Most biotech heavy hitters are taking a wait-and-see approach to California's windfall Proposition 71 stem-cell research fund, says Cheryl Reicin in Prosper

April 01, 2005

Last November, when California voters approved Proposition 71—the US$3 billion fund for stem-cell research—a wave of fear swept through the country: California would lure away other states’ best scientists and gut their biotech industries.

The response by those eager to get into the stem-cell game has been quick. Several other states have been feverishly proposing and developing similar stem-cell research programs. It is predicted that massive new state-of-the-art research facilities will be built around the country; thousands of new jobs will be created; up to US$70 million in new tax revenues will be available within five years; potentially millions of dollars more will be spent on patents and royalties; and ultimately, annual healthcare costs will be reduced by billions of dollars.

Not everyone believes, however, that stem-cell research will be an immediate panacea. Some experts predict that the desired return on the investment—both medically and financially—is still a way off. There are still a few unanswered concerns. For example, Proposition 71’s language does not ensure that the state will receive royalties from discoveries paid for by state dollars. There are also questions about conflicts of interest and about the scientific integrity of the stem-cell lines available for research.

The answers to these questions, says Cheryl Reicin, are likely to be found in the details of what happens over the next few months. In the meantime, Proposition 71 has inspired at least one large east coast client to consider moving its portfolio heavily into California biotech, says Cheryl. Most other heavy hitters are still taking a wait-and-see approach.

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