Torres Says He Needs Salary From CIRM

IRVINE, Ca. -- Art Torres, chairman of the California state Democratic Party, says he will need a salary if he is to serve as vice chairman of the $3 billion California stem cell agency.

In an item by Shane Goldmacher for Capitol Alert, the online service of The Sacramento Bee, Torres was quoted as saying:

"'I do need a salary because I am not a wealthy person,' he said, adding that 'what that compensation should be is up to the board.'"

The vice chair is eligible for as much as $332,000 annually.

Goldmacher also reported:

"He (Torres) touted his connections - he was first elected to the Assembly in 1974 - as beneficial for promoting the mission of the stem-cell agency.

"'That's over 34 years of relationships and experience that is important to communicate the needs of this mission,' he said.

"Torres is also building upon those connections to win the vice-chairmanship. (Lt. Gov. John) Garamendi's nomination letter states that Assembly Speaker Karen Bass, Senate President Pro Tem Darrell Steinberg, and Speaker of the House Nancy Pelosi have all endorsed Torres for the post.

"Torres appears to have some support on the board, as well.

"'I'm keeping an open mind, but (Torres) is well-qualified for this position,' said David Serrano Sewell, who fills the patient advocate slot for multiple sclerosis on the stem-cell panel. 'He has the legislative, business and volunteer experience. Just as important he has the relationships with legislators in Sacramento and Washington D.C., built over 20 years, that will greatly benefit our mission.'"

$1.3 Million Price Tag on CIRM Chair and Vice Chair Compensation

IRVINE, Ca. -- An executive salary deal involving CIRM Chairman Robert Klein and a paid vice chairman, quite likely the man now heading the state Democratic Party, could cost the California stem cell agency something on the order of $1.3 million a year.

That includes $840,750 in salary and 50 percent of that figure to cover fringe benefits for both men. The $1.3 million total also assumes that both Klein and the vice chairman receive the top end of the salary range for those positions: $508,750 for Klein and $332,000 for the vice chairman.

Art Torres, head of the state Democratic Party, veteran politico and former state lawmaker from the Los Angeles area, has been nominated by state Treasurer Bill Lockyer to fill the vice chairman slot. Torres apparently has the support of two other state constitutional officers, who are the individuals who nominate vice chair candidates. Gov. Arnold Schwarzenegger, who has expressed "deep concern" about the executive salary proposals, has not yet announced his nominee.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., said he has heard that Torres will expect a salary. Torres' term as chairman of the Democratic Party expires in April. According to what Simpson has been told, Torres would work for free until that date.

We have queried Torres concerning the matter and will carry his comments when we receive them.

The CIRM board votes on a vice chairman from among the nominees put forward by the state constitutional officers. A contested election, involving a candidate who would not accept a salary vs. one who would, could put Klein in an awkward position. His salary is likely to be approved by CIRM directors meeting here this afternoon and Wednesday, and it would be unseemly to have the multimillionaire chairman taking pay while the vice chairman does not.

The actual vote on the vice chairmanship is not expected any sooner than late January or possibly later.

Based on the last figures we saw for the CIRM budget, it does not appear to include funds for compensation for the chairman and vice chairman.

State Democratic Party Chief Nominated as CIRM Vice Chair

The head of California's Demoratic party, Art Torres, has been nominated as a candidate for the vice chairmanship of the state's $3 billion stem cell agency.

State Treasurer Bill Lockyer, also a Democrat and Torres colleague, offered the former state legislator to fill the post, which carries a salary range of $180,000 to $332,000. If elected by the board, Torres would take the position vacated by Ed Penhoet, who resigned to assume a non-paying membership on the board. Penhoet did not accept a salary.

It was not clear whether Torres(see photo) would accept a salary or continue in his position as chairman of the California Democratic Party should he be elected to the CIRM post.

Terri Somers of the San Diego Union-Tribune reported on the nomination this morning. She wrote:

"The institute's board will select a new vice chairman from a group of candidates nominated by the state's constitutional officers. Torres said yesterday that he also expect to be nominated by Lt. Gov. John Garamendi and Controller John Chiang."

In a letter Friday to CIRM Chairman Robert Klein, Lockyer said,

"Art has always been a champion for funding basic scientific research, including early funding for AIDS research. After leaving public office, he continued his patient advocacy serving on the boards of the AIDS Healthcare Foundation and OneLegacy organ transplant foundation. As chair of the California Democratic Party, he led it in endorsing Prop. 71 and ensured the measure was prominently highlighted in campaign material to over a million California voters."

Torres had a 20-year career as state senator and assemblyman, representing an area in Los Angeles. His leadership positions in the Legislature included chairmanship of the Assembly Health Committee.

Once rejected $1.7 million grant is resurrected

In "a highly unusual" situation, directors of the California stem cell agency this week are likely to approve a $1.7 million grant application that was pulled off a previous round after scientific reviewers turned it down.

In June, CIRM President Alan Trounson removed the application from the list of those being considered for new cell line grants. During a brief exchange at the June meeting of CIRM directors, Chairman Robert Klein said that "there was a problem with it, that it technically has to be re-reviewed." Trounson said he directed that the application be reexamined after he discussed it with the chairman of the review group, Stuart Orkin of the Dana Farber Institute.

There was no further comment in June by CIRM directors on the proposal, numbered 642-1 and labeled "derivation of new ICM-stage hESCs."

In the initial consideration of the application, reviewers raised several scientific questions and concerns about the proposal, according to the summary posted on the CIRM web site. No scientific score for the application was disclosed by CIRM, which considers scores for rejected proposals not suitable for public release.

One member of the Grants Working Group, Chad Cowan of Harvard, was barred from participating in review or discussion of the applicant because of a conflict of interest. CIRM did not specify the nature of the conflict.

The latest summary of the review of the application says that its "technologies and methodologies are not novel and not particularly innovative." But the review also said other aspects of the proposal are "laudable" and that it has "significant potential."

The application was given a scientific score of 80 out of a possible 100. No reviewers were excluded from participation in the most recent review of the application. Cowan is currently listed as an alternate member of the Grants Working Group. It is not known whether he participated in the latest review of 642-1.

The identity of the applicant and his affiliated institution is being withheld by CIRM. The agency makes a practice of withholding the names of successful applicants until the full board acts, although exceptions to the policy have come up. Names of rejected applicants are never released.

Last July, we asked Don Gibbons, CIRM's chief communications officer , for more information on the re-review, which may be the first such public case.

Our questions included:

"Is the grant being re-examined in connection with provisions in the grant administration policy that state that appeal grounds are 'strictly limited to circumstances in which a demonstrable financial or scientific conflict of interest' played a role?

"If not, what sort of additional information justified redoing the review?

"Did the information come to CIRM first? Who generally provided the information: the applicant or ??? Was it forwarded with or without a recommendation to the chairman of the Grants Working Group? What action did he take?"

Gibbons replied at the time that it was the "president's decision." Gibbons said,

"This grant was a highly unusual circumstance; something that has not happened before and something we don’t expect to happen much, if ever, in the future. We are not treating it as an appeal through the GAP. New information came to us, and the president, in consultation with the chair of the working group, decided that it merited sending the grant back to the working group for further review."

Following approval of the grant Tuesday or Wednesday, CIRM is expected to release the name of the researcher and the institution.

(Correction: An earlier version of this item identified the chairman of the Working Group as Dana Orkin. His correct first name is Stuart.)

Klein Says He Can't Afford to Work for Free

California stem cell Chairman Robert Klein, a multimillionaire real estate investment banker, says he can no longer afford to donate his time to the state, according to the San Diego Union-Tribune.

His comments came Saturday in a story by reporter Terri Somers that said "market conditions" have led Klein to seek a state salary after working without pay as the chairman of CIRM since December 2004. The salary could range as high as a half-million dollars a year.

Somers wrote:

"He (Klein) said that in consideration of the current economic climate, he would continue to provide at least 15 percent of his time to the institute for free. He said his institute workweek has always surpassed 40 hours and will continue that way.

"Meanwhile, his financial firm has become 'my night job,' with daily responsibilities handled by its staff.

"Klein's salary has already been discussed by the institute's governance committee, but that figure has not been made public."

CIRM's directors will hold meetings Tuesday and Wednesday in Irvine during which the question of Klein's compensation will come up. Gov. Arnold Schwarzenegger late last week wrote directors, expressing "deep concern" about the Klein salary plan.

The bottom end of the salary range for chairman stands at $275,000 and the top at $508,750. CIRM President Alan Trounson, who does not sit on the 29-member board of directors, receives $490,000.

Another member of the board of directors, the vice chairman, is entitled to a salary ranging from $180,000 to $332,000. That post is vacant after Ed Penhoet, another multimillionaire who did not accept a salary, resigned to take a non-paying membership on the CIRM board.

Somers wrote,

"Reportedly, Schwarzenegger will nominate a candidate who does not need to take a salary, while the lieutenant governor, treasurer and controller are expected to nominate a candidate who would need a salary, said Robert Klein, chairman of the state stem cell institute."

Somers is the only mainstream media reporter to write about the Klein salary issue. Meanwhile, Wesley Smith, a bioethicist at the Discovery Institute, commented about the proposal on his blog, saying,

"This smacks of the sense of entitlement and hubris among the big shots and well connected that is utterly ruining the country.

"Well, the CIRM shouldn't be Klein's personal fiefdom. Rather than pay Klein a half million, let's show him the door instead."

Gov. Schwarzenegger Concerned about $500,000 salary for CIRM Chief

California Gov. Arnold Schwarzenegger has expressed "deep concern" about a proposal to pay the chairman of the California stem cell agency as much as half-a-million dollars a year.

The letter from the governor to the CIRM board of directors comes as the state faces a $28 billion budget crisis and is cutting aid to the poor and elderly. Legislation was also introduced this week to freeze salaries of state employees who make more than $150,000 a year.

In the Dec. 4 letter, Schwarzenegger, who considers CIRM "one of California's greatest endeavors," said that he would soon nominate a candidate to fill the position of vice chairman of its board. He told CIRM's directors,

"I am also writing to share my deep concern about reports that you plan to consider compensation for the chairman and the vice chairman. CIRM has a responsibility to spend taxpayer money with great care, so I urge you to ensure that compensation for these positions is offered only if and to the extent absolutely necessary to implement its position."

It was unclear what specifically generated the letter. The proposal to pay CIRM Chairman Robert Klein has received little attention. Prior to the governor's letter, the only reports about it have come here on the California Stem Cell Report and on a link to our item on Capitol Alert, the online service of The Sacramento Bee.

If CIRM were a normal state agency, the governor could stop the pay increase. However, CIRM is enshrined in the state Constitution as the result of the ballot initiative that created it. The agency is immune to fiddling by either the governor or the legislature. Neither of those two parties can halt the constant stream of state bond funding to CIRM.

Schwarzenegger's letter also seems to reflect a lack of knowledge about pay at the Golden State's $3 billion stem cell agency. The chairman and vice chairman have always been entitled to a salary. However, Klein and former vice chairman Ed Penhoet have declined to accept pay since December 2004. Both men are multimillionaires. Penhoet recently resigned as vice chairman, but continues to sit on the board, which will vote to select a new one once the nominees are named.

For some months, Klein has mentioned that he would be seeking a salary. However, his current timing seems to be off, given the state's economic crisis. Deserved or not, high salaries and pay increases for government workers can trigger intense and hostile public reaction even under the best of circumstances. In contrast, much more significant financial issues can stimulate no response. That's because salaries are personal and easy for the public to understand.

Klein's salary proposal comes up at next week's CIRM board meeting in Irvine. CIRM posted the governor's letter as part of the agenda.

(The Niche, Nature magazine's stem cell blog by Monya Baker, carried a link to our report on the salary matter on Dec. 5.)

Fast-Tracking CIRM Cash for Business

Biotech businesses could get a hefty financial helping hand under a plan coming up early next week before the directors of California's $3 billion stem cell agency.

The proposal would dramatically accelerate funding of grants to the private sector, delivering cash immediately on approval of the grants, as opposed to months later.

CIRM said,

"The biotechnology sector in California faces significant challenges arising from the credit crisis and economic downturn. Press reports suggest that venture capitalists have advised their biotechnology clients to cut costs in order to survive current economic conditions, which are expected to persist for at least the next 12 months. In order to achieve its mission, it is critical that CIRM partner with biotechnology companies in translational research, preclinical development and clinical programs. The financial stability of the industry therefore is essential to CIRM’s success."

Businesses would have to choose the fast-track financing to be eligible, but there seems to be no reason they wouldn't.

Generally speaking, however, fast-tracking can create a climate in which speed is favored over quality and thoroughness. CIRM's proposal could pose similar risks.

That said, if CIRM can do this for business, why shouldn't it be done for all grants. Time is money even in academia. Advancing the onset of research in universities also advances the results, which is what CIRM is all about.

The fast-track proposal is part of additional background information that is appearing on the CIRM web site as part of the directors' meeting agenda.

Here are links to other background material to be considered next Tuesday and Wednesday in Irvine.

Grant Review Group decisions on the $20 million tools and technology round and summaries of the proposals.

The latest draft of the CIRM grants administration policy for academic and non-profit institutions.

Three new alternate members of the grant review group: Andrew Barber, Richard Harvey and Steven Sheridan.

Still missing is background information on the salary request by CIRM Chairman Robert Klein, a proposal to triage proposals for grants and the application by the International Society for Stem Cell Research for funding of a conference.

Two business days remain before the CIRM board meeting begins on Tuesday.

CIRM's Klein Deserves a Salary

In February 2006, Robert Klein, chairman of the $3 billion California stem cell agency, testified in court that he did not consider himself a state employee.

The justification appeared to be that he did not accept a salary and has not since beginning his state stem cell work in December 2005.

That appears to be ready to change. Next week, he is going to seek a salary that could run upwards of half-million dollars a year. The move raises anew questions about his role with his private lobbying stem cell lobbying group. It also raises questions about whether it is possible for him to devote sufficient time to his state responsibilities and also continue to run his real estate investment banking firm in Palo Alto, Ca.

As of this morning, CIRM has yet to post on its agenda for next Tuesday and Wednesday any supporting material concerning the salary request or the conditions under which it would be granted.

Klein holds his post as chairman as the result of a vote of the 29-member board of directors, who may want to establish some clear ground rules for Klein along with approving a salary. Technically he may not even need a vote of the board to draw a salary since he is entitled to one as chairman. However, it would be impolitic to take a salary without running the matter by the board of directors.

Klein's salary move has drawn some reaction from longtime CIRM observers. John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., told the California Stem Cell Report:

"If Bob Klein is working full-time as chairman of the ICOC(CIRM's board of directors) he deserves a salary. The question is how much. A sensible benchmark would be what the director of the National Institutes of Health makes -- $191,300. Round it off to $200,000. More than that is inappropriate and, in fact, would be outrageous in these economic times.

"Klein at his own choice donated his time since CIRM was launched. Californians owe him thanks for that gesture. However, it also allowed him to say he was not a state employee. If he takes a salary, he clearly is a state employee and needs to act accordingly in every respect. Receiving a salary should prompt a close look at Klein's non-CIRM activities and just how much time he spends on the job."

Jesse Reynolds, director of the Project on Biotechnology in the Public Interest at the Center for Genetics and Society in Oakland, Ca., said,

"Chairman Klein's large proposed salary, making him the second highest state employee, is symptomatic of the CIRM's exemption from California's civil service laws - a provision that Klein himself wrote into the state's constitution via Proposition 71. What's gone less examined is that he quietly dropped his promise to serve only the first three years of his term, a promise made when he first assumed office to assuage concerns of potential power-mongering."

The news about Klein's salary has drawn little media attention. The only item we have seen came on the Capitol Alert section of The Sacramento Bee's website. Two readers filed extremely hostile comments in connection with the item.

Klein, who is a multimillionaire, is to be lauded for working without pay for the state of California for nearly four years. He has brought considerable energy and talent to a worthwhile endeavor. In decades of following California state government affairs, I cannot recall another case that comes close to Klein's example. If he will be working fulltime in his role as chairman, he merits a salary and should be well paid.

CIRM Posts Timely Info on Research Standards Meeting

The research standards working group of the California stem cell agency meets on Dec. 12 to deal with the use of IVF embryos for which donors were paid and the use of somatic cells in state-funded research.

Already posted on the group's agenda is substantial background material along with other staff-prepared material clearly laying out the policy issues involved.

Interested parties have ample time to assess the matters to be decided and make their own decisions on whether to attend the meeting or send comments that can be considered next week. CIRM is to be commended for the early posting of the information.

Closer Ties to Industry Promised in Revised CIRM Strategic Plan

The California stem cell agency has quietly unveiled its latest plan on how it intends to spend nearly $3 billion over the next nine years, including a major shift into backing research intended to drive therapies into the marketplace.

The proposal, a revision of the 2006 strategic plan, calls for much closer ties with the biotech industry, "dramatic increases" in funding of potential therapies, expanded national and international collaboration, development of a "real-time financial reporting system" and more funding for interdisciplinary research.

The plan envisions an agency that is on the leading edge of human embryonic stem cell research and calls for considerable travel globally by its top executives and scientific staff.

The strategic plan update was posted on the CIRM website Tuesday as part of the agenda for next week's meeting of the CIRM board in Irvine, Ca. (We have been critical of the laggard posting of information on board agendas, but CIRM deserves praise for a timely posting of this important document.)

Much of the revised plan reflects the thinking of CIRM President Alan Trounson(see photo), an Australian scientist who has been in his job only since January. The proposal is subject to approval and changes by CIRM directors. Public hearings are also promised.

The plan states:

"CIRM places high value on interdisciplinary approaches. When scientists work in collaboration with engineers, physicians, chemists, mathematicians, and others to solve complex problems, they can achieve more than they could have working alone."

It continues:

"CIRM’s current leadership considers this collaborative approach so critical to the agency’s goals that it is recommending that the $120 million recommended in the 2006 plan to be awarded over three years be increased by 75 percent in the first year’s round of grants alone. It is anticipated that the scope of Disease Team Awards will be expanded to include funding for clinical trials and that they will be awarded annually (and more frequently if needed)."

On the subject of "working with industry," the plan says,

"CIRM’s president proposes to create an industry advisory body that will aid its executive to more effectively communicate and partner with the bioengineering, biotechnology and pharmaceutical industries. Consequently, the science initiative outlined later in this document calls for a major increase in CIRM’s industry collaborations."

The proposal presents CIRM's assessment on the current state of the stem cell art, along with an all-in-one-place rundown of its view of its accomplishments.

The document includes plans for stepped-up hiring, particularly in the scientific area. CIRM has long labored with staff shortages. It is capped at 50 employees and now has about 30 after four years of existence. Failure to fill the allotted slots has led some CIRM directors to worry about staff burnout.

The revised goals appear to be ambitious, as did the 2006 plan. Here is a sample from its latest 10-year aspirations:

"CIRM grantees will have clinical proof of principle that transplanted cells derived from pluripotent cells can be used to restore function for at least one disease."

"CIRM-sponsored research will have generated therapies based on stem cell research in Phase I or Phase II clinical trials for 2-4 additional diseases."

"CIRM funded projects will have achieve sufficient success to attract private capital for funding further clinical development of stem cell therapies."

The plan provides more details on CIRM's communications and outreach efforts, which have expanded significantly in 2008. It also outlines the new CIRM website, which is scheduled to debut this month with new features targeting specific audiences from researchers to the public. It additionally lays out a plan for a series of town hall meetings.

The proposal is not a finished document. It has blanks where numbers need to be filled in and contains parenthetical comments that suggest additional material will be added. It is shy on assigning dollars to specific initiatives. The document's structure also does not allow easy, straight-forward comparisons to the 2006 plan.

Nonetheless, it is an important document, one that will clearly drive funding decisions during the next few years. Researchers in academia and the private sector as well as biotech business executives should pay close attention to it and suggest modifications in the next few weeks if they think they are necessary. It wouldn't hurt to express them directly to the board in Irvine next Tuesday and Wednesday but letters or emails can also be sent. Wednesday is probably the best day since approval of grants is likely to consume most of Tuesday. However, it is impossible to predict reliably the order of the agenda at CIRM directors' meetings.

CIRM Directors Meet Next Week: $210 Million Proposal on Table

In addition to considering a salary for California stem cell Chairman Robert Klein, directors of the California stem cell agency next Tuesday and Wednesday will take up changes in its strategic plan and debate the framework of the whopping disease team grant round, which could total $210 million.

Meeting in Irvine, the panel is also scheduled to approve $20 million for as many as 20 grants to develop innovative research tools and technology.

The agenda currently has links to the revisions in the strategic plan, the disease team proposal and another proposal for a $60 million "basic research initiative." Not yet posted is background information on the Klein salary proposal, a "pre-application review" process, new scientific members for grant review group, an accelerated funding plan for grants and loans to business and a conference grant to the 2,100-member International Society for Stem Cell Research.

CIRM President Alan Trounson is on the board of directors of the society. Klein was a member of an advisory committee to ISCCR in 2007, according to The Niche, Nature magazine's stem cell blog. Don Gibbons, CIRM's chief communications officer, is a member of the group's public education committee.

A Salary for Klein? Half-Million Likely

California stem cell chairman Robert Klein, who has worked without state pay since late 2004, is now seeking a salary that could run as much as half-a-million dollars annually, making him one of the state's highest paid employees.

The request will come up at next week's meeting in Irvine of the CIRM board of directors. The agenda only states that the item involves "consideration of compensation of chair of the ICOC(the CIRM board)." No details were offered online. But Don Gibbons, the agency's chief communications officer, confirmed today that it was a salary request but declined to offer a justification for the move.

According to the CIRM salary ranges, Klein (see photo) is eligible for compensation as high as $508,750. Klein is a multimillionaire real estate investment banker and operates a Palo Alto. Ca., firm bearing his name. He forswore pay in December 2004 when he was elected chairman by the CIRM board.

If Klein receives the full amount in the CIRM range, he would become the second highest paid state employee outside of the University of California, according to salary information compiled by The Sacramento Bee. He would displace CIRM President Alan Trounson in that slot. Trounson earns $490,008. In addition to Trounson and Klein, Marie Csete, chief scientific officer for CIRM, is in the top ten earners with a salary of $310,008 and ranks No. 8.

CIRM's Gibbons has not responded to a query about whether Klein is seeking the full $508,750.

CIRM executive pay popped up in the news last spring, when CIRM directors approved a 23 percent hike in the management salary ranges, easily surpassing pay levels at the much larger NIH. At least one CIRM director initially balked but the boost was ultimately approved with little debate.

Twenty-three percent government pay increases generate an image and PR problem at any time. But given the Golden State's current $28 billion budget shortfall and cutbacks in education and aid to the poor and elderly, the timing can appear especially inappropriate. And Klein's salary request, deserved or not, is also likely to create such problems.

However, a bit of a precedent for the salary request popped up today in a story by Jim Sanders in The Sacramento Bee. He reported that 214 legislative staffers received pay hikes this year, despite the state's economic woes. One-third of the raises went to employees earning less than $40,000 yearly but 16 went to staffers making more than $100,000.

The article generated intense reader comment that reflected a certain hostility towards government pay boosts. One reader, identified only as Coaki, said, "These people are incredibly insensitive and stupid. Pay raises with a $27 billion deficit?"

At CIRM, the way for Klein's salary request was cleared when Ed Penhoet resigned as vice chairman. He is also a multimillionaire and co-founder of Chiron. Penhoet, who is continuing to sit on the board, was eligible for a salary, which he did not accept. Penhoet's resignation cited time constraints and did not mention the salary issue. But a vice chairman working for free while the chairman takes a handsome salary would create an awkward situation. No successor to Penhoet has been nominated.

Differing Views on the Future of the Stem Cell Industry

The headline in the San Francisco Chronicle this morning read: "Drastic cuts among some biotech companies."

But just the day before, the Chronicle reported that "many in the stem cell field have a buoyant air these days."

The Chronicle is not alone in posing apparently contradictory views. Monya Baker carried links to some on her Nature magazine blog, The Niche. And here is the "good news" version of the stem cell biz from Midwest: "Why stem cell companies in Wisconsin and beyond will finally catch the eye of investors."

A couple of things are at work here. One is the optimism spurred by the Obama administration and its plans to ease restrictions on human embryonic stem cell research. A superficial assessment of that move generates an unrealistic, but rosy outlook for the stem cell business. The other factor involves the perennial optimism of the entrepreneur. They are a class given to always seeing the glass as half-full. What better time to invest in stem cells? Values are down. Bargains are waiting to be snatched up.

Indeed, financial bottom-feeders with strong stomachs and patience may do well. But the financial vulture business is tough. All the bad economic news has not yet sifted out. Realistically, it would seem to be a good time to be cautious about the prospects of any individual stem cell company.

We all should remember as well that the history of the biotech industry is littered with far more money-losing enterprises than successes.

An Unseemly Bid for Federal Help

California is running out of cash, and its governor has just called lawmakers kindergärtners.

That's in Sacramento, where government leaders have failed to deal with a $28 billion budget shortfall, and the state has cancelled bond sales.

In Washington, the win-at-any-cost battle against a possible economic depression is now running around $8.5 trillion, including loan guarantees.

In San Francisco, however, at the headquarters of the $3 billion California stem cell agency, all is financially well. The agency is assured of a constant stream of cash that cannot be touched by the governor or lawmakers, courtesy of the voters in 2004.

But CIRM Chairman Robert Klein wants more – specifically loan guarantees from the federal government for his proposed $500 milliion biotech bank. With guarantees, it could double in size, he believes, and help struggling biotech firms.

Klein will make his pitch to CIRM directors on Monday, seeking their support for an effort to convince the Obama administration to provide the financial assurances for the CIRM program. Certainly, a good case can be made to help out stem cell firms, which have had a hard time attracting cash. And since money is flying around in Washington, why not try to grab a few bucks. Everybody else is doing it.

But the question is whether it is appropriate? Do CIRM directors really want to put their hands out for help while the poor and elderly in California are seeing their government assistance cut? On the surface, it does appears a bit unseemly.

Novocell Chief Joins JDRF

The head of the only company to win a grant from the California stem cell agency is leaving his business to become the chief executive of the Juvenile Diabetes Research Foundation.

The departure of Alan Lewis is a bit of an illustration of the small world of stem cell research. His company, Novocell, won a $50,000 grant from CIRM, whose chairman is Robert Klein, who is also a member of the board of directors of the JDRF.

The foundation itself is significant provider of research funding. It has awarded more than $1.3 billion in grants since 1970, including more than $156 million in this fiscal year.

Could it be that JDRF and CIRM might collaborate on a funding effort? Possibly. CIRM has ambitious plans for collaboration. They already involve Canada, Japan, Great Britain and the state of Victoria in Australia.

CIRM Turning to 'Dramatic' Increases in Therapeutic Research

What direction is the $3 billion California stem cell agency going to take in the coming year and beyond?

As CIRM Chairman Robert Klein put it, how is the four-year-old enterprise going to respond to a "changing scientific landscape of stem cell science as well as the evolving thinking of the board and of CIRM’s staff and many stakeholders?".

Is the emphasis going to be on basic research or more focused on developing clinical applications? What are the best opportunities for successful grant funding?

Klein provided some answers to those questions in his testimony Nov. 20 before the Little Hoover Commission, California's good-government agency, which is conducting an examination of CIRM affairs.

Klein laid out the essence of the new 2008 strategic plan (an updated version of the 2006 document). He noted that it reflects the "vision, priorities and scientific guidance" of CIRM President Alan Trounson. The plan is subject to CIRM board approval and revision.

What may be of greatest interest to researchers seeking funding is Klein's comment that the plan will call for "dramatic increases" in funding of research "targeted to elicit therapeutic applications."

Here is more of what Klein had to say:

"The 2008 strategic plan update reflects the high value that CIRM places on interdisciplinary approaches. Biological scientists, working with physicians, chemists, mathematicians, and others to solve complex problems, can progress faster and further than can scientists working alone. For this reason CIRM awarded 'Disease Team Planning Grants' to support up to six months of planning and proposal development for novel, team-based research efforts aimed at reaching FDA approval for human trials within 48 to 60 months. The goal is to safely fast-track research from the laboratory to the bedside, with the ultimate aim of submitting an Investigational New Drug (IND) application to the FDA based on stem cell technology. CIRM’s current leadership considers this approach so critical to the agency’s goals that it is recommending a five-to-tenfold increase over the 2006 Plan in funds allotted to the Disease Team research grant program."

Klein continued,

"Building upon the values and foundation expressed in the 2006 strategic plan, the specific goals of the 2008 update of the strategic plan include:

"Measure CIRM’s successes and shortcomings in achieving the goals set in the 2006 Strategic Plan and learn from both.

"Outline a system for updating CIRM’s future research programs in light of the rapid evolution and new developments in stem cell science and regenerative medicine over the past two years.

"Map a plan for accelerating progress through the “pipeline to cures” by focusing research and organizing CIRM’s portfolio to facilitate the connections between CIRM-funded basic stem cell research and translational, pre-clinical, and clinical research.

"Lay out an option for developing robust systems for capturing and evaluating the results of CIRM-funded programs and for sharing these data in ways that accelerate the field.

"Reassess and enhance CIRM’s relationships with the biotechnology and pharmaceutical business communities, relationships essential to our goal of lifesaving therapies based on stem cell research.

"Propose new ways for CIRM to lead stem cell science and regenerative medicine by sharing expertise and collaborating with partners in the scientific community, both nationally and around the world."

Does all this mean a reduction in CIRM funding for basic research? After all, the agency's funds are limited albeit rather large. Klein's remarks did not directly answer that question but recognized that it will be raised. He said,

"CIRM appreciates the tradeoffs involved in awarding funding for therapy development versus basic research and the impact of each on achieving CIRM’s mission. Fortunately, CIRM has not been presented with a binary choice. CIRM has the capacity to fund both basic research and therapy development. As CIRM’s 2006 and 2008 scientific strategic plans make clear, CIRM recognizes that it must fund both basic research and preclinical and clinical research in order to meet the goals established by Proposition 71. Indeed, CIRM’s funding priority is to create a “scientific pipeline to cures” stretching from early discoveries to clinical applications. The draft 2008 update to the strategic plan thus calls for dramatic increases beyond the 2006 plan in the types of research targeted to elicit therapeutic applications, and it envisions significantly more investment in focused “disease team” awards, translational research awards, and linkages to industry—the final conduit for getting research advances to the patient."

Given Klein's disclosures and acknowledgment of the existence of the 2008 plan document, which is a public record, on Tuesday we asked Don Gibbons, CIRM's chief communications officer, for a copy. He refused, declaring,

"He (Klein) said we were working on it. The drafting is not done yet. Once it is, it will be posted for everyone to comment."

Klein: Federal Backing Could Lead to $1 Billion CIRM Loan Effort

Chairman Robert Klein of the California stem cell agency is proposing that the Obama administration provide loan guarantees that he projects would allow the Golden State to mount an ambitious $1 billion lending program for the biotech industry.

He broached the proposal at a Nov. 19 meeting of the Finance Subcommittee of the CIRM board of directors and plans to bring it up at a special teleconference meeting of the full board on Monday.

Klein's plan would double the size of the proposed $500 million CIRM loan program that is his brainchild. The board of directors is yet to sign off on details of the plan, which have not yet been fully worked out.

The $3 billion state stem cell agency itself has no apparent financial problems, although the state is in the midst of a $28 billion budget crisis. The voter-approved law that created the agency guarantees a steady stream of cash that cannot be touched by either the governor or the legislature. But Klein believes that the federal guarantees would help the lending effort.

At the Finance Subcommittee meeting earlier this month, Klein noted the trillion-dollar bailout figures floating around in the nation's capital. According to the transcript, he said,

"In terms of our financial interest, the loan guarantees that are being considered for a number of sectors of the economy could include the biotech sector.

"And here, if there were a 50-percent loan guarantee provision for governmental loan biotech programs, it would mean that if we had allocated conceptually, and only conceptually, because it's subject to approval of every loan at that time at the board level, but if we conceptually approved a $500 million allocation for a loan program and there were a government program for 50-percent guarantee, we'd have the possibility, subject to a lot of detailed work and legal review, to create a billion dollar program with that. So it would substantially expand our capacity for funding."

Klein brought up the proposal to seek "early input" from CIRM board members. However, the Finance Subcommittee ran out of time and adjourned without discussing the matter. He asked board members and the biotech community to send comments to him.

Klein is also seeking to lobby the Obama administration on other biotech industry matters. They include removing unspecified small business loan restrictions, expanding the FDA staff and substantially increasing funding for NIH grants.

On the restriction issue, he said,

"I believe it would be beneficial if some of those restrictions were changed to make it more possible for companies that have received venture capital funding in the past to get SBIC (Small Business Investment Corporation) loans because with falling stock prices, doing another round of stock offerings is not feasible unless you're going to hedge funds, which are extraordinarily difficult to deal with and create tremendous pressure on these small companies to the extent hedge fund money is available at all."

Klein said a substantial increase in FDA staff is needed to avoid a "choke point" on moving stem cell therapies into the clinic. He said,

"Everyone is going to need expert advice on exactly what kind of data and what kind of preclinical work is going to be required for an IND to be approved for a phase I human trial. That advice is required three years or more in advance because this is an innovative area. And so it's going to be an early priority with a lot of lead-time importance to get FDA expansion that can deal with cellular therapies as they advance."

CIRM has not yet provided written background on Klein's proposal on its Monday agenda, which also includes a plan to help ease the problem of absenteeism at board of directors meetings.

The public can listen in and participate during the teleconference meeting from locations in San Francisco (2), Los Angeles (5), La Jolla (3), Elk Grove, Sacramento, Pleasanton, Berkeley, Menlo Park, Healdsburg, San Carlos, San Diego, Irvine (2) and Duarte. You can find the specific addresses on the agenda.

WSJ: No Magic Stem Cell Funding Cure From Feds

Alan Trounson, president of the $3 billion California stem cell agency, is minimizing the impact of President-elect Obama's plan to ease federal restrictions on human embryonic stem cell research.

Trounson (see photo) was quoted today in a piece in the Wall Street Journal by Gautam Naik and Robert Lee Hotz. The article was headlined "Obama's Promise on Stem Cell Doesn't Ensure New War on Diease." This morning the story appeared prominently on the main page of the WSJ web site but on page A9 of the print publication.

Trounson's remarks dealt both with the impact of California's research effort, now the world's largest source of funding for hESC science, and Obama's stem cell plans.

Concerning the Golden State, Trounson said,

"We are at such a high pace and we have so much funding ourselves that there will be no real competition to our leadership."

Trounson also said,

"The incremental money from NIH will be relatively small because of the economy."

The WSJ piece said that "two big questions" must be answered at the federal level.

"How much federal money will be made available for the research? And how quickly can America's major science-funding agency, the National Institutes of Health, take on a leadership role in a field where it has only modest experience and whose funding efforts have lagged behind several state initiatives.

"'To make stem-cell science take off, it needs something equivalent to Nixon's war on cancer,' says James Thomson, a stem-cell scientist at the University of Wisconsin who created the first human embryonic-stem-cell line in 1998. 'But because of today's economic realities, it's not going to happen for at least a couple of years.'"

The WSJ story may be limited to subscribers only. If you would like a copy, please email me at djensen@californiastemcellreport.com

The Bee Assails the CIRM 'Club'

The Sacramento Bee said today that the board of directors of the $3 billion California stem cell agency is "is rife with potential conflicts," "overly large and unwieldy" and "awards multimillion-dollar grants in a manner that favors secrecy over accountability."

The comment came in an editorial on last week's hearing by the state's good-government agency, the Little Hoover Commission, into the stem cell research program.

The editorial said,

"The most striking testimony came from Kenneth Taymor(see photo), executive director of the UC Berkeley Center for Law, Business and the Economy.

"Taymor, who has been watching the institute's operations for three years, noted that nearly everyone on the institute's governing board – medical school deans, university officials – has some sort of financial interest in the grants being awarded.

"Even with officials recusing themselves, the board's deliberations, he said, have the feel of 'a club that was allocating money among themselves' based on preordained decisions."

According to The Bee,

"The hearing revealed, once again, that this institute's 29-member governing board is rife with potential conflicts; that it is overly large and unwieldy; and that it awards multimillion-dollar grants in a manner that favors secrecy over accountability."

The Bee concluded:

"This is troublesome stuff, yet it doesn't appear the Little Hoover Commission will recommend sweeping structural changes, even though the institute still has more than $2 billion left to spend.

"Downsizing its governing board, eliminating conflicts and stripping the institute's chair of operational authority would require a constitutional amendment to Prop. 71. Based on their discussion Thursday, members of the Little Hoover Commission don't want to go that far.

"That's too bad. Without real reforms, Klein and his board will continue to operate like a club, spending taxpayer dollars without the normal safeguards of other public agencies."

Minimal Coverage of Hoover-CIRM Inquiry

News coverage of last week's state Capitol hearing into the affairs of the California stem cell agency was quite light, with only one newspaper writing about the session -- at least based on an Internet search.

Reporter Terri Somers of the San Diego Union-Tribune pulled together the single story on the inquiry by California's Little Hoover Commission, reflecting the importance of the biotech and stem cell industry in her area. The Sacramento Bee did not cover the event, but its Capitol Alert Internet service linked to Somers' piece.

The meager coverage was to be expected. Other matters are consuming news organizations, which also are suffering from heavily cut-back staffs.

Somers led with a statement by CIRM Chairman Robert Klein concerning the possibility of another bond measure to continue the work of the agency, which has only a 10-year funding capability. Another bond proposal could be placed on the ballot if the legislature approves or if it qualifies via the initiative process.

Somers described Klein's "unflinching confidence" in the research enterprise and reiterated his familiar pitch that CIRM has been overseen to a fare-thee-well.

Somers wrote,

"But what was perhaps most revealing were the areas of questioning by the commission members. They asked about the size of the institute's governing board, the transparency of its spending decisions, the ability of biotechnology companies to benefit from stem cell grants and the power and job responsibilities of Klein and (CIRM President Alan) Trounson.

"'I'm concerned that there is an arrogance in how the funding is handled and the institute is structured,' said commission vice chairman Eugene “Mitch” Mitchell(see photo), a vice president of San Diego's Sempra Energy. 'I find it baffling that it is a state agency, but there are so many rules it doesn't have to adhere to.'"

She continued,

"Ken Taymor, a UC Berkeley law professor who has attended many of the institute's board meetings, said the public continues to be frustrated that funding decisions are still made behind closed doors. He also urged the commission to look at how power is divided between Klein and Trounson.

"The board's size, at 29 members, makes it inefficient, said several observers. And it is unusual that it has no members whose sole interest is that of the taxpayers, said Michael Klausner, a Stanford Law School expert on nonprofit governance."

Somers wrote,

"John Simpson of Consumer Watchdog, a Santa Monica advocacy group, suggested trimming the board's membership to 15 people with no conflicts of interest."

(Simpson put out a press release that was distributed widely.)

Somers additionally reported that Trounson indicated that California businesses will do better on the next round of grants. He predicted that probably one-third of the tools-and-technology grant round will go to the private sector. Only one business has won a grant and that was for only $50,000.

We will have more on the hearing over the next few days, but if you can't wait and want to wade through the testimony, it is all available here on the Little Hoover Commission website. An archived video of the entire session should be available soon via the same link.