Tuesday, April 30, 2013

'Praise' for California Stem Cell Agency from Unlikely Corner

The California stem cell agency this month received what some might consider a gesture of approval from a longtime foe – LifeNews.com.

LifeNews is a site devoted to anti-abortion efforts and information and is sharply opposed to research involving human embryonic stem cells.

So it was with some surprise that we read a tacit endorsement of recent CIRM activities in an April 22 piece written by Gene Tame out of Sacramento. It said the most recent $32 million grant round from CIRM “demonstrates – again – where the future of stem cell reserch lies.”

Tame wrote,
“CIRM has been steadily moving away from its original mission to give preferential treatment to funding for human embryonic stem cell research (hESCR). Instead, after adopting a renewed emphasis on translating research into clinical trials, CIRM has more and more shifted the bulk of its grants towards funding research utilizing adult stem cells and other alternatives to hESCR, such as induced pluripotent stem cells (iPSCs).”
Tame continued,
“(T)he lack, once again, of funding for hESCR only serves to highlight how old and dated that approach to finding treatments and cures increasingly seems.”
Tame is correct in his assertion that the stem cell agency has moved a considerable distance from its reason for being – research involving human embryonic stem cells. In 2004, the ballot campaign to create the agency pitched voters hard on hESC research and made no real mention of adult stem cells. Instead, it focused on the threat from the Bush Administration with its restrictions on hESC research, which have been lifted by the Obama Administration. .

In 2010, a study by a Georgia Tech academic, Aaron Levine, reported that through 2009 only 18 percent of California's dollars went for grants that were "clearly" not eligible for federal funding under the Bush restrictions. 

At the date of the study, CIRM had not publicly disclosed statistics on its funding of hESC research.
Today, however, its web site shows that only about 240 of the 595 awards that it has handed out are going for hESC research. CIRM has not made public the dollar value of those 240 awards, but it has given away a total of $1.8 billion. (Following publication of this item, the agency told the California Stem Report that it has funded $458 million in hESC research.) 

A footnote: Levine was a member of the blue-ribbon Institute of Medicine panel that recommended sweeping changes at CIRM.  

Friday, April 26, 2013

California Stem Cell Agency Seeks Lobbyist Bids

The California stem cell agency has put out a bid for a private lobbyist to watch out for its interests in Sacramento, perhaps severing a longtime relationship with one of the Capitol's more prestigious power brokers.

The $3 billion agency has had a contract since 2005 with Nielsen Merksamer Parrinello Gross & Leoni LLP of Sacramento, which reported lobbying revenue last year of more than $5 million. That made it one of the top revenue producers among California lobbyists.

The agency's contract is tiny, however. It started at $49,900 for five months in 2005 on a no-bid contract with Nielsen, although the annual figure is now $49,999.  The agency's request this month for bids calls for a boost to $65,000 annually.

Nielsen Merksamer is very active in health care lobbying. Its biotech/pharmaceutical clients have included Genentech, Merck & Co. and Pfizer. The firm also played a role in the drafting of and campaign for Proposition 71 in 2004. In 2009, at the behest of Robert Klein, then chairman of the agency, it produced a legal memo that Klein used to help box in the agency governing board on taking a position on the Little Hoover Commission report recommending major changes at the enterprise.

The stem cell agency is one of the few agencies that hires a private lobbyist, which has raised some eyebrows. Nearly all agencies handle legislative relations internally.

Deadline for bids is May 3.

Tuesday, April 23, 2013

Stem Cell Agency Provides More Cost Detail on Future Plans

The California stem cell agency today clarified the size of the assumed "public investment" in its rough outline of its plan for future activities. 

In response to a query from the California Stem Cell Report, Don Gibbons, a spokesman for the agency, said,
"This hypothetical range of public investment ($50 million to $200 million) is thought of as a one-time investment, with hope of private investments in multiples of that with the fund recharging to some extent based on revenue."
Gibbons also said the agency did not want to indicate what it was prepared to pay for the study.  He said, 
 "We have not wanted to post the budget range because we want honest estimates of what folks think the budget should be rather than having them penciling estimates that max out the budget."

Deadline This October: California Stem Cell Agency Seeking Detailed Public-Private Plan for its Future

The $3 billion California stem cell agency, which is currently scheduled to go out of business in a few years, hopes to come up with a detailed plan by this fall for a novel public-private arrangement that would extend its life.

The rough outlines of the proposal assume $50 to $200 million in “public investment,” although it is not clear whether that would be a one-time figure or an annual amount from presumably the state budget or perhaps another state bond measure. The concept includes additional private funding of a yet-to-be-determined nature. (The agency later said that the public investment figures would be a one-time event.)

The broad sketch of the agency's latest thinking about how to regenerate itself was found in an RFP posted four days ago on its website.

CIRM is seeking a consultant who would flesh out the general concepts that it has offered. Work would begin in mid June and be completed in four months, close to the ninth anniversary of the agency, formally known as the California Institute for Regenerative Medicine. The RFP did not contain a figure for the cost of the study, but said that the price would be part of the criteria for evaluating bids.

CIRM was created in November 2004 when California voters approved Proposition 71, a ballot initiative. Since then it has awarded $1.8 billion to 595 recipients. It is funded by money borrowed by the state (bonds), but cash for new grants is scheduled to run out in 2017. Interests costs on the bonds raise the total cost of the agency to roughly $6 billion.

CIRM said in the RFP that the plan for its future should provide
“...an in-depth analysis of various public-private funding models with potential to attract private sector investment to, and facilitate further development of the most promising CIRM-supported research projects; and recommend a single preferred approach for achieving this goal, complete with details relating to the recommended structure and an operational plan.”
The RFP also contained a just-released, $31,750 study by CBT Advisors of Cambridge, Mass, that examined mechanisms for financing translational research, which is the key focus nowadays at the stem cell agency. Such research is aimed at pushing laboratory findings into the marketplace.

Among other things, the CBT report, whose lead author was Steve Dickman, said,
“The nature of CIRM as a state agency is perhaps the biggest weak point (and) has to be addressed politically and cleared up as soon as possible or raising money will be unnecessarily challenging.”
The CBT study did not address how that might be done, which could be a considerable task. Proposition 71 modified the state constitution and state law and can be altered only by a super, super majority vote of the legislature or by another ballot initiative.

California is the first state to provide billions for stem cell research by using borrowed money. It also is unique in California state government in that its funding flows directly to the agency and cannot be altered by the governor or the legislature.

Translating all that into some sort of public-private arrangement would be novel among state government departments and could well require legislative or voter approval.

The California Stem Cell Report has queried the agency concerning the frequency of the assumed “public investment” and CIRM's budget for the RFP. We will report that information when we receive it.  (The agency later declined to disclose what it was prepared to pay for the study.)

Wednesday, April 17, 2013

California Stem Cell Agency Budget Up 4.6 Percent, Topping $17 Million

During the past couple of years, the California stem cell agency has vastly improved the way it budgets the relatively tiny amount it spends on operational expenses.

At one point a few years back, its operational budget was often all but incoherent to the public and to at least some members of its governing board. (See here, here and here.) But times have changed. The process for its operational budget, which amounts to about $17 million for the 2013-14 fiscal year, is now more transparent and better organized.

The long overdue improvements can be credited to the hiring of Matt Plunkett in December 2011 as its first chief financial officer in its eight-year history, as well as the efforts of CIRM directors Michael Goldberg and Marcy Feit. Goldberg, a venture capitalist, is chairman of the board's Finance Subcommittee and Feit, CEO of Valley Healthcare in Pleasanton, Ca., is vice chair. Plunkett, however, left the agency suddenly last summer and the agency has no plans to replace him. CIRM Chairman J.T. Thomas says Plunkett put new financial systems in place that can be operated without a CFO.

Interested readers can get a glimpse of what is upcoming for CIRM spending beginning in July in documents prepared for the Monday meeting of the governing board's Finance Subcommittee meeting. The agenda, however, lacks a much-needed explanation and justification for the spending. All that is presented now for the public are raw numbers and a PowerPoint presentation, which is no substitute for a nuanced, written overview.

Nonetheless, here are the basics. The budget proposed for 2013-14 stands at $17.4 million, up 4.6 percent, according to California Stem Cell Report calculations, or $771,000 from forecast expenditures for the current year. The budget represents the cost of overseeing $1.8 billion in grants and loans and preparing new proposals and reviews of applications for hundreds of millions of dollars in additional awards.

The largest budget component is for personnel – $12.1 million, up from $10.7 million. Second largest is outside contracting at $2 million, down from $2.9 million for the current year, continuing a trend away from outside contracts, which once were burgeoning.

One interesting area includes “reviews, meetings and workshops,”- which are expected to cost $1.8 million this year. Next year, they are budgeted for $2 million. Some might look askance at those sorts of expenditures for “meetings.” However, that includes the fees and expenses for scientific reviewers for multi-day meetings in the San Francisco area, which is a high cost area, and other large gatherings. However, the figure does not include travel for reviewers, who come from out of the state and even from overseas.

Examples of the meeting costs include a three-day grant review session last September at the Claremont Hotel in Oakland that cost $44,019. A two-day meeting at the same hotel for the 29-member CIRM governing board cost $34,424. (These figures and others involving outside contracts can be found on the agenda of the board's Governance Subcommittee meeting April 10.)

The agency also dissected the budget from different perspectives on expenditures. The spending plan includes $2.0 million for the office of Chairman Thomas and $1.6 million for the office of President Alan Trounson. Comparable figures for actual spending this fiscal year were not provided, however, by CIRM for the Finance Subcommittee meeting. The size of the chairman's budget reflects the controversial dual executive nature of management at CIRM, which has come under repeated criticism, including from the recent blue-ribbon report by the Institute of Medicine.. However, the arrangement is locked into state law as the result of the ballot measure, Proposition 71, that created the stem cell agency in 2004.

Legal expenses are budgeted at $2.2 million with public relations and communications running slightly more than $1 million. The scientific office, as one might expect, consumes much larger amounts, with basic research, translational research, grants review and grants administration budgeted at $4.7 million. The development side of the scientific office, which focuses on pre–clinical and clinical research, is slated for $3.4 million. The agency did not offer comparable figures for the current year.

Under Proposition 71, the agency can legally spend only 6 percent of its $3 billion in bond funding for operational expenses. At one time the agency had a 50-person staff cap, but that was altered several years ago by the legislature. The most recent figures show it has 54 employees. However, this month's budget documents did not list the number of staff for this year or next.

The stem cell agency also reported that it expects to spend an additional $1 million a year for rent beginning in 2015, when a free rent deal provided through the city of San Francisco expires. The city put together a $18 million package to attract the CIRM headquarters in a bidding war with other California cities. The agency has never produced a public accounting of whether it has received full value on the package.

The proposed budget is likely to be approved by the Finance panel next week without significant changes and then by the full board late in May.

The public can participate in the Finance meeting at two locations in San Francisco one each in Irvine, Pleasanton, La Jolla and Berkeley. Specific locations can be found onthe agenda.

Monday, April 15, 2013

Meager California Biotech Representation in Governor's China Trip

California Gov. Jerry Brown and a flying squad of business types visited China last week, beating the drum for the Golden State in an effort to raise billions of dollars in investments.

Some 90 persons were involved in the governor's delegation, but representation was meager from California's renown biotech sector and none at all from the $3 billion California stem cell agency, which has a collaboration underway with Chinese scientists. It may have been the only state agency with a formal collaboration agreement with China prior to Brown's visit.

According to many reports, the Chinese government regards growth of its biotech industry as one of its core economic efforts. Within that sector, biomedicine ranks as the most important and fastest growing, according to an Italian Trade Commission report. Stem cell research is especially important, according to this Canadian study. Indeed, some scientists in China are eyeing a Nobel Prize in the field (See here or here.)

California would seem to be well placed to take advantage of that situation, given its substantial biotech industry and community, which is only rivaled by Massachusetts. Add to that the existence of the unique California stem cell agency, which has funded a $1.5 million study by Holger Willenbring at UC San Francisco that also involves research by Lijian Hui at the Shanghai Institutes for Biological Sciences, which is separately funded by that country to the tune of nearly $1 million.

A look at the list of those traveling to China with the governor showed two representatives who could be considered from biotech: Joe Panetta, head of BioCom, a life science industry organization in Southern California, and Michel Baudry, dean of the Graduate College of Biomedical Sciences, Western University of Health Sciences in Pomona, Ca..

We queried Baudry before he left for China about the situation. Here is the full text of his reply.
“I do not know how this set of delegates were selected. What I do know is that this is the first of several delegations of California business delegates going to China with Governor Brown, and that more trips are scheduled. The focus of this first trip is Energy and Environment, and this might be why there is no biotech delegates in this trip. I am quite sure that they will participate in the following trips.”
Meanwhile, the folks in Richmond on San Francisco Bay are waiting to hear about plans of a major but unnamed Chinese biotech company for the 53-acre, former Bayer Healthcare Campus.

(Following the posting of this item, Ron Leuty of the San Francisco Business Times gave us a heads up on the latest on the site. He reported in March that Joinn Laboratories, a Chinese contract research organization, purchased the site. Leuty said that its plans are vague about future development, but that it may lease some of the space.)

Thursday, April 11, 2013

StemCells, Inc., Nails Down Controversial, $19 Million Award from California Stem Cell Agency

The stock price of StemCells, Inc., price today jumped as much as 9 percent after the company disclosed it had finally concluded an agreement with the California stem cell agency for a $19.3 million forgivable loan for research twice rejected by the agency's scientific reviewers..

The stem cell agency governing board seven months ago approved the loan to the Newark, Ca., firm. But the cash was withheld until the financially strapped company could demonstrate that it could match the size of the loan, as promised in its application.

The StemCells, Inc., (SCI) application was nixed two times in 2012 by the agency's scientific reviewers who gave it a score of 61. In a controversial move, the 29-member board approved the award in early September on a 7-5 vote after former agency chairman Robert Klein intervened publicly on behalf of the firm. It was the first time that Klein had lobbied the board publicly on behalf of an application. It was also the first time that the board approved an application that was rejected twice by its reviewers, a panel of internationally recognized stem cell scientists.

In a press release, Martin McGlynn, CEO of StemCells, Inc., said,
"With CIRM's support, we are now able to lay the groundwork that could result in the world's first neural stem cell trial in Alzheimer's patients."
Both the company and the $3 billion state research agency were tight-lipped about the nature of the matching funds from the company, which reported losses of $28.5 million in 2012 on revenues of $1.4 million.

In a brief response to questions from the California Stem Cell Report, McGlynn said, 
 “At this time, we do not intend to elaborate any further on the contents of our press releases or public filings pertaining to the SVB (Silicon Valley Bank) or CIRM(the stem cell agency) loans.”
Earlier this week, the company reported receiving a $10 million loan from Silicon Valley Bank. Both McGlynn and the stem cell agency did not answer a question about whether those funds are being used to back the award from California taxpayers.

The agency confirmed that the firm was providing $19.3 million in matching resources. But Kevin McCormack, senior director of public communications, did not provide any specifics on the nature of the match. He only said,
“The matching  requires them to demonstrate they have enough funds necessary to fund SCI’s share going forward as well as their own operations and other commitments.”
The award was originally for $20 million. We have queried the agency about the smaller figure announced today.

The company's stock price rose as high as $1.87 earlier today after closing at $1.71 yesterday. It stood at $1.77 at the time of this writing. Its 52 week high is $2.67, and its 52 week low is $0.59. The loan from Silicon Valley Bank gives the bank warrants to purchase 293,531 shares of the company at $1.70 over the next 10 years.

The 10-year loan from CIRM is low risk for the company, which said its “obligation to repay the loan will be contingent upon the success” of the research. If a product is developed, it will take years before it could hit the market.

The award to StemCells, Inc., put the stem cell agency in a touchy situation involving the company's decision last month to reject an additional $20 million award from the agency.( It was the first time a recipient has rejected an award.) Neither the company nor the agency would give a reason for the rejection of the loan for a spinal injury project . However, the award also required a $20 million match, which undoubtedly tested the company's resources.

The spinal injury application was scored at 79 by agency reviewers and was routinely approved by the board. With its withdrawal by the company, the agency, which prides itself on funding only the best science, was left supporting research (StemCells, Inc.'s Alzheimer's project) judged significantly inferior by reviewers with its score of 61.

In response to a question about that situation, CIRM's McCormack said,
“Our goal is to always fund the best, most promising science. This is not the first time that our board has voted to fund a project that the Grants Review Group had not recommended (this has happened in around 2% of cases) The board did so for a number of reasons, not the least of which is that this was the first disease team application that had a goal of  moving a promising stem cell therapy for Alzheimer's towards clinical trials.”
The round in question, however, had another application dealing with Alzheimer's which was scored at 63, two points higher than the one from StemCells, Inc. Reviewers also did not recommend funding that application.

The action last September by the agency board came only after it publicly said the funds would not be distributed until the StemCells, Inc., could show it could provide the match, still another first for the agency.

The award triggered a column in the Los Angeles Times by Pulitzer Prize winning writer Michael Hiltzik, who said in October that  the process was “redolent of cronyism.” He said a “charmed relationship” existed among StemCells, Inc., its “powerful friends” and the stem cell agency.

StemCells, Inc., was founded by Stanford researcher Irv Weissman, who was a major fundraiser for Proposition 71, which created the stem cell agency in 2004. Klein headed the ballot campaign, which spent more than $30 million to win voter approval. Weissman sits on board of directors of StemCells, Inc., and holds 124,608 shares in the firm, including 8,630 he reported this month receiving.

Sunday, April 07, 2013

Modest Approval from Long-time Stem Cell Agency Critic

Of all California's newspapers, The Sacramento Bee, the only daily paper in the state capital, has long been the most critical – editorially – of the Golden State's $3 billion stem cell research agency.

Today, however, the newspaper gave a modest nod of approval to the agency's modest efforts to clean up its built-in conflicts of interest, which have been cited as a major flaw by the prestigious Institute of Medicine.

The headline on the Bee's editorial today said,
“Stem cell agency finally addresses potential for conflicts”
The piece said that Jonathan Thomas, chairman of the agency, “has taken important steps in reducing the potential for conflicts within this agency.”

The editorial continued,
 “He hasn't gone as far as we would like, or that independent outside reviewers have recommended....But he's achieved what's possible, at least for now, and the board may empower him to go further.”
The Bee referred to action last month in which the agency's governing board decided, among other things, that 13 of the 15 board members linked to recipient institutions could not vote on any grants, although they could participate in discussion of applications. Twenty-nine persons sit on the board. In a $700,000 report commissioned by the agency, the Institute of Medicine recommended a fully independent board.

The Sacramento newspaper said, 
“We think Thomas and the oversight board should go further and adopt the Institute of Medicine recommendations. But that is politically unlikely. As is now obvious, it will be up to the Legislature to fully remove representatives of funding-eligible institutions from being involved in decisions about grants that could come back to them.
“Thomas, to his credit, recognizes that his compromise may not be the perfect solution. He wants to test out the new policy for a year, and see how it works. There's a lot riding on the outcome. CIRM is expected to run out of funds in 2017, and while philanthropy and foundation money could extend that for a few years, supporters of California stem cell research clearly want to go back to the ballot to seek additional funding. To make that case, CIRM supporters can't afford any more scandals about insider dealing. The next year will reveal whether it is on the right track.”

Friday, April 05, 2013

StemCells, Inc., Rejects $20 Million from California Stem Cell Agency

When does a financially struggling biotech company turn down a $20 million “forgivable loan?”

When it is StemCells, Inc., of Newark, Ca., and the cash is being offered by the $3 billion California stem cell agency. The research program has handed out nearly 600 awards, and it is the first time that a recipient has rejected funding.

That's the latest development in a stem cell saga that began publicly last July and that involved unusual personal lobbying by the former chairman of the Golden State's stem cell research agency. The high point of the saga may have come in September when the agency's governing board finished awarding StemCells, Inc., $40 million in two different awards. But there was a catch. StemCells Inc., had to match that figure with $40 million of its own.

Late last month, StemCells, Inc., threw in the towel on the $20 million awarded on its cervical spinal cord injury application. In comments to analysts March 21, Rodney Young, chief financial officer of the publicly traded company, said:
“The funding would have been in the form of a forgivable loan, however, we have elected not to borrow these funds from CIRM(the stem cell agency).”
According to the Seeking Alpha transcript of the conference call with analysts, Young said,
“You may also recall that last September, CIRM approved a separate application under the same disease team program for Alzheimer's disease, which was also for up to $20 million in the form of a loan. We remain in confidential negotiations with CIRM regarding the terms and conditions that would attach to this loan.”
The company provided no explanation for rejecting the cash, either in the conference call transcript or in its press release.

During the conference call, StemCells, Inc., reported continuing losses. For 2012, net losses totaled $28.5 million compared to $21.3 million in 2011. Revenue for 2012 was $1.4 million compared to $1.2 million in the previous year.

The awards last year to StemCells, Inc., founded by Stanford's eminent researcher Irv Weissman, stirred up a bit of a ruckus. The spinal injury award was handed out routinely in July. Scientific reviewers gave it a score of 79 and recommended funding. It was another matter on the Alzheimer's application. It was scored at 61. Reviewers said it did not merit funding. But the company publicly appealed to the full board, which sent the application back for more examination. It was rejected again. Nonetheless, in September, the 29-member board approved the award on a 7-5 vote, bypassing a rival Alzheimer's application scored at 63. It was the first time in the eight-year-history of the agency that its board approved an application that was rejected twice by reviewers.

Approval came only after strong lobbying by Robert Klein, former chairman of the board. Klein was also chairman of the ballot campaign that created the agency, and Weissman, who holds stock in StemCells, Inc., and sits on its board, was a major fundraiser for the campaign. 

The Los Angeles Times' Pulitzer Prize-winning columnist, Michael Hiltzik, wrote in October that  the process was “redolent of cronyism.” He said a “charmed relationship” existed among StemCells, Inc., its “powerful friends” and the stem cell agency.

As for the remaining $20 million award, Martin McGlynn, CEO of StemCells, Inc., expects “quick” action on finally securing the cash.

Here is an exchange that came during the March conference call between McGlynn and analyst Kaey Nakae of Ascendiant Capital Markets.
Nakae: “Okay. Just 2 more questions. I guess the first one, as it relates to CIRM. In deciding to decline the funding for spinal cord yet continuing to pursue the funding for Alzheimer's, is there a difference in what you're getting from them in terms of potential terms and conditions that allow you to proceed on one and not the other, or is it the fact that you're already in human with -- in spine, and still very preclinical with Alzheimer's?”
McGlynn: :”I think you're very definitely -- you're getting at some important criteria when one considers how to fund programs whether you use debt or equity, etcetera. So I wouldn't disagree with anything that you've outlined or surmised. But I just would pray your indulgence until we're finished, the negotiations with CIRM, which are coming to a close and we expect those to resolve pretty quickly with regards to the Alzheimer's program. And then quite frankly, we can be way more forthcoming and way more disclosive with regards not only to our decisions, but to our thinking.”
StemCells, Inc., was trading at about $1.65 at the time of this writing, down slightly from the previous day. Its 52-week high is $2.67 and its 52-week low $0.59.

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