this point.
Q: What are the key qualities you are looking for in a new president?
A: Someone is going to need to have a very dynamic scientific vision because this field is going to rapidly change on a global basis. We are seeing the Chinese and Indians moving in this field very aggressively. The Chinese are looking at developing a medical research theme city north of Shanghai. From each continent there are going to be major contributions and we're going to need someone with great scientific vision to capture the movement and find the critical gaps in research and address how we can most effectively bring some early tools and diagnostics to benefit patients while concurrently moving ahead with longer-term cell replacement policies. That's going to be an extraordinary job to accomplish.