Thursday, July 31, 2014

The New, Official Life Expectancy of the California Stem Cell Agency

Randy Mills' calculations on cash for future CIRM funding

Randy Mills, the new president of the $3 billion California stem cell agency, rewrote some of the agency’s history last week and extended the life span of the now nearly 10-year-old enterprise.

All that talk about the agency running out of money for new awards in 2017? Bushwa, he basically said. “It’s simply not true,” he told the directors of the agency at their meeting in Millbrae.

Mills' comments appeared to be directed at media stories, including those on this Web site, that mention the 2017 timetable. However, the date was not concocted by the writers of those stories. It came directly from the agency itself, which has never challenged it until Mills did last week. The timetable was even referenced as recently as December 2013 by the agency’s directors.

Randy Mills
That said, Mills’ view of the spending possibilities for the California Institute for Regenerative Medicine(CIRM), as the agency is formally known, is not inaccurate. It comes from his fresh, business-oriented analysis of the agency’s finances. It is based on different assumptions than those used previously by the agency.  His perspective does not appear to assume, for example, that all the grant rounds approved in concept by the board will go forward at their existing levels.

A case in point came last week when Mills recommended and the board approved slicing $5 million out of a $15 million component of the agency’s Alpha clinic RFAs. It was the first time that the board has so heavily cut a previously approved "concept" figure.

The agency's last major review of the cash available for awards occurred at last December’s board meeting. CIRM Chairman J.T. Thomas said at the time, 
“We now find ourselves with the reality that, having started with $3 billion, we are down now to how to deploy our last $600 million….”
Pat Olson, executive director of scientific activities, said,
“There’s essentially $950 million yet to be awarded, 321 (million) of the concept approved and the 629 (million) of the future.”
Steve Juelsgaard
Steven Juelsgaard, a CIRM board member and former executive vice president of Genentech, however, looked at the numbers with basically the same view as Mills. Juelsgaard, who has been chipping away at some of the financial assumptions of the agency, said,
“So we’ve been talking for the longest time as if we have three to four years worth of money to spend, right? I asked myself, well, why is that true? Who made that decision that it’s three to four years? That length of time is driven by how quickly we spend our money, not by anything else. So if we spend our money more slowly, we could go for six years or eight years or whatever the number is that you want to pick. It’s all a matter of burn rate.”
Enter Mills five months later as president. By last week, he was telling board members that, yes, they have enough money to give out awards until 2020 at a rate of $190 million a year.  He said that about $1 billion is available.  
“We will be able to fund most anything that meets our criteria.”
Of course, if the agency spends more than $190 million a year, the money will run out faster. And the  agency is engaged in clinical trials and commercialization efforts, which are far more expensive than basic research.

But Mills’ 2020 timetable has some significant advantages even if it slows the pace of awards. It gives the agency substantially more time to arrange some sort of financing for the future. Currently its only real source of funding is state bonds. Its ability to authorize those bonds ends in 2017, according to the agency. Currently Thomas is examining the possibility of some sort of private-public financing arrangement. Asking voters to approve another bond measure has not been ruled out, but it could be problematic politically.  The additional time would improve the possibility that clinical trial results would emerge that would resonate with the public as well as with private funding sources.

While Mills paints a rosier financial picture than the agency previously offered, he also has demonstrated a clear fondness for focused austerity. It fits with the mood of the board. Juelsgaard, who is chairman of the agency’s Finance Subcommittee, is also attempting to bring a sharper financial perspective to the agency at a time when directors are clearly feeling a pinch.  

Gone are the days when $120 million was added with modest discussion to one round of grants. No longer is the governing board throwing another $23 million at already hefty efforts to lure stem cell stars to California labs.

Instead last December, after directors were told that only $629 million out of $3 billion was left uncommitted, CIRM Director Jeff Sheehy, in a comment echoed in tone by other board members, said,
“I just think all of us are starting to get concerned about the burn rate. We’re just flying through the money.”
 One of Mills’ first public actions involved the agency’s $17 million annual operational budget, which is limited by state law. On top of those limitations, in May he whittled the spending plan down to the point where it could be described as less than the previous fiscal year, given inflation.

Also in May, when directors were considering elimination of what was left of the $57 million researcher recruitment program, Mills basically disengaged himself from support of the effort. He told directors,
“It’s not that I don’t like the concept of recruiting great people….It’s just we have to make sure we recruit the people we need.”
Mills' actuarial exercise was not the first involving CIRM's mortality. Back in 2004, it was widely believed that the agency had only a 10-year life, a belief held by some of its staffers, which would have meant this year would have been the agency's last. That misconception grew out of the agency's 10-year authorization to issue bonds. That authorization is now commonly believed to have begun in 2007 because that was the year litigation about the agency was ultimately resolved. It may well be that the date of CIRM's final reckoning will change once again before its last check goes out the door.

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