Klein's Lobbying Group Opposes Affordable Access Bill

The private stem cell lobbying group run by Robert Klein, who also serves as chairman of the $3 billion state stem cell agency, is formally opposing legislation aimed at ensuring that state-financed therapies are affordable and accessible to Californians.

The opposition of Americans for Cures was noted today in the legislative staff analysis of SB1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley.

The legislation cleared the Assembly Judiciary Committee today on a unanimous vote. No lawmaker has voted against the proposal in either house. It now goes to the Assembly Appropriations Committee and from there to the Assembly floor. It has already passed the state Senate.

The staff analysis said that Klein's group, Americans for Cures,

"...believe that access and affordability are best addressed by creating larger pools of affordable healthcare insurance, and that policies should accelerate cures, rather than discourage them. It is important to note that the intellectual property provisions in this bill that the opposition contend will create disincentives to commercialize drugs and therapies are very similar to the current and proposed regulations promulgated by the ICOC."

Klein is president of Americans for Cures, which shares the same address as his real estate investment banking firm in Palo Alto, Ca. It is extremely unusual for the head of a state government agency to also lead an advocacy group whose interests are in the same arena as the agency's. Americans for Cures has denied that it is a lobbying group, although it attempts to influence legislation and government decision-makers.

Klein told the Legislative Subcommittee of CIRM's board of directors last week that patient advocacy groups nationwide would be lobbying California legislators on SB1565. It is our recollection that he did not mention the role of his own group, which has nationwide ties with advocacy groups.

The staff analysis also added more information about an independent state body, the Little Hoover Commission, that would be requested under the bill to examine CIRM with an eye to coming up with recommendations, particularly in relationship to the built-in conflicts of interest on its board. The analysis said,

"The Little Hoover Commission is uniquely positioned to review conflicts and make recommendations for improved governance.

"An independent state oversight agency established in 1962, the Little Hoover Commission's role differs in three distinct ways from other state and private-sector bodies that analyze state programs. Unlike fiscal or performance audits, the Little Hoover Commission's studies look beyond whether programs comply with existing requirements, instead exploring how programs could and should function in today's world. The Little Hoover Commission produces reports that serve as a factual basis for crafting effective reform legislation and follows through with legislation or administrative changes to implement its recommendations.

"In addition to the public hearings the Little Hoover Commission holds to develop findings and recommendations, hearings are held and progress reports are issued in the years following the initial report until the Little Hoover Commission's recommendations have been enacted or its concerns have been addressed. These processes uniquely position the Little Hoover Commission to review possible conflicts and make recommendations for improved governance of CIRM and the ICOC, thus helping ensure better accountability to Californians for their $6 billion investment."

At its meeting Thursday and Friday, the board of directors of CIRM is expected to formally oppose SB1565.

Defining Which Businesses Get an Edge in CIRM Research Purchases

The "five-year threshold" language in the California supplier bill dealing with CIRM-funded research is now available online.

For those of you who don't want to click through, here is the text in question:

"'California supplier' means any sole proprietorship, partnership, joint venture, corporation, or other business entity that meets any of the following criteria:
"(A) The owners or policymaking officers are domiciled in California and the permanent, principal office or place of business from which the supplier's trade is directed or managed is located in California.
"(B) A business or corporation, including those owned by, or under common control of, a corporation, that meets all of the following criteria:
"(i) Has owned and operated a manufacturing facility or research facility located in California that researches, develops, builds, or manufactures products for life sciences research, continuously during the five years prior to submitting a bid or proposal to provide supplies to a California Institute of Regenerative Medicine (CIRM) grantee.
"(ii) Has been licensed by the state on a continuous basis to conduct business within the state during the five years prior to submitting a bid or proposal to provide supplies to a CIRM grantee.
"(iii) Has continuously employed California residents for work within the state during the five years prior to submitting a bid or proposal to provide supplies to a CIRM grantee.
"(C) The entity produces, builds, or manufactures a product or products in California and for the specific product or products that are used by CIRM grantees.
"(2) For purposes of qualifying as a California supplier, a distribution or sales management office or facility does not qualify as a manufacturing or research facility."

For more on this see this item.

CIRM Directors to Give Away Millions, No Details Available

With only two days left before the board of directors meeting of the $3 billion California stem cell agency, its public agenda is nearly bereft of any significant information for the public, other than cryptic references.

It is not a trivial matter. CIRM directors plan to give away $26 million at the end of the week and authorize another $60 million in grant programs. Neither of those figures can be detected, however, by examining the "topline" of the directors' agenda.

Indeed, the fact that CIRM's board of directors is meeting is not even of enough significance to be posted on CIRM's home page – although the directors will also be dealing with FDA concerns about hESC clinical trials, how California businesses could benefit to the tune of hundreds of millions of dollar from CIRM research as well as the agency's 46 percent increase in its operating budget.

For those of you not totally familiar with CIRM, it is an arm of the state of California – not a "quasi-public" agency as it has sometimes been described. It is enshrined in the state Constitution. It is subject to the public records and open meetings laws of the state, which declare that the public has a "broadly construed" right to access to information about state governmental matters.

However, CIRM is denying the public and interested parties any timely, specific knowledge of the matters to be decided this Thursday and Friday in Burlingame, Ca., a longstanding CIRM practice for directors meetings, with a few exceptions. Nor will the public have a chance to listen in or participate in the actual meeting via the Internet or teleconferencing, technologies easily accessible to CIRM.

Meetings of the full board of directors of the agency have never been broadcast via the Internet or via teleconferencing. However, directors subcommittees are widely available via teleconferencing in many specific locations in California and even a couple of times in Australia. But those have been a matter of convenience for directors – not the public.

Twenty-eight items are on the agenda this week. As of Tuesday, only one item has an Internet link to background information. Bob Klein, chairman of CIRM, has repeatedly pledged to comply with the highest standards of openness and transparency. Nonetheless, the agency has been generally plagued with a failure to post background material sufficiently in advance of meetings to give the public or interested parties a chance to decide whether to attend the directors' meeting or even formulate a cogent response. At several points, even CIRM directors complained about the not getting material in time.

Our understanding is that the responsibility for the board of directors' agenda lies with Chairman Klein. We are asking Klein for comment on this state of affairs.

(If you want information about the $26 million grant programs mentioned in the second paragraph of this item, you can find it on the California Stem Cell Report – not on CIRM's agenda. The $60 million proposed grant program is the only item that is linked via the agenda. You can find information on that program here.)

Will CIRM Directors Fulfill Prop. 71 Promises?

SAN FRANCISCO -- The California stem cell agency is maintaining a "watch" position on legislation aimed at pushing it into compliance with a state law that could mean hundreds of millions of dollars for California businesses.

At issue is a requirement in Prop. 71 – ballyhooed during the 2004 campaign – that CIRM set standards to ensure that the recipients of nearly $3 billion in grants purchase goods and services from California suppliers "to the extent reasonably possible."

Those standards still have not been set, nearly four years after creation of the stem cell agency. Because of the delay, some biotech companies and lawmakers pressured the agency earlier this year to move more rapidly. To make it clear that they were serious, legislation was introduced setting the standards in state law in the absence of CIRM setting its own standards through regulation.

That bill, AB 2381 by Assemblyman Gene Mullin, D-San Mateo, has easily passed the Assembly and is now before the Senate Health Committee on Wednesday, where it is virtually certain to pass.

On Friday, the Legislative Subcommittee of the CIRM board of directors discussed Mullin's bill, ultimately deciding to continue to watch its progress. The discussion was a bit muddled because Mullin proposed changes in the legislation only a few days before the Friday meeting. They involve a "five-year threshold" for suppliers, but no text of the proposed changes was available at the San Francisco CIRM headquarters. One Sacramento-area teleconference location, however, seemed to have a copy of the latest proposal. No members of the public had access to the Mullin changes.

CIRM Chairman Robert Klein said a five-year threshold for suppliers would discourage companies from moving to California as well as putting new companies at a disadvantage.

CIRM director Susan Bryant, from a teleconference location at UC Irvine, read other suggested "supplier" language from the University of California system. Again, no text was available at the meeting site at CIRM headquarters.

Meanwhile, it was disclosed during the meeting that James Harrison, outside attorney for CIRM, has begun work on separate standards for suppliers and grant recipients involved in the agency's $1.1 billion lab construction effort. Speed is critical in that effort because recipients are required to complete their lab buildings in two years or face penalties.

Later this week, CIRM directors will address the supplier questions during their meeting in Burlingame, Ca. No background information or text of what they are to consider is yet available to the public on the agenda for the meeting, which begins in two days.

California's Big Biotech Loan Program Headed for Approval in August?

SAN FRANCISCO -- The California stem cell agency's proposed $500 million biotech loan program seems to be headed for August action by the agency's board of directors, but not before size of the program, conflict of interest questions and underwriting issues are resolved.

The Finance Subcommittee of CIRM's board of directors discussed the proposal briefly on Friday, identifying policy questions that remain to addressed by the subcommittee. CIRM Chairman Robert Klein, who originated the plan, said the size of the program was critical. Without sufficient bulk, the size of individual loans would be limited. Klein said that clinical trials involve "very large loans."

CIRM Director Duane Roth said that directors also have to address potential conflict of interest questions that might arise during the loan-making process, a concern echoed by John M. Simpson, stem cell project director of the Consumer Watchdog group.

Klein also said that CIRM does not a large enough staff or expertise to handle a loan program. He said it would have to involve some sort of financial underwriting, similar to the type of underwriting practices at Fannie Mae, the housing loan organization.

No documents from CIRM about the program were available at the meeting or before it.

CIRM Directors Nix Kuehl Legislation

SAN FRANCISCO -- The California stem cell agency is preparing to oppose legislation designed to ensure that Californians have affordable access to therapies developed with taxpayer funds.

Too restrictive and premature. That was the sentiment at today's meeting of the Legislative Subcommittee of the board of the directors.

They were talking about SB1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley. The measure has passed the Senate and faces a hearing in the Assembly Judiciary Committee. No lawmaker has voted against the bill.

Directors pointed out that they already have an affordable access plan in place in their regulations for CIRM-financed therapies. They argued that the legislation would require each product to go before the legislature to determine a price.

Kuehl's measure is a response in part to widespread consumer unhappiness with the high cost of health care and industry pricing of therapies. But Claire Pomeroy, a CIRM director and dean of the UC Davis School of Medicine, said that CIRM's policy "cannot overcome the dysfunction" of the healthcare system. She said the legislature should give CIRM "the opportunity to do the right thing."

CIRM President Alan Trounson said that locking affordability provisions into state law would cripple CIRM's ability to negotiate prices and drive the industry away from developing therapies for diseases with small numbers of patients.

CIRM directors also reacted sharply to a provision in the Kuehl/Runner bill that would make it easier for CIRM to finance research that does not use human embryonic stem cells. The provision seems to play into the hESC vs. adult stem cell debate. CIRM Chairman Robert Klein said that Runner said the change was "very important" to Republican members of the state Senate.

Presumably, recent research developments that demonstrated that adult stem cells can be reprogrammed to take on the pluripotent characteristics of hESC lie behind the proposed change. However, directors said much more work needs to be done before that method can be shown to provide cells that truly match the characteristics and usefulness of embryonic stem cells.

Kuehl's bill also would request a study of CIRM by an independent body that would report back to the legislature next year at this time with recommendations for changes, including dealing with the built-in conflicts of interest at CIRM. One CIRM director is currently under investigation for violating the state's conflict of interest laws. And the board of directors is dominated by members from institutions that are benefiting to the tune of hundreds of millions of dollars in research grants.

Directors said that they understood that the state's Little Hoover Commission has already indicated it is going to perform the inquiry, regardless of the fate of the Kuehl bill.

Directors did not have a quorum at today's meeting and thus could not vote on a position on the legislation. However, their sentiments will come before the full board of directors next week, which is certain to oppose the Kuehl measure.

Here is the latest legislative staff analysis of the measure and the CIRM staff analysis, which we should note was well done.

We will have more later on other legislation discussed today by the Legislative Subcommittee.

Half-Million Salary for Klein?

SAN FRANCISCO -- Back in the early days of the California stem cell research effort, its newly elected chairman – millionaire real estate investment banker Robert Klein -- said he would not accept a salary for his work.

Now that is changing. He could be drawing a salary as high as $508,750, perhaps as early as this year. But the money may not come from state coffers.

The question of salaries for both the chairman of CIRM and the vice chairman came up during Thursday's hearing on the agency's budget for 2008-09.

John M. Simpson, stem cell project director for the Consumer Watchdog group of Santa Monica, Ca., asked whether the budget included salaries for the chairman and the vice chair.

The answer was no. But Klein, who has held his post since December 2005, said, "It's true at some point this issue needs to be addressed."

He said that personally he would like to see "non-taxpayer dollars" used for salaries for the chairman and vice chairman rather than using funds that could be used for research. He indicated that he would not be averse to raising private funds for salary purposes.

The vice chairman of CIRM is Ed Penhoet, also a multimillionaire. He does not accept a salary. We are querying him on his position on salaries.

Coming Up

Directors of the California stem cell agency later today will consider state legislation affecting CIRM. We will have a report on that meeting late this afternoon Pacific Daylight Time.

$13 Million Approved for CIRM Operations

SAN FRANCISCO -- The Finance Subcommittee of the California stem cell agency Thursday approved a 46 percent increase in its 2008-09 budget, which will total $13 million and push staffing close to the legal limit of 50.

The panel of CIRM directors made no changes in the budget that was presented by CIRM staff. Their questions largely centered on clarifying line items in the budget.

CIRM Chairman Robert Klein and director Jeff Sheehy both defended an increase in travel that seems to be up at least 287 percent from the current year, for a total of $558,000. However, that figure is for "other travel." Travel expenditures are also lodged in other budget areas, but were not broken out for Thursday's meeting.

Citing this week's agreements with Canada and the Australian state of Victoria, Klein said more collaboration is expected internationally. He indicated that travel is expected to both Great Britain and Washington, D.C. -- this to deal with federal stem cell legislation and regulation.

Klein said the agency "really needs to have our science teams to have access to leading-edge research." He said meetings with other scientists help CIRM prepare grant proposals that effectively target the most promising areas of research. Sheehy said that while some persons tend to regard travel as something of a boondoggle, "The conferences are very important. This is really work."

John M. Simpson, stem cell project director for the Consumer Watchdog group of Santa Monica, Ca., praised the budget generally but said more detail was needed for it to be fully understood.

The budget is well within Prop. 71 limits, according to CIRM, based on average allowable allocations. Those allocations showed that CIRM will be spending $1.8 million next year on legal expenses, up from $1.2 million this year. That includes its own legal staff and outside legal contracts.

The budget goes to the full board of directors next week, where it is expected to be approved.

We have asked CIRM to provide a breakdown of travel expenses in all categories and a breakdown on external contracts. We will carry that information when we receive it. We also asked Klein to clarify the organizational changes noted in the budget. He said he would get back to us on the language in the spending plan.

Differences in Old, New Versions of Budget Appear Minor

A quick, line-by-line examination of the old and new proposed budgets for CIRM for 2008-09 (see item below) shows only tiny differences in the two documents.

We could be wrong, but none of the major figures appears changed. In fact, the only change we could detect is under the "accomplishments" section.

The old document (posted a couple of days ago) said CIRM "awarded" $167 million in facilities grants to eight institutions. The new document says CIRM "awarded" $195.8 million in grants to eight institutions.

All of which raises a probably picayune question concerning the figures. Why are they different from those announced in May when a CIRM press release said its directors "voted to distribute" $271 million to 12 institutions. Our assumption is that the figures in the budget document actually represent checks going out to the institutions, and that four still have not been actually funded. But we could be wrong, and we have asked CIRM about the numbers.

CIRM Changes Budget Plan for This Afternoon's Meeting

The California stem cell agency has posted a revised operating budget for the fiscal year beginning July 1. The spending plan will be discussed at its directors' Finance Subcommittee meeting this afternoon along with CIRM's proposed $500 million biotech loan program.

The new budget document does not show what changes have been made from the one posted earlier this week nor does it indicate that it has been changed. The agenda as well does not indicate the presence of a revised document. No reason was given for posting the revisions.

Also added for today's meeting are additional teleconference locations where the public can listen to the discussion and comment as well. Those locations include: La Jolla, Los Angeles, San Diego, San Francisco, Pleasanton, Berkeley, Irvine, Carlsbad and Palo Alto.

No background documents have yet been posted on the biotech bank proposal for today's meeting which begins 5 ½ hours from now at 3:30 p.m. PDT.

Deep Yogurt, Biotech and the Anguish of Big Pharma

SAN DIEGO -- Biotech investment guru Steve Burrill Wednesday took hundreds of BIO attendees on a warp speed overview of the state of the industry now and in 2020.

His flight was fast and furious, and he may have caught some sign of skepticism in the crowd. Undeterred he told them he may be off on the timing of his predictions, but they were coming -- probably sooner rather than later.

Some of his observations may have been unsettling to some. Babies will have chips inserted into them at birth to track their health. Walmart will be the model for the delivery of health care. Healthcare seekers will wear T-shirts embedded with technology that will touch their heart, among other things. Self-care will be the order of the day.

Say goodbye to those blockbuster, high-margin drugs. Hello to even more generics. Consumers will drive the market. Big Pharma, already suffering the anguish of expiring patents, will suffer more. Can you spell patent devaluation, he basically asked his audience. The biopharmaceutical industry will have to be re-invented. He said:

"Our friends in Pharma are in deep yogurt."

Research and development will migrate overseas. Pricing will be set on a global basis. Burrill declared,

"Every company is global from Day One."

The average age of death, now about 80, will climb to 100. No longer will health care providers wait for the disease and then try to ambush it with low chances of success. Instead, providers and consumers will be out front, moving to prevent those nasty germs and tumors from even getting a start.

As for financing biotech business, things will pick up later this year. And in 2009, industry will start to roll. "It will be a very good year, a year from now," he said.

Burrill's comments were based on one of his firm's latest studies: "Biotech 2008: a 20/20 Vision to 2020." The report can be purchased online for $295, or $430 if you want bound copy.

Not Coming Up

We are going to hold Steve Burrill's comments today on the future of biotech for later dissemination. It seems there is a surfeit of stem cell news.

CIRM Legislation on Affordable Access Moves Forward

Legislation aimed at ensuring affordable access to California-financed stem cell therapies easily cleared the Assembly Health Committee on Tuesday and is headed for a hearing next week in the Assembly Judiciary Committee.

Meanwhile the California stem cell agency has posted its own analysis of the bill, SB 1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley, setting the stage for CIRM directors to take a position on the proposal.

The vote Tuesday on the bill was 16-0. No lawmaker has voted against the bill as it has moved through the Senate and now in the Assembly. If it clears the next committee, it will go to the Assembly floor, but it will have to return to the Senate for concurrence in Assembly amendments.

The CIRM analysis of the measure did not make a recommendation on approval or support. But it said, among other things,

"SB 1565 appears to tie the price for any and all commercialized products to the lowest pricing based on the current benchmarks of the CalRx program in effect at this time. Any change to that price over time, given any new circumstances, need for flexibility in order to leverage commercialization on products for “orphan diseases” or even for time itself would require a change in statute with more than 70 percent vote of both houses of the Legislature as well as approval by the governor. Any change would further be delayed by a minimum of one year in order to enact authorizing statute."

The analysis also took note of another change in the bill since it cleared the Senate. That amendment would delete a Prop. 71 provision that requires a two-thirds vote of the CIRM grants working group to fund research that does not involve pluripotent or progenitor cells. The Prop. 71 provision is aimed at giving a priority to hESC research.

The bill has also been altered to request, instead of mandate, a study of CIRM by an independent commission with an eye to preparing recommendations for changes in its structure, including its built-in conflicts of interest on its board of directors (ICOC).

According to the Assembly staff analysis of the legislation, its authors believe that "given the ICOC/CIRM's unique formation as a public entity, the public's investment of $3 billion in bond funds, and the close-knit nature of the scientific community, the ICOC and CIRM warrant a high level of scrutiny by an independent body...to ensure public trust and confidence and protect the integrity of the ICOC and CIRM from real or perceived conflicts of interest."

The CIRM Legislative Subcommittee will discuss the bill at its meeting on Friday. Its analysis also discusses two other state measures and links to their text and analysis. However, the CIRM link to the analysis for SB1565 is for an older version of the bill. Here is the link to the latest analysis.

Stem Cell Watchdog Warns of the Lure of the World Stage

San Diego – The Consumer Watchdog group today sounded a cautionary note on the international agreements involving CIRM (see item below) and warned that they "should be supported so long as they are based on scientific merit, not merely the glamor and glitz of playing on the world stage."

John M. Simpson, stem cell project director for the watchdog group, noted that California law requires that CIRM-funded research be conducted within the state. Prop. 71 also requires that California suppliers be given preference, an issue that is now before the California legislature.

Simpson said in a statement,

"If the collaborations are driven by the science, that’s great. If it’s a matter of saying let’s go international, just to play on the world stage, I would be dubious."

He continued,

"It’s important that applicants for the disease team grants be judged completely on the scientific merit of their proposals,. Decisions cannot be twisted for geographic equity. I would hope that international collaborative efforts would rise to the top, but if they don’t, so be it."

Sweeping Cancer Fight Launched by CIRM and Canada

SAN DIEGO -- Backed by $100 million in Canadian cash, the Canadian government and the California stem cell agency today announced a three-year effort to probe the role of cancer stem cells in developing the disease.

California Gov. Arnold Schwarzenegger said in a statement:

"Entering into collaborations such as this, which bring together leading medical research capabilities, have great potential in improving the lives of not only Californians, but people around the world."

Canadian Minister of Health Tony Clement said his government will contribute more than $100 million to the Cancer Stem Cell Consortium, which will work with CIRM on the effort.

A statement from CIRM said,

"The first potential area for collaboration under consideration is the upcoming CIRM Disease Team grants. These grants will provide an opportunity for researchers in California and Canada to collaborate, broadening the potential pool of expertise that can be applied toward research in a specific area."

CIRM's board of directors next week is scheduled to approve $1 million in planning grants for the disease program, which will run about $122 million. Those grants are expected to be awarded this time next year.

CIRM President Alan Trounson said,

"One of CIRM’s primary goals is to accelerate the field of stem cell research as a whole. In some instances we can do this more effectively through collaborations that involve the best scientific endeavors, regardless of geography. Through this relationship, CIRM money will continue to be earmarked only for research that takes place within California, but our funding can be significantly leveraged to accelerate the clinical benefits for patients. Coordinating our joint efforts in cancer stem cell research through collaborative programs with our colleagues in Canada will enhance the opportunities to contain and to prevent recurrence of certain cancers."

The Canadian/California announcement said the the Canadian partners in stem cell consortium are the Canada Foundation for Innovation, Canadian Institutes of Health Research, Stem Cell Network, Ontario Institute for Cancer Research and Genome Canada. The news release said they "are expected to make an initial investment of more than $100 million Canadian dollars in the collaboration, with Genome Canada, the Canadian Institutes of Health Research and the Ontario Government through the Ontario Institute for Cancer Research, having already confirmed commitments of up to $30 million each for cancer stem cell research. CIRM will support the collaboration through its existing programs."

CIRM also announced another collaborative agreement between the Australian state of Victoria, also utilizing the disease team grant program. The announcement said CIRM and Victoria are "laying the foundation for an arrangement under which they will jointly seek grant applications, evaluate them, and make recommendations for funding research activities." (Trounson is from Australia, moving to California to take the presidency of CIRM in January.)

The announcement did not indicate any funding beyond the $122 million from CIRM.

Both announcements were made at the BIO conference here, which has attracted an estimated 20,000 persons from throughout the world.

Schwarzenegger made a luncheon speech at the conference. Video clips are expected to be mounted on his web site later today. His office also prepared a California biotech fact sheet that highlight CIRM's $1.1 billion lab construction effort and its $530 million in research grants.

CIRM Budget to Jump Nearly 50 Percent

The California stem cell agency has proposed a $13 million operating budget for its next fiscal year, up 46 percent from this year's spending plan.

The proposal's biggest increases are for salaries and benefits -- $6.7 million, up 39 percent – and external contracts – $2.7 million, up 50 percent. The agency is proposing to increase its staff from 37 to about 45. Prop. 71 caps staff size at 50.

The "other travel" category is scheduled to jump 287 percent, to $558,000. CIRM said the increase will allow the scientific staff to attend meetings that will enable CIRM "to have an integrated picture of state of the art and forward-looking research agendas."

The spending plan also seems to shift more responsibilities to CIRM Chairman Robert Klein. The document said,

"The proposed budget reflects the redirection of legal and communication staff and contracts, as appropriate, from the Office of the President to the Office of Administration and the Office of the Chair. It also reflects the creation of the new Office of the Vice-Chair/President which is focused on intellectual property issues."

No further explanation was offered.

The budget for the $3 billion agency will be taken up tomorrow at a meeting of the Finance Subcommittee of CIRM's board of directors. It will then go to the full board at its meeting June 26 and 27.

The budget presentation is lucid and reasonably complete but was posted yesterday, only two days before it is scheduled to be discussed publicly.

Canadian Money and Gladstone/Yamanaka Research

SAN DIEGO – Robert Klein, chairman of the California stem cell agency, and Alan Trounson, its president, are in San Diego for the mammoth biotech industry conference -- BIO -- that has attracted about 20,000 persons.
They are scheduled to hold a news conference later today to announce more developments in the California/Canadian stem cell research partnership. Their event appears to be tied to Ontario Premier Dalton McGuinty's announcement Tuesday that his province will pony up $1 million for new stem cell research linked to California. That's on top of $30 million announced a year ago.

According to CBC News, the research will be conducted by Shinya Yamanaka of the Gladstone Institute in San Francisco. Also part of the research effort are the University of Toronto and the Hospital for Sick Children in Canada.

Rob Ferguson of the Toronto Star reported:

"'Both centers will be collecting patients with various diseases and making (ips) cells,' said Dr. Deepak Srivastava, director of Gladstone and a pediatric cardiologist."

We will have more on the Klein/Trounson news conference later today as well as a report on the biotech industry outlook by Steve Burrill, head of the Burrill & Co. biotech investment firm in San Francisco.

CIRM to Dish Up Millions for New Cell Line Research

The California stem cell agency next week is scheduled to hand out $25 million in grants for development of new cell lines and $1 million to help institutions that plan to apply later for $122 million in disease team planning grants.

The new cell line round is the first to be open to businesses based throughout the United States, although they must have a "research site" in California as of Feb. 5 of this year. Twelve firms have applied for funding. Fifty applications in all were received for 16 grants.

Fifty-nine applications were received for the 20 disease team planning grants, including nine businesses.

Also on the agenda for June 26 and June 27 in Burlingame, Ca., is the budget for CIRM for the financial year beginning July 1, CIRM's positions on stem cell legislation in California and Washington, D.C., a report on gifts to CIRM, consideration of a new round of grants for translational grants, "consideration of issues affecting" the $271 million lab grant programs and much more.

The agenda lists 28 items but, as usual at this point, does not contain any background material on any of them, including the decisions made by grant review committee on the new cell line and disease team planning applications. Some material is likely to be posted before the actual meeting.

Link to IP Law & Business Story

The item below originally omitted the link to the story about CIRM and IP. You can find the story here if you use the magazine's free registration.

California Stem Cell Cash – Last Resort for Business?

Revolutionaries, uncertainties and big California bucks are all part of a piece in IP Law & Business magazine this month dealing with the state's $3 billion stem cell research agency.

Written by Joe Mullin, the cover piece explored the world of IP at CIRM, including comments from Robert Klein, chairman of the agency, and concerns from biotech businesses.

Klein was described as maintaining "the rhetoric and stance of a combative underdog." Mullin wrote that Klein spoke to a group of stem cell activists last spring, firing them up for the fray.

"'How many people do you think it takes to start a revolution?' he asked the crowd. 'I can tell you, it's many less than the people in this room.'"

Mullin noted the importance of California's $3 billion for research at both academic institutions and businesses. But he said that the fact that California has called for payback on some of its investment is troubling to some in industry. He wrote:

"...(If) California is any guide, state funding may usher in long periods of uncertainty, and new demands for a much larger share of the proceeds from any discoveries than what the life science industry has seen before."

Mullin continued:

"By contrast (to the federal government), California's stem cell agency is still an unknown quantity, and that spooks the biotech industry. 'There is an oft-repeated concern that IP will need to be shared with competitors,' says (Paul) De Stefano(a Fish & Richardson partner and former chief corporate counsel for Genentech Inc.). 'Whether that's a legitimate fear or not, I've heard literally dozens of investors talk about it,' he adds.

"BioTime Inc., for instance, had considered applying for a small CIRM grant-only about $300,000-but has decided to look elsewhere for now. The company's CEO, Michael West, says he still might apply for a CIRM grant, but he'll keep the money away from BioTime's core business so as not to burden the company with what he calls 'completely unrealistic' state royalty rates."

Mullin wrote:

"The fact that CIRM is considering changes to the IP policies is 'disquieting, to say the least,' says Palo Alto-based StemCells, Inc. general counsel Kenneth Stratton. His company, which along with Geron is well-established by industry standards, won't say whether it is applying for a CIRM grant. But like West at BioTime, Stratton says that the requirements make CIRM money expensive and less attractive than other options. The agency is at risk of becoming a 'funder of last resort,' says Stratton."

However, Mullin quoted CIRM officials as saying it is currently processing 50 grant applications from businesses. That number undoubtedly will rise as more requests for applications are forthcoming from CIRM.

Our comment: Klein is inclined to flourishes that are keyed to his different audiences. On one hand, he fires up activists with rhetoric unsettling to businesses. On the other hand, he assuages industry anxiety at sessions involving his generous $500 million biotech loan proposal. Business concerns about uncertainty are financially quite legitimate and to be expected. However, those concerns will never be completely alleviated, and California has a big bundle of cash previously unavailable to industry. CIRM has an obligation to cut the best deal possible for the people of California.

(Access to the IP Law & Business article requires free registration, although it calls the process a "subscription.")

CIRM Directors To Take Crack at Budget and Stem Cell Legislation

Next week, the $3 billion California stem cell agency will air for the first time the proposed spending plan for its upcoming fiscal year, which begins only 11 days following the budget session.

A draft of the proposed budget has not yet been posted on the agency's website for next Thursday's meeting of the Finance Subcommittee of CIRM's directors. The panel has also scheduled an informational presentation on the proposed $500 million biotech loan program, including discussion of "portfolio policies" and use of consultants. Background information on that presentation is also not yet available.

In another meeting next week, the directors' Legislative Subcommittee is scheduled on Friday to consider state legislation aimed at ensuring affordable access to CIRM-financed therapies. That measure, SB1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Apple Valley, has passed the state Senate and is now before the Assembly Health Committee.

The bill would also require an outside study of CIRM to completed by about this time next year, with recommendations for changes in the agency's structure and procedures.

CIRM has not yet taken a position on the bill, but has opposed similar legislation in the past.

Also up for consideration by CIRM directors is other state legislation (AB2381) aimed at compelling CIRM to follow through on a Prop. 71 requirement to give preferential treatment to California businesses. The bill by Assemblyman Gene Mullin, D-San Mateo, has passed the Assembly and is scheduled to be heard June 25 in the Senate Health Committee, chaired by Kuehl.

CIRM is moving on its own to deal with legislative concerns about failure to comply with Prop. 71, but CIRM's proposal seems to leave the door open to more competition from businesses from out-of-state than Mullin's measure.

Other legislation scheduled to be considered by CIRM directors is AB2663 by Assemblyman Mervyn Dymally, D-Compton, and AB2296, another Mullin bill. The Dymally measure, now in the Assembly Health Committee, would provide for Medi-Cal coverage of stem cell clinical trial expenses, under certain conditions. Mullin's 2296, which passed the Assembly 76-0 and is now before the Senate Judiciary Committee, seeks to deter what its backers believe is an alarming increase in attacks on scientists who use animals in research. The measure is sponsored by the University of California.

CIRM has not posted any proposed positions or analysis of any of the measures. But you can find the latest legislative staff analysis on the bills on the following links: SB1565, AB2381, AB2663, AB2296.

The CIRM committee has also scheduled a "consideration of status" of federal stem cell legislation, including the stem cell bill vetoed by President Bush nearly a year ago.

The main meeting locations of both CIRM committees is San Francisco, but remote teleconference locations are available. For the legislative group, they include Sacramento, Irvine and Elk Grove. For the finance group, they include Pleasanton, Irvine, Berkeley and Carlsbad. The specific addresses can be found via the agenda links in the second and third paragraphs of this item.

CIRM Proposal to End Peer Review Requirement

The Consumer Watchdog group has detected a proposed, far-reaching change in how grants could be awarded by the $3 billion California stem cell agency.

John M. Simpson, stem cell project director for the Santa Monica group, reported on his blog Wednesday that CIRM is proposed to eliminate language that requires peer review of grant applications. Instead, the CIRM president, currently Alan Trounson, would review the applications.

Simpson quotes a CIRM spokesman as saying that the language is intended to apply in the cases of applications for small grants for conferences and workshops. However, Simpson notes that the proposed language goes well beyond that.

He said that the language in the grants administration policy that would be eliminated is:

"'All research proposals will be peer reviewed so that the most promising scientific proposals are funded.'

"The reason given:

"'This is a substantive change to allow for the possibility of Program Announcements under which the President, rather than the GWG(Grants Working Group), will review applications.'"

The change comes up at a June 20 meeting on the grants administration policy. Simpson said he will suggest modification of the proposal so that it would not strike the peer review requirement. Instead Simpson would add the following:

"Proposals to fund conferences, symposia, workshops or similar events will be reviewed by the President."

CIRM Dredging Up Old Economic Controversy

Four years ago, supporters of California stem cell research ballyhooed the economic impact of the Prop. 71, the ballot measure that created the state's $3 billion inquiry into human embryonic stem cells.

A $200,000 study commissioned by the Prop. 71 campaign predicted healthcare savings of as much as $12.6 billion over 30 years and a net state government profit of at least $1 billion. The study was instantly a bone of contention during the campaign and long after and held up as an example of stem cell hype.

"Hopelessly optimistic" was how one reasonably detached writer, David Hamilton, described the campaign analysis in a "biotech bubble" story for Slate.com.

The study was ordered up by then Prop. 71 campaign chief Robert Klein. Now chairman of the California stem cell agency, Klein has commissioned another economic impact report by the same organization, Analysis Group of Palo Alto, Ca. This time the study will cost only $49,900 but it comes at the expense of taxpayers – not campaign donors. It also diverts funds from other activities of the stem cell agency. The question is why?

With few exceptions, no one is likely to deny that California's stem cell research can benefit the state economically. The principal dispute is about the magnitude of the impact. However, this latest study suffers from the same problem as the first. It is not likely to produce a finding that runs contrary to the beliefs of Chairman Klein and other supporters of the stem cell research. That leaves CIRM open to credibility challenges.

The study is also not necessary to convince true believers. And adamant opponents will never believe it. That leaves only a tiny segment of the population as a propaganda target, if one is to believe Klein. He has repeatedly minimized the size of that group, citing overwhelming support for hESC research among the general population.

The study will certainly generate several results – none of which is favorable for CIRM. It will raise questions about unnecessary spending of taxpayer money. It will rekindle a debate about the true economic impact of CIRM, stirring up controversies better left dormant. And it will feed concerns about stem cell hype on the part of the agency and raise questions about its credibility.

Here are samples from the David Hamilton's piece Feb. 6, 2007, in which the former Wall Street Journal reporter wrote that the campaign study appeared "hopelessly optimistic."

"To begin with, they assume that stem-cell treatments will work in the first place. Many of the most hyped biotechnology innovations of the last 25 years have yet to live up to their early promise. And when they do work, they often tend to improve medical care at the margins instead of revolutionizing it."

"What about the potential of stem-cell research to spur economic development—can a state that sponsors stem-cell research hope to attract cool scientists who will then draw others, plus a coterie of entrepreneurs and venture capitalists? Biotech companies do tend to cluster in places like San Francisco and Boston, but their overall impact on regional economies tends to be limited. While they often pay high salaries, the vast majority of these companies are tiny, unprofitable startups with fewer than 100 employees. They frequently collapse well before they earn a dollar in sales. Even successful biotech ventures are often bought out by distant drug companies, which sometimes shut down the acquired company while transferring its research activities and any products elsewhere."

Hamilton also cited a study by Richard Gilbert, a UC Berkeley economist, who estimated California's potential royalty income from CIRM research could be as low as $18 million compared to $1.1 billion suggested by the 2004 study by the Analysis Group.

We could be wrong about all this. Perhaps the Analysis Group will produce a study that is hailed as balanced, objective and useful. CIRM tells us to look for the report, originally scheduled for January, to appear later this month.

Stem Cell Research, Money and State Efforts

The United States is lagging behind other countries in terms of its global share of human embryonic stem cell research, but that could change as more states pump dollars into the effort.

That's the upshot of a report by Aaron Levine(pictured), assistant professor of public policy at Georgia Tech, in the online publication Cell Stem Cell.

He said supportive policies and public research dollars in the United Kingdom, Israel, China, Singapore and Australia are producing unusually large shares of published hESC research.

However, the Georgia Tech press release on Levine's work says,

"Venturing where the federal government fears to tread, states like California, New York, Connecticut and Maryland are becoming places researchers can turn to for human embryonic stem cell funding. But Levine thinks that development may complicate matters.

"'There are a variety of funding sources out there now, but it makes the field more complicated for scientists to follow the various rules set forth by the states and foundations,' said Levine. 'I think scientists would prefer clear oversight from a federal government that’s supportive of their research.'

"Levine plans to follow up this current work with a look at how collaboration is affected by these different state policies."

Monya Baker of Nature's Niche stem cell blog also wrote about the study.

She reported,

"'The study chips away at the question but doesn't necessarily take into account a number of other factors,' says Stanford University’s Jennifer McCormick, whose work has also found that the rate of the US publications in human ES cell research was lagging relative to other countries. For example, the study does not control for the fact that some countries invest more in commercial than academic research or that some countries recognize patents covering human ES cell research and others do not. "

Andrea Gawrylewski of The Scientist had this:

Brian Salter, professor of politics and biomedicine at King's College London, said the Levine study does not take into account the hierarchy of journals and journal impact factors. She quoted Salter as saying,

"Underperforming countries may have scientists who go for the higher status journals."

Fresh Human Eggs and Stem Cell Economics

The price of human eggs and their scarcity, at least for stem cell research, once again have risen as topics, but this time in New York.

The events in the Empire State, however, dovetail nicely with a similar, ongoing issue at the Golden State's $3 billion stem cell agency.

Hawk-eyed Jesse Reynolds of the Center for Genetics and Society in Oakland, Ca., spotted the New York egg issue and reported on it on the Biopolitical Times.

He wrote on June 3,

"One aspect that caught my eye, not surprisingly, concerns the sourcing of fresh human eggs for cloning-based stem cell research (a.k.a. somatic cell nuclear transfer, or SCNT). Although NYSTEM's brief authorizing law is silent on this and related issues, such matters have been deliberated by NYSTEM's Ethics Committee. The draft strategic plan reveals the Committee and the program's governing board are considering offering compensation for women to provide eggs. (pages 26-27)

"This would be an unfortunate deviation to the generally agreed-upon practice of only reimbursing for expenses. I am aware of no ethics committee that has endorsed payments,* and of only one research team which offered them (and that was before the consensus against compensation crystallized in 2004). The good news is that there is still time for input: NYSTEM has not explored the issue in depth, and the Ethics Committee will discuss the topic at its next meeting."

Earlier this year, we reported that the California stem cell agency has embarked on a review of the human egg market and the needs of researchers, some of whom are complaining that they do not have enough raw material.

The study was set in motion after Harvard scientist Kevin Eggan told the CIRM Standards Working Group that he and his colleagues had spent $100,000 advertising for donors and "pursued every option" for collecting eggs with little success.

CIRM President Alan Trounson said "accessing those eggs is no trivial matter." He said scientists are seeking grants from CIRM for research that may not be feasible because of the lack of human eggs.

A wide-ranging review of the issue and related topics is expected to surface publicly at CIRM sometime this year. Issues that may be aired include: availability of eggs and their numbers, researchers' perceptions of the problem, possible reimbursement of IVF treatment, use of eggs by CIRM researchers from other areas where compensation restrictions are not so tight (such as possibly New York) and the grandfathering of cell lines that were derived before CIRM regulations were adopted.

The subject comes under the Standards Working Group, which has a July 25 meeting scheduled in Los Angeles. However, no topic for that session has been announced. We are asking CIRM when the egg issue will come up.

On other related notes:

The Feb. 28 meeting of the Standards Working Group on eggs and other matters carried a reference by CIRM Chairman Robert Klein to an "opinion" by CIRM outside counsel. We queried CIRM about the opinion. Here is the agency's response:

"There is no email or other written legal opinion from James Harrison regarding reimbursements for IVF costs. The transcript from the working group reflects that Bob did query Harrison during the meeting asking him to send a copy of law 1260 (SB1260 by Sen. Deborah Ortiz), which deals with payments for eggs. Harrison did send the bill in an email and that is what is referenced in the transcript. Bob requested that so that he could show a section toward the end of the bill that explicitly states nothing in 1260 is designed to change anything in Prop. 71."

Marcy Darnovsky of the Center for Genetics and Society also has a rundown on writings by feminist scholars on eggs and cloning-based stem cell research. You can find the citations and links to the articles here.

San Francisco Business Times Surveys CIRM

Reporter Ron Leuty of the San Francisco Business Times put together a wide-ranging series of articles this week on the state of California's stem cell agency.

The six pieces cover everything from CIRM's proposed $18 million training program and $500 million biotech bank to its lab construction grants and CIRM-connected research results. Leuty wrote:

"Nary a segment isn’t touched in CIRM’s strategy: companies, newly minted researchers, community college biology students, cutting-edge investigators, small labs, shared labs and big buildings. Likewise, (CIRM Chairman Robert) Klein said CIRM’s portfolio of funded technologies, products and disease targets will be broad. At the very least, stem cells could offer the pharmaceutical industry a more accurate and more animal friendly way of testing the toxicity of drugs. At most, they could change the medical treatments forever."

Much of the ground is familiar to our readers, but Leuty brings a fresh look and interviews with businessmen, scientists and others that are worth reading. Unfortunately the articles are locked behind a subscription only web site. But our bet is that Leuty will ship you copies if you send him an email. He can be contacted through the Business Times website.

It is also a likely bet that CIRM has ordered up some reprints as well. If not, they should.

Fresh Comment

Larry Ebert of the IPBiz blog has posted a comment on the Koch/Murphy item below.

Koch's Experience

An attorney, who must remain anonymous but who is familiar with intellectual property law, sent the following re Nancy Koch in the item below:

"Chiron's chief IP attorney, under whom she worked, was a strong and insightful patent portfolio strategist, so she probably has good experience from working with him."

Murphy and Koch: IP and Presidential Consulting

The California stem cell agency has picked up a couple of consultants – one for intellectual property and one to advise its president – with contracts totalling $230,000.

Nancy Koch (see photo) has been hired part-time for six months through Oct. 7 on a $150,000 contract to deal with IP matters. Richard Murphy snagged an $80,000, four-month contract to assist CIRM President Alan Trounson. It is Murphy's third tour of duty at the $3 billion agency.

Murphy first served on CIRM's board of directors and then as the $300,000, six-month interim president at CIRM. His latest contract runs through July 31.

In response to a query, CIRM reported that Koch was deputy general counsel of Chiron Corp. and its successor Novartis Vaccines and Diagnostics, Inc. During 11 years at Chiron/Novartis, Koch was responsible for a wide range of intellectual property matters including litigation and licensing. Between 1983 and 1995, Ms. Koch worked at the Farella, Braun and Martel law firm in San Francisco.

CIRM Looking for More Help

The California stem cell agency is continuing to hire, currently listing eight openings ranging from a public relations staffer to an intellectual property lawyer.

If it fills the positions, staffing at CIRM will hit about 39 persons, creeping up on its legal limit of 50.

Recently, CIRM posted an opening for an attorney (salary up to $165,000) to deal with legislative matters and provide legal support to CIRM Chairman Robert Klein. The position would also assist outside counsel on conflicts of interest, deal with agency regulations, the biotech loan program and bond financing for CIRM as well as "finalizing" intellectual property regulations. The agency has also been seeking a staff IP attorney for some time at a salary of up $277,500.

Another recent posting is for a science writer/multimedia editor with a salary of up to $75,000. The position would be in CIRM's public relations department with responsibilities for creating videos, writing research summaries and developing pitches for the media.

Other job openings at CIRM include scientific officer, grants management specialist, grants review specialist and two administrative coordinators.

CIRM To Update Goals; Watchdog Urges Openness

The California stem cell agency is moving to revise its strategic plan, as well it should as the field has changed and the ambitious, original goals have not been met.

Just how the changes will be made is unclear. But John M. Simpson of Consumer Watchdog is urging an open process that reflects the spirit of the original proposal. Simpson wrote on his blog:

"...(I)t is essential that the the methodology in developing the plan not be scrapped.

"Key to the plan was the open and transparent way it was developed. Hearings were held around the state. Seventy interviews with 73 individuals were conducted. The interview team even asked me what I thought. Strategic Plan Advisory Committee meetings were public.

"I'm not saying the update needs to take as much, time but certainly it must have the same inclusive approach if it is to win the same broad-based support from all stakeholders that the original plan enjoyed."

Trounson and Clues to CIRM's Scientific Interests

Want to track the latest scientific thinking at the $3 billion California stem cell agency? What research looks promising to the folks at CIRM? And does it mean possibilities for future funding?

CIRM President Alan Trounson is now offering some clues. He has begun a practice of discussing what he considers interesting research at the beginning of meetings of the CIRM board of directors. He also touches on issues of the day in stem cell research during the presentations.

His observations are tucked away in two different places on the CIRM web site. They can be found in the transcripts of the meetings of the board of directors, which is known as the Oversight Committee, as well as on the online agendas of the meetings, but only after the meetings take place – at least so far.

In May, Trounson discussed a report in Nature in April involving the McEwen Center for Regenerative Medcine (Gordon Keller's group) and research by Lei Yang. VistaGen Therapeutics of South San Francisco was also involved. Trounson's slides from the agenda can be found here.

Among other things, Trounson said he anticipated "that there will be a proposal coming downstream for clinical trials." He said,

"Interestingly, in these studies there was not any observation of teratomas or unwanted cell types."

Other topics for Trounson in May:

-- The Catriona Jameson work at UC San Diego involving TargeGen of San Diego, Ca., and the work, also reported in Nature April 2008 involving Michael Clarke's lab, Stanford and the University of Michigan.

-- Work involving Lorenz Studer, Sloan Kettering and Wakayama Riken, published in Nature Medicine March 2008.

Here are links to the transcript and slides in March and the transcript in January, where he also discussed recent stem cell research. No slides were posted in January.

(A tip of the hat to John M. Simpson of Consumer Watchdog who pointed out the usefulness of Trounson's briefings.)

Fresh Comment

"Anonymous" has posted a comment on the "Cost Overruns" item.

CIRM View on Remcho Fees

Don Gibbons, chief communications officer for CIRM, sent the following comment on the item below concerning the contract with its outside lawyers:

"You state the board approved a '$165,000 retroactive payment.' That is not what occurred. The board approved an increase in the total amount billable during the life of the contract which runs through June 30. CIRM also made it clear that it did not expect to need the full amount. The only retroactive piece is for the hours billed in April and May, which while not yet invoiced, are expected to be under $60,000, and again this occurred because of a cancelled committee meeting in April."

Correction

The "Cost Overruns" item below incorrectly reported that CIRM has "roughly 26" employees. CIRM today reported that it has 31 employees.

CIRM's Outside Lawyers Win Retroactive, 66 Percent Pay Hike

A key panel of CIRM directors has approved a $165,000, retroactive payment to its outside attorneys, Remcho, Johansen and Purcell of San Leandro, Ca. Details of the proposed action were never disclosed to the public in advance of approval.

John M. Simpson of Consumer Watchdog reported the approval on his blog, saying,

"Stem Cell Agency Chairman Bob Klein said Remcho billed the additional hours because of (James) Harrison's work on the agency's first bond sale, efforts to negotiate discounts in the grant awards to build research facilities and added involvement in vetting Requests for Applications (RFAs) for grants."

Simpson, who attended the Governance Subcommittee meeting Wednesday and made comments during the session, wrote,

"I suggested that retroactively approving the increase was bad policy. Klein said the item was on the agenda for an earlier planned governance committee meeting, but the session was canceled.

"He said that Harrison ran up the additional billable hours at the law firm's risk, though I can't imagine the agency would have refused to pay."

Well prior to the meeting, the California Stem Cell Report asked for more information on the cryptic Remcho agenda item, but CIRM repeatedly refused to disclose what was being considered despite the fact that the information is certainly a public record.

Cost Overruns and Candor from CIRM

The California stem cell agency now says it is "mind-bogglingly silly" to think, in effect, that the total cost of the Grantium contract for a new grant management program would only be $757,000.

CIRM's directors were assured last October during their meeting in San Diego that the figure was the "complete cost." The expenses were reviewed at the time in some detail by Ed Dorrington, CIRM's information technology director. Richard Murphy, interim president of CIRM, vouched for the figures as well.

We raised questions about the cost in our posting below -- "CIRM Lagging" – since CIRM is seeking an additional $85,000 to perform work that is necessary for the Grantium software.

Don Gibbons, chief communications officer for CIRM, responded to our item,

"Regarding your posting on Grantium, it is mind bogglingly silly to think that a one-person IT department at CIRM could handle all the internal aspects of migrating to a new grant management system while maintaining a legacy system that is our responsibility."

Our response: CIRM's chief executive told its board one thing in October. Now CIRM says something different. New, complex software installations are usually difficult. The costs should have been anticipated. That's what good management is all about.

Additionally, CIRM has chosen to go lean on its staff, keeping it far less than the 50 authorized even after some directors have repeatedly worried about burnout and overwork. In fact, last December Murphy told the directors' Governance Subcommittee that he had chosen not to replace a departing information technology staffer because "the institute is now working quite well in its computer capabilities." That was two months after the Grantium contract was approved by directors.

CIRM Chairman Robert Klein also chimed in at the time, praising the "lean" staffing at CIRM. Lean is good, especially in state agencies that sometimes tend to be overstaffed. But there can also be a financial cost – perhaps in this case $85,000. Less obvious is the wear and tear on employees that results from excessively long hours week-in and week-out.

(Editor's Note: An earlier version of this item incorrectly reported that CIRM had "roughly 26" employees. Following the posting of this item, CIRM reported that it has 31 employees.)

Consumer Watchdog: No Way to Run $6 Billion Enterprise

John M. Simpson, stem cell project director for Consumer Watchdog, commented on his blog Tuesday on the financial matters before the CIRM Governance Subcommittee today.

He said,

"There is simply no excuse for the documents being unavailable the day before the meeting. They should have been there when the agenda was posted. Members of the subcommittee cannot make informed decisions when they receive documents at the last minute. Nor can interested stakeholders offer intelligent comment.

"This is simply not the way to run a $6 billion publicly funded program."

CIRM posted its report on contracts this morning. Still missing is the amendment to Remcho's big contract for legal services. The meeting begins at 3 p.m. today.

CIRM Lagging on Budget Preparation

The California stem cell agency is only one month away from a new budget year, but it has not yet presented to its directors a spending plan for the next 12 months.

This afternoon's meeting of the agency's Governance Subcommittee would have been a good time to offer the proposed budget. That would allow CIRM's directors to make suggestions for revisions and raise questions that might take time to answer.

Presumably CIRM President Alan Trounson will offer a spending plan in time for the June 26 board of directors meetings, but that will come only a few days before the financial year begins on July 1.

While it is too late to present a budget to the Governance Subcommittee, CIRM directors certainly can offer suggestions today about the type of information that they would like to see in the budget proposal, including a bit longer perspective than just the next 12 months.

Some possible questions to be addressed include:

Does CIRM plan to bring its staffing up to the limit of 50 over the next three years? If not, why not? (CIRM directors have repeatedly expressed concern about staff burnout and overwork. The agency has also has lost a substantial number of employees since its inception, including 25 percent in a two-month period last year.)

What is the anticipated impact of the Prop. 71 spending cap on operations over the next 10 years? Are there steps that need to be taken now to avoid a financial crunch later when less flexibility may exist?

Given the heavy reliance on outside contracting, are steps being taken to assure that the staff, which is trained mainly in scientific matters, performs well in selecting and monitoring contractors? What steps are being taken to assure that outside contractors do not have conflicts of interest that could motivate them improperly? Do the proposed $500 million biotech lending program and administration of the $1.1 billion lab construction effort pose special oversight issues?

What steps are being taken to avoid overruns linked to outside contracts, such as the apparent overrun on the grants management contract with Grantium of Ottowa, Canada. (Directors were assured last October that the complete cost of the three-year contract would be $757,000. Recently, CIRM posted an $85,000 RFP for a consultant to help with work on the program. We asked CIRM on May 15 about the need for the consultant. We have received no response to that question.)

Obviously other budget issues need to be addressed as well. But we would hope that Trounson and his tiny 26-person staff would begin to publicly address some of these issues soon.

A Brief Look at CIRM's Outside Contracts

The California stem cell agency plans to post on its web site later today a key financial document on its legal, lobbying, public relations and other outside contracts, less than 24 hours before the report is to come before a panel of the agency's directors.

The document reviews some of CIRM's spending this year for outside contractors, who consume the second largest amount of money in the agency's operational budget (see item below). However, the document was missing even a guess at how much will be spent by the end of this fiscal year, which is about one month away.

The report only covered expenditures for contracts through February. It also contained no total for all outside contracts through February. Nor did it appear to specify all of the ongoing obligations resulting from multiyear contracts.

A quick look at the document showed that CIRM has contracted for $596,899 worth of legal services, apparently mostly for the first three quarters of the year. The figure included $250,000 for the Remcho law firm(see item below). CIRM also spent $100,000 with the State Department of Justice. CIRM has had seven attorneys or law firms on its staff or under contract during the reporting period, including a general counsel. Joining the agency recently is attorney Nancy Koch, who won a $150,000 contract for intellectual property, most of which will be spent during the next fiscal year.

We should note that our $596,899 figure does include $36,900 for the Nielsen, Merksamer law firm of Sacramento, Ca., which performs lobbying services among other things. CIRM classified Nielsen's services under "public education" rather than legal services or lobbying. Our total for legal services does not include, however, $20,000 for the Rubenstein Associates PR firm of New York City.

In February, the Consumer Watchdog group disclosed a $10,000 CIRM contract with Rubenstein through the Remcho law firm and said CIRM was "laundering" its PR advice through Remcho. It was not clear whether the $10,000 figure in February was part of the $20,000 reported by CIRM in today's outside contracting report.

After a flap developed in 2005 about outside contracts, CIRM directors told CIRM staff to provide quarterly reports on outside contracting. The last came in December 2007.

Look for a link to the outside contracting report under the Governance Subcommittee agenda. Its meeting is scheduled for 3 p.m. Wednesday in Los Angeles with teleconference locations in San Francisco at CIRM headquarters, Sacramento, La Jolla, Carlsbad, Palo Alto and Stanford. All of the locations are open to the public.

Don Gibbons, chief communications officer for CIRM, provided a copy of the outside contracting report to the California Stem Cell Report this afternoon and said it was expected to be posted later today. However, he is working through the state bureaucracy, which sometimes does not move with great alacrity.

The Murky World of $2 Million in CIRM Spending

A key committee of directors of the California stem cell agency on Wednesday will examine one of the most important aspects of the $3 billion institute's operating budget, but one that remains hidden from the public with only one day left before the matter is to be aired.

One can only speculate about the reasons for the secrecy. Perhaps it is a deliberate and quite possibly illegal attempt to avoid public scrutiny of CIRM's outside contracts, which are the second largest element in its budget. Or perhaps the secrecy is related to CIRM's inability to produce budget documents in a timely fashion.

Whatever the reason, both are causes for concern. After nearly four years, CIRM should be able to produce routine budget documents quickly. Trying to avoid public scrutiny is hardly fitting for an enterprise that styles itself as an exemplar of bioethics and openness. Withholding the information also makes it virtually impossible for the public or other interested parties to comment intelligently before the CIRM Governance Subcommittee, which convenes on Wednesday to examine the agency's $2 million or so in outside contracts.

CIRM has an operating budget of about $8 million. The largest item in the budget – something like $5 million -- goes for benefits and salaries, including two salaries that rank among the top 10 highest for California state employees, according to a San Francisco Chronicle story this past weekend.

When we cite the budget figures, we must qualify them with terms such as "or so" and "roughly" because CIRM's latest effort at a budget is something of a hodge-podge, missing such things as updated totals with year-to-year comparisons. The most recent available document came up last December. It appears to show something like a $200,000 to $600,000-plus increase in outside contracts since last June, although some of that will be for the 2008-09 budget year.

Up for consideration at Wednesday's Governance meeting is a modification in the roughly $500,000-a-year contract for legal services with the law firm of Remcho, Johhansen & Purcell of the San Leandro, Ca. The Remcho contract is on top of the salaries of four other attorneys working for CIRM including a general counsel but not attorney/Chairman Robert Klein.

James Harrison is the lawyer with Remcho who appears to do most of his firm's work for CIRM. He has been working with Klein since at least the 2004 campaign for Prop. 71, which created CIRM. Harrison wrote portions of the initiative as did Klein. Harrison appears to be a skilled and competent attorney. The agenda item on his contract suggests that it will be extended or perhaps payments will be increased or both. It is not likely that Klein is bringing the contract before the directors in order to cut it.

How much is the proposed increase? We can't tell you. CIRM will not disclose details of the budget item. We began asking for some indication of the details on May 22. At first we were told that the information would not be made public until tomorrow morning, one day before the meeting. That raised a question of whether a document on the matter existed at CIRM. In that case, it would be a public record that would have to be disclosed under state law. We were then told that all of the information about the matter was "verbal," as of last Friday. We were told at another point that a one-page, proposed unsigned contract extension existed for Remcho but that it was deemed not to be a public record.

Whatever the actual facts are, it would not be the first time that public information has been withheld by CIRM for reasons that are difficult to understand. One memorable case last year involved a $31 million proposal by the California State University and College system. Klein's office refused to release the document, but the California Stem Cell Report linked to it after finding it on a non-CIRM Internet site.

Also on the agenda of the Governance Subcommittee, which is chaired by former Hollywood studio executive Sherry Lansing, is more information that is not available to the public. It deals with a look at all the outside contracting, but again we can tell you nothing further about its specifics because CIRM has chosen to withhold the report.

CIRM's staff is capped by law at 50(currently it has only about 26 employees). And "privatizing" some of its work work is necessary and makes good sense. But the use of outside contractors by government agencies requires careful selection and keen oversight.

The California legislative analyst said in a lengthy report in 1996 that outside contracting problems for state government include accountability, accurate cost comparisons and quality control. We also wonder whether it is possible for CIRM's tiny staff to properly monitor a host of contractors, particularly in the case of the proposed $500 million biotech lending program.

We asked John M. Simpson of Consumer Watchdog for his thoughts on outside contracting by CIRM. Simpson, who has watched CIRM closely for about three years, said,

"While there are some services that are best performed by outside contractors, there is a real danger of going outside when it's unnecessary and the work should be performed by staff.

"For instance, while I greatly respect James Harrison's abilities as a lawyer, I am hard pressed to understand why the stem cell agency spends so much on an outside legal counsel when it has a staff counsel.

"The point is that contracts with outside vendors offer a multitude of opportunities for waste and abuse. All of them must be closely evaluated by the oversight board. Moreover, circumstances change. Some of what made sense to be contracted out as the institute was in start-up mode, might now be more appropriately handled by staff."

Time to Sign Up for CIRM E-alerts

The California stem cell agency's new e-alert drew a modest reponse on its first day.

In response to a query, Don Gibbons, chief communications officer for CIRM, reported that 24 persons on Friday requested email alerts for RFAs. Twenty each sought them on press releases, CIRM events and consumer news.

CIRM is providing a valuable service with the e-alerts. We recommend them to anyone interested in the agency. You can sign up for them by going to the CIRM home page.