Economic Woes: California, the Stem Cell Biz and CIRM

In a story that circulated today nationally and perhaps internationally, The Associated Press has painted a bleak picture for the stem cell industry despite the election of a president who is a friend of the cause.

The news came on top of the even more unpleasant news that California is facing a $28 billion budget shortfall. The state's leaders are now in a position of holding out a tin cup to the federal government, enviously eying the $700 billion bailout for the private sector.

California Assembly Speaker Karen Bass, the state's second most powerful elected official, did not exactly say, "Please, sir, can I have some," but her words were close.

All this as the $3 billion California stem cell agency, which is constitutionally protected from budget woes, is looking to hand out tens of millions of more dollars in December and create a $500 million "bank," financed at taxpayer expense, to help struggling biotech companies. All of which may be good, but could lead to a ticklish image problem.

What the PR and policy problem boils down to is this: The state slashes medical assistance to the poorest Californians while millions and millions flow unfettered to CIRM-funded researchers.

First, the news from Associated Press reporter Matthew Perrone, writing out of Washington, D.C., He said that despite the election of a friendly president,

"Experts say struggling stem cell developers will face a new, equally daunting obstacle: an investment climate devastated by the financial crisis."

Perrone quoted WBB Securities analyst Stephen Brozak as saying,

"The good news is there will finally be freedom to operate, the bad news is there will be no more venture capital, which is the real freedom."

The AP story also said that investment in early stage stem cell companies was slumping even before this fall's financial meltdown.

"Venture capital investment in biotech startups — which includes stem cell developers — has fallen more than 65 percent to $443 million in the most recent quarter, from a high of $1.3 billion in late 1999."

According to Perrone, analyst Bill Tanner of Leerink Swann was even more pessimistic on hESC companies. Tanner said,

"Even if one of these companies was going to be successful, I doubt you'd have a new embryonic stem cell product on the market in the next 20 years."

The AP story appeared as California's Legislative Analyst posted a new estimate of California's budget shortfall -- $28 billion over the next 20 months. One recommendation from the analyst was for no new state borrowing, which could strike at CIRM's revenue source, California state bonds. Even before the new figure was released, State Treasurer Bill Lockyer said that the state will not be able to issue new bonds until 2009 because investors want to see how the state copes with its financial crisis.

The fiscal mess is so bad that Jim Sanders of The Sacramento Bee quoted Assembly Speaker Bass as saying "can we have $5 or $6 (billion?)" from the federal government.

The state's stem cell agency is all but immune from the California crisis because Prop. 71 locked in its funding sources and made it impossible for the governor or the legislature to cut its budget. However, if Lockyer refuses to issue bonds well into 2009, CIRM funding might hit a hard spot.

It is not clear what CIRM's current financial status is, although its chairman, Robert Klein, told directors on Sept. 25 that CIRM's cash situation at that point guaranteed "that this critical work to reduce human suffering and advance medical science is able to move forward."

He continued,

"The scientists and clinicians and patients counting on our progress need not be concerned about our work being interrupted."

Klein said that earlier this year he anticipated a troubled bond market and arranged for money from the state's "pooled money investment fund" that should be sufficient until late spring. But he noted,

"Maybe I should have drawn down three years of money."

There is no doubt that research cannot be done without a reliable source of funding. Nonetheless, CIRM must carefully consider how its operations, with salary ranges that exceed $500,000 annually and huge outside contracts, may be perceived by the public or elected officials. It is a time to tread with great care.

As for the $500 million biotech loan program, one could argue that it is needed now more than ever. At the same time, some might look askance at lending taxpayer funds to extremely risky ventures – ones that could not even find financing under the best of circumstances – while Californians who can least afford it will see health care, education and other vital services slashed.

The lending program will not make the slightest dent in the state's economic travails. As we have noted before, CIRM's activities currently have an infinitesimal, immediate impact on California jobs and businesses. CIRM's annual giveaway does not even exceed the $356 million budgeted for a new "condemned inmate complex" at San Quentin prison. That said, the lending program, which is yet to be fully explained, could well be a good idea.

We will know more after Nov. 19 when the CIRM Finance Committee will discuss it in greater depth.

Fresh Comment

Bradley Fikes has identified himself as the "anonymous" author of the comment mentioned in the post below.

Fresh Comment and Link to CIRM Penhoet Release

"Anonymous" has posted a comment on the "CIRM Board Changes?" item with a link to a posting by reporter Brad Fikes of the North County Times on Garamendi's news release on Penhoet. CIRM's news release has now been posted and can be found here.

Penhoet Resigns as Vice Chairman of CIRM

The vice chairman of the $3 billion California stem cell agency, Ed Penhoet, has resigned from his post, but CIRM announced Monday afternoon that he will remain as one of the 29 members of the board of directors.

The statement by CIRM came only hours after the California Stem Cell Report said that Penhoet "denied scuttlebutt in the California stem cell community that he is leaving the board." However, the item also said incorrectly that he denied he "is stepping down as its vice chairman." That item was based on a one-sentence response from Penhoet that did not address all the questions we asked him on Saturday. (More on that below.)

We also queried CIRM early this morning on the matter, asking Don Gibbons, chief communications officer, for comment on reports that Penhoet was stepping down. No response was forthcoming from Gibbons on the matter.

CIRM's press release, which has not yet been posted on its website, said Penhoet was stepping down because of "the time constraints of this leadership position."

CIRM said:

"However, Penhoet has accepted the appointment by Lieutenant Governor John Garamendi to one of the board’s member positions designated for the life sciences commercial sector."

Penhoet was not quoted in the CIRM press release on the leadership change, which said that the co-founder of Chiron will continue to head the CIRM IP Task Force.

The move clears the way for nomination of a new vice chair by the state's constitutional officers, such as governor and lieutenant governor. It is likely that CIRM Chairman Robert Klein will make suggestions for possible nominees. Former CIRM board member Tina Nova has been mentioned as a candidate, but she said earlier today that no one has approached her about serving in that capacity. She also said she has "no plans to return to the CIRM board."

The full CIRM board must vote on the vice chair, selecting from the nominees. The post carries a salary of up to $332,000 annually. Penhoet did not accept a salary, raising a question whether the next vice chair will. If so, it also raises the possibility that Klein, who also has not accepted pay, will seek the $508,750 salary for which he is eligible. He has repeatedly said he may seek a salary at some point.

Some of you may wonder about some of the details involved in preparing our original item below that reported incorrectly that Penhoet said he was not stepping down. Our email query to Penhoet on Saturday said,

"I am planning on writing an item that will say that California stem cell scuttlebutt has it that you are resigning as vice chair of the ICOC. Is that correct?"

Penhoet's response:

"I have no intention of leaving the board, David."

We then asked,

"I may be parsing this too finely, but do you intend to imply that you would remain on the board but give up the vice chair position? Thanks."

Penhoet did not respond to that question. We notified him early this afternoon that our original item had been posted but have received no further communications.

CIRM was queried at 7:35 a.m. California time today about the subject but has not responded to us as of this writing.

Changes on CIRM Board? Penhoet, Nova Say No

Ed Penhoet, one of the co-founders of Chiron, has denied scuttlebutt in the California stem cell community that he is leaving the board of the $3 billion California stem cell agency and is stepping down as its vice chairman.

Penhoet's statement came in response to a query from the California Stem Cell Report concerning the talk about changes in the CIRM board. He said,

"I have no intention of leaving the board."

If Penhoet (see photo) were to resign as vice chairman, CIRM Chairman Robert Klein would like to replace him with Tina Nova(see photo), president and CEO of Genoptix, Inc., of Carlsbad, Ca., according to the scuttlebutt. However, Nova resigned in September from the CIRM board of directors, citing demands of her business.

Responding this morning to our question, Nova said she is not interested in resuming service with CIRM. She said,

"I have no plans to return to the CIRM board. My business is demanding all of my time, that is why I resigned.  I have not been approached about the vice chair position, and I have not spoken to Ed Penhoet for over three months."

CIRM has not responded to an inquiry on the Penhoet/Nova matter. We will carry its response when we receive it.

Given the firm denials from both Penhoet and Nova, one can only wonder how the subject came to surface publicly. Such talk usually has some sort of basis in fact, although it can become distorted as it passes around. It could also represent some sort of trial balloon on the part of persons interested in seeing changes made.

As far as the mechanics of selection of board members are concerned, Klein does not have legal authority to either appoint or re-appoint board members or select a vice chair. Klein is also elected by the board.

The vice chair and chair, who serve for a term of six years, are elected by the full board of directors from nominees offered by California constitutional officers, such as the governor and state treasurer.

Penhoet has been on CIRM's board since its first meeting in December 2004. He heads the task force that worked out the difficult issues of intellectual property concerning CIRM grants, bringing his broad background as a scientist and businessman into play.

2009 CGS Forecast: Petri Dishes -- Not Stem Cell Therapies

The usual season for prognostications for the coming year is the end of December. But Jesse Reynolds of the Center for Genetics and Society in Oakland, Ca., weighed in last week with a couple.

Writing on his group's Biopolitical Times, Reynolds said,

"With the end of stem cell research as a political vehicle, its advocates are likely to temper expectations. They'll not just move out the goalposts on the timeline towards treatments, but the touted uses of stem cells will shift from potential cellular therapies to models of human diseases in Petri dishes and better drug testing methods. These new purposes will win fewer votes than "your own personal biological repair kit," but they are also much more realistic."

Reynolds also predicted there will be no outpouring of federal cash for hESC in the near future. He made a different case than we did in our item below. He said,

"Even when President-elect Obama removes the Bush restrictions, federal funds will be available only to work with embryonic stem cell lines, not to create new ones. Grants for the latter are restricted by the Dickey-Wicker amendment, which would be left in place by both the repeatedly-vetoed stem cell bill and Obama's platform."

Reynolds also made his case for the death of hESC research as a political vehicle. He said,

"...(T)he real message from this election cycle is the end of embryonic stem cell research as a relevant political issue. It was huge in 2004, present but marginal in 2006, and seemed comatose with the 2007's failure of New Jersey's stem cell funding initiative. In this cycle, the topic made barely a peep.

"Hopefully now work can proceed in concert with a level-headed conversation about the true potential of stem cell research and the real challenges posed by human reproductive and genetic biotechnologies."

Waiting For Barack: Don't Hold Your Breath on Stem Cell Cash

Signals are emerging from the Obama team that the president-elect will move quickly to overturn President Bush's restrictions on federal funding for human embryonic stem cell research. However, that may not necessarily translate to a rush of big dollars at the national level.

On Sunday, the leader of Obama's transition team, John Podesta, indicated that the president-elect would move quickly with executive orders that do not require Congressional action, which can drag on for months if not years.

Podesta mentioned stem cell research specifically as one area that Obama could move on immediately.

Podesta's comments followed something along the same lines last week from Obama's chief of staff, Rahm Emanuel. In an interview with the Wall Street Journal, he enunciated a credo for the new administration:

"Do what you got elected to do."

He said "bucket No. 1" for the Obama administration would be children's health care. Second comes ending restrictions on stem cell research. Third is an economic recovery package.

Earlier this year, CIRM Chairman Robert Klein speculated that the Obama administration, beset by a host of enormous issues, would be slow to act on stem cell research. Klein suggested that Congressional action would be needed.

While that does not appear to be the case at this point, transition teams sometimes have trouble getting their act together and priorities can change.

What is certain is that the NIH is suffering from a financial squeeze. Until that squeeze is relieved and the necessary bureaucratic grant-making procedures are completed, don't expect to see large sums flowing into human embryonic stem cell research from the feds. Plus, other worthy scientific research will be fighting for the dollars that might go to the stem cell cause.

Indeed, the existence of such programs as California's $3 billion stem cell research effort could serve as a justification for the feds to hold back on beefed-up hESC research funding at the national level.

CIRM Quorum Solution Stalled

Today's attempt to deal with the perennial problem of attendance at meetings of directors of the $3 billion California stem cell agency was postponed Sunday on short notice.

A special teleconference meeting had been scheduled for today on the issue, but late Sunday the agency said the session had been postponed. No reason was given for the delay. No date was set for a future meeting.

The cancellation notice followed a closed-door meeting of the directors' Governance Subcommittee on Sunday afternoon. It was the Governance panel that had come up with a proposal to to help solve the attendance issues, which have made it difficult to maintain the supermajority quorum needed to do business legally. The plan would allow, on a limited basis, participation of directors via telephone.

However, the only item on the Governance agenda Sunday afternoon dealt with personnel matters. It was not clear whether the cancellation of today's directors meeting, which also included a personnel session, had anything to do with the meeting of the Governance committee Sunday afternoon. The agency released no announcement of actions by the Governance panel.

Potholes in Freeways vs. Therapies in the Clinic

"Where are the cures?" is the headline on the piece in the Nov. 10 issue of Newsweek.

The article by science columnist Sharon Begley virtually cried out for a sidebar on California.

Begley wrote about the "valley of death," translational research and the need for industrial skills that can make the production of stem cell therapies economic.

She quoted Hans Kierstead of UC Irvine, mentioned Geron of Menlo Park, Ca., as well as a proposal to create a "center for cures" at the NIH. Along the way, she noted that scientists involved in basic research are wary of the "center" proposal – a feeling that has surfaced indirectly at the California stem cell agency.

But Begley said:

"The existence of such a center would free scientists to go back to making important discoveries, not figuring out large-scale pipetting, for goodness' sake."

All of what Begley wrote about is on the $3 billion plate at the California stem cell agency. And some of the CIRM actions are coming quite soon. The "valley of death," for example, is scheduled to be dealt with next month through a $500 million lending program. Waiting for action from the new presidential administration is not good enough for CIRM Chairman Robert Klein and company.

As Begley concluded:

"There is lots of talk these days about increasing the nation's spending on infrastructure, such as roads and bridges, to lift the economy out of its doldrums. Me, I'd be willing to put up with potholes in exchange for a new administration spending serious money to take the discoveries taxpayers have paid for and turn them into cures."

Conflicts of Interest, CIRM and Transparency

Do conflicts of interest exist among the scientists who make the de facto decisions on hundreds of millions of dollars in California grants for research related to embryonic stem cells?

The answer? Yes.

Even the California stem cell agency acknowledges that fact. Because of conflicts, the agency regularly excuses some of the scientists who review the grant applications from participating in specific cases.

But CIRM stoutly maintains that the financial and professional interests of reviewers are not suitable for release to the public or applicants. The agency contends the reviewers are only making recommendations. However, the reviewers' decisions are almost never rejected by CIRM's board of directors. The agency also has turned down a recommendation by the state auditor that it seek an opinion from the state attorney general on whether it should publicly disclose the reviewers' interests.

Trust us, the agency says. We will police the conflicts and assure that no abuses occur.

Rarely do rejected applicants raise conflict issues publicly. No one wants to offend the world's largest source of funding for human embryonic stem cell research. In August, however, one scientist brought up the question of conflicts at a meeting of the CIRM board of directors.

Steven Kessler, a scientific director at Advanced Cell Technology of Los Angeles, was not happy with the response he received from CIRM staff on a letter he wrote concerning what he said was a conflict of interest on the part of a unnamed reviewer.

According to the transcript of the meeting, here's how Kessler summarized his position for CIRM directors:

"If a grant reviewer has a financial relationship with company "X"...that is, he's receiving funding from that organization or he's expecting royalty income from some company by virtue of having licensed technology to that company and that reviewer is sitting in on reviews from other for-profit organizations...and doesn't recommend those for funding, to us, from a business perspective, that's a conflict of interest."

Kessler said he had cited "numerous instances" of conflicts on the part of the reviewer, where there would be "every incentive to help impede the competition for the company that he has a relationship with.".

Kessler said,

"I was told that the way CIRM interprets its own conflict of interest policy, the example I gave you was not a conflict of interest."

At that point CIRM Chairman Robert Klein cut off Kessler, declaring that the directors needed to discuss the names for CIRM-funded labs before going to lunch.

Kessler's comments followed a discussion in which Klein and other directors expressed concern about reviewers quitting if they were subject to public complaints.

Klein said,

"To the extent that (applicants) are criticizing peer reviewers, which is sometimes common, we're going to lose our peer reviewers."

On Sept. 14, we asked CIRM for a copy of Kessler's conflict-of-interest letter. On Oct. 22, more than five weeks later and after repeated follow-up queries, the agency declined to release the letter.

Initially, Don Gibbons, chief communications officer for CIRM, said there was a question of redaction of material from the letter. Then he said our inquiry was lost by CIRM's interim general counsel. Ultimately, on Oct. 22, Gibbons said,

"Our interim general counsel has determined that the Kessler letter is part of the grant application process and as such is not a public document."

We asked for the legal reasoning behind that statement. On Oct. 29, Gibbons quoted interim counsel Ian Sweedler as saying,

"Applicants need to know that they can contact CIRM with information about potential conflicts, and that they can do that without leveling public allegations against a professional colleague."

Obviously conflicts of interest can at times involve judgment calls. CIRM also places a burden on its reviewers, all of whom come from out-of-state and cannot apply for CIRM grants. Marie Csete, now CIRM's chief scientific officer, commented last year on the situation when she was a reviewer prior to her employment at CIRM. Among other things, she said that she and the other reviewers were being asked to fund the work of their competitors.

CIRM's overriding concern has been the care and feeding of reviewers. We acknowledge that they need considerable attention. However, the main issue here is the stewardship of public funds and the integrity of a state government process involving billions of dollars. From its birth, CIRM has wrestled with problems spawned by the ballot initiative that created the research program. CIRM was deliberately cobbled together with built-in conflicts starting at the very top. The chief beneficiaries of CIRM's largess sit on its board of directors and set the rules for grants and control the process.

The bounty from CIRM is huge. Here is a list of CIRM recipient institutions (with grant totals) which have or had employees or representatives on the CIRM board of directors: Stanford, $94 million; UC San Francisco, $82 million; UCLA, $51 million; UC Irvine, $51 million; USC, $48 million; Sanford (San Diego) Consortium, $43 million; UC Davis, $36 million; UC San Diego, $33 million; UC Berkeley, $29 million; UC Santa Cruz, $17 million; Burnham, $18 million; Salk Institute, $16 million; Scripps, $9 million; UC Merced, $8 million; UC Santa Barbara, $7 million; UC Riverside, $6 million; Caltech, $2 million, and City of Hope, $2 million.

The built-in conflicts at CIRM are not likely to change, short of another ballot measure. They are enshrined in the state Constitution, a move by Prop. 71 writers who wanted to make CIRM immune to normal government oversight.

However, handing out billions behind closed doors with no outside scrutiny is a recipe for abuse. State ethics officials are already looking into the attempt by one CIRM director to influence CIRM staff on behalf of his institution. Should a major scandal erupt, it would ill serve the agency, the people of California and the cause of science.

If only to protect itself, the agency should comply with its repeated promise to adhere to the highest standards of openness and transparency and publicly release the statements of the economic and professional interests of its reviewers.

(Further note: Kessler also declined to release his letter to us. The CIRM grant review committee meets next Wednesday and Thursday in San Francisco to review applications for $66 million in public funds. The review sessions are closed but the public may comment on Wednesday morning.)

Sunday Afternoon with CIRM: A Personnel Matter

The Governance Subcommittee of the $3 billion California stem cell agency has an interesting little meeting scheduled for this weekend.

Interesting in the sense that the meeting of the group of CIRM directors poses more questions than answers.

Only one substantive item is on the agenda, a closed-door personnel session. Both the narrow scope of the meeting and the unusual Sunday afternoon timing made us wonder what exactly was going on.

We asked Don Gibbons, chief communications officer for CIRM, to illuminate the subject matter further and explain the Sunday timing. His one-sentence response:

"It is because of the chair of the subcommittee’s busy schedule."

The chair is Sherry Lansing(see photo), a former Hollywood studio head (think "Titanic"and "Forrest Gump")and now head of the charitable foundation bearing her name. She is indeed a busy woman and has her fingers in several major pies, including the board of regents of the University of California.

The responsibilities of the eight-member, directors' governance committee include such things as CIRM internal controls, ethics, outside contracting as well as monitoring management goals. One could speculate that the meeting's timing reflects a certain urgency and importance, although its recommendations generally must be approved by the full board of directors. That 29-member group meets on Monday.

Closed-door personnel sessions are permitted under state law. If the committee takes any action, it must be reported following the private session. However, the public will have a chance to speak out during the meeting at six different locations in California, if they choose to do so. The teleconference sites include San Francisco, Los Angeles, La Jolla, Palo Alto, Sacramento and Laguna Beach. The street addresses can be found on the agenda.

Rare Teleconference Session of CIRM Directors on Monday

Californians will have an unusual opportunity next Monday to tell the directors of the $3 billion California stem cell agency what they think and listen to them attempt to solve a problem that has nagged them since 2005.

The occasion is a meeting of the directors, who are officially known as the Independent Citizens Oversight Committee. Virtually all of their meetings have been held under circumstances that require the physical presence of interested parties who might want to observe or comment.

However, on Monday, the meeting will be conducted via teleconference arrangements from locations throughout the state, from Healdsburg to La Jolla. One site in San Antonio, Tx, is included. Apparently one director will be staying at the Grand Hyatt there.

All the locations are public for the purposes of this meeting. The agenda includes only one item – a plan to solve the problem of meeting the board's super-quorum requirement of 65 percent at meetings of the 29-member group. The requirement is enshrined in state law courtesy of Prop. 71 and is politically nearly impossible to alter. Instead, the plan to help provide better director attendance provides for the telephonic participation of a limited number of directors on a limited basis for regular meetings.

Monday's meeting also provides an opportunity for the public to comment on any issue, although the board is legally restricted to action only on agenda items.

Here is the current list of teleconference locations in California other than Healdsburg and La Jolla(two sites): San Francisco(two sites), Sacramento, Los Angeles(five sites), Duarte, Menlo Park, Elk Grove, Irvine, Pleasanton and San Carlos. The locations could change, so keep an eye on the agenda, which also includes the specific addresses.

'No Job Too Big, No Job Too Small'

What does a stem cell watchdog do for fun?

In the case of John M. Simpson(pictured), stem cell project director for Consumer Watchdog of Santa Monica, Ca., he takes two weeks vacation and goes to work in the Obama campaign in Missouri, one of the battleground states in this year's historic presidential election.

Simpson, who has been observing and participating in the affairs of the California stem cell agency for several years, is doing a bit of everything in Joplin, Mo., the fourth largest metro area in the "show me" state.

It is a far cry from expenses and lifestyle of California. The average home price is around $70,000-$80,000. Once the lead and zinc capital of the world, tourism now drives the Joplin economy, generating $220 million annually for the 400,000 persons who live in the metro area (49,024 for the city proper).

More than 70 years ago, Depression-era bank robbers Bonnie and Clyde pillaged several businesses in the community and were chased out of town in a gunfight, leaving their camera behind. The images in it were later developed and may be the most famous of those of the two thieves.

Simpson, however, is not interested in banks. He is looking for beds. Places where out-of-state volunteers can rest during the big push for Obama turnout next Tuesday.

We asked Simpson why he is taking his vacation time to work the long and arduous hours involved in the final stage of a presidential campaign.

He said the election is pivotal, a time to unite the country and move away from "Republican rule that is dominated by the interests of big business."

California seemed to be comfortably in the Obama camp. So Simpson volunteered for out-of-state work. He attended a two-day "Camp Obama" training session in October. They put him in touch with the folks in Missouri.

In addition to scrounging up bunks for volunteers, Simpson is setting up speaking engagements for Obama surrogates, lugging furniture and sweeping floors. "No job too big, no job too small" is Simpson's credo. He reported, however, that he can't keep up with the 20-something, paid staffers who put in 20 hour days. He said he can only do 12 hours.

Simpson is recording some of his experiences on his Facebook site. You can read them after registering as a friend of John.

UCI Defends Lab Press Notice

The University of California, Irvine takes umbrage at our item that pointed out that the school did not credit the California stem cell agency (the California Institute for Regenerative Medicine) specifically by name in its press notice on the Oct. 24 ground-breaking for a stem cell lab financed in part with $27 million in agency funds.

The omission occurred in a news release sent out widely to the media. We characterized the omission as a minor PR gaffe and noted that one page on the UCI site carried a photo caption describing the lab as a "CIRM institute.'

Jennifer Fitzenberger, assistant director of media relations, sent us an email that said,

"Our stem cell center website and event invitation make very clear the new building will be a CIRM institute: http://stemcell.uci.edu/. CIRM is very clearly listed on more than one UC Irvine webpage in connection with our groundbreaking event, not just one as your blog item states."

The ground-breaking received extremely limited media coverage(three items in advancing of the event), based on a Google news search to this morning.

Here is a link to the news release that was issued on the day of the event. That release did mention the California Institute for Regenerative Medicine by its full name. Here is a link to the Sue and Bill Gross Stem Cell Research Center at UCI, which is the name of the stem cell research operation at the campus.

As we noted in the item below, this is not a major issue, at least for us. But CIRM directors have retained the power to approve the names of labs that they help finance – one indication of the importance that they attach to naming and the credit it implies. The reality is that none of these labs are going to be commonly known as CIRM facilities. Rather they will be referred by the names of the donors or some piece of vernacular originating on campus.

UC Irvine Breaks Ground on Stem Cell Lab

In a bit of a minor PR gaffe, UC Irvine announced its groundbreaking ceremonies on Friday for a new stem cell lab that will be partially financed with $27 million in CIRM funds without specifically mentioning the California stem cell agency by name.

The news release named Robert Klein and the Independent Citizens Oversight Committee, but nowhere was the phrase "the California stem cell agency" or "CIRM" used. The Independent Citizens Oversight Committee is the ungainly official name for the CIRM board of directors, but few Californians would make that connection.

One page on the UC Irvine web site did, however, carry a small rendering (see photo) of the lab which identified it as the "Sue and Bill Gross Hall: A CIRM Institute." All of this PR hooha makes little difference to the stem cell effort. However, CIRM directors have expressed their firm desire for PR credit by retaining the right to approve the naming of labs that they finance with public money. The names are not official until approved by CIRM directors.

UK, CIRM Ink Collaboration Agreement

The California stem cell agency has expanded its international connections once again, this time linking to the United Kingdom with an agreement that potentially will finance scientists working in California with scientists working half-a-world away.

No money, however, has yet been committed. Reporter Bernadette Tansey of the San Francisco Chronicle also reported that the touchy issue of ownership of IP has not yet been worked out.

The agreement was announced earlier this week. It follows similar agreements in June with Australia and Canada.

According to Maggie Shiels of BBC radio, CIRM Chairman Robert Klein said,

"...(O)ne of the diseases the CIRM was likely to focus on in the future would be stem cell therapy for a type of macular degeneration that leads to a blindness that affects 7% of the US population over 75.

"Mr. Klein said the UK was well ahead in animal trials in this field and that the deal could pave the way for earlier than hoped for human trials."

"'We are very hopeful that this collaboration can bring us together in human trials to prove the first global embryonic stem cell therapy. It will hopefully break open this entire field,' he said."

According to Monya Baker, writing on The Niche (the Nature magazine stem cell blog), Lord Paul Drayson, the UK minister of science, said,

"UK’s National Health System made his country particularly able to carry out clinical trials and gather clinical data."

Don Gibbons, chief communications officer for CIRM, was quoted as saying,

"We could do a one-off with an investigator in Paris, but that bogs us down."

Baker said the agreement permits CIRM to accept applications "under the same rules and avoid bureaucracy."

If Klein's optimism is borne out, the "break-through" on the first embryonic stem cell therapy could mean that Great Britain will be the first to see the clinical fruits of research funded at least in part by California taxpayers.

The UK/CIRM announcement received light news coverage. For example, Bernadette Tansey's story was tucked away on page D2 of the Chronicle.

A meeting is scheduled for January 2009 among scientists and others to determine the "most fruitful options" for collaboration.

CIRM IP Hearing Set for Oct. 29

For those of you interested in profits from California-financed stem cell therapies, you should pay attention to the latest CIRM meeting on intellectual property.

The IP Task Force has scheduled a session Oct. 29 to discuss what appears to be a routine matter, but it could also involve discussions that go beyond routine.

Here is the language from the agenda. No additional information is available to the public at this point.

"Consideration of draft amendments to consolidate non-profit and for-profit intellectual property regulations and begin formal process of adoption."

The meeting has teleconference locations from which interested parties can participate. They include San Francisco, La Jolla, Irvine and San Carlos. More be be added later to the agenda.

Tracking the Little Hoover Commission and CIRM

The Little Hoover Commission, which is looking into the governance of the California stem cell agency, has posted some material concerning its inquiry, accessibility and schedule.

The first meeting will be held Nov. 20 in Sacramento with the second Jan. 22, also in Sacramento. The agenda says,

"As part of its study, the commission will explore the transparency and accountability of the existing governance structure."

The agenda also says that more information can be had by contacting project manager Eric Stern. To be notified of events concerning the CIRM inquiry, send a message to littlehoover@lhc.ca.gov. The phone number for the commission is 916-445-2125.

Fresh Comment

"Ron" has filed a comment on the "courtier" item below, including the text of a San Francisco Business Times article on the veto of SB1565.

CIRM and the Cause of Philanthropy

By now, you all have heard about Larry Lokey's whopping $75 million gift to Stanford to help build a new stem cell lab. But there is another bit of the story that has not received much attention.

And that is the role of the California stem cell agency in creating a friendly climate that encourages our wealthiest citizens to make huge contributions to human embryonic stem cell research and science in general.

Stanford and Lokey did not specifically cite CIRM and Prop. 71. But the agency has done much to portray favorably hESC research and draw the attention of scientists who need to believe there is a stable source of potential funding for their research. If not, they will choose another path of inquiry.

Four years ago, hESC was the poor stepchild of the NIH, all but banned by the Bush Administration. That is unchanged at the federal level. But California's Prop. 71 fired up the efforts in a number of other states and created a sense that the science could proceed even without the sanction of the NIH.

Lokey is not alone in making a major contribution to stem cell research. Eli Broad, Denny Sanford and others have also donated tens of millions of dollars in California.

Their generosity has set an example and a standard for others to emulate. The hESC philanthropy trend serves both science and charity well.

Biotech Courtier, the People's Will and 'Money Talks'

Gov. Schwarzenegger's veto of this year's CIRM legislation was deeply buried by most news outlets, if they carried anything at all. But his action triggered a fiery op-ed piece by J. Wesley Smith in the San Francisco Chronicle.

Writing on Oct. 2, Smith, senior fellow in human rights and bioethics at the Discovery Institute, asked,

"What is it about embryonic stem cell research that turns politicians into courtiers? "

He said government leaders are more than ready to denounce the "get-rich, money-talks ethos" of Big Pharma, but "trip over each other to grant (biotech) policy agendas carte blanche."

Smith was talking about SB1565, legislation by state Sen. Sheila Kuehl, D-Santa Monica, which was aimed at providing affordable access to CIRM-financed therapies. The measure was opposed by the biotech industry and CIRM.

Smith said the governor claimed "incongruously that it 'does nothing to advance the will of over 7 million voters,' when precisely the opposite - assuring access for the poor to CIRM-facilitated treatments - was clearly part of the package voters thought they bought when passing Proposition 71."

Smith continued,

"Given the governor's constant harping about the crucial importance of bipartisanship, the veto is ironic. Talk about a bipartisan measure! SB1565 passed the Senate unanimously and by an overwhelming 64-7 in the Assembly. Other than naming freeways after dead luminaries, it is rare to find such agreement in the ideologically divided California Legislature.

"In backing the CIRM's fiscal profligacy and giving the back of his hand to the poor and the ill through his veto, Schwarzenegger made a joke of his reputation as a fiscal conservative and bipartisan consensus builder. How sad that the once mighty Arnold, who came to Sacramento vowing to smash boxes, has instead assumed the role of a mere industry retainer."

Jerry Steele, an advocate of adult stem cell therapy writing on the TheraVitae blog, also was critical of the veto. He said,

"The CIRM has been mired in many controversies on where the money has been distributed and is deathly quiet on the issue of when it is going to produce any cure."

Steele asked if California has received a return on its investment,

"Well, even the staunchest supporter of the CIRM would be hard pressed to come up with any successful results- I tried Google and the most I could come up with was a few semi-famous scientists have migrated to California to live off the taxpayer."

Geron, a Menlo Park, Ca., stem cell company, had a different view, although it was very brief. In what amounted to a one sentence news release, the firm said it supported the veto because the legislation ran "counter" to Prop. 71.

Don Reed, patient advocate and a vice president of the private stem cell lobbying group belonging to CIRM Chairman Robert Klein, gave a cyberspace sigh of relief on his blog. But he noted that the Little Hoover Commission, a bipartisan good-government state agency, will be looking into CIRM.

Reed vowed,

"If the Little Hoover Commission develops a new law or initiative against us, I will let you know about it early, so we can protect California’s great gift to the world."

Unsaid was the implication that any proposed change in CIRM's operations would be an attack.

CIRM Seeking Solution to Director Absenteeism

The California stem cell agency has been dogged for four years by problems with attendance of its directors at its board meeting, and it now is moving forward on a plan to allow some of them to participate by telephone.

The attendance issue is not minor. Without a quorum, the board of the directors cannot take legal action. Concerns arose last month that the board would have difficulties at an important, two-day meeting in December.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., attended the meeting of the CIRM Governance Committee that approved the telephone participation. He wrote on his organization's blog earlier this week about the problems with attendance:

"Even when there has been a quorum present there has all too often be a mad rush to take votes before members left for the day. It's not the sort of atmosphere which is conducive to sound deliberation and good policy making."

The attendance issue stems from inflexible language in Prop. 71 that can only be changed by the legislature or another vote of the people. The measure requires a supermajority of 65 percent of directors to conduct business. It also created an unwieldy board of 29 persons, all of whom have major responsibilities elsewhere.

Here's how Simpson described the proposed changes to ease the current problem, short of changing state law.

"The proposed rules would allow up to five members to take part in ICOC meetings by teleconference, but would give the chairman the discretion to limit the number based on 'his or her assessment of the importance of in-person attendance at the ICOC meeting for which a teleconference participation request was made.'

"The rules also limit the number of times a member could phone in to twice a year and offer the teleconference option to ICOC members with significant medical needs."

Simpson continued:

"First, of course, folks who cannot maintain the substantial commitment to the ICOC (the board of directors) ought to quit. There's nothing wrong with that. There is something very wrong with holding a seat and never showing up.

"Second,  a better solution would be to reduce quorum requirements to a simple majority and to adopt a procedure to remove or otherwise sanction members who are chronically absent. Perhaps such suggestions will come from the state's efficiency panel, The Little Hoover Commission, as a result of its planned study."

The CIRM board of directors plans to call a special meeting to adopt the new rules so that they will be in place in December.

Science and Construction Dominate CIRM Newspaper Series

California reporter Sandy Kleffman has pulled together a lengthy overview of the state's $3 billion stem cell research effort, focusing primarily on the science of the research and the building of stem cell laboratories.

The two-part series began Sunday in some newspapers in the San Francisco area. Kleffman reported that therapies are 10 years away and "numerous hurdles must be overcome." Despite the hurdles, Kleffman reported that "optimism remains."

She wrote:

"'I would say this is the most exciting time to be in science, ever,' said Dr. Arnold Kriegstein, director of the UC San Francisco Institute for Regeneration Medicine.

"'I don't think there's ever been as many opportunities to actually alter the course of a disease as there is right now.'"

Kleffman also wrote,

"Others fear the new therapies will be too expensive for many Californians.

"Money may be one of the biggest hurdles. The $3 billion taxpayer investment will not be nearly enough to take most therapies through the required trials and bring them to market.

"'The drug industry computes that it needs $1 billion for every new drug,' said Alan Trounson, president of the state stem cell agency, known as the California Institute for Regenerative Medicine. "If that's the case, we're going to be handicapped severely here.'

"For that reason, Trounson and other stem cell leaders have begun to look at partnering with the biotech industry to ensure the work continues beyond the limits of the state program."

The series was written before the release of the latest, CIRM-financed, economic impact report on its activities. Kleffman's stories also did not deal with the bulk of the public policy issues surrounding CIRM.

Her work was keyed to the fourth anniversary of the agency, which came into being November 2004. The media have a fondness for anniversary pieces since they provide an easy entry point to a story. However, given the short staffing at newspapers today and the host of more compelling issues this fall, don't look for many more anniversary pieces on CIRM this fall. Next year is another story.

CIRM Denies It Was Prompted to Release Economic Study

The California stem cell agency today said that it was not prompted to release publicly a $50,000 economic impact study concerning CIRM as the result of an inquiry from the California Stem Cell Report.

Don Gibbons, chief communications officer for the agency, said in a one-sentence email to us,

"You have quite the ego, writing not once, but twice, that you prompted us to post the Analysis Group report, which is not true."

Gibbons did not explain why the report, which was originally scheduled to be released last January, was posted on the CIRM website one day after we inquired about its whereabouts. We attempted to email him several times this morning, seeking an explanation. However, our emails are being rejected by the CIRM email system. Our presumption is that there is some sort of technical glitch involving emails that are being sent via a satellite link from Mexico.

So this posting also serves as a request to CIRM for an elaboration on the reasons for the delays in releasing the Analysis Group report.

We have additionally asked the Analysis Group if it has any comments on the two items that were posted on Wednesday concerning its work. If they do, we will carry their comments verbatim.

Fresh Comment

"SEO Firm" has posted a comment on the $350,000 item below.

Clarification

The item below concerning economic impact reports involving the California stem cell agency may have been confusing to some. The $350,000 includes the $50,000 already spent for the Analysis Group report that was released this month and the $300,000 proposed to be spent in the RFP.

Coming Next Spring: A $350,000 Paean to CIRM's Value

Is the California stem cell agency performing work that is beneficial to the economy of the state of California?

Any fair-minded person has to respond affirmatively to that question, and perhaps even some who are not so fair-minded.

But does CIRM have to spend $350,000 of taxpayer funds to prove its economic value? Will such an effort convince any skeptics that the $3 billion ($6 billion including interest) stem cell research program is economically worthwhile? The answer to both those questions is no.

If CIRM pays for an economic study, it will be forever clouded by the reasonable assumption that the agency received the findings that it already knows it wants. And those findings would amount to a paean that holds up CIRM as critical to the economic survival of the Golden State.

That conclusion is even more likely given the language in the recent CIRM RFP for a consultant to prepare the economic propaganda piece for the agency.

The RFP makes no bones about what CIRM wants and what the consultant better provide for $300,000. Certainly not an independent, detached assessment of CIRM's economic worth. Instead, the RFP states that the consultant must "execute a vibrant and aggressive strategy to support the goals and initiatives of CIRM."

To be sure the consultant fulfills expectations, he will work with a high-powered CIRM panel consisting not only of the chairman and president of CIRM, but also the vice chair, the vice president for operations, the general counsel, the legal counsel and unspecified "others." Lots of "minders" there to be sure no heresy comes forth.

CIRM has already spent $50,000 this year for what was supposed to be a new economic study. That report was originally scheduled to be released in January. After the California Stem Cell Report asked about it on Oct. 7 in connection with the $300,000 RFP, the document was publicly released a day later on the CIRM web site.

The $50,000 report was prepared by the Analysis Group of Palo Alto, Ca., which is likely to have the inside track on this latest contract. (For more details on the report, see the item below.)

Analysis Group also received $200,000 from the Prop. 71 campaign, which was directed by now CIRM Chairman Robert Klein, for a document that predicted health care savings of as much as $12.6 billion over 30 years and a net state government profit of at least $1 billion.

That report, however, was 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 latest RFP also indicates that CIRM grant recipients will be burdened with additional paper work in the future. It implies that grant applicants will need a nose for dollars and must be able to demonstrate how CIRM cash, if they receive it, will benefit the California economy.

The RFP states that the consultant must create "a standard and routinized methodology for data collection from CIRM grantees and loan recipients and other sources to enable future measurements of economic impact."

Compliance with that methodology is likely to become part of the terms of any grant or loan in the future. We would hope that all the data gathered would be available to the public so that other economists and health policy experts would be able to draw their own independent conclusions.

Interested economic consultants must submit their proposals by Oct. 24. The contract could be awarded shortly thereafter. Look for the economic report in March 2009, if the RFP is to be believed, with the lucky consultant also embarking on a bit of a road show, according to the RFP's terms.

Unsaid in the RFP is the near certainty that the consultant will have an ongoing, lucrative relationship with CIRM for years to come as he updates the report with fresh information annually.

Economists Say "Too Early" to See Significant, Quantifiable CIRM Results

Has the four-year-old, $6-billion, California human embryonic stem cell research effort already paid off?

According to a $50,000 study commissioned by the state stem cell agency, it is "too early to expect to observe significant quantifiable health and economic benefits from CIRM’s funding."

The 31-page report by the Analysis Group of Menlo Park, Ca., which previously performed two controversial economic impact studies for the Prop. 71 campaign, was originally scheduled to be released in January. The document was made available to the public on Oct. 8 after the California Stem Cell Report asked about it in connection with CIRM's plans to spend $300,000 for another economic study.

Analysis affirmed that it is too early to draw definitive economic conclusions about the world's largest human embryonic stem cell research program. The report also contained useful summaries of CIRM's efforts and related stem cell activities in California.

It said, for example,

"Some stem-cell related companies appear to have increased activities in California. For example, Stem Cell Sciences is expanding into California from the UK, and companies like Invitrogen and Novocell (formerly CyThera) have hired new scientists from within and outside the U.S. Other companies, such as Jackson Labs, have committed to major relocations or large-scale expansions in California. As an example, Jackson Labs is in the process of developing and expanding a new California research facility near Sacramento that will ultimately be more than 200,000 sq ft."

The report is largely based on CIRM press releases and other CIRM documents, which presented the justification for another, six-month study at a cost of $300,0000 and continued ongoing work for many years by an economic consultant. The Analysis Group's and the report's two authors, Laurence Baker of Stanford and Bruce Deal(see photo), managing principal of Analysis.

Deal and Baker wrote,

"While it is clearly too early in the course of CIRM’s activities to make a broad assessment of their economic benefits, it is possible to begin to monitor and report on some aspects of CIRM’s activities and their relationships to possible sources of economic benefits."

We queried Don Gibbons, chief communications officer for CIRM, concerning the relationship between the $300,000 proposal and the $50,000 study. He replied,

"It is a very different study from the one proposed in the RFP. Instead of analyzing existing related studies and making projections based on those studies, we are seeking to benchmark certain data points now and determine what data we should be collecting going forward so that we can compare today’s benchmarks to data from serial reviews over time. This requires much more extensive work."

CIRM obviously has an inherent self-interest in demonstrating its value and assuring its existence well beyond its 10-year financing limit. CIRM Chairman Robert Klein has talked on more than one occasion about keeping CIRM alive pretty much indefinitely, but it only has bond funding capabilities for 10 years. Perpetuating CIRM is one of the goals of Klein's $500 million biotech loan proposal, which is aimed at providing an additional $100 million in funding. Klein has additionally spoken of going to the legislature in a few years with a request for additional funding. He would certainly need a hefty study demonstrating CIRM's worth to California to support such an appeal.

Until more time passes and more data are gathered, that tome remains to be produced. Meanwhile, Deal and Baker say,

"CIRM research grants are just beginning to go out, and it would not be reasonable to expect any health benefits or therapies attributable to CIRM at this time. Making predictions about the likelihood of particular future breakthroughs for particular diseases is outside our area of expertise. It is possible that no new treatments of widespread therapeutic use will be developed, which would mean very limited or no economic benefits from improved health."

But on the other hand, Deal and Baker report,

"All told, the information available to date suggests that California is already starting to see new economic activity resulting from CIRM and that there is significant potential for additional future economic benefits."

We are certain that Deal and Baker will find ample evidence over the next few years to document CIRM's value. We hope that CIRM and Deal and Baker will share the raw data and other information with other economists as well.

Finessing the CIRM Directors' Attendance Issue

Next Monday, directors of the California stem cell agency will try once again to figure out how to work around their perennial problem of having enough directors on hand to conduct their business.

The 29-member board has regular difficulty meeting its 65-per cent quorum requirement. Chairman Robert Klein is reportedly worried that not enough members will be on hand in December to hand out many millions in additional grants.

Sherry Lansing, a CIRM director and former Hollywood film studio executive, has taken on the task of finding a work-around in her capacity as chairperson of the CIRM Governance Subcommittee.

The group initiated its effort last month. Several suggestions were made for changes in the proposed policy. However, the latest version is not yet available on the CIRM website.

The quorum issue is one created by Prop. 71, which locked into state law procedural issues that are better left to regulation, which is easier to change. Ironically, directors recently successfully opposed legislation to ensure affordable access to CIRM-financed therapies on the grounds that the bill would codify in state law matters better left to regulation by CIRM directors.

CIRM could ask lawmakers to change the super-quorum requirement but that would open up discussions for other possible changes.

The public can listen in or make comments at teleconference locations in La Jolla, San Francisco, Los Angeles and Irvine. Othere locations may be added later. You can find them on the agenda.

Poppycock and CIRM

The California stem cell agency generates a certain amount of nonsense from time to time.

Some of it comes from CIRM Chairman Robert Klein, including a comment he made to the San Diego Union-Tribune in connection with the upcoming examination of CIRM by a bipartisan good-government panel, the Little Hoover Commission.

Klein has repeatedly referred in the past to the heavy scrutiny that he contends CIRM has endured. Most recently he told reporter Terri Somers:

“It's very important that the (Little Hoover) commission recognize the exhaustive reviews we've already been through and come out of with totally and consistently extraordinarily high marks."

Poppycock, we say.

While Klein thinks CIRM has been subjected to exhaustive and heavy scrutiny, that is hardly the case. He and others who express that view really do not know what heavy scrutiny means. Think Watergate, think the ongoing national financial crisis, think the California/Enron electrical deregulation debacle, think Paris Hilton and Britney Spears, think about television news vans camped outside Klein's home should a scandal erupt at CIRM. Indeed the scrutiny of CIRM does not even go as far as the local government coverage we saw last year in a small town on the Arizona/New Mexico boundary. The local paper published every single payment by the city down to one dollar, along with the name of each recipient. In California, few would even remember the last time a story about the stem cell agency was carried on the evening television news or appeared on the front page of a newspaper.

Klein also refers to the financial audits paid for by CIRM. However, they have an exceedingly limited scope and cover such things as whether Klein provided receipts for his trip expenses and whether a reported purchase of a computer actually can be tracked to a specific computer being used in the CIRM office. Klein has additionally cited the legal challenge to CIRM's existence, which was handily rejected by the courts at every step. That, in fact, covered limited matters as well and was largely bungled by CIRM's legal opponents. The courts did not attempt to assess whether Klein and CIRM were doing their jobs well or whether Prop. 71 was useful to the people of California -- only whether the challengers had proved their case.

The courts also did not determine whether the 50-person limit on CIRM staff was appropriate. Klein now acknowledges that was a mistake on his part in writing Prop. 71, although the agency is still well below that staffing level, a matter of concern to some directors who are worried about burnout and overwork involving CIRM employees.

The state auditor did conduct a lengthy "performance audit." CIRM officially thanked the auditor for her work and made changes in its operations as a result. That audit also was limited in scope. It did not address such questions as whether the quorum requirements written into state law are hampering CIRM's mission. It did not address whether an agency such as CIRM should exist outside of any normal state government controls. It did not address the question of whether overlapping responsibilities between the chairman and president create an inherent, unhealthy conflict that will continue to generate problems as it has in the past.

Back in 2004, backers of human embryonic stem cell research could not find either private or federal funding for their cause. So they ventured into the political arena with Prop. 71 to seek funding from the California public. But playing with the people's cash carries trade-offs. One is public scrutiny that can be uncomfortable.

We recognize Klein's need to posture publicly about CIRM and its actions. Such performances are not uncommon among both politicians and business executives, who believe their main responsibility is to fend off perceived attacks on their endeavors.

However, the Little Hoover Commission is a solid state organization, not given to flip analysis or decisions. Its inquiry should result in recommendations that will help to improve CIRM's operations and deliver more value to the public. Corporations pay millions of dollars to outside consultants to examine their operations and make recommendations that maintain their competitiveness and efficiency. The Little Hoover Commission is going to do that for free for CIRM. The process will certainly make some uneasy, just as it does in the private sector. CIRM should welcome this as a healthy opportunity that could create momentum for needed improvements.

CIRM's Financial Immunity

Just how protected is the California stem cell agency from the financial travails of the state of California?

Almost entirely.

During the legislative/gubernatorial budget stalemate earlier this year, nursing homes, hospitals and other private sector providers to the state did not get paid by the state for nearly three months. Some firms went out of business or had to borrow money because the state could not pay its bills.

That did not happen with those providing services to the state stem cell agency because of its unique and unprecedented constitutional position, which assures that it has cash regardless of how the rest of the state is affected.

CIRM's extraordinary position was mentioned briefly last month at the agency's Governance Subcommittee meeting.

John M. Simpson of Consumer Watchdog asked,

"Is it the case that because of the state's budget crisis, the vendors have not actually gotten paid? Does that affect the (grant) checks actually being handed over?"

CIRM Chairman Robert Klein responded,

"No, it doesn't. our funds are segregated from the state budget."

All of which raises significant governmental policy questions. One can make a case that stem cell research cannot proceed properly if it is cut back every time the governor cannot muscle a budget out of lawmakers. But should researchers be treated differently than hospitals? Should they be treated better than needy children dependent on state aid?

Locking up public money in special funds is part of the state's budgetary problem. However, there are no good answers that will satisfy everybody concerning the creation of special pockets of cash for what almost everybody agrees are worthwhile endeavors, whether they are stem cell research or special programs for gifted children.

Nonetheless, it is likely to appear a bit unseemly to a good segment of the public for the stem cell agency to hand out tens of millions of dollars while California is so hard pressed that it may have to ask the federal government for a $7 billion short term loan so that it can pay its bills.

Arnold Nixes CIRM Legislation

Despite overwhelming bipartisan legislative support, California Gov. Arnold Schwarzenegger has vetoed legislation aimed at ensuring affordable access to stem cell therapies as the result of taxpayer-funded research.

His veto message said:

"This bill (SB1565)undermines the express intent of Proposition 71 in two ways: it eliminates the priority for funding human embryonic stem cell research and it places an unnecessary restriction on the Independent Citizens’ Oversight Committee authority to adopt intellectual property regulations that balance patient need and essential medical research.

"More than seven million voters were very clear when they passed Proposition 71 in 2004. They wanted to fund embryonic stem cell research that the federal government wouldn’t. They also wanted to make sure that California receives a return for its historic investment in medical research. Both of those important goals are already being accomplished.

"This bill does nothing to advance the will of over seven million voters. For this reason, I am unable to sign this bill."

Only a handful of lawmakers voted against the bill, which required 70 percent approval of both houses of the Legislature.

Stem Cell Blog Takes a Break

The California Stem Cell Report will go dark for the next couple of weeks while we do a little island-hopping in the Sea of Cortez. More exciting stem cell tales are expected to be forthcoming then, although there is a saying among cruising sailors – "We have no plans, and we are sticking to them." Meantime, watch for items from John M. Simpson on the Consumer Watchdog site.

Ballot Blowback: The Klein Quorum Petard

Prop. 71 created the California stem cell agency nearly four years ago, but the ballot measure also plays hob with CIRM from time to time.

One of those occasions came last week at its directors meeting in San Diego, which barely mustered the 65 percent quorum necessary to conduct its business legally. It was not the first time. Maintaining a quorum is a regular problem at meetings of directors and their subcommittees. Thursday's meeting also set a record for the largest percentage of alternates filling in for directors. Five alternates were there, 28 percent of the 18 directors in attendance.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., was there and wrote about the events on his organization's blog.

"Chairman Bob Klein is so worried about the possibility of no quorum at the December meeting when the board is slated to award a substantial number of grants, that he announced he will schedule a special ICOC(directors) meeting in about 30 days to adopt the procedures to allow telephone participation in December.

"All of this trouble comes from what I believe is a paranoid fear that stem cell research opponents could somehow gain control of the board and wreak havoc with a mere simple majority quorum requirement.

"And so Proposition 71 passed with a super-majority rule that Bob Klein wrote into it. And now he is often hoisted by his own petard."

The super-majority quorum also does something else. It gives a minority on the board tremendous power. All a handful of persons – maybe even one -- have to do is walk out of the room, and CIRM directors are legally paralyzed.

There is definitely an attendance problem at CIRM meetings, which stems in part from the membership of the board of directors. Prop. 71 stipulates that 29 persons serve on the board, which makes it difficult to schedule meetings at mutually convenient times. It also stipulates that the most of the directors come from top executive positions at other enterprises. These are folks who are more than busy. They already have important responsibilities at their own organizations, and naturally those come first.

The use of alternates to fill in for the directors additionally nullifies some of the justification for the selection of the directors. That argument contends that deans of medical schools and the chancellor of UC Berkeley, among others, should serve on the board because they bring skills and knowledge from their own positions to make good decisions on stem cell matters. So the fact that their organizations also stand to benefit to tune of hundreds of millions of dollars should be put aside. But if they are sending alternates, the state does not receive the benefit of their expertise. That said, at least some of the alternates more than hold their own and make significant contributions at the meetings.

So why not just change the law to reduce the quorum? Easier said than done. Under Prop. 71, that requires another super-majority vote – in this case, a 70 percent vote of both houses of the legislature and the signature of the governor. That is an exceedingly difficult task. Nonetheless some legislator might be willing to carry the bill. But to win approval, Klein might have to do some horse-trading that would affect other aspects of CIRM in ways that do not find his favor. In other words, it is a legislative can of worms that Klein probably does not want to open.

Predictive Toxicology and CIRM's Priorities

Looking for a key to the CIRM cash drawer?

There may be several in a document recently posted on the agency's website. The 35-page piece is called "Stem Cells in Predictive Toxicology." It grew out of a CIRM workshop back in July.

One section of the report targeted "areas of priority" for CIRM, which said in part,

"For these methods to become mainstream, it will also be necessary to develop improved protocols for cell growth, maintenance, and differentiation, and to define in vitro phenotypes that correspond to relevant human endpoints. A second critical goal will be the derivation of iPS cell lines from a diversity of individuals, including those with known disorders or disease susceptibilities, to
allow for the development of comprehensive, customizable approaches for correlating toxicity mechanisms with variable individual response."

The report also said,

"These 'clinical trials in a dish' could help inform and optimize further trials in humans. Workshop participants agreed that the use of stem cell-based assays in the process of drug discovery has the potential to reduce late-stage attrition, to lower the cost of drug discovery, and to help understand the genetic contribution to drug susceptibility."

It continued,

"Workshop participants were extremely enthusiastic about the potential for stem cells to provide superior model systems for predicting toxicity in drugs and environmental pollutants. While technological and cultural hurdles exist, experts were optimistic that these could be overcome. Even in a limited capacity, incorporation of human cell based assays into drug discovery efforts and environmental toxicity screens offers the potential for safer, more customized medicines, reduced costs of drug discovery, reduced or refined use of animal models, and more accurate risk assessment for environmental pollutants."

CIRM Grantees Get More Than Cash

Earlier this month, CIRM grantees assembled for a two-day session to talk about their work and hear some of the leading folks in the field air their own views about stem cell research.

Those of you who did not get to attend can share a bit of the experience via a 146-page report coming out of the conference. Of particular interest are one page summaries of 129 research projects involving CIRM grantees.

There was also this from Alan Trounson, president of CIRM,

"The experiment of Proposition 71 is a critical model for funding innovation that is being closely examined worldwide as a new investment by the community in improving human social values and health....

"Investment in quality of life through the support of stem cells and regenerative medicine needs to be demonstrated to have been a wise choice. Our grantees are the vanguard of this investment in science, and we need to be able to clearly demonstrate the benefits this investment will make in the general community. In the end this will have to be shown as treatments in the clinic in the form of new drugs, cell therapies, gene therapies, tissue engineering etc., for some of the most debilitating diseases and injuries presently costing the society and individuals dearly."

UC Davis Moves Ahead on $62 Million Stem Cell Lab

Some nostalgic folks in Sacramento were perturbed years ago when the California State Fair abandoned its location in a seedy part of the river city.

Last week, however, one of those old Fair buildings officially began a transformation into a state-of-the-art stem cell research laboratory.

The occasion was the groundbreaking Friday for the $62 million project, partially funded with $20 million from CIRM. It was the first-groundbreaking for a CIRM facility in Northern California.

CIRM Chairman Robert Klein was on hand along with Claire Pomeroy, vice chancellor for Human Health Services and dean of the medical school at UC Davis. Pomeroy also is a member of the CIRM board of directors.

The 92,000-square-foot lab is scheduled to be completed in late 2009. Jan Nolta, professor of hematology and oncology and a regular attendee at CIRM meetings, is director of what is officially tagged the "UC Davis Institute for Regenerative Cures, a facility supported by the California Institute for Regenerative Medicine."

The first groundbreaking for a CIRM-funded facility occurred earlier this month at USC. The Trojan marching band high-stepped through those proceedings. There is no word on whether the Aggie band turned out for Pomeroy's affair.
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San Diego's Sanford Center to Seek 16 Disease Team Grants

In the unlikely possibility that you missed it, the San Diego stem cell consortium announced earlier this month that it snagged $30 million from a South Dakota philanthropist, T. Denny Sanford(pictured).

That will come on top of the $43 million the consortium received from CIRM to build its new lab on a bluff overlooking the Pacific Ocean. Some 245 scientists will work out of the facility.

However, Heather Chambers of the San Diego Business Journal reported that the group is still $27 million shy of collecting enough cash to build and equip the $115 million, four-story facility. It is scheduled to be completed by December of 2010, or the consortium could face penalties from CIRM. Construction is scheduled to begin in January.

Terri Somers of the San Diego Union-Tribune put together a piece on the donation and its impact. Buried in her story was an interesting note on the consortium's plans to seek as many as 16 grants from CIRM in its upcoming disease team grant round. CIRM appears ready, however, to limit applications to four from an individual institutions.

The consortium consists of four organizations, Scripps, Salk, Burnham and UC San Diego. Based on Somers' story, it appears that the consortium plans to have each organization apply for four grants, which could run to $20 million or so each. Currently CIRM is allotting about $210 million, not including loans, for its disease team grants.

Obviously, there is not enough money for 16 grants at $20 million each for the San Diego quartet/consortium, not to mention other likely competitors from San Francisco to Los Angeles.

But San Diego's ambitious plans provide some indication of how tough the competition is getting for California stem cell cash.

We should also note that the consortium is no longer known as the San Diego consortium. Its name is now the "Sanford Center for Regenerative Medicine, an Institute of the California Institute for Regenerative Medicine." We should additionally note that Sanford, owner of First Premier Bank, has joined a number of other wealthy individuals who are making hefty contributions to help advance science and medicine. Sanford Center officials say more donors are welcome to help make up the $27 million shortfall, although raising cash in the current economic climate may be a tad tough.

California Efficiency Panel To Scrutinize CIRM

California's Little Hoover Commission has decided to examine the state's $3 billion stem cell research effort.

Stuart Drown, executive director of the group, said the first hearings will be held Nov. 20 with another likely Jan. 22. In response to a query from the California Stem Cell Report, Drown said,

"The commission has been asked to look at governance and transparency, but may look at other issues as well, including a discussion on ways to insure the most effective use of bond money. The commission currently is involved in a study of bond oversight. In setting up the study of the state's stem cell research activities, the commission has directed staff to ensure the study adds value to the current discussion through constructive recommendations and avoids merely repeating work done by others."

CIRM is funded through California state bonds at a total cost to the state of $6 billion. Funds are routed directly to CIRM, bypassing both the governor and the legislature.

The impetus for the study came from legislation by Sens. Sheila Kuehl, D-Santa Monica, and George Runner, R-Antelope Valley, requesting the inquiry. The primary focus of the bill, however, is affordability of stem cell therapies funded by CIRM. The Little Hoover Commission, a bipartisan group, is charged by law with promoting "efficiency, economy and improved service" in California state government.

Writing on his organization's blog, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., said,

"Some stem cell research advocates have lobbied hard against the (Kuehl) bill, partly because they objected to a Little Hoover Commission study.

"I don't get it.  We are talking about $6 billion in public money. What could be more important than ensuring it's spent fairly and so that all Californians benefit from the research they're paying for?

"You'd think anybody who wants that would welcome an outside independent look and suggestions on how to make things work better.  The good news is no matter what Gov. Schwarzenegger does with SB1565,  the Little Hoover Commission has decided CIRM is worth a study."

SB1565 is now on the governor's desk.

CIRM Directors Approve Biotech Loan Policy

Directors of the California stem cell agency Thursday gave the go-ahead to an outline of a far-reaching, $500 million biotech loan program, but many details remain to be worked out.

In apparently the only news story on the subject, Terri Somers of the San Diego Union-Tribune reported this morning:

"Biotechnology companies are expected to rush for the funding because most are perpetually hunting for money from investors. Banks typically won't fund biotech companies because they have little to no revenue, little collateral and a high risk of failure."

She wrote,

"'I am very excited,' said Babak Esmaeli-Azad, chief executive of San Diego-based DNAmicroarray, which is working on stem cell therapies. 'It's a step in the right direction.'

"Stem cell therapies are expected to come to market through companies, not research institutes. The institutes have very little capacity and experience in clinical trials or the process of turning a successful scientific experiment into a pill or injection that might eventually make it to market."

Somers said that companies have become "restless and skeptical" regarding funding from CIRM.

"'We've been waiting for a turning point for (the institute) to become very friendly and accessible by the corporations,' Esmaeli-Azad said. 'This may be that turning point.'"

Under the terms of what was approved by CIRM directors Thursday, Somers said there will be two types of loans:

"One will require the company to pay back the money no matter what happens, including failure of the product or company.

"The second does not require the company to pay the money back unless it has sufficient revenue. This type of loan would have a higher interest rate and give an equity stake to the state, which it would cash out if the product is successful."

The stem cell agency also issued a press release on the biotech loan program. It said that directors had approved a "program" and a "policy" for biotech loans. The news release declared that it was "an integral part of CIRM’s effort to strengthen California’s biotechnology industry and create collateral economic benefits such as high-paying jobs and increased tax revenues."

Somers reported that CIRM plans to "to add further detail to the policy as it receives comments and advice from industry executives, finance experts and the public." One of the key questions involves the use of delegated underwriting a la Fannie Mae as well as administration of the loan program, not to mention conflict of interest issues.

Earlier CIRM said that the plan would not be in place until December, when directors were expected to take final action. An additional hearing on the plan had been announced within the next 60 days by the CIRM Finance Subcommittee.