'A Critical Crossroads:' California Stem Cell Agency's Finances and 'Communications War'

The new chairman of the California stem cell agency, Jonathan Thomas, last week spoke more forthrightly in public about the financial condition of the research effort than we have heard from other CIRM officials.

Thomas also addressed the "communications war" involving the $3 billion research endeavor along with the dual executive arrangement at CIRM. In a conversation at last week's meeting of the CIRM board, he took issue with the coverage of the management structure by the California Stem Cell Report.  Thomas said his prepared statement would more clearly represent his position on the much-criticized arrangement.

Here are excerpts from his remarks dealing with those three areas. The full text of his remarks, which he provided at the request of this blog, can be found at the end of this item.

Thomas summarized the "huge success" story of CIRM and then said,

"Having said all that, CIRM is at a critical crossroads in its history. As the events of the past week continue to remind us, California is in a state of full-out fiscal crisis. No one knows when it will end or how it will ultimately play out. As a result, the agency faces the real possibility that it will not have timely access to the amount of bond proceeds it expected and may be forced to look elsewhere in very short order to the full funding required to meet its projected short term needs or to evaluate how to push grants out or otherwise modify expenses if that becomes necessary. And let's not kid ourselves – this problem could last for a long time. As a result the medium and long term funding questions are no less profound. As the agency enters a translation phase with the goal of getting more and more products into clinical trials, will CIRM be able to help its grantee and loan recipients get the money they need to cover this most expensive part of therapy development? Will CIRM be able to line up funding to sustain it beyond the target last award in 2017? These are huge questions. 

"On other fronts, the agency is in the middle of a communications war. In spite of its great story, the world seems to be focused on internal issues instead of the grand, big picture. These negative impressions distract from CIRM's mission and unnecessarily create adversaries where there would be many fewer if the true story were known. For that reason, CIRM must mount a robust public communications and information effort to get the message out. Front and center in any public communications stragetgy must be the patient advocates and their vast networks. These are the people that it's all about. When you tell their stories, you put a real life face on the marvelous science and cannot help but compel public enthusiasm and compassion."

On the subject of the shared responsibilities of the chair and the president, Thomas said,

"On reading the statute (Prop. 71), the positions of chair and president are designed to be complementary, not overlapping. When carried out as defined in a collaborative and respectful manner, they should together provide 100 percent of what the agency needs to be effective.

"On this latter point, some have decried having two chief executives. I couldn't agree more. If elected, I would attend to my many responsibilities and would expect (CIRM President) Alan (Trounson) to do the same. I would not look to micromanage but would instead empower Alan to handle his considerable job duties. He and I spoke on Sunday on this very issue and agreed that a complimentary, highly collaborative relationship was the best way to bring the agency towards fulfilling its goals."

Here is the full text of Thomas' remarks.
Statement by Jonathan Thomas to CIRM governing board 6-22-11

Nature Magazine's Brief Take on CIRM Chair Election

A Nature magazine blog has carried a brief item on the California stem cell agency's new chairman with the headline reading "Bond king elected as new CIRM chief."

The three-paragraph story by Elie Dolgin was routine although it did point out that Jonathan Thomas' parttime (80 percent) salary of around $400,000 is well above that of the $173,987 for California Gov. Jerry Brown.

The story ran June 23 on Spoonful of Medicine June 23.

NY Times and San Diego UT on New CIRM Chair; LA Times and SF Chron Ignore Election

The New York Times and the San Diego Union-Tribune have published the most comprehensive stories on the election of Jonathan Thomas as chairman of the California stem cell agency, including brief updates on CIRM's progress.

The Times article was posted yesterday on its web site. Andrew Pollack wrote that Thomas was "taking over at a time when the state's fiscal crisis could jeopardize financing for the effort." Pollack wrote that Thomas' financial experience

"... including dealing with government bond issues, seemed to appeal to the (agency's) board. The stem cell effort is financed through bond sales so it has actually been quite well insulated from the budget deficits that have forced huge cuts to many other state programs, including the University of California system.

"Still, the state’s fiscal crisis is now impeding the ability of the state to sell new bonds. That could eventually leave the stem cell agency short of funds, though probably not until next year."

Pollack also mentioned differences between Thomas and Frank Litvack, the other candidate for CIRM chair and a Los Angeles cardiologist, concerning the dual executive arrangement at CIRM. Litvack said the chair's job should be parttime and concerned mainly with oversight. Pollack continued,

"But Mr. Thomas said there was enough work for the chairman to do full time, without conflict with the role of the president."

Pollack's story summarized the current state of CIRM's efforts with three paragraphs:

"Scientifically, it is still too early to determine how successful the program will be. Certainly, it has not yet produced the cures for various diseases that were promised to voters, but realistically it is too early to expect that.

"But from a governance point of view the agency has been criticized by consumer groups, a state commission and newspaper editorials for lack of accountability, an unwieldy structure and conflicts of interest. Many members of the board represent universities and hospitals that receive funding from the agency, though members are not allowed to vote on items that concern their employer.

"The agency is now shifting its emphasis from basic research toward testing potential new therapies in clinical trials, which means it will be giving more of its money to biotechnology companies in the future."

Darce's piece covered more of the debate about the chairmanship. Additionally, Darce wrote:

"The new chairman said he also will try to clean up the institute’s image by launching a public relations campaign focusing on the scientists who have received state funding and the work they have produced.

"'If the true nature of what CIRM does became common knowledge, then the people of California would see this as the amazing success story that it is,' Thomas said. 'They would be very proud to know that California has become the largest center for stem cell research in the world.'"

The Los Angeles Times, the state's largest circulation newspaper, and the San Francisco Chronicle (CIRM's headquarters is in San Francisco) so far have not published any stories on Thomas' election.

Science magazine has carried a brief item by Greg Miller on the election.

Here is CIRM's press release on the election. It does not mention Thomas' $400,000 salary or the actual vote, which is not unexpected for a press release, but which is basic information for a news story.

The Sacramento Bee's story yesterday has triggered 44 comments as of this morning, mostly hostile because of Thomas' salary. But the number of comments is modest compared to other, more high profile stories.

Public Already Commenting Negatively on $400,000 Salary for New CIRM Chair

Initial mainstream media reports about the $400,000 salary of the new chairman of the California stem cell agency, Jonathan Thomas, today promptly triggered compaints from the public.

By late afternoon, the story on The Sacramento Bee website had attracted 39 comments, many of which remarked quite unfavorably on the pay. Torey Van Oot wrote The Bee story.

One anonymous reader said, "'We' the tax payer getting screwed again with this high salary."

Also posting a story on the election of Thomas was Katie Worth of the San Francisco Examiner.

Hand-Off at The Top

Jonathan Thomas takes oath of office. (left to right, Robert Klein, Thomas, Melissa King, executive
director of  CIRM board, James Harrison, outside board counsel)

It was a statement that could be taken in more ways than one.

It came from outgoing CIRM Chairman Robert Klein today as he swore in his successor, Jonathan Thomas, a Los Angeles bond financier.

Thomas read the prescribed oath for all state employees. Then Klein shook his hand and said,

"I congratulate you on a journey that you will never forget."

Klein said one reason he is leaving his post is to spend more time
 with his wife and family.
 (left to right, Klein and his wife, Danielle, and Thomas, following the swearing in. 

CIRM Directors Adjourn Meeting

CIRM directors just concluded their meeting in San Diego this afternoon with the swearing-in of newly elected Chair Jonathan Thomas. His first responsibility was to preside over the unanimous approval of a resolution honoring Robert Klein for his work and then adjourn the meeting.

Consumer Watchdog: $400,000 CIRM Chair Salary Will Incense Public

Consumer Watchdog's John Simpson, a longtime observer of the California stem cell agency, today said that the public will be outraged by the salary of its new chairman, damaging the prospects of a new multibillion dollar bond measure for stem cell research.

Simpson, stem cell project director for the Santa Monica, Ca., organization, supported the candidacy of Frank Litvack, writing an op-ed piece May 31 in The Sacramento Bee. Jonathan Thomas, a Los Angeles bond financier, was elected last night on a 14-11 vote.

Asked for comment on the outcome of the election, Simpson said in an email,

"The election of Bob Klein's successor was an opportunity for the board to end the dysfunctional dual executive model that has plagued CIRM since its launch and move to a structure where the chair serves in an oversight capacity. All outside evaluators have advocated this.

"Instead, after considerable arm-twisting from some of the state's top Democrats, the board picked a $400,000-a year candidate, Jonathan Thomas, who plans to be deeply involved in the agency's day-to-day operations. CIRM already has one executive who makes a half-million-dollar salary, President Alan Trounson. It's pure folly to spend nearly that much again so that two overly paid executives can trip over each other in a 50-person state agency.

"By comparison Dr. Francis S. Collins, director of the National Institutes of Health, gets a salary of $199,700, according to the NIH Department of Human Resources.

"The public outrage that will result from hiring a $400,000-a-year chairman will prove to be a public relations disaster from which the stem cell agency will never recover. Those contemplating going to the public in the future to seek another bond issue should have considered the negative impact such a salary will have. Opponents of a bond initiative will have a field day.

"The board had the chance to correct CIRM's management structure and put the agency on the right track for the future. They squandered that opportunity, opting instead to select the candidate with the best political connections, and did so at considerable unnecessary expense to the public."

More Info on Roll Call on New CIRM Chair

We have added the following information to the earlier item today on the roll call vote on the new chair of the California stem cell agency.

Absent last night were CIRM directors Leeza Gibbons, Eugene Washington, Marcy Feit and Sam Hawgood. Feit attended the meeting this morning and said she would have voted for Thomas. She said had planned to be available to vote from a teleconference location, but could not reach it because of a transportation hang-up.

CIRM Board Puts Off Changes in Review of Big Ticket Grants

Directors of the California stem cell agency this morning put off major proposed changes in the review process for high profile grant applications in clinical trial and disease team rounds.

Director Jeff Sheehy, chair of the directors' Science Subcommittee, sought the delay because, saying that the leadership of the committee and CIRM staff had not been able to reach a consensus on the language. There was no discussion on the matter.

Earlier this month, CIRM staff indicated some urgency existed concerning implementation of the plan.

Trounson's Report Available Online

The California stem cell agency this morning posted the presentation of CIRM President Alan Trounson. In it, Trounson reviews recent stem cell research and briefs the board on his current priorities. During the meeting, board member Jon Shestack noted the importance of posting the material and its importance in communicating about CIRM's direction.

Roll Call on Election of New CIRM Chair

Here is the roll call on the 14-11 vote last night electing Jonathan Thomas as the new chair of the California stem cell agency. All members who were available voted. There were no abstentions.

Voting for Thomas were Floyd Bloom, Jacob Levin (alternate for Sue Bryant), Michael Friedman, Michael Goldberg, Philip Pizzo, Stephen Juelsgaard, Robert Klein, Sherry Lansing, Robert Quint, David Serrano Sewell, Jeff Sheehy, Jon Shestack, Oswald Stewart, Art Torres.

Voting for Frank Litvack: Robert Price (alternate for Robert Birgeneau), David Brenner, Ted Love, Bert Lubin, Sholmo Melmed, Claire Pomeroy, Francisco Prieto, Carmen Puliafito, Duane Roth, Joan Samuelson, Kristina Vuori

Absent were Leeza Gibbons, Eugene Washington, Marcy Feit and Sam Hawgood. Feit attended the meeting this morning and said she would have voted for Thomas. She said had planned to be available to vote from a teleconference location, but could not reach it because of a transportation hang-up.

Stem Cell Directors Resume Meeting in San Diego

Directors of the California stem cell agency  resumed their meeting this morning in San Diego with a presentation by CIRM President Alan Trounson on his priorities and review of recent research. He began with a report on a a piece in Nature Biotech about public perceptions of stem cell research, which shows strong support for the endeavor. Robert Klein is conducting the meeting. Newly elected Chair Jonathan Thomas is seated at the directors' tables. Klein's resignation does not officially take effect until tomorrow.

Thomas Reacts to Vote News

Jonathan Thomas was not in the room late last night when directors of the California stem cell agency voted to elect him to a six-year term as chairman of the $3 billion research endeavor. He was elsewhere in the hotel in San Diego. Directors went on to some minor business as they waited for his return. Shortly after he and his wife were seated in the audience, outgoing Chairman Robert Klein reiterated the vote and Thomas received a standing ovation. In this photo, Thomas is applauding in return. His wife is seated. In the background is Frank Litvack(with glasses), who lost the election for the chairmanship.

Race for the Chair: Political and Financial Pressure Help Thomas Win CIRM Chairmanship

SAN DIEGO, Ca. –- Directors of the $3 billion California stem cell agency late yesterday evening elected Los Angeles bond financier Jonathan Thomas as chairman of the unprecedented research enterprise as it strives to fulfill seven-year-old campaign promises to turn stem cells into cures.

The board voted 14-11 to choose Thomas over Frank Litvack, a cardiologist/businessman, also from Los Angeles. The vote came with no debate following a three-hour closed session. Each candidate appeared separately in private, followed by a discussion among board members, also in private. Only one member of the public spoke out on the election during the public portion of tonight's meeting, during which each candidate read a statement.

The California Stem Cell Report was told that Gov. Jerry Brown's office called six members of the CIRM board during the past two days and managed to switch some members from Litvack to Thomas. The governor's office did not respond to queries about the matter.

Outgoing Chairman Robert Klein said the key factor in the vote was the state's current financial crisis and its possible negative impact on CIRM, which depends solely on state bonds for cash. Earlier Thomas sounded an alarm about CIRM finances, telling directors it was necessary to move to assure financial stability. CIRM faces both short and long term financing problems. Thomas could be the last chairman of CIRM unless he and the board devise a way to finance it beyond 2018, roughly the date when the agency runs out of money.  (For more on Thomas' remarks, see here.)

Klein told the California Stem Cell Report that Thomas would be paid something in the range of $390,000 to $395,000 annually for 80 percent time on the job. (The agency later said the correct figure is $400,008.)

Thomas is chairman and co-founder of Saybrook Capital of Santa Monica, Ca. The firm specializes in distressed government bonds. The current state budget crisis in California has left the state with the worst bond rankings of any state in the nation. State Treasurer Bill Lockyer, who controls the sale of state bonds, and the governor and lieutenant governor all nominated Thomas.

On Monday Lockyer sent a strong letter to his five appointees to the CIRM board urging them to vote for Thomas. He said the bond financier was the only candidate with a "complete toolkit" for the job. Lockyer stressed Thomas' background in bond financing.

Unless CIRM receives funds from a fresh bond sale, it will run out of cash in the middle of next year. However, the state is limiting its bond sales because of its budget crisis. CIRM will face tough competition to have its bonds placed in the two sales rounds expected to come up in the next 12 months. .

Some observers interpreted Lockyer's letter as a veiled warning to the entire 29-member board to approve Thomas, with the letter implicitly raising the possibility that the agency could come up short in the next bond rounds.

Longer term, CIRM has only about $1.4 billion or so to hand out for grants or loans. Klein has touted a $3 billion to $5 billion bond measure that would be presented to voters sometime during the next few years. To win support of the proposal, the agency will need a record of substantial accomplishment that resonates with the public.

During Thomas' six-year term, the agency will also have increasing responsibilities for monitoring its massive and growing grant portfolio. The task will become more challenging with larger and more complex grants and loans that have achievement benchmarks that must be met. If not, CIRM is supposed to withdraw its cash. At the same time, the agency continues to wrestle with its computerized grant management system.

To accomplish its goals, CIRM is working ever more closely with the biotech industry. Some industry executives have been dismayed at the tiny fraction of funding that has gone to businesses. A blue-ribbon review panel last fall cited the need to bolster funding for industry. At the same time, the taxpayer-funded agency must assure that the state receives full value for its dollar.

Litvack also had a blue-ribbon business resume along with a record of scientific accomplishment. One description calls him a "serial entrepreneur." He was CEO of Conor MedSystems of Menlo Park, Ca., when it was sold a few years go to Johnson &  Johnson for $1.4 billion. More recently he has been involved with Pervasis Pharmaceuticals and Capricor, Inc.

Litvack touted his scientific and business experience in developing new products and running the FDA gauntlet. State Controller John Chiang, who recently gained national attention for cutting off the pay of California legislators because they failed to pass a balanced budget, nominated Litvack. Chiang said,

"Litvack knows from personal experience what it takes to develop new medical technologies and move them through the regulatory process to adoption in the market place."

Thomas Elected New Chairman of CIRM

Jon Thomas was elected chairman of CIRM on a 14-11 vote. More to come.

Board Resumes Public Session

The CIRM board just came back into public wsession after about three hours of meeting in private.

CIRM Directors Still Mulling Chair Selection Privately

The two candidates for the chairmanship of the California stem cell agency appeared separately and in private before the organization's directors tonight. Their appearances have concluded. Directors have now been huddled behind closed doors for about two hours. The staff and and the two candidates are all gathered in the public  meeting room, chatting in small groups..

CIRM Board Goes Behind Closed Doors

The CIRM  board has gone into executive session following presentations by the two candidates for chair. It is unclear when the public session will resume.

Thomas Stresses His Bond Expertise, Cites State's Dicey Financial Condition

Jonathan  Thomas, a candidate for chair of the $3 billion California stem cell agency, tonight hammered away at the value of his bond financing experience and what it could bring to the survival of the research enterprise. 

Speaking to the CIRM board, Thomas, a Los Angeles bond financier, hit on many of the themes sounded by state Treasurer Bill Lockyer in his letter on Monday. Lockyer nominated Thomas for the post. In his letter, he said Thomas was the only candidate who had a "complete toolkit" for the job. 

In his comments, Thomas repeatedly said he had "all" the qualifications for the job. Lockyer, in fact,  underlined all in his letter when he referred to Thomas' qualifications.. 

Thomas spoke candidly about CIRM's financial condition. He asked whether CIRM will have funds available after 2017, a reference to CIRM projections that its $3 billion will run out about then. Thomas said the state is in a "full out fiscal crisis." As a result, a "real possibility" exists that CIRM will not have "timely access to the funds it needs."  He said the the agency may have to look to other sources of funding.  

"Let's not kid ourselves. This problem could last for a long time," Thomas said. 

The board has not heard that sort of candid public comment about its finances recently, although the warning signs have been there for some time. 

Thomas also addressed the dual executive issue. He said the CIRM chairman and president should have complementary positions -- not overlapping. He said he spoke with CIRM President Alan Trounson on Sunday and would expect to have a complementary, highly collaborative arrangement with him. 

Thomas brought up the statement by Frank Litvack, the other candidate for chair, that he would serve in a parttime role. Thomas said the position demands more time than that offered by Litvack. 

We have asked Thomas for a copy of his remarks. He said his only copy was marked up and said he would provide one tomorrow. 

Text of Litvack's Statement to CIRM Board June 22, 2011

Here is the text of Frank Litvack's remarks this afternoon to the directors of the California stem cell agency. Litvack is a candidate for chair of the agency.
Litvack statement to CIRM board June 22, 2011