A Caution about Excessive Industry Coziness at CIRM

A longtime observer of the California stem cell agency is warning that the $3 billion enterprise is on the verge of becoming much too intimate with industry.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., said that a plan to create an industry biotech advisory group for CIRM is "fraught with pitfalls."

Writing on his organization's blog on Feb. 19, he said,

"Who picks the members? What would be the criteria for selection? Will the meetings be public? Will these advisors also be applying for grants?"

He noted that four members of the CIRM board of directors hold their positions because of their ties to the life sciences industry. Conducting special, public meetings with industry is okay, Simpson said. Biotech lobbyists can also take part in regular meetings of the agency.

But Simpson wrote,

"Creating an industry special interest group to whisper in the ears of CIRM executives is just wrong-headed.  What do you say to biotech companies not on the panel? Will there be an advisory group from academia, another from patient advocates and another advisory group from the public?

"But that's exactly what the ICOC (the CIRM board) and its committees are supposed to do with their public meetings.  Selecting some industry representatives and giving them special treatment and access to CIRM's leadership is simply wrong."

The 'House of Cards' and a $400 Million Fund-Raising Drive

Borrowing $400 million for stem cell research is no small task, but one that CIRM has chosen for itself.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., today raised questions about the nature of the effort, given the nation's shaky economy and the "house of cards" that is the budget deal approved today in Sacramento.

Here is what Simpson said in an email:

"It strikes me that despite the budget deal, it still may be a long time before the state can get into the bond market.

"Key parts of the deal have to go before the voters in a special election in May. I don't see how you can sell bonds until the outcome of the election is known.

"And, it seems to me, the chances are excellent that the voters just might turn the proposal down throwing everything back to square one.

"I don't know what it does to private placement, but it seems to me that the just-passed budget may be a house of cards that collapses.

"I like to see myself is an optimist -- maybe I'm influenced by how much my own assets have tanked -- but I think it will be an uphill struggle to place $200 million before September when CIRM's cash runs out."

Who is on the Hook for $400 Million in Stem Cell Science?

An anonymous reader has posted a question on the "California budget mess" item, asking about who will pay back the $400 million in bonds that CIRM is seeking to sell privately to support its operations. We suspect some other readers may have the same question, so we are responding here.

But first, let's rephrase the question in more straight forward language: Who is going to pay the $400 million that the state stem cell agency is seeking to borrow privately?

The answer is the state of California and its taxpayers. The bonds are, in fact, loans to the state and become the "general obligation" of the state. They are no different than general obligation bonds that are sold by the state to execute other projects. The bonds do not rely on CIRM to generate revenue to pay them off. The state cannot declare bankruptcy, according to a briefing for CIRM directors last month. Thus investors would seem assured of earning a return at some point. Income from the bonds is also exempt from California taxes but not federal taxes, making them favored investments for California-connected persons and enterprises.

The state has "placed" only $250 million of the $3 billion in bonds authorized to be sold on behalf of CIRM. That initial round of borrowing was the first time ever that general obligation bonds have been used to "finance the development of intellectual capital," according to the state treasurer's office. Generally bonds are used to build roads, hospitals, housing and other "hard" assets.

Here is a rundown from the state treasurer's office on California bonds that should answer nearly all questions about the nature of the devices.

California Passes Budget, Issuance of Stem Cell Bonds Still Distant

In the predawn hours today in Sacramento, California lawmakers passed a budget aimed at dealing with a $42 billion state deficit, but the spigot that feeds CIRM remains firmly closed.

Nonetheless, the action does assist with CIRM's own plans to bootstrap itself out of its cash crunch.

The state legislature has sent the spending proposal to the governor, who is expected to sign it in the next few days. The action sets the stage for possible issuance of state bonds, the funding mechanism for the California stem cell agency, which is facing a major financial shortfall.

State Treasurer Bill Lockyer is evaluating the new state budget to determine whether it enables the state to return to the bond market and under what conditions. However, even if bonds are sold in the next month or so, bonds for CIRM are not at the top of the $53 billion list.

In response to a query from the California Stem Cell Report, Tom Dresslar, a spokesman for Lockyer, said,

"We need to analyze the product(the budget) and get a firm handle on cash flow before we can say anything about how the budget will affect our ability to return to the bond market."

However, passage of the budget should help with the CIRM plan to sell privately $400 million in state bonds to provide funding for CIRM. The legislative action removes significant uncertainty and should help counter possible objections from potential buyers.

The treasurer's office has also assisted indirectly by leading the way on the private placement of state bonds, which has never been done in state history. Lockyer's office has already cut a deal with the San Francisco Bay Area Toll Authority to buy $200 million in state bonds. That means CIRM will not be in the unenviable position of being the first out of the trenches with a private sale and can point instead to a precedent.

Here are links to some budget stories: Wall Street Journal, Sacramento Bee, Los Angeles Times, San Francisco Chronicle and New York Times.

Chapter Two of 'Waiting for Obama' -- The Vagaries of Vagueness

President Obama's delay in announcing changes in federal restrictions on human embryonic stem cell research today triggered another article on the resulting nervousness in stem cell circles.

This one came in the Washington Post. Written by Rob Stein, the piece, intended for publication Thursday, said,

"...{T)he delay and the vague language (from the administration) are making proponents nervous. Has Obama simply been too preoccupied with the economic crisis to focus on the issue? Is he hesitant to wade into one of the flashpoints of the culture wars? Could he even be considering a moderate move as part of his broad strategy of seeking the middle ground on even the most contentious issues?

"'The word the president is 'considering' it is too vague a word for me," (Amy Comstock Rick (of the Coalition for the Advancement of Medical Research) said. 'I don't know entirely what that means. If it means he's just working out the details that's great. But if 'considering' means 'reconsidering' we would be very upset.'"

Stein said the White House has reassured the worriers that something will happen soon. He also quoted Story Landis(see photo), head of the NIH stem cell task force, as saying,

"We are assuming that what we will be asked to do is develop guidelines for stem cell lines derived from embryos produced for reproductive purposes in excess of need."

But Stein added,

"Proponents of the research hope the executive order and resulting NIH guidelines would be more open-ended than that, allowing research on stem cells derived in other ways."

Landis' advice to researchers? If you are smart, start writing your grant now.

(Editor's note: Chapter One of "Waiting for Obama" can be found here.)

Fresh Comments

Ty Tyler has published a comment on the "waiting for Obama" item.

David Granovsky has posted a comment on the "CIRM touts" item.

CIRM Touts Its Financial Outlook

CIRM has officially but quietly announced that it hopes to raise $400 million through 2010 by selling California state bonds privately, a task never before achieved in state history.

The information on the private placement goal was posted Friday on the CIRM web site with virtually no notice or fanfare. The CIRM home page, which often carries far more trivial matters, makes no reference to the item about the state of CIRM's troubled finances. The three-paragraph posting was placed near the top of the CIRM web page page entitled "Funding Opportunities" and "Current Requests for Applications."

As far as we can tell, the item is the only significant reference on the CIRM web site to the hours and hours spent by worried directors last month discussing the agency's cash woes, other than the transcript of the meeting itself.

While the agency is now about seven months away from running out of cash, the Friday item has a positive headline, "CIRM's Financial Commitments Are Secure." The language is tailored to reassure grant applicants, especially those applying for the $210 million disease team RFA that was also posted on Friday.

The financial-status posting also refers to a "CIRM program with the state treasurer" for private placement of bonds. If the program is actually in place, it is a significant advance on the situation discussed by directors just three weeks ago. Many questions were raised at the time by directors about the plan. CIRM Chairman Robert Klein, who devised the private placement effort, promised to report back to the board at its meeting March 12.

CIRM seems determined not to call public attention to its financial problems, given its handling of the matter as long ago as its December board meeting. The January meeting included a lengthy briefing on the subject, but the public had no advance notice from CIRM of the sweeping scope of the problem. Even directors seemed taken aback.

A number of the directors were concerned about the public relations message that would be delivered as a result of the briefing and the ensuing discussion. There was a decided effort at the time to put a positive spin on the news. However, while directors approved $58 million in grants, they balked at funding until they knew more about the agency's finances. Efforts were also made to reassure current recipients of CIRM grants that money would still be forthcoming.

The public relations and positioning tactics could be construed as Pollyannish. But the agency must act in a way to retain the faith of the stem cell community that it will continue to operate unimpeded by what it hopes are transitory issues. CIRM needs a positive outlook to attract the best proposals for its disease round. It also must sell a story of past accomplishment and a rosy future to potential buyers of its bonds. No one is going to invest in a sinking ship.

At the same, CIRM directors and its executives should not be misled about the realities. Waiting too long to act on other measures to deal with the cash crunch will only compound the problem.

(A side note: In an operation independent of CIRM, the state of California is expected to announce later this week that it will make its first private placement of general obligation bonds, which could help smooth the way for CIRM sales with nervous investors. If the state does, in fact, make the private sale, CIRM, which has recorded a number of firsts in its brief life, will not have the opportunity to record another.)

Here is the full text of CIRM's "secure finances" posting:

"California voters approved the sale of  $3 billion in bonds to fund the work of the California Institute for Regenerative Medicine. The State finance committee created to oversee those bonds has authorized the issuance of the full amount.  A total of $2.5 billion in authority remains in funding availability. Proceeds from sale of the bonds are constitutionally protected and can only be used to fund CIRM programs and operations.

"CIRM currently has significant cash reserves of $160 million, which can fund all existing commitments through at least September. The agency’s plans have always called for raising new capital on a cash-flow, as-needed basis. We expect the traditional bond market will open soon with resolution of California’s budget situation.  To supplement this public bond market, CIRM is working with the State treasurer’s office on a CIRM private placement of $200 million in general obligation bonds this year and $200 million again next year.  The CIRM program with the State Treasurer is designed to produce sufficient funding in 2009 and again in 2010 to maintain the pace of funding under CIRM’s proposed grant schedule.

"The Agency intends to continue the planning and review needed to maintain its mission on schedule and expects that additional bond funds will become available by the time they are needed."

Long Wait for CIRM in the California Cash Queue

How long is the line for cash in California before the state's stem cell agency might get some?

Think about $53 billion in bonds waiting to be sold. That is the amount, including CIRM-connected bonds, that has been approved but not yet brought to market. Compare that to the total of $7.35 billion in general obligation bonds sold by the state during the entire fiscal year 2007-08.

California state bonds are what pays for the grants to researchers and the operations of the stem cell research effort, which is now facing a serious cash flow problem. That's because the state has not sold bonds since last June. And it currently has $52 billion in bond indebtedness.

Once the budget mess in California is resolved, the state treasurer's office has told CIRM it will have to wait for funding until other, more pressing bond needs are met.

NY Times Examines the California Budget Mess that Ensnared CIRM

California's $42 billion fiscal fiasco, which is threatening its $3 billion stem cell research effort, today drew some major and dubious media attention.

In a piece by Jennifer Steinhauer, The New York Times reported on the shameful shenanigans in Sacramento. Ballooning deficits, intransigent lawmakers and a governor who is "free of allies or influence" were just part of her first paragraph. The budget issues are so great that CIRM's relatively picayune problems did not merit even a word, although they have raised a loud alarm in state stem cell circles.

California faces a $42 billion budget shortfall. A partial solution is now before lawmakers in Sacramento, but a handful of Republicans, who are more interested in ideology than solving problems, are blocking passage.

Steinhauer wrote that the state, in a nearly unheard of move, has lost access to much of the credit markets and that its bonds are now rated the lowest in the nation. That is the reason that the California stem cell agency is now facing a hefty financial shortfall. The agency relies on bond funding, and the state has not sold any since last June.

Steinhauer continued,

"'No other state is in the kind of crisis that California is in,' said Iris J. Lav, the deputy director of the Center on Budget and Policy Priorities, a liberal research group in Washington. The roots of California’s inability to address its budget woes are statutory and political. The state, unlike most others, requires a two-thirds majority vote in the legislature to pass budgets and tax increases. And its process for creating voter initiatives hamstrings the budget process by directing money for some programs while depriving others of cash."

It was a voter initiative that created the California stem cell agency and isolated it from control by the governor or the state legislature. Instead the ballot measure, Prop. 71, gave CIRM direct funding from state bonds. The measure initially protected CIRM but now the agency has become part of the financial collateral damage in California's budget battles.

Robert Klein, chairman of the stem cell agency, has proposed an effort to sell bonds privately to ease CIRM through its hard times. The state has never before sold bonds privately, but is reportedly ready to do that soon – but not for CIRM. The stem cell agency will have to wait in line while more pressing needs are addressed. Meantime, Klein is trying to cobble together a plan for CIRM to peddle the bonds directly to foundations in the hopes of meeting two of the foundations' needs – a solid return on their investment (probably 5 to 6 pecent) and funding worthwhile research. He is expected to report on that effort at CIRM board meeting on March 12.

Klein, who is an attorney and real estate investment banker, led the drafting effort on Prop. 71. The idea was to make the agency immune from "political" tinkering. In the process, however, he wrote into the measure the seeds of a number of problems that have surfaced since its passage in 2004. The reliance on bond funding is just one, and it now puts the agency, once fiscally well-endowed, near the end of the line for cash as California works its way out of its budget mess. And because the whole arrangement is locked into the state Constitution and state law and virtually impossible to change, CIRM's tenuous situation will continue for some time regardless of what makes good sense either scientifically or in terms of sound policy.

Concerning our earlier comment about the shenanigans in Sacramento, many folks working up there deserve some responsibility for the budget crisis. But fundamentally it is failure of leadership – particularly that of Gov. Arnold Schwarzenegger, who appears to have lost much of the clout he once had and is also unwilling to devote his remaining political and financial resources to "persuading" GOP lawmakers to vote for a budget. (He would do well to study the exercise of power by Lyndon Baines Johnson.) The state GOP legislative leadership seems to be locked into some fantasy unconnected to the realities of the California economy. Democrats also have not conducted themselves well along with the host of special pleaders lobbying in Sacramento, ranging from teachers and business interests to environmentalists and prison guards.

Science, Marco Polo and Kissing

Given that today is Saint Valentine's Day, we are indulging in an aspect of science that may not have much to do with stem cells – kissing.

Sheril Kirshenbaum of NewScientist magazine has graced the online world with a look at one of the latest theories about the origins of kissing. It comes from neuroscientist V.S. Ramachandran of UC San Diego and the Salk Institute, who has been labeled the "Marco Polo of Neuroscience."

Kirshenbaum writes that Ramachandran "points out that since our ancestors needed to find ripe fruit, they would have been attracted to the color red."

She quotes the scientist as saying,

"Red thus became an indicator of food reward. Then something called 'evolutionary co-option' happened, turning red into a general signal for attraction."

Ramachandran says that despite changes that have resulted in an upright posture for human beings, swollen lips remain attractive to males "because of an atavistic persistence of evolutionary memory for attraction to red."

Kirshenbaum notes,

"This hypothesis is supported by the fact that bonobos ( a type of great ape) share our pink lips, as well as our inclination toward kissing, face-to-face mating and oral sex - much more so than pale-lipped chimpanzees."

In a separate piece, NewScientist editorialized,

"...(T)he role of kissing remains mysterious. Perhaps it is one of those facets of human behavior that will remain forever beyond our ken - but no less delicious for that."

As far as we can determine, Ramachandran is not a recipient of a grant from the California stem cell agency. But some clever folks at CIRM might be able to conjure up a concept for an RFA that could attract his attention and advance science in this important area. Color the application red.

Financially Troubled CIRM Hires $200,000 Federal Lobbyist

The California stem cell agency has hired one of Washington's more influential lobbyists, The Podesta Group, to promote a $10 billion biomedical industry aid package being pushed by CIRM Chairman Robert Klein.

In response to an inquiry, Don Gibbons, CIRM communications chief, today said a contract had been signed with the firm, which was founded by Tony Podesta (see photo) in 1988. Gibbons did not disclose the value of the contract, but Podesta proposed a $200,000, 10-month deal in keeping with the terms of CIRM's request for proposals. Travel and other expenses incurred by Podesta would add to the total cost. The lobbying proposal also does not include travel expenses to Washington, D.C., for Klein, other CIRM directors or staff.

The losing firms were Van Scoyoc Associates and Hogan & Hartson.

Earlier we requested a copy of the 15-page Podesta proposal, which is a public record. Gibbons supplied a heavily censored version. More than five key pages were missing, leaving only their titles: "situation analysis" and "strategic framework."
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Asked for an explanation for removal of the material, Gibbons quoted CIRM legal staff as saying,

"The Public Records Act incorporates, as an exemption, the trade secret privilege found in the Evidence Code.  Each responder was given the opportunity to assert that privilege for any part of the proposal it claims as a trade secret."

Without seeing the five removed pages, it is impossible to evaluate the Podesta proposal or whether it is realistic to expect any sort of result from the expenditure of $200,000 in California taxpayer funds. It is also clear that much of the bowdlerized, analytical material would likely consist of little more than what can be read in newspapers, industry publications and online information sources.

Most of the remaining material amounts to boilerplate descriptions of the firm and its work. However, Podesta did strike a ambitious chord or two, indicating that it would lobby for federal cash directly for the agency and would attempt to make CIRM a major biomedical player in the nation's capital.

Podesta wrote,

"Faced with the prospect of being unable to fund previously approved research and facilities grants, CIRM needs federal support in the form of appropriations, loan guarantees, and /or other measures to finance its research program through the end of calendar year 2010...."

In addition to grabbing some cash right now, Podesta said,

"Our strategy also positions CIRM to play a major role in shaping longer-term federal policies on biomedical research in general and stem cells in particular."

The firm said it is "the longest-tenured Washington representative of the pioneer biotech companies – Genzyme, Genentech and Amgen." It also represents Novartis Vaccines and Diagnostics and Novo Nordisk. Business Week has labelled The Podesta Group as one of seven "Uber-influencers: The Lobbyists Likely to thrive in the New Washington."

The hiring of the lobbyist has drawn fire from at least one critic, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., who has called it an unnecessary, costly diversion from CIRM's stem cell research mission in California.

Simpson raised questions about the federal lobbying plan as early as CIRM's board meeting late last month. He specifically mentioned its $200,000 expense.

By that time the request for lobbying proposals, including its cost, had been on the CIRM website for two days. In response to Simpson, however, Klein said,

"The dollar amount of that is completely unknown at this time. It's in order to attract proposals and see what we have and what resources we need. So we're in an investigation stage of that."

Klein made that statement the morning of Jan. 30, the transcript of the meeting shows. The deadline for the proposals was 5 p.m. later that day with selection of a lobbyist scheduled for as early as two business days later.

We have raised additional questions with CIRM's Gibbons. They include whether CIRM's legal staff agrees that only "trade secrets" were removed from the Podesta proposal, whether all the material was removed at Podesta's request and whether CIRM removed material without a request from Podesta. The questions also include terms of the contract, whether the firm has actually begun work and whether Klein is seeking financial support from grantee institutions to pay for Podesta.

We will carry Gibbons' responses when we receive them.

If you would like copies of all three lobbying proposals, send an email to djensen@californiastemcellreport.com.

CIRM/ISSCR Convention Proposal Reduced to $250,000

CIRM directors balked last year at coughing up $400,000 for the 2010 convention of the International Society for Stem Cell Research, but now the figure has been trimmed to $250,000.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., reported the new figure on his organization's blog. He said that CIRM has agreed to help the group raise the additional $150,000 for the San Francisco meeting.

But Simpson wrote,

"That's a mistake.  CIRM should focus with laser-like precision  on where its getting the money to fund existing grant commitments. This sort fund raising effort -- just like hiring a proposed lobbyist in Washington for roughly $200K --  is an unfortunate and unnecessary distraction."

Online Poll Says Nyet to Biotech Bailout; Results Subject to Instant Change

Does the biotech industry deserve a bailout? No, according to the current results of an online poll being conducted today by Fierce Biotech, which calls itself "The Biotech Industry's Daily Monitor."

At least that was the conclusion at the time of this writing. It was a "finding" that might give minor pause to those pushing the $10 billion assistance package championed by the chairman of the $3 billion California stem cell agency, Robert Klein.

Here is what the poll showed at 3:33 p.m. MST today. Forty-nine percent answered negatively to the bailout question. Forty-three percent said yes. Eight percent were not sure.

We were surprised by the numbers because the Fierce Biotech audience presumably consists of folks inclined to support the industry wholeheartedly. But some poll respondents may have been taken aback by the avaricious clamor to climb aboard the already stressed bailout wagon in Washington.

The poll is totally unscientific. No total numbers are offered. You just go to the site and vote. It is even possible to vote twice, if you are crafty. (We did, once yes and once no, to assure complete balance.) Earlier in the day, something like 53 percent supported a bailout, but that changed as the day wore on, Even that number was surprising, however, given the nature of Fierce's audience.

The poll was also linked to an opinion piece by Daniel Nevrivy of the Nevrivy Patent Law Group in Washington, which argued for a bailout. He wrote,

"At a recent healthcare conference, the notion that the biotech industry receive government help was ridiculed by a well-known financial executive. Doing 'something stupid' over there--a reference to the U.S. auto industry bailout - doesn't mean you should do something stupid over here, remarked the executive. The remark is reflective of the evolving attitudes of Congress and the U.S. taxpayer over industry bailouts. Support for U.S. automakers, who regularly get beat by the foreign competition--even on their home turf--may have poisoned the well for other, more worthy industries like biotech that are now struggling."

Nevrivy argued that it is wrong to equate the two. He said US biotech is stronger than its foreign competitors, although it is suffering from a current cash crunch.

He wrote,

"Economists generally disfavor government support and subsidies; however, we are living in a world where the government is an active player, as well as a referee, and is picking winners and losers. If we have to pick winners and losers, doesn't it make a certain amount of economic sense to favor industries in which we have an advantage? If that is the case, it is wrong to equate support for the U.S. auto and biotech industries as equally bad ideas."

Mulling Industry Ties: CIRM, Charities and Cash

The Wall Street Journal this morning carried a piece about the multimillion dollar linkages between some charities and the biomedical industry. The article offers some food for thought concerning the California stem cell agency and its financial crisis along with changes in the strategic direction of the agency.

Reporter Keith Winstein wrote that charities are "increasingly frustrated with the slow emergence of new disease treatments" and are pumping tens of millions of dollars into industry.

He quoted Robert Beall, the head of the Cystic Fibrosis Foundation, as saying,

"Academics are really not good at taking good understandings of the basic defect and translating it to new therapies. We had to get the drug companies to start to get involved with cystic fibrosis."

Winstein said that "about a dozen disease-based charities recently have started funding early-stage drug research at start-up companies -- usually in exchange for royalties or stock options." They include the cystic fibrosis foundation, the CHDI Foundation and the Juvenile Diabetes Research Foundation, of which CIRM Chairman Robert Klein is a director.

The article said that the investments create "potential conflicts for charities, which are called upon for impartial advice to patients but could end up with financial stakes in high-price treatments."

Winstein reported that Aaron Kesselheim, a physician at Brigham and Women's Hospital in Boston, says the investments can create a "potential minefield." Winstein continued,

"Normally, a patient-advocacy group might be expected to argue for lower prices for pharmaceuticals -- but a group with a royalty stake or equity in a drug maker has the opposite interest as well.

"Disease-focused charities also often give recommendations to doctors, patients and the FDA. The fibrosis foundation runs a pharmacy network to dispense drugs, and accredits treatment centers. The impartiality of such activities might be questioned if a group had a stake in one of several competing drugs, says Dr. Kesselheim.

"'Equity relationships can create substantial unconscious biases in the way that these foundations conduct their business that might lead them away from the ideal public-health strategies,' he says.

"'For example, a generic drug might be really useful for patients with MS, or epilepsy, and because the foundation has these sort of close ties with for-profit companies, then they might have subconscious biases against advocating for those sorts of outcomes that might lower costs.'"

CIRM is currently working on a plan to sell California state bonds to private foundations and perhaps others to help fund the stem cell agency's grants. The proposal could dovetail with the foundations' desires to push therapies into the marketplace along with generating reasonable and safe returns in its investment portfolio.

At the same time, CIRM is emphasizing its connection to industry with a push towards bringing therapies into the marketplace. The agency expects to release a $210 million RFA in the next several days for a disease team project that will be one of its largest grant rounds. The agency expects more than 100 applicants for the grants, which are aimed at pushing stem cell research closer to producing a commercial product. Commercial enterprises are expected to be among those seeking CIRM cash. The disease team round is also likely to see the launch of a $500 million biotech lending program for both industry and nonprofits. Last month, CIRM Chairman Klein told directors that the disease team round is a "very, very important" element in pitching the bonds to foundations.

(Editor's note: The WSJ article may not be accessible without a subscription. If you would like to see the full article, email djensen@californiastemcellreport.com and I will send you a copy.)

San Diego Consortium Pushing Ahead on $115 Million Lab

San Diego's Sanford Stem Cell Consortium, an alliance of UC San Diego, Scripps, Burnham and Salk, says that it remains committed to its $115 million lab construction project and that site preparation is currently underway.

Louis Coffman, vice president of the consortium, made the comment Monday in response to a report in the UC San Diego campus newspaper that the project, funded in part with $43 million from CIRM, had been put on an indefinite hold because of financial reasons. CIRM last month disclosed that it is facing a severe cash flow problem because of its inability to sell state bonds.

Coffman said that site preparation has begun but that actual construction will not start until the consortium concludes "the definitive ground lease" with UC San Diego, a process expected to take three to four weeks. Coffman said,

"And it will take a similar amount of time to nail down definitive financing terms and then likely several weeks after that to consummate financing."

Coffman also told the California Stem Cell Report, "SCRM (the consortium) has not expressed doubt that it will receive the grant funds from CIRM. We are confident that CIRM will pay SCRM the grant funds due to SCRM when due.

"California¹s financial challenges have raised potential lender¹s concerns about CIRM¹s ability to pay the grant funds, but CIRM has the means and is working on a document meant to assuage those concerns.

"True, the tax exempt bond market turmoil has impeded our efforts to raise debt funds. But it is an impediment that we will overcome. The tax exempt bond market is showing signs of stabilizing and we continue to work with several groups who have expressed keen interest to help us raise the necessary funds.

"We are fully committed to this project to realize the promise of the Consortium, to harness the power of stem cells to develop the means to diagnose, treat and one day we hope to cure degenerative and other diseases and injuries."

The consortium has close links to the stem cell agency. Two members of the consortium's board of directors, John Reed of Burnham and Marsha Chandler of Salk, also sit on the CIRM board of directors. Scripps and UC San Diego also have representatives on the CIRM board, Floyd Bloom and David Brenner, respectively.

The CIRM grant to the consortium is conditioned on the organization's ability to raise matching funds and meet a completion deadline of December 2010.

CIRM Finances and Grantee Uneasiness

CIRM's financial difficulties have created a certain amount of unease in the California stem cell community. A good example of the anxiety surfaced during its board meeting that ran late into the evening on Jan. 28.

The session was the first public disclosure of the scope of the problems facing the stem cell agency.

Towards the end of the session, Louis Coffman, vice president of the Sanford stem cell consortium in San Diego, addressed the board about his organization's concerns. CIRM Chairman Robert Klein was quick to assure him that night and the next morning that the stem cell agency had legal, contractual commitments to all of its grantees. Here is what Coffman had to say and what Klein told the board the next morning, according to the transcript. First Coffman.

"I bring you a letter from my boss and one of your former members, Dr. Ed Holmes. He's been monitoring this via my e-mail all night long. He said,

"'Mr. Chairman, we appreciate what you, President (Alan) Trounson, and others are doing to realize the vision of CIRM for stem cell research in California and the nation. These are difficult economic times, and your creativity and innovation is appreciated and needed. However, we feel it is important for CIRM to meet its existing commitments in full and on schedule before taking on additional commitments.

"'To not meet the terms of prior NGA's will negatively impact the credibility of cirm as a funding agency. How will future grant awardees have confidence that funds will be there for their programs if existing commitments are not fulfilled?

"'We at SCRM (the consortium) and other entities like us have made warrants, commitments to institutions and individuals based on the NGA we received for our facilities project. We have made commitments to the (UC) regents, to our developers. We have made commitments to generous philanthropists. We've spent his money based upon this NGA, and our consortia members have committed to existing and newly recruited scientists and faculty based on this NGA.

"'We plead with the ICOC(the CIRM board) to honor these existing commitments and request that the adoption of new programs not come at the expense of those that have already been awarded.'"

The next morning Klein brought up consortium's concerns again, saying,

"I was on the phone with Ed Holmes at 10:30 last night going through the constitutional protections for existing commitments and discussing the work that (attorney) James (Harrison) has been doing at my request for the last five weeks on developing something for the banks so they could understand that they could rely upon constitutional protections and the funding authorization we have in place on existing contracts."

CIRM Eyes Three Firms for $200,000 Lobbying Job

The California stem cell agency has not yet made a decision on which of three firms to hire as a $200,000 lobbyist to promote a $10 billion aid package for the biomedical industry.

Don Gibbons, chief communications officer for CIRM, said proposals have been submitted by Van Scoyoc Associates, Hogan & Hartson and The Podesta Group.

The stem cell agency was on a fast track to hire a lobbyist, perhaps as early as last Friday, but Gibbons said that no decision had been made as of Monday.

Van Scoyoc is a Washington, D.C., firm whose web site says,

"We have been a central player in the multi-year effort to double funding for the National Institutes of Health, the National Science Foundation and the Centers for Disease Control and Prevention."

Wikipedia says the firm is 'the largest and most prestigious independent government affairs firm in Washington."

Hogan & Hartson is an international law firm with 1,100 lawyers and offices in both San Francisco and Washington. According to Wikipedia, it is "recognized for excellence in its life sciences and technology practice."

The Podesta Group's clients include Amgen and Genentech. Its principal, Tony Podesta, is "ranked as the the third most influential lobbyist in Washington," according to Wikipedia.

Torres Makes Pitch for Vice Chair's Job at CIRM

State Democratic Party Chairman Art Torres has made the case for his election as vice chairman of California's $3 billion stem cell research agency in a letter to Consumer Watchdog's John M.Simpson.

Simpson wrote late Friday about the statement and the race on his organization's blog.

Torres has a three-part agenda: Dealing with the CIRM funding crisis, enhancing community education/PR and consensus building, including creation of some sort of executive committee for the CIRM board of directors.

Torres said an executive committee could "increase the productivity of meetings." CIRM is currently overseen by a 29-member board of directors that has been hobbled by absenteeism. The absenteeism itself is not so bad, but it makes it difficult to maintain the required superquorum of two-thirds of the board's members necessary to do official business. And because of the size of the board, it is much more of a legislative and debating group than a sharply focused decision-making panel. For example, if each member of the board were to spend three minutes each addressing a single matter, it would take nearly 90 minutes to hear them all.

An executive committee for the board would seem to be desirable, if it can improve the board's efficiency and continue to conduct the people's business in public. But the task of creating one faces several obstacles. One is Prop. 71 itself, whose 10,000 words lock all sort of minutia into the state Constitution and state law and which may make it difficult, if not impossible to create such a panel. Another barrier could come from resistance from some board members who may feel that their voices would not be well heard by an executive panel. And still another is that formation of an executive committee could run into resistance from CIRM Chairman Robert Klein. It could dilute his hold over the board, whose size and diversity of opinion can muddle its focus on some matters. An executive committee could hobble Klein's independence and perhaps call a halt to some of his forays into areas that the panel does not consider high priority.

Running against Torres is Duane Roth, already a member of the CIRM board and a biomedical industry-connected executive. Simpson earlier received a statement from Roth and has written about it.

Simpson's piece drew comment from CIRM board member David Serrano Sewell, concerning objections that Torres, a former state legislator, would "politicize" the board. He noted that CIRM itself was created through a powerful political process, a $30 million ballot initiative in 2004.

He continued:

"Second, most (not all) of the people appointed to the ICOC got on by way of politics, that is to say their name was submitted to a Constitutional Officer, and a third party (usually someone with some heft) advocated for that person.  Some people call that 'lobbying' and there is nothing wrong with that at all."

Sewell continued,

"'Politics' is not a dirty word.  Exhibit A - President Obama, he secured the nomination and won the election by executing some sophisticated political moves and I am glad he did, our country is better off as a result!"

Election of a vice chairman by the board is not expected any sooner than the CIRM's board meeting in March.

CIRM Launches Public Forums With Cast of Stem Cell Headliners

The California stem cell agency will conduct six public meetings in the next three months aimed at promoting the cause of stem cell research and airing proposed changes in its strategic direction.

A gaggle of stem cell research stars will be featured at three Town Hall meetings March 18 in San Francisco, March 31 in San Diego and April 22 in Los Angeles. Their challenge will be to pass the "Taxicab Talk Test," a communications effectiveness measure that originated in La Jolla, Ca.

Two other meetings will focus on the CIRM strategic plan March 5 at the City of Hope in Duarte in the Los Angeles area and March 11 in San Francisco. The purpose is to gather public comment about the proposed changes in CIRM's strategic plan. Another session focused on the business community is scheduled for Feb. 20 at Invitrogen in Carlsbad, Ca.

Nearly all public meetings of the state's $3 billion stem cell agency generate meager audiences, 20 or less in most cases. Whether the latest sessions can generate bigger numbers will be one measure of their success.

We asked Don Gibbons, chief communications officer for CIRM, about the Town Hall forums and outreach efforts to build attendance. He replied,

"These town forums are about educating anyone in the public that we can convince to attend, and, yes, they are strictly science, an update on the progress with their tax dollars. The one in SF is on Market Street after work so that we can get members of the business community. We are printing posters for the Muni/Bart tunnels along Market Street and doing outreach through the email lists of our grantee institutions and patient groups."

Part of CIRM's mission is to educate the public and promote human embryonic stem cell science. While polls show support for the research, the public has only a vague understanding of what is involved and the likelihood of success. That makes public support vulnerable to sudden changes should bad news surface.

PR and communications efforts such as CIRM's have several objectives. One is shore up support from those already in favor hESC research. Another is to reach out and rope in new advocates. Still another is or should be to gather names and email addresses of attendees to build databases for further communications efforts.

One measure of CIRM's success is the Taxicab Talk Test, a concept that we heard first from researcher Jeanne Loring of Scripps in La Jolla, but that we have now reconfigured as a "communications effectiveness measure." She said all researchers should be able to lay out the case for hESC for a taxi driver during a five-minute ride. That means speaking with clarity, brevity and persuasiveness. By the end of the ride, the driver should be nodding in agreement. But, of course, he or she is also motivated by the possibility of a handsome tip.

As far as we know, CIRM is not offering "tips" to attendees at its meetings. But it should circulate feedback forms in the audience to test the effectiveness of the speakers and the general presentation. Something similar should be done at the meetings on the strategic plan to seek written comment from those who may not have a chance or desire to speak publicly.

In addition to Loring, here are the speakers scheduled to appear at the three Town Hall meetings: Renee Reijo Pera of Stanford, Tamara Alliston of UC San Francisco, Bruce Conklin of UC San Francisco, Mahendra Rao of Invitrogen, Stuart Lipton of the Burnham Institute, Hanna Mikkola of UCLA, Donald Kohn of Childrens Hospital Los Angeles and Leslie Thompson of UC Irvine.

CIRM and the Stem Cell Industry: A Lobbying Question

The state of the stem cell/biotech biz drew some attention late last week in Business Week along with a piece on Stockpickr.com dealing with Geron.

Business Week reporter Ben Levisohn painted a depressing picture for most "middling" companies. He wrote that Big Pharma is buying Big Biotech – not the smaller companies. He said,

"That's bad news for small biotech companies, who are already facing a spate of problems. A recent study estimated that 50% of the roughly 380 publicly traded biotechs have less than one year of cash remaining. In the past, they would have raised new capital by selling shares, merging, or partnering with a larger outfit. But for publicly traded companies, equity deals are out—none has been brought to market in the last year, and few are expected to see the light of day in 2009. And even if a deal could be brought to market, with the smallest 10% of stocks in the Nasdaq Biotechnology Index trading down 84% from their 52-week high, vs. 21% for the largest 10%, an equity deal wouldn't make financial sense for many companies."

Over on Stockpickr.com, they had this to say,

"Over the last three months, shares of biotechnology firms Geron (GERN) and StemCells (STEM) are up roughly 200%, compared with a decline in the S&P 500 of almost 5% and a decline in the Nasdaq Biotechnology Index of about 3%.

"So why have both names massively outperformed the boarder market?"

Stockpickr laid out Geron's upcoming clinical trial and surrounding hoopla, but concluded:

"There are still several unknown variables that could take the short-term momentum out of both names."

The Business Week and the Stockpickr pieces could be construed as arguments for the $10 billion biotech aid package promoted by CIRM Chairman Robert Klein. However, the question for the stem cell agency is whether it should be in the business of lobbying the federal government on behalf of the industry. Klein would probably put the question another way: Should CIRM support assistance to the biotech biz so that therapies will result and suffering eased?