Fresh Comment

John M. Simpson of Consumer Watchdog and longtime observer of the California stem cell agency has posted a comment on the “Tea Leaves” item. Among other things, he says that he understands that the terms “of the vice chair's employment -- salary and whether it's a full-time job -- will be discussed in closed executive session” on Thursday. Our comment: That's an interesting way to fill a position that is supposed to be publicly elected. But it will certainly permit candor and may provide a challenge to lawyers seeking to keep the subcommittee from violating the state's open meeting laws.

Executive Evaluation Procedures Posted for CIRM

Proposed procedures for evaluation of the chairman, vice chairman and president of the $3 billion California stem cell agency are now available to the public in advance of Thursday's meeting of its directors' Governance Subcommittee.

The three paragraphs are straight forward and aimed at generating what it calls “deliverables,” The procedures also seem to be non-controversial. No definition of what the board expects from the yet-to-be-elected vice chairman is contained in the document.

Whether the evaluation procedure leads to a broader discussion of the direction of CIRM remains to be seen. But it is interesting that this document is being produced four years after creation of the stem cell agency. It is also coming three months after a salary was paid for the first time to the chairman. A salary may also be paid for the first time this year to the vice chairman, depending on whom the board chooses. The president has always received a salary but Chairman Bob Klein and former Vice Chairman Ed Penhoet were independently wealthy and declined salaries. Klein, however, asked for a salary last year. In December, the board defined his position as half-time and approved $150,000.

One could speculate that the board is telegraphing a preference on the vice chairmanship if it approves formal evaluation procedures for the job that are the same as for the two other salaried positions. However, that may not be the case. You can read more about our speculation about Thursday's meeting here.

$1 Billion for Stem Cell Labs: Troubles and Status

California's $1 billion stem cell lab construction program will be under scrutiny on March 9 as the state's stem cell agency weighs a request for changes in one approved grant while other recipients report difficulty in raising the required matching money to build their labs.

It all comes as CIRM itself faces a looming cash shortage. It will run out of money next fall unless it is successful in privately marketing state bonds – its only significant source of funding – as opposed to their general market sale by the state.

The Buck Institute of Novato, Ca., the Sanford Stem Cell Consortium in San Diego (UC San Diego, Scripps, Burnham and Salk) and UC Santa Barbara have already reported difficulties in completing financing arrangements.

But UC Merced had a bit of good financial news in its bid to change its grant. The proposed changes, which will be presented at the CIRM facilities group March 9 meeting, would reduce the cost from $7.5 million to $6.1 million, $3.8 million of which comes from CIRM. However, the space is about 20 percent smaller.

Merced is requesting that it be allowed to build its stem cell instrumentation foundry on its campus instead of on the former Castle Air Force Base. In a Feb. 9 letter to CIRM, the campus said the old military base has problems with utility service and backup capabilities. UC Merced also cited unspecified issues with the county, which leases the space to UCM.

John Robson, CIRM vice president; Marie Csete, CIRM chief scientific officer, and Ray Groom, a facilities consultant hired by CIRM at a cost of $15,000, are scheduled to visit the campus on Friday to be briefed on the new plans and view the site.

Another item on the March 9 agenda is a status report on all the lab construction projects around the state. No background material on that subject has yet been posted by CIRM on its website.

An additional topic is funding for GMP facilities. Csete has prepared a report on the matter, and her conclusion is that CIRM does not need to fund such facilities at this point. In her Feb. 23 memo, she said that “CIRM grantees have adequate options and access for GMP cell manufacturing.”

But she also said that a “critical lack of workers” exists and that CIRM should provide for training in another round of grants. CIRM hired Biologics Consulting Group of Alexandria, Va.,for $15,000 to assist in the GMP survey.

The facilities group meeting will be in San Francisco. Currently the agency has not posted any plans for teleconferencing access to the meeting. Even if it does, our recommendation is that institutions with something at stake should be at the session in San Francisco and be prepared to comment authoritatively.

Here is a link to Ron Leuty's piece in the San Francisco Business Times on problems at Buck and our item on Terri Somers' article in the San Diego Union-Tribune about the consortium, Buck and UC Santa Barbara. Here is a link to what consortium told us more recently.

Overseeing Top CIRM Execs: A Reading of the Tea Leaves

Next Thursday, a key panel of the directors of the world's largest source of funding for human embryonic stem cell research will consider a matter that could give some indication of its future direction,

Nominally, the issue seems less than controversial. The agenda says it involves “consideration of policy/procedure for performance evaluation” of the chairman, vice chairman and president of the $3 billion stem cell agency.

But lying behind that bland language are such matters as the political and lobbying efforts of CIRM, its connections to industry and the election of a vice chairman to assist in those endeavors. Will the agency continue pushing hard to become a global powerhouse for stem cell research, pleading for billions from Congress for industry? Will it embrace the biomedical industry ever more closely, funding its efforts to bring products to markets? Or both, for that matter?

The agency could get to those issues through more closely defining the position of the vice chairman, which is now vacant, and discussion of related matters. The two contenders for the post come from radically different backgrounds. One is Art Torres, now the head of the California State Democratic Party and a former state lawmaker with good connections in the nation's capital. The other is Duane Roth, an executive with biomedical industry ties and head of Connect business development organization in La Jolla, Ca.

Roth was nominated by Gov. Arnold Schwarzenegger, a Republican. Torres was nominated by Democratic state Treasurer Bill Lockyer, whose good offices are especially important to CIRM as it attempts to market state bonds privately. The treasurer is the ultimate arbiter on state bond deals. On the other hand, the governor loaned CIRM $150 million in state funds a couple of years ago when it had another period of financial difficulty. The loan has been paid back, but CIRM has had to seek his support on other matters, such as his veto of legislation that the agency opposed,

Also entering into the mix is the salary for the vice chairman. The job carries pay that could run as much as $332,000. Torres says he needs a salary, but has not indicated a figure. Roth says he will not accept a salary. In December, CIRM directors awarded CIRM Chairman Robert Klein a $150,000 salary and defined his job as halftime. Klein, a millionaire real estate investment banker, previously declined a salary.

Sadly, the public is pretty much out of the loop in advance of the meeting on the policy/evaluation agenda item, which first came up Dec. 22 last year. The proposal discussed at that meeting was only described orally and never publicly disclosed in written form in its entirety. The only access to what it contains is the transcript of the meeting. Given CIRM's past performance, do not expect to see any written material ahead of the upcoming meeting.

Also missing from next week's meeting are proposed changes in CIRM's internal governance policies, which are closely tied to the responsibilities of the chairman, vice chairman and president. The proposal came up at the Dec. 22 meeting, and directors said it would come up again at the next governance meeting (the one that is next week). However, it is not on the agenda, although it could be discussed.

Next week's meeting will be available to the public to hear and participate in via teleconference locations in La Jolla (Roth's office), Duarte, Sacramento, Irvine and San Francisco. But don't expect a “full and frank” discussion, The board generally deals obliquely with these sorts of issues, It could also sidestep them entirely.

The specific location for the teleconference sessions can be found on the agenda.

Fresh Comment

We have filed a response to John M. Simpson's comment on the “Honesty, Science and Politics” item. Among other things, our response says the No. 1 objective of CIRM right now should be to make sure it has cash next fall to pay its grantees.

Fresh Comment

John M. Simpson of Consumer Watchdog has posted a comment on the “Honesty, Science and Politics” item. Among other things, he says that when California voters approved Prop. 71, they did not expect to see an agency that would become “a platform for worldwide stem cell advocacy by Chairman Bob Klein.”

CIRM Legal Costs Climb Towards $1 Million

Legal costs at the California stem cell agency are heading towards the $1 million mark this year and could well go higher as it embarks on an ambitious and unusual plan to market state bonds to dig itself out of a financial hole.

Next Thursday, the Governance Subcommittee of the CIRM board of directors is expected to increase payments for its main outside counsel, Remcho, Johansen & Purcell, of San Leandro, Ca., and also for Nancy Koch, who deals with intellectual property issues.

According to the most recent document from CIRM, as of Nov. 30, 2008, Remcho had already been paid $237,545 out of its $450,000 contract for the 2008-09 fiscal year. Also as of Nov. 30, Koch had been paid $82,306 out of a $150,000 contract for this fiscal year.

Their contracts and possibly other legal assistance agreements are up for "amendment" at next Thursday's meeting. The use of that word generally means that CIRM needs authorization for more cash to pay the lawyers.

According to CIRM's Dec. 22, 2008, report on outside services, total contracted legal services for the fiscal year amount to $812,930, including $140,431 for the California State Department of Justice. Not all of the total has been spent, but the budget did not anticipate the need for CIRM to engage in attempting to place state bonds with private investors.

CIRM's annual operational budget, which does not include grant payments, totaled about $13 million when approved last July. The currently contracted legal expenses amount to roughly 6.2 percent of the budget. The agency has also not filled the position of general counsel, which became vacant Aug. 15. It is still looking for a person to fill that position, which is now described as general counsel to the president.

CIRM will run out of money in about seven months unless it generates additional cash. That's because the financially troubled state of California has stopped selling the bonds that CIRM relies on to finance its operations and pay for research.

What Bob Klein and CIRM Owe George Bush

Here is what Hank Campbell, the major domo of scientificblogging.com, says,

 "Whether you agreed with Bush or not, his restrictions on stem cell research were good for science - California alone threw $3 billion at human embryonic stem cell (hESC) research for no other reason than that Bush was against it, something that could never have occurred through the NIH, and scientists also found creative alternatives, also something that would probably not have happened."

Honesty, Science and Politics

Part of the justification for the existence of the California stem cell agency lies in the argument that scientific research should be above politics and government and apart from it.

However, science has rarely been apart from politics – at least in the last 50 or 60 years in this country.

New York Times columnist John Tierney dealt with the intersection of the two in a Monday piece – headlined "Politics in the Guise of Pure Science" -- in which he raised questions about whether some of President Obama's scientific advisers can be "honest brokers."

He quoted Roger Pielke(see photo) of the University of Colorado on the matter, whose book, not so coincidentally, is entitled "The Honest Broker." Tierney said Pielke argues that "most scientists are fundamentally mistaken about their role in political debates. As a result, he says, they’re jeopardizing their credibility while impeding solutions to problems like global warming."

Tierney wrote,

"...(T)oo often, Dr. Pielke says, they pose as impartial experts pointing politicians to the only option that makes scientific sense. To bolster their case, they’re prone to exaggerate their expertise (like enumerating the catastrophes that would occur if their policies aren’t adopted), while denigrating their political opponents as 'unqualified'or 'unscientific.'"

Tierney cited recent statements by John Holdren and Steven Chu as examples. Tierney did not discuss human embryonic stem cell research in his piece, but he could have.

The case for hESC research is often imbued with messianic zeal and rhetoric about "missions" that seems more appropriate to an ideology rather than cold, hard scientific research. Hyperbole does not necessarily serve the public or scientists well over the long term, perhaps not even in the short. Instead, it can become a justification for spending on ill-considered, dubious efforts advanced to attain some sort visionary goal. Pielke's and Tierney's cautions are something for the overseers of California's $3 billion stem cell research program to keep in mind as they evaluate the agency's efforts in the next few months.

(Editor's note -- Tierney's column drew 156 comments at the time of this writing. You can read them here).

Operator Error on Loring Comment

A kindly reader pointed out that the Loring comment could not be found on "Obama Chapter Two." That was an error on the part of this operator. Her comment is now available.

Burrill Says Biotech Industry Profitable for First Time in History

The big headline from the influential Burrill & Company merchant bank is "Biotech Scores Black Ink" for the first time ever.

According to Peter Winter(see photo), editor of the Burrill Report, the biotech industry turned profitable in 2008. Winter made this "startling discovery" after analyzing the numbers for 360 publicly traded biotech companies. Presumably the conclusion might change if private firms were included.

The Burrill finding is another piece to consider in the case for and against the $10 billion biotech federal assistance package championed by CIRM Chairman Robert Klein.

However, Winter also said that only 67 of the 360 companies were profitable with the largest sums coming from only three companies: Genentech, Amgen and Gilead.

He said the have-not companies are struggling, and he predicted that a year from now, perhaps only 200 of the 360 companies will survive.

Burrill did not offer a text version of Winter's findings -- only a podcast. We respect Burrill and the authoritative information it provides, but we regard podcasts and recorded videos as a cyberspace abomination when it comes to dispensing information. When recordings replace carefully crafted, written analysis, they are an inefficient, inadequate and miserable substitute.

Just consider the numbers: Normal speech runs about 150 words a minute. Question-and-answer interviews, including trivial remarks, take longer. Downloading and listening to the Q&A with Winter took about 9-10 minutes. In that time, we could have read about 6,000 or 7,000 words or more. We also assume that nearly all the readers of this blog and the Burrill website can handle written information much more rapidly than listening to oral presentations, which often miss important details and nuances. The discipline of writing almost forces the inclusion of those elements.

Recordings on the Internet have their place and can communicate certain kinds of emphasis and emotion better than text. But for the most part, they are used on the Internet like some new gadget, whose novelty is more alluring than its effectiveness.

Serious enterprises that deal with hard facts and numbers should avoid them. That's the conclusion from the California Stem Cell Report in our cyberspace rant of the day.

Fierce Biotech Poll: No Bailout for Biotech

A week-long poll by an industry publication shows that most respondents do not favor a federal bailout of biotech firms, with one reader commenting that "it's all about the survival of the fittest and smartest."

The informal poll was conducted online by Fierce Biotech. It showed that 51 percent answered no to the question "Does the US biotech industry deserve a bailout?" Forty-four percent said yes. Five percent said no.

The results of the poll have some implications for the California stem cell agency and the lobbying effort by its chairman, Robert Klein, to snag $10 billion for the biotech industry. He has already hired a powerful Washington lobbyist, the Podesta Group, for $200,000 to secure the package.

Maureen Martino(see photo), editor of Fierce Biotech, wrote about the poll, quoting some persons who emailed her.

Elinor Gulve was one of those. She wrote,

"Things have to play out in nature's own course. In this industry, it's all about the survival of the fittest and smartest."

Martino said,

"Readers expressed concerns about how the money would be distributed, and whether those government dollars would come with serious strings attached. Several respondents felt that the industry deserves government support, but that it should come in the form of tax incentives and funding for agencies like the NIH--not from a handout."

The poll was not a scientific random sample, just an expression of sentiment from those who felt strongly enough about the matter to respond, Nonetheless it was a bit surprising since the respondents presumably came from the industry and had the most to gain from dollops of federal dough. Results on polls are also shaped by the wording on the questions. If the question were phrased as: Was a bailout "needed" or would it be "useful" to the industry, the results might have been different.

We wrote earlier about this poll after it had been up for only a few days. The early trend was about the same as the final results after seven days.

Fresh Comment

Jeanne Loring, director of the Center for Regenerative Medicine at Scripps, has posted a comment on the "Obama: Chapter Two" item. Among other things, she says that legislative is needed to change federal law on stem cell research.

California Bond Picture Not Too Bright, Say Bond Managers

A couple of bigtime bond investors are shrugging off the California budget deal, reflecting sentiments that do not appear to augur well for the state stem cell agency's plan to sell state bonds privately to solve a cash crunch.

Reporter Martin Braun, writing for Bloomberg News, quoted two bond fund managers as saying that the fundamental state budget problems still exist in California.

Ken Naehu, who oversees $2 billion in municipal bonds at Bel Air Investment Advisors in Los Angeles, was quoted as saying,

“There won’t be a tremendous change in perception purely because the budget has passed. The municipal market is dominated by retail investors now and those investors have been scared, have been spooked."

Paul Brennan, who oversees $12 billion in muni bonds at Nuveen Asset Management in Chicago, including $1 billion in California bonds, was quoted as saying,

"Some of the budget is being balanced from either additional debt or this potential stimulus aid from Washington, that’s a one-time shot and that doesn’t solve the structural deficit."

Currently California has the worst bond rating of any state in the nation. That means that it will have to pay higher interest rates to attract investors when it resumes selling bonds. The state has not sold any bonds since last June.

The Bloomberg article also reported that state Treasurer Bill Lockyer said that the state is considering offering bonds within six weeks.

Bonds are virtually the only source of cash for the state stem cell agency.

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.