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The Business of Human Embryonic Stem Cell Research and an International Analysis of Relevant Laws
Ella De Trizio and Christopher S. Brennan
Dechert LLP

Copyright © 2004 by The Journal of BioLaw & Business

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THE JOURNAL OF BIOLAW & BUSINESS

The Business of Human Embryonic Stem Cell Research and an International Analysis of Relevant Laws
Ella De Trizio and Christopher S. Brennan

ABSTRACT
Few sciences have held out such therapeutic promise and correspondingly stirred so much controversy in countries throughout the world as the developing science surrounding human embryonic stem cells. Since the first reported development of several lines of human embryonic stem cells in 1998, many governments around the world have attempted to address the thorny ethical issues raised by human embryonic stem cell research by the passage of laws. In some cases these laws have directly regulated governmental funding of the science; in other cases they have created a legal environment that has either encouraged or discouraged both governmental and private funding of the science. This article first differentiates human embryonic stem cells from other types of stem cells and frames the ethical controversy surrounding human embryonic stem cell research, then surveys laws governing human embryonic stem cell research in various scientifically advanced countries located throughout the Pacific Rim, Europe and North America and explains the impact these laws have had on governmental and private funding of human embryonic stem cell research.

INTRODUCTION
ew scientific topics consistently have grabbed so many headlines as the budding science surrounding human embryonic stem cells (“HESCs”). Whether it is as a result of reports coming out of South Korea of the first successful extraction of HESC from a cloned human embryo,1 the fact that European Union (“EU”) ministers are at an impasse with respect to the use of EU money for HESC research in Europe2 or impassioned pleas to permit such research from former First Lady of the United States Nancy Reagan,3 the controversy rages globally. Since the first reported development of several lines of HESCs in 1998,4 many governments have attempted to strike a balance between the therapeutic promise of HESCs and the thorny ethical issues they spawn by the passage of laws.5 In some cases, these laws have directly regulated governmental funding of HESC research6 and, in other cases, they have created a legal environment that has either encouraged or discouraged both governmental and private funding of HESC research.7 Many scientists believe that a greater understanding of the functioning of HESCs, along with the ability to genetically engineer these stem cells, may lead to unprecedented treatments for a host of human diseases, such as diaCOPYRIGHT© 2004 BY T H E J O U R N A L O F B I O L AW & B U S I N E S S

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betes, heart disease, cancer, Alzheimer’s disease and Parkinson’s disease.8 These potential treatments include the “correction” of diseased or defective cells by directly altering these cells or introducing “genetically enhanced” stem cells into diseased tissue to regenerate “healthy” cells that oust and replace diseased or defective cells.9 It would seem that the enormous therapeutic potential of HESCs would serve as a magnet for both governmental and private funding for HESC research around the world. Recent statistics show that the private venture capital industry invests on average US$50 billion to US$70 billion worldwide each year10 and that the United States government alone invests approximately US$75 billion per year on research and development.11 Clearly, there is a tremendous amount of money at stake, and the laws pertaining to HESC research promulgated by governments around the world have a direct impact on the flow of this public and private funding to companies, governmental research centers and universities focused on such research.12 As with any science, the success of HESC research is dependent as much upon the availability of funding for such research as upon the willingness of highly accomplished scientists to dedicate their professional focus to such research. Not surprisingly, many of the most renowned scientists specializing in HESCs have migrated to those countries with laws

Ella De Trizio, Esq., is a partner in the Princeton, New Jersey, USA office of Dechert LLP, an international law firm with 17 offices throughout the United States and Europe. She concentrates her practice in the areas of corporate finance and securities, with an emphasis on venture capital financings and the general representation of biotechnology and technology companies. Ella is a graduate of Yale Law School. Christopher S. Brennan is a corporate associate in the Princeton, New Jersey, USA office of Dechert LLP. Chris is a graduate of Fordham University School of Law.

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Cite as: Ella De Trizio and Christopher S. Brennan, The Business of Human Embryonic Stem Cell Research and an International Analysis of Relevant Laws. J. BIOLAW & BUS., Vol. 7, No. 4, 2004.

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permanently committed to the generation of specific cells and tissues, such as the generation of strictly replacement blood, brain or liver cells.20 However, some recent studies have suggested that HASCs may have more plasticity than originally thought and may be capable of giving rise to more than one type of cell or tissue.21 HASCs needed for research are harvested from tissue specimens taken from the human body,22 and research into the effectiveness of transplanting HASCs to initiate the regeneration of healthy blood, skin, heart, liver, brain and nerve cells has yielded early, albeit modest, success.23 Because there is little or no controversy surrounding the harvesting source of HASCs, there are no laws governing HASC research. That absence of laws, coupled with scientists’ early successes with various therapeutic applications of their research, has meant that HASC research has enjoyed robust governmental and private funding to date.24 For example, the United States National Institutes of DIFFERENTIATING AMONG STEM CELLS Health (“NIH”), the governmental agency responsible for Since the 1960s, it has been accepted by the scientific granting governmental funding for all types of stem cell community that certain “primitive” cells have the capacity research in the United States, provided in excess of to form more sophisticated cells that amass and form tis- US$345 million for HASC research in the fiscal year endsues of the human body.14 It was in 1971 that scientists ing September 30, 2002.25 In recent years, private comfirst definitively identified stem cells from mice.15 panies working with HASCs around the world have attractHowever, it was not until the ed, on average, in excess of 1990s that scientists were US$100 million per year in Since the 1960s, it has been accepted by the able to accumulate in private funding.26 Moreover, earnest the data, knowledge some companies, such as scientific community that certain “primitive” and technology necessary to ViaCell, Inc., a private comcells have the capacity to form more sophistibegin research with respect pany located in Boston, cated cells that amass and form tissues of the to human stem cells.16 Massachusetts, have been Human stem cells are the able to use the most prolific human body. most basic cells of the commercial enterprise relathuman body and develop ed to stem cells to date – into the approximately 250 different types of sophisticated cord blood stem cell preservation – to generate revenues cells that constitute the human body.17 It is generally and offset the financial risks associated with its HASC accepted by the scientific community that human stem research.27 While there continue to be impressive advances cells can be broadly divided into two types: Adult Stem and developments made with respect to the science of cryCells and Embryonic Stem Cells. opreservation of cord blood, that science is already at a stage where immediate commercial applications and financial gains are possible.28 So, even though certain other Human Adult Stem Cells commercial applications of HASC research have begun to During the course of each human being’s life, certain cells gain momentum in the international marketplace, such as of the body require “regeneration” or replacement. Blood is the introduction of HASCs into cosmetic products, cord perhaps the most obvious example of this biological truism, blood banks are by far the most financially successful and but it is also true for certain nervous system cells as well visible enterprises related to HASCs. For this reason, an as cells found in muscle and other connector tissue.18 overview of how cord blood banks fit into the overall Human Adult Stem Cells (“HASCs”) have been found in scheme of the science and business of stem cells is worthvery modest quantities in tissues throughout the body and while. However, it is important to keep in mind that the are the genesis of this regeneration process. Many scien- commercial success of cord blood banks has been, and will tists are of the opinion that HASCs are “set aside” by the continue to be, heavily reliant upon the promise of the therhuman body during fetal development and restrained from apeutic applications of a specific type of HASC found in maturing until they are needed for the regeneration cord blood – Hematopoietic Stem Cells. process.19 HASCs have traditionally been considered mulHematopoietic Stem Cells are the genesis of blood formatipotent and “terminally differentiated,” meaning that, tion in the human body, and these stem cells give rise to while they may have some flexibility about which types of all known cell types in the blood-forming and immune syssophisticated cells they will give rise to, generally they are tems.29 Blood in the umbilical cord during and shortly after

that are more hospitable to HESC research, with government and private funding for HESC research following closely on their heels.13 This article begins by explaining the scientific differences among the various types of stem cells and exploring the issue of why research with respect to HESCs has garnered so much scrutiny, while research with respect to other types of stem cells has not. Part I of this article also highlights the correlation between the absence of laws applicable to stem cells other than HESCs and the robust funding that the work with these stems cells currently enjoys. Part II surveys laws governing HESC research in various scientifically advanced countries located throughout the Pacific Rim, Europe and North America and then explains the impact these laws have had on governmental and private funding of HESC research.

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the delivery of a human baby contains Hematopoietic Stem Cells that flow from the liver of the mother to the baby through the umbilical cord and provide the essential building blocks for blood formation in the baby.30 Therapeutic treatments for leukemia, other types of blood diseases and autoimmune diseases have traditionally focused on the bone marrow of the patient, with many such patients undergoing a bone marrow transplant procedure in an effort to replace the patient’s own “malfunctioning,” diseased or radiated bone marrow. Ideally, the Hematopoietic Stem Cells from a cord blood transplant would restore the bone marrow’s ability to produce healthy blood. The procedure of transplanting “banked” Hematopoietic Stem Cells or “cord blood” into the devastated bone marrow of patients is more appealing than accomplishing a more complicated bone marrow transplant for several reasons. Cord blood is easier to collect than bone marrow, which requires a one-day hospital stay and a painful procedure for the donor.31 Additionally, in transplants performed on patients unrelated to the donor, cord blood appears easier to match than bone marrow, thus resulting in fewer instances of rejection of the transplant by the patient’s body.32 The success rate for cord blood transplants and bone marrow transplants are fairly comparable.33 These factors, along with the therapeutic promise that Hematopoietic Stem Cells hold out, has led to a thriving “cottage” industry of cord blood banks, with customers paying an initial preservation fee of approximately US$1,500 and an annual “maintenance” fee of approximately US$500 for the preservation of their child’s cord blood.34 As explained in the next section, the experience of scientists and businesspeople attempting to draw public and private funding to Human Embryonic Stem Cell research has been vastly different from the experience of their counterparts who are focused on HASC research.

Human Embryonic Stem Cells
HESCs are considered “pluripotent,” meaning that they have the potential to develop into all or nearly all of the cells of the human body.35 It is this universality of HESCs that makes them so sought after by researchers. To date, HESCs have only been found in the inner cell mass of human embryos that have achieved the blastocyst stage of development, which occurs three to five days after fertilization of the human egg.36 As a result, HESCs are almost exclusively harvested from cryopreserved blastocysts that have been created during in vitro fertilization procedures and donated for research by the individuals whose genetic materials were used to create these embryos.37 Once the 30 or so HESCs are extracted from the inner mass of a blastocyst, that embryo no longer has the ability to develop through implantation in the human uterus.38 It is the termination of the embryo’s viability to develop into a human being that has prompted fierce opposition around the world based on religious, moral and ethical considerations.39 An alternative source for the harvesting of HESCs has

recently proved plausible with the announcement out of South Korea that a human embryo had been cloned for the specific purpose of harvesting HESCs.40 Unfortunately, this source, generated through a procedure known as “Somatic Cell Nuclear Transfer” or “Therapeutic Cloning,” is no less controversial, since it is argued that, theoretically, there is no biological reason why an embryo cloned for the harvesting of HESCs could not, instead, be implanted in a human uterus and eventually develop into a cloned human being.41 It is important to make a distinction between Somatic Cell Nuclear Transfer and HESC research, since the two terms are not synonymous, although they are sometimes indiscriminately lumped together. While Somatic Cell Nuclear Transfer can properly be classified as falling within the very broad scope of HESC research, Somatic Cell Nuclear Transfer is only one of many avenues of HESC research currently being pursued by the scientific community around the world. An overwhelming majority of the world’s scientists who are engaged in HESC research agree that Somatic Cell Nuclear Transfer for the purpose of reproductive cloning or the creation of a cloned human being is unethical and should be prohibited by the scientific community and lawmakers alike.42 Somatic Cell Nuclear Transfer for the purpose of therapeutic cloning, however, has received considerable support from the scientific community as a viable alternative source for HESCs needed for research.43 Largely due to the controversy surrounding the harvesting sources of HESCs, governmental and private funding for HESC research has been difficult to attract in many countries. For example, as of late 2003, the NIH had granted only US$60 million for HESC research over a three-year period,44 as compared to the US$345 million the NIH had granted for HASC research in 2002 alone.45 As is typically the case with very early-stage sciences, when governmental funding is scarce, there is a corresponding dearth of private funding and companies struggle to convince the international investment community to funnel capital to help them achieve their scientific and business objectives. Dr. Robert P. Lanza, Vice President of Medical and Scientific Development at Advanced Cell Technology, Inc., a private company located in Worcester, Massachusetts, and one of only four significant United States companies focused on HESC research, stated in a recent news report that “[a]ll of the money for this work has dried up … [w]e are lucky to still be in business and [Advanced Cell Technology, Inc.’s] research has suffered immensely.”46 Further to the point, Menlo Park, California-based Geron Corporation, a bellwether biotechnology company whose stock became publicly traded in 1996 amidst much public fanfare, has terminated most of its stem cell researchers and, to a large extent, changed its focus away from HESC research.47 In addition to the lack of governmental funding in many countries, the infancy of the science of HESCs and the long time line and associated significant expense of commercial therapeutic applications of HESC research all contribute to the reluctance of many private investors to provide financial support to private and public entities pursuing HESC

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conduct research.”56 Singapore’s campaign has yielded noteworthy results to date. Dr. Alan Colman, perhaps the most renowned HESC researcher in the world who helped clone “Dolly the Sheep,” relocated from Scotland to Singapore in 2003, stating, “I’m a scientist and the type of science I want to do is expensive and I’ll go where the investment is INTERNATIONAL ANALYSIS OF LAWS AFFECTING made.”57 Dr. Colman has estimated that, as a result of HESC RESEARCH Singapore’s HESC-friendly legal regime and its government’s overt commitment to HESC research, his move to The Pacific Rim Singapore is likely to result in his research alone attracting Singapore has arguably been the most aggressive country in excess of US$50 million from international venture capin the world in its efforts to become a leader in HESC italists.58 Dr. Colman’s move to Singapore is not an anomresearch. The government of Singapore has launched a aly. The United States and Japan are examples of two other two-prong offensive to promote its country as the ultimate countries that have lost to Singapore leading scientists, haven for this research. The first prong of this campaign their research teams and the money that they attract. focuses on creating a legal regime that is highly supportive Edison Liu, formerly a leading researcher at the United of matters related to HESC research – such as the availabil- States’ National Cancer Institute, moved to Singapore to ity of HESC harvesting sources.49 Not only does head the Singaporean Genome Institute.59 Yoshiaki Ito, a Singaporean law permit the harvesting of HESCs from cry- renowned researcher who spent many years at Kyoto opreserved embryos (i.e., surplus embryos created as a University in Japan, is now a member of Singapore’s result of in vitro fertilization procedures), but it also per- Institute of Molecular and Cell Biology.60 Singapore’s mits harvesting of HESCs from embryos created through efforts also have convinced numerous companies whose therapeutic cloning50 and business plans focus on from aborted fetuses.51 The HESC research to relocate second prong of this camto, or at least set up extenAs scientists race to unlock the therapeutic paign is reflected in sive research laboratories in, potential of HESCs, the legal approach scientifSingapore’s firm financial Singapore. Australian-based ically advanced countries around the world have commitment to HESC ES Cell International (the research as exemplified by company for which Dr. taken with respect to the regulation and funding Biopolis, a US$500 million Colman works) and ViaCell of HESC research has had a dramatic impact on state-of-the-art biomedical Singapore Pte. Ltd., a wholly the business of HESCs. research campus in the owned subsidiary of the U.S. heart of Singapore that was private company ViaCell, opened for business in Inc., are just two examples October of 2003.52 The government of Singapore footed of such companies.61 the bill for the nearly 600,000 square foot biomedical Over the past few years, South Korea also has emerged as research center that houses both public research institutes a hotbed for HESC research in the Pacific Rim. This is a and private research laboratories.53 Singaporean officials result of the laissez-faire legal atmosphere that has prehave widely publicized the fact that Singapore intends for vailed in South Korea with respect to HESC research62 and HESC research to be one of the main objectives of the the fact that South Korean President Roh Moo Hyun enthuapproximately 2,000 scientists that will work at Biopolis.54 siastically supports HESC research, which has led to considAdditionally, the Agency for Science, Technology and erable governmental funding for the research.63 One Research (“A*STAR”) of the Singaporean government rou- outcome is the spectacular success reported in February tinely engages in joint funding ventures with private enti- 2004 by a research team from the Seoul National ties, such as the US$3 million fund that A*STAR estab- University, led by Hwang Woo Suk, that human embryos had lished in the fourth quarter of 2003 jointly with the successfully been cloned and matured in vitro to the blastoJuvenile Diabetes Research Foundation International cyst stage, which is the point at which HESCs can be (“JDRF”), a not-for-profit charitable corporation based in harvested from the embryos.64 At the same time that the United States, to support HESC research in Hwang’s team was nearing success in its HESC project, the Singapore.55 Upon the announcement of the establishment South Korean government responded to the increased of this joint fund, JDRF issued a statement that read, in scrutiny that HESC research was receiving internationally by part: “In many countries, including the United States, passing a series of laws regulating certain aspects of this research on embryonic stem cells faces possible limitations research. These laws, passed in January 2004, ban human for political reasons. Due to these factors, JDRF is making embryonic cloning for reproductive purposes, require that efforts to fund [embryonic] stem cell programs where top scientists receive prior approval for their HESC projects scientists have a more favorable environment in which to from an ethics panel and tighten regulations prohibiting

research.48 Part II below explains how governments around the world have attempted to address the controversy surrounding the harvesting sources of HESCs by the passage of laws and how these laws have acted as yet another factor in the availability of funding for HESC research.

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women from selling their eggs.65 Kwak Sun Heon, a South Korean official with the government’s Health Ministry, has expressed concern with respect to the effect such increased regulation will have on attracting and retaining top-shelf HESC research in South Korea, stating, “We’re getting to the point where I think Korea might be more restrictive about this kind of research than the United States.”66 Other Pacific Rim countries, such as Australia and Japan, have been more lethargic than Singapore and South Korea in providing legal certainty with respect to HESC research. This has translated into considerably less scientific and economic development with respect to HESC research within the borders of these countries. In Australia, in particular, recent years have seen fierce national and state political battles over the legal status of HESC research.67 As a result, some Australian companies focused on HESC research have relocated their operations to more hospitable environments, many choosing nearby Singapore.68 The Japanese government has been very deliberate in crafting its current legal stance with respect to HESCs. In February 2004, officials of the Education, Culture, Sports, Science and Technology Ministry approved Japan’s first medical project using domestically created HESCs.69 Previously, scientists working in Japan could only use imported HESCs for their research, a practice that prevented these scientists from obtaining intellectual property rights based on such research under Japanese law.70 With intellectual property rights being the foundation of most financial rewards stemming from scientific research, Japan’s previous regulatory practice has had a cooling effect on HESC research in Japan to date.

Europe
As the countries of Europe continue to work towards a unified economy, the economic policies established by the ministers of the EU bear increasing significance for HESC research. At stake is the estimated US$60 million per year that is anticipated to be made available for HESC research by the EU.71 Therefore, it comes as no surprise that the intense political debate with respect to EU funding of HESC research that erupted in 2003 captured many headlines. Throughout 2003, a moratorium on EU funding for HESC research was imposed by EU ministers who spent the year grappling with regulatory guidelines pertaining to HESC research.72 On December 31, 2003, the moratorium ended, and despite heated debates throughout the year and a last-ditch effort to reach a consensus, the member states of the EU were still unable to pass a regulatory framework for the funding of HESC research.73 Germany, Austria and Italy were the strongest opponents to the granting of any EU money for HESC research, and Portugal suggested that only research that used HESCs created before a certain date be eligible for EU funding.74 EU Research Commissioner Philippe Busquin stated that the lack of an agreed-upon regulatory framework means that the European Commission and EU governments will have to scrutinize each proposal to use EU funds on a “case by

case basis,”75 a process that will make such approvals tedious and likely discourage HESC researchers from applying for such funding. Austria, Denmark, Germany, Finland, France, Greece, Ireland, the Netherlands, Portugal and Spain are all examples of European countries whose laws either outright prohibit HESC research altogether or significantly restrict the use of certain HESC harvesting sources.76 As a result of these restrictive laws, HESC research in these countries has been either modest or nonexistent. Helmut Matthies, chief executive officer of ProteoSys AG, one of the few German biotechnology companies that has successfully applied for and received HESC research funding from the German government, recently put a fine point on the dramatic impact a country’s laws can have on the funding, and overall success, of HESC research by stating: “If we, as a German biotech company, want to compete with [HESC companies from other scientifically advanced countries], then we have to have more or less the same kind of conditions or environment.”77 In Spain, the central government recently filed a lawsuit in the country’s Constitutional Court in order to block the regional government of Andalusia’s pledge to provide US$5 million in grants specifically for HESC research.78 This raging constitutional battle has discouraged the flow of money for HESC research into Spain. Josep Eqozcue, a well-regarded Spanish scientist, indicating that the central government’s legal stance “could forbid any attempt [in Spain] to start research in this field.”79 The British government has made a concerted effort to use the passage of law to create a stable and certain environment with respect to HESC research conducted within the United Kingdom. In fact, British Prime Minister Tony Blair announced that one of the main objectives of his government is to make the United Kingdom the world leader with respect to HESC research.80 To that end, in addition to the British Parliament’s passage of legislation that permits HESC harvesting from cryopreserved embryos and therapeutically cloned embryos, the Medical Research Council, an agency of the British government that granted approximately US$13 million for HESC research in 2002, has been charged with the coordination of stem cell research occurring throughout the United Kingdom.81 Initiatives to increase coordination and communication between HESC researchers operating in the United Kingdom have led to the establishment of the world’s first national stem cell bank to provide “ethically approved” HESCs (as well as other stem cells) to researchers.82 In late 2002, the British government raised eyebrows throughout the world’s scientific community when it announced that it would be funding a total of US$75 million for HESC research conducted in the United Kingdom during 2003 and 2004.83 Lord Sainsbury, the British government’s science minister, indicated that his government hoped that the stable legal environment and robust funding for HESC research that it has worked so diligently to establish would “help attract more scientists [to the United Kingdom] from

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overseas.”84 The British government achieved this objective HESC research to digging for gold: “The gold is the therawith respect to one of the world’s first HESC researchers peutics, but the rest of the dirt in the shovel contains other when Roger Pederson, who had been researching HESCs at useful nuggets.”94 Perhaps it is this focus on the commerthe University of San Francisco in California for nearly 30 cial “exit strategy” for HESC research that makes Swedish years, relocated his research laboratory to Cambridge private companies such as Cell Therapeutics, which has University in 2001.85 British politicians, economists and lured approximately US$12 million in private funding, scientists all believe that the payoff for the United attractive to venture capitalists.95 Kingdom will come a few years down the line when HESC research now being conducted within the country’s borders North America results in medical and therapeutic breakthroughs that will cause the floodgates to swing open to private money from Prior to March 2004, the Canadian Institutes of Health around the world.86 Research’s (“CIHR”) “Human Pluripotent Stem Cell Like the United Kingdom, Sweden has displayed strong Research Guidelines” (the “CIHR Guidelines”) were the public and governmental support for HESC research. In sole regulatory scheme applicable to HESC research in 2002, Sweden established its own national stem cell bank, Canada. Under the CIHR Guidelines, governmental funding which is being funded by the Swedish government.87 While for HESC research is permitted so long as the human Swedish law pertaining to HESCs may not be as liberal as embryos from which the HESCs are harvested are created laws in other countries such as Singapore and the United for reproductive purposes, the gamete providers grant their Kingdom, the Swedish government recognized the value of free and informed consent for the use of the embryos in quickly and quietly establishing legislation that would proj- research, and there are no commercial transactions ect a perception of certainty to the scientific community.88 involved in the creation and use of the embryos.96 When Sweden’s intellectual property legal regime is also very enacted in 2002, the CIHR Guidelines were considered attractive to researchers inasmuch as it provides for most very favorable to HESC researchers. The CIHR Guidelines intellectual property pertainbrought recognition to ing to HESC research to Canada from the scientific reside with the researcher, community, especially since Some countries, such as Singapore and the as opposed to the university the CIHR Guidelines were United Kingdom, have placed a large wager on or company with which the more favorable to HESC the eventual economic payoff of HESC science. researcher has forged a relaresearch than the regulatory tionship.89 HESC-friendly scheme announced only a Other countries, such as Australia and the laws and strong governmenshort time prior by Canada’s United States, have yet to work out the political tal funding has led to a neighbor, the United States. turmoil that HESC science has sparked within steady flow of money from In March 2004, the outside of Sweden to HESC Canadian Parliament passed these countries. researchers within its bor“Bill C-6: An Act Respecting ders.90 For example, the Assisted Human ReproMichael J. Fox Foundation, a not-for-profit entity based in duction and Related Research” (“Bill C-6”). While the the United States, has provided in excess of US$1 million legislation still requires Royal Assent to officially become in each of the past three years to HESC research programs law in Canada, such Royal Assent is typically considered located in Sweden.91 only a formality. Swedish venture capitalists also seem slightly more apt Many in the Canadian government have made an effort to than their counterparts located elsewhere to invest in start- minimize the impact Bill C-6 will have on HESC research, up companies focused on HESC research. Gunnar opining that Bill C-6 addresses the handling of human Fernström, Investment Director of InnovationsKapital, a embryos while the regulation of HESC research remains the Swedish venture capital fund that has invested in Cell domain of the CIHR Guidelines.97 Bill C-6, however, Therapeutics Scandinavia AB, a Swedish biotechnology specifically outlaws human embryonic cloning for theracompany focused on HESC research, summarized a preva- peutic purposes and sets forth stringent consent and lent philosophy among Swedish venture capitalists when approval procedures before HESC lines can be established he stated that “just as it was exaggerated euphoria [with in a Canadian laboratory.98 It also authorizes the establishrespect to HESCs], now there is exaggerated skepticism.”92 ment of a government agency, slated to be named the Swedish researchers also are very focused on the commer- “Assisted Reproductive Agency of Canada” (the “Agency”), cial applications of their research, with some targeting that will report directly to the Canadian Minister of Health 2008 for the launch of clinical trials for therapies derived and will oversee licenses for assisted human reproduction from their HESC research and others focused on medical procedures or research (including HESC harvesting) using screening applications possibly resulting from their HESC in vitro embryos.99 The Agency will also be charged with research.93 Boo Edgar, Chief Executive Officer of Cell ensuring peer and ethics review of any proposed research Therapeutics, has compared the commercialization of project involving a human embryo.100 While Bill C-6

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“grandfathers” certain practicing researchers from some of its restrictions, Bernard Siegel, president of the Genetics Policy Institute, a not-for-profit advocacy organization, indicated that the net effect of Bill C-6 will be that “some of [Canada’s] brightest scientists will be compelled to find labs elsewhere.”101 As a result of the substantial autonomy that individual states exercise in the legal scheme of the United States, United States laws pertaining to HESC research are far more complex than those found in other parts of the world. At the federal government level, President George W. Bush issued a presidential statement on August 9, 2001 (the “U.S. Presidential Policy”) in which he set forth his administration’s policy with respect to federal funding of HESC research conducted within the United States. The U.S. Presidential Policy sought to establish a compromise between the policies promoted by the proponents and opponents of HESC research. The result was that, in order for HESC research to be eligible for any portion of the approximately US$30 million per year in federal funding made available to stem cell research by the United States government, such research must be conducted on governmentally approved HESC lines that were created prior to August 9, 2001.102 Many in the biotechnology community argue that even though the U.S. Presidential Policy has not illegalized HESC research, it has severely hampered its advancement.103 As proof, they point to the fact that of the 78 human embryonic stem cell lines initially identified as meeting President Bush’s eligibility criteria, only about a dozen are currently available for researchers, all of which have been grown using mouse feeder cells.104 For many researchers, the use of mouse feeder cells has called into question the safety of someday using these HESCs in human clinical trials for fear of mouse viruses and other contaminating proteins being passed on to human cells.105 In March 2004, such concerns led to Harvard University announcing that it would make several HESC lines generated in its laboratories available to researchers at no cost.106 Further complicating the situation, there are several federal bills currently being sponsored by United States senators and representatives that either illegalize all, or various aspects of, HESC research or explicitly support and endorse all, or various aspects of, HESC research.107 With the turmoil at the federal government level having “a chilling effect not only on the science [of HESCs] but also on the investment community,”108 some states, such as California and New Jersey, have decided to take the regulation and public funding of HESC research into their own hands. California and New Jersey (each home to hundreds of private and public biotechnology and life science companies) in 2002 and 2004, respectively, enacted state laws that expressly and unequivocally make HESC research, as well as therapeutic cloning, legal within their state borders.109 Additionally, New Jersey and California have each attempted to address the perceived problem of inadequate governmental funding for HESC research. As part of the State of New Jersey’s 2005 fiscal budget, New Jersey Governor

James E. McGreevey has allocated US$6.5 million (with Governor McGreevey calling for US$50 million over five years from both state and private funds) for the establishment of a HESC research institute, to be built in New Brunswick, New Jersey, and run by Rutgers University and the University of Medicine and Dentistry of New Jersey, both state institutions.110 Dr. Wise Young, chairman of cell biology and neuroscience at Rutgers University and one of Governor McGreevey’s advisors on his fiscal budget plan for 2005, indicated that New Jersey hoped to recruit about a dozen of “the best stem cell scientists in the world” to the new HESC research institute.111 California politicians have drafted a voter initiative entitled the “California Stem Cell Research and Cures Act” (the “California Funding Act”), which they plan to have on the November 2004 statewide ballot. The California Funding Act is a US$3 billion bond measure that calls for the amendment of the California constitution to require that stem cell researchers receive an average of US$925 million per year in bonds over a ten-year period.112 Some United States HESC laboratories have successfully appealed to private funding sources. The University of California at San Francisco and Stanford University have raised US$11 million and US$12 million, respectively, for their HESC research centers, and Harvard University has announced its plans to launch fundraising efforts for a US$100 million research center.113 However, the uncertain political environment combined with the infancy of HESC science has deterred many private investors from making an investment in HESC projects in the United States. Linda Powers, managing director of Toucan Capital, Inc., a Maryland venture capital fund, stated that with respect to United States-based HESC research businesses, venture capitalists have to “worry about whether the technology works or not, [about] regulatory approval but also plain old political risk, [because] we could get five years into [an investment] and then have [the United States] Congress pass a law saying that it is illegal.”114 The turbulence with respect to United States laws pertaining to HESC research has led some scientists to seek more friendly legal environments, and Powers has said that this continued migration of HESC research outside of the United States will be “a big blow from a business and economic standpoint,” because HESC treatments and technologies “are going to yield very big economic returns.”115 Many investors predict that the market for HESC treatments and technologies will be in the billions of dollars, and the concern among some United States venture capitalists is that the “highly successful life science companies that do the commercialization of these treatments [and technologies] will be outside of the United States,” resulting in the commercial revenue flowing to those countries and venture capitalists who support HESC research today.116

CONCLUSION
As scientists race to unlock the therapeutic potential of

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HESCs, the legal approach scientifically advanced countries around the world have taken with respect to the regulation and funding of HESC research has had a dramatic impact on the business of HESCs. Some countries, such as Singapore and the United Kingdom, have placed a large wager on the eventual economic payoff of HESC science. Other countries, such as Australia and the United States, have yet to work out the political turmoil that HESC science
ENDNOTES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. See Rick Weiss, Mature Human Embryos Cloned: South Koreans’ Work Has Medical Promise but Raises Concerns, Wash. Post, Feb. 12, 2004, at A01. See Andrew Scott, EU in Stem Cell Limbo: Council Meeting to Resolve the ES Cell Debate Fails to Reach a Decision, The Scientist, Dec. 4, 2003. See <http://www.cnn.com/2004/HEALTH/05/09/reagan.stem.ap/index.html>. See <http://www.cnn.com/HEALTH/9811/05/stem.cell.discovery/html>. See generally Part II infra. See generally Part II infra. See generally Part II infra. See generally Cynthia Robbins-Roth, From Alchemy to IPO: The Business of Biotechnology 91-93 (Perseus Publishing 2001). Id. See Staff Writer, Fortune, Nov. 25, 2002 at 135. See R.D. Burck (Chancellor of the University of Texas), Federal Research and Development Overview, Nov. 14, 2001 at 3 (statistics paper on file with authors). See Luke Timmerman, Stem-Cell Research Still an Embryonic Business, The Seattle Times (Business & Tech. Section), Feb. 22, 2004. See generally Part II infra. See Audrey R. Chapman, Ph.D., et. al., Stem Cell Research and Applications: Monitoring the Frontiers of Biomedical Research, at 1, November 1999 (paper on file with authors). Id. See supra note 4 and accompanying text. See <http://www.stemcellresearchfoundation.org/About/FAQ.htm>. Id. See Dr. Mugur A. Roz, M.D., Ph.D., Stem Cells in Biomedicine … With a Flavor of Bioethics (presentation available at <http://free.hostdepartment.com/ s/stem_cells/>. See <http://www.stemcellresearchfoundation.org/About/FAQ.htm>. See Sylvia Pag?n Westphal, Greater Potential of Adult Stem Cells Revealed, The New Scientist, May 17, 2003. See id. See, e.g., Maggie Fox, Cloned Cells Repair Mouse Hearts, U.S. Company Says, The World Health Network, Mar. 2004 available at <http://www.worldhealth.net/p/416,5374.html>. See Scott Gottlieb, Adult Cells Do It Better: Venture Capital Says Adult, Not Embryo, Stem Cells Are the Cure, The American Spectator, June 2001. See <http//www.bizjournals.com/Pittsburgh/stories/2002/12/16/story2. html?page=3>. See Gottlieb, supra note 24. See <http://www.viacellinc.com/index.asp?p=3>. See, e.g., < http://www.parentsguidecordblood.com/index.html>. See <http://www.isscr.org>. Id. See Mary Niederberger, An Experimental Treatment Still in Its Infancy, PostGazette (Pittsburgh, PA), May 19, 1998. Id. Id. See Helen Pearson, Cord Blood Claims Questioned, Nature, Feb. 5, 2003. See <http://www.whitehouse.gov/news/releases/2001/08/print/20010809-1. html>.

has sparked within these countries. What is unmistakable, however, is that HESC scientists will continue to seek refuge in those countries that provide a favorable legal environment for their work. If their work leads to therapeutic applications, those countries that have taken the biggest political and economic risks will reap the largest rewards.

36.

See Dr. Mugur A. Roz, M.D., Ph.D., Stem Cells in Biomedicine … With a Flavor of Bioethics (presentation available at <http://free.hostdepartment.com/ s/stem_cells/>. Nat’l Bioethics Advisory Comm’n., Ethical Issues In Human Stem Cell Research: Volume I: Report and Recommendations of the National Bioethics Advisory Commission 9-10 (1999) (available at <http://www. georgetown.edu/research/nrcbl/nbac/stemcell.pdf>). See Roz, supra note 36. See Howard Markel, Weighing Medical Ethics for Many Years to Come, N.Y. Times, July 2, 2002, at F6. See Rick Weiss, Mature Human Embryos Cloned: South Koreans’ Work Has medical Promise but Raises Concerns, Wash. Post, Feb. 12, 2004, at A01. Id. See, e.g., Nat’l Acad. of Sciences, U.S. Policy-Makers Should Ban Reproductive Cloning, The National Academies, Jan. 2002. Id. See Paul Elias, America Lags in Stem Cell Research: Political Pressure Limits Funds for Cloning Experiments, The Associated Press, Feb. 13, 2004 (available at <http://www.msnbc.msn.com/id/4261823>). See <http//www.bizjournals.com/Pittsburgh/stories/2002/12/16/story2.html? page=3>. See Elias, supra note 44. Id. See Scott Gottlieb, Adult Cells Do It Better: Venture Capital Says Adult, Not Embryo, Stem Cells Are the Cure, The American Spectator, June 2001. See Paul Mitchell, International Governments Hold Back Stem Cell Research, International Committee of the Fourth International, Aug. 12, 2003. See Send in the Clones, The Economist, Aug. 22, 2002. Id. See Richard Black, Singapore Hi-Tech Haven Opens, BBC News World Edition, Oct. 29, 2003. See A*STAR Press Release, Biopolis Ready For Action: Singapore’s Biomedical Hub Set to Open, Oct. 23, 2003, (available at <http://www.a-star.edu.sg/ astar/about/action/pressrelease_details.do?id=05f58ba5097Sn>). See Richard Black, Singapore Hi-Tech Haven Opens, BBC News World Edition, Oct. 29, 2003. See A*STAR, supra note 53. See Patrick Goodenough, Asian Pro-Lifers to Meet Amid Push for Embryonic Research, Cybercast News Service, Nov. 5, 2003 (available at <http://www.cnsnews.com>). See Dolly the Sheep Scientist Quits Scotland Over Lack of Venture Cash, Mar. 18, 2004 (available at <http://www.ananova.com/business/story/sm_540591. html>). Id. See Send in the Clones, The Economist, Aug. 22, 2002. Id. See A*STAR Press Release, ViaCell, Inc. Announces Global Research and Development Operations with the Establishment of Singapore Research Centre, Feb. 5, 2002 (available at <http://www.biomed-singapore. com/bms/sg/en_uk/index/newsroom/pressrelease/2002/viacell>). See Barbara Demick, S. Korea a Hotbed of Cloning Research, L.A. Times, Feb. 22, 2004. Id. Id. Id.

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38. 39. 40. 41. 42. 43. 44.

12. 13. 14.

45. 46. 47. 48. 49. 50. 51. 52. 53.

15. 16. 17. 18. 19.

20. 21. 22. 23.

54. 55. 56.

24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35.

57.

58. 59. 60. 61.

62. 63. 64. 65.

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66. 67.

Id. See Research Update, JDRF Plays Critical Role in International Stem Cell Debate, JDRF Website (available at <http://216.167.3.245/research/ features/res111302c.php>). See supra note 61 and accompanying text. See Staff Writer, Embryo Stem Cell Research OK’d, The Japan Times, Feb. 14, 2004. Id. See Staff Writer, EU to Fund Stem Cell Research Despite Split, Cell News, Dec. 3, 2003. See Staff Writer, EU Split Over Stem Cell Research, BBC News, July 10, 2003. See Staff Writer, EU to Fund Stem Cell Research Despite Split, Cell News, Dec. 3, 2003. Id. Id. See Stem Cell Research Regulations in the European Union, International Society for Stem Cell Research (updated Oct. 17, 2003) (available at <http//www.isscr.org/scientists/legislative.htm>). See Ned Stafford, Speech Stirs Stem Cell Debate, The Scientist, Nov. 7, 2003. See Staff Writer, Stem Cell Bank Sparks Political Divisions in Spain, N.Y. Times, Feb. 15, 2004. See Doug Payne, UK Presses Ahead with Stem Cell Research While Germany, Spain and the US Agonize Over Ethical Issues, The ELSO Gazette, Feb. 2003 (available at <http://www.the-elso-gazetter.org/magazine/issue13/-news/ news4.asp>). See Raja Mishra, US Stem Cell Support Lures US Scientist, The Morton Cure Paralysis Fund, Nov. 17, 2002 (available at <http://www.mcpf.org/displayarticle. asp?articleId=81>). See supra note 79 and accompanying text. Id. Id. Id. See Mishra, supra note 80. Id. See Staff Writer, Sweden Stem Cell Success, Cell News, Oct. 19, 2002. Id. Id. Id. Id.

92. 93. 94. 95. 96. 97. 98. 99.

See Dan Lee, Sweden Forging Ahead on Stem Cells, The Mercury News, Mar. 30, 2003. Id. Id. Id. See Canadian Institutes of Health Research’s March 2002 “Human Pluripotent Stem Cell Research Guidelines.” See Doug Payne, Canada Passes Cloning Law, The Scientist, Mar. 16, 2004. Id. See Bill C-6: An Act Respecting Assisted Human Reproduction and Related Research.

68. 69. 70. 71. 72. 73. 74. 75. 76.

100. Id. 101. See Kristen Philipkoski, Canada Closes Door on Cloning, Wired News, Mar. 17, 2004. 102. See <http://www.whitehouse.gov/news/releases/2001/08/print/20010809-1. html>. 103. Id. 104. See Ted Agres, Senators Urge Stem Cell Expansion, The Scientist, Apr. 25, 2003. 105. See Merrill Goozner, US Stem Cell Researches Chafe, The Scientist, Dec. 5, 2003. 106. See Staff Writer, Harvard Planning Stem Cell Research Center, SiliconValley.com, Mar. 1, 2004. 107. See Chuck Nowlen, Stem Cell Research Gets Boost, The Capital Times, Mar. 8, 2004. 108. See Steve Mitchell, U.S. Stem Cell Policy Deters Investors, United Press International, Nov. 2, 2002. 109. See Editorial, California Plunges Forth In Mire of Stem-Cell Research, Tampa Trib., Sept. 28, 2002, at 20; Laura Mansnerus, In Stem-Cell Law, Supporters See Opportunity for New Jersey, N.Y. Times, Jan. 6, 2004. 110. Laura Mansnerus, New Jersey Governor Puts Stem Cell Research in Budget Plan, N.Y. Times, Feb. 21, 2004. 111. Id. 112. See Welsey J. Smith, Clone the Taxpayers, Forbes, Mar. 15, 2004. 113. See Staff Writer, Stem-Cell Research’s Creative Financing, The Stem Cell Network, Mar. 15, 2004. 114. See Steve Mitchell, U.S. Stem Cell Policy Deters Investors, United Press International, Nov. 2, 2002. 115. Id. 116. Id.

77. 78. 79.

80.

81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91.

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