Pluses and Minuses in the Geron News Coverage

Media coverage and commentary continued to ripple out today on the Geron clinical trial announcement, generating considerable attention also on California's $3 billion stem cell research effort.

While CIRM has not played a role in the Geron research, the agency's expertise has popped up in many stories with quotes from President Alan Trounson and Chairman Robert Klein along with references to the size of the state effort. All of which helps meet one of the agency's goals of becoming a key media source in all things stem cell.

As usual in such events, the initial coverage on Geron generally tended to be favorable for both the company and for stem cell research. Television news coverage also surfaced, which is rare on stem cell issues. There is no doubt that the Geron announcement is important in establishing a favorable public view of both the science and the business. The expected Obama administration changes in federal stem cell research rules will add to the positive climate and are likely to come in the near future.

But some not-so-ebullient views could be heard as well. The San Francisco Chronicle editorialized this morning that the Geron trials are a "a cautious but unmistakable advance."

The Chronicle continued,

"At this early point, it's mainly about testing the safety of the treatment. That's a key issue because a harmful result or botched trial could set back the stem cell cause immeasurably, a risk that researchers acknowledge."

Reporter Steve Johnson of the San Jose Mercury News wrote,

"California's $3 billion effort to fund such research, launched in 2004, illustrates some of the obstacles federal officials could face in trying to lure companies to begin such studies.

"Aside from being hindered by legal challenges during its first few years, California's program has funneled the vast majority of its money so far for basic research at universities and other nonprofit institutions. And for a variety of reasons — ranging from a lack of investors to skittishness over the ethical debate surrounding the cells — only a handful of companies in the state are experimenting with embryonic stem cells on their own, despite predictions that the effort would quickly bring about a job boom.

"'I would have expected there to be more interest' among businesses, said Alan Trounson, president of the California Institute for Regenerative Medicine, which voters created in November 2004 by passing Proposition 71."

Senior columnist Adam Feuerstein of TheStreet.com had an even bleaker view. He wrote,

"I say don't buy into the hype.

"Geron has a long track record of over-promising and under-delivering. In fact, the company's only real accomplishment after years and years of effort has been to burn through tons of shareholder cash.

"Before you send emails that blast me for spitting on stem-cell therapies, understand that my cynicism is directed at Geron, not the promise of stem cells. Today's news was well orchestrated by Geron -- a splashy story in The New York Times, a conference call and an appearance on CNBC. But let's get real: Geron is starting a small phase I study, and with Friday's run, the stock's market cap now stands around $600 million. And for that, you get very little.

"Sorry, but Geron looks more like a short to me than a long."

Stanford's Christopher Thomas Scott released a statement that said,

"President Obama's intention to lift the restrictions on embryonic stem cell research, Congress' promised actions to legislate funding, and Geron's announcement are three important steps to a long road for cures and treatments. After an eight year drought, patience is needed. The federal government must retool those agencies and institutes bereft of stem cell expertise. The NIH must appropriate funding at a level needed to produce the kinds of results we need to have more encouraging news from the private sector. Finally, the states must enact policies that are in step with the new vision in Washington. This will take time. Once the US is back on track, then it can do what it does best: discover, translate, and develop the science and treatments for its citizens."

Here some links to other interesting stories on the Geron trial and its implications:ABC News, Wired News (Trounson heavily quoted), The Associated Press and the Los Angeles Times.

Correction

The CIRM YouTube item Jan. 22, 2009, incorrectly stated that CIRM posted 28 videos on the CIRMTV site. The correct figure is 14. The number of videos was listed twice in two different categories on the CIRMTV site.

Fresh Comment

Jesse Reynolds of the Center for Genetics and Society of Oakland, Ca., has posted a comment on the "Klein Wants $10 Billion" item. In it, Reynolds identifies as the source of the job multiplier information used by Klein a much-criticized, $200,000 report paid for by the Prop. 71 campaign in 2004. The document was prepared by a Stanford economist who Klein did not identify in the material he presented last Wednesday to the CIRM directors Finance Subcommittee.

Geron Stock Finishes Day up 36 Percent

Geron stock closed at $7.09 today, up 36 percent with the biggest one-day gain in five years, according to Bloomberg.com.

Bloomberg said,

"The FDA’s action may help pave the way for other companies to get permission to start their own trials, said Christopher Thomas Scott, director of Stanford University’s Stem Cells in Society program.

"'Geron is a path-breaking company in getting the first stem-cell trial,'Scott said in a telephone interview yesterday. 'The message is that FDA now feels comfortable with the measure of risk the first trial will contain for the first few patients.'

Bloomberg continued,

"Two other U.S. companies, Advanced Cell Technology Inc. of Los Angeles, and closely held Novocell Inc., based in San Diego, are using embryonic stem cells to develop therapies and are working to begin clinical trials.

"Less than one biotechnology drug out of three that enter clinical trials is approved, said Joseph DiMasi, an economist with the Tufts University Center for the Study of Drug Development in Boston. That risk of failure also applies to Geron, which has spent $45 million preparing an FDA submission on the stem-cell treatment."

From the Reed Family: A Thankful Perspective on the Geron Trials

Don Reed of Fremont, Ca., is a nearly tireless and good-hearted advocate for human embryonic stem cell research. Today's announcement concerning the Geron clinical trials has special meaning for him and his family. We asked him for comment. Here is what he sent.

"MAGNIFICENT BEGINNING

"Don, Roman, and the entire Reed family would like to congratulate Geron Corporation and the stem cell research community for today's wonderful news.

Years ago, California's Roman Reed Spinal Cord Injury Research Act of 1999 funded Dr. Hans Keirstead's pioneering work, just approved for human trials by the FDA. These particular trials, to re-insulate nerves in the damaged spine, will involve only newly injured individuals. But they are forerunners of the day when paralysis will no longer be an automatic life sentence in a prison of immobility.

"Roman was asked by a reporter: what was the first thing he would do on the day when regenerative medicine allows him to walk again?

"He replied: 'I want to walk down the beach, hand in hand with my wife Terri, and toss a ball around with my children.'

"A small dream -- and an enormous one-- because if we can cure paralysis, the very symbol of that which has been called incurable, we can do anything.

"Congratulations to all, and may the New Year, and the new administration, live up to this magnificent beginning.

"Thank you,"

Don C. Reed

Fresh Details on $500 Million Biotech Loan Plan and Underwriting

For those of you looking for more information on the California state plans to start a $500 million loan program for the biotech industry, you can find the latest details stuck away in the Internet archives of the state's stem cell agency.

The biotech loan program and a proposal to hire a delegated underwriter to run it will come up at next Friday's CIRM board meeting in Burlingame, Ca., with an off-site, teleconference location in Broomfield, Co.

No significant information is available via the agenda for the board meeting, but eight documents related to the loan proposal can be found. They were posted on Wednesday just hours before the meeting of the Finance Subcommittee at which they were to be considered. The dilatory posting, a perennial problem at CIRM, basically denied the public or interested parties the ability to make any sort of thoughtful comment at the Wednesday session.

Following the meeting, the documents could only be found shunted off to the archives, five layers down from the home page. That's because the agency generally, but not always, moves agendas for past meetings to its archive site. At some point, CIRM may move the links to the documents to the agenda for the board meeting, three layers down from the CIRM home page.

We asked Don Gibbons, chief communications officer for CIRM, what action was taken on the biotech loan documents. Here is the verbatim text of his reply:

"passed a motion to recommend the LAP to the board as is with the provision that council work with Roth, Goldberg and Penhoet between now and the meeting to refine language on page 9 (redline version) related to loan repayment when project is abandoned."

LAP refers to the loan adminstration policy.

We have not had a chance to digest all the information contained in the eight documents, but wanted to let interested parties know where they could be found. One document came from Silicon Valley Bank and another from Orix Venture Finance in response to a CIRM request for information on structuring the underwriting program.

The Silicon Valley document consisted of only a PowerPoint presentation, apparently a duplicate of one made last year to a panel of CIRM directors. Previously, however, the Silicon Valley presentation was not available via the CIRM website.

Other documents include various versions of the loan administration policy.


(If you have thoughts on any of these issues, you can comment by clicking on the word "comment" below. Anonymous comments are permitted. Or you can write CIRM directly via its web site and ask to have your comments made part of the public comment allowed at each CIRM board meeting.)

UCI Touts Role in Geron Trials

The University of California, Irvine was quick today to put out a news release on its role in development of the Geron therapy that is now moving into history-making clinical trials.

The school headlined the release: "UCI behind world's first embryonic stem cell study in humans." And it said,

"A therapy developed at UC Irvine that made paralyzed rats walk again will become the world’s first embryonic stem cell treatment tested in humans."

Specifically mentioned were Hans Kierstad (see lower photo) and Gabriel Nistor, who published their work in 2005, generating considerable international attention. Kierstad's smiling face dominated the entire home page of UCI today. We asked Nistor to send us a photo which is at the top.

The release also noted that UCI has received more than $52 million from the California stem cell agency. It did not mention that Susan Bryant, vce Chancellor for research at the UCI School of Biological Sciences, and Oswald Steward, director of the UCI Reeve-Irvine Research Center at the campus, sit on the agency's board of directors.

Stem Cell Stocks Rising on Geron's Good News

Geron's high-flying coattails are having a sharp impact today on the prices of some of its competitors.

Streetinsider.com reported earlier today that Aastrom Biosciences, Inc., of Ann Arbor, Mi., and StemCells Inc. of Palo Alto, Ca.,, both jumped 30 percent. At that point, Geron was up 50 percent. (StemCells Inc. was founded by Irv Weissman of Stanford, Fred Gage of the Salk Institute and David Anderson of Caltech.)

Meanwhile scientist Hans Kierstad of UC Irvine or one of his associates has emblazoned "a flash" on the website at California Stem Cell Inc. Geron's hESC therapy is based on technology invented and co-developed by Kierstad and Gabriel Nistor, also of UC Irvine. Kierstad is the chairman of the California Stem Cell scientific advisory board, of which Nisor is also a member.

At the time of this writing, Geron's stock price stood at $7.64, up 47 percent.

CIRM Publishes Reviews on $66 Million Grant Round; Names of Applicants Remain Secret

Ranked and scored reviews of applications for $66 million in stem cell/biotech training grants can now be found on the web site of the California stem cell agency, which is expected to give away the money next Thursday or Friday.

None of the names of the institutions proposing the programs have been disclosed by CIRM in keeping with its longstanding and mistaken policy of not disclosing the identities of those who are seeking public funds. The names of the winners ultimately will be made public, after they been officially approved. CIRM never releases the names of the losers.

The recommendations, which are in reality de facto decisions, of the Grant Working Group that are virtually certain to be ratified by the full CIRM board can be found in the categories of "recommended for funding" and "not recommended for funding." CIRM directors almost never have overturned those decisions by grant reviewers in the process of approving 253 grants since 2005.

Something of a case can be made for not revealing the names of individual scientists who compete for the grants on the grounds that it could be embarrassing. But not to disclose the names of the enterprises – many of which are publicly funded institutions – serves no public interest. It prevents the public from making thoughtful comments on the grants and has led to an embarrassing situation for CIRM itself involving a $2.6 million grant to CHA RMI of Los Angeles. (Following the flap, CHA ultimately withdrew its application.)

In contrast, stem cell insiders are not likely to have too much difficulty in determining the identities of most of the applicants based on the material in the grant reviews.

That said, CIRM is to be commended for posting the links to the reviews on Thursday in reasonably timely fashion ahead of the CIRM board meeting.

Here is where you can find the reviews for the $18 million program to train lab personnel and the $48 million effort to train young scientists.

San Diego UT: California Stem Cell Effort Leads Nation

In a fortuitous bit of timing, the leading newspaper in one of California's stem cell hotbeds today ran a front page story declaring that the state's "taxpayer-funded investment has allowed it to build the infrastructure that puts it ahead of every other state."

The article by Terri Somers in the San Diego Union-Tribune was prepared earlier but it was published the same morning that Geron announced the federal go-ahead on its vaunted hESC clinical trials. The timing promises to generate more general interest in Somers' piece and the field overall.

Somers constructed a broad overview of the state of stem cell research in the nation but particularly in California. Her piece does sound some cautionary notes, including this from researcher Larry Golstein of UC San Diego.

"The devil will be in the details," said Goldstein of how the Obama Administration deals with both executive regulation of stem cell science and legislation controlling hESC reserarch.

Geron Stock Soars 20 Percent on Approval of Clinical Trials

Today is a big, big day for California's Geron Corp., which has received federal approval to begin "the world's first study of a treatment based on human embryonic stem cells."

The Associated Press covered the basics of the action. An early version of its story said said,

"The company gained federal permission this week to inject eight to 10 patients with cells derived from embryonic cells, said Dr. Thomas Okarma(see photo), president and CEO of Geron Corp. of Menlo Park, Calif.

"The patients will be paraplegics, who can use their arms but can't walk. They will receive a single injection within two weeks of their injury.

"The study is aimed at testing the safety of the procedure, but doctors will also look for signs of improvement like return of sensation or movement in the legs, Okarma said."

Andrew Pollack of the New York Times provided a nuanced, comprehensive piece. He reported on the political and scientific implications and quoted Robert Klein, chairman of the California stem cell agency, on the move.

Klein said the FDA approval was tied to the Obama Administration although that was denied by an FDA spokesman and Geron.

Geron's stock rose 20 percent early this morning, hitting $6.26 at 9:47 a.m. EST, close to its 52-week high of $6.55.

Here are links to the Geron press release and other stories about the much-delayed trial: Geron (includes video), Wall Street Journal , AFP and Financial Times.

Klein Wants $10 Billion in Aid From Obama Administration

The chairman of California's state stem cell research agency, Robert Klein, has unveiled more details of what appears to be a $10 billion-plus proposal seeking assistance from the Obama Administration to aid the biomedical industry.

Some of Klein's proposals would clearly benefit industry and researchers in California, but they also could have an impact in locations throughout the nation that have either major biotech industry centers or research facilities.

Klein laid out his thoughts in a draft of a five-page letter during a meeting Wednesday of the directors' Finance Subcommittee. John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., who sat in on the session, said the meeting was running late and Klein's plan was not even discussed. Klein said people should read it so it can be taken up at CIRM's full board meeting next week.

Klein proposed five "federal initiatives." They include a $1.5 billion biomedical lab construction effort, $2.1 billion for assistance to some established state government research programs (presumably including California), a $3 billion loan guarantee program that appears to dovetail with Klein's $500 million biotech lending plan and $6 billion for increased NIH funding of biomedical research. The fifth element would allow some small biotech firms to sell their R&D credits. It contained no price tag.

The letter and accompanying chart promised that the proposals would generate 159,832 "job years" based on estimates provided by an unidentified Stanford economist. The Klein letter did not explain the assumptions underlying the multipliers that were used to come up with the job count.

The letter appears to be directed primarily at Congress. However, it is not clear whether it has actually been sent.

The proposals are the subject of a report scheduled to be discussed next Thursday by CIRM directors in Burlingame. We have asked Don Gibbons, chief communications officer for CIRM, if Klein intends to seek a vote on the proposals or whether he will simply ask them to sign it. He could take an assistance pitch under his signature alone, but we suspect that he would like to have all the board members endorsing it. One question that directors should ask is whether Klein or other CIRM employees will be traveling to Washington or other locations to lobby for the proposals. Another is how much staff time is being devoted to this effort at a tiny, 38-person agency that is chronically understaffed.

Klein's proposals to join the bailout/stimulus gravy train in Washington have grown rapidly over the past few months. CIRM itself, however, is currently well-financed and needs little assistance from the federal government. We have noted that there is a certain logic to Klein's effort. But we have also noted that the Obama Administration's financial pie is limited and that CIRM should step out of the federal hand-out line.

CIRM Makes a YouTube Move

The California stem cell agency has joined YouTube, an Internet video-sharing service used by millions worldwide.

CIRM, the world's largest source of funding for hESC research, hooked up with YouTube on Jan. 15 with videos of California scientists talking about their research. Since then, 259 videos have been watched, as of this writing. Currently CIRM appears to have 28 different videos on the site.

The service is called CIRMTV, and it is part of CIRM's expanding PR effort. On Tuesday, CIRMTV keyed off the Obama inauguration with a four-minute video of CIRM President Alan Trounson and UC San Francisco researcher Susan Fisher (see photo) discussing the likely impact of the new president.

The inaugural video currently has the highest number of views, 109, with one of Hans Kierstad of UC Irvine coming up in second with 76 views, outstripping UC San Diego's Catriona Jamieson, who had 57, and Stanford's Irv Weissman, who had 48.

As always with the Internet, the main problem is how to build traffic. CIRM needs lots of links to the site to build viewership along with comments on the material from outside sources, ranging from print publications to other Internet sites. However, stem cell research has limited general appeal considering the other matters on YouTube, and it is unrealistic to expect massive numbers.

Don Gibbons, chief communications officer for CIRM, reports that CIRMTV has "zero outside cost" and requires "minimal staff time."

The same videos can be seen on the CIRM web site. In our case, the YouTube version loaded and played smoothly while the CIRM site stalled repeatedly. There could be a host of reasons for that, ranging from server capacity to video quality to the bandwidth of our connection.

Normally the videos cannot be downloaded for viewing later when you are not connected to the Internet. But Wikipedia reports that free software can be downloaded to provide that capability.

On Tuesday, CIRM also devoted a good chunk of its home page to the inauguration, featuring both the Trounson-Fisher video and a link to a two-page statement on the impact of Obama's expected stem cell moves.

For more on California state government uses of YouTube, see this piece by Daniel Wood of the Christian Science Monitor.

Stem Cell Research Funding in Lieu of Everything Else?

Attorney Kristie Prinz of the California Biotech Law Blog says the points raised in the our "Millions for Science vs. Cuts in Medical Help for the Poor" are well-taken.

She writes,

"Clearly, California voters believed in the value of stem cell research when they voted for Proposition 71, and there is little doubt that stem cell research has the potential to be tremendously beneficial to the state's biotech community, but did the voters really intend to fund stem cell research with state taxpayer money in lieu of everything else?"

Prinz continues,

"In my opinion, Jensen's point is well-taken.  As a transplant from the South--not Southern California, but the 'real' South--I have always been uncomfortable with California's ballot initiatives for the simple reason that I always felt like I was missing some critical information to making a decision: the budget.  I have run my law firm now for five years, and I can assure you that while I made some mistakes early on, I quickly learned that a business owner cannot make any spending decision without carefully reviewing the budget that will finance such spending.  I serve on a nonprofit board of directors, and the same is true in making spending decisions for that organization.

"Yet, as a California voter, I am somehow expected to make a decision on a ballot initiative without being able to see the overall financial picture of the state.

"Does this really make sense?"

If you have thoughts on any of these issues, you can comment by clicking on the word "comment" below. Anonymous comments are permitted. Or you can write CIRM directly via its web site and ask to have your comments made part of the public comment allowed at each CIRM board meeting.

CIRM Vice Chairman Vote Delayed

The California stem cell agency has deferred a decision on a vote to select the new vice chairman of its board of directors – State Democratic Party Chairman Art Torres or Duane Roth, head of an economic development group and who currently sits on the 29-member board.

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

He said,

"The surprising delay of the vote will give ICOC members more time to think about exactly what attributes the vice chair should have.  For some members the decision could come down to this: If Roth loses, he remains on the board and presumably continues as the productive member many think he has been. Torres would be a new player, bringing strong political connections to Sacramento and Washington -- but does the California Institute for Regenerative Medicine (CIRM) really need and benefit from that?"

Simpson also has a statement from Roth on why he is the best candidate for the job. Torres has been in Washington for the inaugural, and no statement is currently available from him.

Gravy Train Bedfellows: Catfish Farmers and California Stem Cell Research

What do a couple of porn kings, some plumbers and bricklayers, travel agents, yacht builders and catfish farmers have in common with the $3 billion California stem cell agency?

They are all looking to ride the trillion-dollar, bailout/stimulus gravy train that is underway in Washington, D.C.

Everybody is doing it, so why not us? That's the logic.

We must, however, add a qualifier to the business about CIRM, which continues to operate amply funded despite a $40 billion budget crisis affecting other California state departments.

CIRM directors are not yet officially begging for a handout from the Obama administration. But the matter, championed by CIRM Chairman Robert Klein, is breezing through the agency. It comes up again tomorrow afternoon at a meeting of the directors Finance Subcommittee, where it is likely to be sent on with a favorable recommendation to the full board unless some board members stand against Klein.

As is often common with CIRM, the latest specifics about Klein's gravy-train proposal are being withheld from the public even though the meeting is less than 24 hours from now. (The agency's failure to provide such information is persistent, corrosive to the public trust and puts the lie to Klein's pledge of transparency and openness, but that is a subject of another item.)

Here is what we have been able to ferret out about Klein's plan to snag some of the federal goodies. He wants a federal guarantee for CIRM's $500 million biotech lending program. With such a guarantee, the size of the program could be boosted to $1 billion, Klein says. Another element is a move to improve research and development tax credits for the biotech industry. (You can find the latest, Dec. 19, 2008, discussion of this here in a CIRM transcript.) Klein may have other proposals in mind as well.

There is a logic to Klein's effort. Huge amounts of money are going out the door. Biotech ventures, not to mention stem cell research, are chronically short of cash. The industry has high promise, according to conventional wisdom. If you are running a business, it behooves you to grab the cash when you can. Next year, the door will be closed.

But the federal largess comes with a cost, maybe not to CIRM but to the nation as a whole. Many competing demands exist, some for worthwhile efforts that will die if they do not receive help. Klein's proposals may well be be competing with other calls for assistance from California state government or cities and counties, not to mention $1 billion promised by President Obama for autism research.

The financial pie is, in fact, limited. CIRM is well-funded and can progress quite smartly without siphoning off federal assets that might be better used. Moreover, the biotech industry has an army of lobbyists who are more than capable of carrying their own water without the assistance of CIRM, which is a minuscule player in Washington anyway.

The Wall Street Journal today reported on the impact of the competition for federal dollars. It said,

"...(T)he unprecedented largess granted through the $825 billion economic-stimulus bill may bind Obama's hands later. The growing deficit will make it difficult, if not impossible, to fulfill spending promises that total hundreds of billions of dollars....This burst of spending so early in his presidency could also hobble Mr. Obama politically in the years to come as the country's soaring budget deficit demands cutbacks in social programs and even potential tax increases."

I may be old-fashioned, but under such circumstances, I think CIRM should remove itself from the hand-out line and get back to the doing the best it can with its already ample resources. As another president remarked at his inauguration 48 years ago,

"Ask not what your country can do for you. Ask what you can do for your country."

(As for those porn kings, catfish farmers and others mentioned earlier, here are couple of links to them in stories in the Los Angeles Times and New York Times as well as a Phoenix, Ariz., radio station. The porn kings request seems to a bit of humor, highlighting the unsavory nature of the gravy train bandwagon.)

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If you have thoughts on any of these issues, you can comment below by clicking on the word "comment" or you can write CIRM directly via its web site (info@cirm.ca.gov) and ask to have your comments made part of the public comment allowed at each CIRM board meeting.

The public can participate in the meeting tomorrow afternoon at teleconference locations in La Jolla, Berkeley, San Carlos, Palo Alto, Irvine and two in San Francisco. Addresses can be found on the agenda.

Digging Into the Method of CIRM's Creation

For those of you interested in knowing more about California's flawed initiative process – the device that created the state's $3 billion stem cell research effort – you can learn a little more without reading the entire 402-page report cited in the "CIRM Defends" item.

Instead, you can see a very brief version of it in the Los Angeles Times from Nov. 10, 2008. The op-ed piece by Robert Stern and Tracy Western notes that a record 63 initiatives have been on the ballot in the decade since 2000.

Spending on the measures hit a record $330 million in 2006. Stern and Western, top officials at the Center for Governmental Studies in Los Angeles, said,

"What all this suggests is that California's policy agenda today is increasingly driven by ballot initiatives rather than by the elected members of the Legislature. Prompted in many cases by legislative deadlock or legislative inaction, these initiatives effectively shift the policymaking burden to voters, and often leave them overwhelmed and bewildered by poor drafting, misleading campaigns, look-alike counter-initiatives and highly technical policy details.

"The ballot initiatives that voters are being asked to decide are too often lengthy, rigid, inflexible and error-prone. The initiative process is badly outdated and needs to be reformed."

CIRM Defends Its Spending, Positive Impact Cited

The California stem cell agency today commented on the "Millions for Science vs. Cuts in Medical Help for the Poor" item but seems to have missed the point.

Here is full text of what Don Gibbons, chief communications officer for CIRM, sent along:

"Your item on the California budget makes me think you are Herbert Hoover's grandson. CIRM bonds are structured so that there is no repayment prior to January 2010. That means our bonds have no impact on the general fund that is in trouble. All of our grants are pure economic stimulus. When half of Washington is ringing its hands over the fact that “not enough shovel-ready projects” exist to absorb the needed stimulus, shuttering projects that are already having a positive impact, with no negative impact, makes no sense. And the Obama administration is talking about high tech stimulus, like our research, as well as bricks and mortar, like our facilities construction."

Putting aside his personal comments about my ancestry, Gibbons does not deal with the essential point of the item, which is whether it is good public policy to lock up state funds via the initiative process and then hamstring elected leaders when it come time to deal with issues that go well beyond such relatively minor matters as stem cell research.

Beyond that, CIRM's spending, financed by the state of California, flies in the face of the hardship seen elsewhere and poses PR and legislative problems that may ultimately damage the agency. And that is regardless of whether the spending is legal, justified or economically beneficial. State employees are being laid off and salaries cut while three CIRM executives rank in the top ten highest paid state employees while running a tiny, 38-person staff. That is not a image to wave in front of lawmakers right now.

As we have observed in the past, CIRM does have an economic impact, but it is relatively minor in the context of the California economy. In regards to CIRM and economic stimulus/bailouts in Washington, we will have more on CIRM's moves to seek federal assistance later today or tomorrow.

The issues surrounding the creation of CIRM via ballot initiative go well beyond the agency itself and are part of the problems that have helped to create the state's $40 billion budget crisis. It is a crisis that will strike at CIRM as well if it is not solved in the next month or two.

Last summer, the Center for Governmental Studies, a respected nonpartisan think tank in Los Angeles, released its latest report on the California initiative process. "Democracy by Initiative." The 402-page study cited Prop. 71, which created CIRM, as an example of an initiative sponsored by "wealthy elites," one that contained "deficiencies in drafting." "Ineptly written," one critic was quoted as saying.

The report declared:

"Jean Ross, executive director of the California Budget Project, has described initiatives as a case of eating 'dessert without having to eat your vegetables. You can put $3 billion worth of stem cell research bonds on the ballot [Proposition 71] without the voters having to tell you where the $300 million a year to pay those bonds is going to come from, and without asking voters to make the kinds of priorities and choices that the executive branch and legislative branch have to. The voters didn’t have a choice, do you want to cover all children with health insurance in California for 10 years, or do you want stem cell bonds? Those are the kinds of choices that come from the legislature.'"

The report also noted that it cost $6.9 million to qualify Prop. 71 for the ballot, including $2.7 million to paid circulators. CIRM Chairman Robert Klein, who says he wrote the measure, contributed $1.9 million to the qualification process, 70 percent of the total for paid circulators.

Tens of millions more were spent during the campaign to win voter approval.

If you have thoughts on any of these issues, you can comment below by clicking on the word "comment" or you can write CIRM directly via its web site and ask to have your comments made part of the public comment allowed at each CIRM board meeting.

Fresh Comment

"Anonymous" has left a fresh comment on the
"Riddle of the Stem Cell Trinity" item.

A California Stem Cell Question: Millions for Science vs. Cuts in Medical Help for the Poor

As California's public universities are turning away students and state cash is being cut for projects ranging from research labs to affordable housing, the California stem cell agency is on track to give away $66 million later this month.

The awards will come following CIRM's handout of more than $19 million last month.

No one – except for those congenitally opposed to hESC work -- is contending that all these millions are going to unworthy scientists or to dubious research. But the CIRM giveaways stand in marked contrast to what is happening to the rest of the state in the light of its $40 billion budget crisis.

If CIRM were, say, part of the state Department of Health, chances are good that it would not be able to spend taxpayer money so freely.

The disparity raises major public policy issues about the use of ballot initiatives to promote and protect various causes. Should the elderly and poor see their much-needed assistance and medical care cut while cash flows unimpeded, in this case, to researchers, some of whom are already exceedingly well funded?

A ballot initiative, Prop. 71, is just what created the $3 billion stem cell effort in 2004 – not carefully crafted legislation hammered out over months with all parties having their say in public. The measure was drafted in secret by CIRM Chairman Robert Klein (with the help of a couple of others he rarely acknowledges) and placed on the ballot with a signature-gathering effort that probably cost $1 to $2 million. (That is the most common way of placing an initiative on the ballot in California – hiring firms that specialize in such efforts and paying them on a per signature basis.)

Voters did speak, approving Prop. 71 with a 59 percent vote. However, the measure faced only the most feeble opposition. The groups concerned about ethical issues involving hESC were largely focused instead on re-electing George Bush as president.

The upshot is that the Golden State can do little now to enact even the most minor needed changes in the Prop. 71. It locked into state law and the state Constitution true minutia, such as specifying that CIRM Chairman Klein is in charge of putting out the annual report. Prop. 71 enacted super-majority quorum requirements that hamper the agency in conducting its official business and capped its staff size at a ludicrously low 50 persons to run a $3 billion program. And it created a board of directors dominated by the very enterprises that benefit the most from CIRM largess.

Klein, in order to insure that he and the agency would not have to heed the wishes of the governor or other elected officials, wrote into Prop. 71 an unprecedented, constitutional requirement for a 70 percent vote of the legislature to change the law, plus the signature of the governor. That makes it virtually politically impossible to make alterations in the measure. By contrast, even passing a budget for the state of California or raising taxes requires only a two-thirds vote. While less than that for changes in CIRM, the two-thirds requirement is now barring a solution to the state's disastrous financial problems.

All of that is a backdrop to the upcoming CIRM directors meeting Jan. 29 in Burlingame, Ca. In addition to giving away the big bucks, an overdue review of its financial condition is on the agenda. So far, however, no financial documents are posted on the CIRM web site. The subject came up last month repeatedly at the directors meeting in Irvine. Klein, however, shied away from discussing specifics.

But here are the basics: CIRM depends on state bonds for cash. The money flows directly to the agency. The governor and the legislature cannot touch it. But the state has stopped issuing bonds because of its precarious condition. CIRM says that so far it has plenty of cash. But it has awarded more than $600 million in multi-year grants, which need regular payments. One contingency Klein promises to discuss is the private placement of bonds. One would think those would have limited appeal when not even the state of California can find a market for its bonds.

Private placements, moreover, are not likely to be necessary. If California cannot get its financial act together in the next month or two, it will face problems of a magnitude that will dwarf such concerns as stem cell research. That pressure seems certain to force the state's public servants to cobble together a solution before CIRM runs aground financially. Nonetheless contingency plans are always good.

The grants scheduled to be awarded include $18 million to support up to 10 awards for three years "to augment the ranks of laboratory personnel trained in the state-of-the-art techniques required by stem cell research labs." Certainly a worthy endeavor while the state's educational institutions are being whipsawed financially.

The second round involves $48 million in training grants for young scientists, including stipends of up to $77,000 for three years, including research and travel, tuition and health insurance in some cases. Another worthy endeavor, an investment in the future. It is a remake of the first-ever grants awarded by CIRM in September 2005. The agency didn't have the money then to fund the grants immediately, but the cash ultimately came through and helped make the state attractive to new, young talent.

If you have thoughts on any of these issues, you can comment below by clicking on the word "comment" or you can write CIRM directly via its web site and ask to have your comments made part of the public comment allowed at each CIRM board meeting.

$500 Million CIRM Lending Program Up on Wednesday; Details Missing

With only two business days left before a key CIRM meeting, California's stem cell research agency is keeping under wraps important details of how it plans to lend $500 million to the state's riskiest biotech ventures and make $100 million doing so.

Directors of the agency have approved the concept for what amounts to a biotech bank that would cater to enterprises that cannot gain normal financing. Loan default rates of up to 50 percent have been predicted by the plan's backers. The specifics, however, remain to be resolved. On Wednesday, the directors' Finance Subcommittee will dive into that complex subject.

Just what is being proposed at that session is not available to the public on CIRM's web site – only this cryptic language from the agenda:

"Consideration of policies and implementation plan/processes for CIRM loan program, including but not limited to the Loan Administration Policy and the role of delegated underwriters/financial service providers."

The lending program is the brainchild of CIRM Chairman Robert Klein, who has been pushing it for more than a year. The idea behind it is to help to provide funding for companies through what is known as a financial "valley of death" and to generate additional funds (the $100 million profit) for CIRM to use as additional loans or grants.

The closest thing to a current, basic, one-stop overview of the lending program is the proposal approved by CIRM directors in September. No business plan for the enterprise has been produced.

The biotech bank program calls for delegated underwriting of the loans, a practice much criticized at Fannie Mae, which had to be taken over by the federal government. CIRM does not have the expertise to run a half-billion dollar lending program, so an outside contractor must be hired. An earlier draft of a "concept plan" for underwriting was discussed Nov. 19, 2008, at a Finance Subcommittee meeting. It is not clear whether an identical plan will be offered on Wednesday.

Also discussed in November was a 12-page loan administration policy for loans to businesses. Directors made a number of suggestions for changes in it. The version to be considered on Wednesday is not available to the public on the CIRM web site.

Only two companies offered comments on the plans at the November meeting, International Stem Cell of Oceanside, Ca., and DNAmicroarray of San Diego. Both expressed general support of what they heard although they had some criticism of details.

Earlier this month, CIRM posted a request for information concerning the criteria and compensation for an underwriter, including provisions for dealing with conflicts of interest. According to CIRM, only one business responded, Silicon Valley Bank of Santa Clara, Ca., which has been involved in CIRM discussions about the lending program for months. CIRM expects to have more than one underwriter in order to avoid possible conflicts of interest.

In response to a question, CIRM spokesman Don Gibbons said last Thursday,

"We are also in discussion with a few other institutions and hope to have comments from them prior to the Finance committee meeting."

Gibbons has not yet responded to a request for the names of those companies.

Silicon Valley Bank and its parent group, SVB Financial Group, have 27 offices worldwide and 11,000 clients, according to its web site. The bank says that "more than half of all venture-backed companies in the U.S. are SVB clients."

The bank says,

"With an unmatched network of relationships with life science VCs and a dedicated team of life science experts, we are the partner of choice for emerging and established medical device and biotech companies."

SVB presented a plan to the Finance Subcommittee in September that laid out a possible business relationship with CIRM. Directors discussed the possibility of having a similar presentation at a full board meeting but were concerned about leaving the appearance that a decision had been made to go with Silicon Valley Bank. They suggested that if the bank's slides were used that its name be removed from them. It is not clear whether such a presentation will be made at Wednesday's meeting or at the full board meeting later this month.

Teleconference locations (two in San Francisco, one each in La Jolla, Berkeley, San Carlos, Palo Alto and Irvine) where the public can participate in the Wednesday meeting can be found on the meeting agenda.

Another Reed Ethics Item

Writing on the The Niche stem cell blog for Nature magazine, Monya Baker also posted an item on the ethics case involving CIRM director John Reed. Baker's account can be found here.

Klein Ducks Little Hoover Questions

Late last year a California government efficiency agency investigating the state's $3 billion stem cell research effort asked its chairman, Robert Klein, what changes he would make in it after four years of experience.

Klein's response came in the form of what one might call a "modified stonewall." He will not answer the question because it would be "inappropriate" for him to give his views.

The matter involves the Little Hoover Commission, a state department charged with analyzing the performance of other state entities, and which has held one public hearing concerning CIRM. The commission's staffers and some of its members have also attended some CIRM meetings and interviewed other persons with an interest in the agency.

On Nov. 26, the Hoover commission sent a letter requesting Klein's views, a request first made at its hearing earlier that month. The letter asked for an answer by Dec. 15. On Dec. 19, Klein tried to rope in members of the CIRM board in fashioning a response, declaring that it would be "inappropriate" for him to respond, although he frequently says he wrote Prop. 71, the measure that created CIRM in 2004.

However, at least two board members balked. According to the transcript of the directors Legislative Subcommittee on Dec. 19, board member Jeff Sheehy, a communications manager at UC San Francisco, said,

"I would rather you just wrote the letter based on the items that you think are important."

Claire Pomeroy, dean of the UC Davis School of Medicine, told Klein,

"It's asking your opinion about writing the initiative, which was the process that happened before the board even existed. so it seems to me that it is appropriate for you to clarify your personal testimony in response to this letter."

Francisco Prieto, a Sacramento physician and CIRM board member, supported Klein's attempts to develop some sort of board consensus on changes.

During the meeting Klein indicated he would poll board members and perhaps staff about recommendations on possible changes.

Sheehy strongly objected to a detailed, full board review on the questions that the Little Hoover Commission directed to Klein. Sheehy warned that it could generate internal controversy that could have "negative consequences."

He said the board should focus on more important, unfinished work. Sheehy said,

"We're still working on trying to get a strategic plan for this institute....I can go down the list. We're still trying to get grants out. We're still trying to figure out a prescreening process. So there's a lot of the nitty-gritty stuff about our work we need to do."

On Dec. 22, Klein wrote a five-page letter to the Hoover Commission that said the "board is working well." He said the size of the board is beneficial because it provides diversity of viewpoints. He defended its conflict of interest rules, but did not mention the case of a director being investigated by the state for actions taken on the advice of Klein personally. He defended CIRM's transparency but did not discuss its perennial failure to provide timely public, Internet access to important background material on many proposals(including their texts) to be acted on at directors' meetings.

He also reiterated his refusal to give his personal opinion about changes. However, in the past he has publicly stated that the 50 person cap on staff was a mistake. He also has acknowledged attendance problems at board meetings, which often make it impossible to do business officially. Those problems stem from the structure of the board and its super-majority quorum requirements that are locked into state law. He also has supported triaging or prescreening grant applications because of difficulties with the grant review process.

We have asked CIRM for copies of the responses to Klein's queries concerning recommendations for changes. We will carry those when we receive them.

Reprogramming and Unicorns

CIRM President Alan Trounson has weighed in on some of the issues that attend the reprogramming of adult stem cells.

In a piece in the December 2008 issue of Cell Stem Cell entitled "Rats, Cats, and Elephants, but Still No Unicorn: Induced Pluripotent Stem Cells from New Species," Trounson noted that reprogramming is likely to attract attention from animal conservationists trying to preserve endangered species.

On the human front, he wrote,

"No matter how similar mouse, rat, and human iPSCs might be, it remains to beseen whether the usefulness of human iPSCs can be established, given the presence of viral sequences and of multiple copies of the transcription factors in potentially unregulated sites in the human genome. Regulatory agencies are likely to consider these lines to be genetically engineered and will consequently hold them to a very high bar in order to establish safety for use in human therapy. On the other hand, the potential availability of riPSCs for modeling human diseases will be very attractive to researchers and companies involved in drug discovery, as the mouse has often proven inadequate as a model for candidate therapeutics."

Chron on Reed Conflict Case

Reporter David Perlman of the San Francisco Chronicle on Wednesday wrote a piece on the ethics case involving a director of the California stem cell agency. Perlman secured a brief comment from the director, John Reed, who is also head of the Burnham Institute of La Jolla, Ca., Perlman wrote that Reed said only that he will now resume his activities on the CIRM board.

Reed Ethics Case Receives Modest Coverage

The ethics warning by California regulators involving a director of the state's $3 billion stem cell agency drew light news coverage today.

The conflict-of-interest incident received the most fulsome attention in two San Diego area newspapers, the Union-Tribune (Terri Somers writing) and the North County Times(Bradley Fikes writing). That's because the case involves John Reed, head of the Burnham Institute in La Jolla, Ca.

Erika Check, writing on the blog of Nature magazine, carried the following statement from Robert Klein, chairman of CIRM.

"We are delighted that with the completion of the review by the Fair Political Practices Commission. Dr. John Reed will reengage in his role as an ICOC [board] member. As CIRM matures, we continue to review and enhance our policies and procedures to avoid potential problems in the future."

It was Klein, an attorney who drafted much of Prop. 71, who advised Reed to write a letter lobbying the CIRM staff to reverse an unfavorable decision involving a $638,000 grant to Burnham. The letter prompted the state ethics investigation.

The Associated Press also wrote a brief story that appeared on various websites, including those of the San Francisco Chronicle, The Sacramento Bee and the San Jose Mercury News.

None of the stories carried a response from Reed, who Somers reported is traveling.

(An earlier version of this item did not contain the information from the Nature blog.)

Burnham's Reed Warned by State Ethics Agency on Conflict of Interest

California's government ethics overseers have issued a "warning letter" to a director of the California stem cell agency for attempting to influence the agency's staff to reverse a denial of a $638,000 grant to his research organization.

The attempt by John Reed, CEO of the Burnham Institute of La Jolla, Ca., was first disclosed by the California Stem Cell Report in November 2007.

Subsequently, John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca, asked the Fair Political Practices Commission to investigate Reed's action. California's top fiscal officer, Controller John Chiang, also called for an FPPC inquiry. Simpson disclosed the FPPC's warning today in a news release circulated nationally.

The FPPC said that Reed "intended to influence a decision that had the potential to affect his economic interests." The ethics agency said that Reed's action "raises ethical concerns," declaring,

"We are closing this matter with a warning letter....Dr. Reed is advised that failure to comply with the provisions of (state conflict of interest laws) can result in an enforcement action against him, including monetary penalties of up to $5,000 for each violation."

Reed recused himself from serving on the board during the FPPC investigation and appointed an alternate to fill in.

Simpson said he hoped that the 29 members of the CIRM board of directors had learned from the Reed incident. He said Reed can now return to the board and make a "positive contribution."

In response to an inquiry, Chiang's office said,

"Any conflict of interest threatens CIRM’s credibility and jeopardizes voters’ tremendous investment in stem cell research, which is why CIRM itself adopted a conflict-of-interest policy shortly after its creation.

"CIRM and the ICOC have a tremendous amount of work ahead of them – the controller hopes they can move forward and use the guidance provided by the FPPC to avoid any further conflicts in the grant process."

Simpson noted that the CIRM board is riddled with built-in conflicts of interest as the result of the language of Prop. 71, which created the $3 billion research effort.

Simpson said,

"Most of the people handing out the money are the very same people from the institutions that get the money. That means the conflict rules in place must be strictly adhered to and there must be consequences when they are violated.”

Reed wrote his letter seeking to influence the staff on the advice of CIRM Chairman Robert Klein, an attorney who wrote much of Prop. 71. Klein's action triggered calls for his resignation from The Sacramento Bee and Consumer Watchdog.

Ted Kennedy Backs Torres as CIRM Vice Chairman

Will the next vice chairman of the world's largest funding source for hESC research be Sen. Ted Kennedy's candidate or that of California Gov. Arnold Schwarzenegger?

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., disclosed Kennedy's endorsement of Art Torres, the head of the California Democratic Party, on the Consumer Watchdog blog last week.

Contesting Torres for the vice chairmanship of the $3 billion California Institute for Regenerative Medicine is Duane Roth, a current member of the CIRM board of directors, who was nominated by the Republican Schwarzenegger. Roth is also head of Connect, a San Diego area group supporting life science and technology businesses.

In a letter last month to CIRM Chairman Robert Klein, Kennedy said Torres is a friend of 37 years and declared that the former state lawmaker has an outstanding record of public service.

Torres' "years of advocacy for medical research and better health care for Californians will be a major asset" for CIRM, Kennedy said.

"A great deal is at stake," the Massachusetts Democrat said, "and I'm confident that Art Torres will make a difference for our country."

Simpson said he was not sure which candidate was best. Simpson wrote,

"The first task  for the ICOC (CIRM directors) is to define exactly what the vice chairman should be doing.  Both men need to offer a clear public statement of what he would bring to the position as well as his vision for the post." 

It is up to the 29-member CIRM board of directors to choose between Torres and Roth. No vote is yet scheduled.

CIRM's Financial Status, $500 Million Lending Program on the Table

Directors of the California stem cell agency next week will discuss how to run its ambitious and novel $500 million plan to lend money to the state's riskiest biotech ventures as well as the agency's own finances in the light of the Golden State's budget crisis.

The meeting of the Finance Subcommittee is scheduled for Jan. 21 at eight teleconference locations throughout the state. Businesses and others interested in the biotech loan effort should not miss the session.

Also on tap are plans to ask the Obama administration for loan guarantees that would, according to CIRM Chairman Robert Klein, enable CIRM to double its lending program to $1 billion.

No details are yet available on the agenda posted by CIRM on its web site.

Here is the information currently provided on the matters to be discussed:

"Consideration of policies and implementation plan/processes for CIRM loan program, including but not limited to the Loan Administration Policy and the role of delegated underwriters/financial service providers.

"Consideration of Stimulus Program topics

"Update on challenges of state finances and the impact on agency bond issues"

(Stimulus program topics are expected to include the loan guarantees.)

The loan program would target enterprises that cannot get normal financing because of their risk. Default rates are projected as high as 50 percent, but a $100 million "profit" is also expected. The excess is expected to be used for additional grants or loans.

Action taken at next week's meeting is likely to go before the full board of directors at its meeting on Jan. 29 in San Francisco.

The teleconference locations are in San Francisco(2), Menlo Park, La Jolla, Berkeley, Hillsborough, Irvine and Palo Alto. Specific addresses can be found on the agenda.

CIRM's $500 Million Loan Program: Lucrative Contract Looms

The California stem cell agency is seeking advice on its plan to have an outside contractor run a $500 million biotech lending program, and Friday is the deadline.

The information will play a key role in creating a potentially lucrative contract to administer the seven- to 10-year program for the $3 billion agency.

Banks, delegated underwriters and other financial service providers with an interest would be well-advised to weigh in with suggestions. The "request for information," however, is not limited to potential bidders but also solicits comments from "others with relevant experience or information."

CIRM is seeking information concerning the scope of services, models for relationships between "financial services providers/delegated underwriters" and CIRM, compensation structure and conflicts of interests.

CIRM is considering three possible models for the contractor:

"...a delegated underwriter model (delegated underwriter advances its own funds with CIRM guarantee), a hybrid model (delegated underwriter advances its own funds, but CIRM provides cash as collateral), and a fee for services model (CIRM originates loan and advances funds and pays financial services provider a fee for services)."

The stem cell agency states that its staff

"...does not have the internal expertise or capacity to manage all of the financial components of a loan program. CIRM therefore plans to externalize these tasks while maintaining ultimate control over the loan program. To ensure that CIRM obtains this expertise at the best value to California taxpayers, CIRM plans to issue a request for proposals to select two to three financial services providers/delegated underwriters. Because this is a start-up program, it is important to have at least two delegated underwriters at the outset. This would permit CIRM to learn from their different approaches and to refine our best practices. Furthermore, it would permit CIRM to transfer future transactions to another delegated underwriter if the relationship with one of the contractors is unsuccessful."

In February, CIRM plans to seek bids from potential contractors. The loan program is scheduled to begin this spring.

CIRM Begins Application Triage Experiment

The California stem cell agency is moving forward on its plan to perform closed-door, staff-connected triage on grant proposals before they move into the peer review process.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., reported on the action by CIRM directors on Tuesday. But he suggests an alternative that could serve CIRM's desire to reduce the number of applications on some grant rounds. Just open up the grant application process so that the public would know who is applying and hear the pros and cons on the applications.

Writing on his organization's blog, he said,

"It's our $3 billion that's being handed out. If you want our money, you ought to be willing to ask for it in public. Nothing builds more trust in a review process than having it completely transparent."

Simpson reported that Tuesday's special, teleconference board meeting failed to muster a quorum despite an attempt to set up multiple out-of-state locations for the convenience of traveling board members. Only 15 checked in. Nineteen are needed for a quorum. The full board has 29 members.

Failure to attain a quorum meant no action on the request by the International Society of Stem Cell Research for $400,000 to help finance its $1.5 million convention in San Francisco in 2010. It was the second time the board has failed to act on the request.

Here is a link to CIRM's four-page explanation of the triage proposal. The process will be applied in the $60 million basic biology round. The RFA should be posted before the end of this year with the "pre-applications" due towards the end of January.

Correction

The Dec. 22, 2008, item on the ISSCR grant request from the California stem cell agency incorrectly gave the figure as $420,000 as the result of erroneous information from CIRM. The correct figure is $400,000. The additional $20,000 appeared in the CIRM grant application from the ISSCR which we have been told automatically adds 5 percent "indirect costs" to the amount requested. However, the 5 percent does not apply in this case.

Correction

The "financial status" item on Dec. 22, 2008, incorrectly said that CIRM stated that its grant money will run out at the end of this coming June. As noted later in the item, CIRM said it can "cover grant commitments at least through July 2009."

Attention Scientists: CIRM Proposes Triage on Research Plans

The California stem cell agency is proposing a form of scientific triage on research proposals, weeding them out even before they get into the peer review process.

Up for consideration at tomorrow afternoon's CIRM board meeting, the pilot project could have major implications for stem cell researchers in California, allowing them to bypass screening committees at their institutions. The proposal also would create another layer in the closed-door CIRM grant approval process, vest major, new authority with the CIRM staff and push the CIRM board even further away from the de facto decisions on grant applications.

The plan has yet to be published by CIRM on its web site. However, Don Gibbons, CIRM's chief communications officer, made an electronic copy of the Power Point presentation available to the California Stem Cell Report. If you would like a copy, please email the California Stem Cell Report (djensen@californiastemcellreport.com) or CIRM (info@cirm.ca.gov).

The proposal would involve a "pre-application review" of proposals that would involve CIRM staff and two members of the grants review group. It is patterned after "comparable procedures from from the Gates Foundation/MJFF/NIH/Genome Canada."

Some members of the CIRM board of directors balked at the proposal earlier this month. CIRM staff is bringing it up again tomorrow with changes aimed at addressing directors' concerns.

One key reason behind the proposal is to help ease the workload of the scientists who come from out-of-state to review applications. Sometimes the number of applications have run into the hundreds, creating time-consuming situations where scientists are reluctant to devote their time.

It is also designed to ferret out applications that are nixed by institutions prior to coming to CIRM. Marie Csete, CIRM's chief scientific officer, said the agency has received complaints that the best science is not always getting to CIRM.

She told directors earlier this month that CIRM may "not be seeing the full range of science from young scientists."

The public can participate in the meeting from locations in San Francisco (3), Berkeley, Elk Grove, Healdsburg, Los Angeles (3), Koloa, Hi., Beverly Hills, Irvine (2), La Jolla (2), Stanford, Cornelius, NC, Sacramento, Philadelphia and Chicago. The out-of-state locations are presumably where some CIRM directors will be tomorrow afternoon but they are still legally public as far as CIRM meetings go. The specific addresses can be found on the meeting agenda.

Stem Cell Science Group Seeks $400,000 From CIRM

Consumer Watchdog calls it "unbelievable" and "a flagrant squandering of public money." The group says it serves no purpose other "than to inflate the already healthy egos of CIRM's globe-trotting executives "

The language comes from John M. Simpson, stem cell project director for the Santa Monica, Ca., group. Writing on the group's blog, he refers to a pitch by the prestigious International Society for Stem Cell Research for $400,000 from CIRM to pay for 28 percent of the cost of the society's 2010 convention in San Francisco.

Tomorrow afternoon, the grant request will be considered by the CIRM board of directors at a special teleconference meeting. Multiple locations are available throughout the state and even outside of the state where the public can comment.

The request first came before the board earlier this month with no written explanation or detailed justification of benefits to the state of California. Directors told CIRM staff to provide more details if funding was to be seriously considered.

CIRM has close ties to ISSCR. CIRM President Alan Trounson is on the board of directors of the society. CIRM Chairman Robert Klein was a member of an advisory committee to ISCCR in 2007, according to The Niche, Nature magazine's stem cell blog. Don Gibbons, CIRM's chief communications officer, is a member of the group's public education committee.

The request for the grant is signed by Irv Weissman of Stanford, whose medical school dean is on the CIRM board of directors. Weissman will be president of the group in 2009. Stanford has received $95 million in grants from CIRM. Weissman has received $2.6 million.

It is not uncommon for professional organizations to seek some sort of financial assistance from enterprises whose executives serve on the professional group's board of directors.

However, the timing on this pitch is unfortunate, to say the least, given the $40 billion California budget shortfall. Moreover, funding of the convention seems a tad lavish. For example, it includes $235,000 for marketing expenses, a figure that seems more appropriate for MacWorld than a gathering of stem cell researchers.

Even in brighter times, a $400,000 donation from the state would be dubious. Today it cannot be justified unless CIRM wants to chalk up some serious minus points with the folks in the state Capitol and with the public at large.

The public can participate in the meeting from locations in San Francisco (3), Berkeley, Elk Grove, Healdsburg, Los Angeles (3), Koloa, Hi., Beverly Hills, Irvine (2), La Jolla (2), Stanford, Cornelius, NC, Sacramento, Philadelphia and Chicago. The out-of-state locations are presumably where some CIRM directors will be tomorrow afternoon but they are still legally public as far as CIRM meetings go. The specific addresses can be found on the meeting agenda.

(Editor's note: An earlier version of this item incorrectly stated that the ISSCR grant request totalled $420,000. The erroneous information came from CIRM. The additional $20,000 appeared in the CIRM grant application from the ISSCR which we have been told automatically adds 5 percent "indirect costs" to the amount requested. However, the 5 percent does not apply in this case. )

CIRM Clarifies Its Financial Status: Grant Money Could Run Out by June

How long can CIRM continue to operate at full strength given the current state of California's fiscal crisis?

According to CIRM, the agency can cover its "grant commitments" through the end of next July and perhaps longer. After that, the agency will have only enough money to monitor existing grants and perform other "office operations" for another 12 months.

The response came from Don Gibbons, chief communications officer for CIRM. We asked him to clarify apparent discrepancies in CIRM's financial status that were posed in the item below.

The matter is of some import since the state of California has suspended the issuance of state bonds because of the budget stalemate in Sacramento. Bonds constitute virtually the only source of funding for CIRM.

However, we think it is highly unlikely that bond sales will be suspended for the next six months. The state's budget problems should not be minimized, but a solution is almost certain to be found before June. If not, CIRM funding will be among the least of the worries in California.

More to the point is the fact that CIRM enjoys a favored financial position while the rest of state government is struggling. That situation poses PR and policy problems for CIRM that we have discussed previously.

For the record, here is Gibbons' response to questions about CIRM's financial status. They involved the $168.9 million CIRM budget figure in a San Francisco Business Times article and a $160 million figure given to us by Robert Klein, chairman of the stem cell agency. They also involved Gibbons' statement in the Times article that said CIRM had enough to fund office operations until July 2010. Gibbons replied:

"Both are correct. We have enough to cover grant commitments at least through July 2009, but will still have enough in reserve to fund 'office operations' for another year so that we can continue to monitor existing grants, manage the standards review processes, etc."

Gibbons did not respond to our question concerning CIRM's reaction to the governor's request for a 10 percent payroll reduction and mandatory furloughs that amount to a 9 percent salary cut.

(Editor's note: In an earlier version of this item, the second paragraph incorrectly reported that CIRM said its grant money would run out at the end of next June. The next to the last paragraph has also been rewritten to clarify that there were two elements in the question placed to Gibbons.)

Layoffs Loom at California State Agencies, Not Likely at CIRM

More details about the financial condition of the California stem cell agency are emerging as sweeping layoffs and pay cuts have been ordered at other state agencies.

On Friday, Gov. Arnold Schwarzenegger said 238,000 state employees must take what amounts to a 9 percent pay cut via mandatory, unpaid furloughs. He also ordered payroll cuts that amount to 10 percent, beginning Feb. 1.

The governor asked state agencies that he cannot directly control, such as the University of California and CIRM, to take similar action.

Also on Friday, Ron Leuty of the San Francisco Business Times reported:

"The California Institute for Regenerative Medicine next month will weigh a contingency financing plan that could include bond anticipation notes and a private placement with major philanthropic backers.

"The move, which would have to be approved by the state stem cell bond committee and Treasurer Bill Lockyer, comes against the backdrop of a financial markets meltdown that has clipped access to capital for companies and government agencies alike."

Leuty continued:

"CIRM has $168.9 million on hand, said spokesman Don Gibbons, and has enough to fund office operations until July 2010."

That statement is somewhat at variance with figures provided by California stem cell Chairman Robert Klein. He told the California Stem Cell Report earlier this month at the meeting of the CIRM board of directors at UC Irvine that $160 million was available between now and the end of June.

We are querying CIRM concerning the discrepancy and the governor's payroll cuts.

However, CIRM has been chronically understaffed since its inception and actually needs to hire more employees to bring it up to its legal cap of 50, which is tiny compared to the magnitude of running a program that has now awarded more than $600 million in building and research grants. The agency has already indicated it wants to add the much-needed employees, and, in our view, is not likely to roll back staffing levels

Leuty also had an interesting financial tidbit concerning Klein, who says that he has spent personally $6.5 million on behalf of Prop. 71 and CIRM.

Leuty wrote:

"Klein, who operates a financial advisory firm in Palo Alto, said he spent $5.5 million shepherding Proposition 71 through approval and has swallowed $1 million in CIRM-related costs since then while working 40-hour-plus workweeks as chairman."

CIRM Responds to Financial Disparity Questions

The California stem cell agency has responded to questions involving the cutbacks and issues raised in the "Handouts vs. Cutbacks" item below.

Don Gibbons, chief communications officer for CIRM, said Klein is not personally affected by the cuts in funding for affordable housing.

We also asked:

"Does CIRM have anything to say about whether it is appropriate for it to continue handing out tens of millions of dollars or more while facilities for the deaf go unfunded and cutbacks are made in levee reinforcement to protect Sacramento from becoming another Katrina-like disaster, among the thousands of other affected projects?"

Gibbons complete response, which are carrying word-for-word, was:

"The projects being frozen are funded through Pooled Money Investment accounts and CIRM has less than $2 million in that fund.  CIRM bonds have delayed repayment schedules, so have no impact at all on this year’s budget."

Handouts vs. Cutbacks: Strange Financial Tales from the Golden State

Citing the state's severe financial problems, California officials Wednesday shut down $3.8 billion in cash for public works projects, including some closely connected to directors of the state's stem cell agency. The action came coincidentally just one week after the agency gave away $20 million in state funds to stem cell researchers.

The cuts in bond-financed programs struck at projects to aid both the deaf and ailing veterans as well as to assist in genomics research. Also hit were construction projects at medical facilities at UC Davis and UC San Diego, both of which have representatives on the CIRM board.

Funding for hundreds, perhaps thousands, of housing projects was halted, raising the possibility that the moves could personally affect CIRM Chairman Bob Klein, whose real estate investment banking firm specializes in affordable housing.

CIRM spending, however, is a mere piffle compared to the state's $40 billion budget shortfall. But their financial disparity highlights the stem cell agency's unusual nature and the public policy issues that arise when ballot initiatives lock up state funds and create a favored place for some state programs.

The stem cell agency enjoys a relatively rosy position compared to nearly all other state departments. As the result of Prop. 71, which altered the state constitution and state law, CIRM is assured of state bond funding that goes directly to the agency and which cannot be touched by the governor or the legislature. In response to questions from CIRM directors last week, Klein said that the agency had enough money to operate normally at least until the end of June next year. Compare that to predictions that California will not be able to pay its bills by the end of February.

CIRM currently is drawing its cash primarily from the proceeds of a $250 million bond offering that was completed in the fall of 2007.

However, the state is not currently issuing any additional bonds because of the state's budget crisis, which includes $60 billion in debt and the worst credit rating of any state in the nation, according to the Wall Street Journal. Without additional funding, CIRM could run out of money at some point. However, Klein last week told the California Stem Cell Report that CIRM has $160 million to tide it over through the end of June. He also said he is working on a private placement plan for CIRM funding, just in case. Klein said he has already identified some potential participants although he did not spell out details.

Gov. Arnold Schwarzenegger and California lawmakers are wrestling with the budget crisis but have a long history of financial fumbling. At the heart of their failures is a daunting requirement that the legislature must pass a budget or increase taxes only with a two-thirds vote. That gives a minority extraordinary power. In California's case, Republican legislators stand in the way as they have for decades, chanting a mantra of no-new-taxes regardless of the state's needs.

Putting together solutions that will right the foundering Golden State will require compromise and policy changes that ultimately may affect such privileged endeavors as the state stem cell agency. Good arguments exist for steady funding of any sort of scientific research, much less stem cells. But good arguments also exist for steady funding of the state's now troubled institutions of higher learning, once an example for the nation, as well as many other laudable state programs.

CIRM must step carefully in the next few months to avoid becoming a symbol of what is wrong with much of California state government and its finances.

(Note: We have asked CIRM for comment on the issues raised by the disparity between its financial condition and that of the state. We have also asked whether Klein is affected by the housing cuts. We will carry CIRM's response when we receive it. Additionally, the San Francisco Chronicle carried a report this morning that the cutbacks would affect the "state's stem cell research center in San Francisco." No further details were provided, and we could not find anything to support that in the list of projects from the treasurer's office that we reviewed.)