CIRM Seeking More Industry Experience in Top Science Officer; New Post Proposed

The California stem cell agency wants to put more sizzle into its search for a replacement for Marie Csete, who resigned as its chief scientific officer recently and subsequently said her advice was not respected.

Alan Trounson, president of CIRM, is asking its directors to create a new post called vice president, research and development that will be attractive to scientists with commercial experience. The search comes just as the agency is about to award its critical disease team grants, which, at $210 million, are the largest research grant round in CIRM history.

Csete's resignation and her complaints about the organization have received international attention and raised questions about CIRM's management, which the agency has not responded to publicly.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., said Csete's position was the second most important at CIRM. He said,

“Before this new position is created, I think there needs to be a full, public explanation of why the former chief scientific officer, Dr. Marie Csete, resigned after a little more than a year on the job.”

In a memo to CIRM directors, Trounson said the new position would provide an opportunity to “find someone with the skill base to have more of a focus in their role with biotech/pharma – translation – clinical applications, which is where we are moving with our translational, disease teams and clinical grants and where we are thin in capacity.”

The new vice president would report to Trounson and apparently rank at the same level as the vice president for operations, John Robson. The new person would be the third in four years to fill the post or its equivalent.

Trounson's proposal, which will come before CIRM directors Aug. 6 in a special teleconference meeting, did not specify a salary range. Don Gibbons, chief communications officer for CIRM, did not respond to questions about pay. Currently the salary range for Robson and the chief scientific officer tops out at $332,000. Csete was paid $310,000.

Trounson's memo said that the new position is designed to attract applicants with “academic-commercial R&D experience.” Trounson said,

“Pharma is now wishing to engage with us and we need some experience at this interface which we haven’t had to date. The biotech firms had been a bit put off due to a lack of success in granting but are now very keen to re-engage if we can solve some of the issues that have arisen.“

Trounson said the new VP would have primary responsibility for relations with the FDA and the NIH. He said the person would “oversee the basic science and translational to clinical program and partner with the executive director of scientific activities to support and empower the science team.”

The designation of an “executive” director of scientific activities also appears to be new. The current CIRM organizational chart refers only to a “director of scientific activities.”

The CIRM president's memo said a “number of very good people” have indicated an interest in the new VP post.

The Aug. 6 meeting is open to the public and is available at teleconference locations throughout the state, including San Francisco(3), Los Angeles(3), Sacramento, La Jolla(3), Pleasanton, Healdsburg, Duarte, Stanford, Berkeley, Irvine and Palo Alto. The specific addresses can be found on the agenda.

Timely Info Well Serves CIRM and Public

The California stem cell agency is to be commended for its timely posting of background material on the proposal to create a new position of vice president for research within the organization.

We have been critical of CIRM for its dilatory posting of information for its meetings. And even some directors have complained from time to time about not receiving the material sufficiently in advance.

But Wednesday's Web publication of the justification for creation of the new position came with ample time before next Thursday's special CIRM board meeting and well serves both CIRM and the public.

The Podesta Watch: Mother's Milk, Appreciation and CIRM

Lobbyist Tony Podesta, CIRM's man in Washington, garnered some headlines this month with a stunning financial performance, heavy duty fundraising and even a note on his delinquent property taxes.

Podesta is being labelled a “king of K Street” and a powerhouse. He could be on his way to lobbying superstar status. Podesta knows the truth of the axiom that money is the mother's milk of politics. He conducts weekly fundraisers at his home. “People appreciate the fact that you have given of yourself,” he says.

His firm, the Podesta Group, is earning $240,000 for 10 months of work for the California stem cell agency. But the CIRM contract is piddling compared to the performance of his business.

Zachary Abrahamson of politico.com reported that the Podesta Group took in $11.6 million for the first half of this year, a 57 percent increase from the same period last year.

One reason is the family name. Chris Frates, also of politico.com, reported,

“Lobbyist Tony Podesta has a long history in Democratic politics and is a prodigious fundraiser. His wife, Heather, is a powerhouse lobbyist in her own right. Tony’s brother, John — a co-founder of their namesake lobbying firm — was the co-chairman of the Obama transition and is the founder and president of the Center for American Progress, which many people credit with crafting much of the Obama administration’s policy blueprints and staffing its ranks.

“With a pedigree like that, it’s no surprise that Tony Podesta’s lobbying firm has emerged as a king of K Street.”

Podesta told Frates,

“You meet people in the middle of political campaigns, and they appreciate the fact that you’ve given of yourself to get them elected. I’ve helped a lot of the folks who are in Congress politically, and helped them in many ways, and that’s a thing which people are grateful about.”

Kevin Bogardus of TheHill.com wrote that Podesta, “has bundled campaign contributions for several powerful Democratic lawmakers over the first six months of the year,” including “donations of close to $100,000 on behalf of Rep. Henry Waxman (D-Calif.), Sen. Patty Murray (D-Wash.), Senate Majority Leader Harry Reid (D-Nev.) and the Democratic Congressional Campaign Committee (DCCC).”

Andrew Miga of The Associated Press, reported that Sen. Christopher Dodd, D-Conn., one of key players on health care, was a Podesta beneficiary. Miga wrote,

“Anthony Podesta, one of Washington's best-known Democratic lobbyists, contributed $500 (to Dodd). The Alliance for Quality Nursing Home Care paid Podesta's firm, the Podesta Group, $120,000 for the quarter.

“Podesta's wife, Heather Podesta, hosted a $1,000 per person fundraiser in March for Dodd at the Podestas' home in the affluent Woodley Park neighborhood of Washington.

“Her firm, Heather Podesta + Partners, was paid $50,000 this year by HealthSouth Corp., one of the country's largest health care service providers.”

Earlier this month, Arthur Delaney of the Huffington Post wanted to take a first-hand look at a $1,000-a-plate Podesta fundraiser. The Podestas declined even to allow him to bus the dirty dishes and booted him from the premises of their 6,600-square-foot house.

As for the home, the Huffington Post carried this headline on one item: “Lobbyist Tony Podesta Among Delinquent Property Owners In D.C."

The reference was to a Washington Examiner story by Michael Neibauer in which he reported that Podesta owed paid only $33,935 of his $34,483 property tax bill, a shortfall of $696.32. Podesta was quoted as saying,

“We don’t even pay the taxes. They’re paid by the bank. If they sell my house, I’m going to sue the bank.”

It is unusual for a state agency to have a lobbyist in Washington, although the governor's office does have a staffer in the capital to watch out for statewide issues. Some CIRM directors have expressed reservations about CIRM's lobbying efforts, suggesting that it is an exercise in hubris and a bit of mission creep.

Federal Lobbying and the CIRM Mission

The California stem cell agency opened a huge door earlier this spring when it decided to back industry legislation in Washington to protect biotech therapy patents against development of generic equivalents.

Now marching across that portal is a bid to have the directors of the $3 billion state research institute engage in even broader lobbying efforts. Specifically they are being asked to take a position on one of the most sweeping and controversial parts of the national health care legislation -- the public health care option.

Why not, ask some?

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., said,

“CIRM should never have hired a lobbyist; it should never have taken a position on biosimilar (patent) legislation. But now that the board has gone down that ill-conceived route, the only responsible position is a full endorsement of a public option in health insurance reform. Anything else would demonstrate that the ICOC listens to industry, but ignores consumers.”

The public option question will come before the CIRM directors' Legislative Subcommittee on Aug. 6. It was placed there by Art Torres, vice chairman of the board of directors and chairman of the subcommittee, at the request of director Jeff Sheehy, a communications manager for UC San Francisco.

Sheehy brought up the subject following a report on the patent legislation during a subcommittee meeting on July 16. He noted that the patent legislation is part of the healthcare reform act.

According to the transcript, Sheehy said,

“Since that is now on the table, I would like to ask that the board formally consider supporting the adoption of a public plan as part of that measure since we've already opined on one element of that plan....”

Sheehy continued,

“Given that basically the biosimilars bill was a sop to industry in order to get buy-in (on health care reform) to make sure that everybody in America can have access to care, we should have support as a board for the key element of ensuring that people won't be excluded for prior conditions.

“I know as a person living with HIV, I'm basically trapped within my job because I could never be insured. The only way to guarantee that I would have access to insurance and access to these therapies as we develop them -- and I'm perfectly fine letting industry get all that they need for biosimilars for stem cell research -- but we need a public plan as part of the health reform act to ensure that there is a guaranteed access plan for all Americans, including all Californians.”

Torres promptly replied,

“Well put.”

He said he would place Sheehy's proposal on the agenda for the next meeting.

CIRM Chairman Robert Klein did take issue with Sheehy's description of the patent legislation as an industry sop. Here is how the dialogue went.

Klein:

“I'd just like to say that it's important to remind everyone that ours was not a political judgment, but rather one committed to our mission.”

Sheehy:

“And I agree, but I think ultimately none of this means a thing if patients can't get access to these therapies."

Torres:

“Hear, hear.”

Klein:

“I think that's a very, very important debate that Mr. Sheehy is bringing us to focus on. And thank you, Jeff.”

The public can participate in the subcommittee meeting at teleconference locations in San Francisco, Los Angeles, Healdsburg, Mountain View, Irvine, Palo Alto, La Jolla and Sacramento. You can find the specific addresses on the agenda.

Biotech's Financial Troubles and CIRM's New Loan Program

The California stem cell agency is about to embark on an unprecedented, $500 million biotech lending program at a time when the industry finds itself in an “evolve or die” mode.

The loan effort has been sold to CIRM directors as a no-lose proposition that could generate $100 million in “profits” that could be plowed back into research. That would happen even with loan default rates as high as 50 percent, so the story goes.

However, all those predictions were based on assumptions from a different financial era – a time when the stock market was thriving, capital was flowing and optimism reigned.

Today, a much different picture is being painted by those who know the industry best.

The Burrill Report, published by the respected Burrill & Co. of San Francisco, today carried a piece by its editor-in-chief, Peter Winter – headlined “Evolve or Die” – concerning a recent report on the state of biotech. Winter wrote,

“In its 2009 Beyond Borders annual report on the biotechnology industry, Ernst & Young warns that the global financial crisis threatens to render the business models that have driven the sector to date unsustainable. According to Glen Giovannetti, Ernst & Young’s global biotechnology leader, the funding drought is placing these business models that fueled biotech’s growth since its inception under unprecedented strain.”

Winter continued,

“Currently, biotech finds itself caught in a financial crisis that has analysts speculating whether many biotech companies can recover. The situation that they find themselves is different this time because this crisis is deep-rooted, systemic, and persistent.”

Winter wrote,

“Those that do survive will have adapted to changes that are not only being brought about by the prevailing financial crisis, but also by several mega-trends that will shift existing paradigms and, in doing so, create new, sustainable business models, Giovannetti says.”

CIRM's lending program is supposed to target the riskiest biotech firms for loans – ones that cannot find conventional or even venture capital financing. Some CIRM directors who support the loan program find comfort in the belief that lending the money is better than just giving it away in the form of a grant.

They point to lending plans to give CIRM stock warrants in the recipient companies and a stake in any IP that is developed. What hasn't been fully discussed is the total collapse of a loan recipient. In such a case, the warrants would be worthless. And also in such cases, IP can sometimes vanish and computer files disappear, leaving CIRM holding a multimillion-dollar, empty bag.

CIRM is currently looking at three firms that will evaluate the business models of the loan applicants. Assuming that Burrill and Ernst & Young are correct, that evaluation will be trickier than ever, raising questions about whether both CIRM and the evaluators it hires can step outside of the box. Doing so may pose uncomfortable financial risks for a state-funded agency. But it may also be the only way CIRM has any hope of securing either a scientific or financial return on its $500 million in high-risk loans.

(Editor's note: You can find a host of links to information on the biotech lending program, including its financial assumptions via this item. No business plan, however, exists for the effort.)

CIRM Grant Oversight Receives $150,000 Boost

SAN FRANCISCO – A key panel of CIRM directors Tuesday approved a $150,000 increase in a contract to help improve the agency's important grants management efforts after being told that the task has become bigger and more complicated.

The boost in the $200,000 contract with Kutir Corp. of Newark, Ca., was ratified on an 8-0 vote by the Governance Subcommittee.

John Robson, vice president for operations of CIRM, told the directors' panel that the agency “could not run our program” without Kutir. The grants management system is involved in everything from the initial request for applications to conflicts of interests to monitoring grant progress reports.

Currently CIRM has approved $761 million in grants and is expected to hit the $1 billion mark later this year.

Following the meeting, Robson took issue with our July 13 item in which we described the grants management system as in “disarray.” He said that the system does provides the necessary information but is labor and time intensive. Robson indicated that he expected that situation to improve with additional work by Kutir.

Robson also said that he expected the current grant management system to save money compared to the previous arrangement with Grantium. Robson said CIRM and Grantium had come to the “mutual conclusion” that the Grantium system was “not a good fit.”

Grantium originally had a $702,000 contract with CIRM. Robson told the California Stem Cell Report that the firm had been paid $260,000 and was no longer under contract. CIRM is also not engaged in legal action involving Grantium.

Directors also asked for a more detailed breakdown later on expenditures for the grants management system.

New Info on CIRM's Grant Management Problems

More details are now available on the latest attempt to solve major problems in the efforts to monitor $760 million in grants from the California stem cell agency.

The subject comes up at a teleconference meeting tomorrow morning of the Governance Committee of the agency's board of directors.

We wrote last week about the issue, which has troubled CIRM since 2006. The agency has not publicly disclosed the full nature of the difficulties, but discussed part of the problem briefly in a recent item on its Web site.

The latest posting shows that CIRM staff is seeking the directors' approval of a $350,000 contract with Kutir Corp., up $150,000 from $200,000 authorized for Nov. 20, 2008, to Nov. 20, 2009.

The staff memo says Kutir was brought aboard when Ed Dorrington resigned from CIRM in December 2008 as its director of grants managements systems. The staff memo says,

“When he departed there was no one on staff capable of taking over his responsibilities. Kutir now supplies those services, which include creating an application for each new RFA along with a matching review module. The review module takes data that are sorted and transferred from the application and uses this information to manage the Grants Working Group process, including conflicts of interest.”

The memo continues,

“Kutir now supplies (Dorrington's) services, which include creating an application for each new RFA along with a matching review module. The review module takes data that are sorted and transferred from the application and uses this information to manage the Grants Working Group process, including conflicts of interest. These tasks require progressively more time and effort for each RFA as CIRM has evolved and added new complexities to its programs, including collaborative funding partners, pre-application review and loans.

“In addition, CIRM is in the process of assessing and installing new grants management systems in order to meet its growing reporting and portfolio requirements. The IT developers from Kutir are assisting with this project by advising on how best to integrate CIRM’s existing custom-built software with the commercial products being purchased.”

Tomorrow's meeting begins at 11 a.m. And can be heard at teleconference locations in San Francisco (2), Los Angeles(2), La Jolla, Stanford and Irvine. Specific locations can be found on the agenda.

CIRM Director Love Wades into the Trenches at CIRM

It is not exactly an internship, but one of the directors of the California stem cell agency is working as a volunteer at CIRM during the next few months.

The director is Ted Love, a physician and businessman, who until recently was CEO of Nuvelo, Inc., of San Carlos, Ca. He has served on the CIRM board since its first meeting in December 2005.

Earlier this month, CIRM announced that Love will be assisting the agency's management one to two days a week until CIRM appoints a new chief scientific officer. The agency noted that Love has “extensive experience bringing medical therapies to the market.” CIRM said Love will be of “considerable value” in connection with the $210 million disease team grant round scheduled for approval later this year.

Love sits on the board of directors of Arca biopharma, Inc., of Broomfield, Colo., Affymax, Inc., of Palo Alto, Ca., and Santarus, Inc., of San Diego, Ca. Arca is the biopharmaceutical company that absorbed Nuvelo earlier this year. Affymax is another biopharmaceutical business, and Santarus acquires and develops products dealing with gastrointestinal problems.

Given ongoing issues about conflicts of interest at CIRM and more recent questions about micromanagement by CIRM directors, we posed several questions to the agency about Love's involvement.

Amy Adams, CIRM communications manager, responded. She said Love will not be acting chief scientific officer in the absence of Marie Csete, who has announced her resignation. Adams said,

“Ted Love is acting as a part time advisor to the president on the overall architecture of our grants programs.”

We asked,

“Does any of his work involve potential conflicts of interest considering his involvement in Arca and potential future employment in the biotech industry? “

Adams' response:

“No. To the extent that any potential conflicts arise, Ted will recuse himself from participating in the decision.”

She said none of his work will involve applications from any company that has applied for a grant or that is expected to apply for a grant. Adams said that it is “uncertain at this time” what role he will play in the review of the disease team applications by the grants working group.

We also asked,

“How can Love fulfill his oversight responsibilities as a CIRM board member when he is actually performing the tasks that could come under board scrutiny?”

Adams replied,

“He will be assisting the science office on an interim basis and does not expect that his brief tenure at CIRM will interfere with his oversight responsibilities. Indeed, he thinks it will give him a better understanding of CIRM's internal operations.”

She said that Love will receive no compensation for his work, including the per diem granted board members for meetings.

We also queried longtime CIRM observer John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., about his thoughts on Love's volunteer work. Simpson replied,

“Ted Love has been a substantial and important contributor to the ICOC. He is a talented executive who brings the perspective of the bio-medical industry to the table. That’s a necessary perspective, but by no means the only important perspective. If he can briefly help CIRM after the departure of Chief Science Officer Marie Csete, that’s probably a good thing. I worry, however, that if this arrangement lasts too long and he becomes too involved in day-to-day operations, it will be difficult for him to fulfill his oversight responsibilities on the board.

“I also wonder what advising 'the president on the overall architecture of our grants programs' means. That phrase prompts me to wonder about the status of the revised strategic plan, which was first presented in a draft last December. It was the subject of hearings in February and March, but still hasn’t come back to the ICOC. If I were a board member, I would have wanted to approve that revised plan before I even considered the budget for 2009-2010. “

A footnote on all this: Prop. 71 has specific criteria for board members. Love was appointed to the board when he was CEO of Nuvelo, but he no longer is an “executive officer of a commercial life science entity.” He can continue to sit on the board because of his position as board member of a life science firm.

CIRM Directors Rebuff Five Reform Proposals

CIRM directors listen to a presentation on the Little Hoover Commission report. From left to right, CIRM Chairman Robert Klein, Vice Chairman Art Torres and Jeff Sheehy. Torres is chairman of the Legislative Subcommittee.

SAN FRANCISCO – A key group of directors of the $3 billion California stem cell agency today rejected proposals that would cut their board in half and substantially reduce the power of its chairman.

The directors' Legislative Subcommittee formally opposed, on an 8-0 vote with one abstention, the reform proposals made by the state's Little Hoover Commission last month. The action came after CIRM Chairman Robert Klein, a real estate investment banker, warned that “the entire thing (CIRM) could be swept away.” He declared that “certain things should not be on the table.”

The subcommittee took up only five of 14 proposals by the Hoover Commission, the state's good government agency. Following months of study, the bipartisan panel said the current CIRM structure is "is not adequate to protect taxpayers’ interests or serve its own ambitious goals."

The other nine proposals are scheduled to be discussed by the Legislative Subcommittee sometime during the next month. Today's action and any later action will go before the entire board at its meeting Aug. 19-20. Ultimately, however, it is up to the legislature to decide whether to act on the recommendations, although CIRM could make some modest changes on its own.

In addition to proposals to reduce the board from 29 to 15 members and eliminate the dual CEO problem, the other recommendations rejected today call for permitting the board to select its own chairman instead of selecting from outside nominees, reducing the length of board members to four years and directing the governor to appoint 11 of the 15 members, four of whom would have to be public members. The board currently has no public members.

The Legislative Subcommittee's action today was largely based on Klein's arguments and earlier ones by CIRM's outside counsel James Harrison of Remcho, Johansen & Purcell of San Leandro, Ca. He contended that the legislature could not make the five changes and that the proposals would have to go a vote of the people. Harrison reasoned that the legislature could not enact the changes, even with a 70 percent vote and the signature of the governor, because they would not “enhance” the purposes of Prop. 71, which created the stem cell agency. The enhancement requirement is contained in the 10,000-word ballot initiative.

CIRM Director Jeff Sheehy, a communications manager at UC San Francisco, told directors that the Hoover report provided an opening to discuss what might be needed to create an “an organization that has long-term stability.” He said he hoped for “an agency that will outlast us all,” noting that conditions have changed since 2004 when Prop. 71 was approved.

Sheehy, who abstained from the motion by Klein to reject the five Hoover proposals, challenged Harrison on the question of what changes might be considered an enhancement to Prop. 71. He questioned Harrison's opinion that removing the 50 person cap on staff could be done by the legislature while the other changes could not.

Sheehy asked Harrison whether the courts would be likely to consider the five changes an “enhancement” if the CIRM board were to endorse them. Harrison did not answer the question directly.

Sheehy's arguments found little support among the other directors. Their positions may have been best summarized by Vice Chairman Duane Roth, who said the current structure “may not be optimal but is workable.”

Our comment: Klein had the directors in a box. By ordering up the June 23 opinion from the board's counsel, he effectively limited the board's possible action. To do anything other than what they did today would have meant rejecting the advice of their $592,000-a-year outside lawyer, a man who helped Klein write Prop. 71. And it would have been a rebuff to Klein and his strongly held position that the survival of CIRM is at stake.

In going along with Klein, the board, however, indirectly lent support to a finding by the Little Hoover Commission that CIRM is, in many ways, “personality driven.” The commission declared:

“An agency governance structure that features key positions built around
specific individuals does not serve the best interests of the mission of the
agency or the state of California, however well-qualified the individuals
may be.”

Candidates Reportedly On Line for CIRM Chief Scientific Officer Slot

The California stem cell agency reports that “several highly respected candidates” have approached the agency to fill the vacancy created when Marie Csete resigned as chief scientific officer.

In response to a query, Don Gibbons, chief communications officer for CIRM, said last week that the scientists have come forward since Csete disclosed that she was leaving.

Gibbons also said that no decision has been made on whether to hire a search firm to assist in finding a replacement.

CIRM has sometimes been slow in finding top-level executives, particularly for the president’s slot. However, the salary for the chief scientific officer might help speed the process. The top of the range is $332,000 annually. Csete made $310,000.

Applicants should take note that CIRM is not suffering the same financial woes as the rest of California state government because of the nature of the agency’s protected funding.

CIRM Directors and Blogging

It is probably too early to call it a trend, but a couple members of the board of the $3 billion California stem cell agency have joined the world of bloggers in the past few weeks.

The first was Jeff Sheehy, a communications manager at UC San Francisco, who filed an item on the California Stem Cell Report last month. His dealt with recommendations for reforms in CIRM’s structure.

This week Sherry Lansing, the former head of a Hollywood film studio and a UC regent, filed an item for the Huffington Post. It dealt with finding cures for cancer, reflecting her work as head of a nonprofit that fights cancer.

Welcome to both and to any other board members who feel so moved.

CIRM's Troubled Grant Management System: A $1 Billion Oversight Matter

The California stem cell agency is likely to have approved $1 billion in grants by the end of this year, but its grants management system appears to be in disarray, which may be something of an understatement.

CIRM has never publicly revealed the full nature of the problems, which date at least back to 2006. However, in its budget presentation last month, the agency identified oversight of grants as an area of “risk.”

In January, the California State Auditor reported that CIRM was not in compliance with the auditor’s two-year-old recommendations for implementation of a comprehensive grants management system. As the result of a months-long study in 2006, the auditor said that a system was needed to provide accountability and assess how well CIRM was meeting its strategic goals.

CIRM plans to spend at least $575,000 and likely more this year to help fix its problems. CIRM did not provide comparable figures for last year.

It is not clear how much has been spent in the last two years since directors were told that the “complete cost” of a solution from Grantium would be $757,000. The Grantium software now appears to have been tossed out.

CIRM’s budget for this year allots $335,000 for software, training and development connected to the grant management system. Another $240,000 is slated for Kutir Corp. of Newark, Ca., for information technology services. Kutir had a $200,000 contract during the last fiscal year.

This year’s contract with Kutir – size unspecified -- comes before the CIRM directors Governance Subcommittee on July 21 at a teleconference meeting with locations around California.

The June staff's budget commentary on the grants management system said,

“CIRM’s ability to track and report on its grant research portfolio
needs improvement.

“There is a critical need to have a robust electronic grants management system for managing grants, reporting outcomes, monitoring finances, complying with regulations and meeting other requirements as they arise. CIRM had been testing a grants management program that is not able to meet all if its needs. CIRM has revised its approach and has purchased, or is investigating, components of a grant management system that will be flexible enough to handle its evolving programs and processes. Funds for this process are included in this budget. In the long run it is expected that this new approach will be less costly to CIRM than the previous approach."

During next week's look at the Kutir contract, one would hope that there would be a full discussion of past costs connected to the Grantium system, the nature of the problems, the plan to resolve the issues and its likely cost.

Locations where the public can take part can be found in San Francisco (2), Los Angeles (2), La Jolla, Sacramento, Irvine and Stanford. Specific addresses are on the agenda.

CIRM Made Last Minute Bid to Delay Hoover Report

The California stem cell agency made a last-ditch effort to stall release of the results of an investigation into the agency by California’s good government commission despite the fact it had been underway for seven months

The attempt came in the form of a letter signed by four members of the CIRM board of directors, including Chairman Robert Klein, and its president, Alan Trounson. One anonymous critic suggested the letter was a violation of the state open meeting laws because “it was prepared and approved outside any public process” and involved the four board members.

In response to a query from the California Stem Cell Report, James Harrison of Remcho, Johansen & Purcell of San Leandro, Ca, CIRM’s outside counsel, said,

“The letter was not intended to be a statement on behalf of the Board with
respect to the draft proposals. Rather, it was intended to reflect, and
did reflect, only the views of the individuals who signed it. The Board
has not taken any action with respect to the Little Hoover Commission
report.”

The June 8 letter was directed to the Little Hoover Commission, which last month recommended an overhaul of the operations of the California stem cell agency. The commission said changes were needed in CIRM's structure because it is "is not adequate to protect taxpayers’ interests or serve its own ambitious goals."

The letter urged the commission to postpone consideration of the draft recommendations “to allow us time to engage in a meaningful dialogue.” The Hoover Commission began its investigation last November. CIRM knew months earlier that the inquiry would be forthcoming. The commission released its report on June 26.

In addition to Klein and Trounson, Art Torres and Duane Roth, co-vice chairmen of the agency, and Sherry Lansing, chair of the CIRM board’s Goverance Subcommittee signed the letter.

Our comment: It is not uncommon for enterprises under public fire to engage in dilatory tactics. The reasoning is that prolonging an inquiry weakens it, exhausts the investigators and could likely be outdated by the time it is concluded.

Below is the full text of Harrison’s response concerning the legality of the process leading to the June 8 letter.

Harrison Response on June 8 Letter

We asked James Harrison of Remcho, Johansen & Purcell of San Leandro, Ca., outside counsel for CIRM, for his opinion on whether the process leading to the June 8 letter to the Little Hoover Commission violated the state’s open meeting laws. Here is the text of his response.

“In fact, the letter states that the authors would like to thank the Little Hoover Commission, on behalf of the Board, for the invitation to meet with LHC staff. The letter was not intended to be a statement on behalf of the Board with respect to the draft proposals. Rather, it was intended to reflect, and did reflect, only the views of the individuals who signed it. The Board has not taken any action with respect to the Little Hoover Commission report. As you know, the Legislative Subcommittee has scheduled a meeting to discuss the report and to consider the views of other Board members. I hope this clarifies the matter.”

‘Boiling Blood,’ Biotech and Rainmaking

The headline in the Wall Street Journal this morning read “Blood Boils Over Bill to Protect Biotech Drugs.”

And on Friday, the story on Politico.com was about a “king of K Street” in Washington, D.C., the man who is the $240,000 federal lobbyist for the California stem cell agency.

Both stories are related to the agency’s lobbying efforts in Congress on behalf of an industry-backed bill to stall competition from generic companies that may seek to duplicate biotech drugs.

The WSJ story indirectly makes it clear how picayune is the CIRM lobbying effort. The bill endorsed by the agency is not even mentioned. The players are many and powerful. The stage is vast, encompassing the Obama administration’s sweeping health plan effort.

Reporter Alicia Mundy focused on a proposal by Sen. Ted Kennedy that would give biotech firms 13.5 years of protection from generic competition on what the WSJ called “lucrative” drugs. That is about twice as long as proposed by President Obama, who is wrapping the IP legislation into his health care package.

Mundy reported that Kennedy’s effort “may prevail because it would help keep the pharmaceutical industry on board with the (Obama) overhaul, said industry lobbyists and Senate staffers.”

Also involved in this is Tony Podesta, an accomplished rainmaker and CIRM’s Washington lobbyist(the agency has another lobbyist in Sacramento). Chris Frates of Politico.com wrote that “in the age of Obama, it’s a particularly good time to be named Podesta.”

Frates recounted the Podesta family ties to Obama, including brother John Podesta’s co-chairmanship of the president’s transition team.

Frates said Tony Podesta is active in campaign fund-raising, hosting a recent event that funneled $500,000 to the Democratic Senatorial Campaign Committee.

Some CIRM directors and others have questioned the agency’s lobbying effort as largely meaningless given the vast issues in play in Washington. However, $240,000 would not be meaningless to a stem cell researcher in California looking for help to push science along to finding a cure for one of the array of ailments many believe could be alleviated through stem cell therapy.

Assuming that protecting the biotech industry from generic competition is the correct position for a California state agency, the question remains: What do the people of California get out of the expenditure of $240,000, which does not even buy a bleacher seat in the Capitol? And that amount does not count the additional staff and directors time, travel and expenses. Does any of it change the outcome?

CIRM directors will receive a briefing on Thursday on the legislation at a teleconference meeting of their Legislative Subcommittee. The public can participate in session at locations in San Francisco, Elk Grove, Healdsburg, La Jolla (2), Irvine and Palo Alto. Specific addresses can be found on the agenda.

(Editor’s note: The WSJ article is only available to online subscribers. If you would like a copy, please email djensen@californiastemcellreport.com.)

CIRM on Lawsuit and Hoover

We want to call attention to a comment posted yesterday by the California stem cell agency concerning its reaction to the Little Hoover Commission report. Amy Adams, CIRM’s communication manager, filed the comment on the “Klein Warns Stem Cell Directors” item that went up July 10.

She says that CIRM is not threatening a lawsuit in connection with legislative enactment of the Hoover recommendations.

We have posted a response to her comments, which can be found either through the “recent comments” column to the left or at the end of the “Klein Warns” item. Her comments can be found there as well.

Trotter: Memories, Water and Life

Last night, I stumbled across a photographer, John Trotter, who was almost beaten to death in the late 90s while on assignment for our old paper, The Sacramento Bee.

The attack left Trotter unable to walk and with major brain injuries. But today he has regained his career and has shot impressive and evocative photos, ranging from Mexican babies in the dry Southwest to men and women struggling to recover their lives after suffering injuries or disease.

It was an arduous journey for John as well. He says he not only had to learn how to walk again but “re-learn how to remember.”

Our chance meeting came in Sacramento, where we are visiting. He was in the city for an exhibit at the Viewpoint Gallery of some of his work, a series of photos called “The Burden of Memory.” They were taken at the brain injury clinic where Trotter did much of his rehab.

I asked him about a project he was working on that was not on display but mentioned in some biographical notes at the show. It is called “No Agua, No Vida” (No Water, No Life) and deals with the Colorado River in a far-flung way.

The Colorado River is the main artery for much of the American Southwest, including Southern California. It has been dammed and diverted over the years and now is only a relative trickle when it enters Mexico’s Sea of Cortez. Mexico is not happy about that. In the U.S., states battle over the rights to the river water, much of which flows 242 miles across the desert to quench the thirst of Los Angeles.

It also has turned the Imperial Valley, a scorching-hot bit of sandy desolation, into a sometimes thriving industrial-agricultural community where I grew up. In fact, my first paid assignment as a reporter involved coverage of a campaign there to secede from California because of Colorado River water issues.

Trotter’s photos capture the desolation of the desert and dramatically depict how the water is being used and its impact on the lives of many.

You can see and purchase his photos on his Web site. In addition to the Viewpoint show, Trotter’s work is scheduled to be on display beginning Sept. 19 at the Mumm Fine Art Photography Galley in Napa, Ca.

Klein Warns Stem Cell Directors on CIRM Reform Proposal

Recommendations for sweeping changes in the $3 billion California stem cell agency come before its directors next Thursday, although the agency's chairman has warned that support of some of the proposals would violate the directors' oath of office.

In an email to directors June 30, Robert Klein said five of the recommendations by the Little Hoover Commission, the state's good government agency, would be unconstitutional if enacted through the normal legislative process.

Klein wrote,

"As members of the board, we took an oath to uphold Prop. 71 and could not support these changes."

CIRM Vice Chairman Art Torres, who co-authored the memo, scheduled a meeting July 16 of the directors' Legislative Subcommittee to discuss the Hoover report. The board has not taken an official position on the study, but CIRM issued a press release last month that threatened a lawsuit should the legislature and the governor enact many of the recommendations without a vote of the people.

In response to a question from the California Stem Cell Report, Stuart Drown, executive director of the Little Hoover Commission, said neither he nor his predecessor could recall a time when a state agency had threatened a lawsuit in connection with Hoover recommendations.

The five purportedly unconstitutional recommendations would:

• Reduce the size of the unwieldy board from 29 to 15
• Reduce board member terms to four years following expiration of current members' terms, which run from six to eight years
• Eliminate the current dual CEO structure that has proved divisive in the past
• Allow the board to select its own chairman and vice chairman instead of having to accept nominations from state politicians
• Give the governor authority to appoint 11 of the reconstituted board's 15 members. (Presumably Klein would also oppose as unconstitutional a plan to require that four independent persons be placed on the board, although he did not mention it in his June 30 email. The board is currently dominated by representatives of institutions that receive grants.)

In an interview earlier this week at CIRM headquarters, Torres, newly appointed chairman of the Legislative Subcommittee, declined to discuss the specific recommendations. He said he wanted to hear first from members of the CIRM board. He said whatever action the subcommittee takes would go before the full board, presumably in August.

Klein's contention that support of changes would violate directors' oath of office is based on two memos from attorneys. One came from the board's outside counsel. The other came from a Sacramento law firm hired by Klein's private stem cell lobbying group. That firm also has a $50,000 annual lobbying contract with CIRM.

The Hoover Commission took note of the memos from the two law firms, but said the question remains legally open.

Yesterday, Daniel Hancock, former president of Shapell Industries and chairman of the Little Hoover Commission, wrote an op-ed piece in The Sacramento Bee defending the recommendations.

He said,

"As CIRM exits its startup phase, it is unclear whether the founding leaders on the governing board can objectively evaluate the best course for CIRM's future, including the crucial question of whether it should exist beyond its initially intended 10 years. Given that the longer-than-normal terms on the governing board limit turnover, current board members – whose organizations have received 80 percent of the research and facilities grants – may lack the independent perspective required to determine when CIRM's contributions to stem cell science have peaked."

Hancock, however, also said the report is designed to "start discussion."

He cited an article by one CIRM director, published on the California Stem Cell Report, as "encouraging." Jeff Sheehy wrote that he would like the Hoover study to be perceived as "the beginning of a dialogue about governance structures that results in the strengthening and institutionalization of CIRM and sets it on a path toward a long and fruitful existence."

The Hoover Commission report has received little attention in the mainstream media, which has increasingly limited resources because of the news industry's financial problems. But Alex Philippidis of BioRegion News wrote a lengthy piece on the subject on Tuesday.

He quoted Don Gibbons, chief communications officer for CIRM, as saying that changes proposed by Hoover Commission could "waste" time. Philippidis wrote,

"He(Gibbons) cited the 2007 reorganization of California's Department of Public Health, which at least one local news report blamed for a delay in payments to area shelters for victims of domestic violence."

Philippidis reported that Gibbons said a court challenge to the Hoover proposals "would not come from the agency, but most likely from a board member set to lose his or her seat, or patient advocates who have defended CIRM and the ICOC(the CIRM board), saying their value in helping research institutions leverage private donations outweighed any concerns over conflicts of interest raised by Little Hoover."

Philippidis also quoted a state higher education official, Charles Reed, who warned that giving the governor more appointment power would politicize the agency. The president of the UC system currently appoints two members of the 29-person CIRM board. The UC system also has another five appointees on the panel. California politicans appoint the remaining 22.

The meeting of Legislative Subcommittee will be conducted via teleconference with locations throughout the state from which the public can participate. They include San Francisco, Healdsburg, La Jolla(2), Palo Alto and Elk Grove. Specific addresses can be found on the agenda.

(Editor's note: Based on incorrect information from the BioRegion News article, earlier versions this item erroneously connected Charles Reed to the UC system. )

The Bee on Hoover Report: Time for Candor

The Sacramento Bee on Sunday carried an editorial headlined "time for a change at stem cell institute."

The editorial, published also in other McClatchy newspapers including those in Fresno and Merced, was keyed to the report by the Little Hoover Commission. The Bee wrote,

"For far too long, this institute(CIRM) and its leadership have been secretive, defensive and unwilling to acknowledge a flawed management structure, the legacy of a flawed ballot initiative.

"Maturity involves being able to consider outside criticism and engage in self-evaluation. Sadly, the leaders of the stem cell institute have developed a bunker mentality that continues to hurt the agency's mission.

"The institute's reaction to a recent report by the Little Hoover Commission is the latest demonstration."

The Bee continued,

“If adopted by CIRM and the Legislature, (the Hoover) recommendations and others could go a long way toward helping the stem cell institute operate more effectively, with greater accountability of taxpayer dollars. Yet instead of taking a few days to absorb the report and discuss it with his board, (CIRM Chairman Robert) Klein immediately dismissed it in a press release.

"The agency's spokesman dismissed the Little Hoover's process as 'ludicrous,' and Klein threatened a court challenge if the Legislature attempted to act on the recommendations.

“Fortunately, Klein is just one of 29 members of the institute's oversight board. Many others are distinguished academics and patient advocates who have greater candor, and less pride of parenthood, in acknowledging CIRM's flaws.

"Now is the time for their voices to be heard, in public meetings, as the institute approaches its five-year mark."

No IOUs for California stem cell researchers

The State of California began printing IOUs this afternoon to pay its bills because of a $26 billion budget crisis, but stem cell researchers funded by the state need not worry.

That's because the California stem cell agency is immune – for the time being – from fallout from the financial debacle.

The ballot measure, Prop. 71, that created CIRM gave the research effort special legal status. The governor and legislature cannot touch the agency's funding.

CIRM is not the only state agency that is isolated from all the effects of the budget mess. While most state employees are facing a nearly 5 percent pay cut from just last month on top of previous cuts, the the California Highway Patrol is likely to see a pay raise, according to Jon Ortiz of The Sacramento Bee.

Diana Lambert, also of The Bee, reported that the budget pain has not yet “trickled up” to leaders of the University of California system. She reported salaries of $295,000 to $450,000 for UC chancellors along with generous benefits.

Lambert continued,

“The salaries and perks continue despite cuts to freshman enrollment next year, fee increases at some professional schools of as much as 50 percent and student fee hikes of nearly 17 percent over two years.”

At a troubled California regional transit agency, some “foreworkers” are pulling down six figure salaries, including overtime, that run as high as $218,621, according to Daniel Borenstein of the San Mateo Times.

The inequities illustrate the difficulties in dealing with the California cash crisis, which extends into local and regional entities as well as state government. The governor and lawmakers cannot by law reach into all fiscal corners of the state in their efforts to make semi-rational cuts.

One of the reasons for that is government by ballot initiatives, such as Prop. 71, which hamstring legislators – for good reasons and bad – when they try to deal with both policy and budget matters.

CIRM's operational budget is tight overall, probably tighter than many state agencies, although some might quarrel with its priorities, documentation and justification. And scientists certainly should not see their multi-year projects shelved and research basically lost because of state financial vagaries. Midstream loss of funding would throw away much of the original investment.

But that doesn't mean that ballot initiatives such as Prop. 71 represent good government or good policy. Indeed, Prop. 71 itself is one of CIRM's worst enemies as it hampers the board and creates conflicts of interests that are all but impossible to resolve.