A Tipping Point for CIRM? Reform Recommendations Coincide with Pressing Problems

California's Little Hoover Commission's sweeping report on the state's $3 billion stem cell agency comes at a time when the ambitious research enterprise could be facing a tipping point in its short life.

Recent weeks have seen several significant developments involving the California Institute for Regenerative Medicine (CIRM), which is less than five years old.

• Its chairman, Robert Klein, made it clear he is not going fill the job after 2010.
• Marie Csete, CIRM's chief scientific officer, said she is quitting Aug. 1 for unexplained reasons.
  
• The agency is about to embark on its largest and most ambitious round of research grants, a $210 million effort that Klein has identified as critical.
  
• At the same time, it will launch a related, risky and unprecedented $500 million lending program for the biotech industry.
• Festering questions involving structural and governance issues surfaced in a contentious CIRM board meeting earlier this month.
  
• Revision of CIRM's strategic plan, which has guided it successfully so far, has been moldering for months.
  
• Funding problems – solved for the time being – will arise once again in 2010.
  
• And CIRM staff has identified both the potential loss of key staff and community support as two risks the agency faces.
  

That said, CIRM will have approved $1 billion in grants by the end of this year. It is already the largest source of funding in the world for human embryonic stem cell research. “California has made an investment in innovation that is the envy of the world,” said Daniel Hancock, chairman of the Little Hoover Commission and former president of Shapell Industries.

Nonetheless, said the commission, CIRM can and should do better if some of the niggling and not-so-niggling impediments embedded in state law by Prop. 71 are removed or altered. They include: reducing the size of the unwieldy, 29-member board, adding independent voices to the panel, eliminating the overlapping roles of the chairman and president and beginning the all-important planning for leadership transition. (A list of the recommendations can be found here, excerpts here and the complete report here.)

The commission's report is fair-minded, thoughtful and well-researched. It pointed several times to CIRM's accomplishments and the contributions of Chairman Klein. The commission's recommendations stopped short of seeking another ballot measure, which would be unrealistic and stimulate acrimony from CIRM and its supporters. The good government agency said changes should “be prospective and strategic and minimize disruption that might slow CIRM's ambitious and creative agenda.”

CIRM's reaction was adversarial and defensive, a CIRM tendency that the commission discussed in its study.

The agency reaction came in the form of a news release from CIRM in which Klein said,

“To disrupt and delay the agency’s critical work for a year, or even six months, because of what the commission’s staff has called ‘perception’ issues is unacceptable. Let them talk perception to patients who miss out on a therapeutic breakthrough that would have saved their lives because the agency has been paralyzed by a sweeping reorganization.”

CIRM challenged the legality of legislative enactment of the recommendations and basically threatened a lawsuit, raising the rather bizarre picture of a state agency suing the governor and the legislature. More likely, Klein would find a friendly group to act as a legal surrogate, perhaps his own private stem cell lobbying group, Americans for Cures.

The CIRM press release triggered a less than pleased response today from Jeff Sheehy, a member of the CIRM board.

In a comment posted on the California Stem Cell Report, he said,

“On whose authority are thousands of dollars of lobbying, communications, and legal resources being spent opposing this report? The legislature requested this report and to oppose in this knee jerk fashion could properly and reasonably offend those legislators who supported the engagement of the Little Hoover Commission.”

He said that most CIRM board members would likely agree with recommendations to remove the 50-person cap on CIRM staff and the 15-person limit on outside scientists on the grant review panel.

Sheehy said the board – not the agency – should take a position on the report after thoroughly analyzing it.

From outside the agency came a nod of approval for the commission's work. John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., said,

“This is a thoughtful and thorough analysis from a bipartisan group with no ax to grind. CIRM’s management and board should listen to its advice.”

Klein's longstanding involvement with CIRM was touched on by the commission. It said that much was owed to Klein's hard work, beginning with overseeing the campaign for Prop. 71 in 2004. But it said that his actions and personal style “have been at the core of many of the criticisms of the stem-cell agency, and have made him a lightning rod for calls for more accountability.”

The commission continued,

“An agency governance structure that features key positions built around specific individuals does not serve the best interests of the mission of the agency or the state of California, however well-qualified the individuals may be.”

The commission stressed that succession planning should be a top priority of the CIRM board considering Klein's plans to leave his post in 18 months. The commission raised other questions about CIRM's future.

“How will CIRM know when its job is done?
“What happens when CIRM runs out of money?
“Is the mission of Prop. 71 best served by transforming CIRM into a self-sustaining operation?"

Nearly five years ago, voters approved Prop. 71 with the understanding that it was a 10-year effort. While it does lose its ability to sell bonds after that period, the agency will continue to have some sort of life, perhaps only as a vestige in state law books.

CIRM directors should give the commission's report serious consideration as they look at their own plans for the agency's future and life without Robert Klein.

(Editor's note: An earlier version of this item incorrectly stated the Little Hoover Commission's final report included a recommendation for reduction of the super-majority quorum requirement for the stem cell agency board. The change was initially recommended in the commission's draft report, but was dropped in the final report, which said the quorum requirement was “problematic.”)

CIRM Mishandles Reaction to Hoover Commission

The California stem cell agency this week fed right into a Little Hoover Commission finding that is prone to defensive and adversarial reaction to outside criticism.

CIRM's response to the commission's report basically threatened a lawsuit if the Hoover Commission recommendations were adopted by the legislature. CIRM said,

“...(A)ny attempt to enact the changes through legislation rather than by a vote of the people would likely result in a court challenge, which would be costly and time consuming.”

The assertion raised the specter of a California state department possibly suing the state's own governor and legislature. More likely, a CIRM-friendly group would be recruited to file the litigation.

CIRM's statement, aside from the rhetoric, was largely based on a legal memo by its outside counsel. CIRM's chief communications officer, Don Gibbons, said the release was distributed to reporters who requested it, but it was not posted on the CIRM web site. We asked Gibbons why. He replied,

"I see no reason for drawing attention to something for which the process was a farce. When, at the last minute they voted to change our quorum requirements, the one item on their original list that made a modicum of sense, there was not a single commissioner who knew what our current requirement was. Only one of many ludicrous moments in the process."

In an email, he also cited the “hypocrisy” of the Hoover Commission recommendation for more openness for CIRM while the commission withheld its draft recommendations from the public and CIRM until the full report was approved this week by the commission. Gibbons has a point there, which we have written about.

CIRM's statement on the report, however, was another bit of evidence supporting the commission's position that the agency has been unnecessarily adversarial and defensiveness at times.

The report quoted Donna Gerardi Riordan, former director of programs at the California Council on Science and Technology, as saying that “framers” of Prop. 71 were “short-sightedly taunting” state lawmakers. The result was “rancorous public attention” that stood in the way of constructive solutions.

More immediately, however, the CIRM statement ired CIRM board member Jeff Sheehy, who aired his concerns publicly in an unsolicited comment here on the California Stem Cell Report. It is reasonably certain that other board members were less than pleased as well.

The CIRM statement also triggered a negative response from a reader who must remain anonymous. Foolish was the term he used. The reader said CIRM should have sent the following comment to the commission regarding its work.

“Thank you very much for your thorough report and recommendations. It’s clear the staff and commission devoted considerable effort to this important project. We appreciate the constructive spirit in which the recommendations were offered and will give them appropriate consideration as we move forward.”

It would be easy to assign responsibility for the CIRM statement to Gibbons, since he is in charge of CIRM public relations. However, it was clearly released under Klein's authorization and is not the only occasion that Klein has demonstrated seriously flawed judgment about public relations matters. (See here, here and here.)

Hoover Commission Recommendations

Here is the text of the recommendations for CIRM from California's Little Hoover Commission:

Recommendation 1: The Legislature should restructure the CIRM governing board around principles of efficiency and transparency.

• The Legislature should amend the Health and Safety Code to reduce the board size, shorten terms and restructure membership.
• Decrease board size to 15 from 29. Keep diversity of membership but add independent voices to the board: five patient advocates from unspecified disease groups, two independent business leaders and two independent scientists with no ties to CIRM-funded institutions; two University of California officials, one university official (non UC); two private sector biotechnology executives, and one leader of a California research institution.
• Reduce terms to four years for all members.
• The Legislature should amend the Health and Safety Code to streamline the appointment process for CIRM board members.
• Allow the governor to appoint 11 of 15 board members, subject to Senate confirmation. Legislative leaders should continue to appoint two members. The UC system presidentshould appoint two UC representatives.
• The Legislature and CIRM should realign the roles of chair and president to eliminate overlapping authority and to enhance clarity and accountability.
• The Legislature should modify all statutory references inthe Health and Safety Code to the nominating process, job duties and qualifications for the chair and vice chair to invest this authority with the board.
• The CIRM board should elect a chair and a vice chair from within the existing board, subject to set terms and conditions for re-election/removal.
• The CIRM board should clarify that the president manages all day-to-day operations.
• The Legislature should amend the Health and Safety Code to rename the board to more accurately reflect its composition. The Independent Citizens Oversight Committee should be called the Board of Directors.
  

Recommendation 2: The Legislature and CIRM should improve efficiency and transparency for distributing grant and loan funds.

• The Legislature should amend the Health and Safety Code to remove the 50-employee cap on staffing.
• The Legislature should amend the Health and Safety Code to remove the 15-person limit on peer reviewers. CIRM should modify its triage plan to review grants internally.
• CIRM should explore options for greater disclosure of the peer review process.
• CIRM should poll CIRM’s peer reviewers anonymously about their willingness to participate in the review process if their financial disclosure statements are made available
• to the public. The results of this poll should be made public.
• CIRM should conduct a trial grant application round that identifies all applicants.
• CIRM should provide full grant evaluations to applicants.
• CIRM should amend all meeting minutes to specify individual board members’ votes and recusals, and continue the practice moving forward.

Recommendation 3: The CFAOC and the CIRM governing board should use their authority to enhance oversight.

• The Citizen’s Financial Accountability Oversight Committee (CFAOC), chaired by the State Controller, should exercise its existing authority, or be statutorily authorized if necessary, to conduct performance audits and hold regular meetings to review CIRM’s programmatic and strategic performance, in addition to overseeing CIRM’s annual financial audits.
• The governing board should hold its members accountable by adopting removal provisions in its bylaws.
  

Recommendation 4: The CIRM governing board should begin planning for CIRM’s future through an open process.

• The CIRM governing board should create succession plans for board leadership.
• CIRM’s strategic plan should provide clear transparent
• CIRM should develop a transition plan for the eventual expiration of bond funding.

Excerpts Hoover Commission Investigation of CIRM

Here are some excerpts from the report by California's Little Hoover Commission, the state's good government agency, on the California stem cell agency. First, from the cover letter by Daniel W. Hancock, chairman of the bipartisan commission.

“In the California Institute for Regenerative Medicine, California has made an investment in innovation that is envy of the world. Known as CIRM, the institute is the product of Proposition 71, which promised voters they could turn California into the global epicenter of biotechnology. The institute since has directed more than $700 million toward scientific exploration, in the process, leveraging an additional $900 million in private and institutional money that has built new facilities, lured scientists to California and spurred growth in the state’s life-sciences industry.”

“The Commission found that CIRM’s governance structure is not adequate to protect taxpayers’ interests or serve its own ambitious goals. The Legislature must take this opportunity to reform CIRM’s governance structure to ensure that it can deliver on its mission of developing cures for the benefit of all, as well as provide transparency and accountability for California’s taxpayers who will be paying off the bonds.”

He continued:

“The 10,000-word proposition (that created CIRM) laid out highly specific qualifications and detailed operational duties for its chairperson. Its very specificity prevents CIRM from evolving, institutionalizes inefficiencies and hobbles its ability to transition to new leadership.”

“CIRM’s 29-member oversight committee includes representatives from institutions that have benefitted from grants the committee approved. This structure, along with overly long terms and the inability to nominate its own leaders or hold them accountable, fuels concerns that the committee never can be entirely free of conflict of interest or self-dealing, notwithstanding a court ruling that established the legality of such a structure. Legal is not necessarily optimal,”

Here are excerpts from the body of the report:

On conflicts of interest
“Criticism that CIRM’s governing board remains an insiders’ club undermines the legitimacy of the agency. Some 80 percent of the funds to date have been awarded to institutions with representatives on the ICOC...(T)he frequent occurrence of members recusing themselves because of conflicts of interest shows a structural defect in the governing board.”

Accountability
“The detailed provisions of the ballot initiative, which placed the governing board outside of the normal scope of accountability compared to other state agencies and boards, provided stability, diversity and the political protection to get the agency up and running. But today, only five years later, Proposition 71 already looks like a relic of another era.”

Personality Driven
“The actions and personal style of ICOC chair Robert Klein have been at
the core of many of the criticisms of the stem-cell agency, and have made
him a lightning rod for calls for more accountability. That he is a
component of much of the discussion is unavoidable as he drafted,
championed and donated money for Proposition 71 and now serves as
the paid, part-time chairman of the governing board. His passion and
leadership made Proposition 71 a reality, and his financial and political
skills helped CIRM survive its early challenges. At the same time, the
media have chronicled how Mr. Klein has alienated members of the
Legislature and at least one newspaper has called on Mr. Klein to
resign.”

“An agency governance structure that features key positions built around
specific individuals does not serve the best interests of the mission of the
agency or the state of California, however well-qualified the individuals
may be. Such a situation distorts accountability and succession
planning and could, in the event of an abrupt departure of the
individual, leave the agency leaderless for an extended period. A more
efficient and balanced board is possible and more appropriate as CIRM
matures. For CIRM to prosper and sustain itself, such changes are
essential.”

CIRM's Adversarial Defensiveness
From Donna Gerardi Riordan, former director of programs at the California Council on Science and Technology, “By excluding legislators from participating in the creation and design of CIRM, the framers of Proposition 71 were short-sightedly taunting the state’s most powerful
and skillful political players,”

Management
“CIRM has adopted a co-CEO leadership structure between the board chair and the agency president. The board chair oversees several daily administrative duties at CIRM, which gives the chair a dominant role over other members, creates potential conflict with the CIRM president and blurs the lines of accountability.”

More Open Grant Review Process
“CIRM leadership has argued that fewer institutions would apply for
funding if their identities became known and they were not successful.
CIRM, however, should continually strive to improve the openness of its
process. Based on Connecticut’s experience of disclosing all applicants
without negative consequence, CIRM should conduct a pilot project to
evaluate if a more open process would inhibit researchers from coming
forward and applying for CIRM funds. In an upcoming grant round, all
applicants should be identified retrospectively. Disclosing names of
unsuccessful applicants as well as individual reviewers will allow the
public to better track CIRM’s funding processes for fairness and bias.
Judging by the apparent willingness of rejected applicants to identify
themselves and their organizations in public appeals to CIRM, it is
questionable whether the current lockout of applicant identities poses a
real concern. The burden is on CIRM to demonstrate otherwise.”

CIRM's Future
“The rapidly changing political and scientific environment raises questions about whether the organization is flexible enough to adapt to the field it is supposed to lead....

• “How will CIRM know when its job is done?
• “What happens when CIRM runs out of money?
• "Is the mission of Proposition 71 best served by transforming CIRM into a self-sustaining operation?"

Sheehy Comments on Little Hoover Commission Recommendations and CIRM Reaction

We want to call attention to a comment that Jeff Sheehy posted this afternoon on the “CIRM news release” item. Sheehy is a member of the CIRM board. He has served on the board since its inception and serves regularly as the acting vice chair of its grant review group. You can read Sheehy's unsolicited and unmoderated comment at the end of the item in question.

Quick Links: Recommendations for CIRM Overhaul, Media Coverage and Reaction

The Little Hoover Commission's recommendations for sweeping changes in the $3 billion California stem cell agency became public today, generating some interesting news items and reaction from the agency itself.

We were traveling today and have not had a chance to read the 84-page document but will have an analysis tomorrow. Meanwhile interested readers have plenty to chew on.

First, there is the report itself, which can be found here. Then there is CIRM's reaction to it, which came in the form of a press release dated Wednesday June 24. The release has been circulated to at least some reporters, but has not been posted on the CIRM Web site at the time of this writing. The full text is contained in the item below.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., issued his reaction at 2:02 p.m. today. You can find that document here.

Ron Leuty of the San Francisco Business Times wrote a relatively lengthy piece about the recommendations. Sandy Kleffman of the Contra Costa Times also filed a fairly substantial article.

We expect to see more coverage in the mainstream media, but Saturday is not a good day if you are looking for newspapers loaded with news. Even in the heyday of newspapers, Saturday papers were thin and did not offer much.

CIRM News Release on Little Hoover Commission Report

Here is the complete text of a CIRM news release circulated to some reporters today in connection with recommendations by the Little Hoover Commission. As of this writing, the release has not been posted on the CIRM Web site.


For Immediate Release Contact: Don Gibbons
415-396-9117
415-740-5855 (mobile)


CIRM Responds to Recommendations of the Little Hoover Commission

Sacramento, Calif., June 24, 2009 – The leaders of the California Institute for Regenerative Medicine (CIRM), the state stem cell agency, said today that they were disappointed that the Little Hoover Commission chose to release a report with recommendations that, if enacted by the legislature, would slow the agency’s progress toward cures.

The agency believes that many of the recommendations made by the commission are based on an incomplete understanding of the agency’s operation and are so sweeping they would require another ballot initiative to amend Proposition 71, which created the agency. If enacted by the Legislature and signed by the governor the recommendations would dramatically disrupt and delay the agency’s push to achieve its mission of delivering therapies to patients. In addition, any attempt to enact the changes through legislation rather than by a vote of the people would likely result in a court challenge, which would be costly and time consuming.

The Commissioners have publicly acknowledged that CIRM’s existing structure is quite successful in allocating research funds in a manner that has garnered respect from researchers in the state, nationally and internationally. The Commissioner’s have also acknowledged that multiple audits and court reviews have shown that CIRM is managing potential conflicts of interest well.

“To disrupt and delay the agency’s critical work for a year, or even six months, because of what the Commission’s staff has called ‘perception’ issues is unacceptable,” said Robert Klein chair of CIRM’s governing board. “Let them talk perception to patients who miss out on a therapeutic breakthrough that would have saved their lives because the agency has been paralyzed by a sweeping reorganization. The will of seven million voters who approved this highly functional structure should be respected. I would hope the legislature will not devote any of its valuable time to this measure that has little chance of benefiting the state while it has great potential to do harm.”

Specific fallacies of the report:
• The board is too large and unwieldy. With 29 members it is similar in size to the UC Regents (26) and the California Judicial Council (28). On all three boards, size has afforded a diverse membership that brings a needed breadth of expertise.
• There are no independent voices and as a result there are perceptions of conflicts. There are many board members with no ties to organizations that receive grants and those who are from institutions do not participate in even the discussion of grant applications from their institutions. The Court of Appeals noted, “by approving Proposition 71 the voters have determined that the advantages of permitting particularly knowledgeable persons to decide which research projects to fund outweigh any concerns that these decisions may be influenced by the personal or professional interests of those members.
• Reduce politicalization of the board by letting the governor make all but four appointments. The current process, which divides the appointing authority between the State’s four constitutional officers and the UC Chancellors, is a much more effective means of assuring no one political agenda can shape the board and in turn the science CIRM funds.
• The division of authority between the board chair and the agency president is not effective. Proposition 71 created a clear division of responsibility with an executive chair providing financial leadership and a president providing scientific leadership. Current president Alan Trounson and board chair Klein have both publicly stated that this division is working well for the agency.

One of the key objectives of Proposition 71 was to provide stability and predictability to a research-funding program. The inevitable delays that would be caused if the Commission’s recommendations were enacted by the legislature would disrupt California laboratories the length of the state and slow progress to cures.

Related Media:
Videos explaining stem cell research are available on the CIRM YouTube site.
Stem cell images are available at the CIRM Flickr site. These are available for use with credit to the scientist listed in the caption.


About CIRM CIRM was established in November, 2004 with the passage of Proposition 71, the California Stem Cell Research and Cures Act. The statewide ballot measure, which provided $3 billion in funding for stem cell research at California universities and research institutions, was overwhelmingly approved by voters, and called for the establishment of an entity to make grants and provide loans for stem cell research, research facilities, and other vital research opportunities. To date, the CIRM governing board has approved 279 research and facility grants totaling more than $693 million, making CIRM the largest source of funding for human embryonic stem cell research in the world. For more information, please visit www.cirm.ca.gov.

Hoover Commission Report on CIRM Overhaul Out Today

California's Little Hoover Commission is expected to release its full recommendations today for sweeping structural changes at the $3 billion California stem cell agency.

We will be traveling and will not be posting anything on the report until very late today or possibly tomorrow. But you can find the report at the Little Hoover Commission Web site when it is released. John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., is also expected to have something on his organization's site.

Patient advocate Don Reed already has posted some reaction and information on the Daily Kos. He does not look favorably on the commission's work.

Minimal Media Coverage of Csete's Resignation

They didn't stop the presses at the San Francisco Chronicle this week for news of the resignation of the chief scientific officer at the $3 billion California stem cell agency, although it is a bit of a local story for the newspaper.

No mainstream media have covered Marie Csete's pending departure as far as we can tell. But it surfaced in a couple places on the Internet that have international audiences, which this blog has as well. The news was also, we understand, the subject of some discussion at a meeting of CIRM grant reviewers in San Francisco the last two days. No information has been posted concerning Csete's resignation on CIRM's own Web site.

Ron Leuty of the San Francisco Business Times wrote two pieces, one a straight-forward news story and the other something of a reaction piece.

Monya Baker at The Niche, Nature magazine's stem cell blog, wrote that she was “impressed with (Csete's) very practical approach to the unglamorous parts of helping move stem cells into human testing.”

Jim Till put up an item on the blog of the Canadian stem cell consortium. And Peter Jamison of the San Francisco Weekly also posted a piece.

CIRM Rips Hoover-recommended Reforms as Disruptive

The California stem cell agency has fired off a legal memo to the state's good government commission, declaring that its proposed changes in CIRM would impose illegal and “drastic and disruptive” alterations in the stem cell research effort.

The memo from CIRM's outside attorneys came as the Little Hoover Commission today approved its wide-ranging report, which is expected to be released in full tomorrow.

Among other things, the Hoover proposals call on the legislature to reduce the size of the CIRM board, reduce the super-majority quorum requirement, eliminate salaries for the chairman and vice chairman and eliminate the dual executive situation created by Prop. 71.

All of those provisions, in one form or another, hamper the operations of CIRM. Even the salary matter has diverted the board from its primary mission of funding research. Today, nearly five years after CIRM was created, the board is still struggling with an incomplete evaluation process for the chairman and vice chairman. Those positions are filled by a vote of the board.

Nonetheless, James Harrison and Kari Krogseng of Remcho, Johansen and Purcell of San Leandro, wrote on Tuesday (June 23),

“The Little Hoover Commission’s proposals would effect drastic and disruptive changes to CIRM’s governance and operating systems. Such changes run counter to the voters’ intent, and do not further Proposition 71’s purposes.”

The 10-page legal memo hung most of its arguments on a provision in Prop. 71 that states that it can only be amended by the legislature if the changes “enhance the ability of the institute to further the purposes of the grant and loan programs.”

Harrison's memo said the Hoover proposals could only be enacted through another ballot measure, a move that a subcommittee of Hoover commissioners clearly opposed earlier this month.

Americans for Cures, the private stem cell lobbying group of CIRM Chairman Robert Klein, also produced a 14-page legal memo that the reached the same conclusion as Harrison.

The memo was written, also on Tuesday, by Richard Martland and Kurt Oneto of the Nielsen, Merksamer, Parrinello, Mueller & Naylor law firm of Sacramento, Ca. The firm has a lobbying contract with CIRM but we presume no state funds were used for the Martland memo.

The document had this interesting tidbit in it:

“The (Hoover Commission) proposal would effectively permit the ICOC (the CIRM board) decision-making process to be captured by a small minority and would deprive ICOC decisions of the benefit of input from the broad spectrum of views currently represented on the committee. It is inconceivable that voters who approved an organization with 29 members would have imagined that 5 members would ultimately be able to make binding decisions on its behalf.”

However, that is exactly what happens. We pointed out a good example last week in which only six of the board members were permitted to vote. All the rest in attendance were excluded not only from voting but from participating in the debate.

(Editor's note: The copies of the memos were supplied by the Little Hoover Commission to John M. Simpson of Consumer Watchdog of Santa Monica, Ca., who relayed them to us. The Merksamer memo contains a confidentiality warning. However, when it was submitted to the Hoover Commission the memo became a public record.)

Scientist Says Csete Resignation is Regrettable

Here is another comment from a California scientist on the resignation of Marie Csete from CIRM. The researcher must remain anonymous for obvious reasons.

“It is indeed regrettable that Dr. Csete has chosen to leave CIRM. Given CIRM's mandate to move stem cells into the clinic, a Chief Scientific Officer with Dr. Csete's clinical and research credentials, especially as they apply to human transplantation, is absolutely essential. It is perhaps telling that of the over 300 grants issued by CIRM only about 10% (by my accounting) are focused on actual preclinical or clinical studies. Although CIRM was established as a way to bolster the perceived inadequacies of the NIH, that rationale has now, in now small measure, evaporated. The advantage that CIRM has, compared to the NIH, is that they are in a position to fund, almost exclusively if they wish, preclinical studies, especially high risk studies that would not get funded by the NIH. It is these studies that will help determine whether or not a given idea about how stem cells might be used clinically actually has a chance of working. If CIRM and the ICOC are continuing to focus on basic biology studies, at the expense of preclinical work, even as it might apply to the upcoming Disease Team Grants, then I, were I in Dr. Csete's shoes, would also leave.”

Csete Resignation: Researcher Calls it Tragic

Here is a comment on Marie Csete's resignation from a well-respected researcher who must remain anonymous. Comments from other readers are welcome. They can be posted anonymously, if desired, via the “comment” function at the end of this item. Or they can be sent to me for posting at djensen@californiastemcellreport.com.

“CIRM's inability to retain Dr. Csete is tragic. Her scientific stature worldwide and her knowledge and relationships with the FDA made her the most valuable member of CIRM's scientific team. She was the one who scientific and medical leaders respected and trusted. With Dr. Csete's departure, CIRM immediately loses much of its credibility as an organization that puts good science, not politics, first. CIRM needs to pull itself together, decide that high ethical standards and strong scientific leadership are its highest priories, and clean house quickly.  

“They need to bring in a strong COO and respected scientific leadership. Otherwise, Bob Klein's legacy, his remarkable vision, will be crushed under the weight of foolish egotism and political favoritism. Taking a page from American politics, CIRM needs an Obama, not a Bush, as its scientific leader. Dr. Csete provided the no-drama Obama leadership that CIRM so desperately needs. She should have been promoted, not allowed to resign.”

Csete Quits CIRM on Eve of Huge Grant Round

In an unsettling move, Marie Csete has resigned as the chief scientific officer for the $3 billion California stem cell agency, only 15 months after she joined CIRM in the $310,000-a-year post.

Csete's departure comes as the agency is about to embark on its most ambitious and largest round of research grants – a complex, $210 million “disease team” effort aimed at pushing research towards clinical trials.

CIRM Board Chairman Robert Klein has described the round as critical for CIRM, both in terms of producing results and in generating support for the private sale of state bonds to support the agency.

John M. Simpson, stem cell project director for Consumer Watchdog, this afternoon disclosed Csete's departure on the blog on his organization's Web site.

In an email to members of the CIRM board, Csete(photo at left) said,

“I have decided to resign my position at CIRM as of August 1, 2009. I am sorry and disappointed that I was unable to say goodbye to you at the last ICOC (the CIRM board) meeting. I look forward to seeing your many successes! “

In response to a query, Simpson said,

"This is a sad day for CIRM. Dr Marie Csete, like Dr. Arlene Chiu before her, is the backbone of CIRM's scientific endeavors. It's particularly troubling that two top women scientists have left the agency after relatively short tenures. It raises serious questions about the agency's management under Chairman Bob Klein and President Alan Trounson. They owe the board a detailed explanation."

No successor appears to be in the wings. In a message to board members on behalf of Klein, Melissa King, executive director of the board, said,

“We will be working on a succession plan for Marie. Bob would like to talk to each of you to get your thoughts, and he and I will work on that in the coming days.”

On the surface, Klein's plan to call board members would appear to be a violation of the ban on serial meetings of public bodies such as the CIRM board. We suspect it will be justified on the basis that it deals with personnel matters, although it also overlaps into policy areas.

Csete's possible departure had been rumored for at least a month or more. She gave no reason for her resignation in the copies of the email messages that we have received. According to those we talked to, she was reportedly dissatisfied with CIRM's management and possibly with the reception afforded her scientific advice.

Simpson said the board should demand an explanation of her departure from Klein and Trounson.

Filling a high level post such as Csete's always takes a fair amount of time, but CIRM has been very slow in the past in filling top level positions, including that of president.

Prior to joining CIRM, Csete was John E. Steinhaus Professor of Anesthesiology at Emory University, with adjunct appointment in cell biology, and program faculty appointments in biochemistry, cell and developmental biology, neurosciences and the Emory/Georgia Tech Biomedical Engineering Program. She was additionally the director of liver transplant anesthesiology at the Emory University Hospital in Atlanta and director of the Emory/Georgia Tech Human Embryonic Stem Cell Core, and co-director of the Emory MD/PhD program.

In announcing Csete's appointment in March 2008, Trounson said,

”Her training and experience as both a basic researcher and clinician is critical to our strategy of advancing discoveries into the translational pipeline. In addition, her expertise in the field of transplantation and understanding of immunology issues will be highly relevant to advancing new discoveries in the stem cell field toward therapies and cures. ”

The announcement also said,

"'No one knows more about or is more skilled at dealing with the intersecting worlds of real-life clinical transplantation and basic stem cell research than Dr. Csete,' commented David J Stone, MD, Adjunct Professor of Anesthesiology and Neurological Surgery at the University of Virginia School of Medicine."

In the item below, you can read CIRM email messages concerning Csete”s departure.

Text of Email on Csete Resignation

Here are copies of CIRM email messages regarding the resignation of Marie Csete.


Subject: Marie Csete

Dear ICOC Members,

Bob wanted you to have these messages (below), from Marie and Alan. We will be working on a succession plan for Marie. Bob would like to talk to each of you to get your thoughts, and he and I will work on that in the coming days.

Best,
Melissa
~~~~~~~~~~~~~~~~~~~~~~~

MESSAGE FROM MARIE:

To ICOC Members:
I have decided to resign my position at CIRM as of August 1, 2009. I am sorry and disappointed that I was unable to say goodbye to you at the last ICOC meeting. I look forward to seeing your many successes!
Best
Marie


MESSAGE FROM ALAN TO CIRM STAFF:

As you have heard from Marie, she plans to leave CIRM at the end of July. In just a little more than a year she has made highly valuable contributions to our science operations coalescing a new set of core grants and organizing a number of workshops that have invigorated our scientific discourse and changed the direction of many of our programs. She has been a highly respected representative of CIRM at countless meetings nationally and internationally. I think you all would agree that our mission has been advanced by her efforts. Please join me in thanking her and wishing her luck going forward.

Alan

Stem Cell Board Tackles Troublesome Issues Next Week

The men and women who oversee the $3 billion California stem cell agency will meet next Wednesday to act on some of “festering” issues that triggered a robust exchange at last week's board meeting.

The discussion highlighted a host of problems, ranging from whether the agency should staff up to its 50 person legal limit to micromanagement built in by Prop. 71, the ballot measure that created CIRM. 

One key problem is the super-majority quorum requirement embedded in state law that now makes it difficult for the CIRM board to act legally. The quorum matter, however, can only be changed by legislation, which is all but impossible to pass because of language in Prop. 71. 

Next week, CIRM board is only scheduled to address complaints that the board is not adequately supported. During the San Diego session, several board members indicated they would prefer to deal with the matter in private. 

The upcoming meeting, available at teleconference locations statewide, includes an executive session that will allow the board to speak candidly about specific individuals and also quite probably prevent the public from understanding the full nature of all the issues. We understand the desire to take the matter behind closed doors. 

Some of the comments last week did not reflect well on CIRM's leadership. We also understand that because of state open meeting laws the CIRM board operates under restrictions that make it difficult to do business. 

Consider, for example, the legal ban on serial meetings. Those could be private telephone calls or emails between board members that could result in a majority of board members having conferred on an issue. The Institute for Local Government explains,

“The communication does not need to be in person and can occur through a third party. For example, sending or forwarding e-mail can be sufficient to create a serial meeting, as can a staff member’s polling governing body members in a way that reveals the members’ positions to one another.”

Such restrictions are hard for folks from the private and non-profit sector to understand. They are certainly a departure from the way business is handled in most non-governmental enterprises. And the restrictions on serial meetings are but just one example of the requirements of the state's open meeting law. 

That said, some of the problems that were aired last week would have long been solved long ago if they had been dealt with in a forthright and public manner. Going behind closed doors creates a cover of secrecy and non-accountability. 

The result in this case was the frustration and outpouring that emerged last week. The issues raised in San Diego are certainly public business. They go to the effectiveness of the stem cell agency and how well its board exercises its responsibilities. A skilled attorney can, nonetheless, find a way to provide a personnel justification to exclude the public. But it probably would do little good to upbraid individuals either in a public or private board meeting. 

Given the festering nature of the problems, it makes more sense to tackle them once again in public. Doing so enhances the board's credibility and helps to maintain public confidence in CIRM operations. 

The public can take part in the discussions at teleconference locations in San Francisco (2), Los Angeles (2), Sacramento, Elk Grove, La Jolla, Healdsburg, Irvine and Stanford. See the agenda for specific addresses.

Hoover Commission Moving Forward This Week on CIRM Changes

California's Little Hoover Commission meets this week to consider recommendations for changes in the operations of the California stem cell agency, perhaps even adopting final findings.

The committee will go over the draft report on CIRM Wednesday afternoon in Sacramento. Stuart Drown, executive director of the good government agency, said the commission could adopt the recommendations or ask the staff to make revisions.

If the revisions are minor, he said the staff could bring them back for a final vote on Thursday afternoon. If changes are major, the report will be brought back to the commission in August.

The commission has withheld copies of the recommendations, but it did discuss them publicly earlier this month at a subcommittee hearing. Under the preliminary recommendations, the size of the CIRM board would be reduced from 29 to 15, the dual CEO situation would be eliminated, salaries for the chairman and vice chairman would be halted and the super-majority quorums for board action would vanish.

One longtime CIRM supporter has described the recommendations as “ludicrous” and a “disaster.”

The Hoover Commission has no power to impose changes. They would have to be enacted by the legislature or made voluntarily, if possible, by CIRM. Many of the recommendations, if not most, could take place without changes in state law.

CIRM PR Puffs Fanciful Budget Number

Here is a link to the press release that the California stem cell agency issued concerning its board meeting last week. In it, the agency persists in trying to paint the budget as a 3 percent decrease, rather than a 25 percent increase.

CIRM Chairman Robert Klein at one point last week described comments on the budget by board member Jeff Sheehy as a “gross distortion.” In reality, the distortion is coming from Klein and CIRM. As we have noted, Klein's use of fanciful figures raises questions about the reliability of other financial information that he presents to the board.

You can read more about the budget via these links: 25 percent increase, festering issues, budget puffery, budget poorly documented.

Link to Bee Editorial Repaired

The “time is ripe” item below (June 21) had a bad link to The Bee editorial. The link has been fixed, and you can find the editorial here.

Bee Says Time is Ripe for Klein to Leave

The Sacramento Bee Saturday said Bob Klein's departure as chairman of the California stem cell agency is “long overdue.”

Writing in an editorial, The Bee said Klein 's tenure “has not been in the best interest of either taxpayers or the stem cell agency.” Klein announced earlier this month he would not seek re-election as chairman at the end of his term in 2010.

The Bee is the only daily newspaper in the state Capitol and is widely read by lawmakers and policy makers. It has long been critical of Klein. The editorial also appeared in the Fresno Bee, which is owned by the parent company of both papers, and may well appear elsewhere in the McClatchy newspaper chain. (Fresno is Klein's home town.)

The Bee said,

“Chairing a 29-member board that is far too large and rife with conflicts of interest, Klein has operated the institute in a smothering manner, with little regard to transparency or lines of authority.

“Since 2005, Klein has run off talented scientists, such as former CIRM President Zach Hall. He has helped direct millions of dollars to contracts for law firms and public relations consultants – money that could have gone to science.

“Whenever any lawmaker or outside group scrutinizes his decisions or expenditures, Klein cranks up his political attack machine. While serving as a public official, Klein has led or has been affiliated with at least two nonprofit groups that have gone after legislators who sought to reform CIRM.”

The Bee also declared that CIRM should closely examine its internal expenditures, citing coverage of its budget by the California Stem Cell Report.

The editorial generated some reader commentary, including a posting from journalism professor Michael Fitzgerald that said,

“Perhaps Mr. Klein has suffered from hubris, but give him some credit. There would not be a stem cell institute if it wasn't for his efforts.”

Most of the other comments were less generous.

Festering Issues Surface at Contentious Stem Cell Meeting

SAN DIEGO – A bit of a rumpus broke out Thursday at the board meeting of the California stem cell agency. Nominally, the dispute was about hiring an additional staffer to help support the 29 persons who serve on the board that oversees the $3 billion enterprise.

But the heated discussion raised a host of issues, some of which have been festering behind closed doors for years. They included staff support for the 10 patient advocates on the 29-member board, the two-tier board structure, conflicts of interest, super-quorum requirements, ill-conceived legal limits on staff size, CIRM hiring plans, micromanagement and the agency's budget for the coming year.

“Festering” was a word used more than once by board members. It was connected to concerns of patient advocates about the lack of CIRM staff support for their CIRM-connected responsibilities. The discussion also highlighted the fact that other board members can designate alternates to attend meetings, but the patient advocate members cannot.

Those who are permitted to use alternates are executives at research institutions, universities or businesses. They also can use their own staffs to assist with their CIRM responsibilities. But some of the patient advocate members do not have jobs that allow them to do that.

One patient advocate director, Marcy Feit, CEO of ValleyCare Health Systems of Pleasanton, Ca., pointed out that patient advocates must attend more CIRM meetings -- of which there are many -- than other directors because that is the only way that CIRM, in many cases, can get its business done. She described the workload as “incredible.”

The meeting attendance problem arises because of the board's super-majority quorum requirements, which are embedded by Prop. 71 in state law. Conflicts of interests also regularly disqualify many board members from being counted as part of a quorum, voting and even participating in debates. One example occurred at the Wednesday meeting of the board, when only six board members could vote on $41 million in funding for training grants. All the rest in attendance were barred from the discussion.

Why do the conflicts of interest exist? Because Prop. 71 required the appointment to the board of the very persons whose institutions and enterprises benefit from CIRM largess. And Prop. 71 is all but impossible to change, also because of language the ballot measure wrote into the law.

Patient advocate director Jeff Sheehy, a communications manager at UC San Francisco, triggered Thursday's contentious discussion when he said he would not vote for the proposed budget unless another person was added to the support staff for the board. Currently, virtually all of the support goes through a single person, Melissa King, executive director of the board.

While Sheehy and other patient advocates had high praise for King, they said CIRM staff often was not responsive to their concerns. They said “significant difficulties” have arisen when they have tried to get information from staff.

Patient advocate director Jonathan Shestack, a Hollywood film producer, said that the problems have been festering “since the five-month mark” in CIRM's life. Shestack said,

“The truth is for many patient advocates they have other jobs that do not support the work here.”

He added that “I for one gave up at a certain point” trying to get the information and support that he needed. He said board members cannot go easily to staff to find explanations about complex bond financing or scientific issues.

Patient advocate director David Serrano Sewell, a deputy city attorney for San Francisco, resisted a suggestion from one board member that Thursday's discussion take place in private instead of at a public meeting. He said that efforts have been made in the past to resolve the problem both cordially and in private. But he said they have failed.

Some directors objected to Sheehy's attempt to add help for the board. They said it amounted to micromanagement and would be “demotivating” for top CIRM management. Sheehy flared at comments by Ed Penhoet, former co-founder of Chiron, that singling out a specific individual to be added to staff constituted micromanagement. Sheehy said the Penhoet's comments were “condescending,” something that Penhoet said later that he did not intend.

Board Chairman Robert Klein said the concerns of the patient were legitimate. He said,

“The organization is under stress.”

Sheehy said, however, that Klein has failed to address the concerns for much too long.

Director Michael Friedman, CEO of the City of Hope in Los Angeles, noted that CIRM has not reached its legal cap of 50 employees, suggesting it could be fully staffed to help solve some of the issues. Director Ted Love, president of Nuvelo of San Carlos, Ca., asked,

"Are we trying to do much too inexpensively?”

He said the staff should not be subjected to “extraordinary unbearable long-term situations.”

CIRM President Alan Trounson indicated that staffing was a bit of a juggling act. He said more persons would be needed in the science office as CIRM gives out more money and adds more complex research to its oversight responsiblities.

At one point, Klein, who says he wrote Prop. 71, said,

“I made the mistake perhaps of setting a 50 person cap.”

Sheehy was upset about the inadequate budget documents presented to the directors' Finance Subcommittee last week. And he said the budget material presented this week also was not up to snuff. He said basic year-to-year financial comparisons remained missing along with “global” figures that would show complete totals for spending in various categories, such as legal and communications. Sheehy said he had asked for budget figures by function, which were not provided. And he declared that the proposed budget amounted to a “dereliction of our fiscal duty.”

Klein bridled at the comment, which he called a “gross distortion.” He said,

“I understand your frustrations but we have a mission. Let's not destroy our mission.”

Ultimately the budget was adopted on a 19-4 vote with the requirement that a 5 percent contingency fund be included. Added also was a requirement that Klein and Trounson come up with a plan within two weeks to solve the board support problem. The board will convene in a teleconference meeting to consider the proposal.

Following Thursday's session, Penhoet said,

“The board deserves more support if they think they need it.”

But Sheehy said, also after the meeting, he had little faith that the issue would be properly resolved, given past performance.

Klein's Misguided Budget Puffery

SAN DIEGO – Robert Klein, chairman of the $3 billion California stem cell agency, is a man who should know his numbers.

He is a real estate investment banker and sometimes even seems to revel in the arcane world of state bond financing.

But he persisted at this week's CIRM board meeting here, along with CIRM president Alan Trounson, in trying to characterize CIRM's budget for the coming fiscal year as a 3 percent decrease.

The reality is that it is a 25 increase over what is being spent by CIRM this year.

The peg on which Klein hangs his dubious, PR spin is that the budget is 3 percent less than the unrealistic spending plan proposed 12 months ago. But Klein's posturing defies well-accepted accounting and budget standards for describing year-to-year budget changes.

It is difficult to understand why Klein is trying characterize CIRM's spending plan as something it isn't. One can dispute some of the expenditures, but the total amount the agency is spending on operations is not excessive. Indeed, it may even be too little, as suggested by some CIRM directors.

Klein's misguided puffery does not serve him or CIRM well. It only generates skepticism about other CIRM actions and creates suspicion that the agency may be engaged in activities that cannot stand the light of day.

Mouse Breeding Plan Receives $3.8 Million from CIRM

SAN DIEGO – The California stem cell agency this morning approved a $3.8 million grant to breed special mice in the Sacramento area to be used by stem cell researchers.

The vote on the grant was 19-1.

Jackson Laboratory, the grant applicant, said in its application,

“The lack of mouse models of disease in which the immune system has been suppressed significantly hinders the efforts of investigators in California and elsewhere to develop new HuSC-based disease therapies. An additional impediment is the lack of efficient access to the quantities of mice required for such studies, and to mice whose health, reproducibility, and research effectiveness has been assured. In the proposed project at (Jackson), we will develop multiple state-of-the-art, immune-deficient mouse models of human disease that can be used for testing HuSC therapies, and we will establish the production processes for making these models readily available to California researchers.”

Reviewers earlier recommended approval of the grant if funds were available. But they were sharply split in their scores they assigned to the grant.

Marie Csete, chief scientific officer for CIRM, made a case for approval of the grant, saying it would aid researchers. Board member Ed Penhoet, a co-founder of Chiron, said the grant was a “good investment.”

The mouse grant was the only one approved out of the “tier two” applications for early translational grants.

CIRM Pulls Three Grants from Researchers

SAN DIEGO -- The California stem cell agency tonight said it has terminated three research grants for lack of progress, but declined to release immediately the names of the researchers or the institutions involved.

James Harrison, outside counsel to the CIRM board, acknowledged that the names were public record but said the agency wanted time to work out a well-considered way of releasing the information.

Marie Csete, CIRM's chief scientific officer, disclosed the terminations during a report on the progress of CIRM grants. The information came in response to a question from board member Ricardo Azziz, chairman of the department of obstetrics at Cedars-Sinai Hospital n Los Angeles.

She said efforts to monitor the progress of grants were generally well-received by investigators. She said that they discovered several grants that would have been abandoned without the progress monitoring effort by her staff.

Board member Floyd Bloom, executive director of science communication at the Scripps Institute, said the monitoring effort is a “wonderful thing.” He said CIRM's “nuturing relations with PIs is absolutely unique in the grant world.”

CIRM Training Programs Receive a $41 Million Boost

SAN DIEGO -- The board of California stem cell agency tonight pumped $41 million into 15 California institutions to support training programs for stem cell researchers.

The grants were approved last January, but the board deferred funding because of CIRM's financial woes. Those problems have now been eased for the next 18 months. However, the funding decision will add $9 million to CIRM grant outflows for the coming fiscal year.

The 29-member board voted 6-0 to go ahead with funding. Only six of the members in attendance were able to vote or even participate in discussion because of conflicts of interest.

The CIRM staff made a strong case for funding the program beginning July 1. The CIRM board was told that the 221 trainees already in training programs have accounted for two-thirds of the published research papers linked to CIRM funding.

Art Torres, vice chair of the CIRM board and a former state legislator, said that letters would be sent to all 120 state lawmakers, pointing out the benefit of the training programs in their districts. The funding comes as state legislators are trying to make up a mammoth $24 billion state budget deficit.

The training program was the first grant round approved by CIRM in 2005. The names of the insitutions can be found here.

New CIRM Figures Show 25 Percent Budget Increase

SAN DIEGO – The California stem cell agency is proposing a nearly $13 million budget for the next fiscal year, a 25 percent increase over its estimated spending this year.

The largest component of the budget goes for salaries and benefits, which are projected at $7.4 million for 47 employees. That is $1.9 million more than this year's estimated figure of $5.5 million. Personnel costs next year amount to an average of roughly $150,000 in salaries and benefits for each CIRM employee.

The figures are drawn from budget documents posted yesterday on the CIRM Web site. They contain far more details than the spending plan offered last week. CIRM directors were not entirely pleased and asked for more information before taking up the budget today or tomorrow at their meeting here.

Still missing from the budget information are CIRM staff calculations for the percentage increases and decreases in spending for the next fiscal year compared to estimated spending for the current fiscal year. Any such comparisons in this article are the responsibility of the California Stem Cell Report.

Other than salaries and benefits, the next largest budget category is outside contracts. CIRM did not compile total figures, instead placing them in at least three different categories. Out calculations show that they appear to be close to $3.1 million. It is difficult to make a comparison to the previous year because of changes in the way CIRM calculates the figures.

Travel for the upcoming year, which begins in three weeks, is budgeted at $497,000, which is $209,000 or 73 percent more than this year's estimated $288,000.

The CIRM staff presented a 3-page justification for the travel, which includes oversea trips and lobbying expeditions to Washington, D.C. CIRM said travel by Chairman Robert Klein and others in his office (six employees) to the nation's Capitol is necessary for lobbying purposes. They include building support for federal tax exemptions for the California bonds that finance research grants, which could save $400 million, and lobbying for federal loan guarantees for CIRM's $500 million lending program for the biotech industry. The office of the chairman is allotted $148,000 for travel.

As for international forays by CIRM President Alan Trounson, his office (five employees) is provided $83,00 for travel. The budget material said he is central to CIRM's international agreements and must travel to Washington as well.

The science office (25 employees) accounts for $204,000 in travel, which CIRM said is needed to maintain leadership in stem cell science and to stay abreast of the field.

CIRM signaled it is dumping its troubled Grantium grants management program. It identified grants management as a “risk” and “critical” for CIRM It said that Grantium has not met all of CIRM's needs.

CIRM said the budget contains funds to create a new grant management program, but did not specify the amount. The budget does not appear to contain a straight-forward accounting of all the past costs associated with the Grantium program or the projected cost of the new system. It appears to be something in the neighborhood of $610,000. The amount may be on top of the more than $800,000 allotted in the past for the troubled Grantium program. That figure, however, probably is low.

Possibly linked to the grant management issues are future research grants, although CIRM did not specifically tie them to the problems.

CIRM said,

“Many of the more clinical (grant) programs will have complicated milestones and 'go-no-go' decision points, detailed risk and efficacy data and decisions regarding maturity and development with multiple partners. Such evaluation will require new capacity in the science office and the office of the general counsel.”

Links to all the budget documents can be found on the board's agenda this week.

More Info on CIRM's Finances and its Federal Patent Lobbying Position

The California stem cell agency today posted several major background information pieces for its board meeting, including details and justification for its proposed budget and an analysis dealing with its endorsement of industry-backed patent protection legislation.

The documents came as the agency is scheduled to begin a two-day meeting tomorrow in San Diego, which can heard via the Internet(instructions on the agenda).

We have not had a chance to read all the material carefully, but the budget documents go a long way in answering the questions we raised on Friday and presumably the earlier requests for more details from CIRM board members.

The budget material includes more year-to-year comparisons, a commentary explaining some of the assumptions in the budget, a justification for extensive travel and more. All of the items can be found through links on the agenda

In addition, Nancy Koch, one of CIRM's outside attorneys, wrote a three-page analysis of a Federal Trade Commission report last week that dealt with many of the issues involved in the federal patent legislation on biotech therapies.

Koch wrote:

“Lengthy market exclusivity periods (like those proposed by Rep. (Anna) Eshoo in HR 1548), according to the FTC, are not necessary and could actually dampen innovation.”

The Eshoo bill has been endorsed by the CIRM board, which is likely to vote again on the measure during its meetings during the next two days.

Koch performed a careful analysis of the FTC study, reaction to it and its impact on the CIRM position, including exploration of the FTC report's assumptions and weaknesses.

She wrote that the FTC “analysis sidesteps the financially daunting circumstances faced by smaller companies.”

Koch said,

“For CIRM, this last point is particularly significant. Even if the FTC's prediction were generally correct, stem cell research and the market for stem cell therapies would seem to fall outside the agency's analysis.”

Whether you agree or disagree with Koch's analysis or the budget justification and plans, all are important tools for CIRM directors tomorrow. The information also adds significantly to the understanding of the public and parties interested in CIRM's $3 billion operation.

Webcast of CIRM Board Meeting This Week

Here are instructions for listening to the Web audiocast of the Wednesday and Thursday meetings of the board of the California stem cell agency, according to Melissa King, executive director of the board.

On Wednesday, to access the live event or archive, use this URL:
http://65.197.1.15/att/confcast
Enter conference ID#101434  Then click go.

On Thursday, to access the live event or archive, use this URL:
http://65.197.1.15/att/confcast
Enter conference ID# 101436.  Then click go.

The $10 Billion Patent Litigation Bill

As the directors of the $3 billion California stem cell agency this week reconsider their endorsement of an industry-backed, patent protection bill, they may want to think about some of the issues raised in an article in Monday's Wall Street Journal headlined “Why Technologists Want Fewer Patents.”

The opinion piece was written by L. Gordon Crovitz, former publisher of the Journal, and discusses the current state of patent law and intellectual property.

He wrote,

“The Patent Office now gets some 500 million applications a year, leading to litigation costs of over $10 billion a year to define who has what rights. As Judge Richard Posner has written, patents for ideas create the risk of 'enormous monopoly power (imagine if the first person to think up the auction had been able to patent it).' Studies indicate that aside from the chemical and pharmaceutical industries, the cost of litigation now exceeds the profits companies generate from licensing patents.”

Crovitz continued,

“The Supreme Court may decide that more progress would be made with narrower definitions of what is patentable. A book on the U.S. approach to patents, 'Jefferson vs. the Patent Trolls' by Jeffrey Matsuura, makes the key point that 'intellectual property rights were not goals in and of themselves, but were instead a mechanism through which society attempted to facilitate creative collaboration.'"

Some of you may recall that zealous stem cell patent protection has blocked research at Childrens Hospital of Orange County. And some have pointed to excessively tight control of IP as a main reason why nearly all biotech companies have been unprofitable for decades.

The three scientists who founded the company, Stem Cells Inc. of Palo Alto, Ca., which holds the patents in the Childrens Hospital case, have never spoken publicly on the issue, and we do not expect to hear from them.

It is unclear whether the Crovitz piece is available to non-subscribers. If you would like a copy, please email djensen@californiastemcellreport.com.

More on Klein's 2010 Departure Plans

Plans by Robert Klein, chairman of the California stem cell agency, to step down from the post in 2010 drew coverage Monday from the San Francisco Weekly.

Peter Jamison quoted Don Gibbons, chief spokesman for CIRM, as saying Klein plans to rededicate himself to his real estate investment business.

Gibbons was quoted as saying,

"He can't afford to take a second term. It's a huge financial commitment for him to do this, because he cannot run his business at anywhere near full capacity. He's been saying this internally for a very long time."

Jamison wrote,

“Gibbons said Klein may continue to be involved with CIRM in some way after 2010, noting that he would have to be appointed if he were to remain on the agency's governing board.“

CIRM Goes to Washington: Patents, Tornados and Bench Warming

As California stem cell directors this week consider once again their federal lobbying efforts, the Wall Street Journal offers an insight into just what it takes to have an impact in the august halls of Congress.

Can you say $27.6 million?

That's what a coalition of financial services organizations spent during the first quarter to change an accounting rule – albeit an important one – and lobby on other issues. The coalition also pumped $286,000 into the campaign organizations of lawmakers on a key committee.

Compare that to the $240,000 CIRM is spending for a federal lobbyist for 10 months work.

The issue that is coming up this week is CIRM's support for industry-backed legislation dealing with creation of generic biotech therapies. The agency currently has endorsed a measure by Rep. Anna Eshoo, D-Palo Alto, but has taken no position on a competing measure by Rep. Henry Waxman, D-Los Angeles, a far more important and powerful lawmaker.

The generic issue is complex enough on its own. But it apparently is going to be wrapped into the Obama administration's health plan, which Waxman will be carrying in the House. The rationale is that generic biotech therapies will cut costs, thus helping to trim the mammoth price of the health care deal. If the generic therapies are delayed because of industry-sought patent exclusivity, it means higher health care costs, according to supporters of the Waxman approach.

John Carroll of FierceBiotech recently wrote:

“Waxman has been pushing a bill that provides a five-year window of market exclusivity for biologics, something the biotech industry views with the kind of alarm a farmer feels when he sees a tornado heading for the barn. But there are a lot of numbers in play on the Hill. A competing bill offers 14 years of exclusivity and the president's budget proposal for 2010 pencils in a seven-year period.“

A Wall Street Journal blog this spring said the time may be ripe for a compromise and noted that some Big Pharma companies are warming to the idea of selling the copy-cat drugs themselves. The blog drew 18 comments, some of which indicated a high level of industry insight.

CIRM directors are oozing into a significant – for CIRM – federal lobbying role. But it is tiny in the world of Washington. Some on the board are concerned about mission creep and wasting time, money and focus on an effort where CIRM will never be more than a bench-warmer, if that. Directors are dealing with lobbying in what California stem cell Chairman Robert Klein calls an “incremental” fashion. Certainly CIRM can legally lobby Congress and probably should in some cases. But directors have never had a full-blown discussion on when, where and why.

CIRM Pulls a Grant, Aggressive Monitoring Reported

In what appears to be a first, the California stem cell agency has pulled at least one grant from one of its researchers, apparently because of a lack of progress.

Don Gibbons, CIRM's chief communications officer, confirmed the action in response to a query from the California Stem Cell Report.

Gibbons refused to disclose the identity of the researcher or the institution, declaring that more details would be forthcoming in a report to the CIRM board of directors from President Alan Trounson at its meeting in San Diego on Wednesday and Thursday.

We asked CIRM about the withdrawal after we were told by another source that one grant had, in fact, been been pulled and some “push-back” was coming from institutions. At the last CIRM board meeting in April, a report on grant monitoring was on the agenda but was removed with no explanation.

Here are the questions we directed to Gibbons last week.

“Can you confirm or deny that a grant has been pulled?
“Are institutions pushing back in any form whatsoever?
“Are any of the board members involved in any way whatsoever in reactions to monitoring of grantees' progress?
“What was the reason for removal of the monitoring item from the agenda last month?
“Will it be rescheduled?
“Do you have any other comments on this general subject? “

Gibbons replied,

“Yes, we have pulled at least one grant, but the leadership of the science office uniformly reports they are not getting push back from the institutions. No board members were involved in the process. The last board agenda was jammed so plans were made to include the progress reports in the President’s Report for the upcoming meeting. You can hear the details then.”

(The last board meeting ended at 1:24 p.m. on April 29, which is early for most board meetings.)

Gibbons has not responded to an additonal question on June 10 seeking the identity of the researcher and the grant number, both of which are public record.

Marie Csete, chief scientific officer for CIRM, and her staff have been aggressive in checking progress on CIRM grants, we have been told. Some grantees have been surprised and have complained that the NIH does not follow the same practice.

CIRM is to be lauded for monitoring the grants carefully. While strong oversight of grants may be bothersome to some researchers, institutions and perhaps some CIRM directors, it is a healthy practice that should stand CIRM in good stead when it faces its skeptics.

Snippets: Creation of Stem Cell Argonauts, Klein and Biotech Outsourcing

Klein Farewell, Sort Of – Robert Klein's not-so-imminent departure as chairman of the California stem cell agency has received no major media attention. But the San Francisco Business Times picked up the story, citing both this Web site and Consumer Watchdog. You can read the Times piece here. Here is a link to The Pluripotent blog on which Michael Scott wrote, “Get ready my popcorn and nachos, waiting for the scene when Bob Klein dumps CIRM, CIRM gets all cried out, and begs her man back.”

Is State Stem Cell Funding Necessary? – Yes, is the answer from Susan Solomon, CEO of the New York Stem Cell Foundation. She gave the response in a speech Friday. While she did not talk about the effort in California, some have asked whether CIRM is needed, given President Obama's moves on stem cell research. She said the proposed federal hESC guidelines are likely to be more conservative than many had hoped. And she said federal funding for the most advanced human embryonic stem cell research will remain limited. The text of Solomon's speech was carried on the Huffington Post.

Sending California Biotech Jobs to China? – Or is it business-building international collaboration? Ask Tergegen of San Diego about the experience. Or ask the 46 employees the firm laid off this year. Peter Ulrich, founder and head of Targegen, told Helen Kaiao Chang of the San Diego News Network,

“The trick in biotech is to survive the period of time when you’re not making any money in product sales. Being able to utilize outsourcing to China enables more companies to survive the neo-natal process and grow up to be big companies. Collectively, they will employ a whole lot more people by surviving than not surviving.”

Ulrich was quoted in a piece leading up to Biocom's “CalAsia” conference, which began today in San Diego and runs through Tuesday.

The Stem Cell 'Gold Rush' – Legislation aimed at creating a host of latter-day argonauts for the biotech industry has passed the state Senate and is now before the Assembly. The measure – SB 471 – Sen. Gloria Romero, D-Los Angeles, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, cleared the Senate on a 24-14 vote. The CIRM-backed bill would embed stem cell and biotechnology workforce training in the state's public schools. Mid Valley News quoted Romero as saying,

“California's next Gold Rush will be found in the Petri dishes and laboratories of this great state, but only if we produce the next generation of scientists, technicians and trained professionals capable of translating stem cell research into therapies and cures.”

(The vote in the Mid Valley story was incorrectly reported as 21-12, probably because the roll was held open and more votes were added after the initial approval.)

Stem Cell Research as Economic Development

The New York Times earlier this week wrote about how some regions are courting the biotech industry. The story contained some caveats about the economic impact of biotech research, much less stem cell research.

In a counterpoint to arguments in California that CIRM is a major economic engine, Shaila Dewan wrote,

“...(B)iotech is a relatively tiny industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people, according to BioAbility, a consulting firm in the Research Triangle Park in North Carolina.

“There is no guarantee that if a blockbuster drug materialized, it would be manufactured and marketed in the same place it was developed and tested.

“Joseph Cortright, an economist who has studied biotechnology clusters, gave the example of a promising anti-leukemia compound developed at Oregon Health Sciences University in Portland, where Mr. Cortright is based. 'The economic impact in the Portland area is zero because the rights to manufacture and market this drug were owned already by Novartis,' Mr. Cortright said.”

$41 Million in Stem Cell Training Grants Look Good for CIRM Funding

The California stem cell agency today posted more information about what its board plans to do at its meeting next Tuesday, including what is close to a staff recommendation that $41 million be pumped into training programs at 15 institutions.

The training grants were approved earlier this year, but funding deferred because of CIRM's financial woes. But now that cash is available, CIRM staff urged the board to “seriously consider the resumption of funding” at the earliest possible date.

The memo supporting the move said that researchers need the trainees to continue support of research projects.

The memo said the previous training program, the first grants funded by CIRM, was well-regarded. The staff said,

“CIRM Scholars (trainees) conducted stem cell research in 219 distinct laboratories and produced 221 publications, many in high impact journals.

“Upon completing training, individual CIRM Scholars have moved on to faculty positions at top universities, to scientific positions in biotechnology/pharmaceutical companies, or to further training at laboratories of leading stem cell scientists. Many physician CIRM Scholars are now also practicing medicine with a strong knowledge base of stem cell science. Outstanding examples of CIRM Scholar achievements include: research leading to the founding of a biotechnology company and the research leading to a Phase 1 clinical trial.

“In addition to trainee success, the program has served as a focal point for stem cell research at each of the training institutions and produced an attractive stem cell research environment that has contributed to the recruitment of new faculty as well as top trainees. The research conducted by trainees has spanned the spectrum from basic to preclinical research and, importantly, has accelerated research through synergy with other CIRM funded projects.”

Also posted was a three-page justification for continuing the longstanding contract with Remcho, Johansen & Purcell of San Leandro, Ca., as outside counsel to CIRM at $450,000 a year. James Harrison, an attorney with that firm, has been Remcho's visible and unflappable representative on CIRM matters since 2005.

Remcho charges CIRM $350 an hour for work by Harrison, which the CIRM memo said “is significantly lower than the market rates for firms with similar expertise.” Work done by others at the firm is charged at lesser rates. If Remcho billed $450,000 at the $350 rate, it would amount to about six months of full-time work.

Also on tap next week is a do-over on motions for CIRM support of industry-backed legislation aimed at protecting biotech patents against development of generic biotech therapies. Now available on the CIRM Web site is a memo that summarizes the latest developments in Congress and the White House.

An updated version of the CIRM conflict of interest code is also available and has been placed on the consent calendar as a non-controversial item. Removed from the agenda are the consolidated IP regulations, which are to be considered at a later date. No reason was given for delaying the item.

Still missing are guidelines for a change in board voting procedures that could enhance the powers of the board chairman and information about the leadership and some of the membership of the directors subcommittee that will evaluate Chairman Bob Klein, the two vice chairs and CIRM President Alan Trounson.