CIRM Releases Biotech Loan Policy

The California stem cell agency has posted its latest proposed policy for its incipient $500 million biotech loan program, which will be discussed at this week's meeting of its directors.

The policy statement is reasonably clear, but it does not deal with the risk involved. Nor does it explain exactly what CIRM might do with the warrants it takes in the companies it lends to. Will it hold them, trade them or eventually wind up owning stock in a number of biotech firms? If it owns stock, how will it be voted and under what conditions will it be sold? Who makes those decisions – CIRM directors, the CIRM president or chair?

Here is one excerpt from the policy document, laying out the purpose of the proposal.

"The goal of a loan program is to fund the translation of research into research tools, medical diagnostics and devices, and therapeutic products. These loans will be targeted at the funding gaps in product development that will serve to leverage participation by follow-on investors, such as venture capital and other capital markets, and result in more products that enter the market."

Below in a separate item is a piece on the loan proposal, written last week by yours truly for BioWorld Perspective, a free, weekly newsletter from BioWorld, which has 13,000 readers in the biotech industry.

Text of BioWorld Article on CIRM Loan Program

Here is the text of a piece on the CIRM biotech loan proposal that ran Aug. 7, 2008, in BioWorld Perspectives.

Red Flags Remain in Plan to Help Biotechs

By David Jensen
BioWorld Perspectives Contributing Writer

Editor's note: David Jensen is the publisher of the California Stem Cell Report and has written more than 1,700 items involving CIRM since 2005.

California wants to help biotech enterprises navigate through the industry's famed financial "valley of death" with a $500 million loan program.

It comes at a good time for the bio biz. Money is tight, but in the Golden State, one agency has $3 billion to spread around for research and clinical trials. The cash comes from the California Institute for Regenerative Medicine (CIRM), the state's unprecedented stem cell research funding organization.

It was created less than four years ago under Proposition 71, a California ballot initiative that surfaced in reaction to President George W. Bush's restrictions on human embryonic stem cell research. Using funds from California state bonds, CIRM has already handed out more than $554 million in grants. Today, the agency is the largest source in the world for funding for human embryonic stem cell research.

Biotech Loans and Controversy

But CIRM is not without controversy. Recently some disgruntled grant applicants have complained of unfairness in reviews. Some in the biotech industry object to CIRM's rules for sharing the wealth from any state-financed therapies. And there is at least one catch to CIRM's plans to loan $500 million to biotech firms. Recipients of the state's bounty are going to need a California connection — probably a fairly strong one — since state law says CIRM's cash must be spent generally in California. But it probably wouldn't be too hard for an enterprising business to accommodate those needs if it wants, let's say, a $25 million loan.

Policies for the biotech loan program are likely to get the go-ahead next week from CIRM's board of directors. The main reason for its expected approval is CIRM Chairman Robert Klein, a multimillionaire real estate investment banker who has served in his state stem cell role without pay since 2004. His real estate background has taught him the value of financial leverage, which is exactly what the loan program is about.

The loan effort is Klein's brainchild, conceived as a way to not only help biotech enterprises (both for-profit and nonprofit), but also to extend the life of the state's stem cell effort. It is limited by law to only 10 years of state bond funding and currently has no other source of income.

According to a PricewaterhouseCoopers report commissioned by the agency, Klein's plan could generate at least a $100 million profit, although state government delicately avoids the use of the word "profit." The earnings then could be channeled back into more grants and loans. With expectations that default rates could soar as high as 50 percent in some cases, that seems to be almost too good to be true. There are skeptics, but not many public ones.

Firms Found in the 'Valley of Death'

The reason for high defaults? The loan program would target firms that otherwise could not find financing because they are wallowing in the "valley of death," a loose term that describes the financially difficult period between grant and "angel" financing and funding from venture capitalists.

PricewaterhouseCoopers performed an analysis of the proposal based on assumptions provided by the agency. They included a $500 million portfolio, disbursed over a seven-year period, loans up to $5 million, interest rates ranging from prime plus 2 percent to 4 percent with possible warrant coverage from 10 percent to 100 percent. Pricewaterhouse concluded, "Total assets of the program could increase from $500 million to between $600 million and $1 billion over 10 years."

Klein, however, has indicated that changes are likely in those assumptions. During a May meeting of CIRM's Finance Subcommittee, he indicated larger loans should be given and other changes be made to improve the proposal.

"It may take a very significantly sized loan, even on a matching fund basis, for companies to get through the preclinical, Phase I, and Phase II and Phase IIb stage before private capital would be prepared to step in," he said.

Klein said he plans to bring in Ed Penhoet, vice chairman of CIRM, co-founder of Chiron Corp. and currently a venture capitalist, to beef up his call for hefty loans.

Reception of the loan program by industry has generally been favorable. But some have raised questions. Menlo Park, Calif.-based Geron Corp., for example, said the loan sizes initially assumed in the Pricewaterhouse analysis were too small.

Red Flags in an Innovative Plan

Other hurdles remain as well. The Consumer Watchdog group of Santa Monica, Calif., has expressed concern about potential conflicts of interest. The nonprofit advocacy organization cited the possible use of delegated underwriting. CIRM Director Duane Roth, as well, has raised a flag about potential conflicts involving underwriters. Klein had suggested the use of underwriters because of the small size of the CIRM staff (between 30 and 40 persons) and its lack of lending expertise.

At one point, Klein cited Fannie Mae as an example of how underwriting could be used with biotech loans. But given the recent financial news about the Federal National Mortgage Association, it seems unlikely he will mention that enterprise again.

CIRM's biotech loan plan seems innovative, filling an important need in the biotech industry. The plan, however, does involve a substantial risk of public funds that has not been fully explained in a straightforward manner. Given today's difficult economic times and unease about aggressive lending practices, a clear explanation is certainly in order. The public, California lawmakers and industry should understand how it is possible that CIRM can turn a profit with default rates as high as 50 percent and the risks involved.

CIRM is a young government department and should move with caution in order to maintain public trust. Major failures in a biotech loan program could damage CIRM's credibility and cast a pall over its other important activities, including grants, ethical research standards and intellectual property policies.

Notes:
Here are links to more information about the biotech proposal.
The California Stem Cell Report (search on the label "biotech loans"):
http://californiastemcellreport.blogspot.com
The California Institute for Regenerative Medicine:
www.cirm.ca.gov
PricewaterhouseCoopers report (in three parts):
Phase I (loan financial model): www.cirm.ca.gov/meetings/pdf/2008/050608_item_3a.pdf
Phase II – Gap Analysis, Capital Provider Feedback and Financial Model: www.cirm.ca.gov/meetings/pdf/2008/050608_item_3b.pdf
Phase III – Loan model scenarios: www.cirm.ca.gov/meetings/pdf/2008/050608_item_3c.pdf
Transcripts of the Biotech Loan Task Force: www.cirm.ca.gov/transcripts/default.asp
Agendas of the Biotech Loan Task Force: www.cirm.ca.gov/meetings/2008/default.asp
The agendas have links to multiple documents dealing with the plan.

CIRM-Funded Researcher Firebombed; CIRM Should Beef Up Reward

The scientist at UC Santa Cruz whose home was firebombed earlier this month is a CIRM-funded researcher, holding a $500,000 grant to study differentiation of stem cells into motor neurons.

David Feldheim(center of photo), a molecular biologist, won the grant in 2007, one of the first scientists whose research was supported by California's $3 billion agency.

Feldheim was the target Aug. 2 of animal rights activists, part of a recent upsurge in assaults on researchers. Authorities say the crime is being investigated as an attempted murder. The Los Angeles Times reported today that academics in the UC system are "angered and worried," but vow not to be intimidated.

Last week, UC Santa Cruz faculty members and others rallied to support Feldheim and protest violence against researchers. Feldheim spoke to the crowd, along with the UC Santa Cruz Chancellor and the mayor of Santa Cruz, according to the San Francisco Bay Area Independent Media Center, which published a number of photos and comment on the event. (The Feldheim photo is from that report.)

A $50,000 reward is being offered in connection with the firebombing with funds from the FBI, UC Santa Cruz, private citizens, the City of Santa Cruz, the federal government and the Humane Society, according to San Francisco Chronicle reporter John Cote.

J.M. Brown of the Santa Cruz Sentinel reported that the attack came at 5:45 a.m., burning the front door. Brown wrote:

"Feldheim, his wife and two young children fled from a second-floor fire escape. Feldheim's feet were bruised during the escape.

"Minutes later, outside a campus residence less than a mile away, a fire ripped through a station wagon belonging to a colleague. No one was injured in that incident. A third scientist received a threatening phone message at home about the same time."

Last week, Richard C. Paddock and Maria L. LaGanga of the Los Angeles Times quoted UCSC Chancellor George Blumenthal as calling the attack "domestic terrorism." Their story also carried statistics from the Foundation for Biomedical Research:

"In 2000 there were 10 such episodes against biomedical research facilities alone, and in 2006 that figure had grown to 77, according to the group's website. In addition, the type of attacks has changed in recent years.

"'Prior to that, the vast majority of actions taken were against institutions -- break into the lab, steal the animals, trash the facility,' said foundation President Frankie Trull. 'More recently, however . . . they've become much more personal, attacking the researchers at their homes. California seems to be the focus of this activity right now, but not the only focus.'"

The animal rights terrorism issue is not new to this writer. While at The Sacramento Bee, I was the primary editor on Deborah Blum's 1992 Pulitzer Prize-winning series, "The Monkey Wars," which explored the violence against research involving primates.

What was abundantly clear then and even more now is the need for the public – not just academics – to speak out against this terrorism. The community needs to understand that the firebombers explicitly place animal life above human life. The perpetrators should find no shelter from misguided souls who think this is minor mischief.

The California stem cell agency has not yet spoken out on Feldheim bombing, but it has given preliminary support to state legislation aimed at helping to deal with the problem. A strong statement from CIRM is called for, along with a substantial addition to the reward for apprehension of the perpetrators, something along the lines of about $50,000. CIRM Chairman Robert Klein should also direct his private lobbying group, Americans for Cures, to add another $25,000 or so.

Fresh Comment on CIRM's Blog Ban

We have received an email from an anonymous individual on the "blog ban reaction" item last week. The person began by commenting on a description of the matter as "fascinating." Here is the full comment.

"Astonishing seems more apt.
 
"Your blog is the definitive source of information for all-things CIRM.  It is widely read by researchers – here in California and around the world – by other government officials and staff, and by journalists.  What you write shapes the perceptions and coverage of others.  At a time when CIRM is receiving so little press attention, your voice is even more influential.  The CIRM board is ill-served by its staff’s banning the California Stem Cell Report from the daily clippings.  I doubt that most board members have (or make) the time to read your posts regularly.  Perhaps CIRM is counting on that to keep criticism (particularly of its chairman’s ongoing behavior problems) hidden from the board.
 
"Hopefully a few board members will ask that your blog be restored to CIRM’s press clipping reports.  They all should.
 
"Keep up the good work."

Major Information Remains Missing From CIRM Directors Agenda

With two business days remaining before next week's meeting of the directors of the California stem cell agency, still missing from its website is important information needed for intelligent public participation in major issues facing CIRM.

Missing background material includes a current draft of the proposed loan policy for a novel and risky $500 million biotech lending effort and the proposed procedures on how to deal with the sticky question of reconsideration of negative grant recommendations from CIRM reviewers. Also missing is some sort of discussion of what is meant by "recommendations on RFA applicant policies."

The directors are scheduled to give away $41 million in research grants, but no link is posted from the agenda to the public summaries of the reviews. However, those went up on Thursday and can be found here.

Hundreds of California researchers will be affected by the proposal for reconsideration of grant reviews. But for all practical purposes, none of them will have a say in the mysterious plan because there is not enough time for them to analyze the proposal – if it is ever posted – and to make travel plans to Stanford for the meeting that begins on Tuesday.

Dilatory posting of important background information is an ongoing problem at CIRM. The situation improved at one point in the past but has now slipped badly. It makes a mockery of CIRM promises for meaningful public participation in discussions of issues facing the $3 billion public agency.

The WSJ Looks at CIRM and Its 'Sugar Daddy'

The Californa stem cell agency has scored big PR-wise in the Friday edition of the Wall Street Journal.

The influential newspaper, which has more than 1 million paid subscribers on its website, is carrying a laudatory piece about CIRM, focusing on its president, Alan Trounson. The headline? "Stem Cells' New Sugar Daddy."

Science columnist Robert Lee Hotz described daily struggles with ethical and political challenges and an "air of urgency" at CIRM as well as a "second medical revolution" for Trounson. His first involved IVF.

Hotz said the California's "speculative venture" may be "the world's most ambitious experiment in public funding for science."

One might quibble with some of the details of the WSJ story, but it is a coup for CIRM. The WSJ has an influential audience with important links to business. The piece will help set the tone for future mainstream coverage of CIRM and expose it to many key industry and public opinion leaders who otherwise would never take notice.

The story is also linked to an online discussion of whether it is okay to pay women for their eggs.

Here is a link to the story, which may be on the limited public version of the WSJ web site. If not, send me an email requesting a copy, and I will forward it to you. Here is my email address: djensen@californiastemcellreport.com.

CIRM Blog Ban: Reaction From The Agency and Readers

The Monday item about CIRM banning this blog from the news clippings it sends to its directors and staff triggered a modest reaction this week, including a sharply negative one from the agency itself as well as warm endorsements of this website's endeavors.

Some of the reaction was posted directly as a comment on the item itself. Other comments were sent directly to this writer, including two from Don Gibbons, chief communications officer for the $3 billion state program. He is the person who claimed responsibility for excising the California Stem Cell Report from the agency's official clips.

On Monday, Gibbons volunteered the following,

"Using the term 'officially banned' is utter b----s---. We just chose to not use state money to distribute what is freely available on the Web. You should read the Chronicle’s Op/Ed piece this morning on the responsibilities of advocacy 'almost-journalists.'"

On Tuesday, as part of a response to a query on a different subject, Gibbons said,

"I want to reiterate that I think using 'officially banned' is incorrect, and scandalously misleading. It suggests folks here are instructed not to read your blog."

Obviously, CIRM can do whatever it wants regarding the clippings it sends around, but its decisions are officially government action. And the blog is indisputably banned from the clips.

As for Gibbons' assertion that CIRM does not distribute "what is freely available on the Web," nearly all of what CIRM circulates as clippings is freely available on the Web – not just this blog – at least based on the last version of the clips we saw.

The "banned" item also attracted minor attention from other web sites, including Capitol Alert, a news tip service aimed at state Capitol denizens.

Other reaction:

"You must be doing something right"(email from writer who cannot be named).

"If I had to guess, the 'ban' likely has increased your readership dramatically.  When will those bureaucrats ever learn?" (From another person who cannot be identified).

"Your website is vitally important to California taxpayers; I find it to be a balanced and compelling commentary and timely examination of CIRM's operations and the underlying business of the science CIRM was created to pursue." (From an anonymous comment directly on the item.)

Only one negative comment about the blog was received. That was posted directly to the item and agreed with the CIRM ban because the blog is not about "science." As we responded, the blog has never been about primarily about "science," but primarily about public policy. We rarely deal directly with the science of an issue, but rather about the interplay between science and government, not to mention business, academia, politics and public opinion.

Lying at the heart of CIRM is its public nature and public relationships. In many ways it is the quintessential public and political creature. It was created in that most political and public process – an election – through a mechanism (the ballot initiative) that was designed to give the great, unwashed masses the ability to wrest control away from their designated leaders. CIRM is an extraordinary and unique governmental experiment that has had a truly vast impact nationally and beyond. Some see it as a model for possible future endeavors seeking to solve some the intractable problems that plague our society.

California's stem cell research program is worthy of considerable attention, far more than the mainstream media can or will provide. And that is part of the function of this blog. We try to generate more information than can be found in the media or on the CIRM website. We also comment on CIRM and analyze it in a way not possible at most major news outlets, which are hamstrung by standards that are useful but also allow them to be easily manipulated by governmental entities from the White House on down.

Should the CIRM directors and staff be provided the California Stem Cell Report as part of their daily information diet? We think so. However, the spoon-feeding of boards of directors is not an uncommon practice in the world of business. It is also a poor practice that has backfired on more than one major enterprise.

One final note: The San Francisco Chronicle piece cited by Gibbons was written by Dan Gillmor, a former California newspaper columnist and author of the book "We The Media." An advocate of grass-roots journalism, Gillmor wrote in his book,

"We can’t afford, as a society, to limit our choices. We can’t even afford it financially, because Wall Street’s demands on Big Media are dumbing down the product itself."

We asked Gillmor if he had any comment on the CIRM ban. "Fascinating" was his one word response.

New Issues Added to CIRM Directors Meeting Next Week

The California stem cell agency has altered its agenda for next Tuesday's meeting at Stanford, adding an element to its proposed human egg policy rules and an item dealing with eligibility on a new "translational" grant round.

The agency also posted its latest version of how it would like to define California supplier, which is the key to giving preferences worth hundreds of million dollars to state businesses seeking to sell to CIRM grantees.

The definition can be found here and seems to include almost any conceivable potential vendor in the state, but we could be wrong. At the same time, the California legislature is considering its own definition of California supplier in AB2381 by Assemblyman Gene Mullin, D-San Mateo.

That measure is now on the floor of the state Senate.

(In another CIRM legislative matter, the Assembly floor analysis of SB1565, the bill designed to ensure affordable access to CIRM-funded therapies is now available.)

The item with eggs now says that directors will be asked to authorize "a procedure for petitioning the ICOC to designate stem cell lines derived before November 2006 as acceptably derived for use in CIRM-funded research, and to govern use of embryos created for reproductive purposes before August 13, 2008." Added was the language having to do with the Aug. 13 date.

Also added to the next week's agenda is an item which states only: "Consideration of eligibility criteria in concept plan for Translational 1 RFA."

Twenty-one items are scheduled to be considered at the CIRM directors meeting that begins in only three business days. Background information is now available on only six of those items.

CIRM Contracts with Fleishman PR Firm

The Fleishman-Hillard public relations firm has won a $115,000 contract from the California stem cell agency, according to odwyerpr.com.

The website said Fleishman bested five other firms: Burson-Marsteller, Weber Shandwick, Feinstein Kean, GCI Group and Wundermarx.

Odwyer reported that Ruby Barcklay, a senior vice president in Fleishman's San Francisco office, will be in charge of the account.

The contract includes "media monitoring, leadership media training, opinion leader research in the biotech and business communities, and high-level targeted media placement around the organization's leadership position in the field of stem-cell research funding," according to the report.

The odwyer site specializes in "inside PR news" and is partly free and partly paid.

Fresh Comment

"Anonymous" has posted a comment on the "CIRM Bans" item, stating that this blog is "a balanced and compelling commentary and timely examination of CIRM's operations," among other things. I have no idea who posted it, but, no, I did not pay the person. Re the Larry Ebert comment on the Remcho item, Ebert's comment is now available. I failed to moderate it in a timely fashion.

More Info on CIRM Meeting

The California stem cell agency Tuesday posted background information on one item on its agenda for next week's meeting of its board of directors at Stanford.

The material included: the names of two persons to be appointed as medical ethicists to the Standards Working Group. They are Radhika Rao, a law professor at Hastings College of Law and Dorothy E. Roberts, a law professor at Northwestern University.

Fresh Comments

"Anonymous" has filed a comment agreeing with CIRM's ban on this blog. We have filed a response. Larry Ebert has filed a comment on the "$2 Million Remcho" item.

CIRM Providing Some Early Background Info on Directors Meeting

The California stem cell agency today posted the agenda for its Aug. 12-13 meeting at Stanford, along with some background material.

The background material is a good start on helping the public understand what is to be discussed and acted on by the directors of the $3 billion public enterprise. We are looking forward to more in the next few days.

The background information on one item has clarified what is actually to be discussed when directors take up "consideration of annual report on CIRM contracts and interagency agreements." On Sunday, we speculated that the item could be a proposal to change from quarterly to annual the reporting requirements to directors on outside contracts. In fact, the item appears to be simply the 2007-08 annual report on outside contracting expenditures.

Other background material now available includes:

Draft language for a "grandfathering" provision on stem cell lines. Directors will be asked to authorize a procedure for petitioning them to designate stem cell lines derived before November 2006 as acceptably derived for use in CIRM-funded research.

The names and brief bios of proposed alternate members for the Grant Review Group: Sangeeta N. Bhatia of MIT, Paula Marie Bokesch of Hospira, Inc., Mark Furth of the Wake Forest Baptist Medical Center, Marcie Glicksman of Brigham and Women's Hospital, Kurt Gunter of Hospira, Inc., Paul Kulesa of the Stowers Institute for Medical Research, Hai-Quan Mao of John Hopkins, Todd McDevitt of Georgia Institute of Technoloogy/Emory University, Alan Russell of the University of Pittsburgh and Shuichi Takayama of the University of Michigan.

CIRM Bans California Stem Cell Report

California's $3 billion stem cell agency has had enough!

It has officially banned the California Stem Cell Report from information it circulates to its board of directors and staff. Some employees say staff morale has improved as a result, the agency declares.

Like many other state agencies, CIRM collects news clippings and other information pertinent to its operations and circulates them to a selected audience. For some time (a couple of years, as we understand it), items from this blog were included in the electronic clippings sent to directors. They were also included in clippings sent to grant recipients.

Last year, CIRM unceremoniously dumped the California Stem Cell Report from the clippings to the grant recipients. A while back, we heard scuttlebutt that CIRM's 29 directors no longer had the great pleasure of reading our items, at least courtesy of CIRM. No matter, a mere piffle, we thought. Last week, we heard the report again. So we asked Don Gibbons, CIRM's chief communications officer, whether this "shocking" rumor was correct. Yes, he replied. Gibbons said,

"Before I arrived, all citizen blogs, yours and (patient advocate) Don Reed’s, were dropped from the clips that went to the grantees because it was viewed as too much information they did not care about. They wanted the research news in the rest of the clips. But this required paying extra to create two sets of clips, sending the full clips with the blogs to the board and internal staff. I decided it was not worth the extra cost, and started sending the shorter version to everyone. The service has slipped up and let a couple of Reed’s columns get in, but I have asked them to make sure that does not happen. Eliminating both eliminates bias in the package, and frankly, several in-house staff have said morale has improved since your posts have been removed."

But then we wondered about unordained flackery from various enterprises that has been distributed by CIRM as part of its official "news." Yes, Gibbons said in response to our question; PR releases are picked up from the Ascribe PR network, which specializes in pumping nonprofit-oriented publicity into mainstream newsrooms at as much as $300 a pop. Ascribe's clients include Scripps, Burnham, the University of California, AARP and the National Association of Social Workers.

Musing about all this, we sent off a query to Consumer Watchdog's John M. Simpson, a skilled practitioner of flackery, as well as a former newspaper editor and longtime observer of California stem cell affairs. He replied,

"After reading the California Stem Cell Report daily for more-than-two-and-a-half years, I know how dangerous and subversive it is.

"I only let my wife read it under my direct supervision and would never contemplate allowing my adult children to see it."

Aghast we were. Do you really mean that, John, we promptly emailed him back.

His reponse:

"In this day of Google searches and alerts, I'm hard pressed to understand why anyone would pay anything to have any clips circulated. As for the California Stem Cell Report, I certainly don't agree with all the views expressed there, but I don't understand how anyone interested in CIRM and stem cell research would notoi check it daily. It has become the publication of record on all stem cell related issues in California. If I were CIRM's president I'd make it required daily reading for all employees and would encourage ICOC members to check it frequently."

(Editor's note: We have updated the masthead information at the top of this page to reflect our current status with the world's largest source of funding for human embryonic stem cell research.)

Loans, Eggs, Contracts, Suppliers and $41 Million Top CIRM Agenda Next Week

Directors of the California stem cell agency will meet next week to hand out $41 million to 14 lucky scientists and wrestle with a host of other matters, ranging from the $2.7 million in outside contracts to a proposed $500 million biotech loan program.

Here is a quick look at the topics on the Aug. 12 agenda, which will probably be posted soon on the CIRM website.

Researcher Bonanza -- This a bit of a "do-over" of last year's $85 million faculty award program. That effort was tarnished when five CIRM directors violated the agency's conflict-of-interest policies by writing letters on behalf of applicants from their institutions. CIRM said the letters resulted from an "innocent misunderstanding," but disqualified the 10 applicants involved. No CIRM action was taken against the five directors. The full board decided to provide another grant opportunity, which was also open to applicants other than those disqualified. The latest effort, modified from the first offering, is scheduled for $41 million for 14 winners, with awards up to $2 million a year. CIRM received 55 letters of intent to apply for the grants but has not released the actual number of applications as far as we can determine.

Outside Contracting – Perhaps the most important item in the $13 million operational budget of the stem cell agency is the $2.7 million it spends for outside contracting. That figure is up 50 percent from last year. It is the second largest item in the budget, behind only salaries and benefits. CIRM will have spent more than $2 million for outside legal help by the end of this year and has spent hundreds of thousands for executive searches. In 2005, directors imposed restrictions on outside contracts and required quarterly reporting after they were surprised by published reports about the size and impact of those dealings. On Aug. 12, it appears that directors will be asked to reduce the reporting from quarterly to annual. That would be a mistake. CIRM's board should keep a close eye on the process because of importance of contracting to CIRM and the ticklish issues of overseeing those contractors. Earlier this year, directors had to retroactively approve additional funding for its main outside counsel, Remcho, Johansen, & Purcell of San Leandro, Ca., after work had already been performed. CIRM Chairman Robert Klein also told CIRM directors that Remcho is unique in its abilities, that basically no other firm in the state can perform the work. Thus, Klein reported, the attorney general's office has said the contract does not need to go out for bid. See the Remcho item below for more on Klein's explanation of the relationship between him, Remcho and CIRM and the opinion of the state attorney general. Here is the latest list of outside contracts. Here is the budget for 2007-08.

The $500 Million or So Biotech Loan Program -- The formal agenda topic is "CIRM loan policy." CIRM Chairman Klein earlier this year said he hoped to have the biotech loan program approved this month. But this cryptic agenda item may mean that the board will not be presented this month with the whole package for this ground-breaking and novel effort. See the item below for links to various CIRM documents on the loan proposal. Search this blog on the term "biotech loans" for even more.

Definition of California Supplier – Perhaps hundreds of millions of dollars are at stake in this item. It involves the Prop. 71 requirement that California suppliers be given preference on purchases by CIRM grantees. Legislation is being considered in Sacramento along with separate regulatory language being worked out at CIRM. Here is a link to the latest version of the legislation involved and the transcript of the June CIRM directors meeting at which the topic was discussed briefly. This is an area that has changed swiftly and may well again even before next week's meeting.

Grant Appeals – CIRM is wrestling with the issue of how to handle requests for reconsideration of negative recommendations from the Grant Review Committee. Basically CIRM directors follow the recommendations from reviewers and have been uncomfortable with the few public attempts to override the Grants Committee. Two items could be related to this subject: One deals with RFA applicant policies and the other with creation of a policy for dealing with "extraordinary petitions" to directors for grants. Search this blog on the term "grant appeals" for some background stories, including a proposal by CIRM director Jeff Sheehy.

Egg Matters – Directors will be asked to authorize a procedure for using stem cell lines derived before November 2006 in CIRM-financed research. A subtext of this involves the looming question of egg shortages and cash, although it is not formally on the agenda. CIRM President Alan Trounson has said researchers are "floundering" because they do not have enough eggs. If this subject is important to you, you should be at the meeting.

CIRM is likely to post the agenda for the Aug. 12 meeting at Stanford on Monday, which is six business days ahead of the session. We hope to see additional background material posted early as well. That information would help shed light on exactly what the board will be asked to do next week, beyond the brief listings in the initial version of the agenda.

The $2 Million Remcho-CIRM Connection

The California stem cell agency has a no-bid, $2 million, special relationship with the law firm of Remcho, Johansen, & Purcell of San Leandro, Ca.

The firm has had a contract with CIRM since the agency's earliest days. On May 28, the Governance Subcommittee of CIRM directors was asked to act in a retroactive fashion to increase Remcho's contract for 2007-08 from $250,000 to $415,000 to pay for bills for April, May and June. That amounted to a $165,000 or 66 percent increase in the contract.

Based on the transcript of the meeting, it is not entirely clear who authorized the Remcho work without having the subcommittee first actually approve an increase in the contract. CIRM policies require approval by the governance panel if contracts exceed $250,000.

CIRM Chairman Robert Klein, however, offered the explanation for why the work was needed, which included reviewing requests for applications for grants and work on state bond offerings linked to CIRM.

CIRM contracts with Remcho totalled $1.1 million from January 2005 to July 2007 and are slated for $450,000 this year.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., asked Klein at the meeting whether the Remcho contract would be put out to bid in the future.

Here is the exchange, based on the transcript of the session.

Simpson:

"...(T)his is a substantial legal contract, and it's down as probably going on into the future. Is there an expectation that this would be put out formally for bid?"

Klein:

"This is a contract that is obviously where the expertise is built upon a number of years of research and development on this initiative specifically. And at the time we originally entered into this contract with Remcho back in 2004, I personally went to the (California) attorney general's office and asked, given the specialized knowledge of the Remcho firm had in spending two years on the research and drafting of this with me and four other attorneys that I had in specialized areas, whether we needed to put this to bid.

"The attorney general's position at that time was we did not because of the specialized nature and depth of knowledge of the firm. It would be a huge bill to get any other firm to get up to the level of knowledge about this initiative and the tremendous amount of research that went into all of its development as well as all the public policies that have subsequently been developed."

We have asked CIRM for a copy of the statement from the attorney general's office that supports the ongoing, no-bid arrangement.

Links to CIRM Biotech Loan Info

Here are some links to information related to the CIRM biotech loan proposal.

Biotech terms and policy May 6, 2008, version

PriceWaterhouseCoopers report-(three parts)
Benchmarking analysis
Loan financial model
Loan model scenarios

Transcripts of the Biotech Loan Task Force

Transcript of Finance Subcommittee June 19, 2008, which dealt with size of loans and possible conflicts of interest

Agendas of the Biotech Loan Task Force
The agendas have links to additional documents dealing with the plan.

Patient Advocate Reed's Relentless Effort Against SB1565

Patient advocate Don Reed sent along the following concerning legislation aimed at ensuring affordable access to taxpayer-financed stem cell therapies in California.

He focuses on another element of the bill, which changes voting requirements on research that is not directly related to human embryonic stem cell inquiries.

Reed, vice president of Americans for Cures, has been campaigning vigorously against the bill, SB1565 by Sens. Sheila Kuehl, D-Santa Monica, and George Runner, R-Antelope Valley. Many of Reed's efforts surface on the Internet at his blog, stemcellbattles.com. Among other things, Reed is drumming up a letter-writing campaign (better than emails, he says) against the bill.

We checked into his blog recently and saw his account of the hearing last month on SB1565 in the Assembly Appropriations Committee. He noted that CIRM Chairman Robert Klein testified against the measure. It was Klein's first public appearance as chairman of CIRM before a legislative committee. Klein refused to appear before a committee in 2005 and instead launched a national effort among patient advocate groups against those proceedings, triggering a certain amount of unhappiness among some state lawmakers.

The Americans for Cures lobbying group was created by Klein and operates out of the same Palo Alto, Ca., address as his real estate investment banking firm. SB1565 is now on the Assembly floor. If it passes as expected, it will go to the Senate for concurrence in Assembly amendments and then to the governor.

Here is Reed's letter:

"SB 1565 UNCONSTITUTIONAL? Open Letter to the California Assembly and Senate

"Dear Senators and Assembly members:
 
"As the father of a paralyzed young man, (Roman Reed, who inspired the Roman Reed Spinal Cord Injury Research Act, source of America's first state-funded embryonic stem cell research) I strongly oppose Senate Bill 1565 (Kuehl,Runner).
 
"Please be aware that the bill has changed since you first saw it. The bill now contains a poison pill amendment, offered by Senator George Runner, a known opponent of the California stem cell research program. The Runner amendment not only defies the will of the voters, but may violate the California Constitution.
 
"First, here is our stem cell program’s current law, which was enacted by the electorate, and written into the California State Constitution:
 
"'(C) … a high priority shall be placed on funding pluripotent stem cell and progenitor cell research that cannot, or is unlikely to, receive timely or sufficient federal funding…Other research categories…shall not be funded by the institute.'
--Article XXXV of the California Constitution: Section 5, Chapter 3. California Stem Cell Research and Cures Bond Act, Article 1. 125290.60.
 
"As you know, our stem cell program may only be amended  to '…enhance the ability of the institute to further the purposes of…the measure…'—Section 8, Amendments.  
 
"And Senator Runner’s amendment, recently added to SB 1565?
 
"'(D) “Notwithstanding paragraph (C), any other scientific and medical research and technologies and/or any stem cell research proposal not actually funded by the institute under subparagraph (C) may be funded by the institute...'
 
"This turns our program upside down! Proposition 71 was enacted by the voters to give priority to forms of stem cell research not likely to be funded by the federal government.  The Runner amendment removes that priority, and would instead allow precious research dollars to be spent on 'any other scientific and medical technologies'.  That could be almost anything; a bedpan is a piece of medical technology.
 
"How can such a complete reversal be said to “further the purposes” of our stem cell program? Such seeming violations of the Constitution are almost certain to invite legal actions; have we not had enough lawsuits, enough delays?
 
"The original intention of SB 1565, to guarantee access of stem cell therapies to the uninsured, has already been achieved, and without the need for this bill. Bill author Senator Sheila Kuehl, a highly respected legislator, has publicly stated that she and CIRM (California Institute for Regenerative Medicine) are 'on the same page' regarding how low-income residents could receive benefits from CIRM-developed products.
 
"But the Runner amendment could gut the California stem cell program.
 
"Those who know, oppose. SB 1565 is opposed by the Coalition for the Advancement of Medical Research, which is a board of more than 80 medical, educational, and disease advocacy groups: as well as every other stem cell research support group which has taken a position on the issue.
 
"On behalf of every California family with a loved one suffering from chronic disease or disability, I urge your 'NO' vote on Senate Bill 1565, when it comes before you for concurrence.
 
"Thank you.
 
"Don C. Reed
Co-chair, Californians for Cures
Sponsor, Roman Reed Spinal Cord Injury Research Act
Vice President, Public Policy, Americans for Cures"

Giving Credit at CIRM

CIRM Communications Chief Don Gibbons pointed out today that Amy Adams did all the hard work to bring together the useful grant information mentioned in the "CIRM Website Improves" item. A good job indeed.

Adams is communications manager at CIRM and works for Gibbons. We should also mention Alan Trounson, CIRM's president, who last January identified web site improvement as one of his priorities.

While we are on this subject, today we were foraging a bit and checked into the CIRM regulations page. We can't say for sure whether it has changed much, but it is a useful compilation of all CIRM's regulations and their justifications, including links. This is the page where the public can also see the timelines on proposed regulations and learn how to make comments during the official process.

Fresh Comment

Larry Ebert has filed a comment on the "Eggs and Money" item.