Wednesday, August 22, 2012

An Unseemly Performance: Former Chair of Stem Cell Agency Promotes $20 Million Research Proposal

Bob Klein is nearly an icon in the history of the $3 billion California stem cell agency. And when he appeared before its governing board last month and aggressively touted a $20 million grant proposal already rejected by agency reviewers, his actions raised eyebrows.

Robert Klein
Elie Dolgin/Nature photo
Klein's comments carried unusual weight, given that they were supported by his unique and influential relationship with the California Institute for Regenerative Medicine(CIRM). He and his associates wrote the 10,000-word ballot initiative that created the stem cell agency in 2004. He ran the $35 million electoral campaign that convinced voters to buy into the idea. Klein raised millions on behalf of the effort. He personally provided the campaign $3 million. And he was the first chairman of the agency, leaving that office only 13 months ago, when he was designated chairman emeritus.

The meeting last month marked Klein's first public appearance before the board on behalf of a specific application.. He heralded the applicant, StemCells, Inc., as unique and the “best” in United States with a “huge body of experience.”
(The full text of his testimony can be found here.)

Irv Weissman
Stanford Photo
StemCells Inc. is a publicly traded company based in Newark, Ca., that was founded by renown Stanford scientist Irv Weissman, who sits on its board. Weissman also played an important role in the Prop. 71 ballot campaign that created the stem cell agency. StemCells, Inc.'s application was turned down by CIRM reviewers who gave it a score of 61, but the company appealed the action to the agency's governing board. Following the appearance by Klein, Weissman and others, the CIRM board sent the application back for more review. The board will reconsider it next month or in October.

One California stem cell researcher, who requested anonymity, said it is “highly inappropriate for Bob Klein to be advocating for any grant application from a public company.”

The scientist said,
 “He has considerable influence with the ICOC(the CIRM governing board), and is closely associated with biotech in the Bay Area. Even if he doesn't make a lot of money himself from this, then he certainly has friends who will.  Irv Weissman would be one of those friends."
In response to questions asked on Aug. 7 by the California Stem Cell Report, Klein today defended his actions.  He was asked if he had “any sort of financial ties” to firms or individuals that would benefit from approval of the award. Klein, who is a real estate investment banker and also an attorney, said he has “no financial interest” in the firm or individuals that might benefit.

Klein also indicated his appearance was entirely appropriate. He defined his role as a patient advocate – not as a lobbyist who is paid for advocating on behalf of a company. Klein said he had “a particular responsibility to contribute my background knowledge and experience.”

Klein said he hoped other former board members would follow his example. He said,
“(I)t would be a tragedy if the expertise of board members built up over six or more years is lost.”
(The full text of his response can be found here.)

Klein's appearance came at a propitious time for financially strapped StemCells, Inc. The company's financial information shows that it is losing $5.4 million a quarter as of the end of June and had only $9 million in cash on hand. It also had liabilities of $11.6 million, up substantially from $8.5 million in September of last year.

The researcher who criticized Klein's efforts as inappropriate also said,
"StemCells Inc has been on the stock market for 20 years, without producing anything of value for the investors.  The stock price has been sinking fast:  it was 60 cents this June; last year at this time, it was around $5 a share.   
“On July 17, when the CIRM Disease Team Award review results became available, the stock rose from 87 cents to $1.80 – a person who could anticipate the outcome of the CIRM applications could have made considerable money in that 24 hour period.”
Weissman's role with the StemCells, Inc., is more than scientific. According to the company's financial statements, he holds 88,612 shares. His wife, Ann Tsukamoto, is executive vice president of the firm. She holds 185,209 shares in the firm.

Weissman played a significant role in the Prop. 71 campaign. He did the “billionaire circuit,” raising money for the initiative, according to an article by Diana Kapp in San Francisco magazine. Among other things, Weissman worked the exclusive Bohemian Grove in Northern California and “pitched” Bill Bowes, a co-founder of Amgen, who, along with his wife, gave $1.3 million to the campaign. Weissman was the key to securing a $400,000 contribution from Microsoft's Bill Gates. Weissman also plumped for Prop. 71 in a TV campaign ad.

In addition to StemCells, Inc., Klein and Weissman supported a successful attempt last month to overturn reviewers' rejection of another $20 million application by Judith Shizuru of Stanford. The application received a score of 53 from reviewers.

One of the application's problems cited by reviewers was the availability of antibodies for the study. The antibodies were developed by Systemix, a company founded by Weissman. Systemix was acquired by Novartis in 1997 for about $70 million. Weissman said he has “negotiated back” rights to key antibodies, which he said are now held by Stanford.

Klein said that reviewers believed the research was “a showstopper” but did not think the documentation was adequate. He told the CIRM directors that they now have a letter with proprietary information that supports the grant application.

Our take: The stem cell agency has long labored under the perception that it is something of an insiders' club. Even the prestigious journal Nature warned in 2008 about what it called “cronyism” at CIRM. If anything, the situation is worse today,  four years later. Enterprises associated with persons on the CIRM board of directors have received more than 90 percent of the funds handed out by the agency. Klein's efforts last month reinforce the not-so-pleasant image of the stem cell agency as an old boy's club and create an impression – at the very least – of unseemly insider influence.

(See here for an April 2013 update on the StemCells, Inc., awards.)

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