PHS works with biotech comp on stem-cell use regs

For-profit use generally prohibited

By J. Mark Waxman, JD
General Counsel
CareGroup Healthcare System, Boston

Spotlight on Compliance

Although the availability of stem-cell lines remains in the news, decisions about how they will be distributed has been slowly moving forward. Through a Memorandum of Understanding (MOU) between the U.S. Public Health Service (PHS) and BresaGen Inc., a Georgia-based subsidiary of Australian biotechnology company BresaGen Limited, provision has been made for distribution of human embryonic stem-cell line materials to PHS and academic researchers.

This MOU, which went into effect April 24, follows a comparable MOU agreement with WiCell, the entity associated with the University of Wisconsin-Madison that has patented technologies and materials concerning primate embryonic stem cells and their cultivation. Because the goal of both MOUs is to make stem cell materials and know-how available, the terms to implement that goal are important.

The structure of the arrangement is in two parts: 1) An agreement between BresaGen and PHS setting forth the terms and conditions under which the materials will be made available; and 2) A Simple Letter Agreement (SLA) for the actual transfer of the materials to PHS contractors and scientists to be executed by recipients.

Availability of the BresaGen materials under the MOU is based on the following conditions:

a) Materials are made available in only specified PHS biomedical research programs.

b) Materials may not be used for any diagnostic or therapeutic purposes.

c) Materials may not be used for commercial purposes — this would include research funded by a for-profit entity where the sponsor could claim rights to the results of the research. What is or is not a commercial purpose is not defined.

d) Materials may not be used for the direct benefit of a research sponsor without a separate direct written agreement. What is actually a direct benefit is not defined.

e) Materials may not be transferred to third parties of any kind without written consent.

f) If using materials results in the discovery of different materials that could be developed for commercial use, rights to the materials will require a separate agreement with BresaGen. PHS appears to have bargained for the availability of such rights, provided that the terms of such agreements will be comparable to other BresaGen licensing agreements.

g) The materials provided come with no warranties, including any warranty that their use will not violate any existing proprietary rights.

h) A transmittal fee, not to exceed $5,000 per sample, may be charged. A separate fee may be negotiated to cover training required to learn to grow or use the materials.

i) The agreement does not supercede any rights available to PHS by statute.

The term of the agreement is three years. Parties are not required to negotiate an extension. There are no provisions that specifically address rights or obligations in the event of a termination.

The SLA is designed to provide a simple process to implement the MOU on a recipient-by-recipient basis. To receive the materials, the receiving scientist and the related organization must both agree to the general conditions set forth in the MOU. A decision to receive materials also is an agreement to:

a) recognize that the materials are and remain BresaGen’s property;

b) restrict the use of the material to diagnostic or therapeutic, but not commercial, purposes;

c) not use the material in any PHS research program where rights have already been granted to a research sponsor without a direct agreement between the sponsor and BresaGen, regardless of whether the sponsor is a for-profit or nonprofit entity;

d) not further distribute the material, even to other nonprofit research institutions, without written consent;

e) acknowledge the source of the material in any publication reporting on its use;

f) acknowledge that the material is "experimental and may have hazardous properties"

g) handle the materials in compliance with all applicable rules and regulations regarding its use or disposal, including a prohibition on use in humans or in contact with other cells or materials to be transferred into humans. This, of course, is a bar to any preparation of somatic cell therapy or gene therapy products;

h) not seek to engage in any human cloning activities using the material.

There are no particular remedies for a breach of the SLA as would normally be found in the typical Materials Transfer Agreement (MTA). Presumably, this omission was part of an attempt to make the process appear less onerous by leaving out possible legal ramifications if the agreement is breached.

Those receiving materials under the MOU, either with BresaGen or other PHS contractors, will need to be quite careful with respect to its provisions. While the terms are actually fewer in number than might be provided in a typical MTA and for the same types of diligent educational effort, record keeping and segregation of materials will be required. It is likely that a failure to abide by the terms of the agreement will be a relatively high-profile event and would be dealt with rather aggressively.