California Legal Market

The New California Goldrush: Prop 71 Boosts California's Biotech Presence

Ballot proposition 71, California’s Stem Cell Research and Cures Initiative which was passed by an overwhelming majority of voters in November 2004, will energize the state’s already thriving biotechnology industry. Consequently, law practice relating to its growth also will expand in the foreseeable future. Where technology leads, lawyers are not far behind as new intellectual property requires protection, new companies are founded and mature, and new products are developed and brought to market. With recent scientific discoveries and medical advances, the demand for related legal expertise has increased over the past several years. Prop 71’s boost to stem cell research in California can only accelerate this process.

Prop 71 provides for $3 billion in state bonds to fund grants to be disbursed at the rate of $300 million per year over 10 years. These grants cannot be spent outside of California. This is compared to a total of $190 million nationally allocated in 2003 by the NIH (National Institutes of Health) for stem cell research, of which $25 million went for embryonic stem cell research.

The proposition created the California Institute of Regenerative Medicine modeled after the NIH and established the Independent Citizens Oversight Committee, a 29-member governing board of the Institute, comprised of representatives from California’s universities, non-profit research institutions, biotech firms, and patient advocacy groups. The Institute will appoint working groups which will create standards, review grant applications and make recommendations for funding. The first grants will go to universities and research institutions and for building facilities. This May, the Oversight Committee will select its headquarters location, which has been hotly sought after by many California cities as they expect biotechnology companies to sprout around the permanent headquarters. The finalists include San Francisco, Sacramento, San Diego and Emeryville.

Scientists believe that embryonic stem cells can form any of the approximately 200 cell types that make up the human body. In theory, these cells have the potential to cure neurodegenerative disorders such as Parkinson’s, Alzheimer’s and ALS (Lou Gehrig’s disease), diabetes, heart disease, and spinal cord injuries, or could grow into replacement organs for transplants that would not be rejected. Embryonic stem cells have greater potential than adult stem cells because they are more adaptable.

One of George W. Bush’s first acts as President was to restrict federal financing for embryonic stem cell research to a small number of stem cell lines existing as of August 2001. Researchers have been required to rent private labs and use separate equipment, funded privately, to do research outside of those lines. Researchers risk losing all of their funding if unapproved stem cell lines come in contact with federal funds or equipment. Stakes are even higher for California’s research since most of the stem cell lines exempted by Bush’s research restrictions have been found to be contaminated and inappropriate for much of this research. Thus, new, uncontaminated lines must be created.

California already is a leader in the biotechnology field. According to a Milken Institute report, half of the US’s top 12 biotech centers are located here, with San Diego rated as number one. A June 2004 report by the California Healthcare Institute (CHI) and PricewaterhouseCoopers stated that California’s biotech industry employs over 230,000 people, more than any other high-tech industry in the state including computers, telecommunications, motion pictures, and aerospace. California has more biomedical companies than any other state (over 2,600) and has been the birthplace of over one-third of all US biomedical companies. The state’s numerous universities and research institutes engaged in biomedical R&D and manufacturing have spun off over 700 companies.

Research funded by Prop 71 is expected to eventually lead to the development of drugs, devices, and procedures around which profitable companies would be created. Studies have predicted as many as 22,000 new jobs and $10 billion in long-term economic gains for the state both in patent royalties and profits from commercializing the new technologies.

Businesses and scientists are expected to head to California to cash in on the gold rush. At least one out-of-state biotech company, Massachusetts-based Advanced Cell Technology, already is planning its move to California, setting up a lab so that it can apply for Prop 71 research grants. In-state universities and research institutions have started to recruit the best and the brightest stem cell scientists and researchers internationally. They also expect more talented students to enter the field. Researchers are likely to go where their grant proposals have a better chance of being approved and where the political and business environments are friendly. Professors often collaborate with industry and those who start companies tend to locate them near their universities. Thus, having more scientists working in California should eventually mean more business here.

Other states want to hop on the embryonic stem cell band wagon by allocating research funds—but none on the scale of Prop 71—in an effort to attract or retain the best scientific minds. On the other hand, several states have laws expressly prohibiting research on human embryonic stem cells while others have passed new laws prohibiting therapeutic cloning or research on cloned embryos. A patchwork of state laws, some of which are in conflict with federal policy, will make things more complicated but may generate more work for some attorneys in an effort to sort things out. The litigation already has begun. Two lawsuits have been filed in state court in an attempt to invalidate Prop 71.

Assuming Prop 71 survives, it will be several years before its early stage discoveries can be translated into marketable products and a new generation of biotech companies. Prop 71’s public support is expected to attract private investment, spurring an industry boom—a biotech version of Silicon Valley in the late 1990’s.

Many major law firms currently have thriving life sciences practice groups to service their biotech-related clients’ intellectual property, litigation and general business needs.

Life science companies are extremely reliant on collaborative relationships with academia and other biotech companies. Thus, attorneys are involved from the inception: in establishing strategic alliances, collaborations, joint ventures and partnerships; protection of confidentiality and trade secrets; and the formation, strategic development and protection of intellectual property portfolios including patent evaluation and protection, licensing, and technology transfers. For instance, Menlo Park-based Geron invested $96 million of its own money in human embryonic stem cell research and already holds 240 stem cell patents, including exclusive licenses to patents based on discoveries at the University of Wisconsin where the first line of human embryonic stem cells were created in 1998.

As these new biotech companies mature, lawyers are needed for the full range of business transactions from raising private and public capital through venture capitalists and private and pubic securities placements, to M&A’s, divestitures, recapitalization, and restructuring, plus the tax aspects of these transactions. Attorneys will work with regulatory agencies regarding approvals, anti-trust issues, and international trade matters.

Prop 71 will lead to the building of new research facilities and corporate offices which will require legal expertise in real estate development, financing and leasing and, possibly, environmental concerns. Executive compensation, labor and employment issues will arise as researchers and executives are recruited and new ventures are staffed. Eventually, IP infringement, product liability, and litigation of all types will be brought, including bankruptcy for those companies that are not successful.

M. Wainwright Fishburn, one of the founding partners of Cooley Godward’s San Diego office and active in that region’s life sciences community sums it up: Proposition 71 is a “powerfully impactful reinforcement of California ’s leadership in the life sciences industry. [One] cannot underestimate the importance of Prop 71 which takes stem cell research out of the political realm and offers tremendous stability for the industry. It establishes a foundational presence [for this industry] in California which will be able to keep and attract great scientists internationally. It is almost like the commitment to go to the moon.”

California Legal Market The New California Goldrush: Prop 71 Boosts California's Biotech Presence Ballot proposition 71, California’s Stem Cell Research and Cures Initiative which was passed by an overwhelming majority of voters in November 2004, will energize the state’s already thriving biotechnology industry. Consequently, law practice relating to its growth also will expand in the foreseeable future. Where technology leads, lawyers are not far behind as new intellectual property requires protection, new companies are founded and mature, and new products are developed and brought to market. With recent scientific discoveries and medical advances, the demand for related legal expertise has increased over the past several years. Prop 71’s boost to stem cell research in California can only accelerate this process. Prop 71 provides for $3 billion in state bonds to fund grants to be disbursed at the rate of $300 million per year over 10 years. These grants cannot be spent outside of California. This is compared to a total of $190 million nationally allocated in 2003 by the NIH (National Institutes of Health) for stem cell research, of which $25 million went for embryonic stem cell research. The proposition created the California Institute of Regenerative Medicine modeled after the NIH and established the Independent Citizens Oversight Committee, a 29-member governing board of the Institute, comprised of representatives from California’s universities, non-profit research institutions, biotech firms, and patient advocacy groups. The Institute will appoint working groups which will create standards, review grant applications and make recommendations for funding. The first grants will go to universities and research institutions and for building facilities. This May, the Oversight Committee will select its headquarters location, which has been hotly sought after by many California cities as they expect biotechnology companies to sprout around the permanent headquarters. The finalists include San Francisco, Sacramento, San Diego and Emeryville. Scientists believe that embryonic stem cells can form any of the approximately 200 cell types that make up the human body. In theory, these cells have the potential to cure neurodegenerative disorders such as Parkinson’s, Alzheimer’s and ALS (Lou Gehrig’s disease), diabetes, heart disease, and spinal cord injuries, or could grow into replacement organs for transplants that would not be rejected. Embryonic stem cells have greater potential than adult stem cells because they are more adaptable. One of George W. Bush’s first acts as President was to restrict federal financing for embryonic stem cell research to a small number of stem cell lines existing as of August 2001. Researchers have been required to rent private labs and use separate equipment, funded privately, to do research outside of those lines. Researchers risk losing all of their funding if unapproved stem cell lines come in contact with federal funds or equipment. Stakes are even higher for California’s research since most of the stem cell lines exempted by Bush’s research restrictions have been found to be contaminated and inappropriate for much of this research. Thus, new, uncontaminated lines must be created. California already is a leader in the biotechnology field. According to a Milken Institute report, half of the US’s top 12 biotech centers are located here, with San Diego rated as number one. A June 2004 report by the California Healthcare Institute (CHI) and PricewaterhouseCoopers stated that California’s biotech industry employs over 230,000 people, more than any other high-tech industry in the state including computers, telecommunications, motion pictures, and aerospace. California has more biomedical companies than any other state (over 2,600) and has been the birthplace of over one-third of all US biomedical companies. The state’s numerous universities and research institutes engaged in biomedical R&D and manufacturing have spun off over 700 companies. Research funded by Prop 71 is expected to eventually lead to the development of drugs, devices, and procedures around which profitable companies would be created. Studies have predicted as many as 22,000 new jobs and $10 billion in long-term economic gains for the state both in patent royalties and profits from commercializing the new technologies. Businesses and scientists are expected to head to California to cash in on the gold rush. At least one out-of-state biotech company, Massachusetts-based Advanced Cell Technology, already is planning its move to California, setting up a lab so that it can apply for Prop 71 research grants. In-state universities and research institutions have started to recruit the best and the brightest stem cell scientists and researchers internationally. They also expect more talented students to enter the field. Researchers are likely to go where their grant proposals have a better chance of being approved and where the political and business environments are friendly. Professors often collaborate with industry and those who start companies tend to locate them near their universities. Thus, having more scientists working in California should eventually mean more business here. Other states want to hop on the embryonic stem cell band wagon by allocating research funds—but none on the scale of Prop 71—in an effort to attract or retain the best scientific minds. On the other hand, several states have laws expressly prohibiting research on human embryonic stem cells while others have passed new laws prohibiting therapeutic cloning or research on cloned embryos. A patchwork of state laws, some of which are in conflict with federal policy, will make things more complicated but may generate more work for some attorneys in an effort to sort things out. The litigation already has begun. Two lawsuits have been filed in state court in an attempt to invalidate Prop 71. Assuming Prop 71 survives, it will be several years before its early stage discoveries can be translated into marketable products and a new generation of biotech companies. Prop 71’s public support is expected to attract private investment, spurring an industry boom—a biotech version of Silicon Valley in the late 1990’s. Many major law firms currently have thriving life sciences practice groups to service their biotech-related clients’ intellectual property, litigation and general business needs. Life science companies are extremely reliant on collaborative relationships with academia and other biotech companies. Thus, attorneys are involved from the inception: in establishing strategic alliances, collaborations, joint ventures and partnerships; protection of confidentiality and trade secrets; and the formation, strategic development and protection of intellectual property portfolios including patent evaluation and protection, licensing, and technology transfers. For instance, Menlo Park-based Geron invested $96 million of its own money in human embryonic stem cell research and already holds 240 stem cell patents, including exclusive licenses to patents based on discoveries at the University of Wisconsin where the first line of human embryonic stem cells were created in 1998. As these new biotech companies mature, lawyers are needed for the full range of business transactions from raising private and public capital through venture capitalists and private and pubic securities placements, to M&A’s, divestitures, recapitalization, and restructuring, plus the tax aspects of these transactions. Attorneys will work with regulatory agencies regarding approvals, anti-trust issues, and international trade matters. Prop 71 will lead to the building of new research facilities and corporate offices which will require legal expertise in real estate development, financing and leasing and, possibly, environmental concerns. Executive compensation, labor and employment issues will arise as researchers and executives are recruited and new ventures are staffed. Eventually, IP infringement, product liability, and litigation of all types will be brought, including bankruptcy for those companies that are not successful. M. Wainwright Fishburn, one of the founding partners of Cooley Godward’s San Diego office and active in that region’s life sciences community sums it up: Proposition 71 is a “powerfully impactful reinforcement of California ’s leadership in the life sciences industry. [One] cannot underestimate the importance of Prop 71 which takes stem cell research out of the political realm and offers tremendous stability for the industry. It establishes a foundational presence [for this industry] in California which will be able to keep and attract great scientists internationally. It is almost like the commitment to go to the moon.”	Hot Tips The Search Planning Your Search Assessing Your Marketability Resumes and Cover Letters Interviewing Strategies Special Circumstances Following Through Compensation Making the Transition Career Development Getting Ahead In a Down Market Making Partner Hot Practice Areas Law Firm Economics California Legal Market View our most recent Hot Tip - Same Desk, Different Job, posted 3/7/08 The California Bar Exam Listen to Your Recruiter Check out our new book, "The Right Moves: Job Search and Career Development Strategies for Lawyers"

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