Fresh Comment

"Anonymous" has posted a comment on the Trounson item below that has confused us. It asks for names of "invited stem cell companies." We wonder if that comment should have been posted to the "routine withholding" item?

Trounson on 'Impressive Research' Backed by CIRM

California stem cell agency President Alan Trounson is in Fast Company.

The magazine and online, that is.

Trounson talked about his new job and his old job, along with some general views on science.

Here are some excerpts from the question-and-answer feature by Elizabeth Svoboda in the March issue.

"What are some of the most impressive research that the institute is supporting?"

"For lung diseases like emphysema, we're finding that if you put stem cells into the bloodstream, the cells will be drawn to inflammation in the lung to repair damaged tissue. You can also do repairs on seriously injured hearts. Researchers are showing that colonies of cardiac muscle cells grown from stem cells will integrate quite normally into the hearts of rats and mice."

"The institute has unusual rules for grantees: They must make discoveries available publicly and pay royalties to the state. Why?"

"The citizens of California are funding this research, so it's important for them to be able to access developments at a reasonable rate. It's about enabling research, but it's also about enabling patients to access the benefits."

The article continued:

"What do you hope to contribute to the field for posterity?"

"In a big-picture sense, I want to be up on the mountain looking down on the Serengeti, watching all the animals move through. I want to be remembered for having guided some basic discoveries from the lab to the clinic. If I can help get that process going, I think that's sufficient."

"And how did your family feel about moving?"

"My wife, Karin, is Swedish, and she said, 'Alan, it has taken me 20 years to become an Australian, and you want me to become an American now? I don't think so.' But she came around. The boys think it's pretty cool--the 6-year-old thinks there's Halloween every night in America."

CIRM Ill-served by Withholding Routine Information

With some considerable pride, the California stem cell agency issued a press release earlier this month that it was hosting a San Francisco meeting beginning today of the world's leading agencies involved in financing stem cell research.

It wasn't exactly news. The event and CIRM's role were known to most folks who follow the agency. However, the meeting and how the agency handled requests for information about it demonstrate some of the continuing problems at CIRM with openness and transparency.

Hosting the event seems a legitimate and worthwhile endeavor. As California stem cell Chairman Robert Klein noted in the news release, hosting the International Stem Cell Forum is another demonstration of CIRM's leadership. It also will help facilitate cooperation with activities in California.

However, CIRM has refused to answer one simple and basic question – roughly how much is the hosting going to cost? Keep in mind that CIRM is a state agency. Its financial affairs are all legally public. Keep in mind also that CIRM went out of its way to call attention to its role in the event at the Hotel Monaco, a luxury boutique hotel with rates running from about $250 to $500 a night. The agency should have been prepared to answer routine questions about its news release, such as the cost of a particular activity.

We began making inquiries on Feb. 19. Simple questions: what does "hosting" the event entail, what is the location of the meeting and whether it is open to the public. A spokesperson for CIRM came back quickly the same day with a partial response. She said that hosting includes "paying for the meeting room at the hotel where the meeting is taking place as well as the audio visual set up and possibly some things like copies. We are also paying for 2 dinners (but not alcohol)." After some prompting, the location was disclosed a day later.

But despite additional inquiries, no estimated cost has been forthcoming. One CIRM justification for not supplying a ballpark figure is that it might not be exact. Another is that it takes too much staff time to dig up the estimate.

We assume that CIRM budgets with some care. That means that the estimated cost would be readily available in a matter of minutes from whomever is currently handling CIRM's bookkeeping. The more likely reason for withholding the information is that someone very high in the organization is concerned that the figure might appear too extravagant and generate unfavorable comment.

This is not the first time CIRM has stonewalled on an event cost. One particular case comes to mind – the first scientific meeting that the agency sponsored a couple of years ago.

In both cases, the agency is ill-served by refusing to release routine information about its activities. Ultimately, the cost will come to light. All CIRM achieves at this point is to foster suspicion and speculation about what other, much more important information is being withheld, such as the breaches last year by some of its directors of CIRM's conflict-of-interest policies. Those remained hidden until disclosed here and by the San Francisco Chronicle.

As for our question about whether the meeting is public, the answer is no. That raises a whole host of additional questions about whether public funds should be used for meetings that bar the very persons who finance them.

(Here is a link to the only news story we have seen on the event.)

Fresh Comment

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, has posted his economic disclosure under "comments" on the item below. You can see it by clicking on the word comments on the main item.

A Look Behind the Cyberspace Curtain

It's been a merry old romp.

Three years plus and more than 1,500 items posted. That's the count for the California Stem Cell Report, which began its cyberspace explorations of the stem cell world in January of 2005.

A little more than 12 months ago, we gave you a bit of an annual report on this enterprise, which is the creation solely of yours truly, David Jensen. Along with that came our economic disclosure. Today we will give you an update in both areas.

Nothing has changed on our economic interests, which can be found here. But briefly neither my wife nor I nor any members of our immediate family hold any interest in biotech or stem cell companies or other enterprises that could stand to gain or profit or benefit from the activities of California's stem cell agency.

This blog is financed personally on an extremely low budget. Some people ask why I do it. The answer is that the California Institute for Regenerative Medicine and its related activities are interesting, important and unique.

The Golden State's $3 billion enterprise is on the cutting edge of science, business, politics, religion, medicine – not to mention life, death and even sex(certainly one or another stem cell therapy is likely to tackle that last area). How often does one have a chance to dig into all those areas?

The overall readership of this blog is modest by Internet standards. No megamillion counts of page views here. We are currently running about 8,000-9,000 page views a month. Our readers, however, are deeply interested in the subject and seem to represent important sectors in the world of stem cells. They include folks from the UK, Canada, Australia, Korea, India, Germany, Sweden and Singapore. Readers from virtually all the major California research institutions dip into the California Stem Cell Report from time to time. But less than half of the total are from California. Other regions represented include New York, Massachusetts, New Jersey, Wisconsin, Illinois and Texas, Readers also come from enterprises such as the National Institutes of Health and the National Academy of Sciences along with patent attorneys, lawmakers and their aides and investment companies.

This past 12 months, we have branched out somewhat, publishing freelance articles with Wired News online and a couple with The Sacramento Bee.

We also broke the story on the attempt by one of the CIRM directors to lobby the agency on behalf of a grant to his institution. That story led to an ongoing investigation by the state Fair Political Practices Commission and a new audit of CIRM. The story also apparently played something of a role in the formulation of the latest legislation targeting CIRM.

We take no particular pleasure in CIRM's missteps. We support human embryonic stem cell research and CIRM's programs generally. Our main effort is simply to present information about CIRM, which has slipped well below the radar of the mainstream media. We do have a point of view, however. Our starting point is that CIRM is a public agency first. Everything else is a poor second. Without public trust and credibility, without conduct that matches the standard for Caesar's wife, CIRM's efforts could easily become a poster child for what can go wrong. Instead of being an exemplar, CIRM could become a nightmare of conflicts and concealment because it is uniquely free from normal state oversight and is riddled with built-in conflicts of interest that are not going to disappear. As we have reported, the conflicts are so deep that more than once the vast majority of CIRM directors have been disqualified at meetings from taking part in public discussions, not to mention being barred from voting. The result is that sometimes decisions can be made by as few as four out of the 29 members on the board.

We are interested in hearing from readers, both on individual items and on the general direction of the blog. If you have suggestions for changes, improvements or whatever, please send them along to me (djensen@californiastemreport.com) or you can post them via the comment function (created by Google), which does not allow myself or others to know your identity.

As for others involved regularly in CIRM affairs and regularly trying to influence the organization, we urge them to disclose their financial interests as well(via the comment function or other means). That includes newspaper reporters, but that is not anymore likely to happen than CIRM opening the scientific grant review sessions to the public.

CIRM Conflict Problems Behind Latest Stem Cell Bill

A state lawmaker says her new legislation aimed at the California stem cell agency was triggered in large part by breaches of the agency's own conflict-of-interest policy by the agency's directors.

Reporter Terri Somers of the San Diego Union-Tribune today reported that Sen. Sheila Kuehl, D-Santa Monica, said that the bill's requirement for a review of CIRM by the state's Little Hoover Commission was aimed at finding possible solutions to some of the problems that have generated a separate state investigation and audit.

The Little Hoover Commission is a nonpartisan state agency aimed at improving efficiency and performance of state government. In addition to studies, it can conduct public hearings and offer up legislative solutions.

Somers wrote:

"'Those (reviews) are directed at things that have happened,' Kuehl said yesterday. 'What I want to do is look ahead to see if there are necessary fixes.'"

Somers continued:

"Kuehl said her decision to look at the potential for conflicts of interest arose after learning that several grant applications to the institute had to be disqualified because members of the institute's board had written letters in support of the applicants."

The conflict cases involve John Reed, president of the Burnham Institute, and the deans of five medical who intervened on behalf of potential grants to their organizations, which is a violation of CIRM ethics policy.

Kuehl told Somers that a Los Angeles Times editorial urged reconfiguration of the CIRM board, but that following discussions with CIRM, she agreed that directors with expertise brought "the best understanding." Kuehl said,

"I'm really looking for solutions that will protect the public interest but not throw the baby out with bathwater in terms of expertise."

Late yesterday, CIRM released a statement from CIRM Chairman Robert Klein concerning the Kuehl bill, SB1565. It said,

"Last week we had highly productive discussions with Sen. Kuehl and similar discussions with Sen. (George) Runner and we believe we should be able to arrive at satisfactory language that advances the mission of Prop. 71."

CIRM directors have adamantly opposed legislation similar to SB1565 in the past. Klein's statement was carefully crafted to avoid saying anything directly about the latest bill and leave open the possibility of defusing it with some sort of action by CIRM itself.

Here is a link to the text of the bill, which is not yet available online through the legislature. The Foundation for Taxpayer and Consumer Rights put up the copy.

Lawmakers Target California Stem Cell Agency

One of California's more powerful legislators today introduced a bill aimed at the state's $3 billion stem cell agency and designed to ensure that "the state’s neediest residents will have access to therapies and drugs" developed as a result of taxpayer-financed research.

The measure would also require the state's Little Hoover Commission to study the structure of CIRM and report to the legislature by July 1 of next year with recommendations.

The legislation, SB1565 by Sen. Sheila Kuehl, D-Santa Monica, comes only a few days after CIRM attracted unwanted attention (see item below) with its proposal to boost the top pay ranges of its key executives by as much as $200,000 a year or 50 percent. The salary proposal received an unfriendly reception from some of CIRM's directors on Wednesday.

Kuehl(see photo), chair of the Senate Health Committee, said in a statement that the bill, co-authored by Republican George Runner of Antelope Valley, would maintain "the public’s trust by identifying ways to increase public accountability and reduce conflicts of interest."

CIRM watchdog John M. Simpson of the Foundation for Taxpayer and Consumer Rights said in a news release:

"The stem cell agency’s oversight board was designed with built-in conflicts of interest and it’s too big to be effective. They always have difficulties mustering a quorum. An outside analysis by unbiased observers can only be good. A hard-nosed look by the Little Hoover Commission is just what’s needed.”

Simpson also said,

"We need a provision that allows the State Attorney General to intervene if drugs or therapies funded by the stem cell agency are priced unreasonably. We’ve seen too many cases where companies benefit from publicly funded research and then set prices at obscene levels. They act like socialists when seeking research funding but are greedy capitalists when there are profits on the table."

No comment was immediately forthcoming from CIRM.

The text of the bill was not available online at the time of this writing, but Kuehl's office said the legislation would

"...require that grantees and licensees submit for CIRM's approval plans that will afford uninsured Californians access to drugs and cell therapies resulting from CIRM-funded research. The bill also ensures that publicly funded programs get the best prices for stem cell therapies and drugs by requiring grantees and licensees to sell them to publicly funded programs at a price that does not exceed one of the benchmark prices in Cal-Rx, the state’s prescription drug discount program."

The measure requires a super, super-majority vote – 70 percent of both houses – to pass. The requirement was created by Prop. 71 to make it extraordinarily difficult for lawmakers to make changes in the operation of the agency.

Passage would require a consensus from lawmakers that is rare in the Capitol. However, it is probably fair to say that the this week's pay proposal by CIRM will certainly contribute mightily to building that consensus.

(Here is a link to Ron Leuty's story on the bill in the San Francisco Business Journal.)

CIRM's 50 Percent Pay Range Hike Hits Roadblock

A key group of directors of the California stem cell agency today balked at boosting the maximum salary ranges of its top executives by 50 percent, citing the Golden State's budget deficit which has ballooned to $16 billion.

Reporter Jim Downing of The Sacramento Bee reported that members of CIRM's Governance Subcommittee said that increases of more than $200,000 (in the case of the CIRM president) were excessive. The subcommittee action came on the same day that news broke that the state budget deficit had increased another $1.5 billion.

CIRM President Alan Trounson, who earns $490,000, argued that the increases, which affect six other top positions at CIRM, were needed to attract top talent.

Downing quoted Trounson as saying,

"If I can't make appointments of people who can do the job, you've essentially wasted my salary, which is a disaster."

One of the members of the Governance Subcommittee is Claire Pomeroy, dean of the UC Davis School of Medicine(see photo). Downing wrote,

"Pomeroy, whose cash compensation at UC Davis totals $543,800, according to a University of California spokeswoman, noted that she is responsible for 8,000 employees at UC Davis, while the stem cell agency president heads a staff of 50 at most.

"'To me, there are still very fundamental questions about what positions they're citing as comparable,' (Pomeroy) said. 'This is sending the wrong message to the public about our priorities and about how we're going to spend what are limited pots of money.'"

The subcommittee did not act on some of the proposed salary ranges because they affected both Trounson and CIRM Chairman Robert Klein, who were present for the meeting. Klein, however, has declined a salary.

The subcommittee recommended increasing the top pay for some executives from $270,000 to $332,000, rather than the proposed $405,000. They did not act on ranges for agency attorneys, citing a lack of information, Downing reported.

As we have noted, the proposed increases in the pay ranges would have no impact on the state budget because CIRM's budget is constitutionally untouchable. However, the pay raises are important symbolically and politically.

The pay proposal now goes to the full board of directors for its March meeting.

Biotech Loan Taskforce Votes To Hire PriceWaterhouseCoopers

The California stem cell agency's plan to offer an ambitious loan program to the stem cell industry was discussed on Tuesday during a meeting in San Diego with teleconference links to elsewhere in the state.

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, attended the session. We asked him for a report on the event. Here is what he sent.

"CIRM's Biotech Loan Task Force voted unanimously on Tuesday to hire PriceWaterhouseCooopers as consultant for $50,000 to report on loan programs from other states and to offer a model of how the California program could work including rates of return that might be expected.

"PriceWaterhouseCoopers were the consultants that helped CIRM develop its strategic plan. Task force Chairman Duane Roth (see photo) said CIRM had checked with three consulting firms and had proposals ranging up to a cost of $350,000.

"But the primary purpose of the meeting was to hear views of executives of the companies that might apply for loans.

"Meeting in San Diego the loan committee heard general support for a loan program from a panel of seven industry executives. The panel included: William Adams, chief financial officer of International Stem Cell Corp..; William Caldwell, chairman and CEO of Advanced Cell Technology; David Gollaher, president of the California Healthcare Institute; Joydeep Goswami, vice president of stem cells and regenerative medicine for Invitrogen; David J. Earp, chief patent counsel and senior vice president for business development of Geron; Alan Lewis, president and CEO of Novocell and Ken Stratton, general counsel of Stem Cells Inc.

"Roth said that the motive for the program from CIRM's perspective is that it "is a way to recycle money and fund more research."

"Over the course of three hours the executives and the committee members discussed various ways the program could be implemented.

"Earp told the group that with a grant it's CIRM that assumes the risk but with a loan, the company assumes the risk.

"Adams said his company was very interested in a loan program and thought it could help products through the so-called "Valley Of Death," a reference to a promising scientific discovery that fails to make it to the clinic because of a lack of funding. He added that with current economic conditions "the Valley of Death has become more of a Grand Canyon of Death."

"A consensus emerged that a loan program should focus on translational research, not basic science.

"Roth suggested that a company would be able to apply for a loan tied to a specific product or for a company loan. If it was tied to a product and the product failed to be developed, the loan would be forgiven. Such a loan would carry a higher rate of interest than one tied to a company.

"Committee Member Ted Love urged that however the program comes together, "We should be starting out simple."

"CIRM President Alan Trounson told the meeting by telephone from San Francisco that the loan program should be built into various Requests For Applications (RFAs) that are called for in CIRM's strategic plan. There should not be a separate RFA for loans.

"Roth said he envisioned loan applicants applying under CIRM's usual RFA process and then submitting applications for peer review. Loans would be offered only after the application had been judged on scientific merit.

"ICOC Chairman Bob Klein asked if a loan from CIRM could serve as validation" of a company's efforts that would increase the possibilities for additional funding. The executive panel agreed that it would, perhaps with the most benefit to a public company.

"Committee members also wrestled with the fact that CIRM is limited by law to a maximum of 50 employees. That will make it difficult to administer a loan program in-house, they agreed.

"Klein suggested that CIRM follow the model of the housing industry and like "Fanny Mae" use "designated underwriters" to do the nitty gritty work of loan administration.

"Roth said he hoped to have the PriceWaterhouseCoopers report in March and hoped to offer a loan policy for ICOC consideration by June.

"After the meeting in a brief interview Klein suggested that the program might start simply with two RFAs -- perhaps Disease Team Research and Research Tools. He expected both would be offered in the fall.

Here is Simpson's commentary on the meeting:

"A loan program an intriguing idea, but the devil will be in the details and I'll continue to monitor them as they emerge. It's too early to know if FTCR will support the final program or not.

"From a policy making point of view, they are going about this the right way: gathering facts from stakeholders and discussing ideas in public meetings.

"Duane Roth should be commended for the way he is running the committee and the executives deserve thanks for participating on Tuesday."

Mystery Meeting Solved

The subject of the mystery meeting at CIRM has been solved. For you diligent readers, you may recall that the Standards Working Group scheduled a meeting for Feb. 28 but nothing was on the agenda. Here is the list of the significant items to be discussed that were posted today.

"Scientific presentations and group discussion of current issues in stem cell science.
"Clinical trials
"iPS experiments \
"Report on CIRM Guidelines for Oocyte Donation.
"Report and discussion of regulatory consideration for CIRM MES regulations."

It appears to be a worthwhile and informative session. We are looking to some background information on these subjects prior to the meeting.

Negative Reaction to 'Big Bucks' at California Stem Cell Agency

The headline on Biopolitical Times was "Big Bucks Become Bigger at CIRM." The subject was the proposed, whopping increase in salary pay ranges for top execs at the California stem cell agency.

Here is part of what Jesse Reynolds of the Center for Genetics and Society had to say today under the headline:

"Given the dire condition of the state's budget and the recent pay scandal at the University of California, this move will only attract more criticism for the California Institute for Regenerative Medicine. If the compensation sums skyrocket according to the CIRM's plan, calls for its termination, such as the recent editorial in Investor's Business Daily, would likely grow more common. "

Reynolds also had a good link to a 2005 story about the controversy about high salaries at CIRM, which you can find here.

We were not critical in 2005 on the salary issue. Talented people cost money. As we have remarked earlier, the increases in the CIRM pay ranges may be justified. But they have not been justified by CIRM. The agency's pay plan is extraordinarily ill-timed because of California's current budget crisis. Negative reaction could have been minimized with more thoughtfulness at CIRM -- thoughtfulness that could have spread increases over several years with a well-explained rationale. But our sense is that some of the folks at the top of the CIRM organization have a very limited grasp about public perceptions involving government.

CIRM Chairman Robert Klein, its board of directors and executives should understand that CIRM is a public agency first – with all the baggage that connotes – and a scientific endeavor second. Without public money and support, no research grants or fresh hESC science would exist.

CIRM Alleges Misrepresentation of Salary Proposal

The California stem cell agency says we have "misrepresented the issue on the salaries" in our post below, an allegation with which we do not agree.

Here is the statement this afternoon from Ellen Rose, interim communications officer for CIRM:

"You have misrepresented the issue on the salaries in your post. As I stated over the weekend, we are changing the ranges. This does not translate into a salary increase for anyone. We’ve done this to be in line with what we learned from the Mercer survey. Your post makes it seem like salaries are being automatically increased, which is not the case."

Here is our response to her:

"I repeatedly referred to salary ranges, including in the headline. But I will be glad to carry your comments verbatim. Meanwhile, do you want explain the rationale, such as why salary ranges should be increased. If they should be increased, why the 75th percentile? Why increase salary ranges in a year when the state is facing a budget crisis? And why increase the ranges unless there is the intent to pay someone at the level in the not too distant future? There is no point increasing salary ranges if there is no intent to pay at that level.

"Again, I will carry responses to those questions verbatim or to other comments in support of the pay range increase. Thanks."

The boosts in the salary ranges may be warranted, but CIRM has not made a case, particularly for such an ill-timed effort.

Fresh Comments

"Anonymous" has posted a comment on the pay item below and John Simpson. You can read comments by clicking on the word "comments" at the end of the item in question.

CIRM Proposes 50 Percent Pay Range Hikes; Watchdog Says They are Unjustified

The California stem cell agency is set to boost the maximum salary ranges of its top executives by 50 percent, a move that one watchdog group says flies in the face of California's budget crisis.

Under the proposal to be considered Wednesday by a subcommittee of the CIRM board of directors, the top salary range for the president would skyrocket more than $200,000 -- from $412,500 to $618,750. The salary range would also apply in the case of the chairman of the agency, Robert Klein, a multimillionaire real estate investment banker. However, Klein has declined to accept a salary.

Other proposed salary increases would see the top of the range climb from $270,000 to $405,000 for vice chairman, chief scientific officer and chief operating officer, a new position that is currently unfilled. The top of the salary range for general counsel and intellectual property attorney (another new, unfilled position) would jump from $225,000 to $337,500.

The Foundation for Taxpayer and Consumer Rights said the increases "are unjustified in the face of a state budget crisis."

In a statement prepared for release Tuesday, John M. Simpson, stem cell project director for the group, said CIRM was "tone-deaf" in proposing the pay hikes. He said,

"CIRM doesn’t operate with some financier’s private stash of cash. CIRM is a state agency funded by taxpayer dollars. It needs to act like one.”

Simpson also said that CIRM's general counsel already received a 41 percent pay increase in December after only 10 months on the job, boosting her salary from $160,000 to $225,000.

The CIRM document proposing the other executive salary range increases did not offer a rationale nor did an accompanying salary survey paid for by CIRM. We asked Ellen Rose, spokeswoman for CIRM, what the justification was for the increase, She said,

"We are re-aligning the maximum of the ranges to be slightly above the 75th percentile data Mercer provided to be consistent with our Compensation Philosophy."

No further rationale was provided by CIRM for the top pay increases, which amount to more than an average of 16 percent a year since 2005 when the first salary schedule was approved by CIRM directors. At that time, CIRM salaries generated considerable heat because of what critics called their extravagance.

CIRM is a tiny agency with only 26 employees, although it hands out grant money at a rate exceeding $20,000 an hour. It is limited by law to only 50 employees. Its operating budget this year is running about $8 million, about $5.5 million of which is salaries.

The proposed pay raises would have no impact on the state budget. CIRM operates outside of the normal realm of state budget matters. CIRM's budget cannot be cut by the governor or the legislature. CIRM spending (which is financed by state bonds) is untouchable because of constitutional changes approved in Prop. 71. That fact is not likely to be understood by the public. Beyond that, the increases are a symbol of governmental profligacy that will not sit well with many persons, regardless of their position on stem cell research. The pay hikes additionally will hand another cudgel to foes of human embryonic stem cell research.

The chair of the CIRM subcommitteee considering the pay increases on Wednesday is Sherry Lansing, a former Hollywood film studio executive and currently a member of the University of California regents. Several years ago, as a regent she went through a major flap concerning excessive compensation for top executives at many UC campuses.

That episode reflected poorly on UC, and CIRM is likely to suffer the same fate.

(The subcommittee meeting begins at 3 p.m. The public may participate in the sessions at locations in San Francisco, Los Angeles, Sacramento, Carlsbad and Irvine. You can find the specific addresses here.

CIRM's Latest on Navigating the Financial 'Valley of Death'

Coming up on Tuesday is a three-hour meeting involving the California stem cell agency's ambitious proposal for a biotech loan program that could pump as much as $750 million into the state's stem cell business.

The session is scheduled for San Diego with two teleconference locations in San Francisco. It is a must if you are associated with an enterprise interested in the loans or want to shape policy concerning them. And that includes nonprofit organizations, as well as businesses. The Biotech Loan Task Force seems to be heading in the direction of making the loans available to nonprofits as well as private enterprise. Additionally, funds would probably be available to out-of-state companies, so long as the loans were going to California operations.

The idea behind the effort is to leverage the cash available to CIRM and to help organizations bridge what is called the "valley of death" – an economic gap between research funding and traditional financing.

The plan – brainchild of California stem cell chairman Robert Klein – received a major airing last month. Generally the reception was cordial. Few want to rain on a $500 to $750 million parade, the range of amounts that Klein has discussed offering as loans.

At the invitation of CIRM, Gregory Bonfiglio(see photo), managing partner of Proteus Venture Partners of Palo Alto, Ca., laid the groundwork during the hearing. His firm, which has offices in Boston and Cambridge in the UK, is devoted to developing the business of regenerative medicine.

He told the loan task force last month that currently 300 companies exist that are "pure play regenerative." He said 800 clinical trials are underway in the US involving stem cells and regenerative medicine.

Gone are the bad old days – the "trough of disillusionment" – and, he said, "We're now on our way out."

Bonfiglio said,

"How do I know that? What is the current market dynamic? Well, the current market dynamic, triggered again in part to respond to Prop 71, is that you are seeing an incredible amount of activity at the university level. this technology is so compelling that it has captured the imagination of the best and brightest at our major universities. every major university in the United States now with a medical school has a dedicated regenerative medicine program. There are 65 of them in the US alone. There are another ten to twelve in the UK, and there is also very, very promising research going on in Singapore, in Australia, in China, in India."

He also cited additional changing market forces that have created a more favorable economic climate.

One of the caveats to the program was voiced by Richard Murphy, interim president of CIRM. Jeff Sheehy, a member of the CIRM Oversight Committee, echoed some of Murphy's concerns. Murphy said,

"I think the notion that all of this would be evaluated by CIRM staff is really overshooting. As you know, we're limited to 50 people in the organization. We would need to have real partnerships somewhere to be able to do this in a way that these guys would buy into as partners. I suspect that cannot be done in-house, at least with our present structure."

Klein said,

"We could have a delegated underwriting group that becomes the coordinating officer or the coordinating firm that, just as in the real estate field, the delegated underwriters evaluate the appraisals, the market studies, the toxicity reports, etc. In this field the delegated underwriter, a bank, for example, Silicon Valley Bank, could be a delegated underwriter who could agree to service this for us."

In addition to Bonfiglio, industry was represented at the January meeting by Burrill & Co., Advanced Cell Technology, Invitrogen, Silicon Valley Bank, Bay City Capital and Cooley Godward.

While we are not particularly fond of Powerpoint presentations without additional elaboration, Bonfiglio's is available on the CIRM site along with the transcript of his remarks. Combined, they provide a useful perspective on state of the regenerative and stem cell medicine business.

Day-long CIRM Meeting: No Topic Disclosed

The Standards Working Group for the California stem cell agency is holding a mystery meeting on Feb. 28 from 9 a.m. to 5 p.m. at the Kabuki Hotel in San Francisco.

We can't tell you anything about it. All we know is that the meeting has been scheduled. The agenda contains nothing more than the date and location. A few days ago, we asked CIRM about the nature of the meeting. So far, we have received no response.

Stem Cell Mischief and 'Research Sites'

For the first time in the brief life of the California stem cell agency, businesses based throughout the United States or elsewhere have had a chance to bid for some of the $3 billion in research funds being given out by the Golden State.

There is one catch. The firms must have established a "research site" in California by Feb. 5 of this year, which was the deadline for applications in the $25 million new cell lines program. If applicants did not have a site already in California, they had only about two months to set up one after the request for applications went out in late November.

CIRM reports that 12 businesses have applied, but provides little other information. Nor is the agency checking any time soon to see whether the business applicants, in fact, have "research sites" in California. That will come months from now, after CIRM directors approve the grants, which is scheduled for June. Following approval the CIRM staff will begin an administrative review, which in the past has taken additional months.

Perhaps we are overly suspicious, but given the tight timetable for creating a "research site," it seems that now is the time to check on the existence of these sites. Attempting to do so six months from now is problematic at best and is certainly not a good example of what might be called "due diligence." If there is a difference of opinion next summer between CIRM and an applicant about the existence of the site in February, the evidence trail could be cold and murky.

CIRM cannot tell us whether any firms headquartered outside of California have applied. Ellen Rose, a spokeswoman for CIRM, said the application does not ask for that information.

The application forms, in fact, do not even ask for a specific street address of the "research site," a term which is undefined in the CIRM documents we examined. The application asks only for the institutional mailing address of the organization for purposes of receiving the grant.

Rose said,

"Confirmation of applicant research sites in California is not something we do before accepting the application for review. This is a long technical process, which we will embark on only if the grants are recommended for funding during further administrative review."

She also said,

"The burden is always on the applicant to demonstrate eligibility. If a company can't demonstrate evidence of a California site on Feb. 5, then it is not eligible - this was the same for applicants that were new (either new to California or just new) non-profits, that have applied for grants going back to the first SEED and comprehensive grants."

Perhaps all the business applications come from well-established California firms. (The public cannot know because their names are deemed to be secret by CIRM decree.)

But it would seem to be in CIRM's own best interests to scan the applications within the next few days to sniff out any likely attempts at deception. If mischief is afoot, detecting it six months from now could be an ugly and unproductive business.

PR Laundering Update: Subcontracting Unusual, Says Industry Publication

Marc Longpre of PR Week wrote a piece on Thursday concerning the flap over the Rubenstein PR contract involving CIRM and charges of "laundering."

The article contained the following paragraph:

"Several PR pros told PRWeek that while being subcontracted through a law firm happens on occasion in the private sector, they had never heard of such an instance with a taxpayer-funded organization. Still, one source said that because of the small amount of money involved, the urgency of the matter, and the short-term nature of the arrangement, it did not seem to be a 'big deal.'"

California Governor Says Invitrogen and Biotech Leading The Way

California Gov. Arnold Schwarzenegger was out plumping for the biotech industry this week during a visit to Invitrogen, a stem cell firm located near San Diego.

The firm was Arnold's poster child Monday for growth in a time of increasing talk about recession and lack of jobs. Invitrogen has added 200 new employees to its staff of 4,300 at a time when economists worry about rising unemployment in the Golden State

In some ways, the Schwarzenegger appearance is the flip side of the piece on Monday in the Boston Globe that offered a more jaundiced view of stem cell economic activity in California.

The governor cited the $3 billion stem cell agency and its three-year-old grant program, the largest research effort for human embryonic stem cell research in the world.

"The rest of the world is somewhat jealous," he said.

Schwarzenegger added, "It's all about job creation."

His office mounted an impressive array of biotech industry statistics on the governor's web site, along with a video of a portion of his Invitrogen visit.

Missing, however, from the statistics is an important figure: the size of the California workforce, 18.4 million persons. Adding a relative handful of jobs here and here is going to do little to ease immediately the problems of a lack of economic growth. Even the total biotech workforce – 235,000 – is relatively small potatoes. That said, building economic growth is a brick-by-brick endeavor. No magic solutions exist. But hyping the stem or biotech industry can backfire, as CIRM well knows. California's stem cell agency is still feeling the blowback from the excessive rhetoric of the Prop. 71 campaign.

The governor is a powerful media draw. He noted that six cameras filmed his visit, although he attributed that to interest in Invitrogen and stem cell research. Reporter Terri Somers of the San Diego Union-Tribune was also there. You can read her report here.

Readers from overseas and out-of-state may well learn something from watching the Arnold video. It conveys some of the enthusiasm, energy and commitment to California's stem cell research effort.

Some CIRM Grant Applicants Disqualified

A number of organizations fell by the wayside in bids for CIRM millions in the new cell line and disease team planning grant programs.

CIRM reported 123 enterprises submitted letters-of-intent to apply for the grants. But only 109 applications were later accepted by the stem cell agency.

We asked CIRM whether it had disqualified any of the applications. Apparently so. Here is the response from Ellen Rose, interim communications officer for CIRM.

"There is typically a drop in numbers from letters of intent and applications. In some cases people don't follow up their LOI's and in others, applications were not submitted correctly or on time."