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The physicians and researchers and businessmen who circle the UCSF and Stanford medical centers are precisely the people who have made the proposed merger of those two institutions a near-reality. The UC regents have the power to approve or abort the merger. But the Stanford Health Services board of directors also must approve a joining with UCSF. And there are other institutions and groups of people who exert influence on the regents, the SHS board, and other decision-makers who have been in and near the merger discussion.
Clearly, one of those influential groups is the UCSF Foundation, a vehicle used to raise most of the private donations given to the San Francisco medical school. The board of the foundation recently wrote to the UC regents asking for their support in the merger. That letter made a connection between the merger and a new UCSF campus that will be built in Mission Bay and, soon thereafter, is expected to be surrounded by a new biotechnology research park.
UCSF has definitively stated that the Mission Bay site and UCSF-Stanford Health Care support different campus missions, and that UCSF has no plans for major clinical activities at the Mission Bay site. However, in its July letter, the foundation board contended the merger was vital to the new campus.
"The merger is key to the future vitality and progress of the University of California San Francisco," the letter said. "In fact, the vibrant and financially stable clinical enterprise this merger creates would ensure the successful development of UCSF's next major campus site at Mission Bay."
Plans for UCSF's Mission Bay campus are not yet complete. Although initial construction will focus on research laboratories that will (apparently) not become part of UCSF-Stanford Health Care, the campus is likely also to include at least some clinical operations down the road. Those operations -- major or minor -- could fall under the umbrella of the merged nonprofit.
Agreements between the University of California and the new private entity were amended in July to allow the nonprofit to conduct research and clinical trials, if the heads of the UCSF and Stanford medical schools agree.
Clinical trials are the necessary, tedious, and costly process that brings new discoveries from the laboratory into the commercial market. But that market is worth billions. Industry observers believe it's about to boom, with some 200 biotech drugs in the final stage of testing and heading toward approval from the Food and Drug Administration within the next two years.
A huge nonprofit institution that controls hospital beds and has research capability could help determine which companies will prosper most in such a boom.
Many of the people involved in the merger and the Mission Bay development that will host the new UCSF campus have to be keenly aware of the profit potential of the biotech industry.
And many of those people have significant amounts of money invested in biotechnology, which makes for some interesting and cozy arrangements. (A graphic representation of these arrangements and other business links is on Page 20.)
Research-based biotech companies generally make partnership deals with big pharmaceutical firms to bring their drugs to market, once governmental approval has been gained. This year, for example, the San Diego-based DepoTech Corp. reached the final stages of FDA approval with its primary product, DepoCyt, an anti-cancer drug that was developed in partnership with Emeryville-based Chiron Corp., which has the right to market the product in the United States.
As of his latest disclosure form, UC Regent Preuss sat on the board of DepoTech and owned at least a $10,000 interest in the firm. Chiron Corp.'s chief executive, a former UCSF researcher named William Rutter, has been instrumental in pushing for the Mission Bay campus.
Others in and near the merger debate also seem to consider DepoTech stock a good investment. Disclosure forms show that former UC Regent Leo Kolligian, a lawyer from Fresno, who left the board earlier this year, had more than $10,000 sunk in the company at the end of last year. And UC President Richard Atkinson invested at least $10,000 in DepoTech last March, public records indicate.
USHC board members Isaac Stein and Denise O'Leary and a member of a committee that chose board members for the nonprofit all sit on the board of Alza Corp., a Palo Alto-based company that researches and develops pharmaceutical products and would seem well-positioned to benefit from a merger. Stein, general partner of Waverly Associates, a Palo Alto investment firm, also was on the board of CV Therapeutics Inc., another biopharmaceutical company.
Howard Leach, a UC regent and USHC board member, held financial interests in venture capital and stock partnerships invested in medical and pharmaceutical businesses, according to his disclosure form. He is former chairman of Sybron Corp., a medical, dental, and pharmaceutical product maker.
Even the real estate underneath and near the new, biotech-oriented campus raises conflict-of-interest questions. Regent John Davies of San Diego had to recuse himself from voting to select Mission Bay as the new site for a UCSF campus, because, according to his disclosure form, the one and only investment property he holds outside of Southern California is, by coincidence, the Mission Bay Golf Center on Sixth Street, located at the heart of the Mission Bay development that will include the new UCSF campus.
William Bagley, another regent, didn't vote on choosing the Mission Bay campus site because his law firm, Nossaman, Guthner, Knox & Elliott, represents Catellus Development Corp., owners of the land that will become Mission Bay. Preuss owns less than $10,000 worth of stock in Catellus; he apparently did not see the same conflict of interest and voted in favor of the Mission Bay site for UCSF's campus.
