Washington Editor

California stem cell researchers might get a boost through the passage of Proposition 71, paving the way for $3 billion in state-backed funding, and biotech companies hope to feel some trickle-down effect.

In passing Prop. 71, the California Stem Cell Research and Cures Initiative, voters agreed to fund stem cell research at the state's hospitals, medical schools, universities and research facilities.

"I certainly think it sends a strong message to Washington that a large number of people in California feel that embryonic stem cell research is not only acceptable, but desirable, and so much so that they're willing to pay for it out of their own pockets," Michael Goldman, a biology professor at San Francisco State University, told BioWorld Today. "The money going into it is significant, and I don't think it will take away from what private industry already plans to do with it. I see it as more of the symbol and message as being very important, rather than the funding itself."

The initiative has long enjoyed support from patient advocacy groups, trade associations and research foundations. Recently, it received the backing of California Governor Arnold Schwarzenegger. In theory, should the funding lead to stem cell therapies or other health care-related benefits, Prop. 71 proponents said the state should expect to lower its long-term health care expenses.

In the shorter term, Prop. 71 won't increase or create any taxes, but instead authorizes tax-free state bonds that will provide an average of $295 million per year over 10 years. The bonds are designed to be self-financing during the first five years.

Prop. 71 calls for the establishment of the California Institute for Regenerative Medicine, which will oversee the stem cell research program and distribute grants. Each year, the institute will ask the state's treasurer to authorize bonds to pay for the coming year's grants. The initiative is designed to support all types of stem cell research, including research into adult, cord blood and embryonic stem cells, and gives priority to any area that has been under-funded by the federal government.

"I think this is the kind of thing that can provide useful seed money for a lab that's interested in getting into it," Goldman said. "I think it's a very good thing as long as it's allowed to function."

Companies expect to see indirect benefits from the funding, said Bruce Cohen, president and CEO of Cellerant Therapeutics Inc., of Palo Alto, Calif.

"I don't know how much of the money will find its way into companies, but I do believe that the availability of that money will do two things for the biotechnology industry," he told BioWorld Today. "One, it will support basic research at academic institutions, the source of our innovation. Secondly, I believe it will make venture capitalists a little less nervous about investing in this space because now, at least in California, the government will share part of the risk of the basic science."

Naysayers had argued that the state's backing would buoy research operations that have not yet been largely funded by the venture capital community. But Cohen stressed that government funding has long fostered nearly all basic medical research, primarily at the federal level through the National Institutes of Health in Bethesda, Md., well in advance of venture capital involvement.

Stem cell research has not received much in the way of federal subsidies. Current policy has limited NIH funding for adult and embryonic stem cell research, a policy expected to continue, given President Bush's re-election. There also are limitations on the number of cell lines available for research under such federal funding, lines that for the most part derive from people with fertility problems, Cohen said.

The stock values of three publicly traded stem cell companies fell Wednesday - StemCells Inc., Geron Corp. and Aastrom BioSciences Inc. all lost double-digit percentages - in part, because they likely will continue to face federal funding limitations under Bush. Given such an ongoing hurdle, Goldman said he feared further restrictions from a conservative-leaning government.

"I didn't really think [the Bush-imposed boundaries] were such a bad limitation at first, figuring we can do that for six months and everyone would see it's OK and relax those restrictions," he said. "They unfortunately haven't been relaxed, and it turns out that even though the signature characteristic of embryonic stem cells is their ability to proliferate forever and form any kind of tissue, the fact is that they don't last forever. Maybe there are no limitations on the different tissues you can produce from a given cell line, but it's going to take a long time before we know how to get them to produce those different kinds of cells."

In the absence of widespread federal funding for stem cell research, California chose to fund development itself. Cohen said the initiative's passage is good for the state on another level - the funding could play a role in retaining technologies and researchers, rather than losing such resources to governments in Asia and the UK. One of Goldman's colleagues already left the University of California at San Francisco to continue his research in England.

"For a state where the biotechnology industry is a substantial contributor to the economy," he said, "it's important for California economically to both support it on the positive side and not be left out."

Potential down-the-road benefits associated with the use of stem cells for regenerative medicine purposes include therapies for diseases such as Type I diabetes, cardiovascular diseases, paralysis, and Alzheimer's and Parkinson's disease. Cohen also stressed the importance of developing cell lines for research purposes into better understanding disease processes and pathways.

"What you'll start to see, if the research gets funded, is that people will develop cell lines of specific disease," he said. "They will study them and learn how it is that diseases like Alzheimer's happen, why normal cells become oncogenic, or about aging. They'll learn all sorts of things that are not going to lead immediately to a drug, a biologic or a cellular therapy, but it's going to lead to an improved understanding of disease. Historically, that's how you make advances in our field."

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