With, Prop 71, Californians voted to give $3 billion tax-payer dollars to fund human cloning and embryonic stem cell research. They were told that this money was necessary for cures to every disease imaginable. And not surprisingly, I am sure that most Californians were unaware of how long it would take for their hard earned pennies to actually yield therapies in humans. (That would be decades.) And I know Californians were not told that even though it was their money that funded the research and the trials, they were unlikely to see any discounts in resulting therapies. Taxpayer advocacy groups have successfully fought to make sure Californians reaped some of the reward from any grant money given out as a result of Prop 71.
The Stem Cell Institute, the body that gets to pass out the $3 billion tax-payer dollars, has decided that since real venture capiltalists are not putting their money into cutting edge and speculative stem cell research, they will generously use the monies provided by the good people of California to provide not "grants, but "loans." From SignOnSanDiego.com:
California's taxpayer-funded stem cell institute wants to do something a lot of banks won't: make loans to biotechnology companies with no cash flow, very little collateral and a high risk of failure.
The idea is that loans would not pay for basic scientific research, but rather help fund the translation of research into clinical therapies, helping to push therapies closer to market and traditional investors, such as venture capital or public markets....It is not known exactly how much money would be put into the loan program, although it will likely involve a small chunk of the $3 billion that California voters agreed to spend on controversial stem cell research by passing Proposition 71 in 2004.
Also unknown are the terms of the loans, and who would judge the worthiness of the chronically cash-strapped companies and the high-risk products they are trying to develop.
So why do these companies need "loans" from Joe California? Because real venture capitalists don't want to lose their money in such shaky investments:
Meanwhile, some executives said venture capital investors have been overly skeptical about investment in the field because it is still so new and they've become more adverse to risk after being burned in other technology investments.
“I'm not going to say that we get the scraps, but regenerative medicine has not been a rich area for VC investment,” said Alan Lewis, chief executive of Novocell, a San Diego-based embryonic stem cell company.
And pharmaceutical companies, which often partner with biotechnology companies for late-stage clinical trials and commercialization, have been slow to invest in regenerative medicine because of its nascency and political problems, Lewis said.
That creates a dearth in midstage funding, creating what the biotechnology industry has dubbed the “valley of death,” where interesting science goes to die before even reaching late stage, large clinical trials in humans.
The question is will these "loans" be repaid, or is this just a start-up money "grant" in disguise therefore side-stepping the commitment to repay Californians for their investment:
John Simpson, of the nonprofit Foundation for Taxpayer and Consumer Rights in Santa Monica, said the institute spent two years hammering out a fair intellectual property policy that serves the public's interest.
“This is an end run around that carefully deliberated policy and that is outrageous,” Simpson said.
He believes the institute should create grants to bridge the gaps in commercialization funding.
Some skeptics would question why loans would be offered to biotechnology companies, which generally are not in a position to repay them. Many companies fail without bringing a product to market.
So would they be taking the state loan and promising to repay it with a wink and a nod?
So wake-up California! You are now high-risk venture capitalists! Wow! I just wouldn't be waiting by the mailbox for a dividend check.
