California's $30 Million Bet On a Cancer Treatment: New Company Formed to Bring the Therapy to Market

Highlights

Stanford, Weissman involved

Good news for CIRM

Google hooked in

A new stem cell company that targets cancer by unleashing an “eat me” trigger has emerged from a $30 million investment by the state of California.

Creation of the Palo Alto firm, which is called Forty Seven, Inc., was announced this week by its backers and its key researcher, Irv Weissman, director of Stanford University’s stem cell program.

Venture capitalists, including Google, are supporting the enterprise with $75 million. The effort

has two phase one clinical trials underway, the first step in a years-long process of testing potential therapies before the federal government approves their widespread use.

Forty Seven, named after the molecular target of the “eat-me” trigger, is not the first firm to emerge from research funded by the California Institute for Regenerative Medicine (CIRM), as the state stem cell agency is formally known. At least eight others have surfaced over the years.

But this week’s announcement attracted some national attention in a story by Alex Lash on Xconomy, an online technology information service. Lash wrote,

“This is the kind of news CIRM has yearned for in recent years: significant private cash that gives CIRM-funded projects a push to become actual products and to return value to the state…. After a decade of funding buildings, salaries, and early stem-cell related research—not to mention conflict of interest problems that included a past CIRM president and a different company (StemCells, Inc.) with Weissman’s imprimatur—CIRM and its new president acknowledged it needed to show results for the $6 billion taxpayers committed to the agency in 2004.

“This type of follow-on funding is what we’re looking for,” says CIRM spokesman Don Gibbons, who adds that the big financial awards for Stanford were in line with the agency’s mission “to get things moving early when others won’t invest.”

(See here, here and here for more on the conflicts of interest.)

Voters approved the creation of the $3 billion agency in 2004. But no therapies have emerged for widespread use despite the optimism of its early backers and campaign promises. The agency expects to run out of funds for new awards in 2020. One of the possibilities for new funding is another multi-billion dollar state bond issue. State bonds are the only significant source of cash for the Oakland-based agency.

Xconomy reported that CIRM has yet to provide its final $5.1 million to Weissman. And Lash wrote that “Forty Seven is in the process of taking charge of the grant-funded programs.” Asked this morning by the California Stem Cell Report whether the funds would be going directly to the firm, Kevin McCormack, senior director of communications, replied,

“Our grant goes to the principal investigator on the project, in this case it’s both Irv Weissman and his co-PI Ravi Majeti. Both are at Stanford.”

Weissman’s technique uses a monoclonal antibody that attaches to the CD47 protein on cancer cells them from hiding from the patient’s immune system. Lash wrote,

“But cancer cells also produce what Weissman and colleagues call an ‘eat me’ signal from a protein called calreticulin. Normal, healthy cells don’t. By cutting off the CD47 ‘don’t eat me’ signal, Hu5F9-G4 should in theory allow the calreticulin signal to prevail.”

Stanford, which has a member on the CIRM board of directors, is the No. 1 recipient of funds from CIRM. It has chalked up 98 awards totalling $308 million. Weissman has received five awards totalling $36 million. StemCells, Inc., which was co-founded by Weissman, has been awarded $9 million in for three projects.

Fifteen Clinical Trials: Better Marks for California Stem Cell Agency This Year

California's stem cell agency today received higher marks than nearly two years ago when it was last examined by the only state body charged with oversight of the $3 billion research enterprise.

The occasion was a meeting of the Citizens Financial Accountability and Oversight Committee, chaired by the state controller. One of its members, Jim Lott, in January 2014 had some harsh words for the California Institute for Regenerative Medicine (CIRM), as the agency is formally known.

But after a presentation that showed the agency will be involved in 15 clinical trials by the end of this year, Lott said CIRM had improved its pitch, although most of what he was said was lost in a poor quality audiocast of the meeting.

Jim Lott

The California Stem Cell Report asked him to summarize his views. Lott replied in an email,

"I've always felt that CIRM performs well. They needed to better communicate their achievements to justify the $2 billion the agency has spent thus far.  They needed to make their business case.  They did that today, and it would seem that their new president is the change that occurred to make this and other needed transformational efforts happen."

State Controller Betty Yee, chair of the oversight committee, also seemed satisfied with the agency's progress. Her comments were also largely lost in the audiocast. Her office declined to provide a summary of her views for this item today.

Jonathan Thomas, chairman of CIRM, and other agency executives provided an overview of the agency's progress and changes in its strategic plan, most of which is familiar to readers of the California Stem Cell Report.

Some fresh tidbits from the presentations.

-- The move to the agency's new headquarters in Oakland at the end of November will cost roughly $380,000. The agency is losing its rent-free office space in San Francisco and cannot afford the expensive leases in the city of San Francisco.

-- Randy Mills, president of CIRM since May 2014, has brought a sharp-eyed business approach to the agency, accord to Chairman Thomas. He said the agency "needed a business person" as opposed to an academic as the result of its emphasis on financing clinical trials. Thomas said Mills put "discipline and perspective" of business in place at the agency.

Michael Quick, USC photo

-- Thomas was "delighted" to hear Yee ask what the state could do to help the agency in the future. Thomas said the agency is developing a strategy in which the state could play a "very prominent role." Presumably that would involve more state funding since the agency is expected to run out of funds for new awards in about four years.

The controller's office also announced the addition of a new member to the oversight committee, Michael Quick, provost and senior vice president of academic affairs at USC.

As the school's No. 2 executive, he reports to Carmen Puliafito, president of USC and who also sits on the CIRM governing board. USC, which has held a seat on the board since 2004, has received $107 million from CIRM.

The oversight panel is required by state law to examine the agency on an annual basis. The last such session occurred 21 months ago. Asked to explain the delay, Taryn Kinney, a spokeswoman for Yee, said in an email,

"Since her inauguration earlier this year, (the controller) focused on building her staff and strengthening the many core internal functions of the state controller’s office."

No. 2 Exec at Salk Institute Leaving, Move Follows Retirement of President

Another top executive at the Salk Institute is leaving under circumstances that indicate that the move is not entirely voluntary, the San Diego Union-Tribune is reporting.

Left to right, Irwin Jacobs, chair of Salk
 board; William Brody, president; Marsha
Chandler, executive vice president
Salk photo

She is Marsha Chandler, who was executive vice president and chief operating officer of the La Jolla, Ca., enterprise and who also once served as a director of the $3 billion California stem cell agency.

Gary Robbins reported her departure effective Aug. 31, saying that Salk released a statement that “suggests that Chandler's exit was not voluntary.”

The statement said:

"In order to provide the future Salk president with the greatest flexibility to determine the institute’s ideal executive management structure going forward, the executive committee of the board of trustees and the institute’s leadership have decided to restructure the executive team. Therefore, with respect to this decision, Marsha Chandler will be leaving…”

William Brody, president of Salk, announced last week that he would be leaving at the end of the year.

Robbins wrote,

“Chandler, 70, helped Brody to roughly triple the institute's endowment to $370 million and to help recruit a greater mix of scientists at the Salk, whose basic research has led to drugs to treat cancer, and improved treatments in diabetes, inflammation and obesity.”

Chandler served on the stem cell agency board from 2007 to 2009. She was replaced on the board by Brody, who left the position in 2012. Since then Salk has had no representative on the 29-member panel. Nearly all of the institutions that receive awards from the agency have representatives on the agency board.

NDA Appoints Ellen Feigal as Partner

Ellen Feigal, formerly the No. 2 person at the $3 billion California stem cell agency, yesterday was named as a partner in NDA Partners, an international consulting firm to the medical products industry.

Feigal resigned last fall as senior vice president at the stem cell agency, about five months after Randy Mills was named as its new president.

NDA's web site says it is a "a global strategy consulting firm specializing in expert product development and regulatory advice to medical products industries" and that it deals with "emerging biopharma." The web site does not disclose the names of its clients, and it is not known whether any are involved with the California stem cell agency.

California Stem Cell Audit: Praise for Mills but More Work Needed on IP, Conflicts of Interest

The California stem cell agency this week received good marks for changes made by its new president, but it is also being told that it needs to improve how it tracks potential royalties and how it prevents grant reviewer conflicts of interest.

A "performance audit" by Moss-Adams, a Seattle business consulting firm, made 12 recommendations for the $3 billion research enterprise. One of the 12 was to implement the unfulfilled recommendations made by Moss-Adams three years ago.  Seven of the 24 from that audit still need more action, the firm said.

On Thursday, the agency's governing board is scheduled to discuss the latest audit at a meeting in Berkeley.  The study is required by state law every three years. The agency's scientific performance, however,  is specifically excluded from being examined. Moss-Adams is scheduled to receive $230,000 from the agency for the audit, which was for the 2013-14 year.

On Sunday, the California Stem Cell Report covered the deficiencies involving disclosures of the financial interests of grant reviewers.

Other areas of concern included the need for better tracking of intellectual property that could mean royalties for the state, more timely review of progress reports from grantees, more timely, formal evaluation of employees and keeping up-to-date on technology related to grant management and agency efficiency.

Under the subject of "commendations," Moss-Adams said that CIRM had "many strengths."  The consultant said the agency has made "significant strides" in three areas: the grant management system, grants process improvements and "organizational culture."

The grants process comment referred to CIRM 2.0, the fast-track funding program initiated by Randy Mills since he became president a year ago. The organizational culture commendation also involved Mills' efforts, but touched indirectly and delicately on the resignation of Robert Klein as chairman and the election of Jonathan Thomas to replace him in June of 2011. 

Moss-Adams reported "enhanced seamlessness" between the president's and chairman's offices. Proposition 71, which created the agency, dictated a controversial dual executive situation that has troubled the agency since its inception.

The audit found significant deficiencies involving the treatment of CIRM employees, some of which have been addressed in a positive way already by Mills. One example cited by the audit involved performance evaluations that are tied to pay increases. It said that evaluations that were scheduled to occur in 2013-14 did not actually take place until January of this year.  

Moss-Adams said the agency also needs to do better in monitoring and protecting its intellectual property (IP), which could generate royalties. Without tight tracking of the IP and inventions funded by CIRM research, the state could lose out on revenue. Backers of Proposition 71 told voters in 2004 that the state could receive more than $1 billion in royalties from CIRM research. So far, none has resulted. 

Moss-Adams said that royalties are now more possible because the agency is backing late stage research that is more likely to make it into the market place. 

Moss-Adams said more work was needed on implementing the seven recommendations from three years ago, including those involving IP, the transition plan to deal with the possible demise of the agency and a grants outcome database. 

Conflict-of-Interest Failings Reported in Application Reviews at California Stem Cell Agency

Conflict-of-interest issues have dogged the $3 billion California stem cell agency since its inception, and they are surfacing once again this week in a report commissioned by the agency itself.

This time the matter is being brought up by Moss-Adams, LLP, of Seattle, a business consulting firm that is being paid $230,000 by the agency to conduct a "performance audit."

In a report to be discussed at a CIRM governing board meeting on Thursday, the firm said it discovered serious problems dealing with the reporting of the interests of the agency's blue-ribbon reviewers.

The reviewers make the de facto decisions on the applications from researchers for millions of dollars from California taxpayers.  Their reviews are conducted behind closed doors. The identities of the specific reviewers and applicants are not publicly disclosed.

The California Institute for Regenerative Medicine (CIRM), as the agency is formally known, requires the reviewers to fill out forms about their financial and professional interests as part of the review process.

However, those disclosures are withheld from the public and from applicants whose proposals are being assessed.  The agency's basic position has been to say "trust us" to monitor the conflicts.

Moss-Adams said, however, it "found that CIRM did not fully meet its compliance requirements regarding financial disclosures" during 2013-14. It also said that it could not verify that CIRM staff had actually checked for unreported conflicts.

Moss-Adams examined 40 applications and pre-applications and did not mention specific instances, such as the 2013 case involving a reknown scientist from Washington state, Lee Hood, and Stanford researcher Irv Weissman.  The matter was first reported by the California Stem Cell Report.

The audit said,

"Specifically, we found that of the 25 pre-applications we tested, three reviewers were missing Financial Interest Disclosure Forms in connection with the review of applications submitted in response to a particular RFA. These three reviewers participated in the review of four of the 25 pre-applications. Similarly, for the 15 applications we tested, which related to five different RFAs, we found that Financial Disclosure Forms were missing for eight different reviewers. For each of the 15 applications, we found that CIRM was missing a Financial Disclosure form for one or more reviewers who participated in the application review process for a particular RFA. In each of these cases, however, the reviewers completed their Conflict of Interest Form for that review."

The audit, which is required by state law, continued,

"Unlike the Conflict of Interest Form, which had already become an integrated element in the GMS (grant management system) in fiscal year 2013-14, no system restrictions were in place to prevent participation in reviews prior to the receipt of Financial Interest Disclosure Forms. Without these system restrictions, compliance with this requirement lapsed and reviewers with missing Financial Interest Disclosure Forms were allowed to review and score pre-applications and applications."

Moss-Adams said the agency took steps to correct the situation in July of last year. However, it told CIRM that  it should continue those procedures to ensure compliance on conflict of interest matters.

The audit also said it could not verify that CIRM had actually followed its process for determining whether unreported conflict of interests existed on the part of reviewers.

The audit said,

"Currently, there are no written policies or procedures outlining this process. While CIRM regulations define what constitutes a financial conflict of interest, the Grants Review Staff does
not have additional written guidance to follow when performing these reviews. Moreover, because the Grants Review Staff does not document the performance of these reviews, we could
not verify that these reviews were performed or assess the manner in which they were performed. Without procedures that formalize this process or internal records that document
the performance of these reviews, CIRM cannot fully demonstrate its performance of due diligence to ensure the financial independence of reviewers."

Moss-Adams told the agency that it should develop detailed procedures for examining the disclosure forms and document the work via the automated grants management system.

The agency's response to the concerns raised in the audit, which covered a wide range of issues beyond conflicts, did not specifically mention the disclosure and conflict matters.

The California Stem Cell Report will have more on the findings of the audit during the next few days. Specifically excluded from the audit is the performance of the agency's scientific portfolio.

Voting Conflict List on California Stem Cell Preclinical Awards

Here is the list of California stem cell agency directors with conflicts of interest on today's preclinical research awards. The list comes from the stem cell agency. The directors on the list are not allowed to vote on the applications in question.

  Voting Conflict List Preclinical CIRM Awards

Stem Cell Researchers Face Tighter Scrutiny in Quest for California Millions

Attention stem cell scientists: Want to know who is going to be scrutinizing your budget in your next application for financing from the $3 billion California stem cell agency?

The California Institute for Regenerative Medicine (CIRM), the formal name for the agency, is hiring outside firms to examine the budgets currently being submitted in a $50 million clinical stage award round.  

The two firms that are  being considered have a host of other clients, some of whom might be competitors with California scientists applying for state funding.  CIRM plans to require the experts to self-report any conflicts of interest, basically excusing themselves if such a situation occurs during their work.

It is all part of CIRM 2.0, a radical and ambitious plan to speed funds to researchers and improve quality of applications.  The budget review is a new and critical step for researchers. If their financial plans, including a new financing contingency requirement, do not pass muster, the applications will not even be sent to the agency’s blue-ribbon reviewers.

Here is what the agency says about the budget review,

“An external team of budget professionals will review the proposed budget to provide information to CIRM regarding how the proposed costs compare with established market rates for similar activities (or how well the costs are justified when market rates are not established).

 “When a proposed budget differs significantly from market rates, adjustments to the budget will be required by CIRM prior to further review of the application. Applicants will be notified of the specific discrepancies and applications will not be forwarded for scientific review until an amended budget has been submitted and approved by CIRM.” 

Last month the agency posted a 37-page request for proposals on its Web site. It contained details of how the work is to be performed, budget templates and much more material that offers insights into the agency’s new, CIRM 2.0 thinking. 

The firms that responded to the RFP are Amarex Clinical Research of Germantown, Md., and Integrium Clinical Research of Tustin, Ca.

Integrium said in its proposal,

“Integrium does not have experience in providing the type of service required in the RFP. However, we have many years of experience in which we have internally reviewed budgets that we prepared for our clients.”

 It appears to have offered to review each application’s budget for $2,740 each.­­­­­­­­­

Amarex said,

“Amarex has experience in conducting budget negotiations for services across all types of clinical sites, and knows what appropriate market rates are.  Our clients are both privately funded, and government funded, so we are also aware of the difference in budgeting requirements for both types of clients.”

The Amarex proposal appears to have a cost of $703 for each budget, with expenses such as travel billed to CIRM plus a 10 percent fee.

The agency’s RFP said,

“CIRM anticipates selecting multiple budget review firms pursuant to this RFP and will alternate work among them based on relative expertise in specific areas, timelines, and the avoidance of potential conflicts of interest.”

Both of the firms are well-established organizations and have a considerable history of work with a variety of clinical trials. Their clients are not identified but could be competitors with the organizations that apply for California funding.

The RFP does not speak directly to those sorts of conflicts although it is more specific about financial ties with CIRM employees.  Regarding the budget review consultants, the proposed CIRM contract said,

“The (budget review) firm must be free from actual conflicts of interest not only at the time of selection, but also throughout the term of the contract.”

The agency has a substantial number of outside contractors. On at least one occasion, a conflict has arisen in public. The case was first reported by the California Stem Cell Report in 2012 and involved a “special advisor” to CIRM who was elected to the board of directors of Sangamo, Inc. At the time, Sangamo was the recipient of $5.4 million from the agency as a co-participant on an award. In 2013, the Richmond, Ca., firm received another $6.4 million directly from CIRM. (See here and here for details.)  In January 2014, the firm’s president told CIRM,

“We wouldn't be where we are today without you.” 

The RFP requires that the firms sign a contract that states, 

“The consultant affirms that to the best of his/her knowledge there exists no actual or potential conflict between the consultant's family, business or financial interest and the services provided under this Agreement, and in the event of change in either private interests or service under this Agreement, any question regarding possible conflict of interest which may arise as a result of such change will be raised with CIRM.”

The RFP also states that the firms may be required to “execute” a form 700, a state document that is aimed at disclosing financial conflicts of interest. However, the form is most commonly filed by individuals -- not commercial interests -- and has major limitations in providing full disclosure.

The RFP does not make it clear whether the form 700s would be publicly disclosed or simply held privately by CIRM. However, the agency has never disclosed any reports involving conflicts of interests of its consultants.

Here are the proposals, which are public records, from the two companies.

   Amarex CIRM Budget Prep Proposal January 2015

  

   Integrium Budget Review Proposal for CIRM January 2015

Trounson Named as Advisor to California Cord Blood Firm

A California cord blood firm yesterday appointed Alan Trounson, the former president of the $3 billion California stem cell agency, to its newly formed scientific advisory board.

Cord Blood Registry of San Bruno, which says it is the largest “family bank” in the world, announced yesterday that Trounson is one of four members of its science board. It said the panel would help expand the scope of therapies that it is developing.

Alan Trounson, UCSD photo

Trounson last year left his post as president of the agency, formally known as the California Institute for Regenerative Medicine(CIRM). Seven days later, he joined the governing board of StemCells, Inc., a firm that had received $19.3 million in funding from CIRM. The move surprised the agency and generated a flap over revolving-door conflicts of interest.

Cord Blood Registry has not received any funding from the stem cell agency. In response to a question, Kevin McCormack, senior director for CIRM communications, said today the firm has “no connections whatsoever” with the agency.

It is not clear whether the firm plans to seek financing from CIRM in the future. Cord Blood announced last month that it is involved in an effort with a CIRM-funded, Cellular Dynamics International of Madison, Wisc., to reprogram cord blood and umbilical tissue into reprogrammed pluripotent cells.

Cellular Dynamics, founded by famed researcher Jamie Thomson, has a a facility in Novato, Ca., and was awarded more than $16 million from CIRM in 2013.

Heather Brown, vice president of scientific and medical affairs at Cord Blood (CBR), said in a press release,

"The (scientific board) will provide strategic guidance on current issues that will contribute greatly to CBR's continued progress in research and clinical development."

The company’s press release said,

“CBR is dedicated to advancing the clinical application of newborn stem cells by partnering with leading research institutions to establish FDA-regulated clinical trials, requiring CBR processed cord blood….” 

The company has been in business since 1992 but yesterday’s announcement marked the formation of its first scientific advisory board. It is headquartered in the San Francisco Bay Area, but it stores its cord blood in an 80,000-square-foot facility in Arizona.

Last month, Geoffrey Crouse, CEO of the firm, told Karen Garloch of the Charlotte Observer that some private cord blood banks have“overstated the state of the research” involving cord blood.

He made the comment in connection with the formation of the national Cord Blood Association. He said that he expects the association to “bring the industry to a higher standard.”

According to an April 25, 2014, article in the Wall Street Journal, the blood cord banking business globally runs about $4 billion a year and has had its share of problems. The piece by Dionne Searcy and Christopher Stewart said,

“A Wall Street Journal analysis of government inspections and a review of lawsuits in the U.S. found problems in the loosely regulated cord-blood-banking business, including dirty storage conditions, leaky blood samples and firms going out of business. 

“Some private cord-blood banks are essentially marketing websites that lure customers, collect fees, then outsource the processing and storage of what is touted as biological life insurance for children.”

Winners Revealed for $30 Million in California Stem Cell Awards

The California stem cell agency today revealed the identities of the winners of $30 million in awards aimed at removing bottlenecks in stem cell research.

The 20 names were added to the news release posted yesterday afternoon on the agency’s Web site. All the recipients work at institutions that have representatives on the agency’s governing board. Those representatives are not allowed to vote on the applications from their institutions, but they set the rules for and the scope of the research that is being funded.

Today’s posting of the names is a departure from past practices. Previously the agency would release the names on the day when the agency board approved the grants. Yesterday, the agency moved quickly to publish the main body of the news release on the action, minus the names.

The list contains the number of each application, but without a link to the summary of reviewer comments on the proposals.  The reviewer comments cannot be found by searching on the application number on the CIRM Web site.

Instead, a search on application numbers on the CIRM Web site will turn up only an abstract and statement of public benefit prepared by the researcher.

The review summary, which contains more details and something of a critique, can only be found in a 162-page, omnibus document given to board members and posted on the meeting agenda. It encompasses all the application review summaries along with scores and staff comments.  That document, which is much more valuable to the public and the scientific community than the abstract and benefit statement, can be found here.  

(Editor's note: Following publication of this item, Kevin McCormack, senior director of communications for CIRM, sent the following concerning the statement that representatives of institutions receiving awards are not allowed to vote on applications from their institutions.

("That's not quite right. In fact, it's not right at all. Representatives of institutions are not allowed to vote on any applications at all, not just those that involve their own institutions. They can't vote on any funding or award.")

Former California Stem Cell CEO Zach Hall on Conflicts of Interest and Last Week's CIRM Board Voting

Conflict of interest issues have long been a difficult issue for the California stem cell agency, and so it was last week.

The matter involved a proposal to reduce the indirect cost funding rate for both businesses and nonprofit institutions from as high as 20 percent to 10 percent of an award. That recommendation quickly ran into objections from Donna Weston, who is chief financial officer at Scripps and also a member of the board (the ICOC). She and seven other representatives of nonprofit entities all voted to keep their institutions from losing the cash. The rest of the board members voting also went along, on a 17-0 roll call at the Thursday meeting.

During the session, the California Stem Cell Report queried James Harrison, general counsel to the agency, about whether the votes by the nonprofit representatives involved a prohibited conflict of interest. Harrison, who was at the meeting, replied via email,

"No, it is a standard, so it is exempt." 

The item drew the attention of Zach Hall, who served as the first president of the agency.  Here is the text of what he had to say in an email to this writer: 

“As a former President of CIRM and Vice-Chancellor for Research at UCSF, I have what I hope is a constructive comment about the issue of conflict of interest and CIRM indirect cost rates.   

      James Harrison's response to your question about conflict of interest of ICOC institutional representatives who vote on their own indirect costs may be correct by the rules of CIRM, but this voting arrangement constitutes a fundamental conflict by any reasonable standard. Institutional representatives on the ICOC are now disqualified from voting on CIRM grant applications from their own institution. In these instances, most of the money – the direct costs – goes to the investigator, rather than to administrative or infrastructure costs, and, in any case, the total amount is small compared to the overall institutional budget. In contrast, indirect costs rates are much more important for the institution, as they apply to all CIRM grants that an institution receives and all of the money goes to the administration for research support. Because it is so important, research institutions spend tens or hundreds of thousands of dollars to negotiate the best possible indirect cost rate with the federal government. In contrast, for CIRM grants, institutional representatives do not negotiate but actually vote on the size of their own indirect cost rate. By sitting on both sides of the table, they undermine the integrity of the whole process.

      As a former administrator at a California university, I know how important the indirect cost rate is for a research institution. I thus strongly support a rate of 20% on CIRM grants, a rate which is still below the cost of research support at most institutions. Nevertheless, I believe it is a mistake to allow institutional representatives to vote on the rates. This kind of conflict of interest, permitted by the current rules, is exactly what has provoked repeated criticism of the CIRM board structure. In my view, research institutions should make their case to the board and to the public, like any other recipient of CIRM funds, but their representatives should then be disqualified from voting. To increase the confidence of the public in the process, they might consider removing themselves voluntarily from the vote, if not compelled by law.”

Stanford Pulls Its $10.9 Million Alpha Stem Cell Clinic Application

Stanford University has withdrawn its $10.9 million request to the California stem cell agency to create an Alpha stem cell clinic on its campus, along with a complaint that an illegal conflict of interest was involved in reviewing the proposal.

No further details about the alleged conflict were disclosed by the stem cell agency, which cloaks such matters in secrecy.

The Stanford application last October came before the board of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known. It was pulled from the agenda without a vote shortly before it was to be considered because of the late allegation of a conflict.

The application was to have come again before the CIRM board yesterday but again was removed. Kevin McCormack, senior director for communications, said that both the proposal and the complaint had been withdrawn by the applicant.

McCormack did not disclose the identities of the reviewers in the Alpha round nor the identity of the applicant, which the agency keeps secret. But the California Stem Cell Report has learned that it was Stanford.

The proposal received a low score, 64 or below, from the agency’s blue-ribbon reviewers, all of whom come from out-of-state, and was not recommended for funding. It was a rare loss for the Palo Alto institution, which has been the most successful in the state in winning money from CIRM. It has collected $298.3 million in 90 grants. The figure far surpasses the No. 2 institution, UCLA, which chalked up $215.3 million in 75 grants.

The winners in the $34 million round were the City of Hope in Duarte, UC San Diego and UCLA-UC Irvine. All of the institutions involved have representatives on the CIRM governing board. They are not allowed to vote on applications from their institutions.

In addition to Stanford, the other losing applicants in the round were UC Davis and UC San Francisco. 

See below for a CIRM list of the conflicts of interest in the round involving various directors.

   Conflict List -- Alpha Stem Cell Clinics -- Directors of California Stem Cell Agency

California Launches $50 Million, Fast-Track Stem Cell Drive

Directors of the $3 billion California stem cell agency today approved a $50 million plan that will radically reshape its efforts to produce a widely available stem cell treatment, a goal that it has not yet reached after 10 years of trying.

Speed is what the new push is all about – shortening the agency’s funding cycle for awards from nearly two years to about four months.

The plan was devised by Randy Mills, who has been president since last May of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known. He has dubbed the effort “CIRM 2.0” and says,

“We are in the business of trying to save people’s lives….We have to behave with the appropriate sense of urgency.” 

CIRM 2.0 will begin next month for awards related to clinical trials with $50 million allotted for the first six months of the year. The program will be extended to other award programs as well. The agency hands out cash at an average rate of $190 million a year and has about $1 billion left.

The program appears akin to a venture capital process but without face-to-face pitches by those seeking funds.

Researchers from both business and nonprofits will be able to apply on the last business day of each month instead of very sporadically. No caps will be stipulated on the grants, but budgets will be closely scrutinized prior to reaching reviewers.

CIRM directors from nonprofit institutions vigorously balked at a 10 percent cap on indirect costs in the awards.  The indirect funds go to the institution and not for research. Some of the indirect rates currently run as high as 20 percent of the total award and are much valued by California research institutions, most of whom have members on the CIRM board of directors.

Director Donna Weston, chief financial officer of the financially troubled Scripps Institute, led the move against the 10 percent cap. Others indicated that researchers at some nonprofits would not be allowed to apply for grants that only contained a 10 percent rate. As result, the board agreed on a 10 percent cap on indirect costs for businesses and 20 percent on nonprofits.

No opposition was heard online during what appeared to be a unanimous vote. The California Stem Cell Report queried CIRM about whether it is a legal conflict of interest for directors from nonprofit institutions to vote on the indirect cost change that would benefit their institutions.

James Harrison, general counsel to the board, replied,

"No, it is a standard, so it is exempt."

Mills’ plan calls for researchers to receive their money within about four months of submitting an application. Board approval is scheduled for 90 days after submission. Work must begin within 45 days after board action. Unsuccessful researchers with applications that have potential will be coached by the agency so that they can turn in a successful proposal. Successful applicants will see greater involvement in their work by CIRM staffers and will face go-no go milestones. Failing to meet a milestone will mean loss of funding.

Moving the cash quickly to biotech businesses is critical, says Mills, who was a CEO of a stem cell firm for 10 years. Most operate on a thin financial edge and are perpetually raising money. Business applicants, however, will have to show six months of cash-on-hand to win approval. Matching funds will be required in some of the first rounds, and in some cases also from non-profits.

   

Mills predicts that CIRM 2.0 will result in higher quality applications because of the coaching and because proposals are less likely to be submitted prematurely in order to conform to CIRM’s previous funding cycles.

CIRM directors also approved Mills’ reorganization plan that is likely to break up silos at CIRM that may have formed over the past eight years. Mills said his structure will be more efficient and encourage innovation. The new plan calls for the staff – Mills prefers the word “team” – to be organized on much different lines than previously. Units will be organized on therapeutic lines such as “blood and cancer” and “organ systems.” Currently the CIRM team has been organized into such things as “research and development” and “scientific activities.”

For more on CIRM 2.0, see here, here and here. Here is a link to the CIRM press release.

California Stem Cell Agency Cancels $19 Million Award to StemCells, Inc.

StemCells, Inc. has lost its controversial, $19 million award from the California stem cell agency, it was disclosed today.

Cancellation of the forgivable loan was revealed in slides posted on the agency's Web site as part of the presentation today by its new president, Randy Mills, to the agency's board of governors.

The slide said the Alzheimer's award was "discontinued due to lack of functional improvement observed in preclinical studies" after the agency had provided the publicly traded firm with $9.6 million. It was not immediately clear whether any of the money will be repaid.

The company has not yet announced the loss of the award but has been asked for comment.

The most recent cash infusion came last spring in a move that coincided with the appointment of former CIRM President Alan Trounson to the StemCells, Inc., governing board. Trounson joined the board only seven days after leaving the California Institute for Regenerative Medicine (CIRM), as the agency is formally known.  The move surprised and shocked the agency, but it said its limited investigation detected no illegal action in the disbursement to the company. (Also see here.)

The StemCells, Inc., application was approved by the 29-member CIRM board in 2012, on a 7-5 vote,  after being rejected twice by the agency's blue-ribbon reviewers. The approval followed heavy lobbying by the former chairman of the agency, Robert Klein. It was the first time that the board had approved an award that reviewers had turned down twice. It was also the first case of such public lobbying by Klein.

Later in 2012, Pulitzer Prize-winning columnist Michael Hiltzik of the Los Angeles Times wrote that the award was "redolent of cronyism."  Hiltzik asked rhetorically what was the company's secret in winning approval of the award. He then wrote,

“StemCells says it's addressing 'a serious unmet medical need' in Alzheimer's research. But it doesn't hurt that the company also had powerful friends going to bat for it, including two guys who were instrumental in getting CIRM off the ground in the first place.”

Hiltzik referred to Klein and eminent Stanford research Irv Weissman, a co-founder of StemCells, Inc., who still sits on its board and holds considerable shares in the Newark, Ca., company.

Weissman was a key backer of the ballot measure that created CIRM in 2004 and helped raise money for the ballot campaign.  Trounson has recused himself on some matters dealing with applications connected to Weissman. Trouson has been a guest at Weissman's ranch.

California Stem Cell Agency Overhauls Grant Review Conflict Rules; Secrecy Remains

The California stem cell agency this week is expected to begin sweeping out its current conflict-of-interest rules for multi-million dollar research applications and giving applicants wider range to disqualify some grant reviewers in advance.

Little about the operation of the rules, however, will be disclosed to the public or applicants, although the regulations are critical to the integrity of the $3 billion operation.

The new grant review procedures received a preliminary go-ahead Nov. 24 from the Governance Subcommittee of the governing board of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known. The proposals will come before the full board this Thursday at a meeting in Berkeley.

James Harrison, the outside counsel to the CIRM board, described the changes concerning scientific grant reviewers as “substantial” in a memo to the board. One key provision would involve “a screening mechanism that would permit applicants to identify up to a total of three individuals (including labs and companies) whom the applicants believe could be biased (whether for personal, professional, competitive, or any other reasons).”

The exact mechanism was not otherwise described in Harrison’s memo. 

CIRM’s grant review process is currently shrouded in secrecy in keeping with tradition in the scientific research community and will remain that way under the new rules. Virtually all of the grant review is performed behind closed doors. Identities of specific reviewers on an application are withheld. Names of applicants are withheld. Financial and professional interests of the reviewers are withheld, revealed only to some CIRM staffers.

When an applicant files a complaint about a financial conflict of interest on the part of reviewers, all of the information is withheld.

That is the environment in which the agency’s scientific reviewers operate while they make the de facto decisions on virtually all of the $1.8 billion that has been handed out over the last 10 years. The governing board rarely overturns a positive decision by its reviewers, all of whom come from out of state.  

In response to a question today, Kevin McCormack, a spokesman for the agency, said that the secrecy would continue under the new rules. He said applicants could examine the list of more than 100 potential reviewers if they had concerns about conflicts. A much, much smaller number is actually involved in a specific application review. Those names are withheld. 

No restrictions exist, however, on applicants publicly disclosing their conflict-of-interest concerns either directly to the board or to any other private or public entity.

The proposed conflict changes would also disqualify reviewers from evaluating an application from a person who has “been on opposing sides of a formal legal dispute.”  A reviewer would be required “to recuse himself or herself if the member believes his or her objectivity could be compromised for any reason.”

Other changes would expand the scope of financial conflicts by including relationships with partnering organizations and subcontractors.

The Harrison memo said,

“The intent of this change is to capture other financial interests that could create a conflict of interest with respect to a particular application because they are significant participants in the proposed project or stand to benefit financially if the project is successful.”

The proposed rules originated more than a year ago as an outgrowth of a discussion at a stem cell agency board meeting involving earlier possible changes. The board was told that only two cases have surfaced involving violations by reviewers. No names were mentioned during the board meeting.

One case involved reviewer Lee Hood, a renown scientist from Washington state, in a conflict connected to another internationally known scientist, Stanford researcher Irv Weissman, in a $40 million round. The other involved John Sladek of the University of Colorado, who was head of the grant review group, in a $45 million round.  The violations were first disclosed publicly by the California Stem Cell Report. The agency did not post the violations on its Web site, reporting them only to the California legislative leadership as required by law.

At the October 2013 agency meeting of the agency governing board meeting, Jeff Sheehy, a board member and communications manager at UC San Francisco, asked if the Hood and Sladek violations would also be considered violations under the rules being proposed at that 2013 meeting.  Sheehy was told that they would not, according to the transcript of the meeting. Sheehy replied,

“Well then, I think it's not possible for me to even support the initiation of this process because in the last case(Hood-Weissman), at least what I've been told, the identification of the conflict, which was the reviewer and the grantee held property together, and the identification of that conflict was made by a fellow reviewer. So if we have a conflict that is deemed material by members of the scientific community, it's hard for me to understand why the net that we're casting should make the holes bigger in order to let the fish out.”

After some discussion of Sheehy’s remarks and other concerns voiced by board member Stephen Juelsgaard, former executive vice president of Genentech, the proposed changes were sent to the Governance Subcommittee for revision.  

Harrison’s memo for this week’s meeting did not specify whether the two past violations would now also be considered violations under the latest rules.

The new rules would apply initially to the agency’s new, $50 million fast-track clinical program and then be extended to all applications.  The action this week will impose the regulations on an interim basis while they work their way through the state’s official rule-making process during which the public may comment.

In addition to the Berkeley meeting location, interested parties can participate at a teleconference location in Sacramento and two in Los Angeles.  Specific addresses can be found on the agenda. Room numbers can be learned by emailing mbonneville@cirm.ca.gov.  Comments or suggestions can be sent to that email address as well.

Birthday Party for California's 10-year-old Stem Cell Research Program

Fred Lesikar, a heart attack victim aided by
a CIRM-backed cell treatment
CIRM photo

The California stem cell agency today celebrated its 10^th birthday with a media event in Los Angeles where its supporters declared that the effort marked “one of the seminal events in the history of medical research.”

Attending the party in Los Angeles were a number of scientists and university officials whose institutions and research have received hundreds of millions of dollars from the program, which is funded by money that the state borrows(bonds).

California voters created the program in 2004 when they approved a ballot initiative that established the California Institute for Regenerative Medicine(CIRM), as the San Francisco-based agency is formally known.

CIRM has awarded $1.8 billion so far out of its $3 billion allotment. Because the money is borrowed, the effort will cost taxpayers about $6 billion, including interest. The agency is controlled by a 29-member board of directors. Eighty-eight percent of the $1.8 billion in awards has gone to institutions linked to current or past directors, according to calculations by the California Stem Cell Report. (For a recent assessment of the agency, see here.)

CIRM Chairman Jonathan Thomas told the gathering at USC, which has received $88.5 million in funding, that the state research effort amounted to a “seminal event.” California began its program when stem cell research was at a low ebb, Thomas said. He said it helped to keep stem cell research alive and  “galvanized” efforts globally.

He and others celebrated the 10 early stage clinical trials that CIRM now expects to be part of this year. None of the speakers mentioned studies that show that only one out 10 potential conventional treatments that enter clinical trials emerges as a therapy that is widely available to the public. The odds for stem cell therapies are unknown because they are so new.

Thomas and others pointed to news this week from UCLA about a genetic treatment that they said saved the lives of 18 children who had an immune deficiency affliction called the “bubble boy syndrome.” The cure involved insertion of a missing gene into the child’s blood stem cells. The work by researcher Donald Kohn received national attention. Oddly, however, the Los Angeles Times has not written about the research, according to a Google search this afternoon. CIRM's Todd Dubnicoff wrote a very nice piece about the research earlier this week.

The stem cell agency did not directly fund the “bubble boy” experiment, although CIRM awards, ranging from training programs to lab construction, did help to make the effort a reality.  The research is expected to be used in devising a sickle cell treatment in a $13 million CIRM program involving Kohn. 

The man sometimes referred to as the father of the California stem cell effort, Robert Klein, was also on hand today.  Klein led the $35 million ballot campaign in 2004 to win approval for creation of CIRM, which functions outside of the normal controls on nearly all state departments. Klein, a Palo Alto real estate investment banker, was also the first chairman of the agency. 

Klein said that a “revolution is underway” in medicine and that CIRM is leading the way. The dream of patients has become a reality, Klein said.

Only one patient appeared along with researchers, Fred Lesikar, a heart attack patient who was treated with his own heart cells at Cedars-Sinai in Los Angeles a few years ago.

Lesikar told the audience that “little by little over the next six months to a year, they (the cells) went in and started replacing the dead tissue.” He said he is now feeling great.

The researcher involved in that treatment, Eduardo Marban, has moved forward with a trial that CIRM is helping to fund through Capricor, Inc., a publicly traded  Beverly Hills firm.

On the podium today were researchers or officials from USC, UCLA, Cedars-Sinai and the City of Hope. All have representatives on the agency’s board. A researcher from ViaCyte, Inc., of San Diego, another CIRM award recipient, also spoke.

Today’s media event, which was available by a telephonic link, represents a major push to generate favorable coverage of the California stem cell program. It was held early enough in the day to meet deadlines for the early TV news shows along with allowing enough time for preparation of fulsome stories. However, Los Angeles is a tough news market. We will be watching later today and tomorrow for coverage of the event and bring you additional information as warranted.

(An earlier version of this item incorrectly said that Anne Holden wrote the CIRM blog item on Kohn's work.)

$40 Million California Stem Cell Genomics Agreement Signed; A Checkered Past

The California stem cell agency and a Stanford-led consortium have reached agreement on a $40 million stem cell genomics project that triggered complaints about irregularities, unfairness, score manipulation and the role of its then president, Alan Trounson.

The agreement was concluded last month with Stanford, UC Santa Cruz and the Salk Institute in La Jolla, five months after the award was approved by the governing board of the $3 billion agency, which is known as CIRM. The final signature came July 2 when Santa Cruz signed. Salk signed on June 26 and Stanford June 18, according to Kevin McCormack, a spokesman for the agency.

The effort is aimed at paving the way for therapies tailored to a patient’s genetic make-up and positioning California as a world leader in stem cell genomics.

Trounson’s role came under fire when he recommended approval of the Stanford application. The agency’s blue-ribbon grant reviewers, whose advice is rarely rejected by the CIRM board, also recommended funding three competitors. 

The round had a checkered history as a result of a conflict of interest involving scientist Irv Weissman of Stanford and scientist Lee Hood of Seattle, who own a ranch together in Montana. Trounson, who has visited the ranch as Weissman’s guest, recruited Hood to review the applications, including Stanford’s proposal which then specifically included Weissman.

The Stanford application that was ultimately approved did not include Weissman.  Michael Clarke, the No. 2 person in Weissman’s stem cell program at Stanford, was included, however, and was praised by name by Trounson during board consideration of the Stanford application. (See here for discussion of conflicts preceding the board action.)

Seven days after leaving CIRM at the end of June, Trounson was named to the board of directors of StemCells, Inc., of Newark, Ca., which holds $19.4 million in awards from the agency. The firm was co-founded by Weissman, who now sits on its board.  The Trounson appointment surprised the agency and triggered a rash of bad publicity for CIRM. (See here and here.)

The agency’s new president, Randy Mills, banned CIRM employees from communicating with Trounson about StemCells, Inc., matters and announced that he would not accept employment from CIRM grantees until one year after he leaves the agency.

Another Perspective on the Trounson Flap: Columnist Lists It as Example of 'Possible Corruption'

The $3 billion California stem cell agency was mixed up with some bad company this week – part of the fallout from last month’s Trounson Affair. 

The agency was lumped together with some ne’er-do-wells in a column in California newspapers that was headlined:

“California state government awash in corruption, conflict of interest”

The piece was written by Tom Elias, a middle-of-the-road, longtime columnist whose work appears twice weekly in 93 newspapers with a circulation of 2.2 million. Elias wrote,

“To some, it seems almost as if California has lately become New Jersey West. Incidents of possible corruption and conflict of interest are seemingly exposed at least once a month these days, with almost no consequences for anyone involved.”

Top on his list was the business involving Trounson, who left the California stem cell agency June 30. Seven days later, he was appointed to the board of StemCells, Inc., which holds $19.4 million in awards from the agency, formally known as the California Institute for Regenerative Medicine (CIRM).

Second on Elias’ list was a case involving a consultant at another state department that was reminiscent of another situation at the stem cell agency. Elias said,

“A month earlier, this column caught the state Energy Commission earmarking more than $28 million in ‘hydrogen highway’ grants for a new company co-founded by a consultant who only months earlier drew the map determining where hydrogen refueling stations will go and then trained commission staff on how to evaluate grants.

“No conflict of interest there, the commission insisted. Right.”

The case at CIRM involved a “special advisor” by the name of  Saira Ramasastry, managing partner of Life Sciences Advisory, LLC, of Emerald Lake Hills, Ca. In 2012, she was named to the board of Sangamo BioSciences, Inc., a publicly traded firm based in Richmond, Ca. At the time of her appointment to the board, the firm shared in a $14.5 million grant from the agency. She also worked as a consultant to Sangamo.

Since then, Sangamo has received another $6.4 million from CIRM. The president of Sangamo, Edward Lanphier, told the agency last January,

“We wouldn't be where we are today without you.”

In 2013, Ramasastry received $99,662 in cash and stock options from the company, according to its filings with the Security and Exchange Commission.

California Stem Cell Agency and the Revolving Door: A Need for More Safeguards

The revolving door and related conflict of interest issues remain open at the $3 billion California stem cell agency despite the pledge by its new president, Randy Mills, to refrain from taking a job with a recipient of the agency’s largess for at least a year after he leaves.  

Mills’ action last week came in response to the controversial appointment of the agency’s previous president, Alan Trounson, to the board of StemCells, Inc.(SCI),  just seven days after he left the agency.  The firm was awarded $19.3 million while Trounson was its top executive.  Last year, members of the SCI board received as much as $99,000 in stock and cash. 

Mills’ move applied only to himself and excluded other members of the agency’s staff. He said they should not be denied the ability to seek employment with businesses or research organizations that the agency has funded.

John M. Simpson of Consumer Watchdog of Santa Monica, Ca., said, 

"The high profile Trounson Affair  focuses attention on CIRM’s potential revolving door problem that the agency needs to deal with.  Randy Mills' pledge not to take a job with a company funded by the agency for at least a year after leaving is a good step.  There  should be such a formal policy covering all employees. “Serious thought should also be given to the implications of employees leaving for jobs with non-profit entities that CIRM has funded and what safeguards are necessary.”

State laws do exist to deal with revolving door situations, but some consider them weak. (See here for an explanation of the laws.) Trounson’s appointment is an example of the circumscribed nature of the laws. Mills said the agency's “severely” limited investigation into the appointment did not show any illegal activities. Simpson said a more rigorous, independent investigation was needed. 

Mills’ move did send a clear message about his own views on some ethical matters and set a tone that should be helpful at the agency. Some employees might also view it as an example to emulate.

Playing a role in the revolving door concerns is the financial future of the agency. It is facing its effective financial demise in 2017 when funds for new awards are scheduled to run out, according to longstanding calculations by the agency itself. Last week Mills cast that financial picture in a more optimistic light. (The California Stem Cell Report will have more on his analysis in the next few days.)

Nonetheless, as the money runs out and there is no assured refinancing in sight, some employees are naturally going to be considering other employment. Three employees have departed or announced they are leaving since Mills was named. The move of Natalie DeWitt, who was a top aide to Trounson, was already reported by the California Stem Cell Report. DeWitt went to work for researchers at Stanford who have received about $5 million from the stem cell agency.

Elona Baum, general counsel and vice president for business development , this month left her $298,000-a-year job to take a position at Coherus Biosciences of Redwood City. The company yesterday refused to disclose her job title or whether she had already started work. Kevin McCormack, senior director for public communication for the agency, said he did not know her job title. He said the company “has no funding from us or any other business with us.”

The Coherus Web site says the company was founded in 2010 and is “the leading biologics platform company developing biosimilar(generic) therapeutics for global markets.”

The third employee scheduled to leave is Celeste Heidler, financial services officer. McCormack said she is retiring. The agency has posted an opening for her position.

McCormack said it has not been determined whether Baum’s position will be filled.  In addition to legal matters, she played an important role in relations with the biotech and stem cell industry.

Consumer Watchdog’s Simpson said more needs to be done to clear the air concerning the Trounson appointment.

In response to a query, he said,

“There must also be a deeper probe into Trounson’s relationship with StemCells Inc, and it its executives and directors.  Margaret Prinzing’s report, a small step in the right direction, only looked back as far as May 1.  Trounson’s relationship with StemCells Inc. since at least the beginning of 2012 should be examined and the investigation should be conducted by an entity not as closely tied to the agency as the Remcho, Johansen & Purcell firm.  I think the Citizens Financial Accountability Oversight Committee, chaired by the state controller would do a good job."

The committee is the only state entity charged with oversight of the stem cell agency. The governor and legislature have no legal ability to control its operations since it was created by a ballot initiative that specifically spelled out that they had no role.