Sizzling Month for Biotech; More on Patent Protection for Biotech

Good news is surfacing in the biotech industry. One industry watcher on Monday reported that the sector was “hot” during July, but warned that challenges remain including the fate of patent protection for biotech drugs – a matter also of concern to the California stem cell agency.

Burrill & Co., the San Francisco life sciences merchant bank, said the sector was propelled by “drug data, positive drug sales/earnings and partnering and M&A deals.”

But Steven Burrill, CEO of the company bearing his name, also said,

“We don’t yet believe biotech is fully back on track as many companies are still struggling to find the necessary funding to maintain their operations, almost half of US public biotechs have market caps below $100 million and we are seeing companies still consistently turning off their lights for the last time. It is important to remind ourselves that the biotech industry is undergoing a major transition, a process that will likely continue for many months yet.

“This is because we do not know how President Barack Obama’s proposal for health care reform will fully impact the biotechnology industry and the status of biosimiliar legislation (follow-on biologics) is also still unresolved and there are fears that these issues will drive the prices of innovative drugs lower and eat away at biotech company profits.”

CIRM, a taxpayer-funded organization, is lobbying Congress on the biosimilar patent protection legislation. Last month it sent a letter to to U.S. Sen. Diane Feinstein, D-California, backing lengthy, 12 to 14 year patent protection periods, also an industry-supported position.

Without that protection, CIRM said “patient access to this promising technology will de delayed or eliminated and California's biotechnology sector will suffer.” Feinstein sent the letter along to the key Democratic negotiators on the health care reform legislation, urging support of the CIRM position. You can a find copy of both letters here.

A Look Behind a 13-word Matter for CIRM Directors

A bureaucratic yawner – at least that seems to be the appearance of one of the matters before the directors of the $3 billion California stem cell agency on Thursday.

But appearances are sometimes deceptive. And in this case, the issue is freighted with baggage related to the performance of CIRM Chairman Robert Klein and President Alan Trounson. And it goes to touchy matters involving CIRM directors and their oversight of CIRM.

Agenda item No. 3 simply says “consideration of appointment of at-large members and chair and vice-chair for Evaluation Subcommittee.”

The matter comes before the board as it is about to establish – for the first time in nearly five years – a formal evaluation procedure for its chairman and president. The procedure will also include the vice chairmen of the board of directors.

One could make something of a case that formal evaluations were not necessarily called for earlier because until recently Klein had declined a salary. The former vice chairman also refused pay. Now, however, one of the co-vice chairmen and Klein both receive half-time salaries, respectively $75,000 and $150,000.

Director Ricardo Azziz, chairman of the department of obstetrics and gynecology, Cedars-Sinai Hopsital in Los Angeles, put it this way last spring,

“We have been remiss and we are now backtracking to make sure that we have this.”

In late April, CIRM directors created their Evaluation Subcommittee. But they did not settle upon the at-large members or the chair or vice chair of the panel.

The subject triggered a contentious debate during which some directors expressed concerns about public appearances and conflicts of interests because the CIRM vice chairmen and chairman would be serving on the Evaluation Subcommittee, even though they would recused when their performances came up.

According to the transcript, Azziz said,

“There is a potential for the perception of conflict of interest. While I think it is crucial that we obtain feedback from the chair and vice chairs regarding the other members of that group performance, I think that having them as a member of the group raises a significant risk of conflict of interest. And I'm unaware of any other evaluation team, for example, a financial oversight committee, that would include the CFO that is composed similarly.”

Director Carmen Puliafito, dean of the USC medical school, said the committee created a “perception of self-dealing and self-interest.”

Nonetheless the directors approved the structure of the committee, which was presented by Sherry Lansing, chair of the Governance Committee and a former head of a Hollywood film studio. She said Claire Pomeroy, dean of the UC Davis medical school and co-chair of the governance panel, took the lead in coming up with the structure. Lansing indicated that other possibilities were rejected because they appeared to lack support.

Director Jeff Sheehy, a communications manager with UC San Francisco, offered a motion that would have made Lansing and Pomeroy the co-chairs of the Evaluation Subcommittee in addition to their roles on the governance panel.

He said they were most familiar with the evaluation process. But his effort failed after it was opposed by Klein. Initially Klein said the Evaluation Subcommittee should decide who should be the chair, although Klein normally names the chairs of subcommittees. Later, he indicated he would be willing to have the full board select the head of the evaluation panel, setting the stage for this week's meeting.

The session is available to the public at many locations throughout the state. Specific addresses can be found on the agenda.

The Podesta Watch: Public Health Care Option and Loans to College Students

Tony Podesta, the “legendary Democratic fundraiser” who is now CIRM's go-to guy in Washington, made the news during the last few days for roles in connection with the public option in the national health care legislation and aiding Sallie Mae, the nation's largest provider of student loans.

Podesta, who is under a $240,000, 10-month lobbying contract with the California state agency, was mentioned on the nationally broadcast PBS program, Bill Moyer's Journal, on Friday. The program was a scathing look at lobbying efforts by the health insurance industry against the public option in national health care reform legislation. On Thursday, CIRM directors will be asked to endorse the public option.

The guest on the Moyers' program was Wendell Potter, a former health insurance executive who is now an advocate for health care reform.

Here is how the Podesta's name came up, according to the transcript:

Moyers:

"I mean, they (former Congressional staffers) left the government. They go to work for the industry. Now they're back with an insider status. They get an access, right?"

Potter:

“Oh, they do, they do. And these lobbyists' ability to raise money for these folks also is very important as well. Lobbyists, many of the big lobbyists contributed a lot of money themselves. One of the lobbyists for one of the big health insurance company is Heather Podesta, the Podesta Group, and she's married to Tony Podesta, who's a brother of John Podesta.”

Moyers:

“Who used to be the White House chief of staff."

Potter:

“Right. Right. And they're Democrats. And my executives wanted to meet with — and when I say my, the people I used to work for-- “

Moyers:

“At CIGNA.”

Potter:

“Yeah, wanted to meet with Hillary Clinton, when she was still in the Senate and still a candidate for president. Well, that's hard to do. That's hard to pull off, but she did. That just shows you that you can, through the relationships that are formed and that the insurance industry pays for, by hiring these lobbyists, you can your foot in the door. You can get your messages across to these people, in ways that the average American couldn't possibly.”

Danielle Knight, in a special report to the Huffington Post Investigative Fund, mentioned the Podesta Group in a piece headlined, “Lobbying Showdown Over The Future Of Student Loans." The article discussed Sallie Mae's efforts to position itself as the “clear winner” in multibillion dollar fight over the private student loan industry. Knight wrote that in March,

“(S)allie Mae retained the Podesta Group, founded by Tony Podesta, a legendary Democratic fundraiser whose brother headed the Obama transition team. In addition to Podesta himself, the firm, which was paid $110,000 for its work in the first half of the year, assigned at least four of its lobbyists to push Sallie Mae's case on Capitol Hill: Paul Brathwaite, the former executive director of the Congressional Black Caucus and a former Clinton Labor Department official; Israel 'Izzy' Klein, a former aide to Sen. Charles E. Schumer of New York and Rep. Edward J. Markey of Massachusetts, both Democrats; Lauren Maddox, a former assistant secretary for communications and outreach at the Education Department in the Bush administration; and Donni Turner, a former aide to Sen. Richard Durbin of Illinois, Rep. David Scott of Georgia, and former Sen. Max Cleland of Georgia, all of them Democrats.”

Linda Stamato of nj.com also mentioned Podesta in connection with Sallie Mae.

The Meaning of "Further" and a $3 Billion Science Program

Patient advocate Don Reed has pulled together a lengthy piece on a proposed overhaul of the California stem cell agency, concluding that that the $3 billion enterprise does not need to be fixed.

Reed said CIRM is doing “a terrific job.” Writing on his blog, stemcellbattles.com, he said,

“Why should major changes be imposed on such an outstanding program?”

Reed wrote yesterday about the recommendations of the Little Hoover Commission, the state's good government agency, and a meeting earlier this month of the CIRM directors' Legislative Subcommittee.

The heart of Reed's article deals with whether a vote of the people is required on five Hoover recommendations, including trimming the size of the board from 29 to 15 and reducing the powers of the chairman, who has responsibilities that overlap with the president. Both the size of the board and the dual executive situation have created difficulties for CIRM.

Proposition 71, which created the agency nearly five years ago, says the legislature can make changes in CIRM only if they “further” the purposes of the act. Otherwise, a vote of the people is needed to alter the ballot initiative.

That's where the issue hangs. What does further mean? CIRM's lawyers, in an opinion sought by Chairman Robert Klein, have opined that five of the Hoover recommendations require a vote of the people. The Hoover Commission says it is an open question. And as Reed points out in his piece, we told the CIRM Legislative Subcommittee that other, equally capable attorneys could find that the recommendations in question could be legally enacted by state lawmakers.

Reed, an unabashed supporter of CIRM, explores the issue in some detail and notes that it will come before the full board in August. An interim report from the Legislative Subcommittee is scheduled for Thursday of this week.

CIRM Seeks Help in Search for Csete Replacement

The California stem cell agency wants to hire an executive search firm – its third such arrangement in the last four years – to recruit a successor to Marie Csete to lead the organization's scientific research efforts.

CIRM contracted with a search firm, Spencer Stuart, on two different occasions in the past in an effort to find a president for the $3 billion enterprise. Despite spending about $500,000, the searches never turned up a candidate who would accept the job.

In both cases, the two men who ultimately accepted the presidency surfaced by other means.

CIRM's latest effort calls for a timetable of no more than six months to find a vice president for research and development, a new position at the agency. The post would cover the responsibilities of CIRM chief scientific officer, the title that Csete carried.

Alan Trounson, CIRM president, said the new position is aimed at attracting candidates with more commercial research backgrounds.

The RFP said the salary is likely to be $180,000 to $332,000, although it left the door open to going higher. CIRM asked search firms to provide advice on salary levels based on “industry trends and best practices.”

The CIRM board has yet to approve creation of the new vice presidency although the RFP was posted 11 days ago. Bids from search firms must be in by Monday. The board takes up consideration of the new post on Thursday.

Here are links to funding for Spencer Stuart: 2005, 2008.

Call for CIRM Reform to be Heard by Agency Board

Recommendations for sweeping changes in the $3 billion California stem cell agency come before its board of directors next Thursday, including one proposal that would trim the unwieldy 29-member board to 15.

The full board will hear an interim report on the recommendations by the Little Hoover Commission, the state's good government agency. The meeting will follow a session the same day of its Legislative Subcommittee.

Earlier this month, the subcommittee opposed five proposals by the commission contained in an 88-page report entitled, “Stem Cell Research: Strengthening Governance to Further the Voters' Mandate.” The rejected recommendations included a reduction in the size of the board and a move to curtail the power of its chairman, Robert Klein.

One CIRM director, Jeff Sheehy, has said the Hoover Commission offered some “reasonable suggestions.” Late last month, Sheehy said he was disappointed by the “vigorous negative response” from CIRM.

Prior to next Thursday's meeting of the full board, the Legislative Subcommittee will discuss nine other Hoover recommendations, including polling scientists who review grants about whether they would resign if they must publicly disclose their financial interests.

The grant review group makes the de facto decisions on grant applications, although the board has the final legal authority. In practice, the board almost never overturns reviewers' recommendations either to fund or not to fund a specific grant.

Other Hoover proposals include:

• Elimination of the 50 employee cap, which is unnecessary given that there is also a cap on administrative spending. The limit on staff has created a heavy reliance on outside contracting.


• Adoption of a succession plan for leadership and a transition plan when bond funding is no longer available. State bonds are virtually the source of cash for CIRM.


• Identification of all applicants for a grant. Currently only successful applicants are identified. Identification of all applicants would allow the public to see what is not being funded and allow better assessment of whether certain areas of science are being overlooked.


• A performance audit of CIRM by a special oversight committee chaired by the state's top fiscal officer, the state controller.

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

"The (board) needs to spend its time thinking about and acting on many of the issues raised in the report. Number one on my list would be succession planning now that Bob Klein has made it clear he won't be chairman after 2010. Another important thing to deal with is the revised strategic plan that has been lingering in draft form since last December.”

Some of the recommendations being considered on Thursday would require legislative action – an unprecedented, super, supermajority 70 percent vote mandated by Prop. 71, the ballot initiative that created CIRM, plus the signature of the governor. No other California legislation requires a 70 percent vote, including raising taxes and passing a budget.

Earlier this month, the Legislative Subcommittee rejected the more sweeping recommendations largely on the grounds of its own attorney's opinion that they would require a vote of the people – an even more challenging political feat than gaining a 70 percent vote of the legislature.

A memo to other directors from Klein and Art Torres, co-vice chairman of the board and chairman of the Legislative Subcommittee, said that if those changes were adopted only by the legislature, it would be unconstitutional.

They said,

“As members of the board, we took an oath to uphold Proposition 71 and could not support these proposed changes.”

Legal opinions, however, are just that -- opinions. Another equally skilled attorney could come to an entirely different conclusion.

The opinion from the board's attorney was ordered up by Klein before the final report by the Hoover Commission was released. It placed the CIRM board in a box. To do anything but follow the opinion could be construed as a repudiation of Klein and CIRM's outside legal counsel.

The subcommittee session and the full board meeting will be available to the public via numerous locations statewide. The subcommittee meeting begins at 1 p.m. With the full board to follow at 4 p.m. The full board is expected to take up the Hoover recommendations again in August.

Specific addresses can be found on the subcommittee agenda and the board agenda.

The full text of Simpson's remarks can be found in the item below.

Text of Simpson Hoover Comments

Here is the text of comments by John M. Simpson, stem cell project director of the Consumer Watchdog of Santa Monica, Ca., concerning next week's CIRM board meeting on recommendations by the Little Hoover Commission.

“The Little Hoover Commission requires no response and the Legislative Subcommittee is wasting the valuable time of its members trying to formulate one. What matters is action, not rhetoric.

“If the ICOC (the CIRM board) needs to send something, send a simple note:

"'Dear Little Hoover Commission:

"'Thank you for your thorough and thoughtful report. We appreciate its constructive tone and are giving serious consideration to all the recommendations you made.

"'Thank you,
"'The ICOC'

“Then the ICOC needs to spend its time thinking about and acting on many of the issues raised in the report. Number one on my list would be succession planning now that Bob Klein has made it clear he won't be chairman after 2010. Another important thing to deal with is the revised strategic plan that has been lingering in draft form since last December.

“Little Hoover did its job. They offered an independent assessment and a bunch of suggestions. They have done their job and are on to their next study. They really don't care what your write back.

“Now the ICOC needs to do its job. Surely that's not wasting members' valuable time formulating a response to the report. That approach smacks more of ego -- and thin skin -- than anything else. Instead, tackle the very real issues the agency is facing.”

Need Work? San Francisco Organization Offers Opportunities

Looking for a job with a fast-paced enterprise that is on the cutting edge of science and medicine, big business, big politics and big academia? Do you enjoy working in areas that involve life, death, morality, ethics and religion?

Look no further. The $3 billion California stem cell agency has openings for persons who are willing to work long hours with pretty good pay.

In addition to a new vice president/chief scientific officer, CIRM is seeking additional science officers, a deputy legal counsel and an administrative assistant. You should move fast. An opening for a deputy grants management officer was up only yesterday, but now has been removed from the CIRM job listings.

The deadline for the deputy legal counsel application is Aug. 4. The salary range is $133,700 to $200,500 annually. The deadline for the administrative assistant was July 16, but CIRM says the position is open until a suitable candidate is found. The pay range is $51,408 to $77,100. No deadline has been posted for the science officer applications, which pay from $90,000 to $165,000.

CIRM Adds Info on Possible Endorsement of Public Insurance Option

The California stem cell agency has posted a host of wide-ranging links to documents dealing with the public health insurance option that it will consider endorsing at its Legislative Subcommittee meeting next Thursday.

They range from Wall Street Journal and New York Times articles to pieces in support and against the plan, which is being considered by Congress as part of the national health care reform legislation.

The posting of the documents well ahead of the meeting is another instance of giving both the public and CIRM ample time to consider the issues involved.

However, the background material does not address several questions that CIRM directors should consider. Is this sort of broad national issue something that CIRM should be chasing? If so, how many votes can CIRM deliver for or against the plan? The latter may be the most important question in the real world of politics. Third, is this something that CIRM's high-flying federal lobbyist, the Podesta Group, can weigh in on appropriately? It has several other clients that have a major stake in the legislation. And those clients may have interests at odds with whatever position CIRM chooses to take.

If you would like to take part in the CIRM debate over the plan, you can do so via teleconference locations throughout the state. They include San Francisco, Los Angeles, Healdsburg, Mountain View, Palo Alto, Irvine, La Jolla and Sacramento. The specific addresses can be found on the agenda.

You can also weigh with comments on this Web site. Just click on the term "comments" below. Anonymous postings are permitted.

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.