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'Less Than a Drop in the Bucket' -- Dueling Perspectives on California's First Stem Cell Royalty Check


February 14, 2018…

California is counting its first royalties from a 13-year-old effort to develop stem cell cures and has declared that it hopes that the check will be the first in a flood of payments.

Others, however, warn of the dangers of over-excitement about the $190,345.87 payment from the City of Hope, saying that it is "less than a drop in the bucket" compared to the cost of the $3 billion California Institute for Regenerative Medicine or CIRM, as the state stem cell agency is formally known.

Here is a longer look at the two perspectives in the wake of Monday's royalty report.

 The royalties were generated from a $5.2 million award in 2012 to the City of Hope for research involving a potential therapy for glioblastoma, one of the deadliest forms of brain cancer and the type afflicting U.S. Sen. John McCain. 

"A little piece of history" is how Kevin McCormack, senior director for communications for the  stem cell agency, described the royalty in an email. He also wrote on the agency's blog,

"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 continued,

"Maria Millan, CIRM’s President & CEO, says the amount of the payment is not the most significant part of this milestone – after all CIRM has invested more than $2.5 billion in stem cell research since 2004. She says the fact that we are starting to see a return on the investment is important and reflects some of the many benefits CIRM brings to the state."

Asked for comment on the payment, John M. Simpson of Consumer Watchdog in Santa Monica, Ca., who was deeply involved in the development of the agency's initial intellectual property rules, said,

“Once again it’s clear that Proposition 71 (the ballot initiative that created the agency) was oversold by its sponsors. Despite campaign hype, it’s only now that we are seeing the first royalty payment and a rather modest one at that."

Bernard Munos, a senior fellow at FasterCures. a think tank aimed at speeding medical research, elaborated at more length in his response to a query by the California Stem Cell Report. He said,

"The $200,000 check from City of Hope should be acknowledged, but it only represents 0.02% of the $1.1 billion in royalties that were promised to California taxpayers -- and does not even cover the annual salary of CIRM’s part-time vice chairman.

"It is also unclear how the licensing (by the City of Hope) of a discovery to a New York-based company, Mustang Bio, Inc., will generate jobs and investment in California, as proponents of CIRM originally promised voters. 

"The world has changed since 2003 when George W. Bush severely restricted government-funded research on embryonic stem cells. The Obama administration lifted those restrictions, and regenerative medicine has diversified into many lines of research that have taken the field well beyond the embryonic vs. adult stem cell debate of the early days, which gave CIRM its initial impetus. Looking ahead, it is unclear whether CIRM still has a role to play. 

"Regenerative medicine offers enormous promises, and Californians may indeed want to leverage that opportunity by supplementing federal funding with their own. We have proposed a way to do this, as an alternative to developing plans to extend CIRM with another $5 billion in California bonds, to be paid out of the state’s general fund. 

"Whenever a multi-billion dollar fund is created, it tends to attract all kinds of people who want a piece of it. Unless strong governance is in place with clear rules on how the money must be disbursed, some of it is likely to fund projects that don't get the scrutiny they should, or even lie outside the organization's remit. Inadequate governance has been a problem at CIRM, as documented by reports from the Institute of Medicine -- now the National Academy of Medicine -- and others. Before consenting to an extension of CIRM's mandate, Californians should look at the returns they have gotten, and are likely to get (or not) from CIRM's past investments, and should demand an independent assessment of whether these investments are consistent with what they were promised and with CIRM's mission.Image removed."

Marcy Darnovsky, executive director of the Center for Genetics and Society, in Berkeley, Ca., said in her email,

"Many Californians voted to establish CIRM because they believed the promises that its backers were making: that we'd soon see revolutionary medical breakthroughs, that our state would get back a billion dollars or more in royalties, that the agency would be run by an 'independent' board. Almost a decade and a half later, none of that has come to pass. 

"The rules and regulations about royalty returns to California are confusing and unclear, and need to be made far more transparent. But it's hard not to ask whether this first royalty payment is anything other than theater, meant to assuage and allure voters now that CIRM is talking about another ballot measure for $5 billion more from the public purse.

"The royalty check from City of Hope is less than a drop in the bucket. It's almost as if you loaned someone $3000 (at your own expense) because they promised to do some good work and pay you back $1000. Years later, they haven’t finished the work but they are offering you twenty cents instead of $1000, and asking for thousands more."

The debate over what Millan has called the "value proposition" of the agency's work is likely to intensify over the next two years. CIRM expects to run out of cash within that period and is pinning its hopes for survival on a proposed $5 billion ballot initiative on the November 2020 ballot -- a campaign that should excite some considerable interest if it is not heavily overshadowed by the presidential election that year. Sphere: Related Content

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