<html><body>The Business of Stem Cells: Re-Examining Federal, State, and Private Funding and Regulatory Initiatives March 9, 2005 Unedited transcript prepared from a tape recording. <TABLE height=149 width="100%" border=0> <TBODY> <TR> <TD vAlign=top align=left width="15%" height=1>8:45 a.m.</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=1> Registration</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19> </TD> <TD vAlign=top align=left width="24%" height=19> </TD> <TD vAlign=top align=left width="61%" height=19> </TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1>9:00</TD> <TD vAlign=top align=left width="24%" height=1>Introduction:</TD> <TD vAlign=top align=left width="61%" height=1>Jon Entine, AEI and Miami University (Ohio)</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1>9:10</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=1>Human Embryonic Stem Cells: Current Challenge and Future Promise</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=8> </TD> <TD vAlign=top align=left width="24%" height=8>Speaker:</TD> <TD vAlign=top align=left width="61%" height=8>Dr. James Battey, Director NIDCD, NIH Task Force on Stem Cell Research</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1>9:45</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=1>Panel I: State Models/Initiatives for Stem Cell Research</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1> </TD> <TD vAlign=top align=left width="24%" height=1>Panelists:</TD> <TD vAlign=top align=left width="61%" height=1>David Gollaher, California Healthcare Institute</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1></TD> <TD vAlign=top align=left width="24%" height=1></TD> <TD vAlign=top align=left width="61%" height=1>John Gearhart, Institute for Cell Engineering, Johns Hopkins School of Medicine</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=5></TD> <TD vAlign=top align=left width="24%" height=5></TD> <TD vAlign=top align=left width="61%" height=5>Carl E. Gulbrandsen, Wisconsin Alumni Research Foundation (WARF)</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1></TD> <TD vAlign=top align=left width="24%" height=1></TD> <TD vAlign=top align=left width="61%" height=1>Charles Jennings, Harvard Stem Cell Institute</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1></TD> <TD vAlign=top align=left width="24%" height=1></TD> <TD vAlign=top align=left width="61%" height=1>Wise Young, Rutgers University's Keck Center for Collaborative Neuroscience </TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19>11:00</TD> <TD vAlign=top align=left width="24%" height=19>Break</TD> <TD vAlign=top align=left width="61%" height=19></TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19>11:15</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=19>Discussion on State Initiatives</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19>12:15 p.m.</TD> <TD vAlign=top align=left width="24%" height=19>Luncheon</TD> <TD vAlign=top align=left width="61%" height=19></TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19>12:45</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=19>Luncheon Keynote: Beyond Bioethics: New Approaches to the Governance of Human Biotechnology</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19> </TD> <TD vAlign=top align=left width="24%" height=19>Speaker:</TD> <TD vAlign=top align=left width="61%" height=19>Francis Fukuyama, Bernard L. Schwartz Professor of International Political Economy, The Paul H. Nitze School of Advanced International Studies, Johns Hopkins University</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19>1:30</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=19>Panel II: Private versus Public Financing of Stem Cell Research: Opportunity and Concern</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=1></TD> <TD vAlign=top align=left width="24%" height=1>Moderator:</TD> <TD vAlign=top align=left width="61%" height=1>Lori Knowles, University of Alberta</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19></TD> <TD vAlign=top align=left width="24%" height=19>Panelists:</TD> <TD vAlign=top align=left width="61%" height=19>Ken Giacin, StemCyte</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=11></TD> <TD vAlign=top align=left width="24%" height=11></TD> <TD vAlign=top align=left width="61%" height=1>Robert Lanza, Advanced Cell Technology and Wake Forest University School of Medicine</TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19></TD> <TD vAlign=top align=left width="24%" height=19></TD> <TD vAlign=top align=left width="61%" height=19></TD></TR> <TR> <TD vAlign=top align=left width="15%" height=19>3:00</TD> <TD vAlign=top align=left width="85%" colSpan=2 height=19> Adjournment</TD></TR></TBODY></TABLE> Proceedings: MR. ENTINE:  Welcome to the American Enterprise Institute.  We're thrilled that you could come to this important conference on the business of stem cells. I think few issues have been as contentiously debated as the emerging science of stem cell research.  Scientists are convinced that stem cells offer enormous therapeutic potential but the technology necessary to explore and eventually exploit this potential raises many prickly regulatory, financial and ethical issues. How will the United States proceed to unlock the promise of stem cell research, commercialize its use, and establish a flexible regulatory and ethical framework? That's the focus of today's conference on the business of stem cells. Since the development of several lines of human embryonic stem cells in 1968, the United States and many other countries have attempted to strike a balance between ethical concerns and research needs. In August 2001, President Bush authorized limited federally-supported funding of embryonic stem cell research which had been blocked since 1995.  As part of his policy, he restricted that support to existing stem cell lines that had already been created from embryos donated after in vitro fertilization. Private research was allowed to continue.  That decision postponed the very contentious issue over the creation of human embryos for nontherapeutic reasons, human cloning, and that issue I think is still being debated, very much so today. The current budget for human embryonic stem cell research is approximately $30 million a year on the national level through the NIH.  No federal funds may be used to investigate other lines beyond the two dozen or so approved lines or to create new ones. The president also authorized research into human adult and core blood stem cells at higher but still limited funding levels.  I think in 2002, I think he spent approximately $345 million on adult stem cell research, far more than on human embryonic research. This conference is designed to discuss the various issues that have arisen in this country, and elsewhere around the world in response to the current federal policy, because the U.S. policy has had implications in other countries as well. Critics have complained that the 2001 edict has put a damper on public and private research as companies have been unwilling to commit substantial venture capital in an uncertain political climate. It's been noted that a few countries, notably Singapore, China, United Kingdom and Israel, are setting up well-funded research facilities and have begun luring bioresearchers, many from the United States, to grow these new ventures.  They're also attracting interest from venture capital firms. As we will discuss today, with NIH funding limited, a number of states have launched a variety of public and private initiatives.  We have five examples of that today. The most recent and dramatic development occurred last November, when California voters overwhelmingly approved proposition 71, the controversial $3 billion bond measure that requires that the state spend almost a billion dollars per year over a 10-year period on infrastructure and research initiatives on stem cells. These developments have kept California and states as almost mini National Institutes of Health, as they seek to become research centers and dispensers of grants and seed funds. Are these developments an indication of abdication of federal regulatory oversight, which may unleash a patchwork of state initiatives resulting in ethical and regulatory chaos? Or do these new ventures demonstrate how private enterprise and public/private partnership can jump-start this potentially fruitful avenue of research? To help guide us in discussing these questions, I am pleased to introduce James Battey. Dr. Battey's full-time job is director of the National Institute on Deafness and other Communicative Disorders. He moonlights, if you will, in the fishbowl position as head of the National Institutes of Health task force on stem cell research. He has the unenviable responsibility of managing this research within the boundaries established by the Bush administration, balancing both science and politics.  Dr. Battey has been with NIH since 1983 when he joined the National Cancer Institute. He has worked in a number of departments before he joined the NIDCD in 1995.  He assumed its directorship in 1998.  Over the years, Dr. Battey has learned to walk a narrow line between politicians and researchers.  In the case of the volatile stem cell issue, many would call this a firing line. Let's welcome Dr. Battey to talk with us. DR. BATTEY:  Thank you very much for that kind invitation and it's indeed a pleasure to be here this morning and have an opportunity to share where NIH is right now with the human embryonic stem cell research issue. I'm going to apologize in advance.  You just heard that I walk a firing line between scientists and politicians.  I'm going to need to leave pretty promptly, because at 10:15 I'm testifying in the Rayburn building before the House appropriations subcommittee for the president's 2006 budget, and it's not a good idea to be late.  Those guys don't like it when you're late. So I'm going to make every effort to get there on time.  But nevertheless, I'm delighted to have a chance to be here with you all this morning. Could I have the next slide, please. Well, this august audience hardly needs to see this slide but I'll just quickly go over it. The reason why there's so much enthusiasm about research involving human embryonic stem cells is because we think it affords a platform technology with enormous promise. There's no question that these cells provide an unparalleled opportunity to study the earlier stages of cellular differentiation, events that lead to specialization of cells and to the enormous range, estimated at several hundred, of types of fully differentiated specialized cells in a human being. The pharmaceutical industry is very interested in the possibility of taking differentiated versions of human embryonic stem cells and using them as ways to test drugs for efficacy and toxicity, and this may in fact be the first low-hanging fruit that emerges from this platform technology and this is something that will not require IRBs and lots of safety studies, and I think this may be some of the first fruit that is born from the human embryonic stem cell research area. But the thing you heard about most often is the possibility of generating cells in the laboratory or the clinic for the purpose of transplantation to replace cells that have been ravaged by various degenerative diseases, such as Parkinson's disease, where dopamine neurgic neurons in the midbrain are lost.  Heart muscle disease following a heart attack.  Beta cells that produce insulin in response to glucose in the pancreas. These are all the promises of embryonic stem cell research and this is why the research community is so passionate in their desire to move forward and explore the possibilities that are offered by cells which have, as far as we know, an unlimited capacity to self-renew in the laboratory, and a capacity, if given the right signals, to differentiate into any cell type in the body.  Next slide, please. So let me just discuss two ways to make very potent stem cells, and these two technologies were published in 1998.  One of the founding fathers is with us today, John Gearhart, so John, if I mess up on the EG cells I hope you'll stick your hand up and interrupt me. But let's start, first of all, with embryonic stem cells.  We begin as a fertilized egg and by about day three, after fertilization, when, under normal circumstances, we'd be wending our way down the fallopian tube towards the uterus, we go to a four-cell stage and then an eight-cell stage. And then around day four we become what's called a morula, which is some language, old ancient language for raspberry, and that appears like a little clump of cells, still in the fallopian tube.  At day five, we are a blastocyst during development.  A blastocyst is about 150 cells and it consists of about two types of cells.  An outer shell, spherical shell, referred to as the trophectoderm, which is destined to become the placenta, and the umbilical cord. And then a little cluster of 30 to 50 cells on one pole of this hollow sphere that is referred to as the inner cell mass.  These are the cells that are ultimately destined to go on to become the fetus, the baby, and ultimately the human being. These are the cells from which we derive human embryonic stem cell lines, and this is done by a procedure called immunosurgery, that releases the inner cell mass, destroying the embryo in the process, the inner cell mass is then placed into culture and roughly 20 percent of the time, when this is done, a human embryonic stem cell line emerges from this process.  So those are ES cells. Now it also turns out that you can, at the right stage during field development, one can remove primordial germ cells and place them into culture, and that will also give you pleurae potent stem cells.  These cells are called embryonic germ cells and they have m ny of the same properties, maybe even all of the same properties as embryonic stem cells.  They're also pleurae potent and they also have a remarkable capacity for self-renewal. So this is what we're talking about.  This is the entity that's destroyed in the process of creating embryonic stem cells.  It's about the size of a very small pinprick at this point in its development, can barely be seen with the naked eye, and in fact all the work done on it has to be done typically with magnification.  Next slide. So one a the things that one hears an enormous amount about is the fact that there are 78 entities on the NIH registry eligible for federal funding, and yet only 22 human embryonic stem cell lines available to researchers. The reason for that is that it's both time-intensive and expensive to go from removing that inner cell mass from the blastocyst to having hundreds and hundreds of vials of well-characterized human embryonic stem cells in the freezer.  The process takes about nine months to a year to expand these cells, which have a doubling time of typically somewhere in the neighborhood of 48 to 72 hours. It's also expensive because you have to characterize them as you go, make sure they're not beginning to differentiate, make sure that their chromosomal composition is not changing.  Make sure that they're not picking up other unwanted cargo such as retroviruses or other things that will ultimately be deleterious to the cells when they're used in studies that scientists want to do. So I'll say a little more later on, but one of the initial things the NIH did was to fund infrastructure awards.  These were grants that went to entities that had derivations that were eligible for federal funding under President Bush's criteria, and the money was given out to these entities to do this expansion and characterization, so that we would have cells that were ready for distribution to the community.  Next slide, please. The challenge in human embryonic stem cell research right now is fundamentally a basic science challenge.  One of the right limiting resources is unquestionably a small pool of investigators that is comfortable in the art and science of culturing these cells, and we have created training courses, with the help of several universities, to try to expand the number of individuals that are able to culture the cells and keep them undifferentiated when they want them undifferentiated, and then differentiate them into specialized cells when that is the goal, and I'll say a little bit more about these training courses later on.  We have five of them around the country. We clearly need to know more about cell specialization.  What are the growth factors in gene regulatory events that drive these cells to become specific cell types? We're beginning to unlock the mysteries there but we have a long ways to go. Cell host interactions are going to be absolutely critical as we move forward into initiatives studies.  If there is not a perfect isogeneic match between the cell being transplanted and the host, then rejection is an issue and we will need to manage that. It's managed now when we transplant other organs using immunosuppressive drugs.  I mean this is ceratinly one strategy that can be pursued but if you think about a 10-year-old with type 1 diabetes, that's a lot of cyclosporin for a lot of years, with all the attendant toxicity and other problems. It'd be far better if we could either modify the transplanted cells or the host, in such a way that the transplanted cells would not be rejected, and that's an important area for research because most of the time it's quite predictable, that there will not necessarily be an isogeneic match between the transplanted cells and the host. We'll need to know that after we transplant these cells, that they're stable, both in terms of their survival and their function. What a disappointment to transplant in differentiated beta cells to a child with diabetes mellitus, only to discover four weeks later that the cells are all dead or that they no longer function, or that they function inappropriately and are producing insulin shock on a regular basis. So we're going to need to know that these cells will function and continue to function robustly for long periods of time before we embark upon the first Phase I clinical trials. And finally, cell cycle control is going to be critical.  I mentioned earlier that the undifferentiated human embryonic stem cells have an unlimited capacity for self-renewal and this is one of the wonderful features about them, one of the unique features, one of the things that differentiates them from adult stem cells, which are typically rare and have a much more limited capacity for self-renewal in culture. If we need ten to the nine cells, we have generate ten to the nine cells for transplantation therapy.  When we're talking human embryonic stem cells, getting ten to the nine adult stem cells would be a feat, from almost any type of adult stem cell, with the exception of a very few. But the other side of the sword here is that once these cells are transplanted into a host, they had better not be cycling anymore or we will have a teratoma. So if even a small fraction of the cells that are transplanted are still cycling, not fully differentiated and still cycling, we run the risk of creating a tumor in a patient that receives this transplant. So we're going to need to have very tight control over the cell cycle and we're going to need to know that, with great confidence, that these cells are no longer cycling.  We're going to need to do animal model studies to prove to everybody's satisfaction that these cells will not go on to generate a teratoma after transplantation.  Next slide, please. So where are we right now today?  Well, we need to continue our efforts to generate and characterize distribution quality human ES cell lines from derivations, eligible for federal funding on the registry. We clearly need to stimulate more research on the basic biology, to embrace this basic science challenge that I've just articulated, and a big part of that is training new investigators in the art and science of culturing these stem cells, and hopefully simplifying the culture techniques.  Next slide. So I'm not going to dwell on the president's policy.  I'm sure it's well-known to everyone in this audience.  Basically what it says is that federal funding is only available for cell lines where the inner cell mass was removed from the embryo on or before August 9th, 2001. This led to the identification of 78 entities around the world that were eligible for federal funding, 22 of which have been developed into distribution quality cell lines.  That's a small number.  The estimates around the world that there are roughly an additional 150 human embryonic stem cell lines that have been developed since August 9th, 2001, and I'll answer questions at the end, briefly, about the policy, but I'd rather move on because I think everybody knows the policy and has already formulated their own opinions about whether they like it or don't like it.  Next slide. This is what the registry looks like.  You can see that on the right-hand side of the slide, a column, derivations.  Those are the derivations eligible for funding.  If you add up all those numbers you'll get seventy-eight.  Available lines is to the right of that.  If you add up all those numbers you'll get twenty-two.  Next slide. So what does the NIH's portfolio look like?  What is this $24.3 million that was spent in 2004 invested in? Well, we have eight infrastructure awards.  These are the awards I mentioned earlier to entities on the registry, who hold entities on the registry to expand these into distribution quality cell lines. We have 26 investigator-initiated awards.  These are our typical RL-1s or PO-1s where a researcher sends in a research grant application with an idea that involves using human embryonic stem cells in research and undergoes peer review, and roughly one-third of the time the peer review panel deems the idea meritorious, and with funds available we fund the grant. We have funded 67 administrative supplements.  These are supplemental funds provided to existing NIH grants, to allow those investigators to move into an area from where they are, of human embryonic stem cell research, with the ultimate goal of hopefully developing an RL-1 grant application at some point in the future, having gotten the necessary preliminary data using the support provided by the administrative supplement. We have three pilot and feasibility studies as part of NIDDK's beta cell consortium, two post-doctoral fellowships, six training grants, five of which are these short-term cell culture training courses that I'll say a bit more about, and three exploratory center research grants within the NIGMS.  These are multidisciplinary, multi-investigator grants at Wisconsin, at Washington, and at one other place that is slipping my mind at the current time, I apologize--is it Michigan?  Thank you.  Where teams of investigators are pooling their efforts to study human embryonic stem cells. This is typically basic science in these particular centers, again, approaching the challenge that I articulated just a few minutes ago.  Next slide. So these are the infrastructure awards.  As I said, these are awards to entities on the registry, available for federal funds to develop into distribution quality cell lines, two years of support.  We have the nine awards totalling a little over $6 million and provided 22 cell lines that are ready for distribution to the community.  Next, please. Short-term training courses.  Those are the locations of the five courses.  The course at Technion is a collaboration between Technion and Mehendra Rau [ph] who's an intramural scientist at the National Institutes of Health. But as you can see, they're scattered around the country, in California, Pennsylvania, Georgia, and in Maine, and these courses train somewhere between 15 and 20 people a year in the hands-on art and science of culturing human embryonic stem cells. They're typically oversubscribed by a factor of two and we are reissuing the solicitation for these courses, and we're hoping that all of these folks will recompete and continue to offer their courses, and we're hoping to add some courses in the future with additional support from a collaboration among most of the NIH institutes.  Next slide. Within our intramural research program, there's several laboratories at NIH that are using human embryonic stem cells in their research.  Nine labs have received shipments of the cells since 2002. There's expanding interest as the cell line availability becomes more straightforward and some of the materials transfer agreements and intellectual property issues are ironed out. And we've created a stem cell characterization unit within the intramural research program.  This is an effort, under the leadership of Ron Makai [ph] who's one of the leading stem cell biologists in the country, and in fact in the world, to compare and contrast the properties of the 22 cell lines that are out there and ready for distribution, and to provide information so that scientists can select which if any of these cell lines are appropriate for the research application on which they are choosing to embark. There's a $5000 licensing fee associated with not-for-profit people receiving a shipment of human embryonic stem cells, so it's important that scientists know which of the cell lines are in fact the best cell line for their purposes. And hopefully that information will be provided by studies performed in the stem cell characterization unit and posted on a Web site.  Next slide, please. We're currently soliciting for centers for excellence in translational stem cell research.  This is looking ahead, three to five years from now, to the day when we will be ready to contemplate phase I clinical trials.  We're going to bring together teams of stem cell experts, clinical researchers and transplant surgeons. These are people that typically don't have coffee, lunch and dinner together in our academic centers, and we think we need to bring them together now, so that when the time comes for them to collaborate on this and do the first phase I clinical trials, they'll know each other and have had a chance to begin making their plans, and maybe even be enabled by having done some animal model studies that will be the necessary prerequisite for these clinical trials. We hope that this will speed translation of basic knowledge into the clinic and these are designed for both adult and embryonic stem cells.  Next slide. We've also embarked on a solicitation for a national embryonic stem cell bank.  We hope that this will be a one-stop shop, if you will, for the scientific community, to obtain human embryonic stem cells. The bank will compare and expand along with the characterization unit, and in collaboration with the characterization unit, human embryonic stem cells available to NIH-supported scientists.  It will ensure consistent quality control, monitor carefully for karyotypic changes in the chromosomes of these cells, which has been an issue for some of the human embryonic stem cell lines that have been distributed, and hopefully reduce the cost to obtain the cell lines available to researchers for federal funding on the registry.  Next slide. Now as was mentioned earlier, while this talk focused mostly on human embryonic stem cells, we believe that there's importance in supporting both nonembryonic and embryonic stem cell research, and in fact in fiscal year 2003 we invested a little over 190 million, and it was a little over 200 million in fiscal year 2004, in human nonembryonic stem cell research.  That's all other stem cells besides those derived from an embryo. In contrast, the investment in 2003 was about $20.3 million in human embryonic stem cell research, which grew to $24.3 million in 2004, and we promote growth in both areas. There is no cap on the amount of money we are prepared to spend on stem cell research at the National Institutes of Health.  The money that is allocated is a direct result of the process of receiving investigator-initiated grants, having them be peer reviewed, and when they get a good score, funding the grants. If we receive twice as many grants, the amount of money we would spent on human embryonic stem cell research would double. That is why I am convinced that the major rate-limiting resource that we need to keep our eye on, if we want to advance this area, is people. If there were more people out there writing more grants, we would be funding more grants, and we would be spending more on human embryonic stem cell research and the field would be moving ahead faster.  Next slide. So what's on the immediate research horizon?  Well, we clearly need a definition of standardized human ES cell culture conditions that will ultimately obviate the need for either mouse or human feeder cells.  These feeder cells are going to be an issue when it comes time for the FDA to consider cells for transplantation in clinical trials. They are not a deal-breaker but they're an issue, and we'd be much better off if we could reassure the FDA about exactly what things these cells had seen, and that will come when standardized culture conditions are developed. We need enabling tools and technologies to further characterize stem cells as they become specialized cells. We need to define the molecular pathways that specify differentiation into different specialized cells.  Next slide. We clearly need to know the factors, conditions, transcription factors and other molecule that are critical for long-term survival and function of transplanted cells in a host, and of course understanding control of cell division for all the reasons that I mentioned before, which are going to be absolutely essential to expand the cells, to get them in numbers that are useful for transplantation, but must be tightly regulated after transplantation has taken place.  Next slide. This is the one slide that you need to remember.  Everything about human embryonic stem cells and other types of stem cells is attempted to be captured on the NIH stem cell Web site.  We scour the literature every week for new papers and abstract those papers and put references in our science advances section, all the funding opportunities at NIH are listed here, as well as a stem cell primer, a short version and a longer version, for people to learn more about these remarkable cells. And I would encourage you to remember, if you remember anything from this talk, remember stem cell.nih.gov.  Because you can learn a lot from this Web site and I encourage you to hit it, and when you find it deficient, I encourage you to send me e-mail.  We will do whatever we can to try to make it the resource that we want it to be for the public, the appropriators and the research community.  Next slide. These are just a list of contacts at each of the institutes for stem cell work.  You don't need to scribble this down, you can find it on the Web site.  This is the person you call, if you're interested in developing a research grant with one of the NIH institutes.  Next slide. This is the funding opportunities part of the Web site, just what it looks like.  Again, don't need to scribble it down.  You can get there through stem cells.nih.gov.  Next slide. And there's, just to reiterate it one more time, they say if you want people to remember something you should hit it over and over again.  stemcell.nih.gov.  Next slide. And that's all I have to share with you today.  I have a few minutes to answer some questions and I'll do the best I can to do that. QUESTION:  I'd like to start off with a quick question.  In a number of the slides you listed a lot of the programs that the NIH is funding.  Some of those programs have been talked about for quite some years and they still haven't gotten off the ground, and realistically, the financial commitment to this is quite small.  We're talking $24 million for the entire program. Considering that California is putting a billion dollars into this on a yearly basis, and New Jersey $500 million, how does one measure the commitment of the government to actually go forward on these things, considering the timeframe it's taken has been so long, and the dollar commitment is so minimal. DR. BATTEY:  Well, we first began investing in human embryonic stem cell research in 2002.  So the timeframe has been three years, just to be factual about it, and in activities that are sponsored by the government three years it not a lotta time. I mean the government is sort a like the Queen Mary, okay, it doesn't turn very quickly, and you are right in pointing out that we are by no means the nimblest funding agency or source in the world. We are, however, the biggest funding source for biomedical research in the world.  The NIH budget this fiscal year is somewhere around $28 billion and there's no larger source of funds anywhere on the planet for biomedical research. We support, at NIH, roughly 50,000 grants and contracts with members of academia and the biotechnology sector. So what I would offer is the statement, and which is a factual statement, that there is no cap on the amount of money we are prepared to spend.  We are limited, right now, by the receipt of investigator-initiated grant applications that pass the mettle of peer review. Now how will NIH interface its efforts with efforts in California and other places?  I think we will hope to synergize with state- supported-funding efforts.  We hope the states will do things that we cannot do, things that are not eligible for federal funding but the scientific community knows needs to be done. My hope, as we move forward, is that we're not looking at a competitive environment but we're looking at a collaborative and cooperative environment for stem cell research in this country and I'm delighted that these efforts in the states are underway. Yes? QUESTION:  [inaudible]. DR. BATTEY:  I make that statement because the phase of research we're at right now is the basic phase, where the basic mechanisms of differentiation, development, all of the challenges that I listed before, they can all be embraced with the 22 cell lines that are currently on the registry.  Those studies can be done.  Are the twenty-two sufficient to take us into clinical trials?  Are they sufficient to realize the full clinical potential of human embryonic stem cells?  I don't know the answer to that question and there's good reason for questioning whether or not that is the case. Yes? QUESTION:  [inaudible]. DR. BATTEY:  I don't know the answer to that question.  I can tell you that the pharmaceutical industry is quite interested in sources of specialized peer populations of human cells on which to test their drugs for efficacy and toxicity.  I would guess that using differentiated versions of cells would be less expensive than some of the animal models that they currently use for these testing strategies but I don't work in big pharma, so I'm really "talking outta school" here.  I don't know the answer to that question. QUESTION:  [inaudible]. DR. BATTEY:  I don't know the answer to that question but a substantial fraction of it.  If it's typical of an NIH Institutes portfolio, roughly 40 percent of it would be invested in clinical activities. Yes? QUESTION:  Dr. Battey, do you see the trend of increasing funds going to embryonic stem cell research continuing?  And without looking at it, a lot of dollars in absolute figures, but that is a significant increase, a 20 percent increase from 02 to 03.  Do you see that continuing? DR. BATTEY:  I hope it continues.  You know, I embarked on another experiment when I became the director of the Deafness Institute in 1998.  There was an enormous research opportunity in my field to clone the genes that underlie hereditary deafness and the research community was not reaching out to grab that opportunity, and so we build a laboratory in our intramural program to jump-start that activity, to look at families and to collect those families and phenotype them, and make those families available to the community. And you know, at first it was pretty slow going because post-docs would have to come out of this lab and then go, start their own labs, write their own grants, and get going, and it took a while. Now I have a portfolio of something like $20 million in grants to study the genes that underlie hereditary deafness.  So, you know, it takes a while to launch a new field.  People have to be trained.  They're not necessarily out there, ready to go, and I think part of what you're seeing here, certainly there is a chilling effect placed upon the community by the president's policy.  I will not deny that.  But part of it is just the growing pains of a new field of research and I think it's important to keep that in mind. I can answer one more and then I gotta go.  Yes? QUESTION:  [inaudible]. DR. BATTEY:  I didn't say it was a problem.  I said it was a rate-limiting step. QUESTION:  [inaudible]. DR. BATTEY:  I hope that this encourages more young people to come into the field.  I hope the net effect isn't that the few labs that are already funded end up with a boatload more funds.  I hope that instead, the effect is that the field grows and it grows at the grassroots level.  But I will not be the person making the decision about how the money gets spent in the states.  I can tell you that if I were that person, a substantial fraction would be directed towards individuals who had never had a significant research grant before in their career. Thank you very much for your attention.  I appreciate the opportunity to address you this morning. MR. ENTINE:  Dr. Battey, thank you very much for coming here and being on our firing line and I appreciate it very, very much. As part of the program we've invited representatives, people working in research and also in funding mechanisms in five of the states that have, I think are furthest along in developing initiatives for alternative funding of stem cell research. I'd like to invite them to come up and join us on the panel right now. As some of you who have been following the news probably know, there was a vicious blizzard in Boston today, so Charles Jennings is on his way here from Boston, he represents the Harvard Stem Cell Institute.  He will be here soon, along with a couple of other people who are on the afternoon program, all of whom couldn't come in last night but are gradually making their way through various airports, I understand, to be here for the program. Rather than introduce everyone all at once, you won't remember who they are, I'll actually just introduce them before each person speaks, and then, when we're finished, we'll have an opportunity to have some dialogue among the participants themselves, if they have questions for each other, because many of them not have an opportunity to talk with each other in a situation such as this, and then of course we're going to open it up for questions from all of you. I thought it was appropriate to start with David Gollaher, from California.  David was one of the point people charged with explaining Prop 71 to the public before the election last November.  Obviously he did a great job; very successful in getting that passed.  It was a controversial program. All of us I think might have some questions about some aspects of it, which I think he's going to explain today and hopefully we'll have a fruitful discussion. David is the president and CEO of the California Healthcare Institute which is a private nonprofit public policy research and advocacy organization.  It represents the bioscience and academic institutions in California.  He joined CHI when it was founded in 1993.  He was named CEO in 1995.  From 1991 to 1994, he served on the faculties of the University of California San Diego and San Diego State University's graduate school of public health. Between 1985 and 1991, Mr. Gollaher was a vice president of Scripps Clinic and Research Foundation at which he was responsible for managed care, business development and corporate communications, and earlier in his career he had been at Phillips-Ramsey and Young & Rubicam. Since 1997, he has served on the California state legislature's advisory commission on human cloning. Mr. Gollaher. MR. GOLLAHER:  Thank you.  What I'm going to do in the next few minutes is provide some historical context and background for what happened in California, and I think, in some ways, it's hard to appreciate, even if you were on the ground in California, how revolutionary this is. I started my career as a historian of science at Harvard and if you think historically, there has never been anything like this with respect to the democratization of science, meaning that there's never been an enormous allocation of resources put toward a scientific program that was based on the direct expression of the will of the people that is like this.  It's simply unprecedented and it's a great social experiment, in addition to being a great scientific one, and I'd like to talk about some of the conditions and scope and scale of the popular and political movement this represents. It really, in some sense, directly started in 1997 when Dolly, the sheep, was cloned, and everyone remembers that Dolly was on the evening news and on the covers of Time and Newsweek, and so forth, and there was a political crisis at the same time, that reverberated from Washington, from Scotland into California. Part of why I think this hit California harder than many other places is the sheer magnitude of the biosciences industry in the state. There are about 40 percent of all the biotechnology companies and jobs in the world in California, including many of the first generation companies.  For example, Genentech was the first biotech company in the world, it was founded in the middle 1970's.  The largest biotech company in the world is Amgen and Amgen is almost a nation-state, if you drive up to Thousand Oaks. The California economy itself is the sixth largest industrial economy in the world, if California were a separate country. And cloning provoked an immediate and strong reaction in the California legislature and some number of senators sat down and said, you know, we need to create a cloning ban so that people don't do things that are morally reprehensible, and at the same moment scientists stood up at Stanford and UC, and so forth, and said look, there's a lot if important research that will depend on what is called human cloning, and so we need to craft legislation that will enable research but at the same time banning cloning to make a baby, and that's exactly what happened, and we were able to sit down with Senator Pat Johnston at the time, in 1997, and to write the first cloning ban that also specifically allowed human cloning for research purposes. As part of that new law, the legislature created a cloning commission and it had a dozen or 13 members on it, I was a member of it, and it was made up of some ethicists, some attorneys, some scientists, several distinguished scientists, and together, that commission met over the next five years, because when the law was put into effect it had a five year sunset, and the notion was that the cloning commission would come back to the legislature and report on advances in science, would also hold hearings around the state of California to see what citizens were thinking, and make a report on whether the law, as crafted, was working well or working poorly. So in 2002, when the law sunset, the cloning commission came back, made a report and said there needs to be new legislation, one that would continue the ban on human reproductive cloning, but also legislation that would specifically enable cloning research, subject to certain guidelines, what you would think of as IRB type guidelines. At the same time, a state senator stood up and said, you know, this is a really promising area of human life sciences and because of what's happening at the federal level, there's certainly no security that this will move forward through the NIH and through any major effort in federal funding, so shouldn't California put up some money? Well, California was moving into the first, well, really, the middle phases of a serious budget crisis.  There wasn't any money available.  Nonetheless, the political discussion had already begun during this period and the notion was that perhaps the state, in the absence of federal money, should step into the breach, and the person who was mainly responsible for this is Senator Debra Ortiz, who's shown here. Now in California, at this time, 2001-2002, you had strong democratic majorities in both sides of the legislature.  In fact, there was only one Republican who had won statewide office at this time.  So you had almost super majorities of fairly liberal Democrats.  Senator Ortiz, who's head of the senate health committee, steps up and says the state needs to fund stem cell research, and then, right in the middle of that conversation in 2003, as we moved forward, we have the California recall election which you already remember. Now Governor Gray Davis, who had been reelected in 2002, signed the new cloning legislation, including an intent bill that would have provided some state money for human cloning, human embryonic stem cell research, and he did so almost explicitly as a gesture of defiance to Republicans, to the Bush administration, the limitations from the National Institutes of Health on stem cell research. But by the fall of 2003, the political climate in California had completely changed, and no one, in the beginning of 2003, I can assure you, imagined that we would have a recall election that would amount to a popular revolution, that we would have a new governor, and the conditions of this are hard to recreate, if you weren't there at the time, and they're hard to remember, even if you were. You had a governor who announced his intention to run for governor in a recall election on the Jay Leno show.  You had a governor who positioned himself as a man of the people, as someone who wanted to take government back via popular democracy in the face of entrenched politicians.  It's rhetoric I think we're all familiar with. He also did something else, though, which obtains down to this day, which is that he threatened, at the time, and continues to threaten still, that if the legislature doesn't do what he views as the will of the people, he would use the voter initiative, which has a long and distinguished tradition in California, the ballot initiative, as a means of popular democracy to create state policy. And in my view, the recall election itself was a kind of voter initiative in which the voters said we're so unhappy with current government, we're so unhappy with current leadership, that we'll blow it up and do something different, even if we're not quite sure what that is, and I think the governor's election is a product of that popular unrest and use of the ballot box as an expression of direct democracy to make change. I think therefore, that the election of Arnold Schwarzenegger, that everything that came before, in some sense set the stage for Prop 71 in 2004. In this case, the agent provocateur, the architect of Prop 71, is the individual here, Bob Klein, and Bob, whom I've known for some years, brought some interesting attributes to creating Prop 71 at this time.  For one thing, he was a passionate advocate involved in the Juvenile Diabetes Foundation.  He has a son who has type 1 diabetes.  He also is a wealthy individual who had been politically active for a number of years, particularly in creating bond funding for low-income housing in California. So he'd had a lot of experience on not only how you put together a ballot initiative, but how you create the architecture for bond initiatives that could be effective in bringing public money to bear on public problems. He also had a terrific network of people and was quite intelligent, reaching out, early on, to people like Irv Weisman at Stanford, Paul Berg, Nobel prize winning scientist at Stanford, who themselves became passionate advocates for stem cell research and were convinced that California could do something that would move the research forward in the face of what they viewed as federal lethargy. So the team, in late 2003, that was put together to move Prop 71 forward, including these researchers, and then many others as the network filled. [Start side 1B.] MR. GOLLAHER [continuing]:  --the world's preeminent, high tech, life science venture capital firm.  They themselves donated millions of dollars, each, to help fund Prop 71.  At the same time, Bob was quite creative in reaching out to Hollywood, where there were a number of people, again, who had connections through patient groups, people like Michael J. Fox and Christopher Reeve, who had an explicit interest in this and believed that stem cells represented a wave of potential cures that were being politically blocked for political, ideological and religious reasons, and that through driving this initiative forward, there'd be a way to circumvent that. And there were of course dozens, if not hundreds of patient groups who fell into line behind this political movement. So if you look at--I'll go through this quickly--kind of the ledger of support and opposition to Prop 71 as it happened, the backers actually raised more than $26 million.  They probably ended up raising about $35 million altogether to promote the initiative. Governor Schwarzenegger, who had been on the fence, and was seen as neutral and possibly even opposed, at the 11th hour came out in favor of Prop 71, and, in fact, one of my friends, and our former board chair at CHI, Ed Penhoet of whom I'll say something else in a minute, met with the governor shortly before he endorsed it, and the governor looked at him in the eye and he said, you know, the president I think was the greatest president in my experience was John Kennedy, and what made him so great was his vision, so that during the dark days of the Cold War and after the Bay of Pigs and all of that, he said in ten years we'll put a man on the moon, and he had that idealism, and it was the idealism that Americans responded to.  I think that stem cells, bioscience, biotechnology, California has global leadership in this and we need to continue our leadership.  I'm going to support Prop 71. And other people.  Nancy Reagan, George Shultz, Christopher Reeve made a commercial that was shown widely in California, shortly before he died.  Of course John Kerry, and ultimately 59 percent of voters supported Prop 71.  On the other side, there was only about $400,000 raised in opposition. The people who publicly opposed Prop 71, Tom McClintock, who had unsuccessfully run for governor, a conservative Republican, Catholic bishops, Mel Gibson, President Bush, 41 percent of voters, and if you looked at the analysis of the election, the split, Kerry-Bush, was about the same as the split, Prop 71 against. One of the things that the governor remarked, he said, you know, I'm supporting this because there's a very ingenious funding mechanism.  It's not a billion dollars a year. It's a $3 billion bond that provides, in round numbers, about $300 million a year for ten years.  And so that's the order of magnitude of research funding that will be created out of this. The way it works is that the state is authorized to sell $3 billion in general obligation bonds.  They can sell $350 million a year in these bonds, max, and here's the key that allowed the legislative analyst and many critics, including the governor, potential critics, including the governor, to swallow this during a time of enormous budget deficits in California. By statute, there's no principal repayment for five years.  So during the early stages of the research, the interest is paid from bond sales. And then subsequently, repayment of principal and interest from the general fund occurs after year five.  So years five through ten.  So you've got short-term relief and the critics of this said gee, you know, this is really--this is a trick.  So there's no short-term impact while the governor's in office but you have a huge bolus of principal and interest, potentially, that could bankrupt further an already bankrupt state, and it's just being delayed.  You know, it's kind of a cheat. Well, it worked, and people overwhelmingly voted to create the new California Institute for Regenerative Medicine.  They did so on the basis, if you ask lay people about this, which we certainly did, and other pollsters did after the election.  People thought a couple of things.  They thought they were voting for important science, for sure.  They also thought that they were voting for science that would produce cures for important diseases, and the television commercials for Prop 71 focused on things like Parkinson's and Alzheimer's and heart disease and diabetes, diseases that people are pretty familiar with, and there's no question that this ballot initiative was represented as science that would lead to cures for these things. Now it also created something of a camel with respect to the organization that has been put into place to administer the research funding. The new Institute For Regenerative Medicine is the state foundation that will distribute the 300-plus million dollars a year and manage the process of doing so.  It has been characterized as kind of a mini NIH but it has governance.  It doesn't look anything like the NIH. The 29 members of the independent citizens oversight committee have a chair who is Bob Klein, and there was controversy about the person who had sponsored and who had supported the initiative becoming its chair.  To some people this looked like self-dealing or self-serving. It has a vice chair and the vice chair is Ed Penhoet.  Ed was co-founder of Chiron Corporation, one of the world's largest biotech companies, a molecular biologist who taught at UC-Berkeley, and is currently the head of the Gordon and Betty Moore Foundation, a large foundation created by the co-founder of Intel, that gives away about $250 million a year. He happens to be a terrific person to help guide a large grant-making institution. Now in order to gain political support for the proposition, the architects of Prop 71 created a whole set of roles for people from patient advocacy groups and academic institutions, and I'm not going to belabor this, but if you look down it, you'll see that there are, for example, five slots from the University of California branches that have medical schools.  There are four slots from California research institutions, and as it happens Salk, Cal Tech, and so forth, have those slots.  Cedar Sinai, and so forth. Four from commercial firms, and this has been controversial, and then ten from patient groups. So we have two sets of critical issues that are facing this ICOC, and I'll quickly run through them, but the first is building an organization and creating a peer review process that can not only be effective but be seen as impartial and providing the best science. There's already legislative opposition.  This was created as a way to keep the legislature out of messing with the funding that the people are putting in but the legislature is unwilling to sit quietly by and watch hundreds of millions of dollars being distributed a year, without their influence, and there are already law suits, to try to intrude in various ways. How intellectual property will be managed is fraught, and how technology will be transferred out to the private sector, so that things could potentially be made into products is a real problem too as well as conflict-of-interest policy. Future issues that are facing, that I think are long term and deeply serious, are, first of all, that the institute needs to produce breakthrough science; never easy. The institute also needs to educate the public about its progress, and imagine, if we get six or seven years downstream and there are no cures at all, but perhaps very good science at the basic level, that's moving forward, how does the institute explain to the public the lack of cures but scientific progress that may be complex?  In other words, managing the expectations of the public, the political world and the press. Handling of moral and ethical issues is just a perennial in this area and protecting the larger biosciences interest in California and their funding, so that, for example, in the appropriations process, appropriators don't say, well, look, you California institutions are already getting 300 million a year.  We can cut you back here in the federal process. So there's lots of risk, lots of opportunity, enormous complex, and an enormous sense of excitement in California about Prop 71. Thanks. MR. ENTINE:  David, thank you very much.  We're going to hold questions for these gentlemen until after everyone has spoken, so we'll just move on to the next presentation. John Gearhart, as you've heard, is one of the pioneers of stem cell research in the world.  He is the C. Michael Armstrong professor of medicine at the Institute of Cell Engineering at Johns Hopkins University, a professor of gynecology and obstetrics, physiology and comparative medicine at Johns Hopkins University school of medicine, and a professor of biochemistry and molecular biology at the Johns Hopkins University Bloomberg School of Public Health. A leading scientist in the field of human genetic engineering of cells, Dr. Gearhart's work has focused on the development and use of human reproductive technologies.  His research on the isolation and study of human embryonic stem cells has paved the way for the development of tissue transplantation therapies for degenerative diseases and injuries such as diabetes. Dr. Gearhart. DR. GEARHART:  My charge today is to talk about what's happening in the state of Maryland and I think that many of you are probably local, and you can read about this every day, it's an ongoing process. We've included in your folder the current bills that are being considered in the state of Maryland and I want to bring you up to speed a little bit on where that legislation is. For the past several years, bills have been introduced into the senate and house of Maryland, both pro and con stem cell research. It's been an interesting evolutionary process.  The first bills, that were submitted several years ago, made it a criminal offense for anyone to be in possession of human fetal tissue.  Needless to say, they didn't exempt pregnant women, and as this has moved forward, I mean obviously the degree of sophisticated has made it a good deal better. At any rate, this particular session, in Maryland it's important for you to recognize that the legislative arm only meets for about three months, January through early April, and so anything that would hold up other kinds of legislation is really moved out of the way, so a filibuster is very effective in a state, for example. Anyway, there are two bills that are really now being considered.  One is called the Maryland Stem Cell Research Act of 2005, and in the state of Maryland, almost all bills are submitted to the house and the senate in identical fashion, identical wording. In this particular bill, stem cell research is endorsed, and it mandates that the governor spend $25 million a year on stem cell research, and it's important to point out that it's all stem cell research, regardless of the source of the stem cells, be they adult tissues or embryonic. It also includes this controversial area of stem cell derived through somatic cell nuclear transfer. The mechanism for the oversight, the guidelines, the review of grants and loans is proposed in the bill. The money is to come from the tobacco restitution fund, which was the major agreement that came out of the tobacco settlement in 1998. This bill would also make it a crime to profit from selling embryos, punishment by three years in prison and a $50,000 fine, and also, anyone who attempts cloning of human beings would face ten years in prison or a $200,000 fine, or both. Since the bill was submitted, there were amendments.  These are not available publicly at this point but it's very important to point out that they removed stem cell sources from somatic cell nuclear transfer from the bill. So effectively, the bill would permit stem cell research of all kinds, except those derived following a somatic cell nuclear transfer. Another bill was introduced entitled the Human Cloning Prohibition Act of 2005.  This bill would ban all types of human cloning, including techniques to extract stem cells from an embryo and grow them.  The crime would be a felony, punishable, up to ten years in prison or $100,000 fine, or both, and civil penalties would start at one million from anyone who has a financial gain in any of this way. There was a third bill introduced that was quickly withdrawn, promoting $25 million funding for only adult sources of stem cells. Last week, Wednesday and Thursday, the public hearings occurred on both of these bills.  Of course this brought out the best in everyone.  There were hundreds of people there to testify, both pro and con. It is important to comment on Governor Ehrlich's position on stem cell research and on these bills.  When asked about stem cell research, he refers everyone to his position when he was a representative in the U.S. Congress in 2001, where he strongly endorsed President Bush's position on stem cell research, which was that we had appropriate lines available and you didn't need to generate any more, and obviously cloning was off the table. But we find out that his budget secretary has opposed the bill, and this gets into another issue of financial priorities within a state, and this is what the basis of that opposition came from. The governor appears to be quite sympathetic to the needs of the biotech industry.  In Maryland, for those who follow this, apparently Maryland slipped from third on the list to fourth on the list, but, clearly, in comparison to California, it's very far down.  North Carolina has slipped into number three. What is the governor's position overall?  His official position is wait and see till the bills come to his desk.  In fact in the Sun papers this morning, in Baltimore, there was a lead editorial on encouraging the governor to take a position.  The paper supports the bills on stem cell research but, on the other hand, it was encouraging Ehrlich to come out with an official position. Through his spokesperson, we get quotes, that he feels that this is a Federal Government venue, not a state venue, and that the president doesn't want, wouldn't want to do something like this.  So it's clear, apparently, where his position is. What is the status of the bills?  What's the outlook of any of these?  Well, it's doubtful I think that they'll probably ever get out of the committees in which they now sit in this session, and why I would say this is just that when you listen to the arguments, just about stem cell research in general, when you consider the financial needs of Maryland, you look at estimates of the budget deficit of $400- to $700 million, depending on who you read, and clearly, the political leaders in both the house and the senate, in addition to the governor, have other priorities for the money at this point. So I think that's important to keep in mind. Another issue which is unresolved, and an important one that has been made, is where would this investment go and how much of a return would the state get on it?  And this brings up all of the issues that I think were nicely covered in a recent article by Ken Wyland [ph] in Nature Biotechnology, about where does a state really invest in this kind of technology?  Is it through academic institutions?  Is it through propositions?  Legislation?  Where do they put their money? And I think this was well representative.  For those of you who haven't seen that article, it's quite good. Now two other things have happened in Maryland which I think is extremely important. The first, and I've included this in your packet as well, was somewhat of an unexpected op-ed piece by the president of Johns Hopkins University.  I urge you to read it.  He refers to the state initiatives in scientific research as scientific tourism, one that shouldn't be supported.  I won't say anything beyond that. And the second was the editorial yesterday in the Washington Post, and I mention these two papers because they play to the audience, or to the local Maryland--Annapolis isn't very far from here--in which they too don't recommend funding by states into such a sliver or small area of research activity.  So this is where we are at this point in time. MR. ENTINE:  Thank you very much, John. Why don't we actually take a break for a few minutes right now.  I actually just heard from Charles Jennings who is in the air as we speak and hopes to be here as well.  So this is an opportune time.  Why don't we take a break and we'll resume the panel in about ten minutes.  Thank you. [Break.] MR. ENTINE:  I'd like to introduce Carl Gulbrandsen.  He is the managing director of the Wisconsin Alumni Research Foundation, whose name is WARF.  He works very closely with James Thompson, who is also, along with many of the people who are attending this and presenting here today, among the leading researchers, one of the leading researchers in stem cell research.  Dr. Gulbrandsen has been with WARP, the patent management organization for the University of Wisconsin-Madison, since 1997. As managing director, he created and is director of the nonprofit subsidiary, WiCell Research Institute, whose mission is to support human embryonic stem cell research at the University of Wisconsin-Madison, and to distribute human embryonic stem cells to researchers all over the world. For many years, Mr. Gulbrandsen has practiced law in the private sector, concentrating on international property with a specialty in patent prosecution and litigation. He is an adjunct professor in the department of physiology at the University of Wisconsin and is on the faculty of the masters of biotechnology program in the department of physiology.  He's also a lecturer in patent law at the University of Wisconsin law school.  This very eclectic background I think has come in handy in dealing with stem cell research. Carl. DR. GULBRANDSEN:  Sorry.  I said I'm very happy to be here and talk about stem cell research in Wisconsin. In order to understand stem cell research in Wisconsin, I think you need to understand a little bit about the Wisconsin Alumni Research Foundation.  I always start with WARF's mission, which is very simple, and that's to support research at the University of Wisconsin-Madison. We do it two ways, by moving inventions from the lab bench to the marketplace and hopefully bringing dollars back to support research at Wisconsin, and also by investing. We were established in 1925, so we're now 80 years old.  We are a tax-exempt, not-for-profit institution.  We're technically what's called a supporting organization and the only organization that we support is University of Wisconsin-Madison. We are the exclusive patent management organization for the University of Wisconsin-Madison, and we have a $1.4 billion endowment that funds our programs and allows us to do our work without costing the state of the University of Wisconsin anything. At the end of the year we take what we've made off of licensing and what we've made off of our endowment and we give an unrestricted gift to the university for research purposes. I might add that next week WARF will also receive the national medical of technology from the President of the United States.  It's the highest honor that can be given to an organization for innovation in technology. In 1998, James Thompson, actually in November of 1998, James Thompson published in Science magazine, an article announcing that he had successfully cultured human embryonic stem cells. Shortly after that, WARF established WiCell Research Institute.  WiCell, as was stated, has a few functions, namely to conduct research on human embryonic stem cells, to distribute human embryonic stem cells to researchers around the world, and to train embryonic stem cell researchers. We have five of the approved stem cell lines.  We have distributed human embryonic stem cells to over 200 research groups and we've provided training to over 150 researchers worldwide.  We have a monthly short course where researchers come in.  This is totally sponsored by private dollars.  It's not sponsored by the Federal Government, but on a monthly basis, about a dozen researchers come in and have hands-on work with the stem cells, to learn how to culture and maintain the stem cells. It's interesting to understand why WiCell was founded.  First of all, you have to recognize that Thompson's work was done, obviously before the president made his decision, August 9th, 2001, and WiCell was founded and started to distribute stem cells before President Bush made his August 9th decision. WiCell was founded because at the time that Thompson did his work and was trying to conduct his research, there was a prohibition against using federal dollars for research with human embryonic stem cells, and at Madison, Wisconsin, the research funding at the University of Wisconsin is pervasive.  There's literally no laboratory at the university that does not have federal dollars in that laboratory and the university felt very uncomfortable about that research being conducted on campus. We in fact had the instance where a laboratory at, I think the University of California-San Francisco, was in fact shut down by the NIH because of indirect funding that went into the heat and lights of the building in a laboratory that was doing human embryonic stem cell research.  That was in Dr. Peterson's laboratory. And so they forced the university to close down that laboratory and, ultimately, Dr. Peterson left the United States and moved to England.  Now whether it was reason or other reasons, we did lose a good scientist. So the University of Wisconsin-Madison was very sensitive about this issue of conducting research on campus.  There was a federal prohibition in what the framework or what the boundaries of that prohibition were.  We were a little bit unclear and it made the situation nervous.  So they asked the Wisconsin Alumni Research Foundation if we wouldn't set up a private laboratory and allow this research to be moved off campus. And so that was done, and with the building of WiCell, Dr. Thompson had two duplicate laboratories.  One laboratory on campus, where he conducted research on primate embryonic stem cells, that is, the Rhesus monkey embryonic stem cells that he had successfully cultured a couple years prior to his announcement of the human embryonic stem cells. And then a laboratory off campus, which was a duplicate laboratory where he could conduct research on the human embryonic stem cells. Today, since the president's decision in 2001, virtually all the research that is done on stem cell lines that are eligible for federal funding can be done at the university as well as at WiCell.  But WiCell has continued as an independent privately-funded laboratory because the university is worried about research using newly-derived lines on campus, again, where there's pervasive federal funding, and certainly they are not interested in doing research, the derivation in new stem cell lines on campus. So those two activities, research using newly-derived lines, and derivation of new stem cell lines, will certainly be done at WiCell. There's another reason why we keep the laboratories distinct and separate, and that is because Wisconsin is what we call a precarious political environment for human embryonic stem cell research. We have a governor who is very friendly to human embryonic stem cell research and we have a legislature that is very unfriendly.  The legislature, as a matter of fact, is predominantly pro life, and in about every legislative session we are lobbying to keep our scientists out of jail and keep the laboratory from being shut down. Presently, at the University of Wisconsin-Madison, there are over 50 researchers doing research in all, most areas of human embryonic stem cell research.  This includes the researchers at WiCell.  The research includes understanding the basic biology of human embryonic stem cells. There was a paper published just a few weeks ago by Dr. Thompson and Dr. Ren Hee Zu [ph] of WiCell Research Institute, announcing a new media that avoids the infamous mouse feeder cells, and then I see that just yesterday, there was another announcement by scientists from AZT in Boston, announcing that they've been able to derive human embryonic stem cells on a media free of most feeder cells.  So we're making progress in that area. Then there's also lineage research going on at both, on campus and at WiCell, on the lineages that are derived from human embryonic stem cells. WARF is the owner of two basis patents covering the human embryonic stem cells.  We have a number of other patents and patent applications pertaining to cell lineages and uses of human embryonic stem cells. And if you look at the patent world, there are over a hundred patents that pertain to research involving human embryonic stem cells owned by both universities and private companies.  So it is a veritable landmine of intellectual property, if you want to work and do business in this area. WARF has widely licensed its stem cell patents.  As I've said, we've distributed our stem cells to over 200 research groups and when we do that they get a limited research license to conduct research using the embryonic stem cells.  That license is cost-free in most cases. With respect to commercial groups, of course they have to pay money to use our license. The principal commercial licensee, up until recently, has been Jaron Corporation, which helped fund the original derivation and Jaron has some limited exclusive rights in this area.  But all other rights, commercially, have been licensed, to date, on a nonexclusive basis. California initiative.  Certainly all of us were watching it with great interest and we look at it from our vantage point as a glass kind of half full.  Obviously what is going on in California is going to significantly increase the licensing opportunities for the Wisconsin Alumni Research Foundation and we hope to bring some of those dollars back to Wisconsin. In fact I had dinner with Mr. Klein one night and I said I thought a 30 percent royalty on California would be just fine, you can send a billion dollars to Wisconsin.  But he didn't seem to agree with that notion. The California initiative also spurred the governor of Wisconsin to announce a three-quarter of a billion dollar program for research that would include human embryonic stem cells. This would be a ten year program.  It includes both bricks and mortar as well as funding.  The principal part of it is about a $370 million research facility at Wisconsin called the Institute For Discovery which includes some stem cell research but certainly would be much broader than that. I should just say that the other challenge of the California initiative for us, already we're seeing the effects, is to retain and attract key faculty.  It definitely is going to raise the cost of doing research in Wisconsin. The governor's initiative with respect to, in response to the California initiative, as I indicated, includes a key facility in Wisconsin called the Institute For Discovery.  This would be a flexible multidisciplinary space. Originally, this facility was to include space for WiCell Research Institute and that part of the space would have been privately funded. But, again, because of the political environment in Wisconsin, the developers decided that we better move that facility from this complex.  So that's out of the plans right now and WiCell continues on a separate course. And that's what life is like in Wisconsin today.  Thanks. MR. ENTINE:  Thank you very much, Carl. We'll jump now to Wise Young from New Jersey.  Wise Young is a neuroscientist.  He's the founding director of the W.M. Keck Center for Collaborative Neuroscience and chair of the department of cell biology and neuroscience at Rutgers University. Beginning in 1984, Dr. Young served as director of neurosurgery research at NYU, and in 1997, he was recruited to establish and direct the world class center that now exists, the Collaborative Neuroscience at Rutgers.  Dr. Young was part of a 1990 team that developed the first effective therapy for spinal cord research and he later formed the first consortium funded by the NIH to test promising therapies and helped establish several widely-accepted clinical outcome measures in spinal cord injury research. Dr. Young founded and served as editor in chief of the Journal of Neurotrauma.  He organized the national and international neurotrauma societies and has served on advisory committees for the NIH, the National Academy of Sciences, and the National Institute of Child Health and Human Development. Dr. Young. DR. YOUNG:  Thank you, Jon. The speakers before me really summarized the federal situation very well, and I wanted to do more science than politics, so let me just try to cover New Jersey in 30 seconds and then go on to where I think science should effect or should play a role in federal policy. New Jersey passed a bill in January of 2004 to allow all kinds of stem cell research.  Jim McGreevy signed this bill, and shortly after that bill, I wrote a letter to Governor McGreevy saying that a lot of people had put political capital into the passage of this bill.  It was a hard-fought bill; in the assembly it passed by one vote. And so Governor McGreevy decided, in February, to fund, for the first time--I think this is even before California--to fund stem cell research in the state, and he committed $6.5 million and shortly thereafter increased this to 9.5, and then when acting-Governor Cody came on board he was one of the leaders of the stem cell bill in the senate, in New Jersey.  He committed himself to funding $150 million in 05.  This is already-committed money.  This will build and equip the stem cell research institute of New Jersey, and he has proposed a $230 million bond that will be voted on in the November ballot by the people of New Jersey, and the goal there is to provide $30 million per year, over a seven year period, to fund the stem cell activities in New Jersey. So the latest polls in New Jersey indicate 70 percent support by the public for stem cell research in the state.  There is widespread concern that this amount of spending is going to aggravate an already very, very serious budget deficit of $4 billion.  Your Maryland deficit is nothing compared to ours. We have a $4 billion deficit.  Despite that, the commitment has been made by the governor and I think there will be--it's by no means a "done deal" but the 150 million is committed and I think there will be something on the ballot in November.  Okay. [Start next tape.] DR. YOUNG:  [in progress] unintended consequences of this policy.  The first is that it has stalled embryonic stem cell research in the United States.  I think this is evident both from the amount of money being spent by NIH on embryonic stem cell research as well as from the number of publications that come out concerning embryonic stem cells from U.S. laboratories. I think other countries have pulled ahead of the U.S. in all types of stem cell research, including umbilical cord blood and adult stem cell research.  This was really an unintended consequence, I think, of the policy that was announced in 2001.  And finally, I want to point out that this policy has not saved any embryos. Now one of the surprising things that has happened in the last six months is that several states have now responded to the situation by passing laws to support stem cell research, and as you have already heard, California will be funding at least $300 million per year for ten years.  New Jersey has committed $150 million in 05 and $30 million per year for seven years. Other states have proposed stem cell research funding, including Illinois, Pennsylvania, Washington, Wisconsin.  I list Maryland here because it's a proposal.  Minnesota has as well.  I believe that by 2006, state funding of stem cell research may exceed federal funding by an order of magnitude. This is an unprecedented situation.  There has never been a situation where state funding has exceeded NIH funding of any given biomedical field, particularly one as important as stem cells.  But for state funding to exceed it by an order of magnitude is absolutely stunning. So what are the consequences of such funding, state funding, and one of the things that Dr. Battey did not mention was that the current funding of NIH grants is less than 15 percent.  That means less than 15 percent of grants that you submit to NIH will be funded. Given that situation, many scientists are looking at the states that have stem cell funding with a certain amount of longing, and many will be moving.  I believe Wisconsin is already counting the costs of retaining scientists.  I don't think--oh, and by the way, of course, what every legislature and governor is thinking is that pharmaceutical and biotechnology industries will concentrate on, in the states that are funding stem cell research, and people have talked about this race for stem cell research. I want to point out that this trend is not good for the country or for stem cell research.  First of all, we're not utilizing all the talent of our scientists to solve this problem of stem cell research.  Now Dr. Battey did a wonderful job explaining all the things that we still need to do in stem cell research.  He named, literally, dozens and dozens of problems, hundred of problems, really important problems in stem cell research that we need to solve. By the way, these were the same problems that we knew about in 1998.  We knew all these problems.  NIH failed to invest in this area, and by failure, I mean absolutely failed to invest.  It is absolutely shocking that the life science area of stem cell research has received a total of less than $250 million in 2004.  This is less than one percent of the NIH budget.  This is a technology that is widely acknowledged by a vast majority of scientists as being the most important advance in life sciences over the last ten years, that will have impact on virtually every disease that we can even think of. Why are we investing only one percent of NIH into this?  Even those people who claim that umbilical cord blood and adult stem cells, bone marrow stem cells are curing diseases, it's inconceivable that we would be spending only $180 million on that kind of research. I know many people who are not getting their umbilical cord blood or bone marrow stem cell research funded. I served for many, many years on study sections and most recently on a council of NICHD.  I know that when NIH wants to fund something, they can.  They are not waiting around for people to send in grants.  They could have funded a clinical trial network for stem cells.  They could have funded centers of excellence back in 2001. The center of excellence concept was announced 18 months ago.  They're still looking for proposals and trying to implement.  So I want to suggest here that NIH is not putting a high priority on this and they need to put a high priority on this.  The states have put a very high priority on this and they have put their money where their mouths are. And what is happening here is, I don't think, good for this country.  I want to point out that in the national debate on stem cells, several major scientific advances have really been ignored, and I want to bring these up because I think they are relevant to some of the discussions. I think all the discussion that has gone on to date have--you know--and all of you have heard the debate, the moral debate, and so forth.  One underlying assumption in this debate is that we're going to be collecting these cells forever, that somehow, the sources of these cells are important.  We're going to collect them from embryos, going to collect them from fetuses, we're going to collect them from umbilical cord, we're going to collect them from bone marrow. The future of stem cell therapies will not come from collected primary sources.  It's going to come from produced sources.  We have to focus on making cells.  I want to point out that every cell source today is insufficient to meet the needs of people with diseases.  Imagine what would happen if, let's say two years from now, a study is published in France or Germany or China, that says a cell-based therapy, I don't care what kind it is, whether it's umbilical, bone marrow or embryonic, they say that they have a drug or a cell that improves Parkinson's disease.  Significantly improves Parkinson's disease.  But we currently don't have enough umbilical cord blood in the world to treat more than a couple hundred thousand people. We don't have enough bone marrow stem cells to treat even the current people who need bone marrow stem cells.  We certainly don't have enough embryonic and we don't have enough fetal. What is going to happen is that demand is going to vastly outstrip supply.  There's going to be less than one percent availability of cells to treat the people, of any significant disease.  What are we going to do?  Have a lottery? That only the wealthy and the well-connected get the treatment?  I mean, this is a social and moral catastrophe that we need to address now and we need to start investing in, to ensure that when cell-based therapies do work, we have a sufficient supply to treat people who need it.  It's a moral catastrophe because as long as you don't have the cure, it's okay to let people die, but when you have a cure, it is very bad to let people die.  And we must address this problem now. There's a lot of discussion about cloning, and even here, there was a discussion that, well, we need to have isogeneic completely compatible cells for transplantation. I want to point out that we've transplanted cells and organs for decades without isogeneic sources.  We do this by matching HLA antigens.  We do this by selective immune suppression.  And the immune suppression will get much better and our matching of HLA antigens, and so forth, will get much better, and there's no reason why this source, this approach will not work for another ten or twenty years. Some day, we might not need to have isogeneic sources, and yes, it would be nice to have isogeneic sources.  But I want to point out that isogeneic sources are not necessary for the present time, nor, in many cases, are they desirable.  You don't want isogeneic sources to treat genetic diseases.  You don't want isogeneic sources to treat autoimmune diseases, because you're then transplanting the cells with the same genetic problem back into the patient. You want to transplant new cells with different genes, so that you eliminate the problem. So this concept that we need to have cloning, we need to have isogeneic cells, I mean, it's nice that it's not necessary and it shouldn't be part of this debate. Finally, everybody seems to think about Dolly as being the "be all and end all" of cloning.  They use somatic cell nuclear transfer.  Most of these laboratories today that are doing cloning of embryonic cells are not even using somatic cell nuclear transfer.  They're using a technique called fusion. So, you know, a lot of the legislative debates, and so forth, just aren't up there in terms of the science, and it's really unfortunate. Finally, there's been a lot of talk about tumor risk, and so forth, associated with embryonic stem cells, and implying that there is no risk in umbilical cord blood or bone marrow stem cells.  This is not true.  I won't show you this today.  I do have the slide here, but, you know, three months ago we were very surprised to put some umbilical cord blood cells into an animal and found a big tumor in the spinal cord.  Umbilical cord blood cells and all cells that you grow for any period of time do pose a risk of malignant transformation.  This is something that is a matter of course when you're dealing with cells and you always have to screen and we should be complacent and say that umbilical cord blood or any source of cells would be absolutely safe. We have to do the studies that are necessary to ensure safety and, and I want to point out one other thing, and that is everybody talks about pleurae potency as the greatest thing in the world and that is a cell can make any different kinds of cells.  But, in reality, the entire direction of therapy today is to predifferentiate the cells. You don't want to put a pleurae potent cell into the spinal cord because you don't know what it will turn out to be.  The direction that people are heading towards is making more and more predictable cells that will respond the way you would like them to respond, and put them in the spinal cord.  So I want to conclude here, that the current federal stem cell policy has failed because it has held back stem cell research.  America is losing its leadership role in biomedical research and it has not saved any embryos. States have now responded by funding stem cell research.  It will concentrate stem cell science in a few states.  I don't think that this is good for the country.  The current stem cell debate ignores many scientific advances.  They are not addressing serious scientific problems. And finally, no current cell source is sufficient to treat millions of people.  We're facing a moral catastrophe here.  Thanks. MR. ENTINE:  Thank you very much.  Just one quick question.  Could you explain what fusion is, because if it's not being discussed politically--or any of you can address that. I think it'd be helpful for all of us to understand why that's not being discussed and what it actually represents. DR. YOUNG: I can make a quick stab and I would like John to finish on that. As it turns out, stem cells like to fuse with other cells, and furthermore, when you're cloning cells, you're no longer taking a nucleus and injecting it into another one.  You're taking a cell and you're putting, bumping them against each other and passing a little bit of current and the cells fuse with each other. So technically it's not nuclear cell transfer.  But there is now a lot of evidence suggesting that stem cells like to fuse with other cells and when they fuse with other cells a certain number of diffused cells become stem cells themselves.  And this is a very interesting development because it portends a day when we will be able to make stem cells out of any cell in your body. MR. GEARHART:  I agree.  One word of caution, though.  The term somatic cell nuclear transfer, to me, really covers any of the technologies in which you are introducing a nucleus into a nucleated egg, whether it is by the old method of picking up a nucleus or picking up a cell, and when you pick it up you destroy the cell, the cell membrane, but you have a nucleus in your pipette and you introduce it into the nucleated egg. That was technically the way that it was done.  Newer technology now means that you take the egg cell in which you've removed the DNA, place next to it a somatic cell, as Wise has said, and you pass a current through it, and the cell membranes essentially fuse and the nucleus is released into the cytoplasm. MR. ENTINE:  Thank you very much. Do any of you have questions for each other?  Having heard some of your presentations, I'm--at this point.  Okay.  We'll move on to questions from you, and as we move along from-- QUESTION:  I have a question for David.  When are the checks going to be written? MR. GOLLAHER:  Sir, that's a great question and there are two aspects to it.  One is that the leadership of the Institute For Regenerative Medicine wanted to review grants and begin to make grants by midyear.  So they're really looking at May-June.  One thing that's happening is there are two law suits that have gone directly to the California supreme court to try to create injunctions that would prevent funding. These are from expected and long-term opponents of cloning and stem cell research, and were expected.  So we'll have to see what the supreme court says. There's another attack which is from the legislature, and the legislature is trying to intervene in the governance of the institute and say we should have something to say about how these monies are distributed. The leadership of the institute thinks that the biggest problem, and perhaps the rate-limiting factor will be to put together the peer review groups that can vet the science and make certain that the early grants are of extremely high quality and create some momentum that the best science is being funded. So it's a political problem, a legal problem, and they're looking at May, June.  Midsummer is probably more realistic. MR. ENTINE:  Thank you.  When you ask your questions, by the way, if you could wait for the mike and also identify yourself beforehand. I do have one question also for David. I was wondering to what degree will the California infrastructure set up to do this research be duplicative of what could be done at the federal level and might be done at the various states.  How wasteful, from that perspective, if that's the way to look at this issue, would this research be? MR. GOLLAHER:  I think there are two different aspects to that question.  One is what is the grant-making apparatus, including IRB type oversight of research projects?  In that sense, it is duplicative but--at this point potentially duplicative but duplicative of nothing because the research is not being reviewed and prosecuted at the NIH in the way that, you know, will be done in California.  Is there an opportunity for collaboration with other states?  Probably not, under the terms and conditions of the statute, because the research has to be largely focused in California and there are a whole bunch of protections, if you will, that try to ensure that taxpayers' money is used for an enterprise in California. Nonetheless, a number of the best scientists are in places like Harvard and Hopkins, and so forth, and will be consultants to the process.  So, you know, is this the most efficient way to do it?  No.  Would it be great if there was a federal policy in which this was coordinated nationwide?  Yes. Is that likely to happen, given the political environment we currently face?  No.  So we're stuck with a less-than-ideal solution than the one that voters approved. MR. ENTINE:  Carl, John, Wise, any observations from-- MR. GULBRANDSEN:  Well, I think the increased cost is significant and as I pointed out in my comments, at Wisconsin, we've had to establish duplicate facilities, and this gets to be extremely expensive.  The facility, for instance, to derive new stem cell lines, you're talking about building clean rooms that essentially already exist in the in vitro fertilization clinic at a hospital. But since it's university support, state support, and has some federal dollars, they're nervous about doing it there, and probably can't do it there.  So that's a tremendous cost, not just duplicate facilities, but in many cases duplicate staffs. So, you know, it's, frankly, I think, just a waste of money. MR. GEARHART:  I'd like to make two comments.  One of the criticisms that have been leveled for the review process of scientific grants at the state level is not only the issue of duplication but the rigor with which it would be done, and would it really represent cutting-edge kinds of review?  With the Maryland legislation, or the process, we had indicated that we would rely on external reviewers from the state, so there wouldn't be any issue of conflict. But, you know, you've got to keep in mind something that Louis Pasteur had said a long time ago.  Now many of you don't even know who he is probably.  But the issue is that he promoted, very strongly, the idea that science knows no country, and now this is being reduced to science knows no state.  Okay. And that we will be aware of what's going on in other states, we'll be relying on investigators from other states to help make those decisions, and I think that we could, as a network, go forward without doing a lot of duplication with respect to the research.  This is something the NIH, you know, can do in peer review. But I think something else you have to keep in mind is that all review processes have to fund the best research.  It's the merit of the work that is critical and I think that this can be mounted at state levels.  So that's one point I wanted to make.  The second, with respect to cost among--if you reduce this down to state levels, and Carl had brought this up.  We are concerned, at Hopkins, about losing talent, and this is not a trivial issue.  To retain--everyone says good, young scientists.  I'm sometimes worried about we old good scientists.  Okay.  But it's the young scientists that really are vulnerable here, where you know, you give them start-up packages--well, we won't get into details. But the issue is they are movable, they are much more movable, and when investigators from California come and talk to these--you know, you've got to pay attention because you're looking at not only this issue of the funding.  You're looking at an environment which is extremely supportive of what you're doing, and building a network to really move the work forward. And this is what you would like as a scientist.  So there is this real concern.  So for us to retain these faculty, we've got to come up with new resources of money to make even a better offer to stay.  So indirectly, there's another issue here, that we can see. MR.      :  Let me just make a brief comment to that and I think, in some ways, we've done, inadvertently have done the experiment before, and it has to do with what happened with recombinant DNA research in Europe from the 1970's forward, and those of you who know the story know that for largely political, to some degree religious and ideological reasons, European nations were quite slow to adopt genetic engineering technologies in comparison with the United States, and particularly California. And today, you know, fast-forward 30 years, the United States has an incredible lead in biotechnology and Europe, more recently, has been struggling to catch up and finds itself quite far behind the curve. Once you establish centers, they become more and more powerful if they're funded, and it's very hard to recapture, you know, the opportunity that's been lost, and so I agree with that. DR. YOUNG:  I'd like to pose a, or describe a model that's different from the California one and that is the New Jersey model. California is putting a big pot of money and they're going to distribute it amongst many institutions.  New Jersey has a much smaller pot of money but it's going to be concentrated in one place.  The Stem Cell Institute of New Jersey will be built in New Brunswick.  It will have about 12 investigators or twelve principle investigators there.  I'm the chair of the search committee for the new director of the center.  I'm also the chair of the scientific advisory board for the institute. It's going to be modest fundings.  $30 million a year is not a huge amount of money but it's enough to do something with, it's enough to build a base with, and it's also enough to build partnerships with, and that's the concept here. But even so, if you add it all up, it's $380 million, which is not change to sneeze at. We are very interested in collaboration.  I've already been in discussion with Pennsylvania, Delaware, and even Maryland, concerning one aspect of the stem cell program that neither California nor New Jersey is actually going to be funding, and that is the clinical trials. You know, $300 million a year is not enough to fund clinical trials.  Clinical trials have to be funded--each clinical trial costs, you know, 30-40 million dollars.  So the way to do that is through consortiums, through partnerships with industry, and you need to involve the clinicians. I've already been talking with colleagues in California and, by the way, there's another player here, and that is, nobody really is thinking about it.  Canada is a big player.  So Canada, for example, is sending--next week we're going to have a whole delegation  of Canadian stem cell scientists who are looking to join forces with the New Jersey groups, to work together and to share technology, and even participate in networking, a North American network for stem cell clinical trials. So I'm hoping that it's not going to be just California and the sucking noise in the West.  That it's going to be a network of scientists, clinicians, and industry playing a role together, and I am very hopeful that Wisconsin will be part, you know, a major part of this, and Massachusetts will be, and so forth. So in many ways, the state groups are trying very hard now to discuss and to collaborate.  I'm on the phone, nearly every week, with Robert Klein, to talk to him about certain issues, and it would be very, very nice if NIH could become a partner in this.  I'm really sincerely hoping that NIH can become a partner in this, because stem cells does not mean merely embryonic stem cells. It means the other kinds of stem cells, and NIH should take advantage of this aspect from the adult and umbilical cord blood stem cell, and [audio blip] if there's not enough political capital to get a change on the embryonic stem cell issue. MR. ENTINE:  I'd like to take some questions.  Again, please identify yourself and your organization, if you're a member of one.  Yes? QUESTION:  David Mashee [ph], the Pew Forum on religion and public life.  My question is for Dr. Young.  Doctor, you said that the administration's policy hasn't saved any embryos.  Could you explain, in a little bit greater detail, why that's so.  And also could you then square that with your contention that the administration's policy has also held back research and left the United States behind other countries. DR. YOUNG:  It has not saved any embryos because the proposal at NIH to study the embryos  were all embryos that would be thrown away.  Okay.  They were not on embryos that would be otherwise saved.  Secondly, it had zero effect on privately funded or state funded use of embryos, and in fact may have even encouraged it by not regulating or not monitoring it. If there had been a source of embryonic stem cells that was widely available and regulated, there may not have been as much use in the private sector or in the state sector.  So I use the word "may" because there's no accurate numbers, but I think we can be assured that all the embryos that would have been used would have been thrown out.  The second thing is that it was really an unintended consequence of, I think the policy.  I think President Bush was very ernest in wanting to support embryonic stem cells when he pronounced this policy. I'm not sure that he realized, at the time he pronounced the policy, that all the cells were contaminated with mouse feeder cells and therefore cannot be used in humans.  I'm not sure he knew that only 22 of the 60 or 78 cell lines that were available were, you know, embryonic stem cells, and I don't know why but what is really truly difficult for me to understand is why hasn't there been more funding of adult and umbilical blood stem cell research?  A $180 million in 2004.  It's a pitiful amount. Singapore spent more money than we did.  There's no commitment here.  And I know of at least two or three bills in Congress that failed in committee, that had actually wanted to fund more umbilical cord blood work, and I was shocked to find out that in the most recent 2006 budget, there was a $30 million allocation for umbilical coordinated blood banking in the federal budget that was cut by President Bush. So there has been no commitment to umbilical coordinated blood or bone marrow stem cell research at all, and neither source currently are sufficient to support treating millions of people, if any one of the major diseases should be treatable by any cell source. And so I'm very concerned by this and I'm hoping that somebody would really look at this closely. MR.      :  I'd like to comment on the first part of that.  Now that we know that there are 20-some cell lines, and as you heard, many investigators feel that it's not worth pursuing studies on these, we know about the contamination issues.  Carl mentioned the few papers, now, that have come out, claiming to show culturing without feeder layers or animal serum, and we know that there is now a bill submitted in the U.S. Congress to expand the president's policy, not permitting SCNT but just incorporate more lines. You heard Dr. Battey say that the estimate is that there's about 150 new cell lines, worldwide, that could be included.  But knowing this now, knowing where we are currently, there's no indication that the president would ease the policy.  None.  In fact we get quite the opposite message, that there'll be no change in that policy. So whether he knew it or not in 2001, to me, is a bit irrelevant.  It doesn't seem that there'll be any flexibility at all at that level. MR.        :  I'd just like to be a little bit of an advocate for the president.  I do think that the time has come to change the policy but I don't think that the policy, at the time it was instituted, was an ill-founded policy.  This country was in political turmoil and he made a decision that I thought was quite courageous, and that is to use federal funds for presently-existing stem cell lines. It did get the research moving forward.  People are saying now it didn't move as fast as it should have.  But it did start to move it forward and money was spent.  Now is the time to change it and, unfortunately, it became a politicized issue during the campaign, and I think that if it had not been a politicized issue, that the president might have changed it. MR. ENTINE:  Any other questions?  Yes? QUESTION:  Bruce Wolf, Minette Phelps [ph].  I'd like to drill down a little bit on the question of how state-funded facilities and NIH-funded facilities and investigators are going to collaborate, or what's going to happen.  I understand full well, that when WiCell made its decision that things were unclear, about the degree to which one could use the same facilities. So my question is threefold.  Number one, has there been any greater clarity on anybody's part with respect to what can happen in the same labs or in common facilities? Number two.  if that's not far enough advanced, is there in fact an accelerated effort going on now to develop safe harbors or to work this through with NIH?  Or it is likely going to require some either legislative or some intervention?  Or is there a collaboration going on to solve this issue? And three, to the extent that there's a worry about facilities, is there similarly a worry about PIs and other staff members participating, or can they divide their time? MR. GULBRANDSEN:  I think there is a little bit more clarify.  I mean, the NIH does tell you that you could use newly-derived lines in the same laboratory as you're doing research with the lines eligible for federal funding, as long as your cost accounting is done in a way that they can determine that direct federal dollars were not used for the unapproved lines. They've also indicated that indirect costs that go into the heat and the light and the structure of the building are not going to be considered in determining whether federal dollars are used.  The issue of Wisconsin, though, goes beyond federal dollars and we're living in a state that is not very friendly and the university is still nervous about allowing unapproved lines to be used on campus. MR. ENTINE:  Any other comment? DR. YOUNG:  I can quickly comment on this.  We've talked, quite recently, to a number of federal groups and we've actually looked at this issue.  I think the research can be done in the same laboratories.  Careful accounting has to be done.  I also think that--I've been urging our people who are designing the institutes not to replicate facilities.  I don't think that it's a good time to replicate facilities, and even more important, the climate might change in three years time. MR.       :  Just one other follow-up.  There is one activity that I don't think that anybody would dare to do in a federally-funded laboratory and that's derivation of new stem cell lines. MR.      :  That's what I was going to ask, what [inaudible] interpretation is; yeah. MR.      :  Folks I've talked to who run large research labs or large research institutions are concerned that there may be future liability, and there may be a new level of scrutiny, and that they need to be extraordinary careful and conservative in constructing these efforts in ways that don't increase the liability for their overall institutions and enterprises.  So I'm hearing a great deal of caution, and prospective caution, in how these things are pursued. QUESTION:  Peter Gochdam [ph].  I'm with the German embassy and science counselor, and I was wondering--I have two questions, really.  One is how do you see the bottleneck of young talent?  It was mentioned by Dr. Battey that part of the efforts that NIH is expending at this point is--you're giving the overall legislative situation, that they want to, you know, promote infrastructure, promote talent, and also that, you know, with a view to the science, since it's still in a basic research stage, you couldn't do a lot more. Now some states like California propose to spend a lot more, but is this really, this money, could that be spent meaningfully, you know, with the same quality that you would want to spend it in other fields, the high level of peer review? Some of these issues have come up but I wonder how you see the bottleneck of young talent? Well, maybe I'll leave it at that for the time-being. MR. GEARHART:  Students who are completing their degrees in my laboratory now have already committed to going outside the country for their post-doctor fellowships and future training.  This was before the California initiative, that they made those decisions.  So one is a big concerned about that.  Although there's a great interest, we find, at least at Hopkins, and I'm sure at many other institutions, of young investigators getting into this field, and this comes in through the training of students, through post-doctoral training. And as they see some of the struggles that we're going through currently, it sort of dampens, to some degree, their enthusiasm, as we fight for funding, from whatever sources, things like this, and that has an impact, and you try to protect the students and post-docs from that.  Now, clearly, the NIH has reached out and has awarded, if you saw the RO-1 category on there, most of that funding has gone to young investigators coming into the field at the assistant professor level.  So he is living up to that particular comment. But I would also tell you that that amount of money--I mean, although it's appreciated, doesn't amount to very much in an overall research program, to be honest with you. I mean, that's about all the comment I could make.  Most of the funding that comes into our group is from the private side and we do give start-up package and maintenance packages to the younger faculty based on private side money, not on federal money, not on state money. DR. YOUNG:  Can I just answer that question, or expand that question, John's answer a little bit.  You know, stem cell is a relatively new field.  Unfortunately, we don't have to grow stem cell scientists from scratch.  There are really two sources.  We can either grow them from scratch or we can convert cell biologists into stem cell biologists.  I mean, after all, stem cell is a cell.  So part of the goal of all this funding is to create more interest in stem cells and to get more of our best cell biologists to work on the problems of stem cells, and I think they're showing a strong willingness to do so. The problem is that many of the people who want to study the human cells would not be able to do it in a majority of the states in the country, using federal dollars or state dollars, and there will be perhaps four or five states, in the country, that will be able to fund such research. Now from this perspective, there will be a flow of scientists to these states.  I'm involved in retaining and searching and always recruiting young scientists, and I can tell you right now, that even before a single dollar is spent in California and New Jersey, there are people inquiring.  There's also the lure of money and the lure of companionship and this concept of critical mass and environment that's very important, and I think this is what is worrying a lot of the states, including Maryland. MR.     :  One other comment I'd like to make is that Dr. Battey referred to these centers of excellence in translational research that is now out for, getting applications.  Three of these centers will be awarded.  The amount of money is a million dollars per year. Now when you talk about translational research, what you're really talking about is taking these cells and grafting them into various animal models, be they rodents, up through monkeys. What I can tell you is that we, as well as other centers, are involved in this work already.  It's extremely expensive research and I will be honest with you to say that a million dollars a year does not go very far when you are grafting cells into monkeys or pigs, or whatever model systems you're using, and you're looking to measure some type of a clinical outcome.  It's long term.  You know, you have to maintain these animals, if they are models, that compromise the animals in any way.  It's 24/7.  It is just an extremely expensive proposition, and to say that at the end of this grant period, which is a four-year cycle on this particular thing, that you're going to be submitting INDs to the FDA, things like this.  It's terribly expensive and that amount of money just won't do it. MR. ENTINE:  We're going to take one more question for now and then we're going to--obviously Dr. Jennings has just arrived, straight from two airports and a long, long day, to say the least.  But let's take one more question and then we'll have Dr. Jennings.  Then we'll resume, a couple questions before lunch.  Yes? QUESTION:  Will Amatruda [ph], Columbus School of Law.  A two-part question.  Is there any organized opposition to the use of adult stem cells or umbilical coordinated cells, and if the answer is no, how does Dr. Young or anyone else on the panel explain the drop in funding of this kind of research? DR. YOUNG:  Well, I think it's environment and what was not mentioned was the fact that the current funding at NIH is only 15 percentile.  That means only one out of eight, one out of whatever, six grants--no, less.  It's 15th percentile, means only 15 out of a hundred grants get funded.  That means 85 grants get turned down.  This is true of bone marrow and umbilical cord blood stem cell work as well. And it's a very tough situation at NIH, currently, and there has ben no effort to allocate more funds so that more umbilical cord blood and bone marrow stem cell research is being funded.  It's not being given a higher priority. MR. ENTINE:  Was there any other response?  Did he answer both of your questions there? QUESTION:  Well, then I gather the answer is no, that there is no organized opposition to this kind of research? DR. YOUNG:  No.  There's--yeah--in fact there should be very strong support for it, but I don't hear the support in Congress and I don't hear the support in the form of money at the administrative level. MR. ENTINE:  We're now going to switch seats, so Charles, why don't you switch with Wise, and we're pleased to have Charles Jennings to participate with us here.  As you can see by the slide-- MR. JENNINGS:  [inaudible]. MR. ENTINE:  Okay. Charles Jennings is the executive director of the Harvard Stem Cell Institute.  Mr. Jennings has headed the Harvard Stem Cell Institute since September of last year.  His research background is mainly in developmental neurobiology.  He did his postdoctoral work with Ann Mudge [ph] at University College London, Doug Melton [ph] at Harvard, and Steve Berden [ph] at MIT. In 1993, he left bench research to become an editor at Nature, which is based in London and Washington, D.C.,  before he moved to New York in 1998 to become the founding editor of Nature Neuroscience.  From 2000 to 2004, until he took over as executive director of the Stem Cell Institute, he was executive editor, responsible for all the biomedical research titles at Nature.  Anyone familiar with the Nature family, that's quite a family of publications. Mr. Jennings has published numerous research papers and scholarly contributions.  Most recently, the article Altered Nuclear Transfer in Stem Cell Research, A Flawed Proposal, which appeared in the New England Journal of Medicine last year. Mr. Jennings. MR. JENNINGS:  Thank you, Jon, for the invitation to be here today.  Thank you to the American Enterprise Institute.  It's a pleasure to have the opportunity to participate here.  I apologize for having thrown the schedule out of whack.  I've just come up from Boston this morning where we had a huge snowstorm overnight and I sat and watched the airport workers spend about half an hour trying to dig the truck that brings you back to the plane out of a huge snowdrift and then the second plane had apparently some mechanical problem with the steering, which doesn't sound good, but they did manage to steer me to Washington, so I'm happy to be here. What I'm going to do today is give you a overview of the Harvard Stem Cell Institute, who we are and what we do, and then talk a little bit about our experience working with human embryonic stem cells, and we've been, I think, very much at the sharp end of that public debate, and I hope some of our experiences will be of interest to many of you. So the Harvard Stem Cell Institute, we were officially launched in April last year.  The co-director's Doug Melton who's a basic developmental biologist, and David Skaton [ph] who's a clinical hematologist.  I'm the executive director, so I'm the chief administrator for the institute. Our basic mission is to support all types of stem cell research throughout the Harvard community and in particular the focus is on-- [Start tape side B.] MR. JENNINGS: [in progress] for treatment, and we're fortunate at Harvard because we have a very large basic, very large critical mass I think of both basic researchers at the university and at the medical school, and more clinical researchers at a large network of affiliated hospitals. Although our primary mission is to support research, we also intend to engage the extra-scientific issues, if you like, arising from stem cell research, not only in the sense that we must navigate the regulatory process like everybody else, but we also see Harvard as a potential place where scholarly investigation into the societal implications can take place, and again we're fortunate that we have a number of other schools, the divinity school, the Kennedy School of Government, the law school, the business school, and we're hoping to engage people from all of those places in that discussion. Some of our areas of interest--this is not really a scientific talk, so I won't talk a great deal about the biology or the promise of stem cells.  I'll assume that other speakers have probably covered that.  But obviously we start with the basic biology of stem cells but then we want to move that forward into clinical applications in a number of disease areas, and some of the ones that we think are most promising include diabetes, blood diseases, that's leukemia, lymphomas, also AIDS, neurological diseases of which there's of course a very wide range, cardiovascular diseases, diseases of the reproductive system and also cancer, which I think it's become increasing clear that cancer stem cells are a fundamental aspect of cancer biology that must be understood, if you want to beat the disease. Just to give you a sense of scale, we're budgeting approximately 10 to 12 million expenditure in the upcoming financial year and we're looking at the moment at roughly a 10 year horizon.  We don't know what will happen beyond ten years but we would certainly hope that by that time, the clinical promise or lack thereof will be very clear, and so, you know, if we assume 10 million a year to begin with, and we'll ramp that up over time, really, as the fund-raising permits. I assume, probably, that other speakers have covered the biology of stem cells, so I won't belabor this.  But just one point is that there's a broad distinction, one can distinguish between embryonic stem cells and adult stem cells. We at the Harvard Stem Cell Institute are interested in both types.  Obviously the embryonic, particularly human embryonic stem cell work is what's been at the center of the public debate recently.  I think this is really an instance, if you like, of a greater principle, that like 20 percent of your activity gets you 80 percent of your media attention.  That's certainly been true for us and it's the embryonic stem cell stuff that has put us in the public eye. So that's what I'm going to be talking about for the rest of this talk. In particular, I wanted to talk about therapeutic cloning, which is a little bit of a misnomer.  I think many of us in the field prefer to call it somatic cell nuclear transfer, which is a slightly broader term.  But therapeutic cloning has stuck and it's obviously more attractive than research cloning, at least for publicity purposes. So the idea here is that you can take a cell, any cell from the body of an adult, take the nucleus, insert it into an unfertilized egg from which the genetic material has been removed, you can then activate the egg to begin development and once it reaches the blastocyst stage, you can derive embryonic stem cells that are genetically identical to the original donor. And so what this picture is showing is a nucleus being injected into an unfertilized egg.  This is a mouse egg in a mouse nucleus, and I should emphasize that we have not yet begun this process with human cells.  We don't yet have all the regulatory permission that we need in order to do that but we're hopeful that we will have it soon.  I'll say more about that in a minute. So why would you want to do this?  There are several reasons, and the one that I think is mostly widely discussed is that if you can make embryonic stem cells that are genetically identical to the original host, that's a potential host of material for transplantation therapy that will be genetically identical and therefore will be recognized as self by the immune system so you don't have all of these problems of immune rejection. So that's probably the application that's been most widely discussed.  But another application that we're also very interested in is the use of this technology to generate stem cell lines that carry particular combinations of disease genes, and these could then be used as a model system for studying human genetic diseases in a way that really isn't possible any other way. And just to give you one example, and we've used Parkinson's disease here as an example, but it might equally be Alzheimer's or diabetes, or really any other disease for which there is a genetic component that is poorly understood and that you want to know more about. So as I say, the idea would be to take some skin cells from a patient, derive embryonic stem cells by the process that I just described, and I imagine other speakers have also described, and then you want to differentiate those cells into the cell types that are affected in that particular disease, and so I think it's obvious that in a disease like Parkinson's, there's an advantage there.  It simply wouldn't be ethically acceptable to open up the skull of a patient with a neurological disease and pull our some neurons to study in a culture dish.  This is really the only way that you can do the experiment, at least the only way that we've thought of to do the experiment. So the big challenge here is of course to turn those cells into the cell type that's affected in the disease, in the case of Parkinson's it's the dopaminergic neurons of the midbrain, and then you could do all sorts of studies on those cells once you've been able to isolate them, and in particular, I think pharmaceutical companies are likely to be quite attracted to this because it's a potential tool for screening for new drugs. If you can actually see what's wrong with those cells relative to cells from normal donors in culture and then screen for drugs that block disease processes. The experiment is scientifically quite complicated, but, really, at the moment, at least in my mind, the scientific complications seem overshadowed by the enormous complexity of the regulatory issues, and I arrived at Harvard in September and I've just been astonished at the amount of my time, the amount of other people's time that has been consumed by dealing with many of these issues. And Harvard is fortunate, that we're a large and wealthy university.  I can only imagine how difficult it will be for a smaller institution to navigate some of these issues. Obviously, one of the first ones is the need for financial compliance with the federal funding restrictions.  I'm sure other people have already talked about that.  But it really is--I think the principle is clearly stated, that you cannot use federal funds to work on human embryonic stem cells derived after August of 2001. But how exactly that works out in practice is really very complicated.  I don't want to get into the details.  But we, and I think many other research universities, are taking a lot of legal advice on how the guidelines should be interpreted. And, you know, frankly, I can't emphasize strongly enough how difficult it has been to deal with this and how discouraging I think it is for, in particular for young researchers to sort of feel that they're working in this frankly hostile political environment.  It really is a very significant drag on the research.  I imagine we'll talk more about that in panel discussion. So there's a financial compliance with--and then there's also patent issues, and somebody here from Wisconsin, so of course WiCell has some very broad patents on primate stem cells which we have to work with, and so the terms of the license agreement include not just commercial terms but there are some ethical provisions that we have to deal with. And then there's a whole range of ethical and legal issues that I'll talk a little more about. So to do the experiment I just described for the Parkinson's patient, you have to go through a number of different steps.  So firstly, you need an institutional review board which would have to approve the protocol for removing stem cells and using nuclei from the donors.  They give informed consent, and so forth. Completely separate, IRB has to approve the protocol for retrieving unfertilized eggs from a woman donor and that's a complex issue as I think we all appreciate.  I mean, no invasive procedure is completely without risk and so those risks have to be minimized and very clearly communicated with donors.  There are also concerns about the commodification of eggs and the potential for financial incentives to encourage women, particularly poor women, to take risks that they shouldn't take. And so the IRBs have to concern themselves with those issues. In Massachusetts where Harvard is, we also have an old statute, I can't remember its full name, but we always refer to it as 12J, and that's a statute that was enacted long before any of this kind of stuff was envisaged.  It was from the early '70s, and it prohibits experimentation on the human fetus, and the language is pretty ambiguous and at some points it's called a fetus and at other points it's called an embryo, and so what one has to do under the statute is go to the district attorney for specific approval, an indemnification, a confirmation that what you're proposing to do will not violate this old statute.  And that has to be evaluated on a case by case basis.  This is not something which a single decision sets a precedent.  You have to go back every time you want to do this. And then plainly on top of all of that is Harvard's own internal ethical review process which is completely separate from the IRBs, and we did this, really recognizing that the role of an IRB is to protect human subjects, but I think we all recognize that stem cells, the embryonic stem cells in particular, but potentially also adult stem cells, raise ethical concerns that really go beyond the remit, of what's traditionally been the remit of IRBs. And so Harvard has set up its own review process that reports directly to the provost, it's separate from the Harvard Stem Cell Institute, so we're not, you know, we're not regulating ourselves, but people at Harvard are overseeing and regulating what we do. And this may sound like window dressing but it's actually not, it's actually the only thing that stands between us and reproductive cloning of a human being.  I mean, it's absolutely ridiculous that there is no prohibition or is no legal obstacle to cloning a human being, as I understand.  At least in Massachusetts, the only thing that stops us doing that is our own internal regulatory processes.  So these are important and we spend quite a lot of time, or people at Harvard, not me personally, have spent quite a lot of time dealing with those kinds of issues. And the legislative situation in Massachusetts is quite interesting, particularly at the moment it's been quite exciting.  I guess from Washington, Massachusetts may look like a sort of uninteresting, uniform shade of blue, but it's actually not.  The stem cell debate has really been quite lively.  So of course Massachusetts is very predominantly liberal and democratic and has historically been very sympathetic to biomedical research, and has a long tradition of course. But there's also a very strong Catholic presence there, and the governor of course is a Republican, Mitt Romney.  Apparently by today's standards, he's considered center-right.  He's also a Mormon, and it's also, to top if all, his wife has multiple sclerosis which is a disease that potentially some of this work might be able to help. So there's all these different tensions have been coming together, and what's happened in the last month or so, the leader of the senate, Senator Travelini [ph], has introduced pro stem cell legislation into the legislature, which we are very supportive of, Harvard is very supportive of. This would specifically endorse human embryonic stem cell research, including somatic cell nuclear transfer, but it would outlaw reproductive cloning, and so that's, you know, that's exactly where we are and we're very hopeful that this legislation will pass. It will certainly pass but the governor has announced, a couple of weeks ago, that he will veto it if it does pass, and he's put forth his own counterproposal and he's endorsed a procedure that's been advocated by William Hurlburt, a bioethicist at Stanford, which he calls altered nuclear transfer, and I and some of my colleagues have been critical of that idea, and I mention it may come up later on in the discussion. But, anyway, that's the governor's position and skeptics have pointed out that he may be trying to run for national office and bashing Harvard liberals plays well in the heartland.  I don't presume to judge his motives.  But in any case, we have an interesting political mix and an interesting public debate going on. How it will play out I think it's too early to say.  What's unclear at the moment is whether there will be the two-thirds majority in both houses that will be necessary to override a governor's veto. So I imagine we'll know the answer to that in the next few months and if the legislation does pass, then Massachusetts will become the third state, after California and New Jersey, to specifically endorse embryonic stem cell research, and to ban reproductive cloning at the same time, and I think many of my colleagues would agree, this would be tremendously helpful, because I think that the specter, the threat of reproductive cloning has been used somewhat indiscriminately to tar us all with the brush, with the same brush, even people who have no interest in doing it. And I think the strongest possible argument against that sort of slippery slope position is to say, well, we have legislation that stops you right at the top of that slope. In the current version of the bill there's no funding attached but there is discussion going on about possible funding, that will presumably be a separate bill.  The number of 100 million was floated by Travelini, so it presumably has some sort of credibility, but I'm sure there'll be a lot of debate before that's resolved. In the meantime, what are the sources of funding that we and others in our position can look to?  NIH of course funds a great deal of stem cell research, most of it adult, and I think the funding that is available for human embryonic stem cell research is very limited and I think most of my colleagues at the Harvard Stem Cell Institute feel that the federally-approved lines are really too limited to be useful, and everything that I've described with somatic cell nuclear transfer would be ineligible for federal funding because it requires creation of new lines after the deadline. So that's NIH.  There's of course state funding that I'm sure we'll discuss in more detail, great if you live in California but hasn't yet materialized for most states. There's certainly interest in the biotechnology industry but my sense is that that's still relatively still small, financially.  Big pharma clearly has the resources but hasn't yet committed them on a large scale, and that really leaves philanthropic donations which is what we at the Harvard Stem Cell Institute are primarily relying on, at least at the moment. And I'm sure that mix will change over time, but we really need philanthropic support in order to get this off the ground, on the scale to which we aspire. You may have seen this cartoon before.  I don't know if you can see at the back but it shows a scientist testifying.  It's a nice Washington cartoon.  Scientist testifying before a congressional committee, hanging up by his ankles, and a congressman here is asking him, "But other than that, how are Bush's stem cell guidelines affecting your ability to conduct research?" So, you know, I think this captures the sentiments of at least some of my colleagues.  It is a difficult political environment at the moment. But we also have many sources of encouragement from patient advocacy groups and from philanthropic supporters, and I think that spirit of optimism is very much exemplified by Christopher Reeve who of course died last year, and I think has been an inspiration to many of us in the field. And so finally, I wanted to say that we are very happy at Harvard, despite the awful weather, whatever Irv Weisman may be saying, we have no plans to decamp to California any time soon.  So I'll stop with that and look forward to questions in the ensuing discussion.  Thanks. MR. ENTINE:  Thank you very much, Charles.  We have one woman who I think has been waiting for quite some time to ask a question. QUESTION:  I'm Ann Mulkern [ph] with the Denver Post and I have a question about the push in Congress to pass a bill that would prohibit cloning and I'm wondering if you can talk about what that would disallow and what it would allow. I know that there's a bifurcation between people who believe that somatic cell nuclear transfer is cloning and people who don't.  So I suppose some of it would depend on how Congress worded that bill.  But if you can just explain what you're hearing and what it would allow and not allow. MR. JENNINGS:  I think the key issue is the definition of cloning and there are actually a number of bills floating around.  Others are probably better qualified than me to summarize the current status.  But there are bills that would specifically endorse therapeutic cloning while outlawing reproductive cloning, and then there is another bill, for example, the one introduced by Sam Brownback, that would outlaw both and would criminalize not only the research to create stem cells by nuclear transfer but as I understand it would also criminalize patients who take therapies based on that research, if and when they become available.  So even if you were to go outside the United States and receive treatment based on embryonic stem cells, returning to the U.S., you'd be subject to criminal penalties. So there's a pretty wide variation in the different bills, and I think it really comes back to this awkward word, cloning.  I mean cloning means making genetic copies and you can clone a gene, you can clone a cell, you can clone an organism.  I mean, it's such a broad term that I think it can only be usefully used with qualifiers, and I'm afraid that some of the people who are opposed to embryonic stem cell research have not always observed that distinction and the fear of reproductive is an effective argument in scaring people about cloning in general, including what we refer to as therapeutic cloning. MR. ENTINE [?]:  The House started talking about a ban on cloning in 1997, and the right, if you will, including the House leadership, believed that if you had a simple reproductive cloning ban, that that would take all the energy out of a broader cloning ban that would protect blastocyst and early stage embryos which they believed was essential, and so there was never an up or down vote in the House or in the Senate on a reproductive cloning ban because the leadership believed that that would weaken their hand. And there hasn't been down to this day. MR.     :  One of the lessons in language in such bills or drafts could be taken from what's happened at the United Nations over the past several months, where movements have been very strong on both sides to get a total ban, internationally, on the cloning of human beings, but permitting the cloning of human embryos, and the wording that finally was approved, after contentious discussion, and I'll read it to you, is that--it's a declaration.  It calls on all governments to ban all forms of human cloning that are incompatible with human dignity and the protection of human life. Those countries that have approved the cloning of human embryos see this--that's fine.  Those that are opposed to it see it as fine as well.  I mean, so, you know, what's in the--so read that, if you read that whole debate, it's kind of interesting as to how they came down to this wording. QUESTION:  Hi.  I'm Mike Bahr [ph].  I'm with the Kennedy Institute of Ethics at Georgetown and my question is specifically to Dr. Jennings but also to kind of Dr. Gearhart and Dr. Young as well, and you mentioned that you're critical of Bill Hurlburt's proposal and I'm just curious to hear why, and then Dr. Gearhart and Dr. Young, your thoughts on the proposal as well. MR. JENNINGS:  I think the first problem with it is--for those who don't know the idea.  So what Dr. Hurlburt has proposed is an attempt to get round what some people perceive as the ethical objection to deriving embryonic stem cells from human blastocysts-- MR. ENTINE:  Charles, he's the professor from Stanford? MR. JENNINGS:  He's a bioethicist at Stanford University; yes.  He's a Catholic theologian and also an MD. MR. ENTINE:  Okay. MR. JENNINGS:  So what he has proposed is you get round this problem if you are to do the following.  So normal somatic cell nuclear transfer, you would take a nucleus from an adult cell and you would transfer it into the egg and then activate the egg and the egg will begin then to develop, and then when it reaches blastocyst stage you derive embryonic stem cells. So some people believe that that egg is a human life, a human individual, and that it is fundamentally wrong to destroy it at any stage of development and so what Dr. Hurlburt has proposed is that you could do the following. So you would take the cell from the adult donor but before you put the nucleus into the recipient egg, you would make a genetic modification that would inactivate a particular gene that would block the development of the embryo at an early stage, and he cited evidence from mice, that such genes exist.  There is one in mice that prevents the formation of--or causes the breakdown of the trafectiden, those are the cells that would eventually give rise to the placenta. And one can presume, although I don't think it's actually been demonstrated, that such a mouse embryo would still be able to give rise to embryonic stem cells. So Dr. Hurlburt's idea is that you could also do this in humans, so you'd introduce a mutation and that embryo, although it would have to reach the blastocyst stage in order to be able to derive the stem cells, his argument is that that would not be a potential human being because it carries a mutation that dooms the blastocyst to eventual death. So you can see that it has some sort of surface appeal.  I think there are a number of problems with it.  I mean, the first is that this an enormous amount of work and we don't know if this is feasible. I mean, I'm not a hands-on embryonic stem cell researcher, although I do have a lot of lab experience, but I've talked to people who actually do this stuff, and they estimate that it would take two to three years, even to find out whether that procedure can work. The fact that you've identified a gene that blocks development in a mouse doesn't mean that the same gene will have the same effect in humans, and so you would have to go and try a number of different genes until you found one that works, and it's not just a question of doing it once, if and when--I mean, I hope when rather than if, somatic cell nuclear transfer reaches the point where it is therapeutically useful, where you can use it to create cells that can repair damage to diseased organs. Under Dr. Hurlburt's proposal, you would have to do this every single time.  So it would be an enormous additional obstacle to therapeutic application of stem cell research. And then another scientific problem is that we know that there are other things wrong with those mouse embryos, apart from the placenta, even if you can fix the placenta defect, and there are tricks for doing that, the mice still go on to develop other abnormalities.  For instance, I think the gut is abnormal.  And so that raises a question, well, could these stem cells contribute to not forming normal gut cells if you wanted to use them for therapeutic applications in gut disease, for example.  So the stem cells would carry a mutation with unknown consequences, and so the one thing you would know about them is that they are genetically abnormal cells of unknown property. So those are the scientific problems.  But I think the ethical issues, that this really seems like a very unsatisfactory compromise position.  I mean, if you believe that a blastocyst has moral status, then how can it be okay to introduce mutations that doom it to die?  I mean, why is that any different from introducing a cystic fibrosis mutation or a Huntington's mutation that will kill the individual a few years later. So if you believe that life begins at conception, that proposal I think is unlikely to satisfy those people.  If like me, and many of my colleagues, you think that the blastocyst is not morally the equivalent of a human individual and that it is ethically justified to destroy human blastocysts in order to look for cures for serious diseases, then there is no ethical gain here and it's simply an enormous drag on the research. I think, you know, I'm sure that the proposal has been put forth in good faith but I'm concerned that it's practical effect will be to really impose a moratorium on stem cell research, if, for example--and this is Governor Romney's position--is that somatic cell nuclear transfer is not acceptable unless you go through this altered nuclear transfer procedure, and that's effectively a two to three year moratorium until we even know whether it works, followed by an indefinite drag on the research. So I think it's very unsatisfactory, both scientifically and ethically. MR. ENTINE:  Any other comments from-- MR.       :  I think Charles has said it all, and more. DR. YOUNG:  I love your answer.  I want to point out that it is equally--a hammer is equally as effective, a means of preventing these blastocysts from developing further, much cheaper, and why is it that we don't have a hammer to do it?  Why must we use this particular method to do this? So, you know, this is really creating the paranoia and the conscience of the critics of the technique, and it's really not addressing the issue of preventing reproductive cloning. MR. ENTINE:  I just thought of one question for you.  I think--and Carl said this as well.  I think there was a genuine sense, that when President Bush issued his edict in 2001, that he was trying to strike a balance, that he clearly was trying to leave open the door for some kind of research in this area but deal with a constituency out there which even have represented a majority of Americans on this issue, partly because perhaps people didn't understand it or maybe because they did understand it but were opposed to it for ethical, ideological, religious reasons. Considering the situation now, do you foresee--can you conceive of a way to lead us out of the kind of gridlock that we are on this issue, that takes into account that there's a significant portion of the American population that is uncomfortable with going ahead with some types of this research? Is it going to come down to a shootout, so to speak, between the people who view that the science is pretty clear on this, and others opposed on the other side?  Is there any avenue that we can pursue, that might break this deadlock, that you can think of? MR. JENNINGS:  My own view is that it would be an enormous advance if we could enact some kind of convincing ban on reproductive cloning, and then I think this concern that sort of looms over the whole discussion would just go away.  I think that would be a tremendous help. MR.       :  I was just going to say two things.  One is that deploying both state by state and nationally is pretty convincing, and it's by no means close.  Most people, when they understand, at any level, what's involved, you end up with a sort of two-thirds/one-third split in the population for this technology to move forward. MR.       :  Now some certain things shouldn't necessarily be decided on a major-- MR.       :  And overwhelming people are against reproductive cloning to make babies, and about two-thirds of the population is for stem cell research to pursue cures for these diseases.  But I think there's another point, which is that if we make, at some future time, a breakthrough in which there is a real therapy for a real disease, and that's available anywhere in the world, it will change the political dynamics of research cloning enormously. Right now, this is speculative, but imagine--do the thought experiment.  If there were a therapy that were available in the U.K. today, for Parkinson's disease, and that were illegal in the United States but legal in Great Britain, and you're the parent, you know, or your parent has Parkinson's disease, you know, would you take advantage of the therapy or not? And I think that it's important to look into the future when therapies based on this technology may well be available and how that will weigh into a new political dynamic. MR.       :  I think, to build on David's comments, we have literally thousands and thousands of patients contact us for therapies.  Desperation, yes.  But what you also see now are clinics, outside the U.S., spring up, offering bogus therapies for stem cell implants.  One that maybe Wise can address, now, near Beijing, for spinal coordinated injury, for a variety of neurological diseases.  And people are flocking to these, absolutely flocking to these kinds of clinics, and so much so that there's a concern in this country, in the medical community, about at least investigating and trying to make a statement about this. There's the desire here, obviously, for cures, or therapies, is enormous.  So there's this background there.  The second is that we are seeing, now, some remarkable recoveries with respect to heart disease, congestive heart failure, among them, stroke.  Of patients going to South America to receive their own bone marrow treatments, which they can't receive in this country for this type of therapy yet.  It hasn't been through the FDA procedures but yet it's remarkably effective, at least in the short term, the two to three years that we are absolutely aware of.  And one of the concerns that one could immediately say, not only where we are in the science and the translational work with the stem cell work, but how long it's going to take us to get through the clinical trials, that this will go online in this country. So I concur with what David was saying, that if we could come up with at least one type of a cure, I mean based on this, I think it's going to move a lot.  You've got to remember, I mean, Laura Bush made a comment during the campaign, about we haven't even, in our stem cell field, cured a mouse.  I don't know how many people remember this, but this was a comment that was made. Now that comment we could tell you was completely false.  We've cured more than a mouse with some of the stem cell technology.  But it's going to take a while for us to get it into this clinical phase and to do some--we're now talking four or five years beyond, I mean, so I think this particular president is probably safe in feeling repercussions of this, cause the mechanisms of getting this achieved take much longer. MR.       :  Well I do think that getting a breakthrough therapy would have a huge push in getting the parties to try to find common ground, and I do think that before the last campaign, and the issue got so politicized, that there was some movement toward common ground.  I think you also need to divorce the cloning issue from human embryonic stem cell research.  Therapeutic cloning is one strategy but there are other strategies and the success of human embryonic stem cells research doesn't rise and fall on the issue of therapeutic cloning. Also, IVF clinics are legal, and they're accepted, and they're accepted on both sides of the aisle, and they're not going to be shut down, and all these clinics have access embryos that are ultimately going to be destroyed, and, you know, there is common ground there, that if you can't use these excess embryos, then why are you allowing IVF clinics to persist? So it seems to me the parties could come together but it's been so politicized, that people get steeled in their positions, and what we need is a breakthrough therapy to push us there. MR. ENTINE:  I think we're going to wrap up the morning session right now.  These gentlemen will have a chance, I think, if they can stay, to participate in the afternoon as well, but we have, as you know, a wonderful guest speaker for lunch, Francis Fukuyama, and then in the afternoon we'll focus a little bit more on some of the venture capital issues and the actual experiences of companies that have been struggling with the research protocols and the funding issues in trying to launch various kinds of stem cell research, not just human embryonic but also core blood and other aspects as well. So why don't you take a few minutes break and then we'll have lunch.  We're going to be clearing the tables and you'll be able to have a buffet lunch in about ten minutes or two.  Thank you. Thank you all for these panelists.  Please give them a hand. [End tape 2, begin tape 3.[ LUNCHEON KEYNOTE SPEAKER MR. ENTINE:  I think we're going to get started, beginning the luncheon keynote.  I cannot imagine a more appropriate person than Francis  Fukuyama to guide us through the political and scientific shoals of the stem cell debate. Dr. Fukuyama is the Bernard L. Schwartz professor of international political economy at the Paul H. Nitze School of Advanced International Studies at the Johns Hopkins University. Because of his far-ranging interests and intellect, he could be here today discussing any number of issues, including the contentious debate over nation building in Iraq, on which he's taken some provocative positions. His most recent book, State Building: Governance and World Order in the 21st Century, is now in book stores. Dr. Fukuyama has spent much of his career dissecting international politics.  He's made three stops, over the past quarter century, at the Rand Corporation.  He has twice worked at the State Department, once as a specialist in Middle East affairs, and then as deputy director for European political/military affairs. More recently, he was professor of public policy at George Mason before joining the Johns Hopkins. Beginning this summer, he'll be taking on a new position, directing even more of his efforts at examining international politics as he takes over as head of the international development program at Johns Hopkins. Dr. Fukuyama achieved a rare distinction for an academic and intellectual in 1992, when his book The End Of History, transformed him into an international celebrity.  He advanced the controversial thesis that liberal democracy and market capitalism have vanquished competing ideologies.  He followed that best-seller with, among other books, Our Post-Human Future: Consequences of the Biotechnology Revolution, which argues that the human genomic revolution risks radically ordering human nature. He writes there may be sound, nonreligious reasons to put limits on biotechnology, themes he will be talking about today.  That provocative book led to his appointment as a member of the president's council on bioethics, which incidentally is headed by Leon Kass who's a fellow here at the American Enterprise Institute. Today, Dr. Fukuyama turns his attention to the thorny regulatory issues that have developed since President Bush revised U.S. stem cell policy in 2001. Dr. Fukuyama. DR. FUKUYAMA:  Thanks very much, Jon.  I'm really pleased to be able to address this conference.  I'm sorry, because of teaching duties, which we professors periodically are forced to do, I has to miss this morning's session.  But I do want to report on the results of a study group that I've been leading, in parallel with my work on the president's council on bioethics, on regulatory issues in human biomedicine, which is contained in this briefing. Over the past two years, we've been running a study group, here, in Washington, D.C., that's had about 40 permanent members, some of them here, like Marty Apple, the Council on Scientific Society presidents were a part of this group.  we've had a number of presentations, including Lori Knowles, who will be speaking this afternoon, talk to our group, and we tried to get as many of the stakeholders in the whole area of reproductive medicine, biomedicine, around the table to talk about the future of regulation, and what I say today is really the result of, you know, my thinking about this process. It does not have the endorsement of the different members of the study group.  If you're interested in seeing further, you can download, I believe this presentation, and a lot of other materials, at the Web site of our organization, biotechgov.org.  Next slide, please. Now this is an outline of what I'm going to cover.  I'm going to skip over a few slides because I think some of it will have been covered or will be covered in other parts of the conference today, but I'm going to talk about the domain of inquiry, about the area that I think really needs regulation, some general considerations about regulation, and then what are the ends?  Why do we want to regulate any part of human biomedicine in the first place? Then talk a little bit about the current legislative and regulatory framework, it's a moving target, and I know that you have talked about that quite a lot.  Proposition 71 obviously altered that landscape tremendously when it was passed last fall. A little bit on other countries.  Next slide, please.  And then we basically have a proposal for a new regulatory agency that will cover reproductive medicine, that's modeled on similar agencies in Britain and Canada, and then finally conclude with some international considerations. Now the domain of inquiry, the area, there's obviously a huge domain that is currently regulated and that could conceivably be regulated in different ways in the future.  We have defined it as technologies and medical practices related to human reproduction and it includes both the practice of medicine, having to do with ARTs, and also with research, including the topic of the conference today, stem cells.  Of course stem cells are not necessarily used for reproduction but it is so intimately bound up in reproduction, that I think it is really not either practically or theoretically possible to separate it out. And so some of the activities that would fall under this general domain of activity are listed in the last bullet, prenatal genetic diagnosis, various forms of cloning, germ line, and other novel forms of reproduction. Now I have to lay my cards on the table.  You know, this issue--and in fact I think the reason that we've not going to adopt anything like my proposal any time in the near future, is of course because of the moral disagreements that exist in this country over the status, moral status of the embryo, and I'm just going to tell you what my position is. I believe, as, I would say a fair number of other members of the current bioethics council, that human embryos have an intermediate moral status, that is to say, they are not full human beings from conception but, on the other hand, I believe that they have, you know, a moral significance that makes them different from just another clump of cells or a tissue culture. And therefore my position, you know, derives from that.  It means that I believe that embryo research and stem cell cloning are legitimate, but as befitting something with intermediate moral status, it is something that needs to be done under a regulatory framework. For example, cadavers you cannot simply toss in the dumpster, because we treat them instrumentally, we are willing to use them in medical training and in research, but we also pay them a certain amount of respect and I believe that, in my case, embryos would fall under that same category. Now whatever you regulate you get less of, and I think here especially at AEI, you don't have to tell people that, and so therefore I do think that the burden of anyone that wants to regulate, the burden should be to explain why this is necessary. However, I do believe that in this particular area regulation, careful thought to regulation would actually be a stimulus to advances in science, and I simply pose the case of the HFEA, the human fertilization and embryology authority in Britain.  It is a very strict regulatory of embryo research but they permit research cloning and stem cell research, and Britain is one of the most advanced countries in that area and it's perfectly compatible with a kind of regulatory framework of the sort that I believe this country needs. Some people talk about regulation as if, you know, this was the first time they've ever heard of this, but in fact we regulate human biomedicine very extensively, and the idea for a new institution I think is one that also deserves some thought, and I'll just give you this parallel with prior regulation in other areas. The Interstate Commerce Commission was set up in the late 19th Century to regulate railroads basically.  When trucking came along in the first decade of the 20th Century, it was added, in the Hepburn Act it was added to the ICC's portfolio of duties because people said look, it's simply another way of moving goods across state boundaries. I think most experts in regulation think that that was a terrific mistake because the economics of trucking and railroads are just very, very, very different, and so when airplanes came along, it would have been possible to say let the ICC do it, an airplane is just another way of moving a cargo from one state to another, but in fact they set up a new agency, or a couple of new agencies, the Civil Aeronautics Board and the Federal Aviation Administration to regulate airlines. And so we face, I think, a similar juncture right now.  We have a very extensive system for regulating human biomedicine between the FDA and the NIH's control over federal funding, but I think they're a little bit like the ICC because I think that some of the issues that we're going to face are ones that these existing agencies or regulators are not really equipped to handle. Now this is why I think that we need to regulate, and I'm going to go over, you know, some of the ends that I believe biomedicine ought to serve, in a statement of principles.  This is actually modeled very much on the Canadians' approach in their creation of the Assisted Reproduction Agency of Canada over the past year. Now these are the general ethical principles and I don't think that they'd be terribly controversial.  These are the ends that regulation is supposed to promote.  First and foremost is the well-being and health of children, well-being and health understood in a broad sense, not simply the physical, you know, the bodily health, but also the psychological and mental health of children, which may affect, you know, issues like, you know, the health of somebody that is brought up using a very novel or different reproductive technology that would put that person in a very, very different relationship to his or her parent or parents than all the other children that had been born in the world. And it's important to note that this principal comes prior to the important but secondary issue of the access of infertile couples to ARTs.  I think that that is a very important function, that that practice of medicine provides, but I think that the interests of parents are really secondary to the interests of their children, and of course parents have the interests of their children at heart but there are plenty of cases that you can cite where those interests actually diverge, and so I think it's important to put the priority on the interests of the children first, and then the others I think are fairly clear. Well-being and the health of women in terms of oocyte donation, this has been discussed, you know, quite extensively; free and informed consent.  There's a big information gap with regard to ARTs, you know, currently, and the long-term health consequences, and that is something that, you know, needs to be rectified, if you are going to have free and informed consent.  Limits to commercialization. And then I believe this last principal is important.  That biomedicine really ought to be primarily directed towards therapeutic ends rather than enhancement purposes. I know that it is, in some cases, difficult to distinguish between the two, the same technology or practice, medical practice can lead to either enhancement or therapy, but I think that it is perfectly within the purview of society to say that we want the emphasis to be on therapeutic uses. Now this set of ethical principles leads to a list of practices that would be banned under my regulatory system and another list that would be regulated.  Under the targets of outright prohibition, again this tracks the Canadian list quite closely, we would ban reproductive cloning, chimeras and hybrids, germ line modification.  There are certain new reproductive possibilities, you know, the fusing of embryos, or walking, you know, an adult stem cell back to the status of an oocyte, or harvesting fetal eggs, a lot of thing that are kind of over the horizon right now but would lead to very unusual relationships between the children that are produced by these technologies and their genetic forebears, and I think that I would put most of those on the ban list, and finally the patenting of human embryos. Other practices I believe should be permitted but regulated, and that includes research cloning.  I personally believe that that should be permitted.  I will point out, however, that the entire difference between the British and Canadian systems is over this single issue. The Canadians have an institution that looks, and in fact it's been deliberately modeled on the British institution in terms of what it looks like and its regulatory powers, but the big difference is that the Canadians prohibit research cloning and the British do not. And I would say that, you know, much of what I say in the subsequent slides would actually also apply if you wanted to ban research cloning. But as far as I'm concerned, that's not the targeted prohibition. Then PGD, biomedical research, all biomedical research involving early stage embryos or blastocysts, practices like sex selection, commercialization of certain elements of reproduction.  I think all of these should be permitted but carefully regulated. Now I'm just going to go over this.  I think most people that are in this business are familiar with the overall framework but I want to point out some of the gaps and weaknesses of our current regulatory framework as we go down that list, so let's begin with the federal regulators. The FDA of course--you know, we have a funny system in this country, where we have extremely good regulation in certain areas, and in fact people would say over-regulation, and then we have entire domains that are essentially not regulated at all, and I think that's very much the case, and the FDA, in terms of drugs, medical devices, and biologics, you know, they regulate very carefully but they only regulate on the grounds of safety and efficacy and they do not regulate the practice of medicine which is where most of the ART work takes place, and again the NIH that really sets the rules on stem cell research sets--you know--it is allowed to set rules based on ethical judgments, ultimately, that are made by the political system, but it only regulates federally-funded research, and it has no impact on the--or no direct impact on the private sector. And there's other federal legislation that is more directly geared towards reproductive medicine, the fertility clinic success rate in certification act, which actually has good language in it, and it simply has just not been, at this point, implemented very broadly. Research of course is subject to all of the human protections provisions, IRVs, and so forth, although I do not believe that the current law in this area is sufficient to do the kinds of things that I think will be necessary in the coming years, and then of course the control of federal funding has been prevented by the Dickey amendment which is the current impasse that we're in at the present moment. State regulation.  This is something that has blossomed, of course, and I know you've discussed this in your morning session quite substantially.  Of course states have always been the primary regulators of the practice of medicine.  You now have cloning bills and pro stem cell research bills that are springing up, so that we now are going to, I think, end up--in fact a colleague of mine on the council was commenting that we're heading towards a situation where you have blue state and red state signs, essentially very different regulatory systems, depending on the underlying politics of the part of the country that you are in.  Most of the cloning bills, by the way, even the ones that ban things that I would ban, like reproductive cloning, do not go nearly far enough in terms of setting up what I regard as a long-term institution that is able to make decisions, not just on cloning but on a whole host of other technologies and medical practices that will be coming down the line. And then you have direct legislative intervention.  For example, Senate bill 303 would permit research cloning and prohibit reproductive cloning.  But I think, you know, is grossly inadequate in terms of the kinds of protections that I think would be necessary, if you are going--I mean, that's basically my position.  I believe that this kind of research is legitimate but I do not believe that any of the current legislation that has been introduced into Congress goes nearly far enough in terms of setting up a long-term institution that will be able to make judgments about how to actually implement this kind of a ban. And then finally, the practice of medicine in assisted reproduction is largely subject to self-regulation.  I think that self-regulation is desirable where it can be done effectively, because, you know, the doctors and the clinics that are involved in this have an interest in their reputations, in providing a good product to their clients, and I think, by and large, they do a relatively good job, but that regulation is largely hortatory and there's no enforcement, and there are cases where members of these organizations have violated their own rules and, you know, there simply have not been consequences. Now I'm going to skip over this slide.  This is just about the HFEA in Britain and if you'll keep going, there's a new regulatory authority in Canada that was put in place, and I guess Lori has told me that they're actually not going to get up and running until 2007.  But they passed the basic legislation last year, in 2004, to create a Assisted Human Reproduction Agency of Canada.  So if you could go on. Now this is the point that I made earlier.  If you just compare these regulatory agencies, they are virtually identical in every respect, except for their attitude towards research cloning, in which the British regulate it and the Canadians prohibit it. Now that makes a tremendous amount of difference, you know, in terms of the political debate and in terms of how people in a polarized society will line up in support of one institution or another.  But as I said, the actual institution is extremely similar and the same kinds of institutional powers can be used either to facilitate research cloning or to ban it altogether. And this is just a partial list.  In the full version of the study that we hope to publish by late spring, we actually go through very comprehensively. But this is simply to point out the United States is way behind the curve in terms of regulation of this area of assisted reproduction.  There are about five countries that have actually set up completely new regulatory authorities in the last few years.  Virtually everybody else has published regulation or legislation in cloning and other aspects of embryo research. And so we really stand out as the country that does the most of the stuff but is really in a certain sense still the Wild West as far as knowing what our own rules for doing this should be. Now I'm just going to go, I'm working up to my proposal, but I want to go over some of the possibilities for how to handle this set of issues, this coming set of issues in assisted reproduction, and obviously you can stick with the status quo and try to use the existing regulators, the FDA and the NIH, to expand their powers to cover some of the new technological developments. You can have Congress, you know, pass further bills and legislate directly.  You can improve self-regulation on the part of--in this case it's primarily the ART practice of medicine, or you can do what I would prefer, which is to create a new regulatory authority. Now if you use the existing statutory powers, there are obviously big advantages to this.  Nobody likes to create unnecessary new regulators here in Washington and it is conceivable that certain existing powers of the FDA, for example, the FDA has actually tried to exert authority in order to ban reproductive cloning on the, I believe somewhat legally dubious grounds that an embryo is a biologic of some sort and therefore falls under its powers to regulate biologics. But I believe that ultimately the gaps that I pointed to earlier in the FDA's authority and the NIH's authority make this not a terribly attractive option, and I think, for example, if the FDA's assertion of authority over reproductive cloning were challenged in court, the lawyers that we have talked to, and of course during this project, are not sure that those powers would actually, would stand up if it went through the court system, and this is an important point. I think that the design of any new regulatory institution really has to take account of a long-term effort to incorporate public participation to a much greater degree than exists currently and I don't think any of the existing regulators still know how to do this properly. Direct legislative intervention.  Now I want to make this absolutely clear.  On the most morally contentious issues, things having to do with the moral status of the embryo, there's absolutely no question that somehow this society could delegate the authority to make decisions like this to a regulatory agency.  This is a decision for Congress and for the courts to make.  You know, in Roe v. Wade, we've made a decision on the legality of abortion and I think, you know, the legitimacy of stem cell research is something that the political process really has to speak on. What I think needs to be regulated is the implementation of the broad policy and then a myriad of, you know, much smaller decisions.  You know, what is the threshold between therapy and enhancement in the use of a particular technology?  Is it legitimate to, you know, create a child, simply to have that child donate bone marrow to a sibling?  Congress does not have the time or the energy or the expertise to make detailed pronouncements on this, and so this is preeminently a kind of decision, once Congress has set the broad policy, again the status of the embryo thing is something that really has to be done at that level. The other, you know, powers are ones that really need to be delegated to a much more specialist kind of body. So that's why I think Congress cannot really--and I hope Congress will actually not try to wade too directly into this area. Self-regulation.  Again, I think the limits to the current enforcement capabilities is problematic.  The other thing is that if you look at self-regulation, self-regulation happens in the shadow of formal regulation.  I think that this is true in a lot of other, you know, areas that are subject to self-regulation.  That there's no clear dividing line between sectors that are simply self-regulating and those where there are statutory powers of enforcement that the government can call up. And so I think that in fact a lot of the implementation of any regulatory scheme will actually have to be done through SART and ASRM, and so forth, the groups that do the current self-regulation, but there needs to be,  you know, in a certain way, a bigger stick, you know, that's help in, you know, in the background to make this kind of thing work. And then finally, my proposal to create a new authority.  I believe that, you know, this is a sufficiently novel set of challenges to regulate biomedicine, in which you incorporate ethical concerns that I just don't think that, you know, the existing regulators can do it, but, again you are creating a certain precedent for regulation in this area, and I know from a lot of members of my own study group that this makes people extremely uncomfortable. Now some general considerations.  If you're designing a new regulatory institution--this is actually where my new--I mean, I spend a lot of time thinking about general problems of governance.  I'm going to be doing it primarily in a developing world context, but in a certain sense, a lot of the basic principles are very similar. The institution that I would like to see created in this country would be modeled on the British HFEA or the Canadian assisted human reproduction agency. The general design goal of any regulatory agency is to avoid these extremes, either of agency capture by the regulatees, or excessive polarization that puts the regulator into an excessively adversarial position vis-a-vis those that are being regulated, and I think that the problem in this country--I'm going to try to demonstrate this with some numbers in the next few slides--is that if you look simply at the existing interest groups, the polarization that is preventing forward movement on legislation on cloning or stem cell research, or anything else, is the result of a polarization, on the one hand, between the scientific research community and the, you know, the biotech industry on the one hand, that basically wants to move forward with a minimum set of rules, and the pro life community that wants to ban things across the board. And I believe that the American public actually is not in either of these camps, and so we need to somehow engage the public in order to exploit the fact that people are actually more moderate than the existing parties to this argument. And so we're going to try to give power to an independent regulator that will draw on new mechanisms for soliciting public participation, that in some sense can draw on this middle ground that I think actually exists out there in American society. Now this is the deadlock.  I mean, I think that we are subject to real political failure right now because we are, as I said, we're not nearly as polarized, the public is not nearly as polarized as the actual interest groups.  Now just to illustrate this, attitudes towards research cloning, which the scientists--and I personally, I do not have a problem with this, and certainly the scientific community wants this very badly. Now it turns out that if you look at all the polling data on this question, it depends obviously on how you ask the question, but if you take a relatively neutral formulation of a question of should we permit research cloning, the public is about two to one opposed to it. So I think it's fairly clear that this is not a majority position in the United States and so that's to show that the position of the scientific research community is really not that of the general American public. On the other hand, on the question of stem cell research, I think it's pretty clear that at least in cases where you're using excess embryos, the general public in the United States is not in support of the president's current policy, so that I mean, it depends on the poll that you pick, but you get, you know, two-thirds to three-quarters of the American public saying that they actually want to see stem cell research take place using excess embryos.  And so this was the ground for my saying that actually most Americans are somewhere in this, about 70 percent of them are somewhere in the space between the two loudest voices in the current debate over stem cell research. Now how do you bring this forward, so that this becomes, you know, politically--this middle position gains a certain amount of traction?  Well, I think you need an independent agency.  In the body of our report we've got lots of, you know, specific design recommendations.  I mean, you can either have a multiple, like in the British and Canadian cases, you can have these agencies controlled by boards, in which case you kind of boot the problem to the selection of the commissioners or you can have a single head of agency. And then the most important thing I think is really the second bullet, the mechanisms for public consultation. Now we have built into American administrative law a lot of existing mechanisms like notice and comment and public hearings that are meant to elicit public discussion. I think that a lot of the existing ones aren't very good, quite frankly.  I mean notice and comment almost never yields any genuine modification of agency positions, once the rule is published in the Federal Register.  A public hearing sometimes actually further polarize, you know, the parties to debates. In other cases, there have been more novel kinds of attempts to create a deliberative mechanism within the administrative agency through consensus, conferences, and citizen panels. This is something that's actually quite widespread in Europe.  It's been used by some American administrative agencies in the area of environment and so forth.  I mean, the idea is that, you know, people actually don't have fixed opinions, particularly on novel, you know, technological innovations.  They don't have the information to make informed judgments about what is appropriate, but it is possible, through a consensus conference, where they're briefed on the basic, you know, nature of the technology and some of the legal and moral issues that are involved, in a couple of days of discussion, they're actually pretty good at understanding the issues and coming to a much more informed decision as to what their preferences are. And so it's a kind of managed way of getting to revealed preferences, that shapes preferences as much as it simply polls it. And so I think that, you know, what we're hoping to do in the design of this institution is to create a form of public participation that is a buffer, actually a buffer to the current interest group polarization, and that, you know, leads you to some delicate design decisions, who should be consulted.  Obviously, the stakeholders, you know, the stakeholders will be part of this process, as in the case of any form of public consultation.  But, you know, since there's this middle, this much more moderate middle that does not--there's no NGO in the country that represents the views of that 70 percent of Americans that I believe are in the middle on this debate. If you held a public hearing and said everyone interested in this question of stem cell regulation, please show up and state your opinion, there will be no group that will represent, you know, this majority of Americans. And so the question is how do you get to that.  We have very specific suggestions for, in a way, guiding and promoting that opinion, which I would be happy to share with you.  We actually have an executive summary of this report, although we don't have, you know, the full 400-page document that will support this. But it is that kind of an institution that I think we're hoping to get towards. So therefore, yeah, I guess this is a--I was getting a little ahead of myself--but this is the, you know, the overall structure.  Public participation involves things called deliberative panels, which is a kind of very specific way of doing survey research that includes an element of deliberation and a consultative college that involves the use of, you know, electronic mediation as a way of getting at public opinion. But these are all kind of details that I think are not of essence at the moment. Constitutional constraints.  I mean, you can read this slide very quickly.  We basically don't think--I mean, there are potential constitutional challenges but I think, ultimately, they are not going to--I mean constitutional challenges to the constitutionalness of creating such an agency, and I think ultimately they will not stand. And then finally, there's an international dimension to this because you can have--I mean, you already have jurisdiction shopping across the different countries that do stem cell research and I think that ultimately, this is a problem that will have to be addressed, but I think that it is very, very premature to talk about international regulation before the biggest country in the international system has made up its own mind as to what it wants to do in this area. And so I think we Americans need to get our house in order before we go to the U.N.  We haven't had that great a relation with the U.N., anyhow, in the last few years.  But certainly, it's premature to talk about internationalizing this before we, as a country, have done this. So as I said, if any of you are interested, you can either go to our Web site, or if you want to contact me, I would be happy to share these slides and our executive summary, and we do plan to roll out a fuller version.  We're going to have a conference, probably here in Washington in something like the May-June time period, you know, to lay this out a little bit further, and I guess just to conclude, I would say that I have no illusions whatsoever that anyone on Capitol Hill is going to see this briefing and say, ah, yes, let's go set up this kind of agency tomorrow and then pass the necessary powers, you know, statutory powers. I do think, however, that we need to start talking seriously about the structure of a regulatory institution.  I mean, I've been on public record about Proposition 71 in this regard but I think that if you look at the governance mechanisms that are defined in that proposition, they are terrible.  They are very poorly designed with regard to things that people in the governance business understand you have to design into a regulatory institution right from the get-go, and it's very complicated, it takes a lot of time to create these institutions, and so we need to start thinking about it. And then, when the political conditions I think are right, to break past the current logjam that's preventing progress on a federal level, I think it'll be much preferable, rather than this hodge-podge of red state and blue state, you know, state level regulation of this issue, to have a single, more liberalized federal policy that involves some of these regulatory mechanisms that I've outlined here. So thank you very much. MR. ENTINE:  Dr. Fukuyama has graciously said he would take a few questions.  I just have one, referring to just the last statement that you made, and maybe you and David could chat about this for a second, but what specifically do you feel are some of the governance problems associated with Prop 71 and David [inaudible]. DR. FUKUYAMA:  Well, you know, I understand that this is really being debated, I mean the specific implementation, but if you read the actual rule for the, you know, the governing body that will disburse this very large amount of money, it doesn't have any of the usual kinds of protections that you build in. You know, the problem of governance, whether it's public or private, is pretty much the same.  I mean, all institutions have boards that are supposed to be independent of the actual management of the organization and the interests of the boards are supposed to be different, and not aligned with the interests of the, you know, beneficiaries, or first of all, the management of the institution, and then the beneficiaries or the clients that the institution is designed to serve. You know, I think that simply does not exist in the way that the regulatory structure for Proposition 71 was designed in the proposition itself, and in fact, this is on one of my slides, but California actually did have a fairly-- [Start tape side 2B.] DR. FUKUYAMA:  [in progress] and actually, if you go back to that legislation, it was pretty good, I think, in terms of human subject protection and other kinds of, you know, regulatory constraints under which this research could be done legitimately, and Proposition 71, it's actually weakened, you know, that prior legislation, so that you won't even have, you know, the same kinds of standards that exist for federal, you know, human subjects protection in federally-funded research. So I think that, you know, there are a lot of issues that I hope the people that are actually putting this into place will take into account and, you know, just the scenario you really want to avoid is putting the foxes in charge of the chicken coop, and then having the fox run off with the chicken, and then, you know, and the situation is so ripe for that kind of conflict of interest, that you could easily imagine this thing being tied up for many, many years in the courts as people make kind of elementary mistakes, that I think a better designed governance mechanism would avoid, but does mean going a little bit slower in this area. MR. ENTINE: [off-mike]  David, you could probably pick up some of this more in depth later [inaudible] a brief comment now.  [inaudible] some of the more extensive comments for [inaudible]. MR. GOLLAHER:  As I said before, I think that the governance, the independent citizens oversight committee that was designed and plugged into the statute from the get-go is a camel, and it's a loosened, baggy monster.  I'm less worried about the conflict of interest, because I think that as we move forward, that there will be plenty of mechanisms, in fact perhaps too many mechanisms that allow oversight.  The institute, for example, in its management and in its board meetings, is subject to all California's public disclosure requirements.  That would be the same for any part of government.  It'd make it impossible for two or three people to meet together and discuss business without calling a public meeting, which I think is crazy. But I agree that the structures are inadequate to the work.  They were created for political reasons, not--or managerial ones, and not to, you know, run a great grant-making institution. You know, I don't think the foxes, whomever they may be, are remotely in a position to run away with the $300 million a year.  I worry very much about creating an effective organization that can identify the best research and get it done in an expeditious fashion. So I think I'm far less worried, as a Californian, and as someone who's--for a while--and who's on the, works with the state legislature on the cloning commission, I'm not worried about moral failure as I am worried about institutional and managerial failure, and I think those are real dangers and [inaudible]. MR. ENTINE:  Any questions for [inaudible]? QUESTION:  Dr. Fukuyama, I was on Capitol Hill in the fall- MR. ENTINE:  Would you please identify yourself. QUESTION:  I'm sorry.  I'm Greg Shuckman [ph].  I'm the chairman of the National Conference on the Advancement of Research.  Capitol Hill, we had a bipartisan press conference, where there were patient advocacy groups there, bicameral, bipartisan call for stem cell research.  The patient advocacy groups represent more than 140 million people, they said.  And I was looking at your poll data, and you get into the semantics of, you know, destruction of embryo versus therapeutic stem cell research. You talked about the scientific illiteracy that we have up there, and it's complicated now by the Davert [ph] rule and Supreme Court, and et cetera, et cetera. I'm trying to get my head around this idea, that in creating such a regulatory agency, ultimately, you're going to have to work around the bipolar sectors on both sides, and dealing with a Congress and an administration that is largely scientifically illiterate, where it's very easy to get to the bumper stickers of demagouging the issue.  So maybe you can talk a little bit more about how to navigate that stream. DR. FUKUYAMA:  Well, you know, I don't think that the administration and the, you know, the pro life community has any monopoly on demagogy and, you know, using poorly--you know, the fact that the public is, you know, subject to lots of, you know, false hopes, and so forth, in promoting its side of the debate. I think that that is a fault that exists on both sides of that.  You know, my only point was that if you look at the, you know, the politically active participants in this debate, they really do represent views that are, you know, as far as we can tell from the poll data, not broadly representative.  They do not represent anything like majority positions, and I think simply if you count up the memberships of all these disease advocacy organizations, you know, you're--I mean, that's not the way to judge, you know, what the depth of support for something like research cloning is, because there's much more, you know, specific and targeted polling data on this particular subject. So, you know, there are some areas in regulation, if you call a public hearing and you just let show up who, you know, whoever wants to express an opinion, you actually will get a pretty good cross-section of the American public. Like on most environmental issues, now, the environmental community and the business community, I mean they've been at it for, you know, 30-40 years, and so they've very heavily--and in fact you get too many groups showing up that want to express opinions. But in this area, because it is relatively new, the actual existing interest groups I think are, you know, in the state of formation, obviously the ones that have had the most direct stake in this, are the ones that, you know, have shown up at the table first, and that's why I think you cannot simply rely on, you know, the people that talk the loudest to actually--and say, well you sum those up and that's what the American people think. So maybe this will change over the next, you know, over the coming years, as people get more mobilized on these issues, and maybe there will be more NGOs and other kinds of advocacy groups that will, you know, take these other positions. But, right now, I think that that just, you know, it really does not exist. MR. ENTINE:  Any other questions? QUESTION:  Hi, Dr. Fukuyama.  Thanks for your thoughtful presentation.  My question was about-- MR. ENTINE:  Please identify yourself. QUESTION:  I'm sorry.  Frank Scaturo [ph], Federalist Society.  My question is about a technological development that many expect may occur within the next generation, for lack of a better term, the development of an artificial womb that will allow us to see an embryo gestate beyond, you know, through all fetal stages. Now you articulated, at the outset, the intermediate moral status of the embryo and properly narrowly tailored therapeutic uses that you think embryos could be put toward. My question is if the scenario exists, at what stage of gestation would you advocate a full proscription of such uses, and to what extent has the bioethics commission considered the same question?  Thank you. DR. FUKUYAMA:  Yes.  Well, we considered it.  You know, I am happy to live with a rule like the one that exists in Britain, that the HFEA imposes, which is that actually all embryos cannot be, they actually have to be destroyed positively past the 12th day, I think it's the 12th day of--14th day of gestation, you know, precisely to foreclose the possibility that you will allow them to develop into fetuses and use them instrumentally at, you know, at a later point. And we actually, the bioethics council published a report called Reproduction and Responsibility, that was an attempt to come to a consensus, and we voted on this unanimously, the recommendations, to come to a consensus that we, for example, did not want fetuses to be used as we, some of us are willing to use embryos. There are some pro life groups out there that said, well, if you put any number on that cutoff, that means that you're legitimizing experimentation on embryos that are, you know, below the cutoff, and so they had problems with it. So, politically, even that was hard to state.  But my personal opinion is yes, I think there ought to be a very clear--I mean, that's one a the reasons I think you need regulation, because whereas I do not think that there's anything wrong with embryo experimentation, I would like a very, very strict wall, you know, established to prevent this later-stage kind of experimentation, and you can't do that without, you know, a very different kind of regulatory institution. MR. ENTINE:  We have time for one more question. DR. FUKUYAMA:  I know this guy, he's a student of mine, so maybe it's a planted question. QUESTION:  It's not.  In fact one of the students taking up your time from conferences like these.  I apologize.  Felix Alterberg [ph].  I work for a European consultative company in the area of deliberative democracy, and I very much agree with the importance you assign to these processes, in supporting the work of the regulatory agency that you suggest.  Now I've got two questions. One, could you elaborate just a little bit further on the mechanisms you would propose for that.  You mentioned a consultative college and the deliberative panels. And my other question was I was slightly confused by the justification that you used for introducing them.  You said the less polarized position of most citizens would be useful for such a regulatory agency. Now what happens if citizens in fact, in some future issue, will be strictly on one side. DR. FUKUYAMA:  Right. QUESTION:  Would deliberative processes be less useful, less important than in the current situation?  Thank you. DR. FUKUYAMA:  Yeah.  The basic idea is that many people, on these new technology issues, really don't even have the same, you know, adequate information base to come to an opinion.  So you don't have existing preferences.  So the preferences, in a sense, have to be shaped, and there is a hope that as a result of deliberation, you will actually have people gravitate to the middle. Now there's a big literature out there that, you know, tends to show that sometimes deliberation has the opposite effect.  It polarizes groups more than they would have been before they started talking to each other, and so they come out of the room really hating one another, and this sort of thing. And that, you know, that may happen in this case, but, you know, our sense from the polling data, and from a lot of focus group work, is that actually a lot of Americans, you know, once they start talking to each other about this are, you know, are fairly reasonable.  But we don't know that for a fact and you won't know that until you actually do it. You know, the problem with a deliberative panel is that true deliberation has to take place in really small groups, you know, 15 to 20 people.  But you want not just deliberation.  You also want representativeness.  And so how are you going to pick, you know, 15 people representative of the whole United States? And so one of our suggestions is to just actually multiply, you know, the number of deliberative panels you have and to make them actually, you know, have certain criteria for, you know, gender, age, ethnicity, race, you know, all the sorts of things that define the American public, to make sure that you've got these deliberative panels that cut across, you know, some of the big social and economic divides in the country, so that you'll, you know, you'll see that they are a little bit more representative and not just a, you know, single small group. MR. ENTINE:  Thank you very much, Dr. Fukuyama. A F T E R N O O N  S E S S I O N MR. ENTINE:  We're going to begin the afternoon portion of the session with Lori Knowles, who has actually worked with Dr. Fukuyama on the president's commission, and a number of other venues, and Lori will be talking about the international scene and cover a number of issues related to the stem cell debate. She's a bioethics policy consultant and research associate of the Health Law Institute at the University of Alberta, Canada, and Mrs. Knowles specializes in international comparative law, particularly as it relates to biotechnology regulation. She has acted as a consultant to President George Bush's Council on Bioethics, president Clinton's National Bioethics Advisory Commission, the U.S. Food and Drug Administration, Genome Canada, the Canadian biotechnology advisory committee, and the National Academy of Sciences, among other groups. Mrs. Knowles is also a member of the faculty of Bard's College, School of Environmental Policy.  She holds law degrees from Canada, the U.K., the United States, has practiced law in Toronto, Canada, and taught at the University of Wisconsin law and medical schools.  She also has navigated the shoals of Boston airport today and thank you for coming, Lori.  I know she's barely recovered from the flu, so we appreciate her coming today.  And Lori will also monitor the afternoon panel.  Robert Lanza landed just a few minutes ago, so he should be here any minute. MS. KNOWLES:  I'm going to sit, just in the interest of remaining awake and hopefully somewhat vibrant today.  I did have a piece of bread, the first thing I've eaten in two and a half days, so see how I do today. Well, thank you, first of all, for inviting me to speak to you today.  I have titled my speech the business of regulating stem cell research, investment of time, finances, and political will, and what I'm going to do today, in the brief time I have, is outline some of the policy options that are open to nations that are considering developing stem cell policy, and detail the complexity of creating a new regime, which I think follows nicely on what Dr. Fukuyama was saying, and particularly the last question and the last answer between--you know--about California's oversight mechanisms. And then I'm going to underline the time and financial and political resources that are needed to bring such a regulatory scheme to reality. First of all, I just want to outline something that you all know but that really has a tremendous impact on policy development, internationally, which is that there are really three constellations, three basic but, distinct but related areas of concern, when it comes to deciding how to draw lines with respect to stem cell policy. The first is that the threshold issue of whether you will allow embryo research at all, and flowing from that, the permissibility of derivation of hES cells.  So countries that prohibit all embryo research, like Ireland and Norway and Austria, draw a logical line and therefore prohibit human embryonic stem cell research, and that makes logical sense.  There are other countries.  I'm just going to be giving you some international examples. The second is that should derivation be permissible, there's a major division between national policies that revolve, that use, for example, a surplus source, surplus IVF embryos as a source for derivation of stem cells, and those that go further and say that in fact you can create embryos for research, and mostly they say specifically you can create them using cloning technology. And examples of the former, those that use surplus IVF embryos including Canada.  That was one of the major divisions between Canada and the UK.  Australia, Spain, Finland, The Netherlands.  There are a large constellation of countries that have said it's much easier for them to permit some embryo research but rely on existing sources and not cross that line, a moral line, that they will create embryos specifically for the purposes of research and using cloning technology makes it in fact more difficult for a number of countries to follow that route. Those following the second, the embryos created for research, include countries like the UK and Belgium and China, and South Korea, where it's actually explicitly legal.  There are a third constellation of countries that have legally, allow a creation of embryos by cloning technology legally, but don't have specific permission on the books.  So cloning technology goes on, like in Israel it's permitted but it's not specifically legally permitted.  It's not illegal.  Does that make sense?  It's not regulated so that it's legal but it is allowed to occur. And the third issue is whether any research on stem cell lines themselves is permitted, even if derivation is not.  So you have countries like Germany, that have decided that they will not allow, for historical reasons and religious reasons, they have very strong feelings about embryo research.  They will not allow the derivation of stem cells from embryos but they will allow the importation of already-derived stem cell lines. That is also currently the situation in France, which actually has passed new legislation but the legislation is not in force yet, until the end of this year, and in the interim, to allow their scientists to do some stem cell work, they are importing stem cell lines. The next slide would be about possible policy options that are open to countries and there are five.  The first, which I've covered, is to prohibit embryo research and therefore stem cell research. The second is to prohibit derivation but permit importation.  The third is to permit the use of certain stem cell lines and that's what actually Germany and the U.S. have done, say up to a certain date. And the fourth is to permit stem cell research using surplus embryos, and the fifth is to use, to have, permit stem cell research with  surplus embryos, and with cloned embryos, both of those.  So that just covers that. The next is actually a slide I'd like you to see, if we can get it up, which is a world stem cell map, and this resource, which is something that I check quite frequently--this is my area of expertise--is actually up on the Web, if you put in Google worldstemcellmap, you'll come up with William Hoffman's very useful resource.  He's at the University of Minnesota and he updates his constantly, and shows where the major genome centers are, and also shows which countries have flexible and permissive policies and which do not. So we'll come back to this so you can see it.  But what's interesting about it is that you can see large areas of Europe that have permissive and flexible policies but also countries like Iran has a, and Brazil, which recently passed a law in the chamber of deputies on March 2nd, and just needs presidential signature for embryo stem cell research to go ahead there. So a number of places that you would not expect there to be, necessarily, permissive or flexible regimes with respect to stem cell research, in fact are passing laws, making some real legislative progress. There's a policy trend, and that is from a policy perspective, Western countries are moving more in a policy trend towards comprehensive national ART, that's assisted reproductive technology, or embryo research legislation. And that trend has been followed in Canada, France, Australia, which regulates less ART nationally but regulates embryo research. And New Zealand, most recently, of those four.  And the UK HFEA, the Human Fertilization and Embryology Authority, the act which is the Human Fertilization and Embryology Act, which created that authority, is used as the model, and that model is--Frank went very quickly through the slide, which shows you what the HFEA, the authority body is actually made up of. But it's a very interesting mix of scientists and lay members on the actual authority, the people who make the regulatory decisions, and the scientists may not be in a majority position on the authority. Now the lay members are not what we consider lay members when we talk about lay members over here.  They are people who would be law professors--we're up and running, world stem cell map.  Okay; thank you. So the brown areas--this is the world stem cell map I referred to earlier, William Hoffman's map. The brown areas indicate areas where there's what he calls flexible, which is a surplus IVF source of embryos, or permissive, which is what he terms those who use the creation of embryos for research as well. And you'll see that that actually is--I think he's worked out some of the math to be about 3.4 billion people represented in the flexible area, over half the world's population.  So that's kind of an interesting statistic to bounce around.  But you can see that the genome centers, there's a large number of centers of genome, sequencing centers in the States, which is really interested, that it's not [inaudible]. As I said, large portions of Europe, very permissive, and much of Asia, where a lot of really interesting, further, a feel of stem cell work using animal human hybrids which would not be permissible in most of Europe, is being done.  China, South Korea, for example.  So let's just scoot here. Okay.  Investment of time.  One of the points I want to underline is that if you're going to put in place any kind of national scheme, you need to recognize that you're talking about an incredibly long timeline here.  So it's an investment of time that of course requires political time, and scientific time as well. In the UK, they actually struck what was called the Warnoth [ph]--it was actually, had a much more, long name.  But the Warnoth Committee it was called in 1982, issued its report, you know, in breathtakingly fast political time, two years, its Warnoth report, and the legislation was passed, the HFEA was passed in 1990, came into force in 1991. That's a land speed record when it comes to this kind of political work.  If you look a little bit more, you know, further down the timeline, the Canadian Royal Commission on Reproductive Technology was actually created in 1988. It took four years to create the report.  It's absolutely an excellent piece of scholarship.  It's 15 volumes and if you can get your hands on it, I think it's out of print now, the two final reports are absolutely fascinating, packed with information and data, international data, and called for a national legislative body in 1992. By the way, I should say that a tremendous amount of public consultation went into the creation of this document.  Voluntary moratorium was passed in 1996.  Voluntary moratorium of nine practices, including reproductive cloning, largely regarded as unsuccessful and not a successful response to this kind of work and the call that they had put forward for regulation fell on deaf ears, and it was of course voluntary. And then an act was put forward, the Genetic Reproductive Technologies Act of 1988.  That bill didn't pass with passage of a new election and finally, in 2004, there was the passage--it was very contentious--of the Assisted Human Reproductive Technologies Act.  That's not right.  Human Reproductive Act, Reproduction Act.  I've written that wrong.  In 2004.  But as I was mentioning to Frank, it's not in fact up and running yet. Folks at Health Canada are right now writing the regulations to it which is where the real meat of the work gets done in these acts, and so that's an extremely important piece of legislative drafting and the first licenses are only going to be granted under this act, it's a licensing scheme as well, as is the HFEA, granting licenses to do work with embryos.  That's a key piece of information.  Licenses first to be granted in 2007. So when you look at that timeframe that's 19-20 years, between 1988 and 2007.  So a long timeframe.  France, my third example, had already bioethics laws on the books.  They do theirs quite differently, incorporate their laws into existing laws, incorporate various provisions. And the 1994 act took 11 years to be redrafted because of the question of embryo research in stem cells, and cloning, that came up in the interim.  It took an incredibly long time and is not yet in force, will come into force in 2005 with the creation of a new national, very much like the UK, a national agency that will regulate embryology. So with that background in mind, I'm going to move to illustrating the need for continued investment of political will and financial resources by outlining some of the elements that can comprise a regulatory system, things that are largely invisible to you when you're thinking of putting together a national regulatory scheme.  What else do you have to consider?  The five things that I have are licensing schemes, we'll talk a little bit about what's involved in that; consent of donors of human biological materials. We have a lot of this type of regulation.  It just needs to be redrafted in some cases and imported, or tweaked.  Confidentiality systems for donors and information registries.  A major part of the HFEA in Britain and Canada is using and keeping confidential personal information, using it to track results, keep track of patients and children born through various techniques. Legislative review should be built into any kind of act or regulatory system.  Ancillary development of infrastructure I'll talk about briefly, and then methods for public consultation and facilitate a public discussion. So licensing schemes.  The point I want to make is that you need to understand that any kind of licensing scheme, or sort of patient scheme, but licensing schemes, in particular, need to be staffed and empowered with tools that allow them to conduct all or some of inspections. You have to know what's happening with your money.  Audits.  Powers of revocation and suspension, if you're talking about licensing to do work. You need to be able to enforce the limits that keep research protocols of high scientific and ethical quality, and these are what I pulled out from international data, and Frank was talking about some of the previous protocol reviews.  No animal models must be possible to do this research.  You need to use human embryo research in animal models; not possible to do it.  You have to be able to prove that, as a scientist putting forth a research protocol. Of course assuring the means of the research are scientifically valid and the ends are desirable, a 14-day limit, that was mentioned in the question-and-answer period, for the use in embryos. And that the number of embryos or oocytes requested is in fact necessary for the protocol.  Those are just some of the basic ones. Consent of donors of human biologic materials.  You have to construct and properly document this to obtain proper informed written specific consent.  Now with respect to human research cloning, the suggestion has been made that you have to have consent that's specific to that particular use of the human biological material, that a general blanket consent would not be appropriate. Because there is the specific nature of the tissue that has a different kind of attachment between person and tissue in many cases, but also where you're going to create immortal cell lines that might be around for a very, very long time, different from other kinds of research uses of human biological material.  That's been something that's been mentioned a number of times. And then these three, the no coercion, conflicts of interest, management restrictions on commercialization.  Those are all appropriate to this area of research where you're talking about oocyte donation for research, and can absolutely be taken from fetal tissue, transplantation regulations that already exist. So there are templates that can be imported into this area of research, that should be imported and can be used on the fetal tissue side of regulation currently on the books. And then the last point on this slide is confidentiality systems to protect the personal donor information.  This is something I think is actually really important.  Legislative review should be built into these systems, and that includes sunset clauses, and that's particularly important.  Australia has passed an act, two years ago, and wrote into both of their acts, that two years after the acts were passed they would be reviewed, and that's important because it's in the area of scientific and medical development that's rapidly changing, and because social views change over time, and they change rapidly in this area. There should also be review of research protocol outcomes over a period of time.  That's also part of the UK system, to see what has happened with your money, and is it in fact an appropriate use of embryos and oocytes?  Has the research actually produced anything?  Has it been well-managed?  And I think a review of the surplus embryo supply is also appropriate, and whether a shift is necessary to creating embryos, may be warranted, depending on what happens to the supply. Quickly going through this.  I just want to make the point with this slide that there are a number of other pieces of infrastructure that need to be put in place when you're putting together a regulatory system.  So hand in hand with a regulatory system that puts forward the use of embryos in research and research cloning should be reproductive cloning prohibitions.  That just should be already in place, and somebody else already mentioned that. But there are also issues that have been brought up in a number of these acts with respect to revisiting issues, with respect to intellectual property and patenting, and that goes hand in hand with the last point, which is access and benefits issues with respect to potentially medically beneficial research. So issues about patenting are really part of this whole structure and should be carried along with the people who are drafting this legislation.  I'm not going to go through the rest of this. Now I want to make a few example points, and that is what's not being talked about is that the acts in place don't generally cover secondary stem cell usage.  So what they cover, the HFEA and the Canadian act, the AHRA, cover the derivation of stem cells from embryos.  But they do not have the authority to cover secondary stem cell use. So what's happened in both countries is they've had to set up other agencies that are responsible for making funding decisions or for providing the mechanisms by which you can actually deposit stem cell lines or get access to those stem cell lines. So in Canada, the Canadian Institute of Health Research, the CIHR is their major funding arm, and they've put forward guidelines for funding stem cell research.  They have a Stem Cell Oversight Committee, the SCOC, which makes those funding decisions, and there's been one human embryonic stem cell derivation funded to date.  One.  So not a lot happening in Canada; more will be happening--hurry up; okay. It'll work hand in hand with the agency.  They're not sure how.  The agency's not yet up and running. Then the other things I wanted to briefly mention was in the UK there's a stem cell bank.  This is where the secondary use of stem cells is regulated, but they have tremendous administrative and financial resources behind them. For example, they've published a code of practice and this is just a few of the pages of the table of contents of the code of practice that they've published and it's just a draft. So think of the resources, both politically and financially and temporally, that are involved in getting this kind of work up and running. This, which you're not supposed to read, is their map for how to get access to cell lines.  So you can see there's a research ethics committee approval, there's a home office animal procedure license, there's a steering committee. My point is this is the one for deriving them, if you want to derive them and put them in the bank. So there's a whole bunch of organs involved in this enterprise.  And then my last slide simply wants to underline the fact that for public consultation, it's extremely important that this take place while the process is being put together and not while the process is almost finished, not when it's almost finished. And then I want to leave you with this thought, which is it should be recalled that the purpose of bioethics is not to ban up-front scientific advances, particularly in the field of medicine, but to define the limits of the socially desirable and ethically permissible, and in those regions in which stem cell science is going forward, political, public and scientific effort is based on finding the balance between allowing science to proceed while respecting the values that each society holds dear. Thank you. MR. ENTINE:  Thank you very much, Lori.  If Ken and Bob could come up and then Lori could introduce them and we'll just kick off the rest of the afternoon session.  And Bob, Thank you very much for a full day of travel.  You can share your travails if you want, but I'm greatly appreciative that you were able to make it here. Debora Spar from Harvard was not able to make it here today, so we did lose one person. MS. KNOWLES:  Ken Giacin is the chairman and CEO of StemCyte Inc., one a the largest umbilical cord blood stem cell banks in the world.  Prior to joining StemCyte, Mr. Giacin had a career spanning more than two decades with Johnson & Johnson, and at Johnson & Johnson he held senior management positions in a number of global initiatives, including his founding a global franchise within Johnson & Johnson called Independence Technologies that provides innovative products to people with disabilities. Along with his deep business expertise, Mr. Giacin also serves on a number of boards and advisory panels, including Cerebral Palsy of New Jersey, and has been nominated to the board of the New Jersey Stem Cell Research Education Foundation.  Thank you. MR. GIACIN:  Thank you very much. Thanks to the institute for having me speak and have this opportunity to talk about StemCyte.  I think it's pretty important to sort of tell you how I made my way to StemCyte.  I think I retired from J&J for about 12 hours.  As you said earlier, my last assignment was to start a company from scratch within Johnson & Johnson, and as you said, the Independence Technology.  So I got a taste of a start-up and I got a taste of developing products that really did a lot of good for people. And when it came time for me to retire, a former colleague at J&J of mine, and a friend of mine, and there's a lot of us running around, asked me what I was going to do, and I said, well, I really don't know, and he had become a venture capitalist, and had become the major investor in this company called StemCyte, and he said, well, how'd you like to help build a company that's actually saving people's lives as we speak? And that's a hard thing to refuse to do.  So I retired at 4:00 o'clock one day and started at StemCyte at 8:00 o'clock the following morning. First and foremost, StemCyte is an umbilical cord blood stem cell bank and product company that provides lifesaving therapies to transplant hospitals and transplant physicians around the world. This is primarily for people who cannot find bone marrow matches and we'll see later that there's a whole lot of people that cannot.  Used mostly for children, now it's moving into the adult use, and we've been able to take that foundation, layer one or two more businesses on top if it, we're operating in two countries, in the U.S. and in Taiwan, and we're planting seeds for the future to look at the regenerative properties of cord blood derived stem cells. So every company has a vision.  Our vision is to become the leading stem cell provider in the world.  We want to be the core blood bank that's the most trusted by the world's leading transplant physicians, and longer term, we want to become a developer or a provider of stem cell-based therapies using umbilical cord blood stem cells. We do this by supporting clinical applications and we also do it by having partnerships with leading researchers and institutions. In fact what I didn't tell you was I knew nothing about stem cells other than it was a political lightning rod and I certainly got that reinforced this morning.  But the first person I went to was a former collaborator and a current collaborator and a close friend, and that's Dr. Wise Young, and I basically said look, tell me if this is a good idea to get myself into, and he came back and looked at everything that was happening within StemCyte and said yes, I think it would be great, and in fact we want to collaborate with you. So we do have a collaboration underway with Rutgers University in the tech center. The company was started in '97 by a fellow named Dr. Robert Chow.  He had a vision to build the largest and most racially diverse umbilical cord blood stem cell bank in the world. He spent the next two years developing the technologies and the SOPs, applied for some patents, and raised money, raised money from the venture capital arena, and began collection, this is donor collection, donated cord bloods in the U.S. as well as in Taiwan. By the end of 2001, we had delivered the first transplant units.  They were delivered to Singapore--this is truly a global business, and they were delivered to a fellow named Dr. Patrick Tan who was educated in the U.S. and did the first adult multicord transplant in Singapore and for which he won the president's award. By the end of 2002, we had become one of the largest cord blood stem cell banks with about 20,000 units in storage, half in the U.S., half in Taiwan, and in 2003 we surpassed at least the milestone that you look for within a commercial entity, we passed a million dollar sales, a revenue mark.  We had done some licensing, we introduced the family bank, which basically leveraged all the assets and provides a service to individuals who want to bank their own child's cord blood, and we introduced the HLA typing reference lab as an accredited laboratory, and we planted seeds, as I said, for regenerative therapies and collaborations. We're a core blood bank and products company.  It's clinically proven, it's been used for about 15 years.  We have provided over 170 transplants to date, and in fact, right now, we're supplying two to three units per week.  And this is everywhere in the world. I believe last week we shipped a unit to Madrid, we shipped a unit to Singapore, we're shipping a unit to Canada, and obviously throughout the U.S.  But we've shipped units to Singapore, Australia, South America, Mexico, Israel, Japan, Malaysia, and these are the premier hospitals in the world. We have a private bank, as I said, for storage of individuals' cord blood and we have a feedstock of stem cells that we can use for biotechnology or pharmaceutical research. The way we get them is that a donated unit, about 40 percent of those units are not viable transplant units, so they can't go into a registry for everybody to use, and we take those units and in turn, on some occasions, use them as a platform for some research that we are doing in collaborations with people. There's a huge unmet need and it's increasing every day.  In the U.S. alone, there's about 75 percent of the people who actually need a bone marrow transplant simply cannot find a match, and size or number of units counts, and race counts, because it's a probability of match and the probability of match within a race is also very important. So if you're Caucasian, you probably have a good shot at finding either a bone marrow match but also a cord blood match.  But if you are either non-Caucasian, Asian, Hispanic, African American, your chances go down substantially.  It's got major advantages over bone marrow and it's gaining as an alternative therapy. In fact, in October of last year, there was an article in the New England Journal of Medicine as well as the Journal of the American Medical Association, that promoted and talked about the benefits of umbilical cord blood transplant patients, not just for children but for adults. And in a recent article in the Journal of Hematology, in February, there was an article written by Dr. John Wagner and Dr. Julia Barker of Minnesota, that talked about the ability to blend two dissimilar umbilical cord blood units that have at least a four out of six HLH match, get the amount of cells you need, put that into an adult and they've had a lot of success. Our revenue has gone up as the acceptance in physicians and other businesses have grown.  We did about a 3x increase in revenue from 03 to 04 and our projection for 05 is to do a 3x increase again.  Not very large but from a base that's very small but it's growing at a very nice clip.  And we're forming more and more collaborative research initiatives for stem cell therapies. What are the drivers?  Well, it works, and organizations like the National Marrow Donor program predict that cord blood transplants will soon overtake bone marrow transplants.  In fact I think it's happening in Japan as we speak. These articles and physician acceptance is emerging.  It really is the first line of defense for pediatric transplant therapy.  In fact Duke, and Dr. Joanne Kurtzberg [ph], is probably the premier pediatric cord blood transplanter in the world.  Multicord transplants are gaining acceptance.  This, again, is where you take two units, blend them together, and these studies have been really seminal studies for us and for the industry.  Expanded transplant indications are emerging, such as thalassemia and sickle cell anemia, blood diseases that afflict certain racial groups. We in fact are sponsoring a thalassemia study in Taiwan with very, very good results, and everybody's chasing regenerative disease applications. So from a business model standpoint, here's really the business model as we look at it today.  We have a foundation business which is our public bank.  That's the donor units that provide life-saving therapy for people who can't find bone marrow matches. We take those same assets, we offer that service for private individuals who want to bank their child's cord blood, and we have a tissue typing reference lab which not only is used internally but it becomes a very strategic asset for us, to help on the public bank side.  So if we receive a call from a physician--and these are generally people that are out of options--and that patient is very, very sick, and they need an emergency unit, with our own internal HLA reference lab we can pull a unit out of the freezer, immediate thaw a segment of it, do a confirmatory typing of it, get the results, speak with that physician and get it on a plane.  We've done it in as little as four to eight hours after receiving the request. Going forward, from a business perspective, we look at ways to make this whole operation more efficient and more effective.  We believe we've got some very innovative, both medical devices and technologies that'll help us reinvent the way cord bloods are both gathered, processed, stored and delivered. We're also looking at expanded target indications, first and foremost for thalassemia, second will be sickle cell anemia, and then at the apex of this business model is the whole area of regenerative medicine or cell expansion, whether it's differentiation and expanded core blood therapeutic products, or the general expansion of cord blood. What are our assets?  Well, we're one of the largest stem cell libraries in the world.  As you heard earlier, if there is a therapy, and we believe that there--you know, it certainly is used now--but if it cures thalassemia or something like sickle cell anemia, this inventory is likely to be very low. There are a number of banks out there.  Very few of them have the number of inventory units that we have.  We have strategically built the inventory to meet the unmet needs.  So we have the largest supply of, in the U.S., of Asian and Hispanic units, and we're also building our inventory by about 15 percent this year, again along particular ethnic or racial lines. [Start Tape No. 4.] MR. GIACIN:  [in progress] out clinical outcomes are excellent, in fact they're very good across the line for cord blood, and we also have an asset, and being able to bring something to the table so that we could have good collaborative efforts with world class researchers. So you would think that we're in great shape for maybe accessing the state, the national and the international funding initiatives.  Geographically, we're bicoastal.  We've got operations in California which, by the way, we've had since '97, so it precedes the Proposition 71.  We have a research collaboration in New Jersey.  WE have an operation in Taiwan.  We expect to start up another operation, internationally, at least sign the contract in 2005 and begin collecting, and essentially duplicating our model in another country. In 2006, we're going to expand our research initiatives.  We've got one specific research collaboration underway that involves two California companies and New Jersey R&D.  We are in discussions with the City of Hope as well as us, and also in discussions with a East Coast biotechnology company. And we've also been invited by the leading institutions and hospitals in Taiwan.  They in fact are giving us space and want to give us space, and want to set up collaborations with us around the whole area of promoting cord blood stem cell research in regenerative areas as well as specific disease states. So what's wrong with this picture?  We ought to be swimming in money and I probably spend 75 percent of my time either talking to current investors or talking to new investors, trying to get money into the company so we can grow it. Well, maybe nothing.  I mean, our position is that Proposition 71, the New Jersey stem cell research initiative, the NIH funding, they all offer opportunities as well as the international opportunities and interest in stem cell research.  It's all encouraging. When I was asked to give this talk, I think it was right about the time that Proposition 71 had just hit the street.  I had an initial concern that basically everything would shift away from nonembryonic research, and it certainly gets a lot of the press.  But I think that things are moving very fast, there are many articles, and we talked about a couple of them today, about bone marrow for cardiovascular disease. But there are more and more articles talking about the benefits of adult stem cell as well, and if you talk to any scientist or any researcher--in fact I think everyone that talked today does not--it's not polarizing.  People want to look at the overall impact and benefits of stem cell, period, whether it's from core blood, from peripheral blood, from bone marrow, from embryonic stem cells. And we've got growing clinical use in transplants that happens every day.  So what's our position?  Well, from a business perspective, we will pursue all of these opportunities to support our regenerative therapy initiatives, but again, from a business standpoint we just can't count on it. We have to feed ourselves and we have to depend on the business growth and our performance, and on the trust of the transplant physicians and our customers to give us enough revenue to move ahead. Globally or nationally, I think what's really needed, first and foremost, we need more cord blood units that are HLA typed, and they're in inventory.  Numbers count, race counts, and we don't have very many of them.  There needs to be this initiative and we were all counting on this $30 million that the Federal Government would allocate for specifically building an inventory of umbilical cord blood units.  We sort a hope this resurrects itself in another way and this happens, because it's really, really important. We need more cell expansion research, so that we can treat larger patients with a particular unit, or we can take some unique units and expand them so that we can do multiple treatments in multiple people. We've got 15 year plus of safety data.  I think on bone marrow there's about 30 years of safety data for use in humans.  That ought to mean something in terms of perhaps fast-tracking some of these approvals of core blood and bone marrow for cell therapies.  Bone marrow has a couple of liabilities.  You need a perfect match for an HLA type person.  That's when most people can't find the bone marrow match. Core blood, you need a four out of six.  On core blood, there's a lot less graft versus host disease.  And we need to fund targeted cord blood cell-based clinicals and therapies such as thalassemia and sickle cell anemia. And in conclusion, I think that at least from StemCyte's perspective, I feel very gratified by what we do every day.  I think we developed a pretty viable business model, both near term and long term, and I think we do it because it works.  Every day, people have their lives saved around the world, using cord blood.  The issue is more and more people can have their lives saved.  Clinical evidence grows every day, safety and efficacy data grows every day, and policies need to be put in place that maximize both the life saving and the healing potential of umbilical cord blood. MR. ENTINE:  Thank you very much, Ken. Robert Lanza is the vice president of medical and scientific development at Advanced Cell Technology which is in Boston, and is an adjunct professor of surgical sciences at the Institute for Regenerative Medicine at the Wake Forest University school of medicine. Dr. Lanza has several hundred scientific publications and patents and has authored or edited 16 books, including the Handbook of Stem Cells, he was the editor in chief [inaudible] press in 2004. Dr. Lanza is a former Fulbright scholar and a student in the laboratory of Richard Heinz from MIT, Jonas Salk, The Salk Institute, and Nobel laureates, Gerald Edelman from the Rockefeller University and Rodney Porter from oxford. He also worked closely and co-authored a series of papers with the late Harvard psychologist, B.F. Skinner, and heart transplant pioneer Christian Bernard. He is going to talk, as did Ken, about the challenges in his company in dealing with the venture capital and the growth issues that have faced all these companies that have been attempting to develop either human embryonic stem cells, cord blood or adult stem cells over the past few years, and you can say hello and also--I'm glad you're sentient at this point, so-- DR. LANZA:  Yeah.  Actually, my flight yesterday was delayed because of wind, then the second flight was canceled because of snow.  This morning it was canceled again because they couldn't get the crew together, and finally the flight that I got in was delayed an hour because of mechanical problems. I'm going to be talking about some of my personal experiences at Advanced Cell Technology and what they really mean with regard to all the funding and policy issues that you've been discussing, at least for scientists on the front line, and as you know, there are many dozens of human diseases caused by tissue loss of dysfunction. For instance, Parkinson's disease caused by degeneration of the dopamine-producing cells in the brain.  Or diabetes which is caused by a destruction of the insulin-producing cells in the pancreas. But in addition to these many diseases caused by tissue loss, at the cellular level of course there are whole failures such as the liver, the heart, and in the United States alone there are over 80,000 people currently on a waiting list for an organ of one sort or another, whereas only about 20,000 will actually get a transplant. And of course in addition to this very serious donor organ shortage, and for many of these patients of course the hope of a transplant is their only chance for survival, there is the problem that these patients need to have a lifetime of immunosuppression which of course is associated with cancer, malignancies, and a long list of other side effects. With the advent of therapeutic cloning and stem cells, we now have before us methodologies to eliminate both of these problems, namely, the shortage of cells and tissues as well as the problem of immune rejection. Of course this raises all the funding issues.  Most of this research cannot be done with federal funds, certainly not the therapeutic cloning aspect, and most of the existing human embryonic stem cell lines are off-limits for federal funding. Of course one of the very first applications of embryonic stem cell research is likely to be the neurological disorders, because it turns out that that's almost a default pathway.  We can obtain neurons very easily.  In fact in the United States there are about 20 million people who have neurological disorders, costing the U.S. health care system about $200 billion a year. Just as one example, would be Parkinson's disease in the U.S., about a half a million plus, a comparable number in Europe, and that's caused by a degeneration of the dopamineurgic neurons in the brain, and fortunately, now, we have the ability to create entire dishes of these dopamine-producing cells.  In fact we published a paper a few months ago where we actually generated human retinal pigmadepithalion [ph] from embryonic stem cells, and it turns out, it just so happens, that they also produce dopamine and these cells have in fact been used in clinical practice for treatment of Parkinson's. So I think that there are some of these applications that are on the near term, in addition to Parkinson's.  I believe that Juron [ph], for instance, has announced it's going to be in clinical trials next year for spinal cord injuries. So just looking here at Parkinson's, this was a study we did a few years ago, actually using cloned dopamine-producing cells.  On the left here you're seeing a cross-section of a brain of a rat.  The brown is actually the dopamine-producing cells.  The white on the right side shows the absence of these cells. And when we transplanted these cloned dopamine cells into the animal, you can see at the upper panel, actually on the right, that those cells engrafted very nicely.  But most importantly, here, what you can see is the rotational behavior of the way we measure Parkinson's in these animals was reduced in two months to about half of the original symptoms. So this is the kind of results we're hoping to see in clinical trials.  This work has been repeated using dopamine-producing cells from mouse embryonic stem cells.  Lawrence Stuter [ph] at Sloan Kettering has done that work as well. But of course before we can get into the clinic it's very important that we have lines that are safe for applications, and of course this is where we're starting to run into problems because without private funding or at least up until Proposition 71, no state funding was available for the derivation of new lines. And we just published a paper, actually online in the Lancet yesterday, which you may have heard about, where we actually, for the first time, derived a human embryonic stem cell line without exposure to any feeder cells whatsoever or any serum. But I think, you know, before we really have this system optimized, we really need to eliminate all animal products, we need to derive these cells under GMP conditions, and we believe and we have early data that suggests that you can probably reduce the system down to just a few simple extracellular molecules, a very simple system. In fact, the plates that we actually use for our study can be dried, stored on the shelf, and sterilized using conventional methodologies.  But, again, the problem here is is that you need to collaborate with the private sector, or you need to have state funding available to do this, because again, there are no monies to do this at the federal level. Of course now that we would have safe lines, of course there are still a number of scientific hurdles before we can go ahead and start to treat certain diseases, such as diabetes, which we would consider the Holy Grail.  This is a disease that affects over 200 million people worldwide, at least the type one diabetes is caused by destruction of the insulin-producing cells in the pancreas. And there are a number of potential biological therapies for diabetes.  One is this whole organ transplantation but of course there are only a few thousand of these glands available per year and again these patients require immunosuppressive drugs.  The other alternative is to isolate out the insulin-producing cells, the so-called eyelet transplantation, but then you only exacerbate the problem because you need more glands to get a sufficient beta cell mass, and then again, you also have the problem of rejection. And this brings me to, when I originally started in this work about 15 years ago, we had an executive who had pancreatitis and had to have his pancreas removed, and at the time we were just learning how to isolate eyelets, and we only got about 100,000 eyelets, and normally from a pancreas, these days, you can get half a million to a million, and when we infuse those back into the portal vein of that patient who is totally cured of his diabetes, insulin independent, and that has been repeated dozens and dozens of times.  It's known as an autograft, and it works most of the time. That's in contrast to worldwide experience with allografts, that's from one patient into the other, whereas insulin independence, at least prior to the Edmonton protocol, was about 10 percent.  So what's the difference? Obviously, these are the patient's own cells, and that's exactly what therapeutic cloning aims to do.  What we want to do is create the patient's own cells, so that we can inject those back in to treat the disease. And again, you're familiar with the procedure.  Basically you can take any sort of a somatic cell, a body cell, and place it into an empty egg cell in a nucleated oocyte, create your embryonic stem cells, and then the theory is that you produce the various replacement cell types. Another strategy is just to bypass the cloning step altogether, to take the egg cell, fool it into thinking it was fertilized.  This is something known as parthenogenesis, and then you're able to, actually it turns out, create beautiful stem cell lines as well. Again, all of this work is off-limits in terms of federal funds or even in my own state, in Massachusetts, Mitt Romney, our governor, doesn't want any of this work to be permitted, and so hopefully Proposition 71 will jump-start some of this work. But again, let me just talk a little bit about the potential here and what all these funding issues really mean. Parthenogenesis is just not another way to get embryonic stem cells.  It turns out that all the genes are maternally derived, so again, you only have one set of genes, and what that means is that you considerably reduce the complexity of the antigens on the surface of the cell, so that rather than needing hundreds of thousands of embryonic stem cell lines or even millions for a bank, for the population, just a few hundred lines would probably be sufficient to match most of the population. And so that means that you would have cells that would be frozen away, that could be used.  You could even derive the various replacement cell types to be used, as needed, when a patient, say, has a heart attack. And this shows you a study we published in Science, a while ago, which shows you that that technology really does work.  This is in a monkey. Those were embryos.  These are the various markers to show that they were, indeed, embryonic stem cells, and in fact they turned into all the various replacement cells.  These are Glio [ph] cells and dopamine-producing cells. I'm not going to get into this experiment in great detail, but we use some of these embryonic stem cells, that we generate through parthenogenesis to treat in a sheep model [?], something known as myelomeningocele.  It's a type of a spinal bifurda.  And in humans, patients who have this are usually paralyzed or in a wheelchair for the rest of their life, and similarly in the sheep model.  And when we went in, this was several years ago, with these embryonic stem cells, the first animal that was born was walking, healthy and normal.  There was no funding, that those studies have not been repeated, there's just simply no money.  Everyone thinks leave this to the private sector.  Hello.  The private sector has very limited funds as well. So this work has been tabled, essentially for several years.  You know, maybe this could be in the clinic any time soon.  So there will be people, potentially in the future in wheelchairs, or any time in the next few years, that may not need to be.  So it has a very real cost.  So these state initiatives I think, you know, are very, very good, so at least the work is going to get done. Another study that we did, I indicated earlier, is we turned human embryonic stem cells into these retinal pigment epithelial cells, and as you may know, macular degeneration is the leading cause of blindness in the United States, in patients over sixty, and there are a list of other retinal degenerative diseases, and in many of these, you know, the ideology is derived from degeneration of the RP cells. And we have derived these cells, they've been extensively characterized, we have vials of these frozen away, they've been frozen away now for a year, don't have the money to do the preclinical studies. Again, you know, everyone thinks the private sector is rolling in money.  Unfortunately, the venture capitalists think some of these technologies are too far off, you don't get your return yesterday, and the commercial entities, more at the pharmaceutical level, want to just simply wait until a technology is developed, so it sort a falls through the cracks, that the Federal Government traditionally fills those shoes. So this just simply shows you some of these cells, the markers for these retinal cells.  At the upper left is basically latex beads.  Faegal [ph] cytosis is one of the major functions of the cells.  We were showing that they were fully functional. But an important lesson here is that this work we originally tried to do with NIH-funded stem cell lines.  It didn't work.  We couldn't get these cells to turn into these cells at all, and only with the use of the Howard Hughes lines that were privately derived, and some of the lines we derived at Advanced Cell Technology, they worked like a charm.  Whether it was because they were earlier passage or not, what I can tell you is this work would not have been done had we been restricted to the lines that are available through the NIH. So again, these things are very important for those of us, you know, on the front lines, trying to come up with these therapies and do some of the tricks that will need to be done. This is another study that, again, you know, would not be eligible for federal funds, or even state funds in some of the states.  These are some very old cows that I found, they would be equivalent to humans about 80 years old, we used cloning from a skin cell from the ear, generated new, youthful stem cells, CKIT [ph] positive cells, injected them back into the animals without any mylo obligation, they took up home very nicely. We actually knocked into the cloned cells a neomycin resistance gene, which you can see appearing in the first 12 weeks up in the top figure, just so we could discern the cloned cells from the old cow. Now the goal here wasn't just to give an old cow a new immune system.  There are over 80 autoimmune diseases in humans.  So, you know, that's multiple sclerosis, arthritis, the list goes on and on.  Lupus. And again, what's fascinating here is is a year later, half a year later, if you took a sample of blood from these animals, and these are colony-producing cells--this is a white blood cell colony--you only see that with fetal cells, these gigantic colonies.  So you truly do have beautiful cells in the immune system of these animals, and again, these cells took up home through competitor repopulation without the need for drugs. So, again, this is the technology that needs to be developed.  I think we do need to develop autologous therapies, the parthenogenesis, ANTIA [ph], whatever.  But, again, we need to have funding to move this research forward and now with Proposition 71, I think you're going to see movement very rapidly. Another study we did in mice that had severe heart attacks, these were again cloned stem cells, they were injected at the margins of the infarct, that's a cross-section of the heart, and within four weeks, in blue, you can see the cloned cells had repopulated and actually replaced 40 percent of the damaged heart tissue. Not only did they replace the damaged myocardia sites, the heart cells, but they were sufficiently primitive in the lineage, so they also produced the vasculature that you would need to sustain that tissue.  So this is very important.  So we believe that with larger numbers of cells we'd use a very tiny number of cells in multiple injections.  You know, this would certainly be something that you would want to use in a clinical situation. Again, we need to have sufficient funds for this research to move into the clinic.  But before you can realize the full potential of stem cells, you really need to learn how to reconstitute those individuals cells into more complex tissues and structures, which is the whole area known as tissue engineering, and basically it's a very simple principle.  You just have a biodegradable scaffold, you seed your cells on to the scaffold, they repopulate it, you put it back into the patient, the scaffold's reabsorbed and you're left with the living cells.  Of course the hope would as to have raw material generated that would be compatible with the patient, again, be it nuclear transfer, or parthenogenesis, whatever, adult stem cells. And the beauty of course is that you can produce these scaffolds in any design.  They're very sophisticated machines that can actually produce three-dimensional structures. This was a study where we used cloning technology to create myocardial patches, miniature heart patches, they were transplanted back into the animals that they were cloned from, and after six weeks, and then again after three months, we found that these myocardial patches were completely viable, no trace of rejection, and not to bore you with all these details but eventually the goal is to create an entire organ, be it a kidney or even eventually a heart. This was our first primitive attempt to create a miniature kidney.  We actually had these cloned cells, associated cells that we seeded on to a polycarbonate scaffold, transplanted it back into the animal that it was cloned from, it hitched up to the vasculature very nicely and the noncloned miniature kidneys, renal devices,  you can see they didn't produce any urine, they basically rejected, and here in the lower two panels here you see the cloned miniature kidneys produced urine very nicely.  In fact they were removing toxic materials from the blood of the animal.  You could measure the urea and the creatine was sufficient and elevated above normal. But again, this isn't just, you know, an academic question here.  There's a very real human tragedy out there and this research really needs to move forward with either private funds or with public funds.  Thank you. MR. ENTINE [off-mike]:  Thank you very much, Robert.  We're going to just invite Wise, Carl and Charles back up here and take whatever questions we might have remaining from the audience.  They can be directed to [inaudible], Bob or Ken, based on their [inaudible]. QUESTION:  I think one question that I have for all of you is really, there's been a lot of references to things have changed since Proposition 71.  I'm really wondering, on the area of venture capital, and Bob, you mentioned that--I mean, the payoff for venture capitalists is yesterday and the reality of it is that hasn't changed any more.  We still have some--let me just ask the question and you can respond. It seems to me that that landscape may not have changed; correct me if I'm wrong.  I know that obviously the political landscape is clearing a little bit, people are understanding how things might proceed because they can operate under the safety of some of the state umbrella independent organizations. But has the venture capital situation changed?  Has big pharmacy operations--Ken, you could speak to this as well--are they starting to weigh in and beginning to take the kind of financial gambles that will help you guys do the kind of research that you anticipate can and should be done? DR. LANZA:  I think, actually, it has changed the risk ratio here.  It turns out that the venture capitalists now are far more willing to invest money knowing that part of the research will be funded from state funds.  So, for instance, at Advanced Cell Technology, we set up a branch out in California hoping to collaborate with many of the academic institutions out there, and I think that that really allows investors to put money in knowing that there is going to be additional funding to help move this forward. QUESTION:  Still in the hope stage or are you actually getting real signs that this money actually might be coming? DR. LANZA:  Our telephones were turned off before Proposition 71 and we just got a very large infusion and I'm hiring, I've just doubled the staff, things are really moving, and I know this is the case for some other companies as well. MR.      :  I would say the same thing, at least from a venture capital standpoint.  We're a little bit different because--and hopefully I'll be able to tell you this in maybe three or four months cause we're just about to start doing another fund-raise.  But it appears that our whole strategy was to have a base business that was a viable base business, and then have the ability to have a lower risk investment and plant seeds for the future, and it seems that not only Proposition 71 but some of the more recent articles about the benefits of cord blood in adults and New England Journal of Medicine, these other things, seems to have turned it on a little bit more. I don't know whether we'll ever see any money from the Proposition 71 or not, I hope we do, but from a VC standpoint there seems to be a little bit of a heightened activity around this, which is great. DR. YOUNG:  I might comment that even before a single dollar was spent, just the environment and the talk really helped.  I know in New Jersey, I must have spoken to maybe a dozen, maybe two dozen companies, and I recently spoke to AZT as well.  Michael West was at our lab.  I think there is great enthusiasm that was generated by, initially by the California Proposition 71, and now by New Jersey, and by many other states.  Many states are very close to funding major packages.  For example, Washington state is going to put together a one billion dollar package, not all for stem cells, but a significant part. And Wisconsin, as we heard, is going to do that.  New York, for example, is going for one billion, but Sheldon Silver introduced a $100 million package for this year, for 05 or 06.  So there's all this talk and activity and I think this is helping.  Without a single dollar being spent yet, this has helped create the interest within the industry. QUESTION:  Charles, I'm curious, you know, you depend mostly on philanthropy and have been.  Are you moving more aggressively into the area of VC funding to supplement some of the philanthropic support for the Harvard Stem Cell Center? MR. JENNINGS:  No, we haven't sought any kind of VC investment so far, and frankly, I think most of what we're doing is not yet ripe for that.  I mean, we're an academic research organization, we're taking the long view, and we think that we have to take this research very much step by step, and it's quite some time before a lot of the things that we're interested in will really be at the point where VCs will be willing to pump in a lot of money. So we're very much relying on philanthropic support, at least for the immediate future. MR. ENTINE:  Any other comments? MR.       :  It is the first time that industry has actually taken a real interest in this, large industry.  So your research products companies, your drug discovery companies, and, for once, the big pharmaceutical companies are actually starting to come to the table and decide they really want to license the technology and start getting involved in it.  So California has helped a lot. MR. ENTINE:  Any questions from anyone in the audience?  Yes. QUESTION:  My name's Mike.  I work at the Kennedy Institute of Ethics at Georgetown.  You spoke a lot about parthenogenesis and nuclear transfer and some of what Dr. Young was speaking earlier about was the thousands of surplus embryos that we have that weren't saved by the policy decision, August 2001, and I'm curious, because one of the problems that's frequently described is the animal and mouse feeder serums. And is that going to be a problem, in the event that were policy to shift to allowing these excess embryos to be unfrozen, would that be a problem? Do you see parthenogenesis and nuclear transfer as really the only viable options as far as creating therapy versus unfreezing embryos that will probably have abnormalities chromosomally, and also some that have animal contamination? MR.      :  Well, I think that, you know, ceratinly the frozen embryos are adequate to generate the replacement cell types that we're looking to generate.  I think the next problem is not only do you have to generate these cells but you can't just plunk them back in the body without rejection.  So we need to come up with some methodologies to put them back in.  So, for instance, you take a young juvenile diabetic patient. It would not be considered ethical to subject that child to a lifetime of immunosuppression.  So, again, that's a case of the cure being worse than a disease.  So that even if you could produce beautiful insulin-producing cells, we have no way to put them in. Now I've heard all about other approaches.  You know, you can create a universal cell, you can, you know, knock out MHC but then you start off regulating killer cells.  Just 20 years or so ago I was doing heart transplants with Chris Barnard and we were saying, oh, we're going to get away from cyclosporin, we're going to have drugs that had no side effects.  We were going to generate immune tolerance.  And it was always just around the corner, just around the corner, and here we are, 20 years later, and you know what the drug of choice is still?  Cyclosporin.  So I don't know.  Hopefully we will generate some new technologies, learn to educate the immune system.  But for right now, we do know that therapeutic cloning and parthenogenesis are two very viable approaches for generating autologous cells that will allow us to get tehse into the clinic without the need for drugs. MR. ENTINE:  Wise, you have a comment? DR. YOUNG:  Yeah.  I think we need to invet in this.  It's really sort of difficult for me to understand why, since 1997, we knew this problem existed, and yet we have not invested in a--I mean, this is the kind of problem that you would like--it's like going to the moon.  You would like to solve this problem because it will help billions of people; not just millions.  It will help billions of people in the future. If you can find a way in which you can transplant cells, you would avoid all the moral and ethical issues that we're all talking about today, and yet we haven't invested in this and we're still dealing with yesterday's science.  You know, the science that we're talking about is Christian Barnard's science of 20 years ago.  How come we have not invested in solving this problem? We should have a selective immunosuppresive approach.  We should be able to say okay, what part of the immune system would be involved in attacking one particular cell that you're putting in and let's erase that particular set of lymphocytes from the nervous system. I think this is within the realms of possibility today.  We can do leukophoresis, for example.  There are many technologies.  Now Michael West, at ACT, was telling me that one of the approaches of generating a library of embryonic stem cells that would be immune compatible with a majority of the people in the United States would be to take people who are homozygous for HLA antigens.  So instead of presenting six antigens you're presenting only three. Now if you pick the most common HLA antigens and you put that in a library of about 300 cell lines, you can match maybe 80 to 90 percent of the people in the U.S.  Now this is a viable approach and we should be exploring this.  It's not 150,000; it's three hundred. So these are the kinds of approaches that we really need to be thinking about, because I think the last slide shows it very clearly.  We have millions upon millions of people in need and we must come up with viable solutions for them, and we need to invest in this. It's really unconscionable, that we're now spending only $200 million per year into this very, very important problem. QUESTION:  Eli Kinters [ph] with Science magazine.  Wise Young's point is well-taken, if you agree that we're not investing enough in this exciting area.  But in all different places in the American government, we have particular procedures for deciding how much we invest.  NASA, for example, has advisory bodies and it has officials which sit down and decide what the priorities are going to be for investing.  The same is true, obviously, at NIH. Haven't these state initiatives added a rather arbitrary element to how much and which areas of science we invest in? You may agree that stem cell research is the place we should--is an important area that we have not invested enough into as a society.  But why $3 billion?  Why set up an institute in New Jersey?  You know, someone could stand up and say we should be doubling how much we invest in heart disease.  Why not heart disease or cancer?  I mean, we obviously invest in those things in the government but why in the proportions we do. MR. ENTINE:  I don't want to step on you but you're suggesting this might be driven to some extent by faddishness or a sense of this is the "hot" issue of the day, rather than discriminating-- QUESTION:  Perhaps, but that idea is--by just using a popular vote, like we did in California, you let that possibility hang on. DR. YOUNG:  I think you forget that in the last ten years, we've ramped up AIDS funding from zero to over $2 billion a year at NIH, and was that based on the basis of science?  No.  This was pressure by public advocacy groups.  There is a role of public advocacy in the determination of the directions of science and one set of people who have not been given enough credit for this entire stem cell movement are the advocacy groups. This is a grassroots approach.  This is why California got their Proposition 71.  This is why New Jersey has their bill.  This is grassroots.  People have heard about the promise of stem cells now for over ten years.  They're impatient, they want to see it applied to them, they want translational research and they're telling their legislatures we want this to be funded.  The Federal Government refuses to fund it. And if I were to choose a particular set of things to invest in, stem cells come pretty close to the top priority.  I think if you ask a majority of scientists on this issue, they would say yes, would you spend, for example, the same amount of--I mean, there are currently what? $2.4 billion being spent on AIDS research today.  Is that a decision that's scientifically well-justified? Certainly, that's about the level of funding that perhaps in three or four years time stem cell research might get to, if all the states pitched in. MR.       :  Also, too, the entire last year, $25 million was spent in the entire country.  That's a complete joke.  That's not even the amount you get for a start-up biotech company.  Should the largest, most creative biomedical community in the world be limited to the same number of funds as a small start-up company?  I don't think so. MR.        :  That's federal funding, not all funding on-- MR.        :  All federal funding. MR.        :  All federal funding; yes. MR.        :  From the government.  Twenty-five million. MR.        :  Specifically for human embryonic-- MR.        :  Exactly; exactly.  The entire year. MR.        :  [inaudible] much higher. MR.        :  190, but that's adult.  But we're talking about embryonic stem cell research, 25 million for the entire country, the entire year. MR. ENTINE:  Is it possible to look, to say that three or four years from now, we will look back on the federal policy and suggest that ironically--and you could disabuse me of this question--but ironically, maybe it created, because that there were restrictions, and created the public outrage, concern, whatever, that led to state initiatives, led to California Prop 71, led to New Jersey doing things that, in a sense, create an entrepreneurial environment on the state level, that will lead to a more competitive scientific research in this area, and perhaps even lead to more private investment than would have occurred if there had been a more lumbering traditional system of federal oversight, that traditionally accompanies new technologies.  I'm just throwing that out as a possibility. Might we look back at what we now see as a curse and see it perhaps as an odd blessing? MR.        :  The answer's yes. MR.        :  I didn't understand your question.  Are you suggesting that having been somewhat much more restrictive than we would like, and the states coming on board, this is actually going to help us? MR. ENTINE:  Well, the fact that states are now committing themselves and also setting up independent, slightly--I'm not saying this is true.  I want you to kind of react to that.  Will we have a more entrepreneurial way of looking at research into this area, that will actually benefit research?  Or is there any possibility that looking back, this may be a blessing in disguise, the federal restrictions on this? MR.        :  My reaction is that this is absolutely horrible public policy.  It's terribly unbalanced.  It's going to make research much more expensive for other areas of the country.  It may be good for California but for the nation, I think that it's bad public policy.  From a federal standpoint, I mean I have said that I'm a defender of the president, I think the decision he made, when he made it, was a courageous decision.  But, frankly, I can't understand why so little money has been spent.  The explanation that Jim Battey gives is that there aren't enough applications, and, you know, that just doesn't fly with me. I think that there's not been enough effort on the part of the government to fund those lines that are acceptable to fund, and once you get the breakthrough technologies, then we're going to be in a real rush to get it funded. MR. JENNINGS:  I think one of the consequences of a large infusion of state money is going to be different types of decisions about what gets funded.  NIH is typically, I think, perceived as a fairly risk-averse organization.  It's often very thoughtful, very deliberative in its decisions, and states which have, you know, influx of $3 billion or $100 million, whatever it is, will, I think in some cases, have a challenge in spending all of that money wisely. That's the downside.  The upside is that they will be able to, and indeed they will have to fund some high-risk stuff which NIH might not have been willing to fund, and, by definition, high risk might pay off, may or may not success, and I think we'll have a much better sense, five or ten years down the road, whether that was a good investment. DR. YOUNG:  I agree that it's not a good, this is not good public policy, to restrict federal funding for the most important area in biomedical research and to essentially leave it up to the states to fund it, willy-nilly.  Now, on the other hand, the states had no choice, or at least the scientists had no choice. So given the choice of no funding versus state funding, of course you would take state funding, and of course what you would like to do is to make the state funding as good as possible, and as well peer-reviewed as possible, and it's hard because states have no experience. I know that California's struggling with this and there are many, many phone calls and e-mails going back and forth, you know, who's going to serve on the study sections, and so forth, and you try to make this the best way possible. But, unfortunately, you know, we shouldn't have had to reinvent this particular wheel.  I mean, that wheel--if $300 million per year had been spent by the Federal Government, I think that the money would have been better spent at NIH. I don't know if the other panelists feel that way. MR.        :  I think that there's a--it's sort of like you take the best option that's been available to you.  But I think there's going to be fragmentation, duplication, and maybe a big issue is who owns what intellectual property rights.  But, you know, it's what you have, so you go after it. MR.        :  I think it's great that there's another funding agency other than the NIH.  I think, you know, California is what? comparable to the fifth largest economy in the world.  It's great to think that there may be some alternatives to one way of thinking. MR. JENNINGS:  The point about competition over intellectual property is potentially interesting.  I mean, I think if each state sees itself as a sort of independent enterprise and obviously, in many cases, sending these initiatives to the voters on the promise that they will get back the revenue partly through inventions and royalties on them, we may be moving into a more competitive climate in which states are competing with each other and perhaps even we'll see academic institutions getting into more intellectual property disputes with each other, across state lines, than has traditionally been the case in the past. DR. YOUNG:  I want to ask Lori a question because I like to talk very much, but I was also struck by the fact that you talked a lot about the international laws but not the state laws, and there's of course, indeed, several states that have restrictions against stem cells and there are several states that have of course permitted, and some of these states passed these laws very quickly, six to eight months, after very little discussion. So what do you think of the state law situation? MS. KNOWLES:  Well, I think, in a nutshell, it's in flux.  It's going to continue to change.  I mean, I was following what was happening with the bill that went, you know, forward yesterday in New York, and the proposal, and there's no question that a number of the initiatives that were passed before, if you look at the wording, they don't in fact even cover what they intended to cover.  So they define cloning so that it doesn't cover some of the types of cloning that they wanted to cover. The things that were rushed through, that some of the legislatures absolutely do not accomplish what they wanted to accomplish, in some instances. There's also, in my mind, from watching this sort of change and evolve, no question that this is going to be like it is in the international scene, a regulatory patchwork, and I think that's a disappointment from a legislative point of view, that there are going to be differing standards and not potentially, a lot of harmonization in the areas where harmonization would be extremely useful. And not only from an efficiency point of view, which a number of people rightly brought out, but also from a standard setting point of view, so that you have similar standards, so you know that the science has been reviewed to the same rigorous level and things that have come forward through, you know, even some of the clinical applications have been approved the same way. I mean, obviously, there are some federal mechanisms that would be in play but there's no question it's going to continue evolving and change, and I don't think anybody, right now, can accurately predict how many states will jump on the funding bandwagon but it's obviously going to be limited by financial capability too. MR. ENTINE:  Any final comments by any of our panel members?  Or observations?  This is your opportunity to "weigh in" at this point. I want to thank everyone for coming and I thank our panelists here now, and those who had participated earlier today.  I think we all learned a lot, and obviously a prickly debate.  I think we're waiting for the next lightning rod discovery to jump-start the next phase of the political debate on this but that may be a little bit in the future. But thank you, everyone, for coming.  I appreciate it very much. [END OF RECORDED SEGMENT.] </body></html>