Thread: California weighs its future as stem cell epicenter

Tuesday's vote by Californians to spend $3 billion on human embryonic stem cell research could speed progress on the promising but controversial field and make the state the epicenter of such research.

"This is going to be the stem cell center of the world, not just the country," said Evan Snyder, director of the program in stem cell biology at the Burnham Institute in San Diego.

The ballot measure, Proposition 71, will prompt the establishment of a California Institute for Regenerative Medicine, which will become the largest single backer of research in stem cells--a field that scientists hope might eventually be used to create new brain cells for patients with Parkinson's disease, or insulin-producing cells for diabetics, or treatments for numerous other diseases.

The $300 million the institute plans to dispense in each of the next 10 years, generated by the sale of bonds, would dwarf the $25 million spent last year by the main backer of medical research, the National Institutes of Health, on research involving stem cells derived from human embryos. It would easily exceed the $190 million spent by the NIH last year on human stem cells derived from adult tissue, which are not controversial.

Indeed, the California initiative was largely an effort to sidestep restrictions on federal financing of human embryonic stem cell research imposed by the Bush administration, which objects to the destruction of human embryos that is necessary in harvesting the stem cells.

The California initiative will become even more important to the field now that President Bush has defeated John Kerry, who had pledged to end the restrictions on the research and to increase federal financing for it.

The backers of Proposition 71, which included Gov. Arnold Schwarzenegger, a Republican, appealed to voters mainly on the emotional argument that embryonic stem cells, which can potentially turn into any type of tissue in the body, might eventually be used for life-saving treatments.

To counteract critics who said the state could not afford the measure, the backers also argued that Proposition 71 would make California the leader in what could ultimately be a huge new industry, one that could create jobs and bring the state hundreds of millions of dollars in patent royalties.

Viewed that way, the initiative is the largest effort by a state to bolster its bioscience industry, said Walter Plosila, a vice president at Battelle, a nonprofit research institute, who has studied such state efforts. It exceeds the $2 billion of tobacco litigation settlement money that Pennsylvania has pledged to spend over 20 years on life sciences, he said.

Stem cell scientists in California were almost giddy Wednesday with anticipation that talented young scientists and enterprising companies would move here.

Advanced Cell Technology, a perennially cash-starved Massachusetts company that has been trying to use embryonic stem cells, plans to set up a branch in California, in part to tap into the money. The company's chief executive, Michael D. West, has already moved to the San Francisco Bay Area.

And scientists elsewhere, fearing a brain drain, are expected to push their own states to increase financial support.

"We here in Massachusetts are not going to take this lying down," said George Daley, an associate professor at Children's Hospital in Boston and at Harvard University. "We're going to have to work extra hard to make sure we don't lose our best junior scientists to California."

Harvard has started its own stem cell institute and hopes to raise $100 million from donors, Daley said. But that would still be far smaller than what California will spend.

For all the money, embryonic stem cells are not expected to lead to treatments for at least several years, and there is a risk that they may never give birth to a big industry. Even some backers of Proposition 71 said there was a danger that all the new money would attract opportunists.

"We have to have very discerning review boards so it doesn't become a boondoggle for companies that haven't succeeded," said Irving Weissman, who runs a stem cell institute at Stanford University.

If stem cells do lead to big business, California would no doubt have been a center of the activity even without Proposition 71. The state has the universities, entrepreneurs and venture capitalists that have already made it a center of biotechnology and electronics. Because professors who start companies tend to do so near their universities, having more scientists working in California should eventually mean more companies.

Most of the money is expected to go to academic scientists, especially at first.

Indeed, so far most pharmaceutical companies and biotechnology companies appear to have little interest in stem cells. That is partly because of the ethical controversy, but also because many companies consider therapies based on cells, which might have to be tailored to each patient, to be less attractive as a business than one-size-fits-all drugs.

BayBio, the trade group representing biotech companies in the Bay Area, did not even get around to endorsing Proposition 71 until last Thursday. Matthew M. Gardner, its president, said the organization was waiting for answers to some questions from the measure's backers. But, he conceded, for most of his members Proposition 71 was "not the first thing on their mind."

The measure has already helped the few publicly traded stem cell companies, whose stocks rose before Election Day in anticipation of Proposition 71's passing and of a victory by Sen. Kerry. Shares of StemCells, for example, rose from a 12-month low of $1.24 on Aug. 10 to a 12-month high of $4.87 on Oct. 25, even though the company is working on fetal and adult stem cells, not the embryonic ones that would be the focus of the California institute.

The company took advantage of the upturn to raise $22.5 million in a private stock placement last week. The stock offering roughly doubled the cash reserves of StemCells, assuring that the company will have enough money for an initial clinical trial next year using its neural stem cells to treat Batten disease, a rare and fatal genetic disorder.

"There's an old maxim in the biotechnology industry," said Martin McGlynn, the chief executive of StemCells, "that when they are passing around the hors d'oeuvres, help yourself whether you're hungry or not."

McGlynn said the company, which is based in Palo Alto, Calif., also planned to seek money from the new California institute. "We're not carpetbaggers," he said. "We've been pushing this noodle uphill for 10 years in California."

Aastrom Biosciences, which is also working on adult stem cells, not embryonic ones, raised $10 million last week from a private placement. R. Douglas Armstrong, the chairman and chief executive, said the recent rise in the company's stock owed more to progress in its clinical trials than to the California initiative. The company, based in Ann Arbor, Mich., has no immediate plans to set up shop in California to try to get some of the money, he said.

For Geron, which is considered the leading company in embryonic stem cells, Proposition 71 should mean more academic collaborators and faster progress, said Thomas B. Okarma, the chief executive. As more treatments are developed and more companies are formed, he said, there will be more opportunities for Geron, which is based in Menlo Park, Calif., to collect royalties on its main patents.

Still, shares of StemCells, Aastrom and Geron tumbled Wednesday, in part because Kerry was defeated.

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