Waiting for Obama, Chapter 5 -- Be Careful What You Wish For

Some of the California reaction today to President Obama's action on stem cell research indirectly highlighted potential side effects that might make the state's stem cell agency uneasy – not to mention the biotech industry.

With the feds back in the game, they may not look kindly on wildcat activities out in fringy California and elsewhere. Turf does, in fact, matter. Moreover, with Congress now back in the stem cell legislation business, to borrow from one oldtime political commentator, no one is safe.

Consider the comment from John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca. He issued a call for the feds to act to ensure that taxpayers share in any profit generated by stem cell therapies developed with government funds.

In a letter to President Obama, Consumer Watchdog cited the profit-sharing model at CIRM and said,

“Celebrating the change in policy is not enough, however. It is now necessary, more than ever, to examine the regulations governing the way federal funds are distributed to researchers. A change in those rules is needed and we call on you to work with Congress to implement reform of the Bayh-Dole Act.”

Businesses in California have taken issue with CIRM's profit-sharing rules, but the state agency has now broken the Bayh-Dole ice. The precedent in California will help fuel efforts to make changes in the federal law.

From Oakland, Ca., came another call for federal action that could have an impact on CIRM. Marcy Darnovsky, associate executive director of the Center for Genetics and Society, said the national government should enact enforceable rules for all stem cell research, public and private. Such rules would supersede those in California.

Jesse Reynolds, policy director of the center, said,

"We've seen what happens with inadequate regulation and oversight in the financial sector. The human biotechnology sector also needs effective public policy."

The Dickey-Wicker amendment is already on the table in Congress. It could become the vehicle for a host of challenges to the established order in the biotech business.

More Than You Want to Know about CIRM's Cash Crisis

An overview by yours truly of the financial situation at the California stem cell agency was published today by the FierceBioResearcher newsletter. You can find the piece here.

FierceBioResearcher reports that it has more than 65,000 industry email subscribers and 410,000 monthly page views.

Here are additional links on the subject of CIRM finances, which will come up at Thursday's meeting of the CIRM board.

An overview on the California Stem Cell Report of the situation including Power Point presentations by a top CIRM official.

CIRM´s only statement on its web site concerning its financial status.

An assessment of the January briefing by John M. Simpson, stem cell project director of Consumer Watchdog, a Santa Monica, Ca., nonprofit, and a longtime CIRM observer.

The CIRM transcript from the briefing.

Waiting for Obama Chapter 4 -- Political Thorns and hESC

The No. 2 story this evening on the web site of the New York Times is not one that will necessarily please the most avid advocates of human embryonic stem cell research.

Written by Sheryl Gay Stolberg, the article said,

“President Obama intends to avoid the thorniest question in the debate: whether taxpayer dollars should be used to experiment on embryos themselves, two senior administration officials said Sunday.”

Stolberg wrote about a legal prohibition that is generally subsumed in mainstream media reports on hESC research. She said,

“The ban, known as the Dickey-Wicker amendment, first became law in 1996, and has been renewed by Congress every year since. It specifically bans the use of tax dollars to create human embryos — a practice that is routine in private fertility clinics — or for research in which embryos are destroyed, discarded or knowingly subjected to risk of injury."

Stolberg continued,

“Mr. Obama has not taken a position on the ban and does not intend to, Melody C. Barnes, his chief domestic policy adviser, said Sunday. The president believes stem cell research 'should be done in compliance with federal law,' she said, adding that Mr. Obama recognizes the divisiveness of the issue.

“'We are committed to pursuing stem cell research quite responsibly but we recognize there are a range of beliefs on this,' Ms. Barnes said.”

Stolberg wrote,

“A senior House Democratic leadership aide, who was not authorized to speak publicly about the issue, said overturning the ban 'would be difficult, but not impossible,' adding, 'It’s not something that we would do right away, but it’s something that we would look at.”

Hear CIRM Board Live on its Financial Woes and Politically Charged Election of Vice Chair

This week's meeting of the board of directors of the $3 billion California stem cell agency, which will include an update on its financial woes, will be available live via telephone and the Internet.

The audiocast is the second for the CIRM board and provides a valuable opportunity for public and those affected by the agency's actions to hear first hand its deliberations and actions.

In addition to a briefing by CIRM Chairman Robert Klein on his efforts to peddle state bonds privately, the board is expected to choose a new vice chairman, probably two, in fact. You can find the politically charged details here involving Republican Gov. Arnold Schwarzenegger and Democratic State Treasurer Bill Lockyer.

According to the agenda, part of the vice chairman deal now involves an unspecified reduction in the salary range for the position, which currently is $180,000 to $332,000 annually.

Klein, a millionaire real estate investment banker, receives $150,000 for what the board has defined as a half-time job.

The board will also consider unspecified changes at the top of the CIRM organizational chart in connection with the new vice chairmen or whatever the designation for the posts will be.

None of the details are available on the agenda although the meeting is only three days away. Based on past performance, a strong likelihood exists that the public will be denied access to the proposals in advance of the meeting.

Also scheduled for board action are staff recommendations on research funding priorities that reflect that CIRM will run out of cash by next fall unless bonds are sold. The agency has not released anything beyond a cryptic agenda item on that matter.

Another topic before the board is the actual funding of $58 million in training grants approved in January. The board delayed delivery of the cash in light of CIRM's bleak financial situation.

Expected to be approved are additions to CIRM'S outside legal contracts that will push the total to more than $1 million for this fiscal year. The figure does not include the salaries and benefits of attorneys on staff.

John M. Simpson of Consumer Watchdog attended the directors' Governance Subcommittee meeting last week and reported that it approved a $180,000 hike (40 per cent) in the $450,000 contract with the law firm of Remcho, Johansen & Purcell of San Leandro, Ca.

It also approved a $180,000, 6-month extension on a contract with attorney Nancy Koch, Simpson said. Koch started with a $150,000 contract last April. It jumped to $245,000 sometime after Nov. 30 and now will total $425,000 by the end of September if it is not extended further, based on the Dec. 22 and March 5 outside contract reports.

No written justification for the increases was provided last week, although Simpson reported that Klein said the money was needed for legal work connected with CIRM's financial troubles and the inquiry by state's Little Hoover Commission. Koch is also supposed to help fill the gap until the new counsel to the president comes on board in July, although CIRM also has a $140,431 arrangement with the state Department of Justice.

In an email, Simpson said the additional funds were approved only after CIRM director Claire Pomeroy, dean of UC Davis School of Medicine, insisted on a written justification prior to final board action on Thursday. Klein said the justification would be forthcoming. Last year, Klein pushed through a 66 per cent hike in Remcho fees with no public, written justification.

Thursday's board meeting can be heard by dialing in 866-254-5934 or using this Internet address – http://65.197.1.15/att/confcast. The access code is 991416. The audiocasts do not provide for participation, however.

The public can hear AND participate in the Sacramento meeting at teleconference locations in Southern California, including the City of Hope, the Salk Institute and two in Los Angeles, one at UCLA and one at the office of CIRM director Jonathan Shestack. Specific addresses can be found on the agenda.

New Counsel to President Hired at CIRM

After an eight-month search, the California stem cell agency has hired an attorney from Genentech to become counsel to its president.

The name of the lawyer was not disclosed but she is scheduled to start at the beginning of July.

The job has been vacant since Tamar Pachter resigned in August and returned to the California State Department of Justice. Pachter was with CIRM only 16 months and had a salary of $225,000 with the title of CIRM general counsel.

If we were to hazard a guess, the new hire will not be earning that much. She will hold the title of counsel to the president. It appears that the general counsel position has been effectively eliminated.

CIRM is rich in legal talent and spending nearly $1.2 million this year for outside legal help.

CIRM President Alan Trounson disclosed that the new hire had been made at a meeting last week of the CIRM Governance Subcommittee, according to John M. Simpson of Consumer Watchdog, who attended the session.

Consumer Watchdog on Obama and CIRM

Consumer Watchdog of Santa Monica, Ca., today released the following statement concerning the California state stem cell agency and the lifting of federal restrictions on funding for stem cell research.

John M. Simpson, stem cell project director for the group, said,

"With word that President Obama intends to lift Bush era restrictions on federal funding of embryonic stem cell research, California's stem agency needs to think carefully about where to focus California taxpayers' money.
>>
"Fortunately the agency is in the process of reviewing its strategic plan. Clearly the California Institute for Regenerative Medicine should try to avoid duplicating funding efforts by the National Institutes of Health. CIRM's programs should augment those of the NIH."

Fresh Comment

John M. Simpson of Consumer Watchdog has posted a comment on the "Obama cash source" item, pointing out that the new Podesta lobbying contract slips neatly below the cutoff line for approval by a committee of CIRM directors.

CIRM Calendar Hooha Raises Transparency Issues; Agency Says Calendars Cost $23 Each

The California stem cell agency said today that its 2009 calendar cost $23 apiece and provided figures that indicated the total expense for the calendars was about $35,310.

Based on the numbers provided by CIRM, that seems to mean that 1,535 calendars were printed. Earlier, CIRM said the calendars were sent free to its grant recipients and trainees to remind them "365 days a year where their funding comes from." The agency has 448 recipients and trainees, according to figures on its web site. Calendars were also sent to an unspecified number of "constituents."

In comments on our earlier item on CIRM's 2009 calendar, some readers of this blog said production of expensive, free calendars is a waste of taxpayer money.

Here is the current breakdown on the calendar cost, based on a CIRM report and information supplied by Don Gibbons, chief communications officer for the agency: Printing, $14,000; design, $10,200, and $11,110, which was part of a larger contract.

The $11,110 is a new figure and came today from Gibbons. He said it was part of a $45,000 expenditure with Abbott and Company that CIRM now says was for "image development, office art design and framing." The Abbott contract was initially identified as involving the calendar. After the California Stem Cell Report inquired about the calendar project, the description of Abbott contract was altered on the CIRM web site to remove any mention of a calendar. No footnote was provided on the PDF document to notify the public or directors that a change had been made from an earlier version.

Here is the text of what Gibbons sent earlier today concerning our original item on this subject.

"For the record, you never asked me for the cost per calendar. Instead you chose to make one of your usual worst-case projections. The portion of the Abbott contract that covered the calendar was $11,110, which made the cost per calendar $23. Also, this project began in July, long before the complete budget meltdown."

More than a week ago, we asked Gibbons for the total number printed. He has not provided that number. Following his latest email today, we asked again for that information as well as the number distributed and the cost of postage.

As for our "projections," you can read them here along with our assumptions. They were based on information from CIRM, which was incomplete then and remains incomplete today.

The CIRM calendar is a minor expense in the agency's $13 million operational budget. But outside contracts are not. They now total more than $3 million, up from $2.7 million, as the result of action earlier this week. The outsourcing, which often poses major oversight issues for government agencies, is the second largest category in the budget.

How the agency describes the contracts and other budget items and responds to questions about them is basic to the agency's transparency and openness. The calendar issue is not the only one. A lobbying contract with the Nielsen, Merksamer firm in Sacramento continues to be described as "public education." There may be other fanciful descriptions, but without an examination of contracts and other documents, it is impossible to tell.

Several years ago, CIRM directors initiated the requirement for regular reports on outside contracting because they felt they were not fully informed. While creative budgeting occurs in every organization, without good information it is impossible to make good decisions.

Obviously it is nice to offer gestures of good will to "constituents" and others associated with any enterprise, but CIRM's calendar project came at an impropitious time. The project began shortly after a salary freeze at the CIRM that ran through December. As we remarked then, such freezes affect those on the lower end of the pay scale much more harshly than at the top levels. Perhaps during the holidays, CIRM management could have spread that $35,310 among employees making less than $70,000 a year. That would have been a nice gesture as well.

CIRM Identifies Obama as Cash Source for Its Troubled Lab Projects

California stem cell Chairman Robert Klein says that strapped recipients of CIRM lab construction grants should attempt to tap the nearly $1 trillion Obama stimulus package.

His remarks were contained today in a piece by Ron Leuty of the San Francisco Business Times. Leuty quoted Klein as saying,

"Our grantees are perfectly situated — they’re in construction or about to go. They can clearly demonstrate that they’re going to create jobs."

Leuty wrote that CIRM intends to use its new, $240,000 Washington lobbyist, the Podesta Group, to help snag the cash. Leuty reported,

"The California Institute for Regenerative Medicine — with the help of a well-heeled Washington, D.C., lobbying firm — wants organizations like Novato’s Buck Institute for Age Research to seek some of the $1.5 billion that is earmarked in the $787 billion stimulus package for biomedical research facilities and construction."

Other institutions previously identified as needing to raise more matching funds include the Sanford Stem Cell Consortium (UC San Diego, Scripps, Burnham and Salk) and UC Santa Barbara.

The $240,000 figure is new and comes from a copy of the contract requested from CIRM by the California Stem Cell Report. The total includes expenses plus $20,000 a month from Feb. 11 through Dec. 11, 2009. The contract, which does not need CIRM board approval, can be extended indefinitely by mutual agreement.

If you are interested in a copy of the contract, please send an email to djensen@californiastemcellreport.com.

Obama Watch Chapter 3: Funding Ban to be Lifted on Monday

The Washington Post reported this afternoon that President Obama on Monday will lift the restrictions on federal funding of human embryonic stem cell research.

According to reporter Rob Stein's story, the move will be announced at an event at 8 a.m. PDT. He cited an email sent out on Thursday from the White House concerning a ceremony at that time "on stem cells and restoring scientific integrity to the government process. At the event the president will sign an executive order related to stem cells."

No other significant details were disclosed.

Fresh Comment

"Anonymous" has filed a comment on the "CIRM Calendar" item. Among other things, the comment says the agency "appears uninterested in answering legitimate questions regarding the use of public funds."

Fresh Comment

John M. Simpson, stem cell cell project director of Consumer Watchdog of Santa Monica, Ca., has posted a fresh comment on the "CIRM Calendar" item. Among other things, he notes the size of the CIRM public relations operation and the scanty mainstream media coverage of the agency.

Fresh Comment

John M. Simpson of Consumer Watchdog has posted a comment on the "vice chairmanship" item in which he suggests that it might be a good idea to designate all the board members as vice chairs.

Fresh Comment

"Anonymous" has posted an indignant comment on the "CIRM calendar" item. The remarks say, in part, that the calendar is "a blatant waste of taxpayer money. Just because CIRM defends it, and characterizes this site's inquiry about it as petty, doesn't mean it's so. CIRM's mission is to aid industry in emerging science, not publish high quality photos and calendars. Calendars won't cure any diseases, period."

The Tale of CIRM´s 2009 Calendar

Asking questions of government officials can sometimes generate interesting responses, and the California stem cell agency is no exception.

Last week, as part of the agenda for the meeting Thursday of the directors Governance Subcommittee, the agency posted one of its regular reports on outside contracting. The category is the No. 2 operational expense for the agency at $2.7 million for the 2008-09 fiscal year.

CIRM Chairman Robert Klein and President Alan Trounson take justifiable pride in keeping expenses low -- well under the cap in Proposition 71.

That was one reason I asked questions about what appeared to be $69,200 for a 2009 calendar. How many were printed, why and so forth. But by the time, we were through, it seemed that the cost for each calendar could range from anywhere well under $50 to perhaps $100 or so. And the report on the outside contracts had been altered to remove any mention of the calendar as part of a $45,000 expense, which is now described only as image development, office art design and framing

We will probably never know what the correct cost of the calendar is. Don Gibbons, CIRM´s chief communications officer, has not even responded to my 5-day-old question about how many were printed. However, he did say that they went mainly to CIRM grantees and trainees, which number 448. An unspecified amount went to “constituents.”

Here are the calendar figures that triggered the original inquiry: $14,000 calendar printing to Fong and Fong, $10,200 calendar production to Reineck and Reineck, and then the $45,000 for “calendar” work by Abbott and Company.

On Feb. 25, I asked Gibbons about what was entailed in those contracts as part of other questions dealing with the outsourcing report.

His response:

“Calendar was short hand used by the contract office for a complex series of projects that resulted in high resolution stem cell images fit for printing (quite difficult) that were re-used for several projects, including the FLICKR site, backdrops for media interviews, an exposition banner, to provide to the media, and for framing to dress up the bare walls of our office (framing included in the budget), and yes, the calendar.”

On Feb. 27, I asked him:

“Re the calendars, for what year were they printed? How many were printed? Were they given away or sold? To whom? How many does CIRM still have on hand?”

Gibbons replied on Friday:

“I don’t work for the CSCR (this web site). All of your diving into minutia is a huge waste of tax payer resources. They are paying me to execute much more important and informative projects. The calendars were printed in December for the 2009 calendar year. Almost all were given away already (if you think I am going to the store room to count the actual number left over your are crazy). None were sold. Primary audience was the grantees and trainees to remind them 365 days a year where their funding comes from. All the various constituents who give use their time on working groups etc. received multiple copies. Each image is accompanied by a story about the science it represents. Short versions of those stories are the captions on the Flickr site.”

An earlier version of this item incorrectly gave the total as $65,200 instead of $69,200. The difference was in the Fong printing contract, which is for $14,000 instead of $10,000.

Stem Cell Bifurcation at the Vice Chairmanship Level

Come Friday the 13^th of this month, it is a good bet that the $3 billion California stem cell agency will have two vice chairmen or something akin to that.

No matter that the legal charter for the agency calls for only one, the board of directors is likely to find a way. They have a $1 million crew of artful legal beagles to help them sniff out an appropriate direction for almost any course.

CIRM Chairman Bob Klein signaled the dual vice chairmanship likelihood in his agenda for the March 12 meeting of the agency's board of directors. It was a simple but ambiguous matter of saying something in the plural and not the singular – chair(s) versus chair. The agenda item only says:

“Consideration of election of Vice-Chair(s)”

It was a move that the 17^th century Jesuit Baltasar Gracian (see drawing), a student of the exercise of power and control, would have admired and whose works we became acquainted with as a student 47 years ago.

“Maintain an air of uncertainty,” Gracian said in 1653. “Know the meaning of evasion.”

But in 2009 we need to know more. So here it is: The board has a choice between two men: Art Torres, chairman of the state Democratic Party, and Duane Roth, a current member of the CIRM board of directors and an executive with biomedical industry ties and head of Connect business development organization in La Jolla, Ca.

Torres is a former state legislator and was nominated by Democratic state Treasurer Bill Lockyer, who is the final arbiter on the state bonds that finance CIRM's grants and operations. Lockyer is also a former state lawmaker and friend of Torres, who needs a paying job since he is stepping down as head of the state Democratic party. Roth was nominated by Republican Gov. Arnold Schwarzenegger, who okayed a $150 million state loan to CIRM when it was on the financial ropes a few years ago. The governor has expressed concern about the high salaries at CIRM, and Roth has said he will not need a salary.

Both men bring different skills to the job. Torres is well connected in California politics and Washington. He is endorsed by Sen. Ted Kennedy and House Speaker Nancy Pelosi. Torres would contribute mightily to Klein's lobbying effort for a $10 billion aid package for the California biomedical industry. Roth is connected directly to the industry itself, chairing a CIRM committee that pulled together CIRM's $500 million lending program.

No one at CIRM wants to offend either Lockyer or Schwarzenegger.

While our good Jesuit Gracian would likely have admired Klein's agenda item on the Torres-Roth election, another more contemporary observer and participant in California stem cell issues does not.

In response to a query, John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca. and a man who is reasonably adroit in his own political maneuverings, said,

"Once again Chairman Bob Klein is posting an ICOC (board of directors) agenda that raises more questions than it answers. This serves neither the public nor CIRM. If they are thinking about having more than one vice chair, why not say so?"

One CIRM director, David Serrano Sewell, in response to a query about the result next week, said,

"We'll see what happens at the meeting."

As for CIRM's official views on this, earlier today we told the agency via email that we intended to write that the board is considering electing two vice chairmen. We asked whether CIRM considered that accurate.

CIRM Communications Chief Don Gibbons responded,

"No decisions have been made. The board will decide what motions to consider."

Applying flackery's Rosetta Stone to that comment, it means,

"I am not denying the accuracy of what you are writing. I can't say anything else. This is a delicate issue involving my bosses and issues at a much higher level that they do not want to air in public."

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(Editor's note: I have a copy of Gracian's 1653 work -- “A Truthtelling Manual and the Art of Worldly Wisdom” -- in a net bag next to my bunk on our sailboat here on the west coast of Mexico. The version I have was copyrighted in 1945. More recent versions exist, but they are not as powerful as the 1945 version. And by the way, I am fond of legal beagles that can find ways to make things happen.)

The 'Free Rides' Story: Petty Cash but Major Fallout

One of the most widely read stories on the Los Angeles Times web site during the past few days involves a California state government matter of picayune financial proportions. But it scored extraordinarily high on the public outrage scale.

It is a story that confirmed all the worst suspicions of a cynical public. And it has a lesson in it for state officials, elected and otherwise, including those at the $3 billion state stem cell agency.

The key actors in the Times “free rides” story are top officials on Gov. Arnold Schwarzenegger's staff. Here is the what reporter Michael Rothfeld wrote,

“Over the last two years, as California has slashed services and scrambled to pay bills, top administration officials have made free use of government expense accounts with little oversight and, in some cases, no documentation, The Times has found.

“Together, they have spent tens of thousands of dollars on state-funded trips between Sacramento and the areas where they live, justifying the travel as necessary for state business. Some built weekend trips around one short meeting, and some charged the state to attend events with no apparent connection to their jobs. Often their expense reports were approved by subordinates.

“Many of the costs were incurred after the governor issued an executive order a year ago that state agencies avoid all nonessential travel due to California's fiscal emergency. State law allows employees to charge taxpayers only for activities on behalf of the public, which do not include commuting or events related to their personal lives."

These types of stories are regulars on government beats. But the dollars involved are relatively trivial when compared to such things as the state's $42 billion budget crisis.

I have written my share of them over the years and edited them as well. While reporting for United Press International in Sacramento, I wrote one such story that infuriated then Assemblyman John Burton of San Francisco, chairman of the Legislature's Joint Rules Committee . He wrote a letter, with tongue barely in cheek, ousting the UPI bureau from the Capitol.

I have shied away from such stories on this web site because I am now free of the journalistic demand for them. They have high outrage potential and high readership, but limited impact on what is important in terms of dollars and cents and public policy issues. They do, however, demonstrate an egregious sense of public-be-damned entitlement on the part of the officials. And they do provide fodder for their foes and the enemies of the enterprises involved.

Only a handful of these stories have appeared in the mainstream media involving CIRM. They chronicled the use of limos, expensive meals and so forth. It would be easy to gin up more by examining expense reports at the agency, such as those involving the trip by CIRM Chairman Robert Klein to Australia in 2007. He combined his honeymoon with an appearance at an international stem cell convention. We chose not to write about that at the time because of the relatively minor sums involved.

However, it is easy for an agency isolated in a tiny corner of government, unfettered by the usual oversight by the governor and legislature, to slip into bad habits. Some would argue that CIRM management salary scales, which top out at $508,750 annually, are part of those bad habits.

The salaries do not bother me as much as some. What is worrisome is a sense from the agency that the some of the folks there do not grasp how easy it is for an apparently trivial matter to trigger blowback that could seriously damage not only CIRM, but the entire human embryonic stem cell effort.

The Los Angeles Times story is just one example of how a small issue can trigger public outrage. And the result for the governor's aides is that the report of the petty chiseling not only outweighs, but it overwhelms the good work that those public servants perform.

Fresh Comment

John M. Simpson of Consumer Watchdog and longtime observer of the California stem cell agency has posted a comment on the “Tea Leaves” item. Among other things, he says that he understands that the terms “of the vice chair's employment -- salary and whether it's a full-time job -- will be discussed in closed executive session” on Thursday. Our comment: That's an interesting way to fill a position that is supposed to be publicly elected. But it will certainly permit candor and may provide a challenge to lawyers seeking to keep the subcommittee from violating the state's open meeting laws.

Executive Evaluation Procedures Posted for CIRM

Proposed procedures for evaluation of the chairman, vice chairman and president of the $3 billion California stem cell agency are now available to the public in advance of Thursday's meeting of its directors' Governance Subcommittee.

The three paragraphs are straight forward and aimed at generating what it calls “deliverables,” The procedures also seem to be non-controversial. No definition of what the board expects from the yet-to-be-elected vice chairman is contained in the document.

Whether the evaluation procedure leads to a broader discussion of the direction of CIRM remains to be seen. But it is interesting that this document is being produced four years after creation of the stem cell agency. It is also coming three months after a salary was paid for the first time to the chairman. A salary may also be paid for the first time this year to the vice chairman, depending on whom the board chooses. The president has always received a salary but Chairman Bob Klein and former Vice Chairman Ed Penhoet were independently wealthy and declined salaries. Klein, however, asked for a salary last year. In December, the board defined his position as half-time and approved $150,000.

One could speculate that the board is telegraphing a preference on the vice chairmanship if it approves formal evaluation procedures for the job that are the same as for the two other salaried positions. However, that may not be the case. You can read more about our speculation about Thursday's meeting here.

$1 Billion for Stem Cell Labs: Troubles and Status

California's $1 billion stem cell lab construction program will be under scrutiny on March 9 as the state's stem cell agency weighs a request for changes in one approved grant while other recipients report difficulty in raising the required matching money to build their labs.

It all comes as CIRM itself faces a looming cash shortage. It will run out of money next fall unless it is successful in privately marketing state bonds – its only significant source of funding – as opposed to their general market sale by the state.

The Buck Institute of Novato, Ca., the Sanford Stem Cell Consortium in San Diego (UC San Diego, Scripps, Burnham and Salk) and UC Santa Barbara have already reported difficulties in completing financing arrangements.

But UC Merced had a bit of good financial news in its bid to change its grant. The proposed changes, which will be presented at the CIRM facilities group March 9 meeting, would reduce the cost from $7.5 million to $6.1 million, $3.8 million of which comes from CIRM. However, the space is about 20 percent smaller.

Merced is requesting that it be allowed to build its stem cell instrumentation foundry on its campus instead of on the former Castle Air Force Base. In a Feb. 9 letter to CIRM, the campus said the old military base has problems with utility service and backup capabilities. UC Merced also cited unspecified issues with the county, which leases the space to UCM.

John Robson, CIRM vice president; Marie Csete, CIRM chief scientific officer, and Ray Groom, a facilities consultant hired by CIRM at a cost of $15,000, are scheduled to visit the campus on Friday to be briefed on the new plans and view the site.

Another item on the March 9 agenda is a status report on all the lab construction projects around the state. No background material on that subject has yet been posted by CIRM on its website.

An additional topic is funding for GMP facilities. Csete has prepared a report on the matter, and her conclusion is that CIRM does not need to fund such facilities at this point. In her Feb. 23 memo, she said that “CIRM grantees have adequate options and access for GMP cell manufacturing.”

But she also said that a “critical lack of workers” exists and that CIRM should provide for training in another round of grants. CIRM hired Biologics Consulting Group of Alexandria, Va.,for $15,000 to assist in the GMP survey.

The facilities group meeting will be in San Francisco. Currently the agency has not posted any plans for teleconferencing access to the meeting. Even if it does, our recommendation is that institutions with something at stake should be at the session in San Francisco and be prepared to comment authoritatively.

Here is a link to Ron Leuty's piece in the San Francisco Business Times on problems at Buck and our item on Terri Somers' article in the San Diego Union-Tribune about the consortium, Buck and UC Santa Barbara. Here is a link to what consortium told us more recently.

Overseeing Top CIRM Execs: A Reading of the Tea Leaves

Next Thursday, a key panel of the directors of the world's largest source of funding for human embryonic stem cell research will consider a matter that could give some indication of its future direction,

Nominally, the issue seems less than controversial. The agenda says it involves “consideration of policy/procedure for performance evaluation” of the chairman, vice chairman and president of the $3 billion stem cell agency.

But lying behind that bland language are such matters as the political and lobbying efforts of CIRM, its connections to industry and the election of a vice chairman to assist in those endeavors. Will the agency continue pushing hard to become a global powerhouse for stem cell research, pleading for billions from Congress for industry? Will it embrace the biomedical industry ever more closely, funding its efforts to bring products to markets? Or both, for that matter?

The agency could get to those issues through more closely defining the position of the vice chairman, which is now vacant, and discussion of related matters. The two contenders for the post come from radically different backgrounds. One is Art Torres, now the head of the California State Democratic Party and a former state lawmaker with good connections in the nation's capital. The other is Duane Roth, an executive with biomedical industry ties and head of Connect business development organization in La Jolla, Ca.

Roth was nominated by Gov. Arnold Schwarzenegger, a Republican. Torres was nominated by Democratic state Treasurer Bill Lockyer, whose good offices are especially important to CIRM as it attempts to market state bonds privately. The treasurer is the ultimate arbiter on state bond deals. On the other hand, the governor loaned CIRM $150 million in state funds a couple of years ago when it had another period of financial difficulty. The loan has been paid back, but CIRM has had to seek his support on other matters, such as his veto of legislation that the agency opposed,

Also entering into the mix is the salary for the vice chairman. The job carries pay that could run as much as $332,000. Torres says he needs a salary, but has not indicated a figure. Roth says he will not accept a salary. In December, CIRM directors awarded CIRM Chairman Robert Klein a $150,000 salary and defined his job as halftime. Klein, a millionaire real estate investment banker, previously declined a salary.

Sadly, the public is pretty much out of the loop in advance of the meeting on the policy/evaluation agenda item, which first came up Dec. 22 last year. The proposal discussed at that meeting was only described orally and never publicly disclosed in written form in its entirety. The only access to what it contains is the transcript of the meeting. Given CIRM's past performance, do not expect to see any written material ahead of the upcoming meeting.

Also missing from next week's meeting are proposed changes in CIRM's internal governance policies, which are closely tied to the responsibilities of the chairman, vice chairman and president. The proposal came up at the Dec. 22 meeting, and directors said it would come up again at the next governance meeting (the one that is next week). However, it is not on the agenda, although it could be discussed.

Next week's meeting will be available to the public to hear and participate in via teleconference locations in La Jolla (Roth's office), Duarte, Sacramento, Irvine and San Francisco. But don't expect a “full and frank” discussion, The board generally deals obliquely with these sorts of issues, It could also sidestep them entirely.

The specific location for the teleconference sessions can be found on the agenda.

Fresh Comment

We have filed a response to John M. Simpson's comment on the “Honesty, Science and Politics” item. Among other things, our response says the No. 1 objective of CIRM right now should be to make sure it has cash next fall to pay its grantees.

Fresh Comment

John M. Simpson of Consumer Watchdog has posted a comment on the “Honesty, Science and Politics” item. Among other things, he says that when California voters approved Prop. 71, they did not expect to see an agency that would become “a platform for worldwide stem cell advocacy by Chairman Bob Klein.”

CIRM Legal Costs Climb Towards $1 Million

Legal costs at the California stem cell agency are heading towards the $1 million mark this year and could well go higher as it embarks on an ambitious and unusual plan to market state bonds to dig itself out of a financial hole.

Next Thursday, the Governance Subcommittee of the CIRM board of directors is expected to increase payments for its main outside counsel, Remcho, Johansen & Purcell, of San Leandro, Ca., and also for Nancy Koch, who deals with intellectual property issues.

According to the most recent document from CIRM, as of Nov. 30, 2008, Remcho had already been paid $237,545 out of its $450,000 contract for the 2008-09 fiscal year. Also as of Nov. 30, Koch had been paid $82,306 out of a $150,000 contract for this fiscal year.

Their contracts and possibly other legal assistance agreements are up for "amendment" at next Thursday's meeting. The use of that word generally means that CIRM needs authorization for more cash to pay the lawyers.

According to CIRM's Dec. 22, 2008, report on outside services, total contracted legal services for the fiscal year amount to $812,930, including $140,431 for the California State Department of Justice. Not all of the total has been spent, but the budget did not anticipate the need for CIRM to engage in attempting to place state bonds with private investors.

CIRM's annual operational budget, which does not include grant payments, totaled about $13 million when approved last July. The currently contracted legal expenses amount to roughly 6.2 percent of the budget. The agency has also not filled the position of general counsel, which became vacant Aug. 15. It is still looking for a person to fill that position, which is now described as general counsel to the president.

CIRM will run out of money in about seven months unless it generates additional cash. That's because the financially troubled state of California has stopped selling the bonds that CIRM relies on to finance its operations and pay for research.

What Bob Klein and CIRM Owe George Bush

Here is what Hank Campbell, the major domo of scientificblogging.com, says,

 "Whether you agreed with Bush or not, his restrictions on stem cell research were good for science - California alone threw $3 billion at human embryonic stem cell (hESC) research for no other reason than that Bush was against it, something that could never have occurred through the NIH, and scientists also found creative alternatives, also something that would probably not have happened."

Honesty, Science and Politics

Part of the justification for the existence of the California stem cell agency lies in the argument that scientific research should be above politics and government and apart from it.

However, science has rarely been apart from politics – at least in the last 50 or 60 years in this country.

New York Times columnist John Tierney dealt with the intersection of the two in a Monday piece – headlined "Politics in the Guise of Pure Science" -- in which he raised questions about whether some of President Obama's scientific advisers can be "honest brokers."

He quoted Roger Pielke(see photo) of the University of Colorado on the matter, whose book, not so coincidentally, is entitled "The Honest Broker." Tierney said Pielke argues that "most scientists are fundamentally mistaken about their role in political debates. As a result, he says, they’re jeopardizing their credibility while impeding solutions to problems like global warming."

Tierney wrote,

"...(T)oo often, Dr. Pielke says, they pose as impartial experts pointing politicians to the only option that makes scientific sense. To bolster their case, they’re prone to exaggerate their expertise (like enumerating the catastrophes that would occur if their policies aren’t adopted), while denigrating their political opponents as 'unqualified'or 'unscientific.'"

Tierney cited recent statements by John Holdren and Steven Chu as examples. Tierney did not discuss human embryonic stem cell research in his piece, but he could have.

The case for hESC research is often imbued with messianic zeal and rhetoric about "missions" that seems more appropriate to an ideology rather than cold, hard scientific research. Hyperbole does not necessarily serve the public or scientists well over the long term, perhaps not even in the short. Instead, it can become a justification for spending on ill-considered, dubious efforts advanced to attain some sort visionary goal. Pielke's and Tierney's cautions are something for the overseers of California's $3 billion stem cell research program to keep in mind as they evaluate the agency's efforts in the next few months.

(Editor's note -- Tierney's column drew 156 comments at the time of this writing. You can read them here).

Operator Error on Loring Comment

A kindly reader pointed out that the Loring comment could not be found on "Obama Chapter Two." That was an error on the part of this operator. Her comment is now available.

Burrill Says Biotech Industry Profitable for First Time in History

The big headline from the influential Burrill & Company merchant bank is "Biotech Scores Black Ink" for the first time ever.

According to Peter Winter(see photo), editor of the Burrill Report, the biotech industry turned profitable in 2008. Winter made this "startling discovery" after analyzing the numbers for 360 publicly traded biotech companies. Presumably the conclusion might change if private firms were included.

The Burrill finding is another piece to consider in the case for and against the $10 billion biotech federal assistance package championed by CIRM Chairman Robert Klein.

However, Winter also said that only 67 of the 360 companies were profitable with the largest sums coming from only three companies: Genentech, Amgen and Gilead.

He said the have-not companies are struggling, and he predicted that a year from now, perhaps only 200 of the 360 companies will survive.

Burrill did not offer a text version of Winter's findings -- only a podcast. We respect Burrill and the authoritative information it provides, but we regard podcasts and recorded videos as a cyberspace abomination when it comes to dispensing information. When recordings replace carefully crafted, written analysis, they are an inefficient, inadequate and miserable substitute.

Just consider the numbers: Normal speech runs about 150 words a minute. Question-and-answer interviews, including trivial remarks, take longer. Downloading and listening to the Q&A with Winter took about 9-10 minutes. In that time, we could have read about 6,000 or 7,000 words or more. We also assume that nearly all the readers of this blog and the Burrill website can handle written information much more rapidly than listening to oral presentations, which often miss important details and nuances. The discipline of writing almost forces the inclusion of those elements.

Recordings on the Internet have their place and can communicate certain kinds of emphasis and emotion better than text. But for the most part, they are used on the Internet like some new gadget, whose novelty is more alluring than its effectiveness.

Serious enterprises that deal with hard facts and numbers should avoid them. That's the conclusion from the California Stem Cell Report in our cyberspace rant of the day.

Fierce Biotech Poll: No Bailout for Biotech

A week-long poll by an industry publication shows that most respondents do not favor a federal bailout of biotech firms, with one reader commenting that "it's all about the survival of the fittest and smartest."

The informal poll was conducted online by Fierce Biotech. It showed that 51 percent answered no to the question "Does the US biotech industry deserve a bailout?" Forty-four percent said yes. Five percent said no.

The results of the poll have some implications for the California stem cell agency and the lobbying effort by its chairman, Robert Klein, to snag $10 billion for the biotech industry. He has already hired a powerful Washington lobbyist, the Podesta Group, for $200,000 to secure the package.

Maureen Martino(see photo), editor of Fierce Biotech, wrote about the poll, quoting some persons who emailed her.

Elinor Gulve was one of those. She wrote,

"Things have to play out in nature's own course. In this industry, it's all about the survival of the fittest and smartest."

Martino said,

"Readers expressed concerns about how the money would be distributed, and whether those government dollars would come with serious strings attached. Several respondents felt that the industry deserves government support, but that it should come in the form of tax incentives and funding for agencies like the NIH--not from a handout."

The poll was not a scientific random sample, just an expression of sentiment from those who felt strongly enough about the matter to respond, Nonetheless it was a bit surprising since the respondents presumably came from the industry and had the most to gain from dollops of federal dough. Results on polls are also shaped by the wording on the questions. If the question were phrased as: Was a bailout "needed" or would it be "useful" to the industry, the results might have been different.

We wrote earlier about this poll after it had been up for only a few days. The early trend was about the same as the final results after seven days.

Fresh Comment

Jeanne Loring, director of the Center for Regenerative Medicine at Scripps, has posted a comment on the "Obama: Chapter Two" item. Among other things, she says that legislative is needed to change federal law on stem cell research.

California Bond Picture Not Too Bright, Say Bond Managers

A couple of bigtime bond investors are shrugging off the California budget deal, reflecting sentiments that do not appear to augur well for the state stem cell agency's plan to sell state bonds privately to solve a cash crunch.

Reporter Martin Braun, writing for Bloomberg News, quoted two bond fund managers as saying that the fundamental state budget problems still exist in California.

Ken Naehu, who oversees $2 billion in municipal bonds at Bel Air Investment Advisors in Los Angeles, was quoted as saying,

“There won’t be a tremendous change in perception purely because the budget has passed. The municipal market is dominated by retail investors now and those investors have been scared, have been spooked."

Paul Brennan, who oversees $12 billion in muni bonds at Nuveen Asset Management in Chicago, including $1 billion in California bonds, was quoted as saying,

"Some of the budget is being balanced from either additional debt or this potential stimulus aid from Washington, that’s a one-time shot and that doesn’t solve the structural deficit."

Currently California has the worst bond rating of any state in the nation. That means that it will have to pay higher interest rates to attract investors when it resumes selling bonds. The state has not sold any bonds since last June.

The Bloomberg article also reported that state Treasurer Bill Lockyer said that the state is considering offering bonds within six weeks.

Bonds are virtually the only source of cash for the state stem cell agency.

A Caution about Excessive Industry Coziness at CIRM

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

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

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

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

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

But Simpson wrote,

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

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

The 'House of Cards' and a $400 Million Fund-Raising Drive

Borrowing $400 million for stem cell research is no small task, but one that CIRM has chosen for itself.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., today raised questions about the nature of the effort, given the nation's shaky economy and the "house of cards" that is the budget deal approved today in Sacramento.

Here is what Simpson said in an email:

"It strikes me that despite the budget deal, it still may be a long time before the state can get into the bond market.

"Key parts of the deal have to go before the voters in a special election in May. I don't see how you can sell bonds until the outcome of the election is known.

"And, it seems to me, the chances are excellent that the voters just might turn the proposal down throwing everything back to square one.

"I don't know what it does to private placement, but it seems to me that the just-passed budget may be a house of cards that collapses.

"I like to see myself is an optimist -- maybe I'm influenced by how much my own assets have tanked -- but I think it will be an uphill struggle to place $200 million before September when CIRM's cash runs out."

Who is on the Hook for $400 Million in Stem Cell Science?

An anonymous reader has posted a question on the "California budget mess" item, asking about who will pay back the $400 million in bonds that CIRM is seeking to sell privately to support its operations. We suspect some other readers may have the same question, so we are responding here.

But first, let's rephrase the question in more straight forward language: Who is going to pay the $400 million that the state stem cell agency is seeking to borrow privately?

The answer is the state of California and its taxpayers. The bonds are, in fact, loans to the state and become the "general obligation" of the state. They are no different than general obligation bonds that are sold by the state to execute other projects. The bonds do not rely on CIRM to generate revenue to pay them off. The state cannot declare bankruptcy, according to a briefing for CIRM directors last month. Thus investors would seem assured of earning a return at some point. Income from the bonds is also exempt from California taxes but not federal taxes, making them favored investments for California-connected persons and enterprises.

The state has "placed" only $250 million of the $3 billion in bonds authorized to be sold on behalf of CIRM. That initial round of borrowing was the first time ever that general obligation bonds have been used to "finance the development of intellectual capital," according to the state treasurer's office. Generally bonds are used to build roads, hospitals, housing and other "hard" assets.

Here is a rundown from the state treasurer's office on California bonds that should answer nearly all questions about the nature of the devices.

California Passes Budget, Issuance of Stem Cell Bonds Still Distant

In the predawn hours today in Sacramento, California lawmakers passed a budget aimed at dealing with a $42 billion state deficit, but the spigot that feeds CIRM remains firmly closed.

Nonetheless, the action does assist with CIRM's own plans to bootstrap itself out of its cash crunch.

The state legislature has sent the spending proposal to the governor, who is expected to sign it in the next few days. The action sets the stage for possible issuance of state bonds, the funding mechanism for the California stem cell agency, which is facing a major financial shortfall.

State Treasurer Bill Lockyer is evaluating the new state budget to determine whether it enables the state to return to the bond market and under what conditions. However, even if bonds are sold in the next month or so, bonds for CIRM are not at the top of the $53 billion list.

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

"We need to analyze the product(the budget) and get a firm handle on cash flow before we can say anything about how the budget will affect our ability to return to the bond market."

However, passage of the budget should help with the CIRM plan to sell privately $400 million in state bonds to provide funding for CIRM. The legislative action removes significant uncertainty and should help counter possible objections from potential buyers.

The treasurer's office has also assisted indirectly by leading the way on the private placement of state bonds, which has never been done in state history. Lockyer's office has already cut a deal with the San Francisco Bay Area Toll Authority to buy $200 million in state bonds. That means CIRM will not be in the unenviable position of being the first out of the trenches with a private sale and can point instead to a precedent.

Here are links to some budget stories: Wall Street Journal, Sacramento Bee, Los Angeles Times, San Francisco Chronicle and New York Times.

Chapter Two of 'Waiting for Obama' -- The Vagaries of Vagueness

President Obama's delay in announcing changes in federal restrictions on human embryonic stem cell research today triggered another article on the resulting nervousness in stem cell circles.

This one came in the Washington Post. Written by Rob Stein, the piece, intended for publication Thursday, said,

"...{T)he delay and the vague language (from the administration) are making proponents nervous. Has Obama simply been too preoccupied with the economic crisis to focus on the issue? Is he hesitant to wade into one of the flashpoints of the culture wars? Could he even be considering a moderate move as part of his broad strategy of seeking the middle ground on even the most contentious issues?

"'The word the president is 'considering' it is too vague a word for me," (Amy Comstock Rick (of the Coalition for the Advancement of Medical Research) said. 'I don't know entirely what that means. If it means he's just working out the details that's great. But if 'considering' means 'reconsidering' we would be very upset.'"

Stein said the White House has reassured the worriers that something will happen soon. He also quoted Story Landis(see photo), head of the NIH stem cell task force, as saying,

"We are assuming that what we will be asked to do is develop guidelines for stem cell lines derived from embryos produced for reproductive purposes in excess of need."

But Stein added,

"Proponents of the research hope the executive order and resulting NIH guidelines would be more open-ended than that, allowing research on stem cells derived in other ways."

Landis' advice to researchers? If you are smart, start writing your grant now.

(Editor's note: Chapter One of "Waiting for Obama" can be found here.)

Fresh Comments

Ty Tyler has published a comment on the "waiting for Obama" item.

David Granovsky has posted a comment on the "CIRM touts" item.

CIRM Touts Its Financial Outlook

CIRM has officially but quietly announced that it hopes to raise $400 million through 2010 by selling California state bonds privately, a task never before achieved in state history.

The information on the private placement goal was posted Friday on the CIRM web site with virtually no notice or fanfare. The CIRM home page, which often carries far more trivial matters, makes no reference to the item about the state of CIRM's troubled finances. The three-paragraph posting was placed near the top of the CIRM web page page entitled "Funding Opportunities" and "Current Requests for Applications."

As far as we can tell, the item is the only significant reference on the CIRM web site to the hours and hours spent by worried directors last month discussing the agency's cash woes, other than the transcript of the meeting itself.

While the agency is now about seven months away from running out of cash, the Friday item has a positive headline, "CIRM's Financial Commitments Are Secure." The language is tailored to reassure grant applicants, especially those applying for the $210 million disease team RFA that was also posted on Friday.

The financial-status posting also refers to a "CIRM program with the state treasurer" for private placement of bonds. If the program is actually in place, it is a significant advance on the situation discussed by directors just three weeks ago. Many questions were raised at the time by directors about the plan. CIRM Chairman Robert Klein, who devised the private placement effort, promised to report back to the board at its meeting March 12.

CIRM seems determined not to call public attention to its financial problems, given its handling of the matter as long ago as its December board meeting. The January meeting included a lengthy briefing on the subject, but the public had no advance notice from CIRM of the sweeping scope of the problem. Even directors seemed taken aback.

A number of the directors were concerned about the public relations message that would be delivered as a result of the briefing and the ensuing discussion. There was a decided effort at the time to put a positive spin on the news. However, while directors approved $58 million in grants, they balked at funding until they knew more about the agency's finances. Efforts were also made to reassure current recipients of CIRM grants that money would still be forthcoming.

The public relations and positioning tactics could be construed as Pollyannish. But the agency must act in a way to retain the faith of the stem cell community that it will continue to operate unimpeded by what it hopes are transitory issues. CIRM needs a positive outlook to attract the best proposals for its disease round. It also must sell a story of past accomplishment and a rosy future to potential buyers of its bonds. No one is going to invest in a sinking ship.

At the same, CIRM directors and its executives should not be misled about the realities. Waiting too long to act on other measures to deal with the cash crunch will only compound the problem.

(A side note: In an operation independent of CIRM, the state of California is expected to announce later this week that it will make its first private placement of general obligation bonds, which could help smooth the way for CIRM sales with nervous investors. If the state does, in fact, make the private sale, CIRM, which has recorded a number of firsts in its brief life, will not have the opportunity to record another.)

Here is the full text of CIRM's "secure finances" posting:

"California voters approved the sale of  $3 billion in bonds to fund the work of the California Institute for Regenerative Medicine. The State finance committee created to oversee those bonds has authorized the issuance of the full amount.  A total of $2.5 billion in authority remains in funding availability. Proceeds from sale of the bonds are constitutionally protected and can only be used to fund CIRM programs and operations.

"CIRM currently has significant cash reserves of $160 million, which can fund all existing commitments through at least September. The agency’s plans have always called for raising new capital on a cash-flow, as-needed basis. We expect the traditional bond market will open soon with resolution of California’s budget situation.  To supplement this public bond market, CIRM is working with the State treasurer’s office on a CIRM private placement of $200 million in general obligation bonds this year and $200 million again next year.  The CIRM program with the State Treasurer is designed to produce sufficient funding in 2009 and again in 2010 to maintain the pace of funding under CIRM’s proposed grant schedule.

"The Agency intends to continue the planning and review needed to maintain its mission on schedule and expects that additional bond funds will become available by the time they are needed."

Long Wait for CIRM in the California Cash Queue

How long is the line for cash in California before the state's stem cell agency might get some?

Think about $53 billion in bonds waiting to be sold. That is the amount, including CIRM-connected bonds, that has been approved but not yet brought to market. Compare that to the total of $7.35 billion in general obligation bonds sold by the state during the entire fiscal year 2007-08.

California state bonds are what pays for the grants to researchers and the operations of the stem cell research effort, which is now facing a serious cash flow problem. That's because the state has not sold bonds since last June. And it currently has $52 billion in bond indebtedness.

Once the budget mess in California is resolved, the state treasurer's office has told CIRM it will have to wait for funding until other, more pressing bond needs are met.

NY Times Examines the California Budget Mess that Ensnared CIRM

California's $42 billion fiscal fiasco, which is threatening its $3 billion stem cell research effort, today drew some major and dubious media attention.

In a piece by Jennifer Steinhauer, The New York Times reported on the shameful shenanigans in Sacramento. Ballooning deficits, intransigent lawmakers and a governor who is "free of allies or influence" were just part of her first paragraph. The budget issues are so great that CIRM's relatively picayune problems did not merit even a word, although they have raised a loud alarm in state stem cell circles.

California faces a $42 billion budget shortfall. A partial solution is now before lawmakers in Sacramento, but a handful of Republicans, who are more interested in ideology than solving problems, are blocking passage.

Steinhauer wrote that the state, in a nearly unheard of move, has lost access to much of the credit markets and that its bonds are now rated the lowest in the nation. That is the reason that the California stem cell agency is now facing a hefty financial shortfall. The agency relies on bond funding, and the state has not sold any since last June.

Steinhauer continued,

"'No other state is in the kind of crisis that California is in,' said Iris J. Lav, the deputy director of the Center on Budget and Policy Priorities, a liberal research group in Washington. The roots of California’s inability to address its budget woes are statutory and political. The state, unlike most others, requires a two-thirds majority vote in the legislature to pass budgets and tax increases. And its process for creating voter initiatives hamstrings the budget process by directing money for some programs while depriving others of cash."

It was a voter initiative that created the California stem cell agency and isolated it from control by the governor or the state legislature. Instead the ballot measure, Prop. 71, gave CIRM direct funding from state bonds. The measure initially protected CIRM but now the agency has become part of the financial collateral damage in California's budget battles.

Robert Klein, chairman of the stem cell agency, has proposed an effort to sell bonds privately to ease CIRM through its hard times. The state has never before sold bonds privately, but is reportedly ready to do that soon – but not for CIRM. The stem cell agency will have to wait in line while more pressing needs are addressed. Meantime, Klein is trying to cobble together a plan for CIRM to peddle the bonds directly to foundations in the hopes of meeting two of the foundations' needs – a solid return on their investment (probably 5 to 6 pecent) and funding worthwhile research. He is expected to report on that effort at CIRM board meeting on March 12.

Klein, who is an attorney and real estate investment banker, led the drafting effort on Prop. 71. The idea was to make the agency immune from "political" tinkering. In the process, however, he wrote into the measure the seeds of a number of problems that have surfaced since its passage in 2004. The reliance on bond funding is just one, and it now puts the agency, once fiscally well-endowed, near the end of the line for cash as California works its way out of its budget mess. And because the whole arrangement is locked into the state Constitution and state law and virtually impossible to change, CIRM's tenuous situation will continue for some time regardless of what makes good sense either scientifically or in terms of sound policy.

Concerning our earlier comment about the shenanigans in Sacramento, many folks working up there deserve some responsibility for the budget crisis. But fundamentally it is failure of leadership – particularly that of Gov. Arnold Schwarzenegger, who appears to have lost much of the clout he once had and is also unwilling to devote his remaining political and financial resources to "persuading" GOP lawmakers to vote for a budget. (He would do well to study the exercise of power by Lyndon Baines Johnson.) The state GOP legislative leadership seems to be locked into some fantasy unconnected to the realities of the California economy. Democrats also have not conducted themselves well along with the host of special pleaders lobbying in Sacramento, ranging from teachers and business interests to environmentalists and prison guards.

Science, Marco Polo and Kissing

Given that today is Saint Valentine's Day, we are indulging in an aspect of science that may not have much to do with stem cells – kissing.

Sheril Kirshenbaum of NewScientist magazine has graced the online world with a look at one of the latest theories about the origins of kissing. It comes from neuroscientist V.S. Ramachandran of UC San Diego and the Salk Institute, who has been labeled the "Marco Polo of Neuroscience."

Kirshenbaum writes that Ramachandran "points out that since our ancestors needed to find ripe fruit, they would have been attracted to the color red."

She quotes the scientist as saying,

"Red thus became an indicator of food reward. Then something called 'evolutionary co-option' happened, turning red into a general signal for attraction."

Ramachandran says that despite changes that have resulted in an upright posture for human beings, swollen lips remain attractive to males "because of an atavistic persistence of evolutionary memory for attraction to red."

Kirshenbaum notes,

"This hypothesis is supported by the fact that bonobos ( a type of great ape) share our pink lips, as well as our inclination toward kissing, face-to-face mating and oral sex - much more so than pale-lipped chimpanzees."

In a separate piece, NewScientist editorialized,

"...(T)he role of kissing remains mysterious. Perhaps it is one of those facets of human behavior that will remain forever beyond our ken - but no less delicious for that."

As far as we can determine, Ramachandran is not a recipient of a grant from the California stem cell agency. But some clever folks at CIRM might be able to conjure up a concept for an RFA that could attract his attention and advance science in this important area. Color the application red.

Financially Troubled CIRM Hires $200,000 Federal Lobbyist

The California stem cell agency has hired one of Washington's more influential lobbyists, The Podesta Group, to promote a $10 billion biomedical industry aid package being pushed by CIRM Chairman Robert Klein.

In response to an inquiry, Don Gibbons, CIRM communications chief, today said a contract had been signed with the firm, which was founded by Tony Podesta (see photo) in 1988. Gibbons did not disclose the value of the contract, but Podesta proposed a $200,000, 10-month deal in keeping with the terms of CIRM's request for proposals. Travel and other expenses incurred by Podesta would add to the total cost. The lobbying proposal also does not include travel expenses to Washington, D.C., for Klein, other CIRM directors or staff.

The losing firms were Van Scoyoc Associates and Hogan & Hartson.

Earlier we requested a copy of the 15-page Podesta proposal, which is a public record. Gibbons supplied a heavily censored version. More than five key pages were missing, leaving only their titles: "situation analysis" and "strategic framework."
.
Asked for an explanation for removal of the material, Gibbons quoted CIRM legal staff as saying,

"The Public Records Act incorporates, as an exemption, the trade secret privilege found in the Evidence Code.  Each responder was given the opportunity to assert that privilege for any part of the proposal it claims as a trade secret."

Without seeing the five removed pages, it is impossible to evaluate the Podesta proposal or whether it is realistic to expect any sort of result from the expenditure of $200,000 in California taxpayer funds. It is also clear that much of the bowdlerized, analytical material would likely consist of little more than what can be read in newspapers, industry publications and online information sources.

Most of the remaining material amounts to boilerplate descriptions of the firm and its work. However, Podesta did strike a ambitious chord or two, indicating that it would lobby for federal cash directly for the agency and would attempt to make CIRM a major biomedical player in the nation's capital.

Podesta wrote,

"Faced with the prospect of being unable to fund previously approved research and facilities grants, CIRM needs federal support in the form of appropriations, loan guarantees, and /or other measures to finance its research program through the end of calendar year 2010...."

In addition to grabbing some cash right now, Podesta said,

"Our strategy also positions CIRM to play a major role in shaping longer-term federal policies on biomedical research in general and stem cells in particular."

The firm said it is "the longest-tenured Washington representative of the pioneer biotech companies – Genzyme, Genentech and Amgen." It also represents Novartis Vaccines and Diagnostics and Novo Nordisk. Business Week has labelled The Podesta Group as one of seven "Uber-influencers: The Lobbyists Likely to thrive in the New Washington."

The hiring of the lobbyist has drawn fire from at least one critic, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., who has called it an unnecessary, costly diversion from CIRM's stem cell research mission in California.

Simpson raised questions about the federal lobbying plan as early as CIRM's board meeting late last month. He specifically mentioned its $200,000 expense.

By that time the request for lobbying proposals, including its cost, had been on the CIRM website for two days. In response to Simpson, however, Klein said,

"The dollar amount of that is completely unknown at this time. It's in order to attract proposals and see what we have and what resources we need. So we're in an investigation stage of that."

Klein made that statement the morning of Jan. 30, the transcript of the meeting shows. The deadline for the proposals was 5 p.m. later that day with selection of a lobbyist scheduled for as early as two business days later.

We have raised additional questions with CIRM's Gibbons. They include whether CIRM's legal staff agrees that only "trade secrets" were removed from the Podesta proposal, whether all the material was removed at Podesta's request and whether CIRM removed material without a request from Podesta. The questions also include terms of the contract, whether the firm has actually begun work and whether Klein is seeking financial support from grantee institutions to pay for Podesta.

We will carry Gibbons' responses when we receive them.

If you would like copies of all three lobbying proposals, send an email to djensen@californiastemcellreport.com.

CIRM/ISSCR Convention Proposal Reduced to $250,000

CIRM directors balked last year at coughing up $400,000 for the 2010 convention of the International Society for Stem Cell Research, but now the figure has been trimmed to $250,000.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., reported the new figure on his organization's blog. He said that CIRM has agreed to help the group raise the additional $150,000 for the San Francisco meeting.

But Simpson wrote,

"That's a mistake.  CIRM should focus with laser-like precision  on where its getting the money to fund existing grant commitments. This sort fund raising effort -- just like hiring a proposed lobbyist in Washington for roughly $200K --  is an unfortunate and unnecessary distraction."