Saturday, July 30, 2005

Talent, Mumbo-Jumbo and $536,000 Salaries

Salaries are once again a subject of interest at the California stem cell agency, which is trying to put together a rational pay structure for its employees from scientists to clerks.

This is no management mumbo-jumbo matter. If the agency is to attract the talent it needs, it must be willing to put together compensation packages that are at least somewhat comparable to the private sector. Otherwise it could find itself burdened with mediocrities who will linger for years before they ultimately leave, if ever.

The current salary range under consideration runs from $40,000 to $536,000, based on work performed by Alexandra Campe Degg and Dee DiPrieto. Degg works for UC San Francisco in human services but CIRM contracted with the campus for her as its interim human resources officer. DiPrieto is a consultant recommended by Spencer Stuart, the executive search firm hired by CIRM to find a permanent president.

Degg produced a proposal with 10 salary levels. Under it, the chief human resources officer would have a salary range of $78,100 to $140,600. The general counsel would range from $152,500 to $274,500.

DiPrieto performed an initial salary survey with the promise of more information to come in August for the agency's Governance Committee. The survey deals only with salaries and not total compensation or compensation costs, which are significantly larger than salaries.

Depending on their provisions, fringe benefits and related matters can add 33 percent or more to the cost of an employee – beyond his or her salary.

Total compensation is also another matter. Earlier this year, the agency cited salaries at the University of California as a guideline for CIRM. UC is ostensibly a reasonable organization that does not engage in Enron-like compensation deals.

However, when one looks deeper, the UC salary levels cited by CIRM can be misleading. Actual compensation for some positions can run substantially higher than nominal salaries. For example, some years back the highest-earning UC employee had about a $1 million annual paycheck. He was the football coach at UCLA. Last fall, the Wall Street Journal mentioned the $1.2 million salary and bonuses of an ophthalmologist in 1997, also at UCLA. He left the next year to earn more on his own.

When Zach Hall was appointed as interim president of CIRM earlier this year, some critics objected to his $389,000 salary as well as to proposals to pay other top employees in a similar fashion.

We are not critical of Hall's salary or the pay scales developed by Degg or, for that matter, the compensation of the football coach and ophthalmologist. Talent costs money, and the stem cell agency needs as much talent as possible. One can argue about whether any football coach should be paid more than a kindergarten teacher, but that is a subject for another blog.

The stem cell agency will have to live with its salary scale for many years. They are devils to change, once in place. The agency should be forthright about its compensation rationale and information as well as bonus or incentive plans. If side deals are being cut, they should be on the public table, even if they are not strictly CIRM funded.

Salaries are fat targets for critics. Making it all public and accessible is not only good public policy but one way to avoid accusations of back room deals.

Totally Baseless Speculation

We still have not heard from the California stem cell agency about whether Spencer Stuart, the executive search firm whose contract expired two months ago, is still looking for a permanent president for CIRM.

Our request for this routine bit of information is now 13 days old. But there is other news on the presidential front, whose office was expected to be filled by June ("Looking for a New CEO" July 20).

The CIRM search committee has scheduled a meeting for Monday. The public agenda, as usual, gives no indication of whether anything important is likely to occur. However, the meeting comes just a few days before the full Oversight Committee session scheduled for Friday.

Totally baseless speculation could lead one to wonder whether the timing is coincidental. Could a CEO announcement be made next week? But, as we said, that is totally baseless speculation.

Lomax to Sambrano to Sanchez

Three new names have been added to employee rolls at the California stem cell agency, bringing the total of official employees to 17.

The latest CIRM staffers are:

Geoffrey Lomax, senior officer for medical and ethical standards, scheduled to start Aug. 4, salary $120,000.

Gilberto Sambrano, scientific review officer, scheduled to start Aug. 15 , salary $105,000.

Jorge Sanchez, senior executive assistant to the president, started July 12, salary $82,000.

The agency has not yet released information on their professional backgrounds, but we have a query in.

You can see a complete list of all CIRM employees by clicking here. The agency is continuing to hire. Click here for a list of positions available at this date.

Wednesday, July 20, 2005

Looking for a New CEO

Back in February (see Feb. 25 item on this blog), the California stem cell agency was talking about having a permanent president by June. It is now close to the end of July, and the contract with the executive search firm expired at the end of May.

We have asked the agency about the status of the contract with Spencer Stuart and the presidential search, but have received no reply.

Obviously, there could be a number of reasons for not finding a new president. However, the agency is also seeking to hire a host of important top management executives, ranging from general counsel to communications director. Any new CEO would want to make those decisions and not inherit the baggage of whomever actually makes the decision.

However if the hirings are delayed substantially while the presidential search continues, it just takes that much longer for the agency to get itself firmly settled.

If CIRM chooses to speak to the search issue, we will let you know.

At Sea Again: Intermittent Postings Likely

We are putting out to sea once more in the Gulf of California, also known as the Sea of Cortez. Internet contact will be lost for the most part so we are likely to file items only intermittently, if that, for a short while.

Tuesday, July 19, 2005

Setting The Record Straight: Less Than Bleak Climate

On July 16, we posted an item, "Greed, Fear and Stem Cells," quoting Ken Haas of Abingworth Management, a venture capital firm specializing in life science biomedical companies.

We received the following response from Haas, who wanted to clarify inaccuracies that he said were in the Wired News article that we quoted. In addition to setting the record straight, he provides insights into the nature of the stem cell industry and investment climate, which he says can hardly be seen as bleak. Here are his remarks:

"While I very much enjoyed browsing your site, the Wired News article referenced in your posting about a talk I gave recently contained numerous inaccuracies that are unfortunately repeated in the California Stem Cell Report piece.

"For starters, I did not speak at the International Society for Stem Cell research annual meeting but rather at a luncheon sponsored by the British Consulate in San Francisco, to which certain annual meeting attendees were invited.

"I was asked to present a realistic view of the current state of venture capital investment in stem cell research and began with an assessment of the general venture capital climate. Among other things: the biotech industry is maturing and investors are beginning to expect the kind of performance that is normally associated with such maturity (e.g., capital efficiency, commercial focus, profitability); Big Pharma, biotech's ultimate customer,is increasingly reluctant to invest in 'pure research'; and venture capital has, in response, moved more toward "later stage" investing.

"In this context, stem cell ventures are 'early'-- the science still has quite a bit to prove, for example, that it can move successfully from in vitro to in vivo, and that reintroduction procedures associated with cell therapies will be safe and effective. There are also significant questions as to what successful business models will look like in this space.

"Nevertheless, I pointed out in my remarks that the principal issue with respect to stem cell investing is timing-- when, not if. On the positive side, there are significant academic initiatives underway in the U.S. (e.g., Stanford), Europe (e.g., Edinburgh) and Asia (e.g., Korea) and major governmental support in places like the U.K. and California (e.g.Proposition 71). As a consequence, venture capital is now closely monitoring stem cell developments and is poised to jump in, though still cautious.

"Specific 'mature' applications (e.g., analogous to bone marrow transplantation) could lead investment activity. Ultimately, the floodgates could well open based on just a few groundbreaking successes, for example, in tissue reengineering, cell therapy, human disease models for testing and target definition, cancer or degenerative diseases, etc.

"The above views on stem cell investment should hardly be seen as "bleak" and are widely held within both the venture and scientific communities. For instance, an article in the July issue of Nature Biotechnology (published after my talk) led with the comment that: 'Biotech companies with business models as diverse as the products they are developing are laboring to move cell-based therapies into the clinic. Without commercial success, however,investors will remain on the sidelines.'"

I concluded my remarks at the luncheon by advising those in the audience who might be seeking to start stem cell ventures to maximize their fundraising chances by coming to us, insofar as possible, with plans that embody mature
science, a credible business model, capital efficiency, commercial focus and a clear regulatory path. In short, stem cell investing, while a bit premature, will surely be an exciting part of our commercial biotech future."

Monday, July 18, 2005

Roger's Reality Check: Polarization, Backlashes and Mistakes

Don't expect research organizations to change the way they do business because California is giving away $300 million a year for stem cell research.

Get used to the outcry from opponents of stem cell research even if they have no likelihood of success. They are going to be with us for a long time.

Don't expect CIRM to create a host of friends with its billion-dollar beneficence. A backlash could easily surface.

Just a few of the thoughts from Roger Noll, a public policy professor at Stanford University who also teaches in the business and economics departments.

Noll, co-author of "The Technology Pork Barrel," wrote a 44-page paper in June on "The Politics and Economics of Implementing State-Sponsored Embryonic Stem-Cell Research" for the Stanford Institute for Economic Policy Research.

The paper provides a good overview of the sticky intellectual property rights issues involving stem cell research generally, as we wrote about July 17. Noll also spoke directly to events in this state. Here are some highlights from his paper.

"As the California experience reveals, setting up a functioning research program is not easy. Establishing an effective state program requires overcoming substantial political and organizational problems. While spending a great deal of money is easy, spending money effectively without causing a political backlash is difficult. Moreover, opponents of (stem cell) research do not go quietly in the night once legislation establishes a program. Instead, they continue to use all means at their disposal – litigation, political participation, and public demonstrations – to stymie implementation of the program."

"Moreover, when programs are thrust upon a state through a ballot initiative, as occurred in California in 2004, unprepared state officials are likely to find themselves tasked to deal with these problems on a fast time schedule, further increasing the probability of a serious mistake in program implementation."

One unusual feature of stem cell policy is its politics, which is characterized by "intense polarization." Noll wrote that on one side "a relatively large number of high priority on all forms of research that (hold) promise of creating effective new treatments." They wind up "pitted against a smaller but still large number of people who accord equally high salience to adopting policies that would prohibit this research."

"Intense polarization of this form means that battles are never won because losers will not accept defeat."

Noll predicted that political polarization "is likely to create significant uncertainty and delay, and thereby vastly increase the implementation costs of the program."

The economist also wrote, "Politics will tend to favor...commercially interesting projects at the expense of more fundamental, long-term projects with much larger expected future payoffs."

And he said, "The licensing income derived from stem-cell research is likely to be a small fraction – less than five percent – of the costs of that research, and is likely not to be substantial for many years."

Finally, Noll pointed out that "Stanford University receives as much revenues in a year as CIRM is likely to spend on external grants over a decade. The lesson here is that CIRM can not expect to have much leverage over either Stanford or the entities that support it. Any attempt to change the way that research organizations do business with an annual expenditure of $300 million is doomed to failure."

Sunday, July 17, 2005

Following the Stem Cell Money Trail

Don't expect the health industry to share huge bags of swag with California for its investment in stem cell research.

At least that was one opinion in a piece by reporter Terri Somers of the San Diego Union Tribune Sunday.

She noted that the arguments for Prop. 71 had predicted a big economic bonus for the state, but added that "money is unlikely to materialize, at least any time soon, according to those now charged with the task of creating policy for the institute."

"The idea that any new research today could result in rewards that provide an immediate benefit to California is misguided," Somers quoted Ginger Graham, chief executive of Amylin Pharmaceuticals in San Diego as saying.

"Graham is a member of a task force with the California Council for Science and Technology, a group of academics, business executives and lawyers that the state Legislature has asked to make recommendations for handling the rights to any discoveries that result from research funded through Prop. 71."

Somers also quoted Roger Noll, a Stanford economist on the task force. He "pointed to a paper he wrote about California's intellectual property issues as an example of the challenge the state faces. In 2000, the University of California system spent almost $2 billion on research but received only $74 million in licensing, Noll found.

"'These facts should give pause to state officials who see a potential financial bonanza in the (intellectual property) arising from state-sponsored (embryonic stem cell) research," Noll wrote in the paper.

"'The best advice . . . is not to try to be very innovative in creating agencies and policies to make grants and oversee intellectual property rights,'" he said. "'These programs will not succeed if they ask grant recipients to behave a great deal differently than they are required to behave from other, much larger sources of funds.'"

The Bee: Fire Edelman

The Sacramento Bee weighed in Sunday morning with more on the flap about the California stem cell agency and its public relations contract.

It said in an editorial that the agency should fire the Edelman firm and "deal with the issues that are causing (it) the most grief. Chief among these is (Robert) Klein himself, who continues to act like a micromanaging political campaigner instead of the chairman of a prestigious research institute."

Edelman could be replaced by two state government flacks, The Bee wrote.

The editorial also had this snippet, unreported elsewhere, from last week's meeting:

"Jeff Sheehy, a communications specialist at UC San Francisco who serves on the oversight board, said spending $27,550 a month on public relations was 'appalling,' and questioned if the institute was getting anything for its money.

'Klein replied that without Edelman, the institute wouldn't be able to respond to major news events.

"'The public did not give us bonds to respond to major news events,' Sheehy shot back. 'It gave (them) to us to do research.'"

Saturday, July 16, 2005

Greed, fear and stem cells

Have you heard about California's stem cell gold rush?

Some venture capitalists have and they are not necessarily ecstatic – not that their public statements mean much. On the other hand, one stem cell company is publicly quivering with excitement.

Here is its testimony from a piece in Wired News by Kristen Philipkoski.

"'With the passage of Prop. 71 there's been an influx of interest in stem cells,' said Robert Lanza, vice president of medical and scientific development at Advanced Cell Technology in Worcester, Mass.
'We're in a whole new world. We're flush with cash, and just months ago we were struggling as a private company to even make payroll and to keep the phones on.'"

On the other hand, Philipkoski wrote:

"'Some of this stuff still looks like science experiments,' said Ken Haas of Abingworth Management, a venture capital firm specializing in life science biomedical companies.

"Haas gave a bleak outlook for stem-cell companies hopes for venture funding at the International Society for Stem Cell Research annual meeting last month in San Francisco.

"Big pharmaceutical companies aren't funding early research, he said. And VCs have higher expectations in general from biotech firms because they perceive the industry as having graduated from its freshman status. The investment necessary to bring a company public has doubled, Haas said, and the returns have diminished.

"All of these factors combined create a chilly climate for embryonic stem-cell companies, Haas said."

Haas' comments recall a point made to me by a venture capitalist some years ago. He said that VCs make an investment when their greed overwhelms their fear.

Then there is this from a Geron, which raised $40 million in the weeks following the passage of
Prop. 71, is better positioned than many stem-cell firms that don't have deep pockets or profitable partnerships with large pharmaceutical companies. More typical is Burlingame-based VistaGen Therapeutics, a 10-person research firm founded in 1998. CEO Ralph Snodgrass says that the company is using stem cells as a research tool to develop a treatment for a variety of illnesses rather than as the basis for a specific medicine or therapeutic.

"'We want to expand our research efforts, but we are a small firm,' he says. 'We have been contacted by bigger companies, but what is holding us back is our size. We will ramp up as Prop. 71 money becomes available. The effects of these funds across the industry should be dramatic.'"

Friday, July 15, 2005

The $30,000-a-month PR contract: What's it Worth?

Public relations is the business that boondoggle aficionados love to excoriate. It seems -- well -- so useless. And for all their vaunted skills, flacks often seem incapable of defending themselves well.

So perhaps it was no surprise that the California stem cell agency's PR and the huge Edelman PR agency came under fire this week. But there is a tad more to the story than what has surfaced so far.

But first, let's look at what happened at the Oversight Committee meeting on Tuesday.

"Several oversight committee members seemed surprised to learn yesterday that the institute is being billed $27,700 a month for public relations services it receives from Edelman, a national firm. The institute is receiving the bills and services on a monthly basis and isn't paying them until a longer-term contract can be negotiated with Edelman," wrote reporter Terri Somers of the San Diego Union Tribune.

"Committee member Jeff Sheehy, deputy communications director at the University of California San Francisco's AIDS Research Institute, said he was 'shocked' to learn that the institute has been billed for these services since April because he 'just hasn't seen the product.'

"But oversight committee chairman Robert Klein said the institute's one staff member dealing with communications cannot handle the high volume of media calls, public speaking requests and other public relations work."

Reporter Laura Mecoy of The Sacramento Bee also noted that Sheehy was a "little appalled" at the PR situation.

The stem cell agency's PR certainly can stand some improvement. But as a former California governmental and political flack and the recipient of enormous amounts of PR attention over decades of newspaper work, I have a sense that there may be internal issues that could explain some of the lack of product. That said, agency should be doing a better job at this stage of the game.

Some of it is basic stuff, such as assuring that the web site's "what's new" feature actually shows what is new. But where the PR really fell down was losing the positive spin the agency had coming out of the election because of maladroit management and allowing critics to set the terms of the debate. As readers may recall, the agency's first meeting in December ran afoul of questions about its legality, turning what should have have been a celebration into a PR debacle. Since then, the headlines about the agency have been dominated by controversy about its conduct.

Given that background, we can ask whether the nearly $30,000 a month is excessive, ? Probably not. Let's look at some numbers. The agency probably needs at least two PR types and a secretary/administrative assistant. Figure the salary for the head flack at about $100,000, No. 2 at about $90,000 and the assistant at about $40,000. Add one-third or more to that for fringe benefits and you are looking at a total in salaries and benefits of something in the neighborhood of $25,000 and $30,000 a month, which doesn't include the profit that a private firm would need. And the $100,000 salary for the chief spokesperson may be too low to hire the talent needed. Additional PR costs would include printing, phones, work on the Web site and more. We should also note that Edelman's bill does not include the salary of the agency's current spokeswoman, a state employee who has only been on the scene for a few months.

Some times these types of figures come as a shock to newspaper reporters and government PR types. Their salaries are generally lower that what top flight, private sector PR people earn, which is not to say that there are not many top flight PR people in government.

So what does the agency receive for nearly $30,000 a month? The terms of Edelman's working agreement are secret because stem cell chairman Robert Klein says its contract is under negotiation, another PR mistake by the agency and by Edelman. But we can learn something about the scope of the needed PR work by looking at the contract with Red Gate Communications, which resigned from stem cell service earlier this year.

The Red Gate agreement shows that its responsibilities went far beyond fielding reporter calls, emails and writing a handful of press releases. (We should note that some of the agency press releases show nonprofessional earmarks that probably can be traced to others at the agency.)

Here is a partial rundown from the Red Gate contract: develop identity and logo for CIRM, serve as spokesperson for CIRM for all media and editorial boards, manage editorial briefings and interviews, staff all public hearings, prepare op-ed pieces and write editorials, write speeches, prepare the 29 members of the Oversight Committee for media interviews, create CIRM brochures, fact sheets, FAQs, media information kits, newsletters, quarterly reports and Power Point presentations and work on the web site. Public outreach and education, which is sorely needed, also comes under the PR rubric.

To be effective, the top PR person would have to sit in on tens of hours of private CIRM meetings each week in order to be well-informed and speak authoritatively. That person should also be the lead on developing an informational strategy that helps to keep CIRM out of the kind of a corner it has found itself in so much of the year.

Many of the PR chores facing CIRM are routine or would be routine if the agency were not a new and strange entity. Creating a PR program entirely from scratch in an understaffed, fledgling agency is, to say the least, difficult.

Whether Edelman is worth the cost depends on what we see from them and the agency over the next few months.

If you would like a copy of the Red Gate contract, please send a request to But do it quickly. We are going to sea again soon and will be only intermittently online. For a few more details on the Edelman contract, click here. For a list of all the contracts with CIRM, click here.

Stem Cells and Behind the Scenes Decision Making

Smoke-filled rooms are now passe for public policy making, with the exception of Gov. Arnold's cigar tent in California's Capitol. But at UC Berkeley one bioethicist remains concerned about back rooms, decision making and the recipients of public largess.

The issue is the California stem cell agency and how it does business. The man concerned is David Winickoff, an assistant professor of bioethics and society in UC Berkeley's Department of Environmental Science, Policy, and Management.

Prior to last fall's election, he wrote a piece about Prop. 71, arguing that the agency would be anything but independent, while having the power to set policies for human cloning technology and human-subject research, as well as allocate patents to the private sector.

The subject was revisited recently in an internal piece from the UC Berkeley NewsCenter by Bonnie Azab Powell.

She wrote that Winickoff is bothered "a lot" by what he views as the lack of independence of the stem cell agency.

She quoted Winickoff as saying, "Important decisions are being made in the back rooms of university and industry labs that will have huge effects on people and shape their environments and lives. They aren't open for public scrutiny because they're technical, and it's difficult for people to engage substantively in these issues."

One of his issues involves finding "ways that will facilitate democratic control and decision making, rather than just simply giving technocratic control without accountability."

Powell provided this case from Winickoff as an example of a problem involving private individuals providing something that leads to a commercial product.

"A patient with a rare form of leukemia was treated at UCLA's medical center by a doctor who collected many blood, semen, and hair samples from the patient that were unnecessary for his treatment. Five years later, the patient learned that the doctor had collaborated with a biotech company to derive a potentially lucrative cell line from the patient's diseased spleen cells. The patient, understandably, wondered why the doctor and not the patient was profiting from his biological property. The biotech industry and others filed many "friend of the court" briefs with the California Supreme Court, arguing that according property rights to the patient would bring research to a standstill. The court largely sided with the biotech industry, saying that the plaintiff's property rights did not apply to his spleen cells, although he did have a valid (but much less damaging) claim based on the doctor's failure to obtain informed consent."

Winickoff said, "I'm trying to find that sweet spot where we have more accountability and control over important policy decisions, where we can allow a certain amount of politics in without undermining the ability to make policy at all."

Coming Up

A little later today we will have a look at the $30,000 or so monthly PR bill for the California stem cell agency. Is it too high?


In the "Nature" item July 14, we incorrectly reported the source as of the information as Nature magazine. The correct publication is Nature Biotechnology. The URL is

Thursday, July 14, 2005

Transparency and Stem Cell "Hooey"

California's stem cell agency is suffering from a reality gap.

On one hand, its chairman and the prime voice of the agency, Robert Klein, promises the highest and best standards of transparency, openness and disclosure, as he did again just on Tuesday of this week.

On the other hand, the agency cobbles together transparency/disclosure regulations -- only under heavy legislative pressure -- that seem to be a far cry from those at John Hopkins University, the New England Journal of Medicine and the Journal of the American Medical Association.

On Tuesday, the stem cell Oversight Committee moved to tighten its transparency rules with the promise of more review to come – certainly a step in the right direction. One must acknowledge all this is difficult territory. Stem cell research remains an infant business with major unresolved, ethical issues. The stem cell agency itself is a bit of bureaucratic chimera –a quasi-business-scientific-governmental beast that has no real parallel.

Complicating the matter is the small and cozy nature of the stem cell community itself. Just how cozy? David Baltimore, a Nobel prize-winning scientist at age 37, is a member of the Oversight Committee of the California stem cell agency. He is also president of Caltech and serves on the boards of biotech firms Amgen and Med Immune Inc. Baltimore recently received a $14 million stem cell research grant from the Bill and Melinda Gates Foundation.

According to reporter Donald J. McNeil of the New York Times, the grant is for the "radical idea that stem cells could be created that could be safely injected into anyone, would populate the immune system and would contain the genetic instructions for initiating attacks on many diseases. If successful, they would make vaccines obsolete."

Baltimore told McNeil, "I imagined this proposal into existence, but I never imagined we could get money for it. It's not the kind of thing the N.I.H. would fund. It's too big, it's too chancy, it's too focused on a particular product. If this was 15 years ago in the biotech industry, this could be the basis of a company, but venture capitalists now are looking for a much quicker payoff."

Under the terms of the grant, the results of the research could be patented for commercial gain, although they would have to made available to poor countries at either free or at low cost.

Which raises a question about Baltimore and stem cell research grants before CIRM. There are legal restrictions on his potential conflicts, and we have no doubt he is a principled man. But persons with competing approaches will be before the agency with requests. Baltimore's stake in the issues will be well known to grant reviewers and fellow committee members. No one may violate the law, but members of the "club" are often unwilling to act in ways that might appear to be injurious to other members of the "club."

CIRM is an unusual agency in that conflicts of interests were built into it. Scientists, business executives and patient advocates are all directly involved as directors. Some even have personal health issues at stake.

Given that situation, it makes it even more important to have maximum disclosure of the economic interests of those who are making decisions, and that extends to members of the working groups.

So far, members of those groups will have to disclose their economic interests only to members of the "club" – in this case CIRM itself. CIRM contends that is necessary because scientists would not be inclined to serve as members of groups if they have to publicly bare their economic souls.

In two editorials earlier this week, The Sacramento Bee described that assertion as "hooey" and "malarkey."

The Bee dug into the current state of economic disclosure by scientists and reported:

"Throughout the scientific world, stem cell researchers are increasingly disclosing their corporate research relationships and stock holdings.

"Some must do so if they want to serve as faculty on Continuing Medical Education courses sponsored by the Johns Hopkins School of Medicine and other medical schools.

"Others must publicly disclose conflicts when their research is published in the New England Journal of Medicine, the Journal of the American Medical Association and other prestigious publications.

"Consider the recent meeting of the International Society for Stem Cell Research, held in San Francisco. Several of the world's top scientists disclosed their corporate ties there as part of the continuing education program."

Because of these disclosures, The Bee shared economic information with its readers about two members of CIRM's grant working group. The following information from The Bee would be secret if CIRM continues its policies or could control the policies of others:

"Let's examine," The Bee wrote, "the situations of Drs. Andrew Feinberg and Jeffrey Rothstein, two of 15 researchers appointed to the committee. Both work for Johns Hopkins, which owns stock in Geron and has a licensing agreement with the California company. According to an article in Scientific American this month, Geron is expected to be one of the main beneficiaries of a new California fund for stem cell research.' That means that Feinberg's and Rothstein's employer could benefit from any grants awarded to Geron."

While the stem cell agency moved forward this week with new transparency rules, several responsible California organizations said they did not go far enough. You can read two of their critiques at these locations: Foundation for Taxpayer and Consumer Rights. Calaware also advocated stronger rules.

One of the premises of Prop. 71 was that it is time to do business in a different way and throw off old, crippling constructs. Government can fund controversial research. And it can partner with scientists and business in innovative ways that benefit all. It is now time for the stem cell agency to fulfill the promise of Prop. 71. It should lead the way with new, forward-thinking transparency rules that enhance public trust, that provide maximum disclosure and that close the stem cell reality gap.

Notes From Nature: Predicting Stem Cell Winners

What firms are best positioned to reap profits from the stem cell harvest?

Nature magazine ( named four in an article by Stephan Herrera in its July issue. Here is what he had to say.

"Of course, it's still early days to predict those companies whose position is consolidated best for success. But with their clear advantage in terms of intellectual property positions and current stage of investment and product development, firms like Geron in Menlo Park, California, Osiris Therapeutics in Baltimore, Maryland, NeuroNova in Stockholm and ES Cell International in Singapore will be hard to catch."

Herre also had this to say about venture capitalists.
"Investors, like HealthCap in Stockholm, Allen & Company in New York and MPM in San Francisco, have refused to let the politics and uncertainly of stem cells keep them away. They have an early advantage of those who (quite understandably in this risk-averse, late-stage climate) have steered clear of the field."

Wednesday, July 13, 2005

Transparency, Money and Management

The directors of the California stem cell agency delivered a message to Robert Klein on Tuesday.

Irritated by the lack of consultation and information on the agency's budget and spending, they restricted the size of personal service contracts to $100,000 that can be let by Klein and agency employees without board approval. The Oversight Committee also created a governance committee to deal with how the agency does its business.

The agency has spent $2 million so far this year, including more than $1 million in contracts with outside firms or agencies. Earlier some Oversight Committee members expressed displeasure about learning first about the contracts from non-agency sources. That triggered a bit of a flap concerning Klein's management (see "Murky Money" on this blog June 14).

Reporter Laura Mecoy of The Sacramento Bee and Terri Somers of the San Diego Union Tribune covered the management flap as well as other issues in their stories this morning.

Mecoy focused primarily on the Oversight Committee's approval of rules to "open more meetings, disclose more information about its grant awards and tighten its conflict-of-interest rules."

Somers led with the news that the California treasurer's office is "preparing to sell $200 million in bond anticipation notes to start funding the institute's first round of grants and first full year of operations."

She said the schedule calls for the notes to be issued prior to September so that the board can make grants for training programs that months. Twenty-six California institutions have expressed an interest in the multimillion dollar grants, but CIRM has refused to release their names.

The agency adopted its new rules on openness and disclosure following heavy pressure from the California legislators, led by Sen. Deborah Ortiz, D-Sacramento, a strong backer of Prop. 71 and chair of the Senate Health Committee. More changes in the area of conflicts of interest are scheduled to come up at the August meeting.

CIRM was quick to issue a press release on the Tuesday action, posting one by mid-afternoon. Klein said in that statement, “Sen. Ortiz has committed intense energy and passion to this important task of ensuring that California has the highest and best public transparency, conflicts provisions, and legislative oversight of any state or federal program in our nation. This is an ongoing process and we will continue to listen to the input of the legislature and the public to ensure the finest standards for medicine, ethics, and competitive peer review in every aspect of our stem cell program.”

The agency summarized the new rules as:
"broadening conflict of interest provisions for working group members;
"providing earlier public availability of working group funding recommendations;
"requiring comprehensive reports to the State Legislature summarizing grant awards and recipients;
"ensuring increased public access to meetings of the Standards Working Group and the Facilities Working group;
"and providing public access to the Grants Working Group, except for discussions related to scientific and medical evaluations of grant applications and other mission critical exceptions."

The California Stem Cell Report will have more on the transparency and conflict issues on Thursday.

The Price of Eggs

One of the famous examples of excess during California's 1849 Gold Rush was the price of eggs, something over a dollar each, according to legend.

Today the price of eggs is being set by the California stem cell agency – at least the price of human eggs from women.

That price appears to be zero.

No real surprise there because Prop. 71 banned payment for human eggs except for direct expenses. But some folks are not entirely happy.

Reporter Edie Lau of The Sacramento Bee wrote about the egg economics earlier this month. She said that Robert Klein, chairman of the stem cell agency, said "the payment ban was intended as a safeguard against women - especially poor women - feeling pressured or enticed to sell their eggs." He said employers should help out.

Lau reported on a meeting of the Scientific and Medical Accountability Standards Working Group of the stem cell agency, formally known as the California Institute for Regenerative Medicine.

She wrote that some witnesses were not pleased with CIRM's position.

"'I don't know why you put (yourselves) in a position to not compensate for time and effort,' said Jose Cibelli, a stem cell researcher at Michigan State University. 'It's something you will come to regret.'

"Ann Kiessling, a Harvard University biologist who runs an independent, nonprofit center that solicits egg donors specifically for stem cell research, predicted that some women who wish to provide eggs will be unable to if, for example, they aren't reimbursed for lost wages.

"'All normal, healthy subjects that undergo any research in this country are compensated for their time,' she said."

Lau continued:

"Klein, who also sits on the standards working group, did not respond to criticism of the rule during the meeting, but said in an interview that the prohibition cannot be changed, nor should it.

"'It is a more challenging provision, but it provides us with a higher ethical standard,'" Klein said.

"He said he hopes employers will support employees who wish to donate eggs, and continue to pay them as some employers do for jury duty. 'It's a public service to society,' Klein said."

You don't have to be Milton Friedman (the Nobel-winning free market economist who lives in San Francisco) to understand that if human eggs become sought after, their price will rise, regardless of Prop. 71. Another human product -- blood -- is purchased regularly at very low prices, but it is a common commodity. The market for human eggs and their price are yet to be determined. But there is no doubt that a statutory attempt (a la Prop. 71) to set a price (commonly known as price-fixing) will fail.

Coming Up

Later today we will have a report on Tuesday's meeting of the Oversight Committee, brought to you from a semi-remote anchorage in the Sea of Cortez in Mexico.


On July 8, we reported about a contract that Red Gate Communications had with CIRM. Red Gate resigned from the contract and was not terminated by CIRM.

Friday, July 08, 2005

CIRM's Million Dollar Outside Contracts

Legal and public relations advice, legislative lobbying and grant procedures – all are part of the $1.6 million mix of outside contracts that the California stem cell agency has quietly let since the beginning of the year.

It is not surprising that the agency has gone to the private sector, and it is likely to do more of it in the future. The fledgling bureaucracy is limited to only 50 employees by law.

Use of private consultants and service has some virtue. Properly done, it is a way to handle start-up and special costs without creating a large bureaucracy that is hard to change as needs change. At the same time, use of private consultants, some of whom have access to sensitive information, raises issues about potential conflicts. None of the consultants seem to be required to meet the same conflict-of-interest standards as CIRM's own employees.

That means CIRM must exercise careful oversight of the consultants, which requires a critical eye that may not fit with the startup team ethos of the new agency. The handling of the contracts also may provide some insight into how the agency is likely to proceed in the future as it hands out hundreds of millions of dollars in research grants.

The contracts have triggered some criticism from Oversight Committee members, who have complained about learning about them in the media(see "Murky Money" on June 14). And only one of the contracts (the executive search agreement) seems to have been let in what might be considered a normal competitive process.

Reporter Laura Mecoy of The Sacramento Bee was the first to disclose the total value of contracts. We have written about the $10,000-a-month lobbyist (May 5) and the now terminated contract with Red Gate Communications for public relations work("Hello to Edelman" April 22). Mecoy noted that her total did not include a figure for the Edelman PR contract, which the agency said was still under negotiation. One source indicated to us that it could be in the neighborhood of $700,000 annually, which would presumably include building a community education program from scratch.

Here is a look at some of the other contracts:

$350,000 one-year contract with the state controller's office for various support services for 2005, ranging from personnel to setting up computer networks.

$320,000 seven-month contract with the law firm of Remcho, Johansen and Purcell of San Leandro CA to act as general counsel with rates up to $300 an hour, plus expenses. The total on this contract was raised from an original $100,000.

$165,000 contract, plus expenses, for the Spencer Stuart search for a CIRM president and assistance with a search for a chief scientific officer. The contract was scheduled to end by May 31. The firm could be in for a substantial bonus if CIRM hires other persons turned up in the CEO search for non-CEO positions.

$70,000 six-month contract with Constance Atwell of Pinehurst NC to provide advice concerning development of policies and procedures for grant management. Atwell's contract has an interesting "trust me" provision regarding possible conflicts of interest. The contract states that Atwood "affirms that to the best of (her) knowledge there exists no actual or potential conflict between the consultant's family, business or financial interest and the services provided under this agreement...." Atwell is a retired grants manager from NIH.

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