SB1565: CIRM Hopes Now Rest with Arnold

The California stem cell agency will be looking to Gov. Arnold Schwarzenegger to gallop to its rescue and veto legislation aimed at ensuring affordable access to state-financed stem cell therapies.

The bill cleared the Assembly on Monday, 64-7, and now is only one step away from hitting the governor's desk. It will only take Senate concurrence in Assembly amendments to send the measure, SB1565 by Sens. Sheila Kuehl, D-Santa Monica, and George Runner, R-Antelope Valley, to the governor.

So far the governor has not taken a position on the legislation, although he has been a friend indeed to the stem cell research program. A couple of years ago when CIRM was in financial straits, he loaned it $150 million, which has since been repaid with the state bond funds that finance CIRM's efforts. On more than one occasion, he has cited CIRM as evidence of doing good, both economically and scientifically.

CIRM and industry groups object to Kuehl's bill because it would lock into state law requirements that the agency contends would hamstring it in connection with negotiations with biotech companies. CIRM also objects to a provision that would lower a barrier to the funding of non-embryonic stem cell research.

Reporter Ron Leuty of the San Francisco Business Times wrote about the provision last month, noting that it was inserted at the request of the conservative Runner, who opposes to human embryonic stem cell research.

Leuty quoted Jeff Sheehy, a member of the CIRM board of directors, as saying,

"We may be handing a political victory to people opposed to human embryonic stem cell research that hasn’t been earned and that isn’t supported by the science."

The issue, however, is of little notice in the Capitol, where lawmakers and the governor are embroiled in a nearly two-month stalemate that has become the California budget crisis. The governor has ordered the layoff of 10,000 state employees and seeks to cut the pay of 200,000 state employees to the federal minimum hourly wage of $6.55 until a budget is passed. The spending measure is being blocked by Republicans, who can do so because it requires a two-thirds vote.

One could speculate that the CIRM legislation could get caught in that battle. Schwarzenegger needs some Republican votes for a budget. Perhaps he could generate a couple by signing the legislation, arguing that he is acting to support stem cell research that does not destroy human life.

The possibility may be remote but stranger things have been done under the dome. And lawmakers and the governor are desperate to find a solution to the budget crisis.

Fresh Comment

"Anonymous" has posted a comment on the "CIRM Bans California Stem Cell Report" item.

Consumer Watchdog: Some CIRM Directors Missing Work and Should Resign

Five directors of the $3 billion California stem cell agency have missed 60 percent or more of its board meetings this year, the Consumer Watchdog group reported today, declaring that there is "no excuse for flagrant absenteeism."

John M. Simpson, stem cell project director for the Santa Monica, Ca., group, said directors who cannot attend meetings should resign.

Simpson disclosed the attendance performance in a news release after doing an analysis of meeting records since 2006 of the board of directors, which is known as the ICOC.

Here is key paragraph on this year's attendance, which includes names, affiliation and designated slot occupied on the board.

"The worst attendance records for the five meetings this year, according to ICOC minutes, are: Marsha Chandler, executive vice president and chief operating officer, Salk Institute, an executive from a California Research Institute (20 percent); Jonathan Shestack, founder & vice president, Cure Autism Now, patient advocate mental health (20 percent); Tina S. Nova, president and CEO of Genoptix, executive officer of a commercial life science entity (40 percent) and Marcy Feit, president and CEO Valley Care Health Systems, patient advocate Type II Diabetes, (40 percent)."

Also absent from 100 percent of meetings this year is John Reed of the Burnham Institute, who has recused himself during a state investigation into conflict of interest violations involving Reed's attempt to influence CIRM staff on a grant application.

CIRM has been plagued since its inception by attendance and quorum problems, making it difficult to complete its official business. Part of the problem exists because of Prop. 71 language that requires a two-thirds quorum instead a simple majority of the 29-member board. Simpson said his analysis understates the attendance problem because a member is marked present if he or she attends only part of a session. On occasion, some directors seem to be fleeing for the exits in the waning hours of two-day meetings as they try catch planes, we have observed. Simpson wrote:

"At this month’s ICOC meeting Chairman Bob Klein was urging members to act quickly because the board would lose a quorum in 25 minutes. That’s no way to make substantive decisions affecting a $6 billion (including interest) program."

Simpson said,

"Patients hoping for stem cell cures rightly expect 100 percent commitment by board members.  If they can’t do that, the fair thing for everyone is to step aside."

Here is Simpson's complete attendance tally by member or alternate beginning in 2006:

"Ricardo Azziz — 14 of 14 — 100 percent
"David Baltimore — 10 of 10 — 100 percent
"Robert Birgeneau — 16 of 18 — 89 percent
"Keith L. Black — 2 of 2 — 100 percent
"Floyd Bloom — 6  of 6 — 100 percent
"David Brenner — 11 of 11 — 100 percent
"Susan Bryant — 17 of 18 — 94 percent
"Marsha Chandler — 3 of 7 — 43 percent
"Marcy Feit — 12 of 18 — 67 percent
"Michael Friedman — 15 of 18 — 83 percent
"Leeza Gibbons — 5 of 6 — 83 percent
"Michael Goldberg — 13 of 18 — 72 percent
"Brian E. Henderson — 14 of 15 — 93 percent
"Edward Holmes — 4 of 6 — 67 percent
"David Kessler — 10 of 13 — 77 percent
"Robert Klein — 18 of 18 — 100 percent
"Sherry Lansing — 16 of 18 — 89 percent
"Gerald Levey — 11 of 18 — 61 percent
"Ted Love — 15 of 18 — 83 percent
"Richard Murphy — 5 of 10 — 50 percent
"Tina Nova — 10 of 18 — 56 percent
"Ed Penhoet — 16 of 18 — 89 percent

"Philip Pizzo — 17 of 18 --- 94 percent
"Claire Pomeroy — 17 of 18 — 94 percent
"Francisco Prieto — 15 of 18 — 83 percent
"John Reed — 9 of 18 — 50 percent (Recused himself during ethics probe)
"Duane Roth — 16 of 16 — 100 percent
"Joan Samuelson — 12 of 18 — 67 percent
"David Serrano Sewell — 15 of 18 — 83 percent
"Jeff Sheehy — 15 of 18 — 83 percent
"Jonathan Shestack — 5 of 18 — 28 percent
"Oswald Steward — 16 of 18 — 89 percent
"Leon Thal — 6 of 6 — 100 percent
"Janet Wright — 15 of 15 — 100 percent."

CIRM's Secret 18 Disclosed

The Consumer Watchdog group today pulled away a bit of the veil of pseudo-secrecy that surrounds much of the grant process at California's $3 billion stem cell agency.

CIRM – most of the time – refuses to disclose the names of enterprises or individuals seeking its taxpayer-financed largess, unless they have actually won some CIRM cash. However, the agency chooses to identify applicants when it is convenient for CIRM purposes, as was the case in the mammoth lab grant program earlier this year.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., has long contended that good government practices demand the release of the names of those who seek funding from the state of California.

Today on his blog, he disclosed the names of 18 companies that were looking for grants from CIRM. Only one, Novocell, eventually received a grant, despite oft-expressed desires by some CIRM directors that California companies should receive the benefit of state financing.

Simpson noted that some rejected business applicants have complained about CIRM's review process, contending that it "is skewed towards academic science." Some CIRM directors have also questioned the approach of its scientific reviewers, saying that they may overlook worthwhile efforts that are heavily focused on bringing cures into the hospital. Simpson suggested that the companies he identified might want to get together and talk.

Simpson said the names were drawn from a document "used for internal CIRM vetting processes" involving letters of intent, which are required in order to apply for a grant. Simpson wrote:

"Here's the list of firms which filed an LOI (letters of intent) to apply for the Disease Team Planning Grant:  Advanced Cell Technology, Alameda; BioCardia Inc., South San Francisco; DNAmicroarray Inc., San Diego; Genomics Institue of Novartis Research Foundation, San Diego; International Stem Cell Corp., Oceanside, Novocell, San Diego; Panorama Research Inc., Mountain View; RegeneMed Inc., San Diego; StemCyte Inc., Covina; and Stemedica Cell Technologies, San Diego.

"Here are the companies that filed an LOI to apply for New Cell Lines Grant:  Advanced Cell Technology, Alameda; BioTime, Inc., Emeryville; California Institute of Molecular Medicine, Ventura; Cascade Life Sciences Inc, San Diego; DNAmicroarray Inc., San Diego; Gene Security Network, Portola Valley; International Stem Cell Corp., Oceanside, Raven Biotechnologies Inc., South San Francisco; RegeneMed Inc., San Diego; Supercentenarian Research Foundation, Inglewood; VistaGen Therapeutics Inc., South San Francisco and WaferGen Biosystems, Fremont."

A 'Booster Rocket' For Research in the 'Big Tomato'

The headline talks about the "dark side" of stem cells, but the piece was a bit of good news for the University of California, Davis, and particularly one man there who just won $2.2 million from the California stem cell agency.

Reporter Carrie Peyton Dahlberg of The Sacramento Bee reported this week about Paul Knoepfler(pictured), a scientist who recently received a faculty award grant from CIRM that he calls a "booster rocket" that will nearly double the budget of his lab.

Dahlberg wrote:

"His target is a gene that causes tumors – and that can transform adult skin cells into versatile stem cells similar to those in embryos."

She said his hope is to make potential stem cell therapies safer. Knoepfler was quoted as saying,

"I'm very optimistic. I don't think the hurdles we're facing are insurmountable."

Dalhberg also quoted Meri Firpo of the University of Minnesota and Joseph Wu of Stanford, commenting favorable on Knoepfler's work.

The Bee piece triggered one reader remark on its website that expressed appreciation for an objective report. The anonymous commentator said it was one of the few articles that have addressed the cancer risk involved in stem cell therapies.

UC Davis has received $38 million from CIRM during the last three years. The dean of its medical school, Claire Pomeroy, is listed as one of the 100 most powerful persons in Sacramento (along with Gov. Schwarzenegger) by Sacramento magazine. Pomeroy is also one of the 29 directors of the state stem cell agency.

Interestingly, she is not quoted either in The Bee article or the press release from UC Davis on Knoepfler. We assume that is the result of her own choice. Probably a good position to take considering the conflict of interest issues surrounding all the many academic and research executives who sit on the CIRM board and whose employers have benefited to the tune of hundreds of millions of dollars handed out by CIRM.

(Editor's note: For those of you unfamiliar with California geography, Davis is just west of Sacramento, where the UC Davis medical school is actually located. Sacramento is sometimes known as the Big Tomato because of the vast amounts of tomatoes that are grown in the area. In years past, the Sacramento River would run red in the summer from tomato waste from processing plants.)

Stemcellbattles.com Is Offline; Webmaster Hospitalized

We received the following from patient advocate Don Reed of Hayward, Ca.

"Karen Miner’s and my weblog, www.stemcellbattles.com, is down.

"Webmaster Karen(pictured) is in hospital, recovering from bladder augmentation surgery. The operation was done in hopes of freeing her from many problems of a personal nature, related to her spinal cord injury of fourteen years.

"We are in hopes she will recover fully, but for the foreseeable future, our small column, www.stemcellbattles.com, will not go forward. Karen was the webmaster; now her health will not permit her to carry on this unpaid chore.

"Selfishly, I am devastated.

"Not only did Karen’s webmastery give me a voice, but she and I have worked closely together for more than ten years. She is a part of everything I have done in research advocacy. Co-chair of Californians for Cures, Karen worked hard on the Roman Reed Spinal Cord Injury Research Act, Senator Deborah Ortiz’s stem cell laws, Bob Klein’s magnificent and unparalleled Proposition 71, and the four years continual defense of it afterward, in the unending attacks the California Institute for Regenerative Medicine has endured; always, Karen was there.

"Paralyzed in body but never in spirit, Karen Miner is a constant source of inspiration to me and all who have the blessing of knowing her.

"Anyone wishing to send Karen a get-well-soon email may send it me at: diverdonreed@pacbell.net. I will print them out and take them to her in the hospital.

"Don’t send anything electronically complicated or fancy, no e-cards, please. I don’t know how to work that stuff. Thanks.

"Don C. Reed
"Co-chair, Californians for Cures"

Changes in the California Stem Cell Report

We have made a few changes on this page that we hope will be useful to readers. For those of you hunting for a site feed (formerly at the very bottom of this web page), it can now be found at the top just to the left. We have moved the "Links" listings to place them above the archives of recent headlines. And we have added a "related content" gizmo at the end of each item. It is a device that will take you automatically to content that its creators think is connected to the subject of the posting on this report. It seems moderately useful although like most automated search engines it turns up irrelevant information as well. Your comments are welcome along with suggestions for additional changes and improvements. You post them by clicking on "comments" or you can send them to me directly: djensen@californiastemcellreport.com.

Fresh Comment

"Jim" has posted a comment on the "blog ban comment" item. Jim's item links to a Vadlo cartoon involving stem cell research and "Science" magazine.

Minimal News Coverage on CIRM Faculty Grants

News coverage of this week's $59 million in grants from the California stem cell agency was light today.

Most of the stories were heavily focused on the local impact of the grants. All appeared to have been written from the CIRM news release as opposed to actual coverage of the directors meeting.

Here is a listing of the stories we turned up.

Sacramento Bee

San Diego Union-Tribune, story by Terri Somers

San Francisco Chronicle, story by David Perlman

San Jose Business Journal

The Associated Press


Here is a listing of the news releases from recipient institutions.

Stanford

UC Irvine

University of California, statewide

UC San Diego

UC San Francisco

UCLA put out a news release that has not surfaced on its stem cell web site. You may be able to find it in the next day or two by going to the UCLA stem cell home home page.

Correction

The correct number of applications for the most recent round of CIRM faculty award grants is 54. The initial CIRM news release on the subject incorrectly the number as 55, which is actually the number of letters of intent. CIRM has corrected the figure in its news release.

The Perils of Prop. 71: CIRM's Search for a Vote

Crafty. Ingenious. Resourceful. And dubious.

All of which describe the events Tuesday night at the meeting of the directors of the California stem cell agency.

As John M. Simpson of Consumer Watchdog of Santa Monica, Ca., put it, the board "essentially drafted a member from the audience" in order to achieve a quorum and to be able to act officially.

Simpson, a regular and longtime observer of CIRM, wrote on his organization's blog,

"Assembling a quorum for the 29-member ICOC is never easy. It's comprised largely of high-powered academic and industry representatives. Moreover, Prop. 71 requires a super-majority. A quorum is 19 members."

Tuesday night, board officials had expected the necessary number but for a variety of reasons, the panel was short.

Simpson continued,

"Then as the board broke for dinner, Jacob E. Levin, Director of Research Development at UC Irvine, who was in the audience, asked Board Executive Director Melissa King what was necessary to serve as an alternate member.

"His boss, board member Dr. Susan Bryant, was one of those who was unable to attend. Under the ICOC's rules, board members from universities and research institutions may appoint alternates if they can't make it. The designate must be an executive of the university or institution.

"The lawyers determined Levin met the requirements, staff caught up with Dr. Bryant by phone, who agreed Levin could be her designate and after dinner the board got down to business. Chairman Bob Klein noted that Levin had been present for all the agenda items that had been discussed."

In years of covering hundreds, perhaps thousands, of California governmental hearings, I have never seen anything quite like this. State lawmakers have occasionally been locked in their legislative chambers until their leadership gets a desired vote. Some lawmakers have been dragooned from their homes to come in for a vote. But nothing quite like the CIRM maneuver on Tuesday.

It is one more example of the pitfalls of Prop. 71 and the perils of writing laws by initiative. The board of directors of CIRM is too large to run efficiently and the quorum requirements too high. Other problems exist as well, including a dual executive situation and built-in conflicts of interest. All of which are virtually impossible to change. That's because Prop. 71 altered the California State Constitution to require a 70 percent vote of the Legislature and the signature of the governor to amend the measure. The super, super-majority vote requirement is unprecedented and unique. It makes CIRM nearly immune from tinkering by lawmakers. But it also prevents changes that would enhance CIRM's mission and fix problems that arise when laws are put together in private by special interests.

$59 Million Bonanza For California Stem Cell Researchers

Twenty-three California scientists hit it big today when the California stem cell agency awarded them grants that totaled as much as $3.2 million each.

In all, directors of the agency gave away $59 million in its second round of Faculty Awards, which are designed to support "young" researchers and develop more talent in the area of human embryonic stem cell research,.

The grants will support the recipients for as long as five years. They come at a time when competition for grants at the federal level is increasingly competitive. In a news release, CIRM Chairman Robert Klein noted that the average age of a researcher receiving his first grant from the National Institutes of Health is 43. Presumably, today's CIRM recipients are younger, but the agency did not specify their average age in its news release, which contains the names of the recipients and their institutions.

Grant reviewers decided 20 grants were unequivocally worth funding. Directors added three more from the second tier of applications, which reviewers say are worth approving if funds are available. Nine more grants remain in that category and will be considered at next month's directors meeting. A final vote will also be held then on the 22 applications not recommended for funding by reviewers. Fifty-four applications were received.

Today's grants come on top of a similar round approved last December. CIRM gave away $54 million then to 22 scientists. However, that round was tainted by conflict of interest violations by some CIRM directors, that caused the agency to reject 10 applications. Directors then decided to go ahead with another round of Faculty Award grants.

Initially CIRM budgeted $41 million for 14 recipients in the latest round of Faculty Awards. CIRM did not explain the rationale for increasing the program in its news release today.

(Editor's note: This item originally contained a sentence noting that CIRM's original press release said there were 55 applications although internally the numbers totalled 54. We queried CIRM about the matter. CIRM said that 55 was a mistake and that only 54 applications were received.)

A Tardy CIRM Posting on New Grant Reconsideration Policies

Only hours before its directors meet today, the California stem cell agency has posted its proposed policy for handling requests for reconsideration of negative recommendations from reviewers on grant applications.

The proposal is an attempt to deal with a problem that has dogged CIRM since last January when an unhappy applicant asked the board to approve its grant despite a negative decision by reviewers.

The board was clearly uncomfortable with the attempt, both in terms of fairness to other applicants and because of the disruption of its normal procedures. The issue surfaced once again in June, leading to more extended public discussion of the appeal or reconsideration process. CIRM allows "appeals" only in the case of conflicts of interest on the part of reviewers. However, reviewers do not have to publicly disclose their economic or professional interests.

The proposed procedure requires the applicant to file a request for reconsideration five days prior to a directors meeting. CIRM's president will then evaluate it and make a finding on whether it has merit. The proposal is unclear on whether it means calendar days or business days.

The reconsideration requests, which CIRM calls "extraordinary petitions," will be posted on the CIRM website. Presumably the president's findings will be as well, although that is not specified.

The policy does not appear to eliminate an applicant's ability to appear publicly before the board to seek reconsideration. However, with a negative decision from reviewers and a "no merit" finding from the president, a disgruntled applicant is not likely to find a receptive audience.

It is unfortunate, to say the least, that this important proposal, which affects hundreds of scientists in California, has been posted at the very last minute. It deals with an issue that affects CIRM's credibility and the credibility of its reviewers. It is virtually impossible for those affected by this plan to comment intelligently to the board in a timely fashion.

Presumably, they could send an email with their comments at this late hour – if they are aware of the details of the proposal. It is our sense, however, that few scientists spend much time scouring the depths of the CIRM website, which does not even put a notice of its directors meetings on its home page.

For a look at previous items on this issue, search on the label "reconsideration" or "grant appeals."

CIRM Should Say No to Mullin Tresspass Bill

Directors of the California stem cell agency this week are scheduled to discuss legislation aimed at dealing somewhat with the recent upsurge in attacks on California researchers, including at least one of its grantees.

On the agenda for either tomorrow or Wednesday is AB2296 by Assemblyman Gene Mullin, D-San Mateo. It has already passed the Assembly and is now in the Senate Public Safety Committee in a heavily amended form.

It now states in part:

"Any person who enters the residential real property of an academic researcher for the purpose of chilling or interfering with the researcher's academic freedom is guilty of trespass, a misdemeanor."

The bill totals about 600 words. The legislative staff analysis is about 5,600 words, reflecting the complexities of the issues involved. (CIRM has linked on its agenda to an earlier analysis.)

While we are adamantly opposed to the domestic terrorism that has targeted researchers in this country, we cannot support the Mullin bill. Nor should CIRM.

The legislation is vague and raises major constitutional issues regarding freedom of speech. Existing law already provides a wide array of tools dealing with trespass, as the legislative analysis points out. The measure is certain to be challenged by such enterprises as the ACLU. Who knows what "chilling" a researcher's academic freedom means? And one wonders exactly why persons engaged in labor union activities are specifically exempted from the terms of the proposed law.

Instead of endorsing the bill, CIRM directors should add $50,000 to the reward in the firebombing case at UC Santa Cruz, which occurred at the home of CIRM-funded research David Feldheim. That would bring the total to $100,000. CIRM should also issue a strong condemnation of the terrorist actions and make it clear that there is no tolerance for those misguided souls who think they protect mice by endangering children and adults.

CIRM To Define PI and Their Grant Time Commitments

If you are interested in winning a grant from the California stem cell agency, you may want to pay special attention to proposed policies that define the eligibility of a principal investigator and spell out the amount of time he or she must commit.

The proposal, which also deals with limits on the number of applications, will come before the directors of the agency tomorrow or Wednesday. The actual text of the recommendations was not available on the CIRM website until today.

The document does not make it explicitly clear what the purpose of the plan is. However, CIRM has sometimes been flooded with grant applications, creating an extraordinary burden on its staff and reviewers. The document also attempts to deal with the question of co-principal investigators, which seems to be an issue involving a grant that includes multiple institutions. You can find a discussion of this in the transcripts from the June directors meeting (v. 1) and their March session.

Two important paragraphs from the PI document read:

"CIRM, in contrast to the NIH, has a limited lifespan in which to accomplish its mission. Funding is commensurate with a sense of urgency to accomplish the mission that should be matched by a commensurate effort by key personnel, especially the PI and Co-PIs.

"Therefore CIRM, mindful of the urgency of its mission, will require a minimum percent effort of the PI (and Co-PIs), typically 10%, where it deems such minimum effort is necessary to ensure PI (Co-PI) oversight and timely accomplishment of the proposed research. Extraordinary circumstances may be applied by CIRM, at the discretion of the President, to allow senior research scientists to have reduced percent effort commitment in the interests of obtaining the best outcomes for a research project. CIRM and the Task Force agree that no changes will be made to the GAP in order to maintain flexibility."

The recommendations were developed without public hearings by an "ICOC RFA Task Force" that appears to consist of Stanford Medical School Dean Philip Pizzo, who is also a CIRM director, and one other person. It is not clear whether other institutions that are likely to submit grant applications were consulted in the process.

Fresh Comment

"Anonymous" has filed a comment on the "firebombing" item.

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."