California Stem Cell Conflicts of Interest and Their Regulation Rise Next Week

Proposition 14 left the state stem cell agency with $5.5 billion plus a significant and wide range of new issues. One involves creation of “advisory task forces,” which were not formally enabled in the ballot initiative that created CIRM 16 years ago.  

Next Thursday the agency's governing board takes on conflict-of-interest rules for those new entities as its directors push into the new territory of Proposition 14. Conflicts, however, have been a bugaboo for the agency for years. 

Advisory/working groups to CIRM have played a significant role in the past and may play an even greater role under the agency’s new charter. They are likely to be the venue where major new issues are hashed over and policies developed that are adopted by the full board with little change.

Those policies are likely to have an impact on businesses developing stem cell therapies and their affordability and accessibility not to mention researchers.

Read all about it in an item posted today on a new platform for this blog, the California Stem Cell Report (CSCR), the only independent, news and information source devoted solely to the  Golden State's 16-year-old research program, the first of its kind in state history. 

This blog's migration to a new platform is aimed at improving service to readers and helping to bring a new focus to our coverage, which began in January 2005 and which has resulted in 5,000 items since then.

California Stem Cell Agency Set to Fund $182 Million in Research in Next Six Months

Click on the above to see a recording of today's online meeting of the CIRM Science Committee

California's newly rejuvenated stem cell program today kicked off its fresh spending plans with a $182 million effort that focuses heavily on awards that could lead more quickly to actual treatments.

The plan was approved by the Science Committee of the governing board of the California Institute for Regenerative Medicine (CIRM), as the $12 billion agency is formally known. CIRM was running out of money until voters this fall approved Proposition 14 and rescued the agency from financial oblivion. 

The $182 million plan for the first half of next year represents CIRM's first major dip into its new, $5.5 billion bucket that was created by narrow voter approval of Proposition 14. The full board is expected to approve the new research budget at its Dec. 21 meeting. 

The program allots $100 million for possibly 10 clinical awards in the next six months. Translational research will receive $60 million (11 awards). "Quest" research is allotted $22 million for 15 awards. Quest awards involve early stage, basic research while translational research involves attempts to move basic research into the clinical level. 

Clinical trials are the last hurdle to clear before a treatment can be approved by the federal government for widespread use. No CIRM-financed stem cell treatments have yet received that approval since the agency began its work 16 years ago. CIRM, however, has helped to fund 68 ongoing clinical trials. 

The Science Committee has 10 members, at least six of whom are linked to institutions or businesses that could apply for CIRM funding.  While members of the 35-member CIRM board can vote on the overall research budget and also "concept" plans for such things as Quest and clinical research, they are barred from voting on specific applications from institutions that they are connected to.  

The Science Committee also approved changes aimed at increasing diversity in CIRM-related research and requiring greater data sharing by scientists. The committee strengthened the staff-proposed diversity language by also proposing scoring applications on how they beef up diversity among researchers. Details on that are yet to be worked out and will be presented to the full board on Dec. 21. 

A call for more diversity among researchers was aired last month at a meeting of the only state entity charged with reviewing CIRM's financial affairs. 

The data-sharing requirement triggered some concern about whether it would be a disincentive to some researchers who feared losing control over their intellectual property.  However, CIRM CEO Maria Millan said the agency was treading carefully to take those concerns into consideration. 

Researchers will be able to apply for the awards shortly after Jan. 1 when detailed program announcements will be released by CIRM. 

Here are links to the changes approved for the Quest program, the translational program and the clinical programs. 

What's Old is New Again: Multibillion-dollars in Stem Cell Spending and Conflicts of Interest

Controversy about conflicts of interest at California’s $3 billion stem cell agency arose once again last week -- this time involving a plan to basically hand over conflict regulation to a prestigious, national organization that is virtually unknown outside of the scientific world. 

That little known group is the National Academies of Sciences (NAS), which doesn't rank high in anybody's breakfast table talk. However, the NAS has already weighed in with recommendations for solving conflicts of interest at the California stem cell agency. And the agency's board has said "neyt" to the NAS proposals.

Instead, the directors of the agency, formally known as the California Institute for Regenerative Medicine (CIRM), enacted their own, less sweeping changes to try to reduce the perception of conflicts of interest among the 29 members of the board.

Events last Thursday at the CIRM board meeting captured the essence of the conflict concerns. Nine awards totalling $54 million were involved. All went to enterprises that had links to institutions represented by CIRM board members. None of the board members tied to the recipient institutions was allowed to vote on the applications. 

However, the entire CIRM board makes the decisions that create the agency's grant programs, ranging from clinical trials to basic research. And over the years, roughly 90 percent of the $2.7 billion in CIRM awards has been swept up by institutions with representation on the agency's governing board, according to calculations by the California Stem Cell Report. 

Seven years ago, the NAS looked at that situation and other CIRM activities at the agency's behest. CIRM paid the NAS $700,000 for the work, done through what was then called the Institute of Medicine (IOM). 

Here is how the chairman of the 13-person study group, Harold Shapiro, a former president of Princeton University, described the problem to the Los Angeles Times in 2012. 

“They (the CIRM directors) make proposals to themselves, essentially, regarding what should be funded. They cannot exert independent oversight.”

The report said, 

“Far too many board mem­bers represent organizations that receive CIRM funding or benefit from that funding. These com­peting personal and professional interests com­promise the perceived independence of the ICOC(the CIRM governing board), introduce potential bias into the board’s decision making, and threaten to undermine confidence in the board.” 

Issues about conflicts surfaced even before the agency came into being when opponents used matter during the 2004 ballot campaign that created the agency. 

The electoral effort to establish the agency was directed by Robert Klein, who also directed the writing of the initiative and then became the agency's first chairman. Klein, a Palo Alto real estate investment banker, has now submitted to state officials a new ballot measure to give the agency $5.5 billion more.

It would make major changes in the agency, increasing its board size from 29 to 35. Some of the additional members would come from enterprises that would stand to benefit from the largess of the retooled agency.  

Klein's initiative would legally require CIRM to establish conflict of interest regulations that are "generally aligned with standards adopted by the National Academy of Sciences." That is new language that could provide a rationale for not creating tougher standards and take some of the heat off the agency and its directors. 

Jeff Sheehy, a longtime patient advocate member of the board and chair of its science committee, released to the California Stem Cell Report a 3,300-word critique of the Klein initiative. Sheehy said last week in his analysis, 

"Questions related to conflicts of interest regarding the distribution of $5.5 billion in state funds obtained via debt financing should NOT be handed to an entity that is not under the control of the State of California. In addition, the National Academy of Sciences has no public meeting requirements nor other measures around public accountability and transparency that are uniformly applied to all government bodies in California.

"Those sections removing conflicts of interest oversight from the purview of Californians should be removed. The way to address any concerns expressed around conflicts of interests by board members is to add new language changing the composition of the ICOC(the agency's governing board)."

For a look at one experience in California dealing with state stem cell issues and the NAS, see this item on the California Stem Cell Report. 

On Friday Nov. 15, the CIRM board will meet to consider Klein's new initiative, which requires more than 600,000 signatures to be placed on the November 2020 ballot. Klein is the only person who can make changes in it. He has until Monday Nov. 18 at 5 p.m. to do so, if he wishes. 

Klein has not yet commented on the upcoming CIRM board hearing. The California Stem Cell Report will carry his written response verbatim when it is received. 

California Stem Cell Funding Flap: Stanford Ponies Up $1.8 Million

Stanford University has come through on matching funds for state-financed stem cell research, coughing up $1.8 million after California's stem cell agency applied a little financial pressure.

The matter involves Stanford  researcher Judith Shizuru, who is conducting a clinical trial that is aimed at treating the "bubble boy" genetic affliction without requiring high-risk chemotherapy or radiation. Her work has implications for reducing the need for the dangerous treatments in other diseases. 

In 2012, Shizuru was awarded $19 million by the stem cell agency for her trial. Late last year, she applied for $6 million more. 

Sharp questions arose, however, from the governing board of the $3 billion California Institute for Regenerative Medicine (CIRM), as the stem cell agency is formally known. It was the first time that the CIRM board had publicly rebuked a grantee and an institution on co-funding.

The board noted that the $19 million grant required $1.8 million in matching funds that had not been forthcoming.  

Directors pointed out that Stanford was well-endowed and should not be hard-pressed to provide cash to help develop a potentially "transformative" product that would eliminate the toxic impact of chemotherapy for a number of diseases. 

That was back in January. The CIRM directors set a May 1 deadline for seeing the cash. 

Last month the agency, which expects to run out of funds for new awards later this year, received a letter from Robert Harrington, the chairman of the Department of Medicine at Stanford. 

The letter said, 

"This letter is to confirm that the Department of Medicine will provide funding in the amount of $1,784,953 to meet the required co-funding for Operational Milestones #3 and #4 disbursements as referenced in your email dated 3/14/19 for the above referenced grant. These funds are available immediately to Dr. Shizuru for the study."

The flap also led to an inside look at how research funding works at the stem cell agency in a case involving a rare affliction, delays in clinical trials and the financial pressures now facing CIRM. 

Over its 14-year life, the agency has awarded $2.6 billion. Stanford is the No. 1 recipient with $383 million. Its total far exceeds the No. 2 recipient, UCLA, which has chalked up $284 million. 

Nine out of the top 10 recipient institutions, including Stanford and UCLA, have members on the CIRM governing board. They are not allowed to vote on awards to their institutions, but they establish the research award programs and their rules. 

$115 Million Stock Offering by California State-backed Biotech Firm, Forty Seven, Inc.

A California company backed by the state's stem cell agency has announced that it is planning a $115 million initial public offering.

The firm -- Forty Seven, Inc., of Menlo Park -- filed a notice of its plans with the Security and Exchange Commission last Friday. The company has been awarded $15.2 million from the California Institute for Regenerative Medicine (CIRM), as the stem cell agency is formally known.

The company was founded by renown stem cell researcher Irving Weissman of Stanford University, who serves on the Forty Seven board of directors and who has a 9.5 percent equity interest in the firm.

John Carroll of Endpoint News this morning wrote:

"Forty Seven has an interesting past. The 78-year-old Weissman was able to wrangle substantial support for his early research work on CD47 from the California Institute for Regenerative Medicine, even launching early human studies — a rare feat in academic circles. Weissman and former CIRM chief Alan Trounson enjoyed a tight relationship, which extended to Trounson’s appointment to the board of another startup that Weissman had helped found — StemCells, Inc. —shortly after his departure from the agency. And Forty Seven is still getting money from CIRM under its latest $19 million grant."

The company said in its SEC filing,

"We are eligible to receive up to $19.2 million in grants from CIRM and the Leukemia and Lymphoma Society, or LLS, of which $11.6 million has been received through March 31, 2018."

Weissman has received  more than $34 million from the agency, part of the $360 million going to Stanford projects from CIRM, whose 29-member governing board has included a member from Stanford since 2004. Stanford ranks as the No. 1 recipient of funds from the $3 billion California stem cell agency, which is slated to run out of cash for new awards by the end of next year. 

For more on Forty Seven, see here and here.

California Pumping $19 Million More into Stem Cell Effort to Improve Kidney Transplant Success

The California stem cell agency is set to make a nearly $19 million bet next week on a treatment that is aimed at significantly improving the success of  kidney transplants and helping to reduce healthcare costs.

The agency's board is expected to ratify a decision to award $18.8 million to Medeor Therapeutics, Inc.,  of San Mateo, Ca., for a phase 3 clinical trial, the last stage before its proposed product can be widely used.

Next week's award will bring to $25.4 million that the state has invested in the work. The agency awarded $6.7 million for the research in 2016.

The company's chief medical officer, D. Scott Batty, Jr.,  said last spring that its product, dubbed MDR-101, "has the potential to address the two most critical transplant patient needs: preventing organ rejection and mitigating anti-rejection treatment-associated toxicities. " He added that the technology could potentially be used in all solid organ transplant patients.

Fierce Biotech reporter Phil Taylor wrote last April,

"Patients who undergo organ transplants may no longer have to rely on lifelong immune-suppressing drugs, if Medeor Therapeutics has its way."

Taylor continued,

"More than 30,000 Americans get an organ transplant every year, and while success rates for these procedures are improving, it is estimated that up to a third of the most common transplants—such as heart, kidney, and liver—fail within 5 years."

The Medeor treatment uses adult stem cells to create a condition in which the transplanted kidney "is no longer viewed as foreign by the recipient," according a summary of the closed-door review of the company's application (CLIN2-10411). 

The agency's reviewers, who do not have to publicly disclose if they have  potential conflicts of interest, voted 11-1 to fund the research. The agency's board almost never overturns the decisions of its reviewers, who come from out-of-state. The names of persons reviewing specific applications are not disclosed by the agency, which also does not disclose the name of applicants until after board action. The California Stem Cell Report identified the firm from public records.

Samuel Strober, Stanford photo

Last November, Medeor announced it had raised $57 million in Series B financing, "led by RA Capital Management. Additional new investors included Sofinnova Ventures and 6 Dimensions Capital, who were joined by existing investors Vivo Capital and WuXi Healthcare Ventures."

The scientific founder of the firm is Samuel Strober, a professor of medicine at Stanford and who is a member of its scientific advisory board. 

The estimated date of completion of the trial is January 2022, according to clinicaltrials.gov. The governing board of the $3 billion stem cell agency is scheduled to meet Jan. 18 to approve the award. No other action is scheduled.

'Critical Stage' for $3 Billion California Stem Cell Effort and its Search for More Cash

California's $3 billion stem cell research program later this month is expected to unveil detailed plans for extending its life beyond the middle of 2020 in hopes of avoiding a lingering death.

The latest proposals, which are not yet public, are scheduled to be discussed Nov. 27. Possibilities range from another multi-billion dollar bond measure to private fundraising to possible merger with some sort of private entity.  

The stem cell agency, known formally as the California Institute for Regenerative Medicine (CIRM), projects its cash for new awards will run out in about 2 1/2 years. At that point, unless more money is forthcoming, CIRM will only be overseeing the dwindling number of awards whose terms extend beyond June of 2020.

The agency's fate was dictated by Proposition 71, which created CIRM in 2004. It also provided $3 billion in state bond funding, which flows directly to CIRM without oversight by the governor or the legislature. No additional, significant resources were contained in the ballot initiative.

CIRM's future has been an occasional topic for its board for some time. But the issue has taken on more urgency this year. At a meeting in September of a newly formed Transition Subcommittee of the governing board, CIRM Chairman Jonathan Thomas said in what may have been an understatement,

"CIRM, as we know, is at a critical stage of its mission here." 

The meeting on Nov. 27 will additionally involve the board's Science Subcommittee. What emerges from the session will go to the full, 29-member board in December for ratification.

Options in September included a multi-billion dollar bond ballot measure in 2020 and a possible merger, which was described as something of a last resort. Whatever path is chosen, it likely would lead to changes in the agency, which has been criticized for conflict of interest issues and its dual executive arrangement, among other matters.

The agency has awarded $2.3 billion in 919 grants during its 13-year history. About 90 percent of the awards has gone to institutions with links to members of the governing board, past and present, according to calculations by the California Stem Cell Report.

So far the agency has not fulfilled expectations of voters that it would generate a widely available therapy. Something may emerge in the next couple of years from the 38 clinical trials currently backed by the agency. (Forty-three have been funded but five were terminated.) The trials, which can take years, are the last stage before a therapy is approved by the Food and Drug Administration for widespread use. CIRM plans to add more trials in the next couple of years.

This month's meeting will be based at CIRM's Oakland headquarters with teleconference locations elsewhere in the state where the public can take part. It is scheduled to begin at 1 p.m. PST and run until 4 p.m.

The California Stem Cell Report will provide full coverage of the meeting that day with advance information as it is posted on the CIRM web site.

(Here is a link to the transcript of the September meeting. Here is a link to Thomas' slide presentation.)

Conflict List for CIRM Directors Clinical and Preclinical Awards

Here is the conflict of interest list for directors of the California stem cell agency compiled by the agency in preparation for voting today on applications for clinical and preclinical awards.  The list identifies the directors with conflicts on specific applications. The directors with conflicts are barred from voting on those applications or discussing them during today's meeting.

  Conflict of Interest List CIRM Directors Clinical Awards June 2017 by DavidJensen on Scribd

Conflict List for CIRM Directors on Quest Awards

Here is the conflict of interest list for directors of the California stem cell agency compiled by the agency in preparation for voting today on applications for Quest research awards. The list identifies the directors with conflicts on specific applications. The directors with conflicts are barred from voting on those applications or discussing them during today's meeting.

  Conflict of Interest List CIRM Directors Quest Awards June 2017 by DavidJensen on Scribd

$3 Billion California Stem Cell Agency Now Involved in 23 Clinical Trials

The California stem cell agency yesterday pumped $38 million into three clinical trials with the hope that it will lead to therapies for colorectal cancer, "bubble boy" syndrome and a form of high blood pressure.

The action brought to 23 the number of current clinical trials in which the $3 billion agency is participating via funding in whole or in part, according to information on its Web site. It is hoping that one of those trials will produce its first widely available stem cell therapy.

The trials deal with afflictions ranging from HIV and Huntington's Disease to blindness and skin cancer.

The agency's cash for new awards will run out in about three years. The California Institute for Regenerative Medicine (CIRM), as the agency is formally known, has been in business since 2004 when voters created the agency through a ballot initiative.

Yesterday's funding was expected and largely reported earlier this week by the California Stem Cell Report (see here and here). Yesterday, the agency's board simply ratified -- in a matter of minutes -- decisions in October by its grant review group, which makes the de facto decisions on awards behind closed doors and without publicly disclosing the economic and professional interests of reviewers.

Here is a link to the press release from the agency and a link to its blog item. Here are links to the review summaries of each proposal: colorectal, bubble boy and blood pressure.

The summaries were the only information that the board had in approving the three grants.

During its telephonic meeting yesterday, the board also became entangled in a budgeting and priorities debate involving four translational research proposals, all of which the agency now says are hanging fire. An effort is being made to schedule a special board meeting soon to deal with the issue, but it requires 10-days advance public notice. The California Stem Cell Report will have a full report later on the situation.

California's $150 Million Public/Private Plan to Commercialize Stem Cell Therapies: An Update

California's plan to create an ambitious, $150 million public/private partnership to commercialize state-funded stem cell research edged forward this week as the deadline for applications closed on Monday afternoon.

Little is known about the nature of the applications -- not even the number received. The state's stem cell agency yesterday declined to reveal the figure, declaring that the proposals needed to be examined to determine eligibility.

Traditionally the $3 billion agency does not disclose the names of applicants for its funding or details of their applications, although there have been exceptions. Their proposals are reviewed behind closed doors by scientific grant reviewers whose names are not disclosed. Nor are the reviewers' statements of economic interest publicly revealed.

A CIRM document calls for the proposal to be evaluated by reviewers during the first quarter of next year with final board action also coming during that period. The recommendations of reviewers are almost never overturned by the board.

The public/private partnership could well be one of the landmark legacies of the stem cell agency, formally known as the California Institute for Regenerative Medicine(CIRM). The project would be unique in California history and nationally.

The eligibility requirements include the following:

• A California location for the work
• Documentation of an "upfront financial commitment" of $75 million(no in-kind services)
• Readiness to begin work as required by CIRM
• Incorporation by the date of the application

The recipient must begin work on the project within 45 days of the award, which translates to before the middle of next year.

Center for Genetics and Society Calls Trounson Affair Scandalous

The Center for Genetics and Society, a longtime critic of the California stem cell agency, yesterday described the Trounson-StemCells, Inc., affair as "scandalous" and part of an "object lesson" in how not to set up a state agency.

Writing on center's blog, Pete Shanks referred to the disclosure that Alan Trounson, former president of the $3 billion research effort, had received $443,500 in total compensation from StemCells, Inc., of Newark, Ca., for his work on the company's board over a two-year period. Trounson was appointed seven days after leaving the agency, which came as an unpleasant surprise to the stem cell agency's governing board.

StemCells, Inc., was awarded $40 million while Trounson was president of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known.

Shanks, an author and consultant to the Berkeley-based center, said,

"Did Trounson or StemCells Inc. do anything illegal? Quite likely not. Was this transaction appropriate? Absolutely not! It’s scandalous, but it’s the kind of scandal that was built into CIRM from its very inception."

Shanks recounted the conflict-of-interest issues that have troubled the agency even prior to voter approval of the program. He concluded,

"CIRM is now slowly running out of the $3 billion of public funds allocated to it in 2004, and is expected to wind up in 2020. It has provided an object lesson in how not to set up and run an independent public-funded agency. These latest revelations should end any speculation about extending its charter."

Text of Irv Weissman's Comments Re Trounson Compensation

Stanford University stem cell researcher Irv Weissman has sent along the following comment in the wake of the publication of the Sept. 2, 2016, story concerning Alan Trounson's compensation from StemCells, Inc., a company co-founded by Weissman, who also served on its board of directors.

"I would like to correct some information that can be verified by CIRM officials and employees. I have known Alan Trounson for years before he came to CIRM both as a scientist and once on a fishing trip. After he got settled into his position at CIRM we met socially, and agreed to go on another fishing trip together. From that time forward he recused himself on all grants and CIRM related activities that involved either my lab or Stem Cells Inc. This was unfortunate for me, as there were times when he was the field expert and could have suggested appropriate reviewers, or mistakes in review, for grants coming from me at Stanford or Stem Cells, Inc. Although you mention the many successes we have had with CIRM grants, there were many more times when I failed to reach a funding score that was sufficient, sometimes with what I thought were inaccurate reviews,and sometimes with reviewers that I would have asked to be removed for conflicts outside of scientific expertise. I am happy to answer any questions on these issues for all grants on which I am a principal investigator, or as on the stem cell genomics grant, a participating but minor investigator who was the only person with purified stem and progenitor cells.

"I hope you dig into the actual current value of his or my stock, so that the public will know the real numbers. At least up to the wind-down of the company I believe I have never sold stock I hold, as I felt I always could have had information not generally available to the public, even when it was legal by SEC standards. In the early days of the company I contributed personal money to the company for stock so that the company could meet its payroll, and also I never sold those stocks. All of my SCI stocks are worth no more than and probably much less than 10% of that single contribution."

Alan Trounson, Former CEO of California Stem Cell Agency, Later Received $443,500 in Total Compensation from StemCells, Inc.

The Sacramento Bee this morning carried on its front page the following article about Alan Trounson and his relationship to StemCells, Inc. The piece was written by the producer of this blog. Following this item are the full texts of the comments made via email by Trounson and StemCells, Inc. (Irv Weissman of Stanford University submitted comments following the publication of this piece.) The complete text of comments from the state stem cell agency and Consumer Watchdog are contained within the article.
--------

By David Jensen
Special to The Bee

The former president of the $3 billion California stem cell agency received $443,500 in total compensation from the Bay Area stem cell company that appointed him to its board of directors only seven days after he left his state post.

The stock and cash were provided over a two-year period to Alan Trounson by Newark-based , a firm that was awarded more than $40 million in funding while Trounson headed the California Institute for Regenerative Medicine(CIRM), as the state stem cell agency is formally known.

Alan Trounson -- LATimes photo

StemCells Inc.

In 2014, when Trounson served less than six months on the StemCells, Inc.. board, his total compensation was more than double that of any other board member.

The surprise appointment of Trounson almost immediately after he left CIRM in 2014 generated allegations of conflict of interest. The size of Trounson’s total compensation, however, was not available at that time.

Conflict-of-interest allegations have dogged the agency since it was created in 2004 by California voters to use state bond proceeds to finance stem cell research.

In 2008, the respected scientific journal Nature warned about “cronyism” at the agency. In 2012, the Institute of Medicine, a division of the National Academies of Sciences, recommended in a $700,000 study commissioned by CIRM that the stem cell agency make sweeping changes to reduce the possibility of such conflicts.

Speaking about the agency’s board, Harold Shapiro, chairman of the Institute of Medicine team, told the Los Angeles Times,

“They make proposals to themselves, essentially, regarding what should be funded.”

The agency made some changes to deal with conflict questions but resisted the institute’s far-reaching proposals.

The latest news prompted John Simpson, who has followed the stem cell agency for Consumer Watchdog of Santa Monica, Ca., to say in an email,

 “Trounson’s joining the StemCells Inc. board a mere seven days after quitting as CIRM’s president at the time smacked of being a payback for a job well done on behalf of the company when he should have been looking out for the taxpayers’ money and interests. It was a blatant conflict that undermined the agency’s credibility. Now we know his price tag.”

In 2014, the stem cell agency said its “limited” investigation showed that no violation of law occurred. At the time, CIRM Chairman Jonathan Thomas described the issue as a “perception” problem.

The state’s Fair Political Practices Commission (FPPC) later investigated to determine whether Trounson “had made, participated in or influenced a governmental decision involving StemCells, Inc., after he began employment negotiations.”

A Feb. 6, 2015, letter to Trounson from the FPPC said there was “insufficient evidence to demonstrate” a legal violation.

Asked for comment, Robert Stern, the key author of the California Fair Political Practices Act and former president of the Center for Governmental Studies in Los Angeles, said in an email,

“It is an appearance problem when someone goes to work for a company that has benefited from huge contracts from the agency that he heads even if he had nothing to do with the decision to award the contract.”

The payments to Trounson were made in 2014 and 2015, according to Securities and Exchange Commission filings by StemCells, Inc. (See here and here.) The cash totaled $59,500 and the stock options totaled $384,000 for the two-year period. Trounson was appointed president of California’s stem cell agency in 2008. He was named to the StemCells, Inc., board July 7, 2014. The stock price has dropped precipitously since the award of Trounson’s stock options.

Last month, Trounson resigned from the StemCells, Inc.,  board as part of a deal in which the financially troubled firm was acquired by Microbot Medical Ltd. of Israel. StemCells Inc. said in an Aug. 15 SEC filing that the resignations of Trounson and Stanford University researcher Irv Weissman were not “the result any disagreement with the company on any matter.”

Irv Weissman, Stanford photo

Weissman was a co-founder of the company and also served on its scientific advisory board. Trounson served on the company’s strategic transactions committee.

Connections between Trounson and Weissman surfaced well before Trounson’s appointment to the StemCells, Inc., board. In 2013, a $40 million CIRM funding application round involving Weissman was postponed after it was disclosed that one of the application reviewers had a legal conflict of interest. The case involved Lee Hood of Washington state, who owns property in Montana with Weissman. Hood acknowledged the conflict of interest and resigned as a reviewer. Trounson helped to recruit Hood as a CIRM reviewer, the agency said.

In 2012, StemCells, Inc., was awarded $40 million in a single funding round, the only applicant ever to reach that level of success. One of the two $20 million awards was approved by the stem cell agency’s board despite being rejected twice by its grant reviewers. It is the only time that an application has been rejected twice by reviewers and then approved by the governing board. (See here.)

In 2013, the company declined one of the awards, which required a matching amount. In December 2014, the second $20 million award was terminated early because of poor results. That left StemCells, Inc., receiving a net of $9 million from the agency.

Trounson, a pioneering researcher in the field of in vitro fertilization, returned to his home in Australia after leaving the agency. Contacted by email, he said,

 “I was cleared by independent legal advice by CIRM and no conflict was found by a Californian government investigation. ... The share values are unknown – perhaps worth nothing. I actually pay monthly fees to hold them.”

Weissman, who has received $30.5 million from the agency, did not respond to a request for comment. (Following the publication of this piece, Weissman said in an email that some time after Trounson "got settled into his position" at the agency, "he recused himself on all grants and CIRM-related activities that involved either my lab or StemCells, Inc.")

The Trounson controversy surfaced shortly after C. Randall Mills was named to replace Trounson as president of CIRM. Mills then signed a pledge that he would not accept employment with any award recipient for at least a year after he leaves the agency. However, the agency did not set restrictions on future employment by other agency employees.

Asked for comment, Thomas, chairman of the agency since 2011, said in an email,

“Dr. Trounson’s financial involvement with StemCells Inc. occurred after his separation from CIRM in June of 2014, and we have not been in contact with him since. Two years later, CIRM is a very different and vastly improved organization – we’ve reduced the time it takes to review applications by 80 percent, recaptured $75 million from programs not meeting performance standards, and reinvested that money, doubling the number of clinical trials in our portfolio.

“In addition we are doing all this with the good governance, transparency and accountability the citizens of California deserve.”

The agency has about $800 million in uncommitted funds. It expects to run out of cash for new awards in 2020 unless it finds fresh sources of funding.

Text of Trounson Comments Re Compensation from StemCells, Inc.

Here is the text of Alan Trounson's email comments concerning the total compensation he received from StemCells, Inc., for service on its board. Trounson made the comments in response to an inquiry by the California Stem Cell Report regarding the matter and conflict of interest issues. The query did not involve reimbursement of travel expenses.

" I don't know what you think the conflict of interest is - I was cleared by independent legal advice by CIRM and no conflict was found by a Californian Government investigation. I was paid Directors fees and travel expenses to attend Board meetings. Do you expect me not to be reimbursed for travel and sitting as a Board Director? The share values are unknown - perhaps worth nothing. I actually pay monthly fees to hold them. I am no longer a Director of Stem Cells Inc and do not know what will happen to the shares. Stem Cells Inc has advised you the $ you quote for my reimbursement is inaccurate.
"Alan Trounson PhD
"Emeritus Professor"

The California Stem Cell Report followed up with an additional question regarding the matter and the state investigation. Trounson replied,

"Stem Cells Inc has told you exactly what I was paid and the state of the shareholding. You ought to do your own investigations into the Cal Government investigations and report like any reasonable journalist. The CIRM review was not 'limited' - external legal advice confirmed internal advice." 

Text of StemCells, Inc., Comments on Trounson Compensation

Here is the text of remarks from Ken Stratton, president of StemCells, Inc., concerning the $443,500 in total compensation from the company to Alan Trounson.

"As stated in our SEC filings, Dr. Trounson was paid total cash compensation of $59,550 for the years 2014 and 2015, consistent with board practice. He has also been provided stock awards which were to vest over time. Dr. Trounson currently owns fewer than 20,000 shares of our common stock and to my knowledge, he has never sold any of his shares. His unvested equity awards will not continue to vest now that he has resigned from the board in connection with the Microbot deal."

California's StemCells, Inc., Flatlines; A Look at the Implications

StemCells, Inc. stock price performance -- Google chart

Highlights
Layoffs, clinical trial closed
Conflicts of interest
Implications for CIRM
Risk and stem cell research
Twenty years ago, StemCells, Inc., was more than riding high. Its stock price (split adjusted) had skyrocketed to $2,160 in January of 1996. Its outlook was ebullient. But times have changed. Today the company's stock plummeted as low as 51 cents after it announced that it was closing its doors.

The company said yesterday that it is possible that its shareholders will wind up with nothing. Its 50 employees will lose their jobs this summer. And its latest clinical trial for spinal cord injury has been cancelled because the results do not merit spending any more money.

The company's sudden shutdown surprised and shocked some, but it also demonstrated the level of risk in stem cell research and offered implications for California's $3 billion stem cell agency, which is pushing aggressively to bring a stem cell therapy to market.

StemCells, Inc., was co-founded by two respected academic stem cell researchers, Irv Weissman of Stanford, and Fred Gage of the Scripps Institute. The Newark, Ca., firm, however, has a checkered history, particularly involving the $3 billion California stem cell agency, which once awarded StemCells, Inc., a record $40 million in 2012.

Conflict-of-interest controversies involving the business and the agency's former president, Alan Trounson, and its first chairman, Robert Klein, have surfaced in past years. Trounson was named to the StemCells, Inc., board seven days after he left the agency. In his first and only lobbying appearance before his former board, Klein was successful in winning approval of a $20 million award to the firm despite the fact that it was rejected twice by the blue-ribbon reviewers of the California Institute for Regenerative Medicine(CIRM), as the agency is formally known. It was the only time that the CIRM board has overridden its reviewers in such a fashion. (For more on Trounson and Klein, see the links at the end of this item.)

In its final days, StemCells, Inc., no longer enjoyed financing from the agency. The last award was terminated in 2014 because of poor results. But the outlook for the firm appeared brighter during the past 12 months when its stock climbed to $9.19 and stock analysts were bullish. So how did the company slip into liquidation?

The headline on an item on Barron's by Ben Levisohn said it was a "lesson in biotech risk."

Sam Maddox, writing on the blog on the Web site of the Christopher and Dana Reeve Foundation, which has a special interest in spinal cord injury, commented on the firm's final clinical trial,

"So what happened? You can read the full, depressing press release here. The gist of it is that yes, there was a measured effect of the stem cell injections but the 'magnitude' of effect over time did not trend well enough to spend more money running the trial." 

Larry Goldstein of UC San Diego told STAT reporter Meghana Keshavan,

“Biotech is like prospecting for gold — only a small fraction of companies make it through the gauntlet. Disappointing clinical trial results happen all the time. … You can’t get too alarmed when one thing, such as StemCells Inc., fails.”

One longtime observer of the stem cell world said the company's failure indicated that the state stem cell agency should be wary of  cozy engagement with industry, citing the profit imperatives that drive companies. The observer, who must remain anonymous, told the California Stem Cell Report,

"Academic institutions at least do not exist at the whims of investors, they can manage risk of failure (it happens all the time), and grant money goes much further."

UC Davis stem cell scientist Paul Knoepfler, writing on his blog The Niche, said the company's demise was "sad." He added,

 "A fair question today is how we should now process (the agency's) sizable investment in (the firm). Is there anything that can be learned from it for the agency and the field?"

Irv Weissman, who was on the StemCells, Inc., board at the end, said in a statement reported by the San Francisco Chronicle by Victoria Colliver,

“Given the collective strength of past data with these cells, we sincerely hope others will pick up the many questions we have about the variability of results seen in the Pathway Study (dealing with spinal cord injury).” 

And the California stem cell agency released this comment from Kevin McCormack, its senior director of communications:

"It’s always disappointing when a company that has been trying to pioneer treatments for diseases such as Alzheimer’s or conditions like spinal cord injury fails. We know how hard everyone at the company worked to develop treatments addressing conditions that right now have no viable alternatives. It is the nature of science that not every experiment will work yet even in failure we can learn a lot, and it’s our hope that the lessons learned from StemCells, Inc.'s work will help inform other researchers and ultimately lead to effective therapies." 

Here are excerpts and links to some previous articles dealing with StemCells, Inc., and the California stem cell agency.

Wednesday, September 05, 2012

StemCells, Inc., Wins Another $20 Million From California Stem Cell Agency

Following a second impassioned pitch by its former chairman, Robert Klein, the governing board of the California stem cell agency approved a $20 million award to a financially strapped biotech firm, StemCells, Inc., of Newark, Ca.

Thursday, September 06, 2012

Arm-twisting and Emotion: Stem Cell Directors Move to Reform Appeals on Multimillon Dollar Grants

Frustrated with politicking, “arm-twisting,” lobbying and “emotionally charged presentations,” the governing board of the $3 billion California stem cell agency today approved short-term changes in its grant appeal process and ordered up a study to prepare long-term reforms.

Monday, September 10, 2012

California Stem Cell Firsts: From Emotional Appeals to $40 Million Awards

During the last few months, the $3 billion California stem cell agency, which is approaching its eight-year anniversary, has chalked up a number of important firsts.

Wednesday, October 17, 2012

Los Angeles Times: StemCells, Inc., Award 'Redolent of Cronyism'

The Los Angeles Times this morning carried a column about the “charmed relationship” between StemCells, Inc., its “powerful friends” and the $3 billion California stem cell agency.

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 forgiveable loan?

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.

Sunday, May 05, 2013

Cash and Favors: Robert Klein Gives $21,630 to the California Stem Cell Agency

A seemingly innocuous $21,630 gift to the California stem cell agency has kicked up new questions about a controversial $20 million research award and generated a wave of special favors for the donor that stretched out to include a gold mining multimillionaire from Canada.

Wednesday, May 15, 2013

Klein, StemCells, Inc., and $31,000 in Consulting Fees for Torres

The Robert Klein-StemCells, Inc., affair has taken another turn with the disclosure that a vice chairman of the California stem cell agency was paid at least $31,000 over a two-year period by Klein and also voted on behalf of Klein's effort to win approval of a $20 million award for StemCells, Inc.

Monday, July 07, 2014

Former CEO of California Stem Cell Agency Named to Board of Firm that Received $19 Million From the Agency

Alan Trounson, the former president of the $3 billion California stem cell agency, today was named to the board of a company that has received $19.4 million from the agency, raising fresh and serious questions about conflicts of interest at the state-funded research program.

Wednesday, July 09, 2014

California Stem Cell Agency Bans Some Communications with its Former President; Conflict of Interest Feared

The California stem cell agency today banned its employees and governing board from communicating with its former president, Alan Trounson, about matters involving StemCells, Inc., which holds a $19.4 million award from the state program.

Friday, July 25, 2014

Los Angeles Times: Flawed Investigation Magnifies California Stem Cell Scandal

The Los Angeles Times is carrying another column excoriating the $3 billion California stem cell agency, and it involves the same set of players, the agency’s former president and a San Francisco area stem cell company.

Ethics to Eye Disease: Presentations This Morning at California Stem Cell Agency Meeting

Here are links to a couple of presentations on the agenda for today's meeting of the governing of the $3 billion California stem cell agency.

Ethics presentation by James Harrison, general counsel to the agenda: Topics include conflicts of interest and financial disclosure requirements.

Briefing on eye disease, clinical trial projects backed by the agency.

California Stem Cell Researchers Expect $44 Million in Awards from the State Next Week

California's stem cell research agency next week is expected to hand out more than $44 million for attempts to find therapies for everything from cancer to diabetes.

Scheduled to be approved at the $3 billion agency's board meeting next Wednesday are nine applications, most of which are termed translational, meaning that they are attempting to move from basic research to a level where they might be suitable for clinical trials.

Two of the awards are more advanced, and are discussed in an item on the California Stem Cell Report yesterday. They total $7.4 million. Seven translational awards are up for action, totalling $36.8 million. All were approved earlier behind closed doors by the agency's reviewers.

An eighth application for $2.9 million to study a 2nd generation vaccine for the treatment of glioblastoma was also approved by reviewers. However, an agency document said board action is being deferred "to review material new information."  Asked whether questions had been raised "about the nature of the action by the grant review group," Kevin McCormack, senior director of communications, replied, 

"No, this has to do with information that has come to us that might affect the recommendation" of the review group.

Twenty-two applications seeking a total of $59 million were rejected.

None of the applicants was identified by the agency, which withholds that information until the board acts.

However, the agency posted more detail about the review process, scoring and voting than it has in the past. The review summaries and the additional material consumed 85 pages for all of the applications, including those rejected.

The review also marked the first use of new procedures that cut off awards on applications that received a scientific score of less than 85. In the past, awards were made for some applications that ranked in the 60s, including this one that was scored at 61.

In the past, some of the researchers whose applications have been rejected have appeared before the board to request that reviewer decisions be overturned. It was not clear whether that would occur under the new procedures.

Formal appeals are limited to demonstrable conflicts of interest and are pursued in private,  under the agency's rules. However, applicants are not told the names of persons who review their applications, making it difficult to determine whether conflicts exist.

California Stem Cell Agency to Award More Than $7 Million for Duchenne and 'Bubble Boy' Afflictions

Highlights
Capricor, UCSF win
Duchenne, "bubble boy" affliction targeted
Board linkage to recipient enterprises

The California stem cell agency is set next week to make two awards totaling $7.4 million to a Beverly Hills stem cell firm and to scientists at UC San Francisco for late stage research into therapies for rare diseases.

The largest award, $4.3 million, appears to be going to a team in San Francisco that has already received $3.9 million for its research. The lead scientists on that effort were Morton Cowan and Jennifer Puck. 

The latest award involves the "bubble boy" immunodeficiency disease. The agency's summary of the application review said that the research "could lead to a lasting cure" for that version of the affliction. 

The review said the treatment would modify a gene "to become normal by addition of a correct copy of the Artemis/DCLRE1C DNA repair gene (Art)." The goal of the grant is to complete nonclinical efficacy studies and set the stage for a clinical trial in 18 months.

Meeting behind closed doors earlier this year, the agency's blue-ribbon, out-of-state grant reviewers narrowly approved the application on 8-6-1 vote, meaning eight favored the award,  six thought the application needed improvement and one voted for denial. The governing board of the agency, formally known as the California Institute for Regenerative Medicine (CIRM), has a decade-long record of going along with its reviewers' positive funding decisions. Reviewers are not required to publicly disclose their economic or professional interests.

Also approved by reviewers was a $3.4 million award to Capricor, Inc., a firm that has already received $19.8 million from the agency to develop stem cell heart treatments, The $19.8 million came on top of earlier, related funding for research at Cedars-Sinai that hit $7 million. The lead scientist on those efforts was Eduardo Marban, who co-founded the firm with his wife, Linda. She is now president of the firm. He is chairman of the scientific advisory board.  

Capricor will add $2.3 million in matching funds to what CIRM provides to finance a clinical trial of the firm's treatment for Duchenne muscular dystrophy cardiomyopathy using a product called CAP-1002. The review summary said the treatment is "intended to stop fibrosis and potentially initiate regeneration following administration."

No therapies exist for treatment of cardiomyopathy for persons with Duchenne, according to the review summary.

The reviewers voted 12-1-0 to approve the award. 

Capricor is publicly traded. Its stock closed today at $2.18. Its 52-week high was $10.68 and its low was $1.88.

CIRM's governing board includes representatives from Cedars-Sinai and UC San Francisco. About 90 percent of the $1.9 billion awarded by CIRM has gone to enterprises with links to past or present board members.

CIRM does not disclose the names of award recipients until after the full board acts. The California Stem Cell Report identified the applicants on the basis of publicly available information.