Monday, August 31, 2015

Sunlight on California's Stem Cell Loan Effort; Info Missing on Changes in $127 Million Research Programs

Some details on loan changes
New Alpha clinic center proposed; no details
Unspecified changes upcoming in $93 million award programs

A little sunshine popped up over the weekend on a bit of fiscal alchemy at the $3 billion California stem cell agency, and a little clarity emerged.

The matter involves the agency’s loan program, which affects multi-million awards to businesses. The awards are called loans but are forgiven if no viable product emerges.

The matter surfaced as a result of a cryptic agenda item for Thursday’s meeting of the agency’s directors’ Intellectual Property Subcommittee. Here is what happened:

About a week ago, the agency posted the agenda for the meeting. The agenda contained a 24-word line that said that it was going to change its policies “to permit existing loan recipient whose loan has been forgiven to convert its award to a grant.”

The need for change and its financial impact on the agency was not discussed. The specific language being changed was not spelled out. The timetable for the changes was not specified. Nor was it discussed whether the move was desired by any recipients of the agency’s largess.

Given the opaque nature of the agenda item, the California Stem Cell Report carried an item Friday morning that said,
“In just four business days, the $3 billion California stem cell agency is going to perform a bit of financial alchemy. But like most alchemists, its methods are less than transparent.” 
Much later that day or possibly early Saturday, the agency posted a brief memo and regulatory language that provided a better look at the loan rule changes, which could have an impact on royalties the state might receive on a successful stem cell therapy.

Based on what is now on the agency’s Web site, the proposal would clarify what happens if a loan-financed therapy is dropped and then revived, leading to actual revenue. Under existing rules, such a situation could trigger an ambiguous financial burden that would have to show on the company books. And business executives and investors do not like ambiguous financial burdens. 

The memo from the California Institute for Regenerative Medicine (CIRM), as the agency is formally known, said,
“To provide clarity regarding future obligations, CIRM proposes giving existing loan recipients whose loan has been forgiven by CIRM the option to convert their loan to a grant and forego reinstatement of a forgiven loan. In this way, loan recipients will be automatically governed by the revenue sharing (and other) principles of the agency’s intellectual property regulations in the event future revenue streams are realized. This will be particularly important in the event future revenues are realized after CIRM has exhausted its funding.” 
The directors’ subcommittee is likely to approve the change on Thursday. It would then go to the full board at its Sept. 24 in San Diego for action before it enters the state’s regulatory process, which will open it to further public comment.

The Thursday meeting will also take up changes in the “loan election policy” for this year’s $100 million clinical award program. Details on that are still not available as of this morning, but one assumption would be that they are an extension of the proposed loan changes to that particular program.

The weekend’s memo on the loan changes was dated  Aug. 20.  One can only assume that it was lingering on some CIRM executive’s desk for eight days until it was made available to the public, researchers and likely affected businesses.  

Problems with timely posting of agenda material are not new to the agency. In the more distant past, they were significant but have diminished. That is, until this case and others earlier this year.

The agency also has another directors’ subcommittee coming up in just five business days. The session involves two significant, multimillion dollar programs. One proposal calls for creation of an “Alpha Clinics Accelerating Center” in connection with the $34 million Alpha clinics effort.
The other proposal before the Science Subcommittee deals with unspecified changes in the agency’s upcoming, $93 million “discovery and translational” award rounds.

This morning, no additional details were available on those two matters.

The Science Subcommittee teleconference session on Sept. 8 will be based in San Francisco. Interested parties can weigh in at public locations in Irvine, La Jolla, Los Angeles and Duarte. Addresses are on the agenda.

The meeting Thursday of the Intellectual Property Subcommittee is also a teleconference session based in San Francisco. Public locations are available in San Diego, Hawaii, Woodside and Redwood City with two in San Francisco.

The only public access to these meetings is at their physical locations. No participation is available via the Internet.  However, comments may be submitted in advance or later by emailing them to

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