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.

Merksamer Makes Only Bid For Stem Cell Agency Lobbying Contract

Only one of California's lobbying firms is interested in working for the California stem cell agency – at least interested enough to put in a bid.

However, that is likely more of a function of the small size of the contract – $65,000 – and the entrenched nature of CIRM's existing lobbyist – Nielsen, Merksamer, Parrinello, Gross & Leoni LLP – one of the state Capitol's larger lobbying firms with $5 million in billings last year.

The firm touted its longstanding connection to the $3 billion agency in its 21-page proposal in response to a CIRM RFA this spring. The firm has been with CIRM since 2005.

Nielsen Merksamer's proposal also noted a couple of other interesting aspects of the continuing arrangement. CIRM will run out of money for new grants in 2017, and Nielsen Merkasamer said,

“Furthermore, as a premier legislative advocacy and (Nielsen's italics) ballot measure law firm, Nielsen Merksamer can actively and effectively assist CIRM as it contemplates returning to the voters for additional funding.”

The proposal also suggested that it can conceal information that normally would be public record. The firm said,

“Another unique advantage offered by Nielsen Merksamer is that, unlike the vast majority of lobbying firms, since we are a full-service law firm, our relationships with our clients are subject to the attorney-client privilege.”

CIRM used such a technique in 2012 and 2008 in matters involving its budget and PR advice.

Nielsen Merksamer also said,

“(N)o one understands CIRM’s 'total picture' better than Nielsen Merksamer. Not only has Nielsen Merksamer been representing CIRM before the Legislature for the past decade, but Nielsen Merksamer was also one of the principal drafters of the aforementioned Proposition 71—which brought CIRM to life. The depth of Nielsen Merksamer’s familiarity with, and understanding of, CIRM’s mission and structure, the challenges it faces, and the promise it holds simply cannot be matched by any other legislative advocate.”

The firm said it would not need the $65,000 offered by CIRM but would charge only $49,200 annually, about the same as it has been paid for several years. Steve Merksamer and Gene Erbin, who drafted portions of Proposition 71, would handle most of CIRM's affairs. John Moffatt and Missy Johnson would also be available.

The firm's proposal outlined several instances where it successfully killed legislation opposed by CIRM. You can read about them in their proposal below.

Merskamer 2013 Lobbying Proposal by DavidJensen

The Klein Donation: Text of Stem Cell Agency's Key Responses

Here is the text of the key comments from the California stem cell agency in response to questions from the California Stem Cell Report (CSCR) concerning the $21,630 contribution by Robert Klein. Here is a link to the full story on the matter.

CSCR to CIRM:

“Is CIRM concerned about the appearance created by the donation from Bob Klein to enable scientific staff to attend the ISSCR meeting in Yokohoma, coming one month after the GWG (the review group) rejected StemCells Inc's Alzheimer's application and one month before the July Board meeting that led to the approval of the award?”(Editor's note: It was actually two months before the board meeting.)

CIRM's response:

“No, the two items are entirely separate with no connection. Item 1  involved Bob Klein making a donation to allow science officers to attend a critically important scientific meeting on stem cell research.  The science officers  had originally planned on attending but then were told they could not because of cuts in our out-of-state travel budget – Bob Klein’s donation, without using state funds, enabled the science officers to attend.  Item 2 is an ICOC decision to fund a research project that they felt had promise and was important for the people of California.”

CSCR to CIRM:

"Please explain why the agency could not finance the trip itself ."

CIRM's response:

"During the financial year 2011/12  the Governor's Office issued an Executive Order requiring state agencies, under the Governor's direct authority, to reduce out-of-state travel.  Although CIRM was not required to participate, we nevertheless imposed restrictions on out-of-state travel to meet the intent/spirit of the Governor's request.  Accordingly, we made a decision to reduce the number of our science staff who would be attending the  conference.  Bob Klein's donation made it possible for those staff to go." 

CSCR asked several questions re the failure to report the Klein donation to the board as required by agency rules.

CIRM's response:

“Under the Gift Policy, the President had the authority to accept Mr. Klein’s generous offer as a 'Direct payment or reimbursement by third parties for the costs of general operation or grant management administrative activities.' (Gift Policy, Sec. III(A)(2).)  Because CIRM receives gifts only infrequently, CIRM staff determined that it would be more efficient to report gifts to the Board on a semi-annual basis.  Mr. Klein’s donation was the first gift CIRM had received in some years.  Due to the lack of additional donations, a transition in CIRM’s finance office, and an oversight, CIRM staff has not yet presented a report including Mr. Klein’s gift.  Staff plans to report Mr. Klein’s gift as part of the finance report at the May Board meeting.  Because the President had the authority to accept the gift pursuant to section III(A)(2) of the Gift Policy, it did not require a commitment letter.  (See Gift Policy, Sec. III(C)(1) ['A Commitment Letter is not required for gifts described under III.A.2., 3. and 4.'].)  However, consistent with the policy, Dr. Trounson sent Mr. Klein a letter of appreciation, a copy of which we have already provided you.”

The Klein Donation: Text of Robert Klein's Response re StemCells, Inc.

Here is the text of the initial response from Robert Klein, chairman of the California stem cell agency until July 2011, to questions from the California Stem Cell Report (CSCR) concerning his $21,630 donation to the agency. The questions posed by CSCR on precede the response by Klein. Here is a link to a story on the matter.

CSCR to Klein:

“Why did you give the agency the money?
“Did you place on conditions on its use?
“Did anyone connected with the agency indicate in advance  that your donation would be desired? If so who? Who did you deal with primarily on the donation -- Trounson, Thomas or...?
“The donation came one month after grant reviewers rejected StemCells Inc.'s Alzheimer's application. Do you think it was appropriate to make the donation and then ask the board twice to override its reviewers?
“Do you think the donation and subsequent action on StemCells, Inc.'s Alzheimer's application will negatively color the perception of future efforts by CIRM at private fundraising?”

Klein's response:

“In April or May of 2012 I committed approximately $20,000 as a contribution to CIRM to cover the travel expenses of staff to the International Stem Cell Society meeting in Japan. My commitment to ensure scientific staff can participate in international meetings dates back many years. In 2011 I wrote the following explanation of its importance in obtaining the knowledge to accelerate the drive of scientific research to reach patients with chronic disease.

            Leverage Leading Edge Science

            “Travel by CIRM staff members and leadership permits CIRM to stay in contact with, and understand, the leading edge advances of scientists all over the world, and to leverage those advances by creating a platform for collaborations between these leading scientists and their peers in California. Currently, CIRM has collaboration agreements with 15 foreign governments pursuant to which these governments have pledged $134,380,000 in commitments to fund the work of their scientists on join teams with California scientists to develop therapy candidates and to advance therapies to human trials. Although a significant amount of this commitment is currently pending scientific peer review and not all of it will be awarded as part of a successful application, every dollar in funding by a foreign government magnifies the scientific impact of California’s taxpayer dollars. If just $40 million is awarded each year over ten years, it would provide California with $400 million of scientific leverage.

•     It is critical to understand that there are unpublished scientific discoveries in progress in each of these nations. Often, publication may trail a scientific discovery by nine months or more.
•     The travel requested by CIRM provides a critical link for the timely transmission of valuable new information. California cannot afford to lose the opportunity to harness discoveries in other countries to advance the development of therapies in California and to capture the opportunity to advance therapies for patients instead of using California taxpayer dollars to duplicate discoveries already mastered in other countries.
•      While CIRM’s scientific staff works with scientists in other countries to capture the scientific knowledge for the benefit of California’s therapy development teams, the Chairman’s Office works with international finance ministers, the premiers of international states, and foreign funding agencies to ensure funding allocations for these bilateral funding agreements. These discussions often involve face-to-face negotiations in foreign nations and states, in addition to meetings at international conferences, all of which are supported by extensive staff work in California.
•      CIRM issued its first co-funding awards early in 2009. Over the last two years, these agreements have yielded $57 million in international funds actually approved through peer review. This $57 million represents participation by only the first five countries and one international state with which CIRM established a collaboration. Now, CIRM has agreements with nine countries and two international states and an additional three countries will be added in the near future.
•     Even if CIRM were only to obtain $30 million per year in international matching funds, the ratio of return on CIRM’s $206,920 travel expenditures would be approximately 145 to 1.
•    Proposition 71 specifically anticipated and directs CIRM to develop leverage and global leadership to capture the benefit for patients.

Keeping on the Cutting Edge of Stem Cell Science

"CIRM’s over 20 MDs and/or PhDs science officers on the grant review staff at CIRM reach out nationally and internationally through conferences that may include 10-20 meetings per day and workshops of 8-12 hours per day to grasp the leading edge of this pre-publication, dynamic revolution in medical knowledge. In order to ensure that the every research dollar is optimally deployed to advance therapies to save lives or rescue the quality of life for patients, it is critical that CIRM staff remain on the cutting edge of new discoveries. International conferences and workshops provide a critical opportunity for massive and decisive transfers of information, which ensures that California is funding the right research.

“I principally corresponded with Dr. Trounson on the issue covering the travel expenses for the staff for the reasons stated above. I had no input into the selection of scientific staff. In May and even in June when the conference occurred I had no idea that there would be any disagreement on the Alzheimer’s application of Stem Cells Inc. in August. At the Board meeting I asked that there be consideration for the fact that three other peer reviews had found the work leading up to this application to be outstanding and they had ranked it highly. In addition, the current peer review had not been briefed on the fact that they downgraded the applicant for following the directions on material points by the prior peer reviews. Finally, the standard deviation on the 2012 peer review was extremely high and the re-review by the three member committee resulted in a split decision. It is particularly appropriate with a huge standard deviation, demonstrating both strong support and opposition within the peer review group, for the Board to make its own independent decision.  Please recall that the staff recommended against approval so that they clearly were not influenced by my commitment to a contribution to the Agency, months before, for the benefit of scientific staff to be able to attend an international science conference. Additionally, Dr. Trounson, I believe, recused himself from the review of the Stem Cells Inc. application, for unrelated reasons, so he was not involved. I personally had served on the three prior peer reviews, including one in the prior year that recommended this application for a Disease Team approval. I know how strongly the scientists on those three prior peer reviews supported funding this scientific research, with the 2011 review specifically recommending this Disease Team for approval. I believe it was extremely important for me to provide a voice to those three scientific panels who disagreed with a portion of the scientists on the 2012 scientific panel. Supporting the scientific movement to human trials for Alzheimer’s has to be eventually approved by the FDA; but, this loan will move the science and the potential for clinical trials forward significantly and hopefully obtain FDA approval. I believe all three of the Board’s overrides of the peer review recommendations on the Disease Team round in 2008 are leading directly to human trials in the United States and/or United Kingdom. 92% of the all of the funds awarded by CIRM have followed the recommendations of the peer review committee; but, in those significant cases where the Board has made an independent decision, there has been an extremely high success rate particularly when there has been a high level of disagreement within the Peer Review Board that was overridden and prior peer reviews recommended and/or approved the scientific approach and concepts of the applicant.”

(Editor's note:  The applications in this round were reviewed once in April 2012 by CIRM's full grant review group. StemCells, Inc.'s application was subject to a reevaluation after Klein's appeal in July 2012 and rejected again, but it was not a full review.  Klein may be referring also an earlier round that provided grants for planning to apply for the full $20 million.) 

The Klein Donation: Text of Robert Klein's Comments on Special Treatment by CIRM

Here is the text of comments from Robert Klein, former chairman of the California stem cell agency, concerning his $21,630 donation to the agency and subsequent actions by the agency. Klein's comments May 1 came in response to questions from the California Stem Cell Report(CSCR) on April 30. The text of the inquiry from CSCR precedes Klein's response. Here is a link to the story on the matter.

CSCR to Klein:

"I have sent the following to CIRM asking for their response and am offering the same opportunity to you. Here is what I sent the agency:
'The documents that I have received so far show that after Klein gave CIRM $21,000 the agency instructed six of its science officers to give him special access to their activities and apparently did not object to additional instructions from another member of the public, Melissa King, to provide Klein and her with written summaries about their activities at the ISSCR convention and “details” about their work at CIRM. Email addresses of the six were also provided to Klein, who may have additionally received their cell phone numbers although that is not entirely clear. The CIRM documents show that the six were told to engage in one-on-one sessions with Klein, which actually included a third person, a wealthy Canadian mining company executive. One document indicates that the science officers should assist in fundraising for CIRM by identifying areas of “special importance” to Klein and 'other donors.'
"'Additionally, Alan Trounson, at Klein's request, invited the mining executive to a closed door session involving the agency's international partners, a session at which presumably valuable, little known scientific information would be discussed and future directions charted. Trounson specifically told the executive that it was Klein who asked that executive be invited to the session, adding to Klein's clout in any business or other dealings that Klein might have with the executive.'

My questions to CIRM deal with the special treatment that was provided in connection with your donation. I would ask you if you think that state agencies should provide this sort of extraordinary treatment for individuals who donate to the agency. At the very least, doesn't this raise questions about the integrity of the agency and doubts in the public mind about whether it can be fair and even-handed in its activities?

Klein's response:

"In April or May of 2012 I committed to contribute a charitable donation to CIRM to cover the travel costs for 5-7 additional science officers to attend the International Stem Cell Conference in Japan.  It is important to CIRM that their science officers understand the cutting edge research being developed around the world so that CIRM does not fund redundant research; but, to the contrary, the science officers understand how to create networks between California scientists and scientists in other foreign countries who are doing complementary research that can potentially accelerate the advancements of therapies for patients. I do not hold any financial interest in biotech companies. I have historically been involved in encouraging international collaboration to advance medical therapies; for patients, every day of delay in the development of a therapy is a delay they cannot afford. To conceptually document the value of additional scientists traveling to these meetings, it was discussed that there should be conceptual, bullet point summaries about the value for CIRM obtained through the scientists discussions at the international conference.  The idea was to create bullet points of information about a few of the most meaningful scientific concepts and contacts the science officers benefitted from each day of attendance at the conference. I did not participate in the selection of the science officers who attended and I did not play any part in determining what activities they participated in. There were two fundamental goals to the very short one-on-one sessions that were arranged at "down time" that would not conflict with their other activities. The first goal was to conceptually understand if each of the science officers believed that the benefit to the agency was sufficient to justify the cost of their attending, when considering the learning and contacts they had gained which might accelerate research and therapies for patients. The second goal was to assist universities and non-profits, principally in Canada - a research partner of CIRM - in advancing their contributions from an existing donor or donors.

"The Canadian mining executive had an important history in contributing to the International Stem Cell Society and to Canadian non-profit research institutions. This individual has an expert background in mining and a passionate personal commitment to medical research; but, he does not engage in technical discussions of research. On a conceptual basis it was important for him to understand the spectrum of medical advances towards therapies. His additional contributions to Canadian non-profits could assist Canada in collaborating with California on more international research, with California only funding the research done in California and the donor helping to fund the research done in Canada. No specific grant applications were discussed. Finally, the discussion with the international partners focuses on the funding process and funding collaboration it does not discuss any individual grants. The value of international collaboration and the benefits of collaborating with new international partners is discussed. Scientific theories and individual grants are not discussed and new scientific information is not presented. I attended this session of international partners to support international collaboration; again, I do not hold any financial interest in any biotech organizations. Additionally, I do not have any business or financial relationship with the Canadian mining executive. The Canadian executive, based upon family and friends who have had chronic disease, is a significant donor to non-profit research institutions in Canada. All of my activities, the donation and the encouragement to develop information to validate the future benefits of science officers traveling to international stem cell conferences were focused on benefitting California patients with chronic illness or injury and the agency formed through Proposition 71."

The Klein Donation: Trounson's Memo Instructing Six Staffers to Meet with Klein and Canadian Gold Mining Executive

Here is a copy of the memo that CIRM President Alan Trounson sent to six stem cell agency science officers after Robert Klein gave the agency $21,630.  The SO abbreviation refers to science officers.
CFP refers to collaborative funding partner, which are international partners with CIRM. Here is a link to a story on the matter.

The Klein Donation: Memo from Klein Aide to Six Stem Cell Agency Science Officers

Here is the email that Melissa King, an aide to Robert Klein, sent to the six science officers from the California stem cell agency. King was executive director of the CIRM governing board when Klein was chairman of the agency from 2004 to July 2011. Here is link to the story involving Klein's $21,630 gift to the agency.

California Stem Cell Agency Seeks Lobbyist Bids

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

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

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

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

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

Deadline for bids is May 3.

Update on Move To Curb Researcher Appeals at California Stem Cell Agency

Directors of the $3 billion California stem cell agency are still mulling details of changes in their free-wheeling and sometimes emotional appeals process for grant applications that are rejected by the agency's reviewers.

A special task force of directors met last week for the second time to discuss the likely alterations. Kevin McCormack, spokesman for the agency, said the group made no decisions. Another meeting will be held later at a date to be determined. The task force's recommendations will then go before the full board, probably in late January.

McCormack said members of the panel have asked for “more details regarding the process that would be employed if the appeals and extraordinary petition processes were merged.”

The agency has an odd, bifurcated appeals process. Early in its existence, the agency said appeals of reviewer decisions could be based only on conflicts of interest. However, researchers have a right under state law to speak to the governing board in public on any issue whatsoever. As some researchers began to use that avenue to ask for reconsideration of their applications, the CIRM board created what it called “extraordinary petitions” in an effort to control the process and limit appeals. Both the “appeals” and “extraordinary petitions” are, in fact, appeals but on different grounds and employing different mechanisms.

The task force was created in September after directors complained about “arm-twisting” and “emotionally charged presentations” in connection with a record number of appeals earlier this year.

Here is a link to an item about the task force's first meeting. Here is a link to an agency summary of the task force's deliberations prior to last week's meeting. The transcript of the session should be available on the CIRM web site within the next two weeks. It will be found under the meetings section of the web and then under the heading for the task force's November session.

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.

Most of them came during the July and September meetings of its 29-member governing board and were related to strenuous efforts by researchers to win approval of awards of up to $20 million each. Several firsts involved the agency's former chairman, Robert Klein, who could be considered the father of the state's stem cell research effort.

So here is the California Stem Cell Report's list of firsts at the California Institute of Regenerative Medicine (as CIRM, the stem cell agency, is formally known) for the summer of 2012.

It was the first time that a single company – in this case, StemCells, Inc. , of Newark, Ca. – received two awards in the same round.

It was the first time any company has been awarded as much as $40 million. Again, StemCells, Inc.

It was the first time that Klein has lobbied his former board (see here and here) on behalf of a particular grant application. That occurred in both July and September with one of StemCells, Inc.'s application.

It was the first time that the board has approved an application that has been rejected twice by reviewers, again the StemCells, Inc., proposal backed by Klein.

It was the first time that board has received such a large outpouring of appeals by rejected applicants.

It was the first time that the board has received such lengthy presentations of emotional appeals by patient advocates on behalf of rejected applicants.

It was the first time that action on a grant round has been extended over three months(see here and here). The disease team round began in July. Action will not be completed until the end of October.

It was the first time that the governing board has sent so many applications back for re-review – five, six if the one to be acted on in October is included.

It was also the first time that the board has ordered a full-blown review of its grant appeal process with an eye to making making major changes in it.

Several reasons exist for the number of firsts racked up by CIRM. One is the high stakes involved in the disease team round that began in July and the low number approved by reviewers – six compared to the 12 approved by the board, as of today, out of 21 applications. Another reason involves the increasing understanding on the part of many scientists that they can appeal directly to the board when reviewers reject their applications. However, it is also clear that not all applicants grasp the full range of appeal possibilities. A third reason involves the agency's muddled appeal process, which has been a problem for years. And a fourth reason involves the board's push to drive research into the clinic and commercialization, which applicants are quickly learning how to exploit.

Readers should feel free to add their own firsts to this list. They can do so – even, anonymously – by clicking on the word “comments” at the end of this item.

StemCells, Inc., Gunning for Another $10 Million from California Stem Cell Agency

Fresh from winning $40 million from the California stem cell agency, StemCells, Inc., is shooting for another, $10 million award from the state research effort.

The latest proposal comes as the publicly traded firm also faces the task of raising $40 million that it has promised the agency to match the earlier awards. That figure could well rise to $50 million given the new application.

Martin McGlynn, CEO of the well-connected Newark, Ca., firm, disclosed StemCells, Inc.'s, latest proposal in an article by Catherine Shaffer in BioWorld. She wrote,

“Already looking ahead, StemCells has set its sights on one more CIRM initiative designed to fund early stage clinical trials over a four-year period. StemCells has applied for that grant, worth up to $10 million, to fund a Phase II trial in PMD(Pelizaeus-Merzbacher disease).”

The article did not disclose the timing on the new application.

StemCells, Inc.'s lobbying efforts with the stem cell agency were vigorously aided by the former chairman of the $3 billion California stem cell agency, Robert Klein (see here and here). And Wednesday evening, the company convinced the state agency's board to overturn two successive reviewer rejections of a $20 million proposal for Alzheimer's research. The vote was 7-5.

Klein's efforts came in a record-breaking round of appeals and emotional presentations by patient advocates, which triggered complaints from the board this week about "arm-twisting" and politicking. 

StemCells, Inc., was founded by the eminent Stanford stem cell researcher Irv Weissman, who helped to raise millions for the ballot initiative that created the stem cell agency. He additionally appeared in in the campaign's TV advertising. The campaign was headed by Klein, who ultimately raised $35 million to convince voters to create the agency. Weissman is currently on the board of the StemCells, Inc. His wife is executive vice president.

In July, the stem cell agency board approved the first $20 million award to the firm for research involving spinal injury.

McGlynn told BioWorld,

"We're the only company that has programs going on in all three regions of the central nervous system: the brain, the spinal cord and the eye."

Not discussed in the BioWorld article was a requirement, imposed by the CIRM board, that StemCells, Inc., show it can deliver $20 million in matching funds on the Alzheimer's award before receiving any state funds. CIRM said no such board requirement existed on the spinal award, but the firm has promised to match the $20 million on that award as well.

BioWorld described the awards as grants. In fact, they are loans. But under the terms of the loans, if the research is not successfully commercialized, it will be forgiven.  

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.

Approval came on a 7-5 vote with the condition that the company demonstrate it has access to $20 million in matching funds prior to funding.  It is the second $20 million award that the company has received in the disease team round, which now totals $214 million. Another disease team application has been tabled and will not be considered until October.

The current CIRM chairman, J.T. Thomas, a Los Angeles bond financier, asked for the financial proof because he said some concerns were expressed during an executive session that CIRM would now "account for such a large part of the assets of the company." Martin McGlynn, CEO of StemCells, Inc., also told the board that the company might have to drop its Alzheimer's research if it did not receive the CIRM award.

The StemCells, Inc., application was rejected twice by reviewers. The original rejection came before the July meeting at which Klein first appeared (see here and here). The proposal was then sent back for re-review, during which it was rejected again.

However, the 29-member board narrowly approved the application following discussion tonight and following its rejection of another Alzheimer's research proposal from USC. Both applicants produced a number of witnesses, including patients, on behalf of their appeals.

The re-review on the StemCells, Inc., application said in reference to a statement by Klein to board in July,

“The reviewers did not feel there was compelling data for neuron migration in the submitted manuscript. This is the manuscript specifically referenced at the ICOC (CIRM governing board) meeting (in July) that prompted the call for additional analysis. The manuscript is not yet accepted, it is 'potentially acceptable' but requires 'major revisions' according to the journal editor note. In addition, however, the studies in this manuscript used mouse NSCs, not the human NSCs proposed for the disease team award....”

In July, Klein said, “....(W)e have brand-new data that demonstrates and totally contradicts the key weakness on which it was downgraded.” 

A footnote: The CIRM staff said that as a result of two StemCells application, a proposal is being prepared to limit applications to one per entity in later rounds.

Good News on Three Appeals; Not-so-Good News for StemCells Inc. and Klein

A Los Angeles biotech firm, Capricor, Inc., and a UC Irvine researcher, Henry Klassen, appear to be assured tonight of winning their appeals for nearly $20 million each from the California stem cell agency.

A research team at UCLA – Stanley F. Nelson and M. Carrie Miceli – also apparently won its appeal on its application but only on a substantially revised basis, according to a CIRM document. The agency indicated it would fund the grant but at reduced scope and cost – $6 million instead of $20 million.

However, StemCells, Inc., which was publicly supported by the former chairman of the stem cell agency, Robert Klein, lost its appeal for $20 million. The CIRM document said research cited by Klein as contradicting what reviewers identified as a key weakness did not contain “compelling data.”

A fifth applicant who appealed, Tim Hoey of OncoMed Pharmaceutical of Redwod City, Ca., was also rejected during the re-review process on a $20 million application.

The CIRM governing board, in July, sent all five applications back for reconsideration as a result of appeals of negative decisions by reviewers. The move followed a record-breaking level of appeals by researchers during an emotional meeting filled with testimony from patient advocates. The appeals came in a round that was budgeted originally for $243 million and that represents one of the agency's key efforts to commercialize stem cell research.

It was also the first time the agency's governing board has engaged in such an extensive re-review process on applications.

The revised recommendations for funding are scheduled to be acted on tonight at a meeting of the CIRM board in Burlingame, Ca. The panel has almost never rejected positive decisions by its review group and is likely to accept the latest recommendations. The board is deeply concerned about maintaining the integrity of the review process and not rejecting reviewer decisions without ample consideration.

The recommendations for funding on Capricor's application by Linda Marban, CEO of the firm, and the one from UC Irvine by Henry Klassen both contain conditions, but those probably will not stand in the way of acceptance by the applicants. (The executive chairman of Capricor is Frank Litvack, who last year was a candidate for chairman of the California stem cell agency.)

StemCells, Inc., of Newark, Ca., which is a publicly traded firm, had two applications in the disease team round. One dealing with spinal injuries was approved. However, the agency in its re-review of the second, dealing with Alzheimer's, said,

“The reviewers did not feel there was compelling data for neuron migration in the submitted manuscript. This is the manuscript specifically referenced at the ICOC (CIRM governing board) meeting (in July) that prompted the call for additional analysis. The manuscript is not yet accepted, it is 'potentially acceptable' but requires 'major revisions' according to the journal editor note. In addition, however, the studies in this manuscript used mouse NSCs, not the human NSCs proposed for the disease team award....”

In his pitch to the CIRM board, Klein said, “....(W)e have brand-new data that demonstrates and totally contradicts the key weakness on which it was downgraded.”

In the document prepared for the CIRM board, Ellen Feigal, senior vice president for research and development, discussed the re-review process and gave more details on the decisions. She said,

“In consultation with the Chair of the ICOC and CIRM scientific staff, the President and the Co-Vice Chair determined that the additional analysis should be conducted by the Review Chair of the GWG(grant review group), another scientific member of the review panel, and a patient advocate member of the GWG. The additional scientist reviewer was selected based on the expertise necessary to assess the new information. Each of the 3 individuals (chair, scientist, and patient advocate) voted on whether the information changed the funding recommendation by the GWG. A new score was not assigned."

Feigal continued,

“For each application, the information provided or referenced at the board meeting, and associated specific additional material were requested from the applicant. The new information was evaluated in all cases by the GWG Review Chair as well as one of the originally assigned reviewers and a patient advocate.”

Feigal's report does not identify the applicants by name – only by application number. Here is the number and name for those who do not want to wade through the CIRM web site to determine who is who: 5735 Capricor, 5739 Klassen, 5426 UCLA, 5352 Oncomed, 5416 StemCells, Inc.

The California Stem Cell Report will provide gavel-to-gavel coverage of tonight's and tomorrow's meeting of the CIRM board. The session will be audiocast live on the Internet. Interested parties can participate in the meeting at teleconference locations in Pleasanton, Los Angeles and La Jolla. The agency has added another way of listening to the proceedings -- a dial-in method using an 800 number. Details are on the agenda. 

Bob Klein, "Lobbying" and Reader Reaction

A robust discussion has arisen concerning Bob Klein and his appearance last month before the governing board of the $3 billion California stem cell agency, a body that he once chaired and an enterprise that he once oversaw.

The comments were triggered by the original "unseemly performance" item on the California Stem Cell Report and a subsequent comment by Francisco Prieto, a longtime member of the board.

The comments discussed whether Klein was manipulated and whether he was engaged in so-called “revolving door” activity – the practice of former government officials, such as Klein, becoming paid representatives of enterprises that were involved with their former agency.

The comments raise a number of interesting questions that we will discuss on the California Stem Cell Report during the next few days.

You can read the remarks by going to this item and scrolling down to the end of the piece.

(Editor's note: Our apologies to some of those who commented for the delay in posting their remarks.)

Inside Biotech in San Diego: A Multibillion Dollar Matter

If you want to understand a little more about the biotech biz in San Diego, the Voice of San Diego Web site has a couple of pieces that deal with the industry that employs 40,000 people in that balmy corner of California.

Both are by David Washburn, who wrote last month about the impact in San Diego of the Pfizer cutbacks. He said:

“Pfizer's research facility in La Jolla...was not only spared in the downsizing, but is now one of five main R&D centers in the newly restructured operation. That's good news for the roughly 1,000 employees at the La Jolla facility, and perhaps for other San Diego scientists who could get hired by Pfizer as it moves more of its work here.

“And, on another level, the new Pfizer — as well as other Big Pharma restructurings — might be good news for the all the little fish that make up the San Diego biotech industry.”

In October, he explored reasons for the tiny voice that the tech and biotech industry has in local government, a phenomenon not unique to San Diego. Washburn said,

"San Diego is home to hundreds of high-technology and biotechnology companies that collectively employ close to 150,000 people, and have an overall economic impact on the region of more than $10 billion.

“Despite these big numbers the tech industry does very little to push the agenda at San Diego City Hall. In fact, among the hundreds of lobbyists registered with the city, only about a half-dozen organizations represent the tech and biotech industry. Scores of lobbyists, on the other hand, represent the tourism and building industries.

“Consider that San Diego Bike & Kayak is represented by a lobbyist, but Connect, the tech industry's most high-profile industry organization, is not.

"'That is telling,' said Duane Roth, the CEO of Connect(and co vice chairman of the California stem cell agency). 'It shows how little cause we've had to be down there.'

The Podesta Watch: White House Visits, Red Shoes and 61 Percent Gains

Tony Podesta, the California stem cell agency's man on the Potomac, is making news again, largely for flashy fundraising and access to the Obama White House.

Podesta was hired as a federal lobbyist by CIRM last February under a 10-month, $240,000 contract. California state agencies, rarely if ever, hire federal lobbyists, although the state does maintain a lobbyist on the state payroll in Washingon.

Podesta visited the White House five times in six months, but the clients were not identified. Our guess is that they did not include CIRM. So far, CIRM Chairman Robert Klein has not reported publicly to his board of directors on what California taxpayers are receiving for their money. Podesta's contract with CIRM is due to expire in December but could be extended.

Here is a rundown on recent Podesta stories:

“Podestas Rule Washington and Obama Guest List” – US News and World Report – The story says it shows “the power of the Podesta family. Between them, Obama adviser and former Clinton Chief of Staff John Podesta; his brother, lobbyist Tony Podesta; and Tony's lobbying wife Heather made 25 visits. By comparison, House Speaker Nancy Pelosi made one visit.”

“Holdouts to Obama's Vow to Change” – Commentary by Albert R. Hunt, formerly of the Wall Street Journal and now of Bloomberg, “Heather and Tony Podesta are conscientious objectors to the culture of change in Washington. The husband and wife, with separate lobbying firms, are raking in millions from the insurance and drug industries, tobacco companies and corporate interests fighting changes to labor laws or the overhaul of the student-loan program.” In New York Times also.

Tony Podesta Scoops Up Nearly $19 million in Third Quarter, Up 61 percent – National Journal

"Tony Podesta has happy feet for 65th birthday” – Washington Examiner - Podesta and friends celebrate his birthday at a high-profile fete wearing red shoes.

“Big money buys seats at lawmakers' dinner tables” – Washington Times --Heather Podesta, wife of Tony and a lobbyist herself, throw fundraiser at her $2 million home

Then there is this paean to Heather Podesta in the Washington Post in August that had, as they say, tongues wagging along the Potomac.

Releasing the names of the White House visitors was a first. The Bush administration refused to do so. Initially Obama adopted that position but wisely changed his mind. The release of the list attracted a great deal of coverage because of its novelty but that will diminish.

Here is a link to the White House list of Podesta visits.

As readers may recall, we have raised questions about the effectiveness and propriety of CIRM's efforts to become a player in Washington politics. We do not object to CIRM making its voice heard in Congress nor particularly in Sacramento. But CIRM has more than enough laundry to take care of in the Golden State. Attempting to become a major influence in Washington will require funds and time that CIRM cannot afford.

Here is a link to one article on the subject. You can also search on the terms “podesta” and “lobbying.”

The Podesta Watch: Public Health Care Option and Loans to College Students

Tony Podesta, the “legendary Democratic fundraiser” who is now CIRM's go-to guy in Washington, made the news during the last few days for roles in connection with the public option in the national health care legislation and aiding Sallie Mae, the nation's largest provider of student loans.

Podesta, who is under a $240,000, 10-month lobbying contract with the California state agency, was mentioned on the nationally broadcast PBS program, Bill Moyer's Journal, on Friday. The program was a scathing look at lobbying efforts by the health insurance industry against the public option in national health care reform legislation. On Thursday, CIRM directors will be asked to endorse the public option.

The guest on the Moyers' program was Wendell Potter, a former health insurance executive who is now an advocate for health care reform.

Here is how the Podesta's name came up, according to the transcript:

Moyers:

"I mean, they (former Congressional staffers) left the government. They go to work for the industry. Now they're back with an insider status. They get an access, right?"

Potter:

“Oh, they do, they do. And these lobbyists' ability to raise money for these folks also is very important as well. Lobbyists, many of the big lobbyists contributed a lot of money themselves. One of the lobbyists for one of the big health insurance company is Heather Podesta, the Podesta Group, and she's married to Tony Podesta, who's a brother of John Podesta.”

Moyers:

“Who used to be the White House chief of staff."

Potter:

“Right. Right. And they're Democrats. And my executives wanted to meet with — and when I say my, the people I used to work for-- “

Moyers:

“At CIGNA.”

Potter:

“Yeah, wanted to meet with Hillary Clinton, when she was still in the Senate and still a candidate for president. Well, that's hard to do. That's hard to pull off, but she did. That just shows you that you can, through the relationships that are formed and that the insurance industry pays for, by hiring these lobbyists, you can your foot in the door. You can get your messages across to these people, in ways that the average American couldn't possibly.”

Danielle Knight, in a special report to the Huffington Post Investigative Fund, mentioned the Podesta Group in a piece headlined, “Lobbying Showdown Over The Future Of Student Loans." The article discussed Sallie Mae's efforts to position itself as the “clear winner” in multibillion dollar fight over the private student loan industry. Knight wrote that in March,

“(S)allie Mae retained the Podesta Group, founded by Tony Podesta, a legendary Democratic fundraiser whose brother headed the Obama transition team. In addition to Podesta himself, the firm, which was paid $110,000 for its work in the first half of the year, assigned at least four of its lobbyists to push Sallie Mae's case on Capitol Hill: Paul Brathwaite, the former executive director of the Congressional Black Caucus and a former Clinton Labor Department official; Israel 'Izzy' Klein, a former aide to Sen. Charles E. Schumer of New York and Rep. Edward J. Markey of Massachusetts, both Democrats; Lauren Maddox, a former assistant secretary for communications and outreach at the Education Department in the Bush administration; and Donni Turner, a former aide to Sen. Richard Durbin of Illinois, Rep. David Scott of Georgia, and former Sen. Max Cleland of Georgia, all of them Democrats.”

Linda Stamato of nj.com also mentioned Podesta in connection with Sallie Mae.

CIRM Adds Info on Possible Endorsement of Public Insurance Option

The California stem cell agency has posted a host of wide-ranging links to documents dealing with the public health insurance option that it will consider endorsing at its Legislative Subcommittee meeting next Thursday.

They range from Wall Street Journal and New York Times articles to pieces in support and against the plan, which is being considered by Congress as part of the national health care reform legislation.

The posting of the documents well ahead of the meeting is another instance of giving both the public and CIRM ample time to consider the issues involved.

However, the background material does not address several questions that CIRM directors should consider. Is this sort of broad national issue something that CIRM should be chasing? If so, how many votes can CIRM deliver for or against the plan? The latter may be the most important question in the real world of politics. Third, is this something that CIRM's high-flying federal lobbyist, the Podesta Group, can weigh in on appropriately? It has several other clients that have a major stake in the legislation. And those clients may have interests at odds with whatever position CIRM chooses to take.

If you would like to take part in the CIRM debate over the plan, you can do so via teleconference locations throughout the state. They include San Francisco, Los Angeles, Healdsburg, Mountain View, Palo Alto, Irvine, La Jolla and Sacramento. The specific addresses can be found on the agenda.

You can also weigh with comments on this Web site. Just click on the term "comments" below. Anonymous postings are permitted.

The Podesta Watch: Mother's Milk, Appreciation and CIRM

Lobbyist Tony Podesta, CIRM's man in Washington, garnered some headlines this month with a stunning financial performance, heavy duty fundraising and even a note on his delinquent property taxes.

Podesta is being labelled a “king of K Street” and a powerhouse. He could be on his way to lobbying superstar status. Podesta knows the truth of the axiom that money is the mother's milk of politics. He conducts weekly fundraisers at his home. “People appreciate the fact that you have given of yourself,” he says.

His firm, the Podesta Group, is earning $240,000 for 10 months of work for the California stem cell agency. But the CIRM contract is piddling compared to the performance of his business.

Zachary Abrahamson of politico.com reported that the Podesta Group took in $11.6 million for the first half of this year, a 57 percent increase from the same period last year.

One reason is the family name. Chris Frates, also of politico.com, reported,

“Lobbyist Tony Podesta has a long history in Democratic politics and is a prodigious fundraiser. His wife, Heather, is a powerhouse lobbyist in her own right. Tony’s brother, John — a co-founder of their namesake lobbying firm — was the co-chairman of the Obama transition and is the founder and president of the Center for American Progress, which many people credit with crafting much of the Obama administration’s policy blueprints and staffing its ranks.

“With a pedigree like that, it’s no surprise that Tony Podesta’s lobbying firm has emerged as a king of K Street.”

Podesta told Frates,

“You meet people in the middle of political campaigns, and they appreciate the fact that you’ve given of yourself to get them elected. I’ve helped a lot of the folks who are in Congress politically, and helped them in many ways, and that’s a thing which people are grateful about.”

Kevin Bogardus of TheHill.com wrote that Podesta, “has bundled campaign contributions for several powerful Democratic lawmakers over the first six months of the year,” including “donations of close to $100,000 on behalf of Rep. Henry Waxman (D-Calif.), Sen. Patty Murray (D-Wash.), Senate Majority Leader Harry Reid (D-Nev.) and the Democratic Congressional Campaign Committee (DCCC).”

Andrew Miga of The Associated Press, reported that Sen. Christopher Dodd, D-Conn., one of key players on health care, was a Podesta beneficiary. Miga wrote,

“Anthony Podesta, one of Washington's best-known Democratic lobbyists, contributed $500 (to Dodd). The Alliance for Quality Nursing Home Care paid Podesta's firm, the Podesta Group, $120,000 for the quarter.

“Podesta's wife, Heather Podesta, hosted a $1,000 per person fundraiser in March for Dodd at the Podestas' home in the affluent Woodley Park neighborhood of Washington.

“Her firm, Heather Podesta + Partners, was paid $50,000 this year by HealthSouth Corp., one of the country's largest health care service providers.”

Earlier this month, Arthur Delaney of the Huffington Post wanted to take a first-hand look at a $1,000-a-plate Podesta fundraiser. The Podestas declined even to allow him to bus the dirty dishes and booted him from the premises of their 6,600-square-foot house.

As for the home, the Huffington Post carried this headline on one item: “Lobbyist Tony Podesta Among Delinquent Property Owners In D.C."

The reference was to a Washington Examiner story by Michael Neibauer in which he reported that Podesta owed paid only $33,935 of his $34,483 property tax bill, a shortfall of $696.32. Podesta was quoted as saying,

“We don’t even pay the taxes. They’re paid by the bank. If they sell my house, I’m going to sue the bank.”

It is unusual for a state agency to have a lobbyist in Washington, although the governor's office does have a staffer in the capital to watch out for statewide issues. Some CIRM directors have expressed reservations about CIRM's lobbying efforts, suggesting that it is an exercise in hubris and a bit of mission creep.

A Caution about Excessive Industry Coziness at CIRM

A longtime observer of the California stem cell agency is warning that the $3 billion enterprise is on the verge of becoming much too intimate with industry.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., said that a plan to create an industry biotech advisory group for CIRM is "fraught with pitfalls."

Writing on his organization's blog on Feb. 19, he said,

"Who picks the members? What would be the criteria for selection? Will the meetings be public? Will these advisors also be applying for grants?"

He noted that four members of the CIRM board of directors hold their positions because of their ties to the life sciences industry. Conducting special, public meetings with industry is okay, Simpson said. Biotech lobbyists can also take part in regular meetings of the agency.

But Simpson wrote,

"Creating an industry special interest group to whisper in the ears of CIRM executives is just wrong-headed.  What do you say to biotech companies not on the panel? Will there be an advisory group from academia, another from patient advocates and another advisory group from the public?

"But that's exactly what the ICOC (the CIRM board) and its committees are supposed to do with their public meetings.  Selecting some industry representatives and giving them special treatment and access to CIRM's leadership is simply wrong."