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updated 2/9/2005 6:48:04 AM ET 2005-02-09T11:48:04

With millions of dollars in stem cell research grants soon to be up for grabs, California is starting to look a lot like El Dorado for medical researchers and investors. And now a handful of other states, including New Jersey, Wisconsin and New York, are racing to catch up with the Golden State, mindful of the health and economic benefits that stem cell funding could bring.

“Everyone’s rushing to put together a stem cell program,” says Andrew Cohn, a spokesperson for the University of Wisconsin-Madison’s Alumni Research Foundation, which holds the patents for the university’s stem cell discoveries. “People recognize that this field of study has incredible potential, not only to cure disease, but also as an economic tool.”

Stem cells — precursor cells that can develop into any cell type — were first discovered at the University of Wisconsin-Madison in 1998.

Wisconsin's governor, Jim Doyle, recently vowed to spend some $750 million on stem cell studies.

California's new gold rush
But that's dwarfed by a massive fund for embryonic stem cell research that looks to be turning California into the stem cell center of the world, driving biotechnology innovations that researchers hope might one day cure diseases and conditions like diabetes, Parkinson's and spinal-cord injuries.

Californians voted last November to adopt Proposition 71, a ballot initiative to gain $3 billion in funding over 10 years for embryonic stem cell research through the selling of state bonds. The program, to be run by the California Institute for Regenerative Medicine, will dole out $300 million a year in financing, many times the $25 million the federal government spent on stem cell research in 2003.

To date, not a single person has been cured by such research, and although most experts agree that the development of commercial therapies remains at least a few years off, stem cell advocates are likening the California bond measure to a new gold rush for the state. Studies have even conjectured that Proposition 71 could lead to as much as $10 billion in long-term economic gains for California, fueling job growth and strengthening the local biotechnology industry.

“This is vital for the biotech industry, which is so vital to [California’s] economy,” says Dr. Frank H. Eeckman, chief scientific officer at San Francisco-based bioinformatics consulting firm Centient Consulting. “Stem cell research is the next big thing in biotechnology after the human genome project.”

Other states jump in
The promise of billions of dollars in biotech rewards has not been lost on other U.S. states with expertise in the stem cell field. Some are now moving aggressively to pour millions of dollars of investment money into stem cell research, aiming to draw in — and in some cases retain — the best scientific minds at their medical institutions.

Last month, New Jersey’s acting Gov. Richard J. Codey proposed spending $380 million on research into stem cells, allocating $150 million in unspent bond money to build and equip the new Stem Cell Institute of New Jersey. He also announced plans to ask voters’ approval for $230 million in research grants.

In neighboring New York, legislators recently announced legislation to commit $1 billion to a similar effort, specifically citing the growing competition from California. Massachusetts State Senate President Robert Travaglini has said he wants the state to authorize similar funding. In addition, Illinois Comptroller Dan Hynes has proposed the creation of a state-funded institute that will award $1 billion in stem cell research grants over the next decade.

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These states are moving forward at a time when federal embryonic stem cell research has been tightly restricted. In one of his first official acts in 2001, President Bush limited federal financing for embryonic stem cell studies to a handful of existing stem cell lines — an act that many scientists say dramatically hinders advancement of the field.

Embryonic stem cell research is highly controversial with many Americans opposed to it on religious or ethical grounds, while others are skeptical about its scientific benefits. Lawmakers in a few states, like Arkansas and Virginia, are working to ban or limit stem cell research.

Investor interest stoked
In California, though, Proposition 71 has caused a stir of enthusiasm in the biotechnology community and has stoked investor interest in the science.

One company piquing investor interest is Geron, a 53-employee biopharmaceutical firm based in Menlo Park, Calif. Geron recently said it is in plans to begin clinical trials by mid-2006 of a possible treatment for spinal-cord injury that uses cells derived from human embryonic stem cells.

Over the last eight years, Geron has invested $96 million in the field of human embryonic stem cell research, notes David Greenwood, the company’s chief financial officer. And with its leadership position in the industry and its projected royalties from 240 stem cell patents, he expects Geron to be one of the big players in the emerging stem cell business.

However, the projected gold mine from stem cell therapies might still be some way off. The primary beneficiaries of California’s stem cell funds will likely be research centers and universities, with money going to institutions like Stanford University and the University of California at San Francisco, says G. Steven Burrill, CEO of Burrill & Company, a merchant bank based in San Francisco that invests in companies involved in biotechnology.

A few years down the line, technologies developed at these institutions may translate into new medical sciences and into companies, which in turn will attract seed capital from private investors, adds Burrill.

“We are still in the early stages of stem cell research and development, and so most of this will develop initially in academic institutions,” Burrill says. “It takes time for a new technology to come to the marketplace.”

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