California's Bond Sale Suspension, Stem Cells and Cutbacks

Simmering beneath the surface of California's financial crisis is the possibility that the state's $3 billion stem cell agency could become a victim, waylaid as state leaders look for more ways to cut state spending.

Lawmakers and others are discussing the likelihood of a continued suspension of sales of state bonds, which are the lifeblood of the $3 billion California stem cell agency. Without the funds from the bonds, the agency has no cash for its ambitious grant programs.

Currently CIRM has enough money on hand to last roughly through June 2012 in support of existing programs, according to its top officials. But the state has suspended sales of bonds through the middle of this year. Already, the state is forking over to investors $5 billion a year in interest for all its bonds, a figure that has skyrocketed in recent years. The interest cost to California taxpayers for CIRM is roughly $200,000 a day for the $1 billion the agency has borrowed so far.

Should sales of bonds, which take months to arrange, be resumed in a timely fashion, CIRM would not be affected. However, without the certainty of cash coming in, the agency would likely delay, as a minimal response,  additional grant rounds and loans, interrupting its efforts to transform stem cell into cures.  In January 2009, CIRM directors made a move along those lines when they were surprised by a financial crunch. More drastic measures might be required if bond sales are delayed for a lengthy period.

Proposals to prolong the suspension of bond sales surfaced during budget debate in the legislature last week. In February, the state's legislative analyst also said halting bond sales was one on a list of moves that could meet the $26 billion state budget shortfall if tax extensions were not approved in June by voters. Efforts to place such a measure on the June ballot have come up short in Sacramento.

Complicating the issue is the possiblity that a ballot initiative on tax extensions would be placed before voters in the fall. The Sacramento Bee reported yesterday that Gov. Jerry Brown is considering such an effort and could announce it this week. That would raise the need for additional cuts this year in the state spending. Deferring sales of state bonds could be a relatively politically painless way of saving some money. ($248 million was the estimate for a six-month suspension.)

The possibility of a bond delay comes after CIRM Chairman Robert Klein in December warned the agency's governing board that it was "essential" that the agency quickly provide assurances of "reliabity of our funding."

He said,

"Recent applications for clinical trial rounds and the acceleration of our funding commitments on our other programs require an immediate focus on this issue, given there may not be another opportunity until late 2011 to authorize additional bond funding.”

Klein added that “our collaborative funding partner nations” would require early this year “assurances of our future performance.” 

All of the discussion concerning further delays in bond sales is cloaked in the sometimes murky politics of Sacramento and could change suddenly – for better or for worse. Nonetheless, it would behoove CIRM directors to begin examination of their possible responses if bond sales should be substantially delayed this year and next.

Trounson's Views on Grant Terminations at CIRM

The California stem cell agency and the NIH have some things in common. They both give away billions of dollars, and they both generally work outside the view of the general public.

But major differences do exist. CIRM operates on borrowed money. The NIH does not – at least nominally. CIRM operates free of legislative or meddling by the state's top official(the governor). The NIH does not. Congress and the president have full sway over the organization. Another difference involves oversight that the agencies exercise on the scientists who are beneficiaries of their largess. The NIH basically sends the money out the door and researchers do whatever they want – at least that is the view of some. CIRM, however, has actually terminated at least three grants (out of 406) from scientists who are not meeting the requirements of the grants. However, the agency has not reported since June 2009 whether additional grants have been withdrawn.

CIRM President Alan Trounson earlier this year described CIRM's efforts to ensure that researchers are abiding by the terms of their grants. He spoke at a meeting in January of the Citizens Financial Accountability Oversight Committee. The panel, chaired by the state's top fiscal officer, Controller John Chiang, is a sister organization to CIRM and is the only state entity specifically charged with overseeing CIRM finances.

Trounson made his remarks in connection with his summary of last fall's blue-ribbon external review report and its concern about lean staffing at CIRM.

Here is what Trounson had to say, according to the transcript of his remarks.

"We were going to...increase the number of scientific staff because we actually feed back on our projects. The NIH does not feed back on the projects, nor do many of the research foundations. So when we get quarterly reports or yearly reports, we're feeding back to those scientists, saying, hey, that's not what you really agreed to, or fantastic, you've accelerated....We have a one-to-one on the scientists. And if it's a company, we are making sure that they are meeting those kind of deadlines that they put in.

"That does not happen with NIH nor with many of the other funding bodies. We want it to happen. We're here for a relatively short time. Maybe they're there forever, but we want these dollars to work as effectively as possible. So we have stopped some projects. We've actually terminated them because they didn't do what they agreed to do. It's never happened with an NIH project. And you can imagine some of the senior scientists in California being told you didn't do what you said you were going to do, and we're going to take your grant away because we've given you a couple of opportunities to correct that, but you didn't. And that has happened. So we are different in that respect."

CIRM's oversight on grants is increasingly important as it ventures into clinical trials and more translational research. Terms of those grants and loans require deadlines for specific achievements and go or no-go decisions that are more commonly made by businesses than governmental agencies. With tens of millions of dollars at stake on an individual grant, the process is likely to trigger ferocious behind-the-scenes debate.

Here is more on grant terminations at CIRM.

More Media Attention on California's Stem Cell Journal Venture

The state of California's modest foray into scientific publishing is drawing attention in a couple of science publications.

Both "The Scientist" and "Nature Medicine" recently carried items dealing with the $600,000 venture by the California stem cell agency in partnership with a North Carolina business, AlphaMed Press of Durham.

Nature published the more fulsome piece that predated action by CIRM's governing board last week. The article by Michelle Pflumm carried the headline, "Government-funded journal seen by some as waste of grant money."

Pflumm cited critics John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., and Martin Frank, executive director of the American Physiological Society, which publishes 14 journals.

Simpson said,

"They need to demonstrate a need, and I don't think they have done that."

Frank said government dollars are better spent for research. He said,

"We are not flush with money today."

Pflumm also quoted Arnold Kriegstein, director of the stem cell program at UC San Francisco, as praising the move. He said,

"What I find most novel is the idea that there would be negative results published. I think that's the big attraction and the big element that seems to be missing for what's out there currently."

UC San Francisco has received $112 million from CIRM. The dean of its medical school sits on the CIRM governing board.

Pflumm's article noted the plethora of existing stem cell-focused journals, as many as 18 by one count.

The Scientist magazine carried only a brief mention of the journal. It said,

"The scientific community welcomes two new scientific journals to the peer-reviewed landscape—Nature Publishing Group’s Nature Climate Change and Stem Cells Translational Medicine, an open-access title launched by the California Institute of Regenerative Medicine (CIRM). Nature Climate Change will make its official debut next month, but has been publishing free content (about 12 papers or commentaries per month) since January on its website. Stem Cells Translational Medicine is the first foray into the publishing world for California’s state-funded stem cell agency, and the first print installment is slated for publication next January, with some online articles going up in December. You can check out an iPad preview of the journal here."

That link is to a document uploaded to the Internet by the California Stem Cell Report.

Pera Cites Personal and Professional Reasons for Returning to Australia

Scientist Martin Pera said tonight that he was departing as head of the USC stem cell research program for both personal reasons and an opportunity to help lead a national consortium in Australia.

Pera also said that disposition of the $7.4 million in grants from CIRM in which he is the principal investigator is under discussion with the agency, USC and himself.

Pera came to California in 2006 from Australia to launch the USC stem cell effort.

His comments came in response to a query from the California Stem Cell Report. Here is the text of what he emailed.

"It has been a fantastic and very rewarding experience to serve as the Founding Director of the Eli and Edythe Broad Center for Regenerative Medicine and Stem Cell Research at USC. I am very grateful for the support of the Broad Foundation, the University of Southern California, and CIRM in this endeavor. I have been able to bring on board some great young scientists who are doing exciting and innovative stem cell research, and to work with clinical colleagues on some very promising new therapeutic approaches in regenerative medicine. The University is fully committed to recruiting a world class scientist to guide the Center through its next stage in development.

"The opportunity to help lead a national stem cell research consortium in Australia, alongside personal considerations, were key factors in my decision to move to the University of Melbourne, a top ranked institution in biomedical research.

"The disposition of the CIRM grants on which I am Principal Investigator is a matter under discussion between the Keck School of Medicine, CIRM, and myself, but there is no question of these funds being used to support research conducted outside of the State of California."

In an aside, Pera said he has "always enjoyed" the California Stem Cell Report.

Pera Leaving Golden State for Down Under

Internationally reknown stem cell researcher Martin Pera, who holds $7.4 million in California stem cell grants, is leaving the state to return to Australia to head the stem cell program at the University of Melbourne.

Martin Pera
USC Photo

In a March 7 memo to staff at USC's Keck School of Medicine, Dean Carmen Puliafito said that Pera will assume his new job in Australia on June 1 but plans on remaining "actively engaged" with colleagues at USC during the 2011-12 academic year.  Pera joined USC in 2006 to launch the school's stem cell program.

Pera was the first director of USC's stem cell effort, which began following the passage of Prop. 71 in 2004, the measure that created the $3 billion California stem cell agency. A good portion of Pera's motivation for coming to the state was widely believed to be the availability of generous stem cell research funding here. During Pera's tenure, USC has garnered $72 million in CIRM grants, ranking 5th among state institutions.

Pera is the principal investigator on three grants from the California stem cell agency. It is not clear how those grants will be dealt with. By law, CIRM cannot finance research outside of California. We have queried CIRM and Pera concerning the status of the research.

(Pera responded following the publication of this item, saying that the grants are under discussion by the various parties. He also cited personal as well professional reasons for returning to Australia.)

Pera, a former colleague of CIRM President Alan Trounson when they were both in Australia, has personal ties to Australia and has wanted to return, one researcher told the California Stem Cell Report today.

USC's Puliafito, a member of the CIRM governing board, said an international search is underway for Pera's successor. USC is likely to seek help from CIRM's $44 million recruiting fund.

CIRM Posts Key Information in More Timely Fashion

The California Stem Cell Report has grumped mightily about the lackdaisical posting of important public information about matters that are to come before the directors of the $3 billion California stem agency.

Today, however, we are pleased to report that CIRM performed much better in advance of last week's meeting. Agency staffers should take some pride in that accomplishment.

We are referring to the posting on the CIRM web site of information that provides background, justification, dollars and cents and more on the matters that the 29 directors must act on. Without that information well in advance of a governing board meeting, the public, scientists, biotech businesses and policy makers are basically shut out by CIRM.

Normally we try to follow the posting of the background information on a daily basis. However, we were at sea until Sunday March 6. When we logged on to the CIRM web site at that time, we were pleasantly surprised to find a passel of information for the March 10 meeting.

As we examined the documents, they appeared to have been posted primarily March 3 and 4. To double check, we asked Melissa King, executive director of the governing board, about the dates.

She replied,

"Most, if not all, of it was up by Friday, 3/4. I was pushing for that."

While not all the important information was there, such as CIRM Director Jeff Sheehy's proposal on the role of the chair, most of the major stuff was available to the California public and CIRM stakeholders. It represents a step forward for CIRM. We hope the effort will continue into the future.

Real Life and the California Stem Cell Report

For the readers of the California Stem Cell Report who may want to know what we do in real life, you can find some inkling on the Hopalong Chronicles. It is an intermittent account of life on a sailboat named Hopalong, on which we haved lived fulltime for the last 12 years – mostly in Mexico but now in Central America. The latest item recounts the events surrounding last Friday's tsunami warning here in Nicaragua. You can find the blog here.

CIRM Schedules Action on New Directions for May

Directors of the California stem cell agency last week curtailed discussion of recommendations for changes in the agency's direction, including stronger ties with the biotech industry, putting off the matters until their May meeting.

At last Thursday's meeting, CIRM President Alan Trounson quickly ran through his agency's response to the proposals last fall from a blue-ribbon panel commissioned by the agency. But other matters, including selection of a new chair, occupied the board's time.

CIRM's staff response to the commission did not contain specific implementation plans and was vague on some of the matters.

Art Torres, co-vice chair of the CIRM board, told directors that he would like to see directors vote specifically on the staff proposals regarding CIRM's international leadership role, improvement of communications and PR and movement away from traditional funding models (responses 3, 5 and 7 in the CIRM memo).

Director Jeff Sheehy, a communications manager at UC San Francisco, asked the CIRM staff to provide in May a "clear implementation path" for its proposals, including specific actions that the staff would like the board to take.

The recommendations will affect how CIRM allocates its remaining cash, including support for basic research versus grants and loans for efforts more focused on producing clinical therapies. The proposals could mean putting more cash behind research before the results have been "written up," in Trounson's words. The staff recommendations also could mean more cash for biotech firms, including grant rounds that would be limited to business applicants.

Commenting on involvement of biotech companies with CIRM, Trounson said,

"Companies sometimes don't know we are in this space. They all don't read our web site avidly."

He added,

"Clearly we're not meeting their needs."

CIRM Directors Move to Alter Role of Chair of $3 Billion Stem Cell Program

Directors of the California stem cell agency, in sharply divided moves, today said that its next chairman should serve in a part-time capacity in largely an oversight role.

The board's actions are aimed at giving guidance to four elected state officials who have the authority to nominate persons for the job, which carries a salary that can reach as high as $500,000 for fulltime work. The moves are the latest effort by the board to deal with top-level management issues that have troubled the agency since its inception.

In a 17-5 vote, the 29-member board approved a motion designating the position as parttime with the "best assessment" that it needed only a 50 percent to 80 percent time commitment, depending on the candidates.

On an 11-8 vote with three abstentions, the board approved a motion indicating that the new chair would fill more of an oversight role with the board delineating the responsibilities of the chair and president. The state's top fiscal officer, Controller John Chiang, warned yesterday that the current co-executive situation "severely compromises" accountability at CIRM.

The board hopes to elect a new chair perhaps as early as May but possibly in June to replace Robert Klein, whose term has expired.

Finding a replacement roiled the board last fall. Discussion was also vigorous today during the debate over the role of the chair – an issue that has troubled CIRM since its earliest days. Prop. 71, which created CIRM in 2004, established a dual executive situation that has created friction and still troubles the agency today, CIRM President Alan Trounson acknowledged during today's meeting.

Duane Roth, co-vice chair of the board and a San Diego businessman, noted the longstanding problem
He said,

"This has been flagged...as something we need to get fixed."

Director Claire Pomeroy, dean of the UC Davis School of Medicine, said that CIRM has evolved to the point that the board must ensure that the staff is respected and allowed to run the organization. She said,

"We should empower them to go and do their job without the micromanagement of our board."

She said the public understands that CIRM has not been optimally functional because of the "lack of clarity" between the roles of the chair and the president.

Art Torres, co-vice chair of the board and a fomer state legislator, also warned that the nominating state officials – governor, treasurer, controller and lieutenant governor – may well find themselves hard pressed to nominate someone for a $500,000 state job as the state faces a financial crisis.

Some board members offered suggestions that the time commitment range be altered to 20 to 80 percent or from 20 to 100 percent but those proposals did not win sufficient support.

The board also recommended additional criteria for the position that included "experience with advocacy, proven vision and leadership abilities, and prior scientific understanding and experience with governance."

The board 's timetable calls for nominations from the officials by April 11 with public presentations by candidates at the May board meeting.

Here is the text of the successful motion by Director Jeff Sheehy, a communications manager at UC San Francisco on the role of the chair.

"The Governance Subcommittee recommends that the board clearly delineate the discrete responsibilities of the chair, vice chairs and president, and that the chair and vice chairs lead a robust oversight effort, including taking advantage of the skills of the board members in conducting their oversight role, and if the chair and vice chairs possess expertise in the areas of responsibility assigned to the chair in Proposition 71, then the board may elect to take advantage of their expertise operationally in those areas as well."

Here is a link to the CIRM press release that deals with the succession issue and other matters at today's meeting.

Stem Cell Directors Adjourn Meeting

CIRM directors have concluded their meeting. We will have a story coming up shortly on action dealing with the selection of a new chair.

CIRM Directors Taking Up Chair Selection

The governing board of the California stem cell agency has resumed its session with a discussion of the selection of a new chair.

California to Partner with AlphaMed on Stem Cell Research Journal

A $600,000 venture into scientific publishing with a North Carolina firm today received the go-ahead from the governing board of the California stem cell agency.

Anthony Atala

The endeavor with AlphaMed Press of Durham, N.C., is expected to focus on translational aspects of stem cell research. The research journal would operate independently of CIRM and have a $1 million annual budget. CIRM would contribute $200,000 of that for each of three years.

Some members of the CIRM board expressed a desire for assurances that the journal would publish "negative" findings, which they said some journals are loath to do. Director Philip Pizzo, dean of the Stanford School of Medicine, said commercial interests have actively moved to suppress the publication of negative findings. Pizzo had high praise, however, for the new journal's editor, Anthony Atala, director of the Wake Forest Institute for Regenerative Medicine.

A CIRM staff memo said that the AlphaMed had agreed to publish negative results, but the matter is expected to be brought up at the May CIRM board meeting. That raises the possibility that a final contract with AlphaMed may be delayed, although that issue was not discussed at the board meeting.

CIRM President Alan Trounson said AlphaMed currently has an office in Palo Alto and plans to expand it.

Lunch Break for CIRM Board

The governing board of the California stem cell agency is on a lunch break/executive session. Still to come today is action on the selection process for a person to replace Robert Klein as chairman of the enterprise.

CIRM Board Reverses Initial Rejection on $1.8 Million Grant

A UCLA stem cell researcher today won approval of an $1.8 million grant when directors of the California stem cell agency overturned an initial, negative decision by grant reviewers.

The proposal by Martin G. Martin deals with inherited diarrheal disorders. In January, Martin appealed the rejection by reviewers, and the board sent the proposal back to the grant panel. CIRM staff reported that reviewers changed their position in light of additional information.

The board recently altered its appeals procedures to facilitate sending applications back to reviewers when directors need more information when acting on appeals.

World Stem Cell Summit Garners Support from State Stem Cell Agency

The California stem cell agency board today approved $125,000 to send as many 125 persons to the World Stem Cell Summit in Pasadena in October.

Up to 75 would be patient advocates, a group that will be key in drumming up support for a new $3 billion to $5 billion bond ballot measure that has been proposed by by CIRM Chairman Robert Klein. The other 50 would be researchers and others involved in CIRM grant programs. The subsidies would be paid with funds donated to the agency by private parties.

The stem cell meeting is sponsored by a stem cell advocacy organization, the Genetics Policy Institute.

Board members raised questions about the cost of the registration -- $495 -- at the convention. They also asked whether any speakers or parts of the program would be controlled by industry sponsors. A representative of the convention said sponsors cannot "pay to play."

During the board discussion, CIRM staff disclosed that the agency also expected to receive a request for a $50,000 conference grant to support the meeting from Caltech, one of the convention sponsors.

San Leandro Law Firm Awarded $700,000 by California Stem Cell Agency

The California stem cell agency today approved on a voice vote a 32 percent increase($160,000) in fees this year for Remcho, Johansen & Purcell of San Leandro, Ca., for its work as outside counsel for the agency. Also approved was a $545,000 contract for 2011-12.

The firm, principally through James Harrison, has represented CIRM since 2004. Harrison is one of the five attorneys who drafted the ballot initiative that created the agency. A CIRM memo said the $350 per hour rates for partners and $265 per hour rates for associates at the firm are "significantly lower than the market rates for firms with similar expertise."

The memo presented to the board today did not explain why additional funds were needed this year. Nor did it give provide an overall figure for the current contract. A CIRM document from last June reported that Remcho was slated originally to be paid $475,000 this year.

CIRM staff reported the $475,000 figure during the meeting after being asked for it by Director Ted Love, a biotech industry executive. The board was also told that an increased workload generated the need for the 32 percent increase in the Remcho contract this year.

Another $22 Million to Go to 17 California Stem Cell Research Institutions

Directors of the California stem cell agency today approved a $22 million extension of the $50 million shared lab program that was scheduled to expire in 2012.

CIRM said the programs at 17 research institutions are a "valuable resource." A CIRM memo declared,

"These labs provide dedicated (safe harbor) research space, specialized instrumentation, a supply of cell lines and culture materials, and stem cell expertise. Additionally, they supply instruction and training in cutting-edge methods both as formally offered courses and one-on-one, customized instruction. This training function extends to the CIRM Bridges programs that rely on the Shared Labs to provide basic stem cell techniques courses for Bridges trainees. Furthermore, the Shared Labs serve as foci for collaboration, networking, and information exchange for stem cell research communities at the various institutions."

CIRM staff said CIRM funds cover about 20 to 25 percent of the cost of running the labs.

Duane Roth, a San Diego businessman and co-vice chairman of the CIRM board, raised a question about whether the productivity of each shared lab was evaluated as part of the proposal. The answer was no. Subsequently, the board directed the staff to provide such evaluations in the future.

Roth noted that CIRM's external review panel has recommended that the agency should focus on funding only the best programs.

The CIRM board has 29 members but only eight in attendance today could vote on the extension. The others had connections to the grant recipients that created a legal conflict of interest.

CIRM Directors Begin Business Meeting

Directors of the California stem cell agency have settled into their business session with action scheduled today on approval of a once-rejected $1.8 million grant by a UCLA researcher and a closed-door meeting on CIRM's first-ever involvement in clinical trials, a $50 million loan round for stem cell companies. Geron and Advanced Cell Technology are likely to be among the applicants. 

CIRM Directors Begin Business Meeting

Directors of the California stem cell agency have settled into their business session with action scheduled today on approval a once-rejected $1.8 million grant by a UCLA researcher and a closed-door meeting on CIRM's first-ever involvement in clinical trials, a $50 million loan round for stem cell companies. Geron and Advanced Cell Technology are likely to be among the applicants. 

CIRM Chair Should Back Away from Management Role, Says Top State Official

The board of the $3 billion California stem cell agency should direct its chairman to step aside from management of the organization and concentrate on oversight, it was told this morning.

In remarks prepared for delivery at the directors' meeting in Burlingame, Ruth Holton-Hodson, a representative of California's top fiscal officer, said,

"Frankly, it is difficult to uphold the appearance of accountability and objectivity when the board chair is involved in both management and oversight of CIRM's operations. Under the current model, the chair is essentially responsible for evaluating and approving much of his own work."

Holton-Hodson, deputy state controller, spoke on behalf of state Controller John Chiang. He is one of four statewide elected officials who can nominate candidates for chair of CIRM. He is also chair of the only state body charged specifically with financial oversight of the stem cell agency.

Holton-Hodson reiterated a number of points made by Chiang in his letter to the board yesterday. She said,

"It is also important to keep in mind that the chair is but one member of the ICOC Governing Board(the CIRM board of directors). Good governance must rely on the actions of the whole board, not a single member. As CIRM moves into the next phase, it is important that it be driven by a fully engaged oversight board, rather than a single individual, regardless of how talented that individual may be.

"As the Controller stated in his letter, CalPERS and CalSTRS (the state's mammoth retirement systems) both have a policy of voting in support of shareholder resolutions that separate the chair and the CEO of corporate boards because board independence is at the heart of effective governance and accountability. The public deserves no less from publicly-funded agencies and undoubtedly thought that independent oversight is what they would be getting from a body named the Independent Citizens' Oversight Committee(the formal name of the CIRM governing board)."

Later today the board is expected to discuss the selection of a person to replace Robert Klein, whose term has expired as chair.