CIRM Loans Turning Into Cash

(Editor's note: The following was based on incorrect information from the state treasurer's office. The notes were repaid and no windfall exists.)

The California stem cell agency appears to be the beneficiary of an $11 million windfall.

It comes in the form of cash from the Gordon and Betty Moore Foundation -- $10 million – and another $1 million from California venture capitalist J. Taylor Crandall.

Both had invested those sums in bond anticipation notes (BANs)issued by CIRM and were to have been repaid following the agency's California Supreme Court victory over its foes.

However, the state treasurer's office says the notes have "surrendered" by both the foundation and Crandall, meaning CIRM gets to keep the cash. The other purchasers of the bond anticipation notes have been repaid. And so has the state's $150 million loan to CIRM.

In response to a query from the California Stem Cell Report, Tom Dresslar, a spokesman for state Treasurer Bill Lockyer, said,

"We don't have any new bond issues planned. The timing of the next issue largely will be determined by CIRM's requirements. We understand CIRM may make some facility grants soon. Initial funding for those grants would come from the state's Pooled Money Investment Account."

Crandall is managing partner of Oak Hill Capital Partners and has "senior responsibility" for its technology, media and telecom groups.

The Moore Foundation is the creation of Gordon Moore (see photo) and his wife. Moore is one of the founders of Intel. Ed Penhoet, vice chairman of CIRM, was president of the foundation at the time of the BAN purchase.

Light Coverage of CIRM Lab Leverage

The San Diego Union-Tribune and the San Francisco Chronicle both carried stories this morning on the half-billion dollars pledged to match lab construction grants scheduled to be awarded in May by the California stem cell agency.

Sabin Russell of the Chronicle quoted David Serrano Sewell, a member of the CIRM board of directors, as saying,

"Sometimes it has been hard to see that vision come to fruition, but it has here."

Terri Somers of the San Diego paper wrote,

"Louis Coffman, vice president of the San Diego (stem cell) consortium, said he could not reveal the sources of the pledged donations."

That strikes us as somewhat of an odd position since these contributions will need to be publicly verified at some point.

Fresh Comment

Larry Ebert has posted a comment on the stem cell patent item below.

AP Story on WARF Patent Matter

Re the WARF patent fight(see item below), here is a link to The Associated Press Story, which has been now carried on the San Jose Mercury News website.

Stem Cell Patent Fight Enters Another Round

Players in the ongoing saga of stem cells, WARF, California and patents rolled out another chapter today with folks on both sides finding something to make them happy.

WARF apparently fired out the first news release, declaring it was "pleased by the United States Patent and Trademark Office’s decision to uphold the claims of a key stem cell patent."

The opposing side, the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., and the Public Patent Foundation, said the decision showed the following gains for researchers.

"The original broad patent was abandoned showing it was underserved and new amended claims have been narrowed.

"The original patent covered all embryonic stem cells no matter how they are derived, but the amended 'non-final' ruling, while permitting the patent, narrowed the claim only to stems cells derived from pre-implantation embryos.

"The newest stem cell research technology — Induced Pluripotent Stem Cells (IPS cells) — would clearly not be covered by the narrowed patent.

" Stem cells derived from fetal tissue could have been claimed under the old patent, but now cannot be."

FTCR and the patent group have been personally supported by CIRM President Alan Trounson in their challenge to the WARF patents.

The Wall Street Journal picked up on the story in its health blog, quoting Ken Taymor(see photo), a longtime follower of California stem cell affairs and executive director of the Center for Law, Business at UC Berkeley.

"It’ll be several years before the patent fight shakes out, according to Taymor, who co-authored a recent article on the subject in the journal Cell Stem Cell. 'In the mean time, there is all this other patenting activity that’s going on — patenting activity that’s not being challenged,' he said.

'Those are essential steps for commercialization.'

"What’s more, Geron and WARF hold a lot of the newer stem cell patents. 'So the more interesting question,' Taymor said, 'is what patents do they hold and what’s the scope of the claims that they have downstream in commercialization?' Taymor and his colleagues are looking into that now, and plan to publish their findings."

The story received a fair amount of attention in Wisconsin. At the time of this writing, only one newspaper in California, which is the leading biotech state in the nation, had carried a story. That publication is the San Jose Business Journal, and it wrote based on a Geron press release.

Here is a link to the story in The Scientist.

California Set for $758 Million Stem Cell Lab Construction Program

California's young stem cell agency has extracted promises of nearly $500 million in matching funds to help build what it calls one of the most ambitious medical science lab construction programs in the nation's history.

The agency announced today that the 12 competitors for $262 million in CIRM lab construction grants said they had raised the matching dollars in an effort to win the grants in May. The agency will give higher priority to institutions with larger matching funds.

The largest single "matching and leverage" amount -- $150 million -- came from Stanford, which is seeking a $50 million grant from CIRM. The San Diego Consortium for Regenerative Medicine, which consists of UC San Diego, Scripps, Salk and Burnham, offered $65 million for its $50 million grant request. UC San Francisco logged in with $54 million for a $40 million grant for its building(See photo. Larger version here).

Interestingly, UCLA came up with only $12 million matching for a $30 million request. UC Irvine offered only $23 million for a $37 million grant. (A table with the complete list of the grant requests and size of matching is available here.)

In a news release, CIRM Chairman Robert Klein said the total of about $758 million (including leverage and grants) can mean "a research infrastructure building program that historically exceeds any prior state government research facilities program for a new field of medical science anywhere in the U.S."

CIRM President Alan Trounson said,

"The research facilities established by the CIRM Major Facility Grants will provide a safe haven from federal government restrictions for stem cell scientists to conduct research that will lead to therapies and cures for millions of patients who suffer from chronic disease and injury. These grants are an important part of the CIRM’s goal of making California an ideal environment for all avenues of stem cell science to flourish."

However, none of the labs are likely to be built before a new US president changes George Bush's restrictions on stem cell funding. We understand there are other concerns about federal restrictions and have queried CIRM concerning those.

While the sums for lab construction appear vast, some of the applicants may be disappointed. The total amount of grants requested is $336 million, exceeding CIRM's budgeted $262 million by $74 million.

Earlier this year, Klein said he might ask some of the institutions to reduce the size of their requests in order to fund all of the building programs.

CIRM's Facilities Working Group is scheduled to review the applications April 4 and 5 with its decisions going to the CIRM directors for ratification May 6-7. CIRM directors have already ratified the decisions of the scientific reviewers on the grant requests.

You can find the scientific reviews here. However, that document does not list the applicants by name. You will need to pick up the number of the application from today's news release and find the same number on the scientific review document to correlate the two.

The latest applications are scheduled to be posted on the CIRM website sometime in the future. We have queried CIRM concerning that date.

(Our figures on the totals in the grant program differ slightly from those in CIRM's press release. We have based ours on the cumulative totals of the raw figures and then rounded.)

'Mystery' Documents Now Available on CIRM Research Standards

Background information has now been posted for Thursday's session of the California stem cell agency's Standards Working Group in San Francisco(see item below). The documents involve a summary and response to public comments on proposed revisions to CIRM MES regulations along with reports dealing with clinical trials and reprogramming of adult stem cells.

Other subjects on the agenda include a report on CIRM guidelines for oocyte donation. That report is not available at the time of this writing.

Fresh Comment: CIRM's Mystery Meeting Remains a Mystery

Marcy Darnovsky of the Center for Genetics and Society makes an important comment on the "mystery" item we posted. She is absolutely right. Those documents from the California stem cell agency should have been posted days ago if CIRM wanted serious public comment. The daylong meeting on Thursday involves complex issues dealing with the ethics and practice of stem cell research. The session could have major implications for the conduct of CIRM-financed stem cell research, but there is no way to know.

CIRM has repeatedly pledged to adhere to the highest standards of openness. Earlier today, we discussed a relatively minor item that belies that pledge. The failure to provide adequate information on the Thursday session, assuming its subject is of some consequence, is a more significant issue. CIRM can and should do better. You can see Darnovksy's comment by clicking on the word "comment" at the end of the item.

Fresh Comment

"Anonymous" has posted a comment on the Trounson item below that has confused us. It asks for names of "invited stem cell companies." We wonder if that comment should have been posted to the "routine withholding" item?

Trounson on 'Impressive Research' Backed by CIRM

California stem cell agency President Alan Trounson is in Fast Company.

The magazine and online, that is.

Trounson talked about his new job and his old job, along with some general views on science.

Here are some excerpts from the question-and-answer feature by Elizabeth Svoboda in the March issue.

"What are some of the most impressive research that the institute is supporting?"

"For lung diseases like emphysema, we're finding that if you put stem cells into the bloodstream, the cells will be drawn to inflammation in the lung to repair damaged tissue. You can also do repairs on seriously injured hearts. Researchers are showing that colonies of cardiac muscle cells grown from stem cells will integrate quite normally into the hearts of rats and mice."

"The institute has unusual rules for grantees: They must make discoveries available publicly and pay royalties to the state. Why?"

"The citizens of California are funding this research, so it's important for them to be able to access developments at a reasonable rate. It's about enabling research, but it's also about enabling patients to access the benefits."

The article continued:

"What do you hope to contribute to the field for posterity?"

"In a big-picture sense, I want to be up on the mountain looking down on the Serengeti, watching all the animals move through. I want to be remembered for having guided some basic discoveries from the lab to the clinic. If I can help get that process going, I think that's sufficient."

"And how did your family feel about moving?"

"My wife, Karin, is Swedish, and she said, 'Alan, it has taken me 20 years to become an Australian, and you want me to become an American now? I don't think so.' But she came around. The boys think it's pretty cool--the 6-year-old thinks there's Halloween every night in America."

CIRM Ill-served by Withholding Routine Information

With some considerable pride, the California stem cell agency issued a press release earlier this month that it was hosting a San Francisco meeting beginning today of the world's leading agencies involved in financing stem cell research.

It wasn't exactly news. The event and CIRM's role were known to most folks who follow the agency. However, the meeting and how the agency handled requests for information about it demonstrate some of the continuing problems at CIRM with openness and transparency.

Hosting the event seems a legitimate and worthwhile endeavor. As California stem cell Chairman Robert Klein noted in the news release, hosting the International Stem Cell Forum is another demonstration of CIRM's leadership. It also will help facilitate cooperation with activities in California.

However, CIRM has refused to answer one simple and basic question – roughly how much is the hosting going to cost? Keep in mind that CIRM is a state agency. Its financial affairs are all legally public. Keep in mind also that CIRM went out of its way to call attention to its role in the event at the Hotel Monaco, a luxury boutique hotel with rates running from about $250 to $500 a night. The agency should have been prepared to answer routine questions about its news release, such as the cost of a particular activity.

We began making inquiries on Feb. 19. Simple questions: what does "hosting" the event entail, what is the location of the meeting and whether it is open to the public. A spokesperson for CIRM came back quickly the same day with a partial response. She said that hosting includes "paying for the meeting room at the hotel where the meeting is taking place as well as the audio visual set up and possibly some things like copies. We are also paying for 2 dinners (but not alcohol)." After some prompting, the location was disclosed a day later.

But despite additional inquiries, no estimated cost has been forthcoming. One CIRM justification for not supplying a ballpark figure is that it might not be exact. Another is that it takes too much staff time to dig up the estimate.

We assume that CIRM budgets with some care. That means that the estimated cost would be readily available in a matter of minutes from whomever is currently handling CIRM's bookkeeping. The more likely reason for withholding the information is that someone very high in the organization is concerned that the figure might appear too extravagant and generate unfavorable comment.

This is not the first time CIRM has stonewalled on an event cost. One particular case comes to mind – the first scientific meeting that the agency sponsored a couple of years ago.

In both cases, the agency is ill-served by refusing to release routine information about its activities. Ultimately, the cost will come to light. All CIRM achieves at this point is to foster suspicion and speculation about what other, much more important information is being withheld, such as the breaches last year by some of its directors of CIRM's conflict-of-interest policies. Those remained hidden until disclosed here and by the San Francisco Chronicle.

As for our question about whether the meeting is public, the answer is no. That raises a whole host of additional questions about whether public funds should be used for meetings that bar the very persons who finance them.

(Here is a link to the only news story we have seen on the event.)

Fresh Comment

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, has posted his economic disclosure under "comments" on the item below. You can see it by clicking on the word comments on the main item.

A Look Behind the Cyberspace Curtain

It's been a merry old romp.

Three years plus and more than 1,500 items posted. That's the count for the California Stem Cell Report, which began its cyberspace explorations of the stem cell world in January of 2005.

A little more than 12 months ago, we gave you a bit of an annual report on this enterprise, which is the creation solely of yours truly, David Jensen. Along with that came our economic disclosure. Today we will give you an update in both areas.

Nothing has changed on our economic interests, which can be found here. But briefly neither my wife nor I nor any members of our immediate family hold any interest in biotech or stem cell companies or other enterprises that could stand to gain or profit or benefit from the activities of California's stem cell agency.

This blog is financed personally on an extremely low budget. Some people ask why I do it. The answer is that the California Institute for Regenerative Medicine and its related activities are interesting, important and unique.

The Golden State's $3 billion enterprise is on the cutting edge of science, business, politics, religion, medicine – not to mention life, death and even sex(certainly one or another stem cell therapy is likely to tackle that last area). How often does one have a chance to dig into all those areas?

The overall readership of this blog is modest by Internet standards. No megamillion counts of page views here. We are currently running about 8,000-9,000 page views a month. Our readers, however, are deeply interested in the subject and seem to represent important sectors in the world of stem cells. They include folks from the UK, Canada, Australia, Korea, India, Germany, Sweden and Singapore. Readers from virtually all the major California research institutions dip into the California Stem Cell Report from time to time. But less than half of the total are from California. Other regions represented include New York, Massachusetts, New Jersey, Wisconsin, Illinois and Texas, Readers also come from enterprises such as the National Institutes of Health and the National Academy of Sciences along with patent attorneys, lawmakers and their aides and investment companies.

This past 12 months, we have branched out somewhat, publishing freelance articles with Wired News online and a couple with The Sacramento Bee.

We also broke the story on the attempt by one of the CIRM directors to lobby the agency on behalf of a grant to his institution. That story led to an ongoing investigation by the state Fair Political Practices Commission and a new audit of CIRM. The story also apparently played something of a role in the formulation of the latest legislation targeting CIRM.

We take no particular pleasure in CIRM's missteps. We support human embryonic stem cell research and CIRM's programs generally. Our main effort is simply to present information about CIRM, which has slipped well below the radar of the mainstream media. We do have a point of view, however. Our starting point is that CIRM is a public agency first. Everything else is a poor second. Without public trust and credibility, without conduct that matches the standard for Caesar's wife, CIRM's efforts could easily become a poster child for what can go wrong. Instead of being an exemplar, CIRM could become a nightmare of conflicts and concealment because it is uniquely free from normal state oversight and is riddled with built-in conflicts of interest that are not going to disappear. As we have reported, the conflicts are so deep that more than once the vast majority of CIRM directors have been disqualified at meetings from taking part in public discussions, not to mention being barred from voting. The result is that sometimes decisions can be made by as few as four out of the 29 members on the board.

We are interested in hearing from readers, both on individual items and on the general direction of the blog. If you have suggestions for changes, improvements or whatever, please send them along to me (djensen@californiastemreport.com) or you can post them via the comment function (created by Google), which does not allow myself or others to know your identity.

As for others involved regularly in CIRM affairs and regularly trying to influence the organization, we urge them to disclose their financial interests as well(via the comment function or other means). That includes newspaper reporters, but that is not anymore likely to happen than CIRM opening the scientific grant review sessions to the public.

CIRM Conflict Problems Behind Latest Stem Cell Bill

A state lawmaker says her new legislation aimed at the California stem cell agency was triggered in large part by breaches of the agency's own conflict-of-interest policy by the agency's directors.

Reporter Terri Somers of the San Diego Union-Tribune today reported that Sen. Sheila Kuehl, D-Santa Monica, said that the bill's requirement for a review of CIRM by the state's Little Hoover Commission was aimed at finding possible solutions to some of the problems that have generated a separate state investigation and audit.

The Little Hoover Commission is a nonpartisan state agency aimed at improving efficiency and performance of state government. In addition to studies, it can conduct public hearings and offer up legislative solutions.

Somers wrote:

"'Those (reviews) are directed at things that have happened,' Kuehl said yesterday. 'What I want to do is look ahead to see if there are necessary fixes.'"

Somers continued:

"Kuehl said her decision to look at the potential for conflicts of interest arose after learning that several grant applications to the institute had to be disqualified because members of the institute's board had written letters in support of the applicants."

The conflict cases involve John Reed, president of the Burnham Institute, and the deans of five medical who intervened on behalf of potential grants to their organizations, which is a violation of CIRM ethics policy.

Kuehl told Somers that a Los Angeles Times editorial urged reconfiguration of the CIRM board, but that following discussions with CIRM, she agreed that directors with expertise brought "the best understanding." Kuehl said,

"I'm really looking for solutions that will protect the public interest but not throw the baby out with bathwater in terms of expertise."

Late yesterday, CIRM released a statement from CIRM Chairman Robert Klein concerning the Kuehl bill, SB1565. It said,

"Last week we had highly productive discussions with Sen. Kuehl and similar discussions with Sen. (George) Runner and we believe we should be able to arrive at satisfactory language that advances the mission of Prop. 71."

CIRM directors have adamantly opposed legislation similar to SB1565 in the past. Klein's statement was carefully crafted to avoid saying anything directly about the latest bill and leave open the possibility of defusing it with some sort of action by CIRM itself.

Here is a link to the text of the bill, which is not yet available online through the legislature. The Foundation for Taxpayer and Consumer Rights put up the copy.

Lawmakers Target California Stem Cell Agency

One of California's more powerful legislators today introduced a bill aimed at the state's $3 billion stem cell agency and designed to ensure that "the state’s neediest residents will have access to therapies and drugs" developed as a result of taxpayer-financed research.

The measure would also require the state's Little Hoover Commission to study the structure of CIRM and report to the legislature by July 1 of next year with recommendations.

The legislation, SB1565 by Sen. Sheila Kuehl, D-Santa Monica, comes only a few days after CIRM attracted unwanted attention (see item below) with its proposal to boost the top pay ranges of its key executives by as much as $200,000 a year or 50 percent. The salary proposal received an unfriendly reception from some of CIRM's directors on Wednesday.

Kuehl(see photo), chair of the Senate Health Committee, said in a statement that the bill, co-authored by Republican George Runner of Antelope Valley, would maintain "the public’s trust by identifying ways to increase public accountability and reduce conflicts of interest."

CIRM watchdog John M. Simpson of the Foundation for Taxpayer and Consumer Rights said in a news release:

"The stem cell agency’s oversight board was designed with built-in conflicts of interest and it’s too big to be effective. They always have difficulties mustering a quorum. An outside analysis by unbiased observers can only be good. A hard-nosed look by the Little Hoover Commission is just what’s needed.”

Simpson also said,

"We need a provision that allows the State Attorney General to intervene if drugs or therapies funded by the stem cell agency are priced unreasonably. We’ve seen too many cases where companies benefit from publicly funded research and then set prices at obscene levels. They act like socialists when seeking research funding but are greedy capitalists when there are profits on the table."

No comment was immediately forthcoming from CIRM.

The text of the bill was not available online at the time of this writing, but Kuehl's office said the legislation would

"...require that grantees and licensees submit for CIRM's approval plans that will afford uninsured Californians access to drugs and cell therapies resulting from CIRM-funded research. The bill also ensures that publicly funded programs get the best prices for stem cell therapies and drugs by requiring grantees and licensees to sell them to publicly funded programs at a price that does not exceed one of the benchmark prices in Cal-Rx, the state’s prescription drug discount program."

The measure requires a super, super-majority vote – 70 percent of both houses – to pass. The requirement was created by Prop. 71 to make it extraordinarily difficult for lawmakers to make changes in the operation of the agency.

Passage would require a consensus from lawmakers that is rare in the Capitol. However, it is probably fair to say that the this week's pay proposal by CIRM will certainly contribute mightily to building that consensus.

(Here is a link to Ron Leuty's story on the bill in the San Francisco Business Journal.)

CIRM's 50 Percent Pay Range Hike Hits Roadblock

A key group of directors of the California stem cell agency today balked at boosting the maximum salary ranges of its top executives by 50 percent, citing the Golden State's budget deficit which has ballooned to $16 billion.

Reporter Jim Downing of The Sacramento Bee reported that members of CIRM's Governance Subcommittee said that increases of more than $200,000 (in the case of the CIRM president) were excessive. The subcommittee action came on the same day that news broke that the state budget deficit had increased another $1.5 billion.

CIRM President Alan Trounson, who earns $490,000, argued that the increases, which affect six other top positions at CIRM, were needed to attract top talent.

Downing quoted Trounson as saying,

"If I can't make appointments of people who can do the job, you've essentially wasted my salary, which is a disaster."

One of the members of the Governance Subcommittee is Claire Pomeroy, dean of the UC Davis School of Medicine(see photo). Downing wrote,

"Pomeroy, whose cash compensation at UC Davis totals $543,800, according to a University of California spokeswoman, noted that she is responsible for 8,000 employees at UC Davis, while the stem cell agency president heads a staff of 50 at most.

"'To me, there are still very fundamental questions about what positions they're citing as comparable,' (Pomeroy) said. 'This is sending the wrong message to the public about our priorities and about how we're going to spend what are limited pots of money.'"

The subcommittee did not act on some of the proposed salary ranges because they affected both Trounson and CIRM Chairman Robert Klein, who were present for the meeting. Klein, however, has declined a salary.

The subcommittee recommended increasing the top pay for some executives from $270,000 to $332,000, rather than the proposed $405,000. They did not act on ranges for agency attorneys, citing a lack of information, Downing reported.

As we have noted, the proposed increases in the pay ranges would have no impact on the state budget because CIRM's budget is constitutionally untouchable. However, the pay raises are important symbolically and politically.

The pay proposal now goes to the full board of directors for its March meeting.

Biotech Loan Taskforce Votes To Hire PriceWaterhouseCoopers

The California stem cell agency's plan to offer an ambitious loan program to the stem cell industry was discussed on Tuesday during a meeting in San Diego with teleconference links to elsewhere in the state.

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, attended the session. We asked him for a report on the event. Here is what he sent.

"CIRM's Biotech Loan Task Force voted unanimously on Tuesday to hire PriceWaterhouseCooopers as consultant for $50,000 to report on loan programs from other states and to offer a model of how the California program could work including rates of return that might be expected.

"PriceWaterhouseCoopers were the consultants that helped CIRM develop its strategic plan. Task force Chairman Duane Roth (see photo) said CIRM had checked with three consulting firms and had proposals ranging up to a cost of $350,000.

"But the primary purpose of the meeting was to hear views of executives of the companies that might apply for loans.

"Meeting in San Diego the loan committee heard general support for a loan program from a panel of seven industry executives. The panel included: William Adams, chief financial officer of International Stem Cell Corp..; William Caldwell, chairman and CEO of Advanced Cell Technology; David Gollaher, president of the California Healthcare Institute; Joydeep Goswami, vice president of stem cells and regenerative medicine for Invitrogen; David J. Earp, chief patent counsel and senior vice president for business development of Geron; Alan Lewis, president and CEO of Novocell and Ken Stratton, general counsel of Stem Cells Inc.

"Roth said that the motive for the program from CIRM's perspective is that it "is a way to recycle money and fund more research."

"Over the course of three hours the executives and the committee members discussed various ways the program could be implemented.

"Earp told the group that with a grant it's CIRM that assumes the risk but with a loan, the company assumes the risk.

"Adams said his company was very interested in a loan program and thought it could help products through the so-called "Valley Of Death," a reference to a promising scientific discovery that fails to make it to the clinic because of a lack of funding. He added that with current economic conditions "the Valley of Death has become more of a Grand Canyon of Death."

"A consensus emerged that a loan program should focus on translational research, not basic science.

"Roth suggested that a company would be able to apply for a loan tied to a specific product or for a company loan. If it was tied to a product and the product failed to be developed, the loan would be forgiven. Such a loan would carry a higher rate of interest than one tied to a company.

"Committee Member Ted Love urged that however the program comes together, "We should be starting out simple."

"CIRM President Alan Trounson told the meeting by telephone from San Francisco that the loan program should be built into various Requests For Applications (RFAs) that are called for in CIRM's strategic plan. There should not be a separate RFA for loans.

"Roth said he envisioned loan applicants applying under CIRM's usual RFA process and then submitting applications for peer review. Loans would be offered only after the application had been judged on scientific merit.

"ICOC Chairman Bob Klein asked if a loan from CIRM could serve as validation" of a company's efforts that would increase the possibilities for additional funding. The executive panel agreed that it would, perhaps with the most benefit to a public company.

"Committee members also wrestled with the fact that CIRM is limited by law to a maximum of 50 employees. That will make it difficult to administer a loan program in-house, they agreed.

"Klein suggested that CIRM follow the model of the housing industry and like "Fanny Mae" use "designated underwriters" to do the nitty gritty work of loan administration.

"Roth said he hoped to have the PriceWaterhouseCoopers report in March and hoped to offer a loan policy for ICOC consideration by June.

"After the meeting in a brief interview Klein suggested that the program might start simply with two RFAs -- perhaps Disease Team Research and Research Tools. He expected both would be offered in the fall.

Here is Simpson's commentary on the meeting:

"A loan program an intriguing idea, but the devil will be in the details and I'll continue to monitor them as they emerge. It's too early to know if FTCR will support the final program or not.

"From a policy making point of view, they are going about this the right way: gathering facts from stakeholders and discussing ideas in public meetings.

"Duane Roth should be commended for the way he is running the committee and the executives deserve thanks for participating on Tuesday."

Mystery Meeting Solved

The subject of the mystery meeting at CIRM has been solved. For you diligent readers, you may recall that the Standards Working Group scheduled a meeting for Feb. 28 but nothing was on the agenda. Here is the list of the significant items to be discussed that were posted today.

"Scientific presentations and group discussion of current issues in stem cell science.
"Clinical trials
"iPS experiments \
"Report on CIRM Guidelines for Oocyte Donation.
"Report and discussion of regulatory consideration for CIRM MES regulations."

It appears to be a worthwhile and informative session. We are looking to some background information on these subjects prior to the meeting.

Negative Reaction to 'Big Bucks' at California Stem Cell Agency

The headline on Biopolitical Times was "Big Bucks Become Bigger at CIRM." The subject was the proposed, whopping increase in salary pay ranges for top execs at the California stem cell agency.

Here is part of what Jesse Reynolds of the Center for Genetics and Society had to say today under the headline:

"Given the dire condition of the state's budget and the recent pay scandal at the University of California, this move will only attract more criticism for the California Institute for Regenerative Medicine. If the compensation sums skyrocket according to the CIRM's plan, calls for its termination, such as the recent editorial in Investor's Business Daily, would likely grow more common. "

Reynolds also had a good link to a 2005 story about the controversy about high salaries at CIRM, which you can find here.

We were not critical in 2005 on the salary issue. Talented people cost money. As we have remarked earlier, the increases in the CIRM pay ranges may be justified. But they have not been justified by CIRM. The agency's pay plan is extraordinarily ill-timed because of California's current budget crisis. Negative reaction could have been minimized with more thoughtfulness at CIRM -- thoughtfulness that could have spread increases over several years with a well-explained rationale. But our sense is that some of the folks at the top of the CIRM organization have a very limited grasp about public perceptions involving government.

CIRM Chairman Robert Klein, its board of directors and executives should understand that CIRM is a public agency first – with all the baggage that connotes – and a scientific endeavor second. Without public money and support, no research grants or fresh hESC science would exist.

CIRM Alleges Misrepresentation of Salary Proposal

The California stem cell agency says we have "misrepresented the issue on the salaries" in our post below, an allegation with which we do not agree.

Here is the statement this afternoon from Ellen Rose, interim communications officer for CIRM:

"You have misrepresented the issue on the salaries in your post. As I stated over the weekend, we are changing the ranges. This does not translate into a salary increase for anyone. We’ve done this to be in line with what we learned from the Mercer survey. Your post makes it seem like salaries are being automatically increased, which is not the case."

Here is our response to her:

"I repeatedly referred to salary ranges, including in the headline. But I will be glad to carry your comments verbatim. Meanwhile, do you want explain the rationale, such as why salary ranges should be increased. If they should be increased, why the 75th percentile? Why increase salary ranges in a year when the state is facing a budget crisis? And why increase the ranges unless there is the intent to pay someone at the level in the not too distant future? There is no point increasing salary ranges if there is no intent to pay at that level.

"Again, I will carry responses to those questions verbatim or to other comments in support of the pay range increase. Thanks."

The boosts in the salary ranges may be warranted, but CIRM has not made a case, particularly for such an ill-timed effort.

Fresh Comments

"Anonymous" has posted a comment on the pay item below and John Simpson. You can read comments by clicking on the word "comments" at the end of the item in question.

CIRM Proposes 50 Percent Pay Range Hikes; Watchdog Says They are Unjustified

The California stem cell agency is set to boost the maximum salary ranges of its top executives by 50 percent, a move that one watchdog group says flies in the face of California's budget crisis.

Under the proposal to be considered Wednesday by a subcommittee of the CIRM board of directors, the top salary range for the president would skyrocket more than $200,000 -- from $412,500 to $618,750. The salary range would also apply in the case of the chairman of the agency, Robert Klein, a multimillionaire real estate investment banker. However, Klein has declined to accept a salary.

Other proposed salary increases would see the top of the range climb from $270,000 to $405,000 for vice chairman, chief scientific officer and chief operating officer, a new position that is currently unfilled. The top of the salary range for general counsel and intellectual property attorney (another new, unfilled position) would jump from $225,000 to $337,500.

The Foundation for Taxpayer and Consumer Rights said the increases "are unjustified in the face of a state budget crisis."

In a statement prepared for release Tuesday, John M. Simpson, stem cell project director for the group, said CIRM was "tone-deaf" in proposing the pay hikes. He said,

"CIRM doesn’t operate with some financier’s private stash of cash. CIRM is a state agency funded by taxpayer dollars. It needs to act like one.”

Simpson also said that CIRM's general counsel already received a 41 percent pay increase in December after only 10 months on the job, boosting her salary from $160,000 to $225,000.

The CIRM document proposing the other executive salary range increases did not offer a rationale nor did an accompanying salary survey paid for by CIRM. We asked Ellen Rose, spokeswoman for CIRM, what the justification was for the increase, She said,

"We are re-aligning the maximum of the ranges to be slightly above the 75th percentile data Mercer provided to be consistent with our Compensation Philosophy."

No further rationale was provided by CIRM for the top pay increases, which amount to more than an average of 16 percent a year since 2005 when the first salary schedule was approved by CIRM directors. At that time, CIRM salaries generated considerable heat because of what critics called their extravagance.

CIRM is a tiny agency with only 26 employees, although it hands out grant money at a rate exceeding $20,000 an hour. It is limited by law to only 50 employees. Its operating budget this year is running about $8 million, about $5.5 million of which is salaries.

The proposed pay raises would have no impact on the state budget. CIRM operates outside of the normal realm of state budget matters. CIRM's budget cannot be cut by the governor or the legislature. CIRM spending (which is financed by state bonds) is untouchable because of constitutional changes approved in Prop. 71. That fact is not likely to be understood by the public. Beyond that, the increases are a symbol of governmental profligacy that will not sit well with many persons, regardless of their position on stem cell research. The pay hikes additionally will hand another cudgel to foes of human embryonic stem cell research.

The chair of the CIRM subcommitteee considering the pay increases on Wednesday is Sherry Lansing, a former Hollywood film studio executive and currently a member of the University of California regents. Several years ago, as a regent she went through a major flap concerning excessive compensation for top executives at many UC campuses.

That episode reflected poorly on UC, and CIRM is likely to suffer the same fate.

(The subcommittee meeting begins at 3 p.m. The public may participate in the sessions at locations in San Francisco, Los Angeles, Sacramento, Carlsbad and Irvine. You can find the specific addresses here.

CIRM's Latest on Navigating the Financial 'Valley of Death'

Coming up on Tuesday is a three-hour meeting involving the California stem cell agency's ambitious proposal for a biotech loan program that could pump as much as $750 million into the state's stem cell business.

The session is scheduled for San Diego with two teleconference locations in San Francisco. It is a must if you are associated with an enterprise interested in the loans or want to shape policy concerning them. And that includes nonprofit organizations, as well as businesses. The Biotech Loan Task Force seems to be heading in the direction of making the loans available to nonprofits as well as private enterprise. Additionally, funds would probably be available to out-of-state companies, so long as the loans were going to California operations.

The idea behind the effort is to leverage the cash available to CIRM and to help organizations bridge what is called the "valley of death" – an economic gap between research funding and traditional financing.

The plan – brainchild of California stem cell chairman Robert Klein – received a major airing last month. Generally the reception was cordial. Few want to rain on a $500 to $750 million parade, the range of amounts that Klein has discussed offering as loans.

At the invitation of CIRM, Gregory Bonfiglio(see photo), managing partner of Proteus Venture Partners of Palo Alto, Ca., laid the groundwork during the hearing. His firm, which has offices in Boston and Cambridge in the UK, is devoted to developing the business of regenerative medicine.

He told the loan task force last month that currently 300 companies exist that are "pure play regenerative." He said 800 clinical trials are underway in the US involving stem cells and regenerative medicine.

Gone are the bad old days – the "trough of disillusionment" – and, he said, "We're now on our way out."

Bonfiglio said,

"How do I know that? What is the current market dynamic? Well, the current market dynamic, triggered again in part to respond to Prop 71, is that you are seeing an incredible amount of activity at the university level. this technology is so compelling that it has captured the imagination of the best and brightest at our major universities. every major university in the United States now with a medical school has a dedicated regenerative medicine program. There are 65 of them in the US alone. There are another ten to twelve in the UK, and there is also very, very promising research going on in Singapore, in Australia, in China, in India."

He also cited additional changing market forces that have created a more favorable economic climate.

One of the caveats to the program was voiced by Richard Murphy, interim president of CIRM. Jeff Sheehy, a member of the CIRM Oversight Committee, echoed some of Murphy's concerns. Murphy said,

"I think the notion that all of this would be evaluated by CIRM staff is really overshooting. As you know, we're limited to 50 people in the organization. We would need to have real partnerships somewhere to be able to do this in a way that these guys would buy into as partners. I suspect that cannot be done in-house, at least with our present structure."

Klein said,

"We could have a delegated underwriting group that becomes the coordinating officer or the coordinating firm that, just as in the real estate field, the delegated underwriters evaluate the appraisals, the market studies, the toxicity reports, etc. In this field the delegated underwriter, a bank, for example, Silicon Valley Bank, could be a delegated underwriter who could agree to service this for us."

In addition to Bonfiglio, industry was represented at the January meeting by Burrill & Co., Advanced Cell Technology, Invitrogen, Silicon Valley Bank, Bay City Capital and Cooley Godward.

While we are not particularly fond of Powerpoint presentations without additional elaboration, Bonfiglio's is available on the CIRM site along with the transcript of his remarks. Combined, they provide a useful perspective on state of the regenerative and stem cell medicine business.

Day-long CIRM Meeting: No Topic Disclosed

The Standards Working Group for the California stem cell agency is holding a mystery meeting on Feb. 28 from 9 a.m. to 5 p.m. at the Kabuki Hotel in San Francisco.

We can't tell you anything about it. All we know is that the meeting has been scheduled. The agenda contains nothing more than the date and location. A few days ago, we asked CIRM about the nature of the meeting. So far, we have received no response.

Stem Cell Mischief and 'Research Sites'

For the first time in the brief life of the California stem cell agency, businesses based throughout the United States or elsewhere have had a chance to bid for some of the $3 billion in research funds being given out by the Golden State.

There is one catch. The firms must have established a "research site" in California by Feb. 5 of this year, which was the deadline for applications in the $25 million new cell lines program. If applicants did not have a site already in California, they had only about two months to set up one after the request for applications went out in late November.

CIRM reports that 12 businesses have applied, but provides little other information. Nor is the agency checking any time soon to see whether the business applicants, in fact, have "research sites" in California. That will come months from now, after CIRM directors approve the grants, which is scheduled for June. Following approval the CIRM staff will begin an administrative review, which in the past has taken additional months.

Perhaps we are overly suspicious, but given the tight timetable for creating a "research site," it seems that now is the time to check on the existence of these sites. Attempting to do so six months from now is problematic at best and is certainly not a good example of what might be called "due diligence." If there is a difference of opinion next summer between CIRM and an applicant about the existence of the site in February, the evidence trail could be cold and murky.

CIRM cannot tell us whether any firms headquartered outside of California have applied. Ellen Rose, a spokeswoman for CIRM, said the application does not ask for that information.

The application forms, in fact, do not even ask for a specific street address of the "research site," a term which is undefined in the CIRM documents we examined. The application asks only for the institutional mailing address of the organization for purposes of receiving the grant.

Rose said,

"Confirmation of applicant research sites in California is not something we do before accepting the application for review. This is a long technical process, which we will embark on only if the grants are recommended for funding during further administrative review."

She also said,

"The burden is always on the applicant to demonstrate eligibility. If a company can't demonstrate evidence of a California site on Feb. 5, then it is not eligible - this was the same for applicants that were new (either new to California or just new) non-profits, that have applied for grants going back to the first SEED and comprehensive grants."

Perhaps all the business applications come from well-established California firms. (The public cannot know because their names are deemed to be secret by CIRM decree.)

But it would seem to be in CIRM's own best interests to scan the applications within the next few days to sniff out any likely attempts at deception. If mischief is afoot, detecting it six months from now could be an ugly and unproductive business.

PR Laundering Update: Subcontracting Unusual, Says Industry Publication

Marc Longpre of PR Week wrote a piece on Thursday concerning the flap over the Rubenstein PR contract involving CIRM and charges of "laundering."

The article contained the following paragraph:

"Several PR pros told PRWeek that while being subcontracted through a law firm happens on occasion in the private sector, they had never heard of such an instance with a taxpayer-funded organization. Still, one source said that because of the small amount of money involved, the urgency of the matter, and the short-term nature of the arrangement, it did not seem to be a 'big deal.'"

California Governor Says Invitrogen and Biotech Leading The Way

California Gov. Arnold Schwarzenegger was out plumping for the biotech industry this week during a visit to Invitrogen, a stem cell firm located near San Diego.

The firm was Arnold's poster child Monday for growth in a time of increasing talk about recession and lack of jobs. Invitrogen has added 200 new employees to its staff of 4,300 at a time when economists worry about rising unemployment in the Golden State

In some ways, the Schwarzenegger appearance is the flip side of the piece on Monday in the Boston Globe that offered a more jaundiced view of stem cell economic activity in California.

The governor cited the $3 billion stem cell agency and its three-year-old grant program, the largest research effort for human embryonic stem cell research in the world.

"The rest of the world is somewhat jealous," he said.

Schwarzenegger added, "It's all about job creation."

His office mounted an impressive array of biotech industry statistics on the governor's web site, along with a video of a portion of his Invitrogen visit.

Missing, however, from the statistics is an important figure: the size of the California workforce, 18.4 million persons. Adding a relative handful of jobs here and here is going to do little to ease immediately the problems of a lack of economic growth. Even the total biotech workforce – 235,000 – is relatively small potatoes. That said, building economic growth is a brick-by-brick endeavor. No magic solutions exist. But hyping the stem or biotech industry can backfire, as CIRM well knows. California's stem cell agency is still feeling the blowback from the excessive rhetoric of the Prop. 71 campaign.

The governor is a powerful media draw. He noted that six cameras filmed his visit, although he attributed that to interest in Invitrogen and stem cell research. Reporter Terri Somers of the San Diego Union-Tribune was also there. You can read her report here.

Readers from overseas and out-of-state may well learn something from watching the Arnold video. It conveys some of the enthusiasm, energy and commitment to California's stem cell research effort.

Some CIRM Grant Applicants Disqualified

A number of organizations fell by the wayside in bids for CIRM millions in the new cell line and disease team planning grant programs.

CIRM reported 123 enterprises submitted letters-of-intent to apply for the grants. But only 109 applications were later accepted by the stem cell agency.

We asked CIRM whether it had disqualified any of the applications. Apparently so. Here is the response from Ellen Rose, interim communications officer for CIRM.

"There is typically a drop in numbers from letters of intent and applications. In some cases people don't follow up their LOI's and in others, applications were not submitted correctly or on time."

Secret PR for Legal Proceedings? A Comment

Last week, the California stem cell agency was lambasted for "laundering" public relations activities through its outside attorneys.

We called the item to the attention of Jeff Raimundo, a partner in Townsend Raimundo Besler & Usher of Sacramento. Raimundo is a former political reporter and longtime PR practitioner whose operations have spanned California.

Here is his comment:

"This one is not an easy question, in my view. At some point you have to take them at their word, because it does make a difference in how I would see this. Ordinarily, I would agree that PR contracts, products, etc. should be part of the public record and available for scrutiny. Even in those situations, I believe, 'drafts' of documents are exempt from disclosure under the California Public Records Act, so they probably don't need to worry about some 24-year-old junior account executive's ruminations being mistaken for some sort of sage advice or policy recommendation (which is exactly what happens too often with premature disclosure).

"In the case of PR around legitimate, legal proceedings, however, I think it should be kept secret. When we've done this in the past, the lawyers really have been our clients. They want to be able to deal with the trial lawyers' very well-honed and experienced PR apparatus in the case of liability lawsuits and with the prosecutors' (especially federal) equally professional PR operations in the case of criminal actions. Again, I would limit that PR counsel to legal issues only and not include peripheral issues like CIRM board actions or such PR activities as the announcement of new research grants."

Last week, we also reported about an indication that the governor's office may have been involved in the matter. Ellen Rose, a spokeswoman for CIRM, said, however,

"The governor's office was not involved in formulating strategy or in hiring Rubenstein."

The governor's office has not responded to our query.

More Than 100 Requests for CIRM Millions

California's stem cell agency and its dauntless grant reviewers have more than their share of work cut out for them this spring.

More than 100 new applications for some of CIRM's swag have arrived at its headquarters in San Francisco. They include the first ever applications from private businesses.

The applications come on top of the ambitious $262 million in lab grants, which are scheduled to be awarded this spring and which are the largest single round of grants in CIRM history.

Fifty fresh applications, including 12 from business, have been received for the $25 million new cell line program. Only 16 are scheduled to be awarded so the competition will be tough. The number of applicants is down from those announced for letters of intent. Fifty-seven organizations, including 15 businesses, wrote intent letters.

Alan Trounson, president of CIRM, said in a news release,

"We are pleased to have received applications to support research across the spectrum of approaches used to derive pluripotent stem cell lines. Advances in new technologies such as induced pluripotency, while promising, are in their infancy in terms of being able to drive therapies and cures for disease and injury. Therefore, to ensure that research moves forward in all of the areas that have potential to deliver medical advances to patients, these grants will fund the derivation of new cell lies from both the well-established means of human embryonic stem cells, which remain the gold standard for research into pluripotent cells, as well as new technologies."

Another 59 applications were received for 20 disease team planning grants of up to $55,000 each in a program totaling only $1 million. However, the planning grants are prelude to $122 million in disease team grants. Sixty-six organizations sent letters of intent for the planning phase. Nine businesses actually applied, although 10 earlier sent letters of intent to apply..

Trounson said,

"Our ultimate goal is to fund research that will deliver stem cell therapies and cures to patients. By funding this innovative disease team approach that encourages early collaboration among experts in the many disciplines and functions involved in moving a concept from preclinical research into the clinic, we hope to facilitate rapid advances across a broad spectrum of diseases. A key objective of the subsequent Disease Team Research Award will be for teams to produce an approvable regulatory filing enabling human clinical testing within four years after the award."

The scientific members of the group that reviews the grant applications in private come from outside California to avoid possible conflicts of interest. However, their statements of economic interests are not made public by CIRM. The other members of the panel are patient advocates who sit on CIRM's board of directors.

The group's recommendations go to CIRM's board of directors (the Oversight Committee), which has final authority. However, it has never rejected a recommendation for funding from the grant review group, as far as we can remember.

Bean Town Perspective: California Still Waiting for Stem Cell Results

The Boston Globe looked at California this morning and said the $3 billion stem cell research effort in the Golden State is a "lesson" and a "reality check" for Massachusetts.

Reporter Tod Wallack wrote that three years after the creation of CIRM, "Californians are still waiting for some results."

He continued,

"'It's too early,' said Alan Trounson, president of the California Institute for Regenerative Medicine, the agency charged with administering the stem cell funds. 'There are very few substantial developments [in medical science] that have happened in less than 25 years. There have been some, but they tend to be rare.'"

Wallack also noted the conflict of interest problems at CIRM, although he mistakenly reported:

"The stem cell agency rejected several applications for grants because they contained letters of support from advisory board members."

Those letters were written by members of CIRM's board of directors (medical school deans) who are prohibited by CIRM policy from writing such letters. The board is far from an advisory group. It makes the decisions on who receives grants.

The Boston piece downplayed the impact of CIRM's efforts, perhaps a reflection of a parochial East Coast perspective. Pumping money into stem cell research at the rate of $20,000-plus an hour, however, is no small achievement, even though it does not measure up to the perceptions created by the campaign rhetoric surrounding Prop. 71 more than three years ago.

Margolis: Beware the Embryonic Cheerleaders

The Stem Cell Blog run by Stanford's Chris Scott carried an interested commentary the other day from Don Margolis, founder of the adult stem cell company, VesCell, who tackles some of the issues related to reprogramming of adult stem cells.

Among other things, Margolis invokes cancer, criticizes "embryonic cheerleaders" (presumably not unborn pom-pom girls) and attacks "censorship" of those who differ with the heralds of hESC.

Margolis also hails the "refreshing" honesty of such folks as Jamie Thomson, George Daley, Doug Melton and Shinya Yamanaka. You can find the piece here.

Tackling Stem Cell Collaboration

Last week, the Mission Bay conference center at UC San Francisco was the scene of a meeting to discuss issues related to stem cell research. We asked one of those involved in organizing the event, Krishanu Saha, to give us a summary of the session. Here is Saha's report.

"In a successful workshop on Feb. 6 organized by the Berkeley Stem Cell Center and the Berkeley Science, Technology and Society Center, scientists, lawyers, ethicists, academic leaders, and patient advocates across California and the US gathered in San Francisco to discuss collaboration in stem cell research (see the "research roadblocks" item on Feb. 2).

"The morning consisted of three panels that described the problems in three interacting domains - the technical, proprietary, & ethical - of California's stem cell research climate. The need for sharing data on stem cell lines themselves was raised by a panel of practicing scientists, and later echoed by panels of intellectual property experts and ethicists.

"Intellectual property in stem cell tools was debated by both members of academia and industry, especially in regard to CIRM's policy. Legal experts and ethicists detailed the challenges of practicing within a patchwork of regulations across states and with tissue/cell donors.

Patient advocates and industrial leaders stressed their involvement in developing better healthcare during lunch, and in the afternoon, discussion shifted to how institutions could collaborate to deal with the problems laid out earlier. Both within stem cell research and other life sciences, several models of collaboration across states, academic institutions, and hospitals were discussed in an open forum.

"Participants agreed that there was a clear need for collaboration among stem cell research institutions and that California institutions will likely be intensely involved. Creating a database among institutions was seen as a potentially feasible first step, however further conversations will be necessary to determine the membership, costs, incentives, and types of data to include.

More information, including an important policy paper regarding this issue and a summary of the workshop, can be found at http://stsc.berkeley.edu/Events/2008StemCellResearchFeb6.htm.

Arnold Involved in CIRM Legal/PR Strategy?

CIRM documents in the Remcho/Rubenstein PR "laundering" affair suggest that the office of California governor Arnold Schwarzenegger may have been involved at one point – or that somebody connected to either the agency or Rubenstein wanted to engage the governor's aides.

An Oct. 15, 2006, email from Patrick Smith, executive vice president of Rubenstein Associates, to Richard Murphy, interim CIRM president, concerning a conference call about the Monash investigation in Australia contained this sentence:

"Do you (Murphy) want to include someone from the governor's office?"

It was not clear from the 54 pages of documents concerning Rubenstein's business with CIRM what generated that reference. Normally the governor's office does not become engaged in legal or PR strategy sessions of state agencies unless something exceptional is taking place.

It also was not clear from the documents whether gubernatorial aides actually did assist in CIRM's discussions.

We asked Smith what generated the mention of the governor's office in his email and whether the governor's aides became involved. Here is Smith's response verbatim:

"We do not discuss client matters."

We are querying CIRM and the governor's office about the matter.

New Comment

"Anonymous" has spanked yours truly in a fresh comment on the "laundering PR advice" item below. You can read it by clicking on the word "comments" at the end of the item.

Rubenstein Responds to 'Laundering' Charges

We asked Patrick Smith, executive vice president of Rubenstein Associates, for a response on "laundering" charges made below by the Foundation for Consumer and Taxpayers Rights. Following are the questions and his verbatim response.

"Do you think it is appropriate for your firm to 'launder' its advice to governmental agencies through the agency's attorneys? Is this common practice for your firm? Is it a good PR strategy for your client to engage in such surreptitious maneuvers? What is the nature of the contract that CIRM reports it is negotiating with your firm? Does your firm have any links with Rubenstein Public Relations? Please feel free to add any additional information that you think is appropriate."

Smith's response:

"Given the tone of your questions, which assume a negative before you have determined the fact, one wonders if this is a wasted effort. It is not uncommon in situations such as this for law firms to retain p.r. Counsel to ensure that any public statement or action is coordinated with the legal strategy, especially when a confidential investigation is involved."

"Laundering" PR Advice at $3 Billion California State Agency

The California stem cell agency has hired a prestigious New York City PR agency and, according to one watchdog group, has "laundered" its PR advice through lawyers in order to avoid public scrutiny.

The firm is Rubenstein Associates, whose founder, Howard Rubenstein (see photo from the firm) has been described as the "godfather of New York PR." The firm's clients include Super Bowl Champions New York Giants, the New York Yankees, Bloomberg LP and Pfizer.

The Foundation for Taxpayer and Consumers Rights disclosed on Thursday the $10,000 contract with CIRM's outside counsel. The FTCR said that some of the details of Rubenstein's work can be found in 54 pages of CIRM records that the FTCR secured as a result of a public records act request.

The group said,

"The stem cell agency used the tactic (of routing the contract through an attorney) to claim legal 'confidentiality' on public relations strategies...."

The watchdog group said,

"Eight of the 54 pages, which seem to be about specific advice on handling the news media, were redacted because they are 'documents exempt from disclosure on the grounds of attorney-client privilege and attorney work product,' according to Tamar Pachter, general counsel for the stem cell agency."

John M. Simpson, FTCR stem cell director, said,

"'What they've done is launder the public relations advice to a state agency through their outside attorney, Remcho, Johansen & Purcell. Once again the leadership of the California Institute for Regenerative Medicine has shown concern about image, rather than substance, and a continued commitment to secrecy."

Ellen Rose, a spokeswoman for CIRM, said,

"Rubinstein's advice was sought in relation to the news items that appeared in the Australian Herald-Sun about a researcher under investigation for improprieties who worked in the stem cell laboratory run by CIRM's incoming President Dr. Alan Trounson. There was no suggestion that Dr. Trounson was under investigation or involved in any wrongdoing.

"Rubenstein was hired because at the time, CIRM had no communications officer to provide advice and research on the Australian articles and related legal matters. They were hired via our outside attorney because the confidential investigation taking place in Australia may have had legal ramifications for CIRM and knowledge about what was taking place in this area was important for CIRM legal counsel to understand."

The initial, documented overture to Rubenstein came on Oct. 12 last year. However, Bob Klein, chairman of CIRM, has been quoted as saying the Australian investigation was known to CIRM as early as sometime in September or perhaps even August, long before CIRM's former communications director had left.

The practice of using attorneys to cloak certain matters is not entirely uncommon, at least with Rubenstein. Howard Rubenstein told the New York Times in 2006, in connection with celebrity scandals, that if they involve any sort of illegality, he advised "hiring a lawyer who could sit in on meetings, thus giving both star and publicist the benefit of attorney-client confidentiality."

However, this a matter involving a public agency, public dollars and public trust – not some troubled Hollywood personality. The amount is picayune compared to CIRM's overall spending; it gave out grants last year at a rate exceeding $20,000 an hour. But concealing relatively innocuous PR advice can only lead to speculation about what other, more important matters are being hidden because of CIRM's unnecessary desire for secrecy.

Also an issue for concern is the FTCR disclosure that CIRM is currently negotiating another PR contract with Rubenstein. Rose says, however, that it would be with CIRM directly. But given the dubious nature of the Remcho/Rubenstein arrangement, any further dealings with the New York firm would seem to require special scrutiny.

We have queried Rubenstein concerning their views on concealing PR advice to government agencies behind a legal veil. We will carry their comments when we receive them.

You can read reporter Steve Johnson's story in the San Jose Mercury News on the contract here.

Correction

In the "research roadblocks" item on Feb. 2, we incorrectly described one of the sponsoring groups as the UC Berkeley Stem Cell Center. It is correctly called the Berkeley Stem Cell Center, which is a collaboration of UC Berkeley, Lawrence Berkeley National Laboratory and Children's Hospital Oakland Research Institute. Thanks to Lily Mirels for pointing this out.

Klein's Role in Raising Matching Lab Grant Funds

Attention lab grant applicants: Bob Klein wants to give you a hand in raising matching funds to help you secure millions of dollars for your project. Just give him a call.

Klein, as most of you know, is chairman of the agency that this spring will be giving away $262 million for new stem cell lab construction. He is also one of the 29 members of the CIRM Oversight Committee that will ultimately decide which of the lab grant applicants will receive cash to build their projects.

One of the criteria for receiving a multimillion dollar grant from CIRM is a requirement for matching funds – the more dough you can bring to the table, the more competitive will be your application.

Last month we asked Klein about scuttlebutt that he was assisting some applicants in raising matching funds. Basically he said yes, but noted that he is not dealing with any of the specifics of the applications – just helping to raise funds.

He said that one of his roles as chairman of CIRM is to raise funds for stem cell research. He said that if potential donors for a lab grant project call him concerning matters of public record, he has been willing to speak with them. Of course, he noted he is prohibited from discussing the application itself.

We asked him if all applicants knew that he was available to help in raising matching funds. He pointed to the transcript of the Facilities Working Group in November in which he indicated he was willing to assist. He said all applicants have been told to read the transcripts of the facilities group.

Klein said his goal is to raise as much money as possible so that all the applications can be approved. He also said that some applicants with large amounts of resources may be asked to reduce the amount of money they are seeking so that all applicants can be funded.

Obviously, Klein's assistance raises questions about fairness. Are all applicants aware that he is available to assist? He said he may notify them. Is it appropriate for a member of the Oversight Committee to be so directly involved with applicants that he must later sit in judgment on? Klein said his overriding concern is to raise funds for stem cell research and help develop cures for millions.

Here is the text of the November transcript that Klein cited. It came during an exchange with a CIRM attorney, who affirmed that Klein's comments below were correct.

"I previously talked to various members of this, chairman and vice chairman, I think, and/or other members, to make sure that we were considering the fact that there may be donations from donors who come to us. And those donors who are related to some applicant who has publicly on file an application, while we can't talk to the donor about the application, the donor can ask us to see the history, which is a public record, of what grants have been approved for that institution or other historical information related to that institution.

"So the point is we can't talk to the institutions about their applications, but it's my understanding that doesn't mean we can't answer questions as to publicly available information of donors who want to know about the particular institution where we have a public history of making grants that we can point them to."

Biotech Loans: Industry Reaction, 30-40 Percent Failures, IP Qualms

The California stem cell agency's ambitious program to loan as much as $750 million to stem cell companies is the subject of a lengthy feature today by Terri Somers in the San Diego Union-Tribune.

The story is new to her readers so she covered a lot of ground familiar to readers of this blog, but she reported some additional details and comments from several biotech executives. Her story also carried some caveats from one watchdog and a member of the CIRM Oversight Committee.

Comments from industry were generally favorable. William Adams, chief financial officer of International Stem Cells in Oceanside, said,

"From our perspective, if we can pick up a loan for $2 million to $5 million, that helps us get a product into (clinical trials) and helps push us along to commercialization."

Also quoted were Samuel Woods, president of Stemagen in La Jolla, Alan Lewis, chief executive of Novocell, a San Diego-based embryonic stem cell company, and William Caldwell, chief executive of Advanced Cell Technology, now headquartered in Los Angeles.

John M. Simpson of the Foundation for Taxpayer and Consumers Rights, however, was critical of initial suggestions that loans would not carry the same affordability and access requirements as grants.

He said,

"This is an end run around that carefully deliberated policy and that is outrageous."

Jeff Sheehy, a member of the CIRM Oversight Committee, said he was concerned about the ability of the 26-person CIRM staff to administer a loan program.

"I don't think we have the capacity to evaluate and manage these kinds of things."

The loan program is the brainchild of Robert Klein, chairman of the agency. He downplayed concerns about administering the program.

"So we could do the scientific review, but have a delegated underwriter who essentially can, in fact, be in a risk sharing position. Under a risk sharing agreement, for example, that delegated underwriter might get a part of the upside on the repayment of the loan, including a part of the interest revenues."

Somers' report on the Internet carried one skeptical comment from a reader, "Gary63," who wondered about predicted loan failure rates of 30 to 40 percent. He said,

"Stay glued to this story...and follow the taxpayers' money."

More on Wednesday's session on Stem Cell Research

If you are interested in attending the session noted below on stem cell research issues, the organizers are asking you to preregister. You can do that by emailing Joe Tayag at jtayag@berkeley.edu.

Exploring Research Roadblocks and Cooperation

Intellectual property bottlenecks, data withholding and regulatory complexity involving embryonic stem cell research – all are part of a daylong meeting next Wednesday at the Mission Bay Conference Center of UC San Francisco.

Speakers include Bob Klein, chairman of the California stem cell agency, and its new president, Alan Trounson. Others include Jeanne Loring, director of the Center for Regenerative Medicine at the Scripps Institute; Jonathan Auerbach(see photo), president of GlobalStem in Maryland, and Michael West, CEO of Biotime in California, plus a host of academics.

The session is aimed at exploring a collaboration among various institutions to improve research sharing and cooperation.

Here is an an excerpt from a paper prepared in advance of the meeting. The authors are Krishanu Saha, Gregory Graff and David Winickoff, all of UC Berkeley.

"The technical, proprietary, and regulatory conditions currently giving shape to stem cell R&D are far from ideal: closed information, congested entitlements, and regulatory uncertainty present formidable challenges for the conduct of research and its translation into practical applications. Such an environment is likely to slow the pace of innovation, skew the distribution of health benefits towards the wealthy, and force ethical decision-making that lacks public accountability.

"Here we propose an institutional mechanism to coordinate the conduct and governance of human stem cell R&D: a collaboration among academic institutions to collect and make available information detailing the technical, proprietary, and ethical characteristics of cell lines and research tools developed at participating institutions. Centralization would help promote more efficient transfer and use of available and ethically preferential technologies. The coalition could also leverage the collected information to assemble and disseminate complex enabling research tools under common material transfer agreements or patent pools in those cases where multiple patents are necessary but are fractionated across multiple owners."

The session, which is sponsored by the UC Berkeley Stem Cell Center and the Science, Technology and Society Center, also at UC Berkeley, appears to be open to the public with no admission charge.