California Stem Cell Measure Scrutinized in Virus Budget Crunch

California voters will be asked this November to spend big on stem cell research, an expensive proposition that could help find cures for debilitating diseases but also put the state deeper in debt.

The measure (Proposition 14) on the Nov. 3 general election ballot seeks $5.5 billion in bonds for the California Institute for Regenerative Medicine (CIRM), a public agency that distributes hundreds of millions of dollars each year to promote medical advances through the study of rudimentary human cells.

In 2004, Californians approved a $3 billion bond measure, Proposition 71, to create CIRM on the promise it would spur innovation for therapies for a range of ailments, from Alzheimer’s disease to immune system disorders. That money is running out, and CIRM says it would cease its Oakland, Calif.-based operations next year if Proposition 14 fails.

If the measure passes, the state could be paying off the investment in stem cell research for another 30 yearsstarting in 2026—$7.8 billion with interest, or $260 million a year, on average, according to the state’s Legislative Analyst’s Office. That’s on top of nearly $1.3 billion California still owes for the 2004 bond measure, according to data from the California State Treasurer’s Office. That amount will range from $11 million to $239 million annually through 2038-2039.

Photographer: Simon Dawson/Bloomberg

A scientist works with stem cells inside a stem cell research laboratory.

To entice the baby boomer voter demographic this time around, Proposition 14 would dedicate $1.5 billion to fund research into diseases such as Alzheimer’s, dementia, Parkinson’s, stroke, epilepsy, and other brain and central nervous system conditions that often come with age.

Gov. Gavin Newsom (D) endorsed the measure last Friday, saying he was an “outspoken champion” of Proposition 71 when he served as San Francisco’s mayor from 2004 to 2011.

But Californians are facing the worst economic climate since the 2008 Great Recession, and the coronavirus pandemic this year has left the state in a $54 billion hole, with millions losing their jobs.

“The primary question that voters need to ask themselves is, is this the right use of what has become very scarce?” said Marcy Darnovsky, executive director of the Berkeley, Calif.-based Center for Genetics and Society, referring to the state’s deficit.

‘Valley of Death’

The politics of stem cell research are far different today than in 2004 when Proposition 71 came before California’s mostly Democratic voters and Republican President George W. Bush was seeking a second term. Bush in 2001 banned federal funding for research on newly created human embryonic stem cell lines. President Barack Obama reversed that move eight years later.

“It was essentially a partisan cultural weapon against the Bush administration,” said Dan Schnur, a University of Southern California adjunct professor of politics and communications.

The 2004 measure passed on the promise of medical innovation, with endorsements from actors Michael J. Fox, who has Parkinson’s, and the late Christopher Reeve, who was paralyzed in a horse-riding accident. CIRM notched some high-profile successes for rare and debilitating diseases. A form of severe combined immunodeficiency (SCID)—a disease made famous by the 1970s “bubble boy” David Vetter whose immune system was so weak he had to live in a plastic enclosure—is now curable through gene therapy developed with agency dollars.

The agency’s grants have been essential in helping researchers bridge the “valley of death” of medical research—the period between early experiments and clinical trials when funding lags and projects often fizzle. In that time, private investors aren’t interested in the research yet, and nonprofit foundations don’t have the money to support projects, said Dr. Donald Kohn, a professor of pediatricsat the University of California, Los Angeles.

Photographer: Kyle Grillot/AFP via Getty Images)

Actor Michael J. Fox, who has Parkinson’s disease, in 2017 in Beverly Hills, Calif.

“There’s no one like them in the world that supports that mission,” said Kohn, referring to CIRM’s support during researchers’ valley of death. His laboratory discovered the SCID gene therapy, and he has received five CIRM grants worth more than $30.7 million.

But in 16 years, CIRM has had just two cancer therapies in the marketplace, the agency said in an 18-month report card released this past July.

The state’s return on investment is also slim: from the billions invested in stem cell research, the state recouped just $352,560 in royalties from therapies developed using Proposition 71 bond proceeds, according to the state legislative analyst.

“It had 16 years to prove itself and it failed,” said state Sen. John Moorlach (R), a fiscal hawk and longtime critic of CIRM. “You’re not stopping a bridge in mid-construction, you’re stopping a con job.”

Economic Development

Even some stem cell research supporters wonder whether a $5.5 billion gift to California’s medical research world is appropriate now. Jeff Sheehy, who sits on CIRM’s board as a designated HIV/AIDS advocate, questions the California agency’s importance when the federal government devotes more than $2 billion to stem cell research annually.

“I don’t see the need, and our mission is really ill-defined,” said Sheehy, a former San Francisco County supervisor and adviser to Newsom when he was mayor.

But Proposition 14 proponents say the return on investment is large. California’s life science industry provides more than 1.4 million jobs with economic activity generating $372 billion in 2019, trade group Biocom said in its 2020 economic impact report. Proposition 71 has generated $641.3 million of additional state and local tax revenues, $726.6 million in additional federal tax revenues, and 56,549 additional full-time jobs, according to a 2019 CIRM-funded report.

Robert Klein, a Silicon Valley real estate developer, wrote both Proposition 14 and Proposition 71. He became a stem cell research advocate after his son was diagnosed with Type 1 diabetes.

Klein has contributed nearly $4.9 million—out of $9.4 million total—to pass the measure, according to filings with the California Fair Political Practices Commission. So far, no committee opposing the ballot measure has raised enough money to reach the $1 million reporting threshold, the commission said.

It will be challenging to recreate the same level of excitement over stem cell research that existed in 2004, said Jeanne Loring, a stem cell biologist who credits CIRM funding for helping start her company. But public support for medical research provides more stability than the private sector, where Loring said she believes the coronavirus pandemic has fanned a volatile environment for investment.

“Once you’ve invested a lot of money in setting up something, it is just not usually a good idea to abandon it,” she said.

Dr. Tracy Grikscheit, a pediatric surgeon and scientist with a laboratory focused on regenerative medicine and tissue engineering at the Saban Research Institute at Children’s Hospital Los Angeles, sees the children who directly benefit from stem cell research and notes many more could be helped from therapies on the cusp of development.

“There’s never been a more exciting time in medicine because all of the possibilities that have opened up in the decade with stem cells have just markedly changed hope for patients,” Grikscheit said. “And so I can’t understand why we wouldn’t seize that hope when we already have a machinery up and running to grasp at it and to help people.”

To contact the reporters on this story: Joyce E. Cutler in San Francisco at jcutler@bloomberglaw.com; Tiffany Stecker in Sacramento, Calif. at tstecker@bgov.com

To contact the editor responsible for this story: Tina May at tmay@bloomberglaw.com