Poppycock and CIRM

The California stem cell agency generates a certain amount of nonsense from time to time.

Some of it comes from CIRM Chairman Robert Klein, including a comment he made to the San Diego Union-Tribune in connection with the upcoming examination of CIRM by a bipartisan good-government panel, the Little Hoover Commission.

Klein has repeatedly referred in the past to the heavy scrutiny that he contends CIRM has endured. Most recently he told reporter Terri Somers:

“It's very important that the (Little Hoover) commission recognize the exhaustive reviews we've already been through and come out of with totally and consistently extraordinarily high marks."

Poppycock, we say.

While Klein thinks CIRM has been subjected to exhaustive and heavy scrutiny, that is hardly the case. He and others who express that view really do not know what heavy scrutiny means. Think Watergate, think the ongoing national financial crisis, think the California/Enron electrical deregulation debacle, think Paris Hilton and Britney Spears, think about television news vans camped outside Klein's home should a scandal erupt at CIRM. Indeed the scrutiny of CIRM does not even go as far as the local government coverage we saw last year in a small town on the Arizona/New Mexico boundary. The local paper published every single payment by the city down to one dollar, along with the name of each recipient. In California, few would even remember the last time a story about the stem cell agency was carried on the evening television news or appeared on the front page of a newspaper.

Klein also refers to the financial audits paid for by CIRM. However, they have an exceedingly limited scope and cover such things as whether Klein provided receipts for his trip expenses and whether a reported purchase of a computer actually can be tracked to a specific computer being used in the CIRM office. Klein has additionally cited the legal challenge to CIRM's existence, which was handily rejected by the courts at every step. That, in fact, covered limited matters as well and was largely bungled by CIRM's legal opponents. The courts did not attempt to assess whether Klein and CIRM were doing their jobs well or whether Prop. 71 was useful to the people of California -- only whether the challengers had proved their case.

The courts also did not determine whether the 50-person limit on CIRM staff was appropriate. Klein now acknowledges that was a mistake on his part in writing Prop. 71, although the agency is still well below that staffing level, a matter of concern to some directors who are worried about burnout and overwork involving CIRM employees.

The state auditor did conduct a lengthy "performance audit." CIRM officially thanked the auditor for her work and made changes in its operations as a result. That audit also was limited in scope. It did not address such questions as whether the quorum requirements written into state law are hampering CIRM's mission. It did not address whether an agency such as CIRM should exist outside of any normal state government controls. It did not address the question of whether overlapping responsibilities between the chairman and president create an inherent, unhealthy conflict that will continue to generate problems as it has in the past.

Back in 2004, backers of human embryonic stem cell research could not find either private or federal funding for their cause. So they ventured into the political arena with Prop. 71 to seek funding from the California public. But playing with the people's cash carries trade-offs. One is public scrutiny that can be uncomfortable.

We recognize Klein's need to posture publicly about CIRM and its actions. Such performances are not uncommon among both politicians and business executives, who believe their main responsibility is to fend off perceived attacks on their endeavors.

However, the Little Hoover Commission is a solid state organization, not given to flip analysis or decisions. Its inquiry should result in recommendations that will help to improve CIRM's operations and deliver more value to the public. Corporations pay millions of dollars to outside consultants to examine their operations and make recommendations that maintain their competitiveness and efficiency. The Little Hoover Commission is going to do that for free for CIRM. The process will certainly make some uneasy, just as it does in the private sector. CIRM should welcome this as a healthy opportunity that could create momentum for needed improvements.

CIRM's Financial Immunity

Just how protected is the California stem cell agency from the financial travails of the state of California?

Almost entirely.

During the legislative/gubernatorial budget stalemate earlier this year, nursing homes, hospitals and other private sector providers to the state did not get paid by the state for nearly three months. Some firms went out of business or had to borrow money because the state could not pay its bills.

That did not happen with those providing services to the state stem cell agency because of its unique and unprecedented constitutional position, which assures that it has cash regardless of how the rest of the state is affected.

CIRM's extraordinary position was mentioned briefly last month at the agency's Governance Subcommittee meeting.

John M. Simpson of Consumer Watchdog asked,

"Is it the case that because of the state's budget crisis, the vendors have not actually gotten paid? Does that affect the (grant) checks actually being handed over?"

CIRM Chairman Robert Klein responded,

"No, it doesn't. our funds are segregated from the state budget."

All of which raises significant governmental policy questions. One can make a case that stem cell research cannot proceed properly if it is cut back every time the governor cannot muscle a budget out of lawmakers. But should researchers be treated differently than hospitals? Should they be treated better than needy children dependent on state aid?

Locking up public money in special funds is part of the state's budgetary problem. However, there are no good answers that will satisfy everybody concerning the creation of special pockets of cash for what almost everybody agrees are worthwhile endeavors, whether they are stem cell research or special programs for gifted children.

Nonetheless, it is likely to appear a bit unseemly to a good segment of the public for the stem cell agency to hand out tens of millions of dollars while California is so hard pressed that it may have to ask the federal government for a $7 billion short term loan so that it can pay its bills.

Arnold Nixes CIRM Legislation

Despite overwhelming bipartisan legislative support, California Gov. Arnold Schwarzenegger has vetoed legislation aimed at ensuring affordable access to stem cell therapies as the result of taxpayer-funded research.

His veto message said:

"This bill (SB1565)undermines the express intent of Proposition 71 in two ways: it eliminates the priority for funding human embryonic stem cell research and it places an unnecessary restriction on the Independent Citizens’ Oversight Committee authority to adopt intellectual property regulations that balance patient need and essential medical research.

"More than seven million voters were very clear when they passed Proposition 71 in 2004. They wanted to fund embryonic stem cell research that the federal government wouldn’t. They also wanted to make sure that California receives a return for its historic investment in medical research. Both of those important goals are already being accomplished.

"This bill does nothing to advance the will of over seven million voters. For this reason, I am unable to sign this bill."

Only a handful of lawmakers voted against the bill, which required 70 percent approval of both houses of the Legislature.

Stem Cell Blog Takes a Break

The California Stem Cell Report will go dark for the next couple of weeks while we do a little island-hopping in the Sea of Cortez. More exciting stem cell tales are expected to be forthcoming then, although there is a saying among cruising sailors – "We have no plans, and we are sticking to them." Meantime, watch for items from John M. Simpson on the Consumer Watchdog site.

Ballot Blowback: The Klein Quorum Petard

Prop. 71 created the California stem cell agency nearly four years ago, but the ballot measure also plays hob with CIRM from time to time.

One of those occasions came last week at its directors meeting in San Diego, which barely mustered the 65 percent quorum necessary to conduct its business legally. It was not the first time. Maintaining a quorum is a regular problem at meetings of directors and their subcommittees. Thursday's meeting also set a record for the largest percentage of alternates filling in for directors. Five alternates were there, 28 percent of the 18 directors in attendance.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., was there and wrote about the events on his organization's blog.

"Chairman Bob Klein is so worried about the possibility of no quorum at the December meeting when the board is slated to award a substantial number of grants, that he announced he will schedule a special ICOC(directors) meeting in about 30 days to adopt the procedures to allow telephone participation in December.

"All of this trouble comes from what I believe is a paranoid fear that stem cell research opponents could somehow gain control of the board and wreak havoc with a mere simple majority quorum requirement.

"And so Proposition 71 passed with a super-majority rule that Bob Klein wrote into it. And now he is often hoisted by his own petard."

The super-majority quorum also does something else. It gives a minority on the board tremendous power. All a handful of persons – maybe even one -- have to do is walk out of the room, and CIRM directors are legally paralyzed.

There is definitely an attendance problem at CIRM meetings, which stems in part from the membership of the board of directors. Prop. 71 stipulates that 29 persons serve on the board, which makes it difficult to schedule meetings at mutually convenient times. It also stipulates that the most of the directors come from top executive positions at other enterprises. These are folks who are more than busy. They already have important responsibilities at their own organizations, and naturally those come first.

The use of alternates to fill in for the directors additionally nullifies some of the justification for the selection of the directors. That argument contends that deans of medical schools and the chancellor of UC Berkeley, among others, should serve on the board because they bring skills and knowledge from their own positions to make good decisions on stem cell matters. So the fact that their organizations also stand to benefit to tune of hundreds of millions of dollars should be put aside. But if they are sending alternates, the state does not receive the benefit of their expertise. That said, at least some of the alternates more than hold their own and make significant contributions at the meetings.

So why not just change the law to reduce the quorum? Easier said than done. Under Prop. 71, that requires another super-majority vote – in this case, a 70 percent vote of both houses of the legislature and the signature of the governor. That is an exceedingly difficult task. Nonetheless some legislator might be willing to carry the bill. But to win approval, Klein might have to do some horse-trading that would affect other aspects of CIRM in ways that do not find his favor. In other words, it is a legislative can of worms that Klein probably does not want to open.

Predictive Toxicology and CIRM's Priorities

Looking for a key to the CIRM cash drawer?

There may be several in a document recently posted on the agency's website. The 35-page piece is called "Stem Cells in Predictive Toxicology." It grew out of a CIRM workshop back in July.

One section of the report targeted "areas of priority" for CIRM, which said in part,

"For these methods to become mainstream, it will also be necessary to develop improved protocols for cell growth, maintenance, and differentiation, and to define in vitro phenotypes that correspond to relevant human endpoints. A second critical goal will be the derivation of iPS cell lines from a diversity of individuals, including those with known disorders or disease susceptibilities, to
allow for the development of comprehensive, customizable approaches for correlating toxicity mechanisms with variable individual response."

The report also said,

"These 'clinical trials in a dish' could help inform and optimize further trials in humans. Workshop participants agreed that the use of stem cell-based assays in the process of drug discovery has the potential to reduce late-stage attrition, to lower the cost of drug discovery, and to help understand the genetic contribution to drug susceptibility."

It continued,

"Workshop participants were extremely enthusiastic about the potential for stem cells to provide superior model systems for predicting toxicity in drugs and environmental pollutants. While technological and cultural hurdles exist, experts were optimistic that these could be overcome. Even in a limited capacity, incorporation of human cell based assays into drug discovery efforts and environmental toxicity screens offers the potential for safer, more customized medicines, reduced costs of drug discovery, reduced or refined use of animal models, and more accurate risk assessment for environmental pollutants."

CIRM Grantees Get More Than Cash

Earlier this month, CIRM grantees assembled for a two-day session to talk about their work and hear some of the leading folks in the field air their own views about stem cell research.

Those of you who did not get to attend can share a bit of the experience via a 146-page report coming out of the conference. Of particular interest are one page summaries of 129 research projects involving CIRM grantees.

There was also this from Alan Trounson, president of CIRM,

"The experiment of Proposition 71 is a critical model for funding innovation that is being closely examined worldwide as a new investment by the community in improving human social values and health....

"Investment in quality of life through the support of stem cells and regenerative medicine needs to be demonstrated to have been a wise choice. Our grantees are the vanguard of this investment in science, and we need to be able to clearly demonstrate the benefits this investment will make in the general community. In the end this will have to be shown as treatments in the clinic in the form of new drugs, cell therapies, gene therapies, tissue engineering etc., for some of the most debilitating diseases and injuries presently costing the society and individuals dearly."

UC Davis Moves Ahead on $62 Million Stem Cell Lab

Some nostalgic folks in Sacramento were perturbed years ago when the California State Fair abandoned its location in a seedy part of the river city.

Last week, however, one of those old Fair buildings officially began a transformation into a state-of-the-art stem cell research laboratory.

The occasion was the groundbreaking Friday for the $62 million project, partially funded with $20 million from CIRM. It was the first-groundbreaking for a CIRM facility in Northern California.

CIRM Chairman Robert Klein was on hand along with Claire Pomeroy, vice chancellor for Human Health Services and dean of the medical school at UC Davis. Pomeroy also is a member of the CIRM board of directors.

The 92,000-square-foot lab is scheduled to be completed in late 2009. Jan Nolta, professor of hematology and oncology and a regular attendee at CIRM meetings, is director of what is officially tagged the "UC Davis Institute for Regenerative Cures, a facility supported by the California Institute for Regenerative Medicine."

The first groundbreaking for a CIRM-funded facility occurred earlier this month at USC. The Trojan marching band high-stepped through those proceedings. There is no word on whether the Aggie band turned out for Pomeroy's affair.
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San Diego's Sanford Center to Seek 16 Disease Team Grants

In the unlikely possibility that you missed it, the San Diego stem cell consortium announced earlier this month that it snagged $30 million from a South Dakota philanthropist, T. Denny Sanford(pictured).

That will come on top of the $43 million the consortium received from CIRM to build its new lab on a bluff overlooking the Pacific Ocean. Some 245 scientists will work out of the facility.

However, Heather Chambers of the San Diego Business Journal reported that the group is still $27 million shy of collecting enough cash to build and equip the $115 million, four-story facility. It is scheduled to be completed by December of 2010, or the consortium could face penalties from CIRM. Construction is scheduled to begin in January.

Terri Somers of the San Diego Union-Tribune put together a piece on the donation and its impact. Buried in her story was an interesting note on the consortium's plans to seek as many as 16 grants from CIRM in its upcoming disease team grant round. CIRM appears ready, however, to limit applications to four from an individual institutions.

The consortium consists of four organizations, Scripps, Salk, Burnham and UC San Diego. Based on Somers' story, it appears that the consortium plans to have each organization apply for four grants, which could run to $20 million or so each. Currently CIRM is allotting about $210 million, not including loans, for its disease team grants.

Obviously, there is not enough money for 16 grants at $20 million each for the San Diego quartet/consortium, not to mention other likely competitors from San Francisco to Los Angeles.

But San Diego's ambitious plans provide some indication of how tough the competition is getting for California stem cell cash.

We should also note that the consortium is no longer known as the San Diego consortium. Its name is now the "Sanford Center for Regenerative Medicine, an Institute of the California Institute for Regenerative Medicine." We should additionally note that Sanford, owner of First Premier Bank, has joined a number of other wealthy individuals who are making hefty contributions to help advance science and medicine. Sanford Center officials say more donors are welcome to help make up the $27 million shortfall, although raising cash in the current economic climate may be a tad tough.

California Efficiency Panel To Scrutinize CIRM

California's Little Hoover Commission has decided to examine the state's $3 billion stem cell research effort.

Stuart Drown, executive director of the group, said the first hearings will be held Nov. 20 with another likely Jan. 22. In response to a query from the California Stem Cell Report, Drown said,

"The commission has been asked to look at governance and transparency, but may look at other issues as well, including a discussion on ways to insure the most effective use of bond money. The commission currently is involved in a study of bond oversight. In setting up the study of the state's stem cell research activities, the commission has directed staff to ensure the study adds value to the current discussion through constructive recommendations and avoids merely repeating work done by others."

CIRM is funded through California state bonds at a total cost to the state of $6 billion. Funds are routed directly to CIRM, bypassing both the governor and the legislature.

The impetus for the study came from legislation by Sens. Sheila Kuehl, D-Santa Monica, and George Runner, R-Antelope Valley, requesting the inquiry. The primary focus of the bill, however, is affordability of stem cell therapies funded by CIRM. The Little Hoover Commission, a bipartisan group, is charged by law with promoting "efficiency, economy and improved service" in California state government.

Writing on his organization's blog, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., said,

"Some stem cell research advocates have lobbied hard against the (Kuehl) bill, partly because they objected to a Little Hoover Commission study.

"I don't get it.  We are talking about $6 billion in public money. What could be more important than ensuring it's spent fairly and so that all Californians benefit from the research they're paying for?

"You'd think anybody who wants that would welcome an outside independent look and suggestions on how to make things work better.  The good news is no matter what Gov. Schwarzenegger does with SB1565,  the Little Hoover Commission has decided CIRM is worth a study."

SB1565 is now on the governor's desk.

CIRM Directors Approve Biotech Loan Policy

Directors of the California stem cell agency Thursday gave the go-ahead to an outline of a far-reaching, $500 million biotech loan program, but many details remain to be worked out.

In apparently the only news story on the subject, Terri Somers of the San Diego Union-Tribune reported this morning:

"Biotechnology companies are expected to rush for the funding because most are perpetually hunting for money from investors. Banks typically won't fund biotech companies because they have little to no revenue, little collateral and a high risk of failure."

She wrote,

"'I am very excited,' said Babak Esmaeli-Azad, chief executive of San Diego-based DNAmicroarray, which is working on stem cell therapies. 'It's a step in the right direction.'

"Stem cell therapies are expected to come to market through companies, not research institutes. The institutes have very little capacity and experience in clinical trials or the process of turning a successful scientific experiment into a pill or injection that might eventually make it to market."

Somers said that companies have become "restless and skeptical" regarding funding from CIRM.

"'We've been waiting for a turning point for (the institute) to become very friendly and accessible by the corporations,' Esmaeli-Azad said. 'This may be that turning point.'"

Under the terms of what was approved by CIRM directors Thursday, Somers said there will be two types of loans:

"One will require the company to pay back the money no matter what happens, including failure of the product or company.

"The second does not require the company to pay the money back unless it has sufficient revenue. This type of loan would have a higher interest rate and give an equity stake to the state, which it would cash out if the product is successful."

The stem cell agency also issued a press release on the biotech loan program. It said that directors had approved a "program" and a "policy" for biotech loans. The news release declared that it was "an integral part of CIRM’s effort to strengthen California’s biotechnology industry and create collateral economic benefits such as high-paying jobs and increased tax revenues."

Somers reported that CIRM plans to "to add further detail to the policy as it receives comments and advice from industry executives, finance experts and the public." One of the key questions involves the use of delegated underwriting a la Fannie Mae as well as administration of the loan program, not to mention conflict of interest issues.

Earlier CIRM said that the plan would not be in place until December, when directors were expected to take final action. An additional hearing on the plan had been announced within the next 60 days by the CIRM Finance Subcommittee.

Klein and Sheehy Tangle Over Lucrative CIRM Contract with Former CIRM Director

Should a former director of the California stem cell agency be paid hundreds of thousands of dollars by the agency after he leaves the board?

That was the essential question at a meeting last week of the CIRM Governance Subcommittee, which is a subset of the 29-member board of directors.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., wrote about the session on his organization's blog in an item headlined, "Tempers flare at stem cell subcommittee meeting."

Simpson alluded to the "old boys network" at CIRM and wrote,

"Stem Cell Board Chairman Bob Klein and member Jeff Sheehy clashed heatedly over a former board member's highly paid consultancy to the state agency at a recent  meeting of the Governance Subcommittee.

"I lit the spark on Friday when I asked what Dr. Richard Murphy was doing under the description of "Strategic Consulting" for a fee $155,000 from April 15 through Dec. 31.  Was he revising the California Institute for Regenerative Medicine (CIRM) strategic plan?  That was a large part of it, President Alan Trounson said."

Simpson also wrote:

"'You don't like Dr. Murphy,' Klein told Sheehy. 'Let's stick to the mission.'

Sheehy said that 'he deeply resented' the suggestion his concern stemmed from 'personal animus.'  

"'We need a more open process,' he said."

Murphy served as interim president of CIRM last year and part of this year under a $300,000, six-month contract. The consulting contract followed.

In another item, Simpson also discussed the proposal by the Governance Subcommittee to deal with CIRM's longstanding difficulties in securing quorums necessary to do business legally. Ironically, the subcommittee meeting itself did not have a quorum.

More Info Emerges on CIRM Biotech Loan Effort

The California stem cell agency has posted important details of its proposed $500 million biotech loan program, including the size of loans and information on possible interest rates.

The agency is considering $200 million in loans for the disease team grants that are scheduled for 2009 with individual loans exceeding $25 million. More details are also available on the delegated-underwriting proposal that CIRM is borrowing from Fannie Mae.

The "loan program overview" can be found here and loan portfolio information can be found here.

In addition to consideration at tomorrow's directors meeting in San Diego, the CIRM Finance Subcommittee will hold a hearing on the program within the next 60 days. It is scheduled to be approved by directors in December.

Big Bucks Giveaways and CIRM Integrity

Handing out hundreds of millions of dollars behind closed doors naturally leads to concerns about fairness and conflicts of interest.

Especially when it becomes personal, such as when a scientist's career and the economic well-being of his family, his business or his employer may be at stake.

It is even more complicated when those who make the de facto decisions (the scientific reviewers) are competitors in the field, albeit from a different state, and when their economic and professional interests are cloaked by secrecy.

Then couple all that to a public agency with $3 billion to hand out for research in a controversial area of science. The agency itself has its own important needs and responsibilities. Above all, it must maintain public trust and its own integrity. It must have candor from its reviewers and protect them from unwarranted attacks and retribution from disgruntled applicants. It must somehow provide the reviewers with the incentive to come to the Golden State and work hard to hand out tons of cash that they will not have a chance to compete for. Beyond that, the agency must maintain the confidence of applicants and potential applicants. They must feel that they are being treated fairly regardless of the final outcome on their bids for the golden ring.

No small challenge. But one that faces the California Institute of Regenerative Medicine.

CIRM's 29 directors will wrestle with the task once again on Thursday in San Diego. They constitute the body that has the legal authority to make the grants. However, scientific reviewers, during closed door sessions, have already scored each grant and made their decisions on funding, which are presented to CIRM directors. The CIRM board almost never overturns a positive or negative decision by reviewers.

But state law permits any person to appear before directors and make a pitch, including rejected grant applicants. When that first occurred last January, it made some directors more than uneasy. It happened again in June. In an effort to bring order to the process, CIRM staff has come up with a plan to deal with requests for reconsideration of negative application reviews.

The proposed "policy regarding extraordinary petitions" for "special consideration" calls for them to be submitted to CIRM at least five days before the directors meeting at which the application will be considered for funding. The policy declares that the petitions should only be submitted under "extraordinary circumstances" and be limited to no more than three pages. They will be posted on the CIRM website. Material may be cut from the public versions to "protect personal, proprietary or confidential" information.

The staff will evaluate the petitions and be prepared to make a recommendation to the board of directors. However, the evaluations will only be presented if requested by a director.

The policy is slightly modified from the plan offered at last month's directors meeting. CIRM President Alan Trounson then described the proposal as a method for handling "extraordinary requests for reconsideration," declaring,

"What we don't want to do is have a raft of complaints that might topple continuously into the press, which would be very damaging, I think, for the reviewers."

CIRM's outside counsel, James Harrison of Remcho, Johansen & Purcell, of San Leandro, Ca., said,

"We have tried to develop a policy that strikes a balance between the right of applicants to communicate with the board and the necessity for thorough, fair, and thoughtful consideration of applications."

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., had his own perspective:

"It is a way to bring order to the chaos of people who decide to, in fact, lobby the board, which ...people are entitled to do."

CIRM Director Sherry Lansing, a former Hollywood studio executive, told Simpson his was an "incredibly clear" summary.

This week's proposed policy has its flaws. It does not make clear what "extraordinary circumstances" justify an appeal, a word that CIRM does not want to use to describe the petitions. Applicants certainly will ask for a definition of "extraordinary circumstances" from CIRM before filing a petition. The proposed policy also appears to allow considerable fiddling with the public version of the petition, permitting material to be censored on the basis of overly broad, undefined terms such as "personal" and "confidential." The proposed policy additionally does not specify that the petitions must be posted publicly before the CIRM directors meeting.

Both CIRM management and board members have acknowledged the review process is not perfect. The proposed policy is a good first step in beginning improvements that will both help CIRM with its mission and protect the organization's integrity as well.

CIRM Spending Plans, More Details on Biotech Loans and Delegated Underwriting,

Directors of California's $3 billion stem cell research agency meet this Thursday to finish up work on its faculty grant program, deal with a proposed $500 million biotech loan program and act on a new plan to handle requests for reconsideration from rejected applicants.

The board will also discuss just how much cash is currently available for grants. A CIRM document shows that currently the agency has committed $1 billion through June 2009 and only has $1.9 billion left to give away. Its plan now calls for the research funding effort to continue through the first half of 2017.

The CIRM document also appears to project a $510 million "profit" from its biotech loan plan. CIRM plans to plow back the "profit" into more grants or loans. The agency has said defaults could be as high as 50 percent in the loan program. It has yet to lay out in a straightforward manner how it can generate "profits" of $510 million with default rates of that magnitude.

The CIRM board will also discuss the "business review" plan for the biotech loan program. It proposes contracting with delegated underwriters, mentioning their use by Fannie Mae. The business review plan cites the Fannie Mae delegated underwriting system for multi-family housing as a success as compared to "recent problems" with the single-family program.

Not provided in the business review plan are details about how the underwriters would be selected(other than issuing an RFP), how they would be paid and what provisions would be in place to avoid conflicts-of-interest in what is a tiny financial world.

The compensation plan is important because if it gives an underwriter major incentives for qualifying businesses for loans, it could also be encouraging lax financial standards.

The biotech loan policy can be found here. Missing is background material on "loan portfolio policies."

Also on the agenda for San Diego are names for CIRM funded labs, a petition to designate a "covered stem cell line" as acceptably derived and a project to consolidate nonprofit and for-profit IP regulations. Discussion of the $210 million disease team RFA is also scheduled, a session not to be missed by those who plan to vie for the cash.

As of this writing, three days prior to the directors meeting, background material is available on their agenda on five of the 13 substantive, public items to be discussed.

Coinciding with the meeting is the first ever Stem Cell Awareness Day. In a news release, CIRM President Alan Trounson said the day, which involves his old employer, Monash University, in Australia, is designed to "inform a broad audience of patients, clinicians, students and the general public about some of the many advances in the field that California is helping to accelerate through CIRM funding.”

The day will include a Webcast from the CIRM meeting location in San Diego involving juvenile diabetes presentation but not of the directors meeting itself. A live, interactive online Q&A is scheduled for the afternoon with California research scientists taking questions.

CIRM will preview its new Web site offline at the directors meeting. The new site is expected to be available to the public in October. Other events are scheduled in California, including ground-breaking at UC Davis on its new stem cell lab, which is partially funded by CIRM, and the launch of a new, stem cell Web site at Stanford.

You can find a full rundown on the day's events here along with instructions on how to log on for the Internet activities.

CIRM Grant Review: Questions About Fairness, Conflicts and Accuracy

Here is the text of article by yours truly concerning questions about fairness in the CIRM grant review process that ran Sept. 18, 2008, in BioWorld Perspectives.
Following this item, you can find related posts, including the text of responses we received from businesses that we queried and links to related CIRM and other documents.

CIRM Grant Controversy Continues with Publication of Biotech Company Names

By David Jensen

BioWorld Perspectives Contributing Writer

Editor's note: David Jensen publishes the California Stem Cell Report and has written nearly 2,000 items on the California stem cell agency since 2005. Jensen's Perspective last month, "Red Flags Remain in Plan to Help Biotechs," dealt with the controversy surrounding CIRM.

Questions are being raised about the fairness, conflicts of interest and even the accuracy involved in the grant review process of California's $3 billion state stem cell research program, the San Francisco-based California Institute for Regenerative Medicine (CIRM).
While nearly all of the rejected applicants remain silent, a handful of stem cell companies have publicly discussed their concerns.
Complaints About CIRM Add up in 2008
One California stem cell company, Advanced Cell Technology Inc., of Los Angeles, has complained about a financial conflict of interest on the part of one unnamed reviewer. Others have complained about inaccuracies in reviews, the failure to provide an opportunity to rebut reviewers and the lack of a grant resubmission process like the National Institutes of Health. Privately, more complaints are aired about reviewer conflicts and a tilt at CIRM toward funding "big guns," well-established senior scientists.
Last month, Alan Trounson, president of CIRM, told the agency's directors that "large numbers" of rejected applicants have contacted the agency concerning reconsideration of their rejected applications or related issues. But when asked more recently for specifics, a spokesman for the agency minimized the number, saying it amounts to no more than 10 on any round of grants.
CIRM acknowledges its review process is not perfect. It is working on a formal procedure for requests for reconsideration, which will come before directors on Sept. 24 or 25. But basically, CIRM sees no fatal flaws in the making of its grants, which now total $614 million over three years. When CIRM's review process came under fire last month, Trounson told directors, "Scientists, like other people, kind of believe [if] they live in California [they] should get a grant, [that] CIRM was set up to give them grants."
The agency first had to deal with public complaints from a rejected applicant last January. Questions of fairness surfaced more visibly later in the year, the first time that businesses have been permitted to apply for CIRM cash.
Out of the 18 applications from the private sector only one business, Novocell Inc., of San Diego, has received a grant. In the case of Novocell, it amounted to $50,000 to help plan for a much larger disease team grant.
Watchdog Publishes Names of Biotechs That Likely Applied for Grants
Until recently, the names of the rejected business applicants were unknown. CIRM's policy is to withhold the identities of all rejected applicants. But last month, Consumer Watchdog, of Santa Monica, Calif., a nonprofit group that has followed CIRM for nearly three years, disclosed on its website the names of the 18 businesses that filed letters of intent (LOI) to apply for grants.
The list reads like a Who's Who of California biotech companies. According to John M. Simpson, Consumer Watchdog's stem cell project director, firms that filed an LOI to apply for the Disease Team Planning Grant were: Advanced Cell Technology; BioCardia Inc., of South San Francisco; DNAmicroarray Inc., of San Diego; Genomics Institute of the Novartis Research Foundation, of San Diego; International Stem Cell Corp., of Oceanside; Novocell; Panorama Research Inc., of Mountain View; RegeneMed Inc., of San Diego; StemCyte Inc., of Covina; and Stemedica Cell Technologies Inc., of San Diego.
The companies that filed an LOI to apply for New Cell Lines Grant were: Advanced Cell Technology; BioTime Inc., of Alameda; California Institute of Molecular Medicine, of Ventura; Cascade Life Sciences Inc., of San Diego; DNAmicroarray; Gene Security Network Inc., of Redwood City; International Stem Cell.; Raven Biotechnologies Inc., of South San Francisco; RegeneMed; the Supercentenarian Research Foundation, of Inglewood; VistaGen Therapeutics Inc., of South San Francisco; and WaferGen Biosystems Inc., of Fremont.
Simpson noted that some companies earlier had "groused" about their treatment. And he asked, "Did the companies get a fair shake or not?"
We queried all 18 concerning the grant reviews. Fifteen did not respond to the questions. One said it was satisfied, one said anonymously it was quite dissatisfied, and one was withholding judgment until the next round of grants. At least three additional companies, however, have publicly told CIRM directors that they have issues with the agency's review process.
Alan Lewis, CEO of Novocell, responded to our query, saying he was pleased with the process. Lewis said his company has "developed a relationship with CIRM" and tried to help it in formulating the grant process. He noted that "very few" industry representatives often attend CIRM meetings.
At the August meeting of CIRM directors, Steven Kessler, a scientific director at Advanced Cell Technology, said that his company had filed information that one of the reviewers had a financial conflict of interest as the result of ties to another company. Kessler did not identify the individual or spell out the exact nature of the conflict. He told directors that he was told by the agency "the way CIRM interprets its own conflict of interest policy, the example I gave you was not a conflict of interest."
Kessler also cited the low success rate of business applications as "clear evidence of bias."
At the same meeting, William Adams, chief financial officer of International Stem Cell, indicated that CIRM directors were excessively worried about "ticking off" scientific grant reviewers with public criticism of the quality of their reviews.
At the June directors meeting, Kenneth J. Woolcott, chief business officer of Cascade LifeSciences, commented on the process but did not seek an appeal, having been told none was available. Shortly after Woolcott left the meeting, a reconsideration letter from an applicant from a nonprofit was read by a director, resulting in the approval of that grant.
Woolcott was not pleased when he learned about the situation. He then sought reconsideration of the Cascade application, alleging that its review included factual errors involving a "fundamental oversight." He also said reviewers did not adhere to the published review criteria. CIRM rejected Cascade's request. (See links below for more information.)
In response to our query, another California company researcher, who asked for anonymity, said reviewers' comments on his application were "ridiculously incomplete" and "misinformed." "You can tell when people really didn't read it," this scientist said.
Leading to Positives for Future Stem Cell Grants?
Consumer Watchdog's Simpson said that the publication of the names of rejected businesses has had a healthy impact. (In fact, BioWorld Today reported last month that the biotech industry is poised to receive more CIRM funding in the future.)
"I'm not advocating that anybody be required to divulge proprietary information, but the application process needs to be more transparent," he said.
"My publishing the names of the applicants has enabled them to communicate with one another, compare notes and figure out how to voice what appear to be very legitimate concerns about the grant-making process.
"I'm by no means a big fan of the biotech industry, but I think this is a case where awards have been tilted toward academia. There ought to be a level playing field."
Interested in reading more? Here are some links to documents relating to the California stem cell agency and complaints about fairness in its grant review process:

• Consumer Watchdog Identifies Businesses Rejected for CIRM Grants
  
• CIRM's August Proposal for a Reconsideration Procedure (this draft is likely to be modified before CIRM's meeting later this month)
  
• Transcript of August 13, 2008, CIRM Meeting
  
• Cascade LifeSciences Seeks Reconsideration
  
• Text of Cascade's Reconsideration Letter
  
• CIRM Response to Cascade Complaints
  
• Transcript of June 26, 2008, CIRM Meeting Involving Cascade

Text of Responses From CIRM Applicants

For the piece in BioWorld Perspective on the CIRM grant process, we queried 18 companies identified by Consumer Watchdog as filing letters of intent to apply for grants.

Three responded directly to the questions, one off the record. A fourth also responded but said it was wrapped up in other business and could not answer the questions at this time.

Here are the questions we asked and the responses from the two companies that responded on the record.

1. Was your company satisfied with the fairness of the CIRM grant review process and the accuracy of reviewer comments? If not, why not?

2. Do you have suggestions for improving the process and improving CIRM's engagement with industry?

3. Does your firm have plans to apply for a CIRM grant in the foreseeable future?

4. Are there any other comments you would like to make on this subject?

Alan Lewis, CEO Novocell,
Question one:

"Yes we were and have developed a relationship with CIRM whereby we participate in their meetings and have tried to help them during the formulation of the grant process."

Question two:

"I believe it is up to the industry to participate actively in meetings to share their issues and concerns. there are often very few industry representatives at such meetings."

Question three:

"Yes---we will submit a disease-focused grant(diabetes) and we have also submitted 2 tool grants. We intend to collaborate with academic scientists to take advantage of the skills and experience of stem cell scientists in California. The disease grant will allow all grant participants to help create a cell therapy for insulin requiring diabetics using human embryonic stem cells as the source. This program will benefit greatly by academics who are leaders in diabetes research translation synergizing with the Novocell development effort to create this first-in-class product."

Question four:

"Since funding of stem cell research is very difficult---both government and venture capitalists have avoided this space--the CIRM funding is incredibly important to ensure this important research is both funded and encouraged to develop innovative products not being pursued elsewhere. Patients around the world will be the beneficiaries of these transforming products."

Dawn Applegate, President RegeneMed

"CIRM seems to be responding to the issue (meetings of Sept 12). We will hold our evaluation until the next round of funding results. The numbers speak for the last round: 50 and 59 applicants, 13 and 10 from industry, 16 and 22 awards, on a percentage basis with academics and industry being treated equally, industry should have received 7-8 of the total 38 awards; the question is were the applications equally competitive."

Our thanks to those who responded. A public dialog is healthy and can help meet the needs of all interested parties, including CIRM.

Text of Kessler's Conflict-of-Interest Comments

Steven Kessler, a research director with Advanced Cell Technology Inc., of Los Angeles, last month raised a question about a conflict of interest on the part of one unnamed CIRM scientific grant reviewer.

Kessler also addressed the issue of reviewer bias and proposed restrictions on the length of an appeal letter.

Here is the text of his remarks at the August CIRM directors meeting, including comments from CIRM Chairman Robert Klein.

Kessler:

"It's my understanding that for the new cell lines awards, that there were 58 proposals overall, that 12 came from for-profit organizations, none of those were recommended for funding, compared to presumably 18 of 38 from not-for-profit organizations. To me, that's clear evidence of bias.

"I've had – we formally appealed this on June 26th. The appeal -- I was the PI on one of them -- was two and a half pages describing for CIRM what a conflict of interest is from a business perspective, and another seven and a half pages specifically rebutting point by point all the reviewers' criticisms. I don't see how we can do this (in less length). We can certainly condense the letter, but what we did was cite the reviewers' comments and what our proposal actually stated that factually contradicted that. It would be more difficult, I think, for the board to understand what actually took place if we didn't do it in that type of a sequence.

"But just to come back to the conflict of interest issues, I've had discussions with CIRM staff just this week following up, citing CIRM's own conflict of interest policy to them on specific issues. One issue was:...If a grant reviewer has a financial relationship with company 'X,'...that is, he's receiving funding from that organization or he's expecting royalty income from some company by virtue of having licensed technology to that company. And that reviewer is sitting in on reviews from other for-profit organizations, companies 'A,' 'B' or 'C' and doesn't recommend those for funding. To us, from a business perspective, that's a conflict of interest.

"This is a bit different from the situation in academia where people quibble about technicalities on papers.... For-profit organizations...invest millions of dollars building up their patent estate because they won't proceed down the development path, which incurs...tens of millions of dollars in expenses, unless they have a clear patent path. So it is really a serious issue if...somebody, some reviewer with conflicts -- and we cited numerous instances (and) in our view there's no reason to recite those right now – where...a reviewer would have every incentive to help impede the competition for the company that he has a relationship with."

Klein:

"Well, I very much appreciate those comments. We do have an existing separate policy for conflicts. We treat them very seriously. We have a separate policy in place for re-review in the event of conflicts. And the staff does a thoughtful analysis. They have gone through and found a conflict in a particular -- potential -- even if they find a potential for a conflict, they look at potentially re-reviewing it. They're trying to err on the side of equity and justice here."

Kessler:

"I realize that. And I was told that the way CIRM interprets its own conflict of interest policy, the example I gave you was not a conflict of interest. So -- "

Klein:

"Okay. So we'll have the opportunity between now and the next session to look at that as well, but we appreciate your comments. Thank you very much."

A "Certain Skew" Among CIRM Reviewers

Jeff Sheehy is a patient advocate member of the CIRM board of directors and a communications director at UC San Francisco. He has served as a CIRM director since its inception and has taken part in the closed-door review of hundreds of grant applications as a member of the CIRM grant review group.

When a public appeal was made to directors last January by one applicant who received a negative review, Sheehy made an interesting comment on the review process.

Here is part of what he had to say,

"It's been my observation within the context of the working group that clinical work is not reviewed (in) the same way as basic science, that we have a certain skew towards basic science in our review process. I talked to one of the reviewers. He says it's almost the nature of the beast....One of the comments that was made is that...that they're on something, but they're not doing anything particularly innovative. But these incremental states are what happens, according to the reviewer I was talking to, who was the expert on translational research, (and that) is what typically find in a clinical program.

"If we look at the new faculty awards and if were to actually have separated out the basic scientists and the clinical scientists, there's a vast gap in the scores except for one exception. And this is because clinical science is not reviewed as highly within the context of how we do our work as basic science. Basic science is new science by definition. Clinical science is incremental steps. I think it's interesting that everyone seems to kind of just gloss over this novel blood collection technique for umbilical cord. This is the kind of things that are important for moving the science forward. This a little thing, but it actually is a very big thing."

You can find additional comments in the transcript of the meeting.

Links to CIRM Grant Review Process

Here are some links to documents relating to the California stem cell agency and complaints about fairness in its grant review process.

Consumer Watchdog Identifies Businesses Rejected for CIRM Grants

CIRM's August Proposal for a Reconsideration Procedure (this is likely to be modified for CIRM's September meeting)

Transcript of August CIRM Meeting

Cascade LifeSciences Seeks Reconsideration

Text of Cascade's Reconsideration Letter

CIRM Response to Cascade

Transcript of June CIRM Meeting Involving Cascade

Transcript of the January CIRM directors meeting, which heard the first public appeal of a scientific review. Search on the term "luben," which is the misspelling of the name of Bertram Lubin, president of Childrens Hospital Oakland Research Institute, who appeared before the directors seeking reconsideration.

Nature magazine article April 30, 2008, in which Lubin comments on CIRM

California Stem Cell Report account of part of the January meeting involving the Lubin appeal.