EMBRYO EXPERIMENTATION: by Ken FrancisNews Weekly
Government push to use super funds for embryo research
, November 5, 2005
Private investors regard investment in embryo stem-cell research as risky, writes Ken Francis. Despite this, the Victorian Government has proposed to conscript public servants' superannuation funds to support local biotechnology companies.Victorian Premier Steve Bracks and the Committee of Melbourne created an uproar recently with their proposal to use public servants' superannuation funds to support local biotechnology companies.
Opposing this proposed venture were public servants who owned the funds and professional investors familiar with the problems of funding new entrepreneurial ventures in the biotech sector.
Bob Schwartz, chief economist of the property firm Dimasi, demanded: "Don't you dare touch my super, Premier. If you want to donate money to some biotech charity, do it out of your money, not mine". (Australian Financial Review
, September 19, 2005).Brazen attempt
The proposal by the Victorian Government, and its "socialist" capitalist mates in the Committee of Melbourne, is a brazen attempt to divert the retirement funds of ordinary workers into risky biotech proposals which their super funds would not normally touch.
Any losses experienced by the super funds would be reimbursed by surplus cash from government programs.
As Schwartz put it to Premier Bracks, "If biotech is such a great investment, eliminate the middle man and do it yourself."
A report in the Melbourne Age
(September 10, 2005) describes the biotech industry as "a global sinkhole, down which billions of dollars are poured each year by optimists hoping for commercial successes that will give inventors, most commonly university professors and their backers, a financial bonanza".
Experienced investors and venture capitalists understand that biotechnology enterprises, especially those based on new technologies like stem-cell therapy, are essentially full of risk and often fail to deliver the returns necessary to attract investment.
Leading international management consultants, Bain & Company, recently reviewed the prospects for stem-cell therapies which have been proposed as offering cures for a range of diseases from diabetes to damaged spinal cords (The Economist
, September 24, 2005).
Despite the excitement promoted in the popular media about these treatments, particularly embryonic stem-cell applications, the report by Michael Steiner and Nils Behnke forecast a market decline of $100 million by 2010 rather than the sales of $10 billion optimistically projected by embryonic stem-cell enthusiasts.
Furthermore, according to Bain's estimates, there are currently 140 stem-cell-related products in development throughout the world, but that 80 per cent of these are at the early stage of development "where many a gleam in a scientist's eye dies", and the technology is still far from the clinical studies phase which would prove the feasibility of the application.
There are numerous risk factors perceived by early-stage investors when they consider putting money into biotechnology developments.
First is the cost and time required to confirm the efficacy of the technology, followed by the expense of having it approved by the regulatory authorities, and finally the huge investment required to establish the product in the global market place.
Investors have also understood that there are serious ethical issues arising from the destruction of human embryos where embryonic stem-cells are used as the basis of the technological process.
Despite the resistance of the investment community to participation in stem-cell commercialisation, and particularly embryonic stem-cell projects, any proposal involving embryonic stem-cells is likely to achieve an iconic status in the eyes of researchers and many government leaders.
They seek to have such technology introduced at any cost, believing that such technology is a Holy Grail in its capacity to provide jobs and investment. Biotech enterprises are seen as easy options rather than following the more difficult road to jobs and investment through facilitation of traditional industries.
In the headlong charge to secure investment at any cost, it is likely that considerations of the ethical dimensions of embryonic stem-cell research will be abandoned.
Thus, when considering the advisability of using embryonic stem-cells in a new research institute in Florida, the founder of the stem-cell committee is quoted as saying: "We're spending $800 million to bring science companies here. Why would we want to chase them away?"
In other words, money is everything and ethics cannot compete.California's example
The problem arises for the politician and those seeking to commercialise the technology when the private sector fails to invest enough to allow the further development of the concept.
Worldwide in 2004, US$1 billion was spent on stem-cell research, of which less than one-fifth came from private sources. The rest of the investment - more than four-fifths - came from governments, according to Bain's report.
In attempting to conscript public servants' super funds for the benefit of such risky "long shot" investments, Victoria is following the example of California, which makes a very interesting case study.
In 2004, a real estate investment banker, Robert Klein, dreamed up the California Institute for Regenerative Medicine (CIRM) to exploit new developments in therapeutic cloning (Scientific American
, September 2005).
The institute was to benefit from state funding authorised under by referendum Proposition 71 which had been carried by Californian voters.
CIRM was to be Klein's pet project. He donated $2.6 million of his own money, became the leading promoter of the scheme and, in December 2004, was named chairman of the organisation responsible setting up the agency and overseeing a $3 billion jackpot of research money sourced from state government bonds.
To Klein it was an attractive idea to apply the entrepreneurial "can-do" finance approach to any area of research, but particularly to embryonic stem-cell research where the consideration of serious moral and ethical issues tended to delay progress.
He wanted to remove the legal and administrative burdens from the scientists, accelerate the grant process, and cast off the ethical and quality constraints applicable for funding obtained from the US Federal Government's National Institutes of Health (NIH).
The CIRM has struck a number of hurdles in seeking to undertake research programs by literally throwing money at the problem.
First, the public is very upset about perceptions of poor standards of delivery and inadequate consultation with voters. Klein has been called to attend 29 public meetings in 22 weeks and explain what his institute is actually doing.Stricter controls
Second, State Senator Deborah Ortiz, an early supporter, has demanded stricter controls over Klein's perceived conflicts of interest as both proponent and part-owner of the new technology.
She has called for policies to ensure that royalties, revenues and any actual therapies are delivered for the benefit of residents of the state.
Other criticisms of the CIRM were made on the basis that regulations governing it were structured to shield it from oversight by public officials and to permit CIRM to operate more like an entrepreneurial start-up company than the state-funded research institute which it is supposed to be.
Furthermore, some observers, such as Mildred K. Cho, director of the Stanford Center for Biomedical Ethics, are concerned about the over-representation of patient advocates on key governance boards, resulting in research being undertaken without due consideration of ethics and scientific procedures.
She warns that there is a risk that "the public drives not just what disease areas get attention but what the research strategies are".
It is understandable that all parties interested in the outcomes of stem-cell research should be impatient for results and cures.
However, good science and good ethical decisions are seldom compatible with the world of finance, bureaucratic and governmental authority and personal avarice.
Let us be patient enough to engage in stem-cell therapies in a patient, careful, and above all ethical manner.