Friday, December 18, 2009

CSCR At Sea Until End of January

The California Stem Cell Report is taking a break for a few weeks. We have set sail for Isla Socorro, part of an island chain in the Pacific Ocean about 350 miles southwest of Mazatlan, Mexico, and will have no access to the Internet or phones. We expect to be back online at the very end of January.

Thursday, December 17, 2009

CIRM Issues for 2010: From Klein to Cash Flow to Conflicts

Money, manpower and performance – all are some of the top issues facing the $3 billion California stem cell agency in 2010.

They are not the only major issues confronting the 29 men and women who – as its directors – are charged with giving away the cash and ensuring that the California Institute for Regenerative Medicine stays on course.

But all the challenges will surface more or less prominently during the coming year. Here is a quick overview of the situation.


CIRM Chairman Robert Klein says he is leaving in 12 months. The Palo Alto real estate investment banker has been the guiding spirit behind the agency since it was a mere gleam in the eyes of the supporters of hESC research. Today he is the dominant force at the agency, almost completely setting its course on its financing with state bonds, the agency's only real source of income. His planned departure will leave a huge gap, for better or worse. It is one that CIRM directors need to address publicly and soon, perhaps by appointing a task force out of their governance and finance subcommittees. Obviously much of the replacement discussion is too sensitive for public airing. But steps should be taken by CIRM to assure the public, business, researchers and other interested parties that the agency will function smoothly -- financially and otherwise -- regardless of who is chairman. Klein once proposed hiring a high-level bond/finance person to help replace his expertise. That opening has not been posted, but a search should begin promptly because of its likely prolonged length. Plus the person should be on board by around next June.


Careful management of the outside contractors is already critical and will become increasingly so as the agency moves forward. The 50-person cap on staff has made the agency unable to operate without spending $3 million a year for outside help. In the next several years, CIRM may well bump up against the percentage budget cap in Prop. 71 as well, as the agency uses more contractors. CIRM is shy in dealing publicly with such issues. However, many businesses go through long-term staff planning to avoid being blindsided financially. It would behoove the agency to project publicly its needs for outside contractors for the next five years. Of course, such plans are subject to major modification but do help to provide a better picture of future needs. Related to the contracting is electronic security. This topic has rarely, if ever, come up publicly with directors. CIRM has approved grants for more than 300 researchers. It has large amounts of confidential information to protect, with more to come. The disease team round and additional ones with commercial potential are likely to generate information that has significant economic value. Hacking the data may well be financially profitable. But one way to gain access to confidential data is through an employee with an outside contractor, which is sometimes done with financial information on Wall Street. The financial interests of contractors, especially related to their other clients, and their employees should be carefully scrutinized, although this is only a partial answer. Someone at CIRM, but more likely a specialized security contractor, should scrutinize all software, especially the custom programs, for holes and backdoor access.

CIRM staff

President Alan Trounson last week announced that he needs to hire more persons than is permitted under the terms of Prop. 71. He warned that CIRM does not want to get in a position where it cannot fulfill its responsibilities. Ordinarily this would not be an issue. But the agency is hamstrung by the 50-person cap on its staff, which can only be changed by 70 percent vote of the legislature. Asking the legislature to modify Prop. 71 may well stimulate the desires of lawmakers for other changes at CIRM, including some recommended by the Little Hoover Commission, the state's government efficiency group. CIRM has adamantly opposed any changes in its operations. Negotiating any legislative changes successfully will require considerable skill and a public image for CIRM that makes it less vulnerable to criticism.

Cash flow

CIRM directors received a nasty surprise last January when they were suddenly confronted with a cash flow crisis. The problem is now alleviated through June 2011. It is fair to say that the cash flow report should have come earlier and been managed better. Anyone following the California bond situation (not us at the time) could have anticipated the problem in the fall of 2008, if not earlier. Klein did, but balked at being forthright with directors at a meeting at the time when some asked questions that would have led to a discussion of the issue. Authorization and timing of bond sales needs long-term planning as well, given the state's fiscal plight, particularly since Klein is leaving in a year.


The conflicts of interest are not going to go away at CIRM. They are built into the organization by Prop. 71. As an important sign that CIRM is aware of the issue and not trying to sweep the conflicts under a rug, it should make its statements of economic interests and travel expenses available in a searchable form on the Internet. Gov. Arnold Schwarzenegger already does this for his top officials. If CIRM follows his example, it will go a long way in dealing with criticism that CIRM is an entity that only serves the interests of the employers of its directors. Internet access to the statements of economic interest is also important as CIRM becomes increasingly friendly to the biotech industry. Statements of economic and professional interests of scientific reviewers should be posted. They make the de facto decisions on the grants. Applicants can only appeal their decisions on the basis of a conflict, but applicants do not know which scientists examine their applications, much less their economic interests.


Sometime in 2010, probably in the summer, CIRM plans to bring in an outside panel of scientists to review its research portfolio. Presumably the group will generate recommendations to fill any voids in CIRM research and to make other improvements. The session could serve as a fine exercise in the directors' new effort to improve its communications with the public. Opening that session to the public would not only enhance CIRM's credibility but it would be useful to scientists and businesses in California interested in seeking CIRM funding. Selection of the panel is important as well and should include someone willing to serve as a scientific devil's advocate. Without that perspective, the review session could degenerate into back-slapping self-congratulation.

Sacramento Bee: CIRM is 'petri dish for patronage'

The leading newspaper in the California capital today deplored the $150,000 salary increase for Art Torres, co-vice chairman of the California stem cell agency.

The Sacramento Bee said the pay is “the latest example of how people who owe their livelihood to California's taxpayers refuse to share their pain.”

The Bee's editorial was headlined, “Institute is a petri dish for patronage.”

The Bee said that Torres “has apparently improved CIRM's relations with both the Legislature and the state treasurer's office,” but that does not justify the increase.

The newspaper concluded,
"CIRM leaders continue to claim that it is vital for California to spend billions of dollars on this science, even though the new administration in Washington is funding forms of stem cell research that the previous one restricted.

“But when the institute spends money like this, taxpayers have to wonder: Does California still need a stem cell institute – one with this type of leadership?”

Wednesday, December 16, 2009

The Dark Side of Financing Stem Cell Research

Every day of the year, the California stem cell agency is racking up “hidden” costs of about $192,000. By the time CIRM gives away its allotted $3 billion, those “hidden” costs will soar to about $600,000 a day.

The expenses are the dark side of paying for scientific research with borrowed money – in this case California state bonds. That's what CIRM uses to pay the hundreds of researchers it is backing. The mechanism was set up five years ago, when voters approved Prop. 71, which created CIRM.

The cost of the bonds – interest on the borrowed money – is rarely, if ever, seen in CIRM's public documents. That's not much different, however, than other state agencies which use bond financing, such as the University of California. But the cost of state borrowing is attracting increased attention because of the state's $21 billion budget gap and draconian cuts in some areas of state services. Students at UC campuses are being forced to accept 32 percent tuition hikes at the same time CIRM is giving UC scientists $471 million.

Scores of stories have appeared in the last several weeks about the impact of borrowing on California's financial health. But a column by George Skelton of the Los Angeles Times caught our attention today. He focused on warnings by state Treasurer Bill Lockyer, the man who orchestrates the sale of state bonds. Skelton wrote,
“The state's credit card is about maxed out, the veteran Democratic office-holder warns. Payments on bond borrowing are becoming uncomfortably high, crowding out funds for universities, healthcare, parks -- and all the other government services being slashed these days.”
Skelton quoted Lockyer as saying the Golden State is “paying substantially more than Third World countries, er, emerging markets” for interest on its bonds.

That's because California has the lowest bond rating of any state in this country. Every $1 billion in bonds costs taxpayers $70 million a year, Skelton said. That translates to about $192,000 a day for the $1 billion in grants that CIRM has now approved.

Meanwhile the state has not kept up with its financial binging. Since 1999, the overall cost of interest on state bonds has skyrocketed 143 percent. General fund revenue, which pays those costs, has grown only 22 percent.

What does this sorry mess mean for CIRM? Probably the most serious impact is a less than warm environment in the Capitol should the stem cell agency ask lawmakers to remove the 50-person cap on the CIRM staff, which it seems likely to do. To win the required 70 percent approval from lawmakers, CIRM is likely to have to compromise on other proposals that it may not fancy.

The stem cell agency is only a flyspeck in the state's fiscal muddle. But it serves as an illustration of some of the state's more dubious political practices. One of which is ballot box budgeting – enactment of initiatives and approval of bonds with little attention to the long-term consequences.

However, unless something exceedingly unusual pops up, CIRM will continue with its programs, using borrowed money. CIRM's opponents may find fodder in all the concern about state borrowing. But even CIRM's most adamant supporters should understand the true cost of the effort to turn stem cells into cures.

Job Opening at CIRM for Administrative Assistant

Looking for a new job? The California stem cell agency is seeking an administrative assistant at pay level that tops out at $77,100 annually.

The successful job applicant would be working for the vice president of operations and also the general counsel.

A bachelor's degree and four years experience are necessary, but a science background is not required. The deadline for applications is Dec. 29.

CIRM is also expected to be looking for some help next year for its new vice president of research and development, but the VP post is not likely to be filled until sometime next year. CIRM is also seeking a science officer. Both positions have been posted for some time.

Monday, December 14, 2009

CalAware: CIRM Not Serious About Transparency

CalAware Today, a blog devoted to open government, has picked up an item about the California stem cell agency that CalAware says shows that CIRM “still hasn't learned to take governmental transparency seriously.”

CalAware made the comment on a piece Nov. 17 on the California Stem Cell Report, which said the stem cell agency “has had difficulty even complying with the basic state public records law and the state Constitution's public access guarantees.”

Terry Francke
produces the CalAware blog from Sacramento. He was general counsel for 14 years for the California First Amendment Coalition and served for 10 years as legal counsel for the California Newspaper Publishers Association. Francke founded Californians Aware in 2004.

Science vs. Salaries: What Do People Talk About?

The $225,000 salary now enjoyed by Art Torres, co-vice chairman of the California stem cell agency, made the news again today.

This time it was in the San Francisco Chronicle, in a column by Philip Matier and Andrew Ross. The piece provides an example of the staying power of such relatively minor matters compared to the size of California's fiscal problems and CIRM's $3 billion research effort. The column also illustrates the difficult task facing CIRM's new communications push by its directors.

Torres' salary was brought up in connection with those of state and local government officials. Matier and Ross pointed out that San Francisco city officials are paid more than a number of state officials who have greater responsibilities, including the governor, state treasurer and attorney general.

“On the other hand,” they pointed to Torres' salary, noting that he received a $150,000 boost last week from his previous half-time position.

Matier and Ross quoted Torres as saying,
"I'm saving the taxpayers $50,000 a year by not taking my (state legislative) pension or having my health benefits paid by the agency."
Since the beginning of this year, the San Francisco Chronicle, CIRM's “hometown” newspaper, has carried five stories dealing primarily with CIRM, based on a search on its site using the term “stem cell agency.” One of the five deals with a conflict of interest problem involving a member of the CIRM board of directors. The Torres story does not come up in the search, but with it, two out of six Chronicle stories this year with a heavy CIRM component carry a negative spin on CIRM.

One cannot draw the conclusion that a similar balance exists at other newspapers. But it does confirm that coverage of CIRM has been very light in the Chronicle. That pattern is true around the state, based on our daily searches throughout the year. That means that positive messages can easily be overwhelmed in impact and staying power by negative ones. One rule of thumb in such cases that it takes 10 positive stories to neutralize one negative piece.

The question is: What do people talk about? They don't talk about arcane research results. They don't talk about CIRM collaborating with the state of Maryland. They talk about $150,000 pay raises for state officials.

Something for CIRM directors to consider as they begin their work with the new communications subcommittee.

Chiang Delays CIRM Oversight Meeting

State Controller John Chiang has postponed Wednesday's meeting involving the California stem cell agency until sometime in late January.

The session of the Citizens Financial Accountability Oversight Committee was slated to discuss the recommendations by the Little Hoover Commission for changes at CIRM, among other things.

The committee was created by Prop. 71, the same measure that created the stem cell agency. The controller, the state's top fiscal officer, is chairman of the committee by state law.

A new date for the meeting is expected to be posted sooon. However, we are not likely to be carrying a notice on it since we will setting to sea in a few days and will not have access to the Internet until sometime late in January. You can find the meeting schedule for the panel and other information here.

Friday, December 11, 2009

Inside Biotech in San Diego: A Multibillion Dollar Matter

If you want to understand a little more about the biotech biz in San Diego, the Voice of San Diego Web site has a couple of pieces that deal with the industry that employs 40,000 people in that balmy corner of California.

Both are by David Washburn, who wrote last month about the impact in San Diego of the Pfizer cutbacks. He said:
“Pfizer's research facility in La Jolla...was not only spared in the downsizing, but is now one of five main R&D centers in the newly restructured operation. That's good news for the roughly 1,000 employees at the La Jolla facility, and perhaps for other San Diego scientists who could get hired by Pfizer as it moves more of its work here.

“And, on another level, the new Pfizer — as well as other Big Pharma restructurings — might be good news for the all the little fish that make up the San Diego biotech industry.”
In October, he explored reasons for the tiny voice that the tech and biotech industry has in local government, a phenomenon not unique to San Diego. Washburn said,
"San Diego is home to hundreds of high-technology and biotechnology companies that collectively employ close to 150,000 people, and have an overall economic impact on the region of more than $10 billion.

“Despite these big numbers the tech industry does very little to push the agenda at San Diego City Hall. In fact, among the hundreds of lobbyists registered with the city, only about a half-dozen organizations represent the tech and biotech industry. Scores of lobbyists, on the other hand, represent the tourism and building industries.

“Consider that San Diego Bike & Kayak is represented by a lobbyist, but Connect, the tech industry's most high-profile industry organization, is not.

"'That is telling,' said Duane Roth, the CEO of Connect(and co vice chairman of the California stem cell agency). 'It shows how little cause we've had to be down there.'

Thursday, December 10, 2009

Stem Cell PR, Salaries and Mixed Messages

Directors of the California stem cell agency today created a special panel to come up with better and more effective ways to tell the good news about the $3 billion stem cell research effort.

That was shortly after it voted to triple the half-time salary of one of its two vice chairmen, Art Torres, to $225,000 for working four days a week. The move almost immediately prompted an irate posting on the Consumer Watchdog blog, which said that the salary sends a “horrible message” at a time when the state is chalking up record unemployment rates (30 percent or more in one county) and other state workers are facing pay cuts and mandatory furloughs without pay.

A strong case can be made that Torres is worth every penny, but that doesn't fly with folks who have been laid off and can't find work. “Wildly out of touch with the realities of a state mired in a financial crisis” was the comment from John M. Simpson, a longtime CIRM analyst, on the blog at Consumer Watchdog.

CIRM already has salary ranges that are among the highest for California's public servants, topping $500,000. One of the questions for the new PR/communications subcommittee to ponder is how to square that largess with public expectations that public servants should be lean and hungry.

Another PR/efficiency issue popped up at today's directors meeting. CIRM's other vice chairman, Duane Roth, a San Diego businessman, did a little arithmetic and pointed out that CIRM is training undergraduates for stem cell work at a cost of $50,000 per person. He said he would like to see more young people in the programs to lower the average cost.

CIRM Chairman Robert Klein likes to paper over these sorts of issues, citing what amount to notional ideas about the economic impact of CIRM spending, which is minimal considering the size of the state's economy.

The media and critics, however, seize on tangible, understandable details that make for sizzling headlines and irritate the men and women who have to work for 10 years before they see $500,000 in wages.

It is likely that Torres' salary will barely stir a ripple in the pool of sad economic news that surrounds California. But, while CIRM ponders how it can persuade the legislature to give it a pass on the 50-person staff limit enacted by voters, directors should consider the mixed messages that CIRM delivers.

The directors certainly should avoid stepping into another potential pile of financial unpleasantness discussed by Consumer Watchdog. Simpson noted that Torres' salary
“...also raises the possibility of another interesting dilemma for the board. Chairman Klein, a millionaire, initially declined to take a salary. After four years financial reality caught up with him and a year ago the board agreed to pay him $150,000 for what it also defined as a half-time job.

“How long do you think it will before he tells the board he's working four days a week and asks for a raise to $240,00?”

CIRM Identifies Training Grant Recipients

The California stem cell agency has identified the recipients of the $10.8 million in training grants. They include: The Buck Institute, USC, California State University campuses at Fullerton, Northridge and San Bernardino and city colleges in Berkeley and San Francisco. Here is a link to the CIRM news release.

Torres Receives $225,000 Salary as CIRM Vice Chair

Directors of the California stem cell agency this afternoon unanimously approved a $225,000 salary for one of its co-vice chairmen, Art Torres, declaring that his work was “extraordinary” and has helped to improve relations in the nation's capital and elsewhere.

Torres (at right) joined CIRM in March on a half-time basis, with a $75,000 salary. Today's action gives him a $150,000 boost for work on an 80 percent basis.

Michael Goldberg, a CIRM director and general partner with Mohr, Davidow Ventures, a venture capital firm in Menlo Park, Ca., said Torres has picked up the work that previously was done by a fulltime legislative relations staffer. CIRM Director Jeff Sheehy, a communications manager at UC San Francisco, described Torres' work as “extraordinary” in telling the CIRM story to lawmakers.

No one at the directors meeting at Stanford University spoke against the salary move. However, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., was monitoring the proceedings in Southern California via an Internet audiocast.

Responding to a query, he said,
"At a time when California is in a severe economic crisis, state workers' salaries are being cut and they are facing mandatory furloughs, this raise is highly inappropriate. Art Torres knew the terms of the job when he took it. He should have been happy simply not to face the cuts endured by other state employees."
Torres has made a career as a public servant and politician. The former head of the state Democratic Party (1995-2009) had a 24-year career in the state legislature. He was first elected to the state Assembly in 1972, later served in the state Senate and became the first Latino nominated as a Democrat for statewide office(insurance commissioner).

Torres' talents and experience are unique within CIRM. No other director possesses the web of political connections and government experience that Torres brings to the state-financed stem cell effort. He also has maintained his political roots, campaigning last weekend in Hayward for a candidate for the Alameda county board of supervisors.

The candidate is Nadia Lockyer, wife of the state treasurer, Bill Lockyer, who is a friend and former state legislative colleague of Torres. Lockyer also presides over the sale of state bonds, which are virtually the only source of funding for the $3 billion stem cell agency.

The other vice chairman is Duane Roth, a San Diego businessman who has declined a salary.

Prop. 71 Not Alone in Super, Super Majority Requirement

The outside counsel for the California stem cell agency today pointed out that other adopted ballot measures besides Prop. 71 require a super, supermajority vote to be altered by the state Legislature.

James Harrison, of the Remcho, Johansen & Purcell firm of San Leandro, Ca., made the comment via email in connection with our “Legal Cap” item Dec. 9, 2009.

He said,
“I noticed that you said that no other changes in state law require a super, super-majority. In fact, both Prop. 116 and 117, adopted in 1990, require a 4/5 vote of both houses of the Legislature. Also, many members of the public do not understand that the California Constitution prohibits the Legislature from amending an initiative, unless the initiative expressly permits legislative amendment. Thus, there are many initiatives that do not permit legislative amendment at all, including Prop. 213 and 215, both approved by the voters in 1996. And there are a slew of measures that require a 2/3 vote of the Legislature to amend the law, including Prop. 98 (1988) and Prop. 10 (1998).”
Our thanks to Harrison for calling this to our attention. We have corrected the item.

CIRM Pumps More Millions Into Training

Directors of the California stem cell agency today added $10.8 million to its training efforts at California colleges and universities, a welcome change for the institutions that have been reeling under brutal cuts because of the state's financial situation.

Earlier this year, the directors declined to fund the seven programs because of CIRM's then precarious financial situation. However, the agency now has funds through June 2011.

Scientific reviewers earlier concluded that the seven applications should be approved if cash were available, a decision that CIRM directors this morning accepted without dissent.

Duane Roth, a San Diego businessman and co-vice chairman of CIRM, however, said the $50,000 per student cost in the overall Bridges program was high and asked for a more detailed report later. Given the size of the schools involved, he said the number of students involved (about 100) was quite small.

CIRM staff said that not all the money goes to the students. The institutions take a cut for "indirect costs." Additional funds are also used elsewhere rather than going directly to students.

CIRM has not yet identified the specific institutions that will receive the funds. But here are the number of the grant applications: Training program II, TG2-01155, TG2-01161; Bridges program, TB1-01181 70, TB1-01185 70, TB1-01183 68, TB1-01197 65, TB1-01188.

Summaries by number of the grant reviews for Training II can be found here.

Summaries for the Bridges grant reviews can be found here.

CIRM is expected to issue a news release later today with the names and more details.


An earlier version of the “Keirstead Leaves” item said that Hans Keirstead and CIRM Chairman Robert Klein briefed Congress on stem cell research last March. It was, in fact, another Robert Klein.

Keirstead Leaves Co-Directorship at UC Irvine Stem Cell Center

A California scientist who has been a media star and super-salesman for human embryonic stem cell research has quietly stepped down as co-director of the stem cell research center at UC Irvine.

The announcement of Hans Keirstead's resignation was made Nov. 24 in an internal UCI email by Susan Bryant, vice chancellor for research at the campus. She said that Keirstead (at left) was resigning as co-director “to devote his full efforts to his ground-breaking research program.” Keirstead currently is listed as an associate professor at the university.

Keirstead was featured on the “60 Minutes” television news show in 2006, which said of him,
“If paralyzed people are ever going to walk again, it might be because of the scientist in this story.”
Keirstead's media career includes a five-minute video on the YouTube Web site of the California stem cell agency. Keirstead's research is also the basis for Geron's much vaunted but now delayed attempts to conduct the first-ever clinical trial for an hESC therapy.

Keirstead was featured in an article in the November issue of Esquire magazine, in which he seems to speak disparagingly of the peer review process for research. The article by M.A. Woodbury said,
“This go-round, he (Keirstead) wants to increase velocity. No dribbling out a paper here and there and waiting for his colleagues' comments.”
The article reportedly incensed some stem cell researchers in California.

Keirstead did not respond to our query yesterday afternoon about his resignation. But he did comment to Gary Robbins of the Orange County Register, who posted an item on Keirstead at 9:13 p.m. last night.

Robbins quoted Keirstead as saying,
“I decided to just concentrate on my work. I’ve got another clinical trial coming up, my lab is really busy and I’m coming up for a full professorship, and I need to get my (research) papers out.”
Bryant's email in November said Peter Donovan, who was also co-director of the UCI stem cell center, will assume the full directorship.

Bryant, who is a member of the CIRM board of directors, did not respond to our queries yesterday but told the Orange County Register,
“It was time to have one boss instead of two there. It’s better for organization and efficiency. Some people are more comfortable working with one boss instead of two.”
The Register said Donovan and Keirstead “helped UCI raise almost $60 million in Proposition 71 research money in recent years, and Keirstead played a pivotal role in raising money for a $60 million stem cell research building that’s scheduled to open next summer.”

CIRM's Web site shows that Keirstead won a $2.4 million grant from CIRM in 2007.

We began our inquiries into Keirstead's resignation yesterday afternoon after the California Stem Cell Report received anonymous comments that more was involved in Keirstead's resignation than his desire to return to fulltime research. That information could not be confirmed yesterday.

Cathy Lawhon
, media relations director for UC Irvine, said,
“We do not respond to anonymous blog posts.”
In response to a query, Os Steward, director of the Reeve-Irvine Research Center at UC Irvine and also a CIRM director, said Keirstead was not fired.

(Editor's note: An earlier version of this item incorrectly said that Keirstead and CIRM Chairman Robert Klein briefed Congress on stem cell research. It was, in fact, another Robert Klein. )

Wednesday, December 09, 2009

CIRM Wants to Exceed the Legal Cap of 50 on Staff

The California stem cell agency wants to hire more staff, exceeding the 50-person legal cap approved by voters when they passed Prop. 71 in 2004.

CIRM President Alan Trounson told CIRM directors this afternoon that he wanted to hire an additional five to 10 persons. He said,
“We don't want to get in the situation where we can't do the work properly.”
Currently, CIRM has approved more than 300 grants worth more than $1 billion, which it must monitor. It is slated to give away another $2 billion over the next few years, including more grants involving businesses.

Because of the cap, CIRM has been forced to rely heavily on outside contractors and is currently spending about $3 million annually on their services. That amounts to the second largest category in its operational budget, with salaries and benefits at the top.

It was not clear how CIRM can circumvent the 50-person cap without going to the state Capitol. A change would appear to require 70 percent approval of the legislature and the signature of the governor. Such a super, super-majority requirement, another provision of Prop. 71, is extremely rare in state government.

We asked CIRM spokesman Don Gibbons by email how CIRM plans to work around the legal limit. He replied that the method has not been determined

If CIRM asks for legislation, other areas at CIRM could become the subject of attention from lawmakers. Deals may have to be cut.

Other provisions written into Prop. 71 have troubled CIRM. One of those is a supermajority requirement (65 percent) for quorums. Tonight, for example, the CIRM board is operating without a quorum and thus cannot take legal action.

(Editor's note: An earlier version of this item incorrectly said that no other state laws require a 70 percent vote to change them. In fact, two other adopted initiatives have an 80 percent vote requirement. A few other initiatives as well do not permit legislative changes under any circumstances.)

Anonymous Comment Deleted; More Info Needed

An anonymous person posted a comment at 3:01 p.m. today containing serious allegations against a prominent California stem cell researcher. We have deleted, for the time being, the comment until we can gather additional information concerning the charges. If the anonymous poster is reading this, we would appreciate it if you would send an email with additional information about the matter to

CIRM Releases More Info on New Communications Move

The California stem cell agency yesterday posted the rationale for a new effort by the CIRM board of directors to deal with public and media communications matters, including some details on what can be expected.

The proposed vehicles for the effort are a subcommittee of directors and a task force that would be composed of members of the subcommittee. The panels are expected to be approved at tomorrow's session of the full board at Stanford University.

We asked John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., if he had any comment on the communications move. He offered some advice to CIRM, based on his decades of experience in the newspaper business. His suggestions included a recommendation that the agency respond to questions rather than ignoring them, which it has done in some cases. The full text of Simpson's comments can be found here.

CIRM's one-page explanation of the communications effort said,
“The size of California, the diversity of its population, and the complexity of stem cell research present challenges to CIRM’s ability to communicate with the public. The subcommittee will work to establish a strategy to provide information on the progress of the board and the agency in meeting the mission of Prop 71.

“To accomplish this, the board will call upon outside experts and the CIRM staff for input. The Subcommittee will seek to develop objectives and goals, for each quarter, over the next 24 months, starting with the second quarter of calendar year 2010. The subcommittee will develop a system for receiving public input and measuring the achievement of the goals. An implementation plan is contemplated with the participation of CIRM staff and outside experts.”
Specifically mentioned was the annual report, which the memo said should reflect the agency's performance and “promising new research areas.”

The memo continued,
“This report to the public is not currently broadly communicated to the public and there is a fundamental responsibility to bridge this communication gap with traditional earned media and online communications vehicles.” (Earned media is jargon for news coverage, also sometimes called “free media.”)
As for the task force, the memo said,
“The Task Force will work to develop specific strategies with public communications media, covering non-scientific print media, television, radio and documentary earned media opportunities.”

Text of Consumer Watchdog Comments on CIRM Communications Proposal

Here is a statement from John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., related to the proposal to create a subcommittee of CIRM directors to deal with public communication matters. Simpson had a long career as a newspaper editor and has observed and participated in CIRM proceedings for several years. He has both praised and criticized the agency.
"There is a simple thing CIRM could do to improve communication. Maybe they can discuss this at their first communication committee or task force meeting. It's really quite simple: Their communications director and vice chairman should respond to questions from the public.
"When an agenda is posted saying the compensation for the statutory vice chairman will be considered, people who follow the agency want to know what's up. Currently Art Torres is paid $75,000 for what officially is described as a half-time job. As soon as the agenda was posted, CIRM should have expected questions and had answers ready.
"Because I follow CIRM's activities I sent Don Gibbons, communications officer, an email asking what was under consideration. There has been no response.
"So then I sent an email to Art Torres asking what is proposed. I didn't get an answer.
"The first rule of public communication is to anticipate questions and then when they are raised, answer them. I used to get $500-a-day as a consultant offering this sort of advice. No charge this time.
"An appropriate answer could be: 'The issues involved are considered a personnel matter and will be discussed in executive session. If a decision is made to change Torres' salary, the action will be considered in open session and the public may comment on the proposal before final action is taken.' Again, no charge for the advice.
"The irony in all this is that Torres might deserve a raise. I hear he is devoting full time to the job. I'm trying to keep an open mind, but it's hard to do so given CIRM's silence."

Tuesday, December 08, 2009

Coverage Planned of CIRM Directors Meeting Wednesday and Thursday

The California Stem Cell Report will be monitoring from Mexico the two-day meeting of the directors of the California stem cell agency. We will file fresh items as warranted beginning late tomorrow afternoon and continuing into Thursday.

Problems With CIRM's $1 Million, Free HQ Lease

Back in 2005, the California stem cell agency snagged a free, 10-year lease for office space in San Francisco to house its $3 billion effort.

But today something is amiss. All the details are not clear, although CIRM is looking at having someone set up a nonprofit to handle the lease, according to our source. We understand that the agency cannot afford to assume additional expenses because of a 3 percent cap on administrative overhead, which is locked into state law by Prop. 71, the measure that created the agency.

According to the most recent auditor's report on CIRM, the city of San Francisco provides about “20,000 square feet of premium office space free of charge” through November 2015. The value of the office space and “other incentives” was $1 million for the year ended last June 30.

Currently CIRM has 42 employees. It is limited, again by Prop. 71, to no more than 50.

In addition to the office space is the question of parking, now free for CIRM staffers. One estimate places the cost of parking as high as $600 a month in San Francisco, although it can drop below $400. For 50 employees, that could mean $360,000 a year.

San Francisco Mayor Gavin Newsom, CIRM Chairman Robert Klein and Terry Fancher of Stockbridge Capital Partners announced the signing of the free lease with some ballyhoo on June 24, 2005. A city news release said the lease was “critical” to San Francisco's successful, $18 million bid to win the CIRM headquarters. Fancher's Stockbridge Partners, a real estate investment fund, donated the space.

We asked CIRM last month about the lease issues. Don Gibbons, chief communications officer for CIRM, replied,
“We have no problem with Stockbridge and are not seeking to change the lease, which has six years remaining. However, we have had very preliminary discussions with the City regarding how the lease and related costs could be handled in the future. One option that has had very tentative discussion is a non-profit to own the office space, which would allow us to avoid these costs now as well as in the years beyond the current lease.”
Use of a nonprofit in such a fashion does have a precedent in state government. More than one governor has lived in a house in Sacramento owned by such a group, which provided the home to the chief executive of the Golden State at little or no cost.

Inside Stem Cell Funding: The Cost of Making a Grant

How much does it cost to give away $230 million? Something more than $173,000 or about $12,000 for each of the 14 awards in the recent disease team round from the California stem cell agency.

Those are conservative figures based on a document posted Sunday on the CIRM Web site. The report said it could have cost up to $280,000 to approve all the grants in the disease team round if the new “PreApp” review had not been in place. That figure would have climbed to $300,000 or so if you add in about $20,000 for the cost of the CIRM directors' meeting. (We have also added $20,000 to the $152,500 figure reported for PreApp disease team process).

We say our calculations are conservative because the $20,000 figure was reported several years ago, and it is not clear whether it includes all travel and meeting expenses for the directors and staff. The calculations also do not include interest expense, which would perhaps double the total cost of each grant. Interestingly, the debt financing of research makes CIRM grants much more costly to taxpayers than NIH grants.

The main point, however, of the CIRM PreApp report dealt with a staff recommendation that the process be continued in the future. The excellent, 10-page document covered nearly all the bases on the PreApp process, including comments from reviewers, applicants, staff and more. CIRM directors will consider the recommendation to continue the process at their meeting tomorrow and Thursday.

What is missing is an analysis of whether the process removes the CIRM directors, who legally have final say on grants, even further from the approval process. Already, reviewers make the de facto decisions on grants. Directors almost never overturn positive or negative decisions by reviewers. CIRM staff, however, probably made an overt decision not to even dip a toe into that sensitive area.

Here are some of the other conclusions from the report, in addition to cost savings, concerning the virtues of PreApp:
  • It “encouraged many new successful applicants – more than 50% of applicants had never previously applied for a CIRM grant.”
  • Several reviewers “indicated that the overall quality of applications reviewed after the PreApp process was better than without PreApp.”
  • Most applicants (87 percent), when given a choice between limiting the number of applications submitted per institution and an open submission of PreApps, preferred the PreApp process.
The pre-screening process was begun about a year ago to deal with problems handling large numbers of applications. Indeed, CIRM was swamped by more than 200 applications in one round several years ago. Handling those kinds of numbers can require more than one meeting of the grant review group, whose scientist members are all from out of state. Beyond the expense, the travel time required for four meetings a year places a professional burden on reviewers.

Here is how the PreApp process works. Each initial proposal is assigned to three external reviewers, who receive electronic copies of the proposals. No meeting of the external reviewers is held, and they do not see each other's reviews. Following the external review, CIRM science officers evaluate the proposals. A CIRM review meeting is then held with attendance limited to appropriate science officers, review officers, legal staff and the president of CIRM, Alan Trounson.

According to CIRM, the proposals are “ordered according to the level of enthusiasm across all reviewers with those having a unanimous recommendation to invite on top and a unanimous recommendation not to invite at the bottom.”

CIRM said,
“The PreApps were considered and discussed taking into account any discrepancies among reviewers. For each application, the science officers took a majority vote to invite or not invite the applicant to submit a full application. The CIRM President and CIRM CSO (chief scientific officer)do not participate in the vote unless the Science Officers are at a tie.”
The report is a forthright and clear explanation of the PreApp process that should be required reading for all potential applicants. It also could serve as a model for other background information on all items on the CIRM directors' agendas.

Venture Capitalist, Bankers to Weigh In on $500 Million Loan Program

The California stem cell agency is promising an interesting cast of characters for its meeting tomorrow concerning its fledgling $500 million biotech loan program.

Representatives from Proteus Venture Partners, VitaPath Genetics, Inc., Burrill & Co. and Silicon Valley Bank have been invited to appear, according to a document posted today.

Duane Roth
, chairman of the CIRM Loan Task Force, says that the panel of CIRM directors will review the initial loan policy and terms in light of feedback from potential applicants. It may well be that significant changes in the loan program will be forthcoming.

Also added to the agenda are links to the loan administration policy and terms.

Monday, December 07, 2009

Info Dribbling Out for CIRM Directors Meeting Wednesday

Directors of the $3 billion California stem cell agency meet in only two days, but only just now are details beginning to emerge about what they plan to decide and why.

On Friday, the skimpy directors agenda was virtually barren of background information on the CIRM Web site. Some information for the public, businesses and researchers began to appear yesterday and more today.

Now up is a 10-page report supporting continuation of the triage process for grant applications, an $80 million proposal for early translational grants, a one-page status report on the CIRM budget (no evident problems), the routine CIRM annual audit and appointment of an administrative chairman for the group that makes the de facto decisions on CIRM grants.

CIRM staff has nominated John Sladek, professor of pediatric and neuroscience at the University of Colorado, as the administrative head of the Grants Working Group, on which he has served on for about two years.

Missing from the agenda is any background information on the proposed salary increase for Vice Chairman Art Torres, who has been paid $75,000 a year for half-time work. He has been in the position since last March.

Also missing:
  • The chairman's report, which has never been available but which often contains important information
  • Wording of proposed changes in how the grant reviewers operate
  • Justification for new action on a $16 million disease team grant to Don Cleveland of the Ludwig Institute, Samuel Pfaff of Salk and Lawrence Goldstein of UC San Diego
  • Background on the proposed modification of terms of the $230 million disease team round
  • Wording and justification for a change in the conflict of interest appeals policy, which CIRM describes as a “correction”
  • And the rationale for creation of a directors subcommittee on communications with the public, including the media.
Failure to post background material in time for interested parties, including businesses and researchers, to react with well-considered comment has plagued CIRM for some time. That, despite the California constitutional “guarantee” that the public has “the right of access to information concerning the conduct of the people's business.”

As the Sunlight Foundation of Washington, D.C., points out,
“Public oversight, civic participation and electoral engagement—the stuff of democratic accountability—all depend on a transparent, open government.

“Indeed, transparency and openness are the very foundations for public trust; without the former the latter cannot survive.”
The foundation also notes,
“Information cannot be considered public if it is available only inside a government building, during limited hours or for a fee. In the 21st century, information is properly described as 'public' only if it is available online, 24/7, for free, in some kind of reasonably parseable format. Almost all of our public sphere is now online, and our public information should be there, too.”
The CIRM directors meeting begins at 4 p.m. Wednesday at Stanford with an offsite teleconference location at the City of Hope in the Los Angeles area. The meeting will be audiocast on the Internet, but no public participation is possible through the Internet. However, it is possible to send comments via the Internet to CIRM officials using this email address: You can ask that email comments be read by staff during the public comment period, but there is no guarantee that will occur. Details of the audiocast and City of Hope address are available on the agenda.

Saturday, December 05, 2009

Art, Bill, Nadia and Stem Cell Billions

The vice chairman of the $3 billion California stem cell agency, Art Torres, today will return to his old roots as a campaigner when he hits the hustings on behalf of the wife of the state treasurer, Bill Lockyer.

Torres(at left), who is up for a pay increase at the CIRM board meeting next week, will be “pounding the pavement” in Hayward for Nadia Lockyer, who is running for a seat on the Alameda County Board of Supervisors, according to an item on the Political Blotter.

Torres, former chairman of the state Democratic Party, and Bill Lockyer are friends and served together for many years in the California Legislature. Lockyer is also instrumental in matters of money for the stem cell agency. He is the person who presides over the sale and allocation of state bonds, which are virtually the only source of funding for CIRM.

Josh Richman wrote on the Political Blotter that Torres was quoted in a Nadia Lockyer news release as saying that he is proud to support her candidacy.

Torres also said,
“I have had the pleasure of knowing her ever since she was a young person who was intent on serving her community and making a difference. Over the years, Nadia has proven herself as a leader who has consistently fought to empower her community, and Alameda County will greatly benefit from her dedication, hard work, and enthusiasm.”
All politics is local – that's the way the old saying goes. In this case, it also reaches into the laboratories of the more than 300 researchers whose work is financed by the California stem cell agency -- not to mention the hundreds more expected to be funded in next several years, as well as their institutions and businesses.

Friday, December 04, 2009

Changes Upcoming in $500 Million State Biotech Loan Program?

California biotech firms looking to dip into a new $500 million source of capital would be well-advised to sit in on a meeting next week of the state's stem cell agency.

A group of its directors – the Loan Task Forcemeets next Wednesday at noon on the Stanford University campus to discuss the state of the unprecedented lending program and, more specifically, the loan terms. The session offers a golden opportunity to learn about the program, influence its direction and chat with key figures at the $3 billion funding agency.

The loan program is clearly in its formative stages. CIRM only approved its first loan --- $20 million loan to Novocell, Inc., of San Diego – a little more than a month ago.

Curiously, while CIRM has embarked on an effort to become more friendly to the biotech industry, it has provided little public information about the specifics to be discussed next week. That's the sort of stuff, however, that is needed to draw busy executives to the task force meeting to provide valuable input on the program and to encourage them to seek funding.

With three business days left before the task force meeting, the agenda states only that the panel will hear a presentation and discuss loan terms.

In order to provide more information to businesses, the public and other interested parties, the California Stem Cell Report yesterday queried Duane Roth, chairman of the task force and vice chairman of the stem cell agency, about next week's meeting.

Roth, a San Diego businessman, told us that the meeting will include a review of the initial loan policy and terms in light of feedback from potential applicants. He indicated that the session will focus on items that need further review or adjustment. Those specifics and any others identified at the meeting would come back to the task force and then the full CIRM board for action on later dates. It is fair to say that significant changes could be in the works.

The biotech loan program is significantly different than ordinary commercial lending. It specifically targets firms that otherwise could not raise cash or secure conventional financing. The idea is provide help to firms that are in what is known as the financial “valley of death.”

For more on the biotech loan program, click on the label “biotech loans” at the end of this article. You can find a list of members of loan task force here.

Thursday, December 03, 2009

CIRM Approves $300,000 More for Tech Help, Including Grant Management

The Governance Subcommittee of the California stem cell agency yesterday approved spending an additional $300,000 for technology assistance as it wrestles with its $1.2 million – and growing – grants management system.

A $100,000 increase was okayed for Turner Consulting Group of Washington, D.C., and a $200,000 extension for 25by7 of Santa Monica, Ca., according to a CIRM spokesman. Turner began work August 2008 on the grants management system under a $120,000 contract. Increases were approved last February and September. With the latest increase, the value of the two-year contract now stands at $350,000. Turner's contract is scheduled to end next June but may well be extended.

25by7's original $175,000 contract for network, server and desktop support began one year ago. Under the action yesterday, the contract was extended for one year, bringing its two year total to $375,000.

CIRM expects to seek additional information technology help next year.

The directors subcommittee also heard a report on the system designed to oversee $3 billion in grants and loans. It was first public accounting of how much has been spent on the grant management system, which CIRM has described as "a risk." No details were available concerning directors' comments.

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