CIRM Approves Planning Grants for $240 Million Round

Directors of the California stem cell agency this afternoon made the first installment on a $242 million effort to drive stem cell research into the clinic.

The CIRM board approved $1.8 million for 19 planning grants for a $240 million disease team round to be awarded next year. Seventeen applications were rejected. Five of the awards had conditions that must be met before they could continue in the disease team competition.

Both academic and business researchers could compete for the grants.

UCLA researchers John Adams and Chia Soo were unsuccessful in asking the board to reverse a negative decision on their planning grant application.

Here is a list of the researchers and a link to the CIRM news release.

Stem Cell Agency Chair Pleased With Likelihood of Fresh Funding

STANFORD -- The chairman of the California stem cell agency this morning expressed optimism about staving off a cash flow crisis at CIRM with additional funding from the sale of state bonds this fall.

Jonathan Thomas, a Los Angeles bond financier, told the CIRM governing board meeting here that he has been dealing with the governor's and state treasurer's offices during the past two months and is "very happy with the way things are going."

Without additional funding from state bonds, the $3 billion research enterprise will face a severe cash crunch next spring. Earlier this year, the state suspended the sale of general obligation bonds, the only source of funding for CIRM.

Thomas, elected in June as chairman of CIRM, did not go in details about the bond sale this fall. But he noted that it is a "tricky time" because of the state's financial crisis.

The size and timing of the bond sale is yet to be determined. The state treasurer's office has said many details are still being worked out.

Biotech Industry Alert: California Stem Cell Agency Moves Ahead with Industry-Friendly Efforts

The newly elected chairman of the $3 billion California stem cell agency is pushing forward with efforts to engage industry more deeply in state efforts to develop commercial stem cell therapies.

Industry has long been unhappy with its meager share of CIRM grants – 7 percent of $1.25 billion. A blue-ribbon panel commissioned by CIRM last year recommended major improvements.

Duane Roth

The latest action by Jonathan Thomas, the Los Angeles bond financier who was elected in June to head the agency, comes in the form of a thrust to be led by CIRM co-Vice Chair Duane Roth, a San Diego businessman.

Thomas' plan for engagement of industry will be discussed this evening at Stanford at the first meeting of the board's new eight-member Intellectual Property Subcommittee.

Thomas' proposal, posted only early today on the CIRM web site, would expand the panel's current jurisdiction. The document said,

Stephen Juelsgaard

"In light of CIRM’s desire to engage industry in its mission to deliver therapies and cures to patients who suffer from chronic disease and injury and the overlap between industry-related issues and the current jurisdiction of the subcommittee, Chairman Thomas, with the concurrence of Subcommittee Chair (Stephen) Juelsgaard, proposes to expand the jurisdiction of the subcommittee to include industry-related issues, such as: (1) participation by representatives of industry as members of the Grants Working Group; (2) the development and refinement of programs to incorporate industry into CIRM’s research programs; (3) financing issues relating to industry involvement with CIRM; (4) evaluation of barriers to industry engagement in CIRM-related or funded activities; (5) addressing means of encouraging industry interaction and involvement, especially in the areas of development, regulatory compliance, manufacturing and commercialization, with CIRM-funded research organizations that have identified potential promising therapies and (6) consideration and refinement of CIRM’s loan program."

Juelsgaard, former executive vice president of Genentech and currently a lecturer at Stanford Law School, was appointed to the board last May by Lt. Gov. Gavin Newsom. Juelsgaard once was reported as being considered as a possible candidate for chair of the agency.

Thomas said Roth would be named co-chair of the IP Subcommittee with responsibility for industry relations. Juelsgaard will deal more generally with IP issues, including "developing a program to assist CIRM grantees in protecting intellectual property generated from CIRM-funded research and to ensure that the state has an opportunity to share in the revenues arising out of CIRM-funded research." That topic is on the agenda of this evening's meeting.

Also to be discussed is another industry-friendly effort: A $30 million "Opportunity Fund" to "enhance the likelihood that CIRM funded projects will obtain funding for Phase III clinical trials (e.g. follow-on financing), (ii) provide a potential source of co-funding in the earlier stages of clinical development, and (iii) provide CIRM funded projects with access to pharma and large biotech partners that can provide valuable expertise in the areas of regulatory, clinical trial design and manufacturing process development."

Stem Cell Agency Cuts Travel Under Pressure from Governor

No more lollygagging in London – that's the message from Gov. Jerry Brown to the California stem cell agency.

Brown is trying to crack down on out-of-state travel, including two dozen "mission critical" international CIRM trips to such locations as Paris, Amsterdam, Japan and Australia.

The Sacramento Bee this afternoon reported the governor's efforts to limit CIRM travel at a time when the state is under extreme financial duress. Reporter David Sider of The Bee quoted Evan Westrup, a Brown spokesman, as saying,

"Now is not the time to be lollygagging in London on the taxpayer's dime. We have quite a bit to focus on here in California."

The travel issue comes as the stem cell agency will be seeking support from the governor for a significant allocation from the sale of state bonds this fall. The agency will face a severe cash crunch late next spring unless it receives additional bond funding.

The Bee said that following an inquiry earlier this week by the newspaper, new CIRM Chairman Jonathan Thomas wrote to CIRM board members that he is reducing his office's travel by more than 50 percent and "has asked officials to consider similar reductions elsewhere in the agency."

According to The Bee, Thomas noted that like former CIRM Chairman Robert Klein he considered the proposed travel "mission critical," but said,

"I believe we can accomplish these goals while doing our part to reduce expenditures in these times of fiscal challenge."

However, the amount of travel expense involved is tiny in comparison to the agency's research grants, which now total more than $1 billion. CIRM's operational budget is only $18.5 million.

For the 54-person agency, the total budgeted travel (in state and out of state) for this fiscal year is $494,000,down from the $500,000 budgeted in 2010-11. The out-of-state travel budget for the office of the chair is $100,000. For the president's office, it is $107,356.

One reader commenting on The Bee story said,

"In the world of research, there are meetings all over the world, and if you don't attend you become irrelevant. ...I know none of you(other readers) will agree, but research is very different than going to Las Vegas for the WIz BAG Conference, then out on the town.  Research meetings are working meetings where people doing primary research work on the problems disjointed but collaboratively in the same breath."

Our comment: CIRM's travel expenses are a symbol in the context of the governor's public austerity efforts. While symbols are important, the travel expenses do not affect or come out of the state budget. They come from bond funds. CIRM's operational budget – also funded by bonds – is very tight, some say too tight to do the job right. If Brown is concerned about spending by the stem cell agency, he should focus on significant expenditures – grants and loans -- and whether the state is getting the most for its money. One way would to do that would be a true performance audit conducted under the auspices of the state controller instead of under the control of the agency itself.

Here is the text of the memo by Thomas to board members:

"The Governor’s Office recently confirmed that CIRM’s Governing Board has the authority to approve the agency’s out-of-state travel, but requested that CIRM consider reducing its travel expenditures by 50 percent. I have reviewed the proposed budget for out-of-state travel for the Office of the Chair. Although I believe the proposed travel is mission critical, as it is intended to advance CIRM’s mission by leveraging CIRM’s investment in stem cell research with investments by other countries and states with which CIRM has collaborative funding rrangements, I believe we can accomplish these goals while doing our part to reduce expenditures in these times of fiscal challenge. I have therefore decided to reduce the out-of-state travel budget for the Office of the Chair by more than 50 percent. Furthermore, I have requested that the Finance Subcommittee review the out-of-state travel budget for the other offices within CIRM to determine whether similar reductions can be made consistent with CIRM’s mission."

California To Proceed with Fall Bond Sale; Stem Cell Agency Could Benefit

The California state treasurer's office today reaffirmed that it intends to move ahead with a state bond sale this fall, which could be good news for the $3 billion California stem cell agency.

CIRM will face a severe cash crunch in less than 12 months, roughly May or June of next year, without additional dollars. Its only real source of funding is through the sale of California general obligation bonds.

Tom Dresslar, spokesman for state Treasurer Bill Lockyer, told the California Stem Cell Report today that details for the fall sale are still being worked out. He said in an email,

"At this point, the only thing we can say with a good degree of certainty is that we'll sell (government obligation) bonds this fall. The number, size and structure of those transactions remains undetermined. Much will depend on priorities set by the Administration (of Gov. Jerry Brown), and how much new bonds they want to issue to keep current projects going or start new ones."

Last May, the state said that it would sell only $1.5 billion in bonds this fall to keep borrowing costs down in light of the ongoing state budget crisis. Roughly $37 billion in long term bonds are awaiting sale, according to the state treasurer's office, including $1.9 billion in bonds for CIRM. That is likely to mean that CIRM will face competition in receiving an allocation from this fall's sale.

Reporter Kathleen Pender quoted Dresslar in this morning's San Francisco Chronicle as saying,

"We need to get a firm handle on the financial situation of ongoing infrastructure projects, how much money they need, how far can they go with their current cash."

In June, the stem cell agency's new chairman, Jonathan Thomas, spoke frankly about CIRM finances just before he was elected chair. He told CIRM directors,

"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." 

Thomas was nominated for his post at CIRM by both Lockyer and Gov. Brown, which should be of benefit to CIRM in securing bond proceeds.

Earlier state plans called for a $2.4 billion bond offering in the spring of 2012, which the stem cell agency might also share in. However, that might cut very close in terms of CIRM's cash flow. Additionally, the state could be in the midst of another major budget crunch because of cutbacks that could be triggered in January.

More Information and Earlier for Public on California Stem Cell Issues

The California stem cell agency yesterday finished posting background information for its board meeting Aug. 25, which may be the first time it has provided the information so far in advance.

The postings allow the public and interested parties enough time to examine the material and make comments, if so desired. Matters before the board next week range from a major change in review procedures in big-ticket grant rounds to action on the first stage of a $243 million effort to push therapies into the clinic.

The improved posting performance appears to be linked to the election of a new chairman, Jonathan Thomas, who controls the board agenda. It is a welcome change from past practices in which information about important matters to be considered by the board was not made available in a timely fashion or sometimes was not available at all prior to a meeting. Even some board member have complained about late information.

Melissa King, executive director of the board, notified the California Stem Cell Report about the postings in an email. She said,

"I just wanted to let you know that all the documents for the board meeting next week are now posted. The items without docs linked to them are ones for which there will be no documents These are the chairman's report and item # 14, consideration of report from Intellectual Property Subcommittee, both of which will be reports and will not require action by the board."

Some of the information, however, is less than completely developed. One matter before the board involves discussion of its translational grant portfolio. The posted background material is a simple listing of the grants with no analysis or explanation of why the subject is being discussed and no indication of what decision points are necessary, if any. Another document involves ongoing work on CIRM's critical grants management program. The document is more an outline than a comprehensible narrative and is larded with technology jargon.

The full agenda can be found here with links to the background material.

California Stem Cell Agency Reviewers Scored Geron Loan Application at 66

Scientists evaluating the Geron Corp. application for a $25 million loan from the California stem cell agency gave it a score of 66 on a scale of 100.

The score was disclosed publicly this afternoon for the first time at the request of the California Stem Cell Report. Directors of the agency approved the loan last May, on a 16-1 vote, during a process that was a major departure from other funding rounds. Normally, the scores of applicants approved for funding are publicly disclosed prior to action by the full CIRM board.

James Harrison, outside counsel to the 29-member CIRM board, said in an email,

"Geron's application received a scientific score of 66. For context, it is important to understand that CIRM utilized new criteria for the Targeted Clinical Development RFA on a pilot basis. As a result, the scores in this round should not be compared to scores for applications submitted in response to other RFAs, in which the piloted criteria were not used; the Geron score is only relevant when compared to other scores for applications in the same round. Here, there were no other scored applications presented to the Board as the other applicants withdrew. As a result, CIRM concluded that the most important information was whether or not the application had been recommended for funding and that presenting the score for the Geron application would not provide meaningful information."

In addition to not disclosing the score prior to board approval, CIRM failed to provide the usual summary of grant reviewer comments. The three other applicants in the $50 million round all withdrew prior to presentation to the CIRM board – another first in CIRM's grant program. And no public explanation was provided at the time for the departures from long-established procedures used for more than 400 grants and loans.

Harrison has defended the handling of the Geron application, declaring that it was needed to protect confidential information.

California's $25 Million Loan to Geron: Approval Came Only After Major Departure from Longstanding Procedures

The state of California chalked up a historic first last May when its stem cell research agency approved a $25 million loan to a corporation engaged in another first – a clinical trial for a treatment created from human embryonic stem cells.

It was the first time that the state has funded a clinical trial -- one watched by untold numbers of persons globally who hope that stem cells will ease their pain and cure their suffering. The funding is also critical to Geron Corp. of Menlo Park, Ca., which initiated the safety trial for its spinal injury stem cell therapy.

CIRM President Alan Trounson told agency directors in May,

"It's just possible that this trial might have faltered without our backing."

Approval of the loan, however, came after the $3 billion stem cell agency publicly deviated significantly from its normal funding procedures. The Geron application was not given a public scientific score, standard practice for all the other 433 applications that the agency has approved over the last six years. The usual summary of grant reviewer comments was not provided to the public or the board. The three other applicants in the $50 million round all withdrew prior to presentation to the CIRM board – another first in CIRM's grant program. And no public explanation was provided at the time for the departures from long-established procedures.

In response to questions from the California Stem Cell Report, CIRM defended its actions. James Harrison, the board's outside counsel, said the unusual handling of the Geron application was necessary to protect confidential information. Harrison said,

"CIRM has a significant challenge and responsibility to protect the confidentiality of the companies’ submissions as any violation could have adverse consequences for the companies, including a material disclosure, particularly for those companies that are publicly traded."

Regarding the failure to provide a summary of grant reviewer comments, Harrison said a summary was indeed available, pointing to a document that contained only a 67-word listing of the criteria used by evaluators. By contrast, the top-scoring applicant for a $14.6 million disease team grant in 2009 had a 1,219 word summary review.

Regarding withholding the scientific score of the Geron application by reviewers, Harrison said publishing it would have been "confusing" because all the other applicants had dropped out.

Asked whether the applicants were encouraged by CIRM in any manner to drop their applications. Harrison replied,

"In this case, three applicants, on their own volition, withdrew their applications before the board meeting and therefore the applications were not presented to the board."

Asked whether the other applicants had any sort of assurances that they would have a better chance later, Harrison said,

"CIRM has made no assurances, either directly or indirectly, to any applicants, including the applicants for the Targeted Clinical Development Awards, regarding future funding.  CIRM does try to assist applicants by providing feedback, where appropriate."

As to the lack of an explanation to the public and interested parties for the departure from longstanding procedures, Harrison did not respond directly. He said,

"This was CIRM's first clinical trial review and we expect to strengthen and refine the procedures for the next round, including explaining to the public how and why clinical review summaries differ from other CIRM grant review summaries."

(The full text of Harrison's statement can be found here.)

Geron's application was approved in May by directors on a 16-1 vote. The dissent came from Joan Samuelson, a patient advocate member of the board and a member of the grant review group.

According to the transcript of the directors meeting, she said the trial was not ready and CIRM was not ready.

"There were lots of -- this is based on the peer review and the comments by the scientist members of the grants working group. There were many concerns that many of the scientist members felt should be satisfied before embarking on a clinical trial and they weren't."

Ellen Feigal, CIRM's vice president for research and development, responded following Samuelson's remarks. Feigal said,

"I want to make it clear, making the decision to move towards and into a clinical trial is a very complicated decision. It's not black and white. It's based on judgment, on experience, on science, and the data, and there's not really a right or wrong answer. And I just think that the tenor of the discussions that we've had, the tenor of the discussions of the grant review group had were appropriately deliberative and considered all the different issues."

(Editor's note: Discussion of the Geron application begins on page 142 of the May transcript. It picks up again on page 153. The 16-1 roll call vote on the application by the 29-member board can be found here. Five board members did not vote because of conflicts of interest. The others either were not present or did not answer the roll call. Votes by the grant review group are not disclosed. The names of scientists specifically evaluating applications are not disclosed except for the membership of the grant review group.)

Text of CIRM Response on Geron Funding Procedures

Here is the text of what the California stem cell agency said concerning the unusual procedures in the approval of the $25 million loan to Geron in May 2011. The statement came in response to emailed questions from the California Stem Cell Report. James Harrison of Remcho, Johansen & Purcell of San Leandro, Ca., outside counsel to the board, prepared the statement after consulting with the chairman, vice chairmen and senior management of the agency.

Here are the questions posed by the California Stem Cell Report..

"Why wasn't the grant scored?
"Were the other applicants encouraged by CIRM in any manner to drop their applications? Were the other applicants given any sort of assurances -- including a wink or a nod -- indicating that they would be approved or have a better chance later?
"Why wasn't the grant reviewers' summary posted on the CIRM web site? Was a grant review summary ever prepared?
"Does CIRM expect that its conduct in this case will inspire confidence on the part of other applicants that they will receive fair treatment in the future? How does the unusual handling of this round square with CIRM's vows to adhere to the highest standards of openness and transparency?"

Harrison's response:

"Before I answer your questions, I wanted to provide you with some context.  As you know, the Targeted Clinical Development Award program represented CIRM’s first effort to fund clinical research, a highly specialized area of medical research.  As a result, CIRM had to develop new criteria and processes for the review of applications.  In addition, the agency hired Dr. Ellen Feigal, who has tremendous clinical experience, as Vice President for Research and Development to oversee CIRM’s clinical program.  Indeed, Ellen participated in the Grant Working Group’s Targeted Clinical Development review within days of being hired.  We recognized when we issued the Targeted Clinical Development RFA that this was an iterative process and we intended to learn from this first effort in order to refine our procedures for future rounds of clinical awards.  We have already begun to work on these refinements, including a procedure to obtain supplemental information which will be presented to the Board in August.

"It is also important to bear in mind that one of CIRM’s major goals is to collaborate with the biotechnology and pharmaceutical sectors to bring therapies from the bench to the bedside, and CIRM’s clinical trial program represents one of our most important opportunities to engage with companies.  In order to work with companies, we need to be able to assure them of CIRM’s capacity to protect their proprietary information and their ability to obtain financing.  This is particularly true for companies involved in clinical research:.  At this stage of commercial product development, many things are proprietary (e.g., FDA communications, data, clinical plans, etc.); therefore, CIRM has a significant challenge and responsibility to protect the confidentiality of the companies’ submissions as any violation could have adverse consequences for the companies, including a material disclosure, particularly for those companies that are publicly traded.  Thus, we were  mindful of the importance of protecting the confidentiality of the applicants for Targeted Clinical Development Awards.

"With that context, here are our answers to your specific questions:

"Why wasn't the grant scored?  The Grants Working Group did score the application, but given the fact that the application was reviewed pursuant to new criteria and was the only application presented to the Board, we concluded that presenting the score without context would have been confusing.  We therefore presented the GWG’s recommendation without the score.

"Were the other applicants encouraged by CIRM in any manner to drop their applications?  Every applicant for CIRM funding has the right to withdraw its application for funding before the Board considers the application.  In this case, three applicants, on their own volition, withdrew their applications before the Board meeting and therefore the applications were not presented to the Board.

"Were the other applicants given any sort of assurances -- including a wink or a nod -- indicating that they would be approved or have a better chance later?  CIRM has made no assurances, either directly or indirectly, to any applicants, including the applicants for the Targeted Clinical Development Awards, regarding future funding.  CIRM does try to assist applicants by providing feedback, where appropriate.

"Why wasn't the grant reviewers' summary posted on the CIRM web site?  A public summary was prepared and posted on CIRM’s website; given the fact that much of the information relating to the review was proprietary, the summary was, by necessity, brief.

"Was a grant review summary ever prepared?  Yes, see above.

"Does CIRM expect that its conduct in this case will inspire confidence on the part of other applicants that they will receive fair treatment in the future? Yes, we believe that the care CIRM took in protecting the confidential information of applicants serves applicants, grantees and the public.  The protection of applicants’ confidential information is critical to CIRM’s success."

"How does the unusual handling of this round square with CIRM's vows to adhere to the highest standards of openness and transparency?  CIRM’s mission is to fund research to find therapies and cures for chronic disease and injury – we believe that CIRM’s handling of the clinical trial awards serves this goal and is consistent with our commitment to transparency and to protecting applicants’ confidential information."   

After receiving Harrison's comments, we asked the following questions.

"I cannot find a summary of the reviewers comments. The only thing that I turned up was this, which is not a summary of what the reviewers had to say as provided in other grants:
http://www.cirm.ca.gov/summary-application-ct1-05168

"Perhaps you can point me to something else.

"Given the great departure from normal grant review procedures, why was
there no attempt to explain that in public at the May meeting? But
perhaps I missed it in the transcript. Thanks."

Harrison replied,

"You identified the correct summary. As I mentioned in my earlier email, because of the proprietary nature of the information, the review summary was, by necessity brief. This was CIRM's first clinical trial review and we expect to strengthen and refine the procedures for the next round, including explaining to the public how and why clinical review summaries differ from other CIRM grant review summaries."

Stem Cell Directors Moving on $243 Million Program and Industry-Friendly Efforts

Directors of the California stem cell agency will meet next week to begin the first stage of giving away $243 million in their pursuit to push a stem cell therapy into the clinic.

The immediate effort involves $3.3 million in planning grants for the second round of the CIRM disease team program. Applications are targeting cancer, HIV, Alzheimer's, ALS, Huntington's Disease, Parkinson's and muscular dystrophy, among others. The next step in the disease team effort will be much larger – $240 million, to be awarded next summer with roughly $20 million for each grant.

For the smaller planning grants to be awarded next week, 36 researchers applied for cash of up to $100,000. Nineteen were approved for funding by the grants review group, which is tantamount to full CIRM board approval. Their scores ranged from 87 to 62. One application was approved for funding but no score was listed. However, that application was ranked below the application with a score of 62. CIRM provided no explanation for failing to publish the score. Names of applicants were not disclosed in keeping with the agency's longstanding practice.

The disease team round was open to both business and academic researchers. We have queried CIRM about whether any businesses applied. The stem cell industry has been less than happy with its meager share of CIRM grants. The $3 billion agency's new chair, Jonathan Thomas, has indicated he wants to make CIRM more industry friendly.

The board meeting next week will be Thomas' first full session as chairman. The meeting was originally scheduled for two days, which was not uncommon under the tenure of former Chairman Robert Klein. But next week's session has been reduced to one day under Thomas. The agenda also seems not as fully packed as under Klein, although it has two executive sessions that could consume a fair amount of time. One deals with the evaluation of CIRM President Alan Trounson. The other deals with proprietary matters on grant applications.

Heavy agendas during the Klein era often generated quorum problems because of the supermajority requirements for voting by the board. It took so long to work through the material that competing priorities among board members meant that some – sometimes quite a few – had to leave.

Today – with eight business days before the Aug. 25 meeting – the agenda has a fair amount of background material posted, giving interested parties a chance to examine the information in a timely fashion.

Included on the agenda is a document about CIRM's ongoing issues, including security, with its self-developed, computerized grants management program, a listing of its translational grant portfolio and a plan to extend its $44 million researcher recruitment effort.

The CIRM board also has plans to take up a report from its new Intellectual Property Subcommittee.  The full board agenda contained no indication of what the report would deal with, but presumably it will involve a new, $30 million program aimed at the stem cell industry. That program will be acted on by the IP subcommittee next Monday, preceding the full board meeting. The panel's recommendation would normally go to the full board meeting on Aug. 25.

Also missing from the agenda is any explanation of the purpose of the discussion of the translational grant portfolio or analysis of the portfolio. Additionally, still to come is the latest version of changes in the grant review process for CIRM's big-ticket grant efforts as well as a job description for CIRM's first-ever chief financial officer.

The job description effort has been underway for some months and is linked closely to issues involving CIRM's controversial dual executive arrangement between the chairman and president. The new CFO will be reporting to both the president and the chairman.

The disease team planning grant item also reflected a change in the way CIRM presents the public summary of reviewer comments on the applications. The new format is more concise. Gone is the narrative format that often contained a more fulsome discussion of the applications. Here is a link to one summary on a planning grant application and another link to an application in January.

California Stem Cell Achievements: The Perspective from Robert Klein

The former chairman of the $3 billion California stem cell agency -- Robert Klein -- last week fired off an email touting the accomplishments of his tenure in a statement that had many of the earmarks of an election campaign document.

The 3,770-word missive was emailed under the auspices of Americans for Cures, Klein's stem cell lobbying group which has the same address as his Palo Alto real estate investment banking firm. Presumably the email went to a national audience.

Americans for Cures said in an introduction to the statement that Klein is now preparing "for the next installment of this magnificent effort," which could well be another statewide bond election seeking additional billions for stem cell research. Klein directed the 2004 ballot campaign that created CIRM.

CIRM will run out of cash in about 2017. It relies on borrowed money – state bonds – for its operations and grants. Interest costs double the real expenses of the program, making what appears to be a $20 million grant actually cost around $40 million.

Another stem cell bond measure is not likely to be attempted until 2014 or later. California's current financial crisis makes it unlikely that a bond measure would win voter approval any time soon.

In his statement, Klein soft-peddled the state's current economic downturn, declaring that California was under "maximum financial stress" also in 2004. (Editors note: Unemployment in California was 6 percent just before the Proposition 71 election that created CIRM. In contrast, joblessness stood at 12.1 percent in June of this year.)

Titled "Bob Klein's last words as chair of the stem cell board," the document clearly reflects Klein's view of the California stem cell world. Almost needless to say is that there are other, more measured perspectives.

Here is the email from Americans for Cures and Klein.Statement by Robert Klein, Aug. 4, 2011, on his term as chairman of the California stem cell agency

Faulty Research, Fraud Attract Page One Attention in Wall Street Journal

The Wall Street Journal today reported a sharp upturn in retractions of scientific studies and a trend in research fraud that one editor of an influential scientific journal called a "scar on the moral body of science."

The journal's page one piece was headlined, "Mistakes in Scientific Studies Surge."

The article documented instances in which hundreds of thousands of persons were treated on the basis of faulty research.

Reporter Gautam Naik wrote,

"Science is based on trust, and most researchers accept findings published in peer-reviewed journals. The studies spur others to embark on related avenues of research, so if one paper is later found to be tainted, an entire edifice of work comes into doubt. Millions of dollars' worth of private and government funding may go to waste, and, in the case of medical science, patients can be put at risk."

The Journal piece has implications for the California stem cell agency, which ballyhoos the number of papers its grant recipients publish -- some 600 or so from $1.3 billion in grants and loans. The agency also has established critical bench marks for performance that must be verified on some big-ticket grants if state money is to continue to flow to recipients. And CIRM grants are awarded on the basis of a peer review process.

Naik wrote,

"Since 2001, while the number of papers published in research journals has risen 44%, the number retracted has leapt more than 15-fold, data compiled for The Wall Street Journal by Thomson Reuters reveal.

"Just 22 retraction notices appeared in 2001, but 139 in 2006 and 339 last year. Through seven months of this year, there have been 210, according to Thomson Reuters Web of Science, an index of 11,600 peer-reviewed journals world-wide."

The article said that retractions related to fraud increased more than sevenfold between 2004 and 2009, according to an analysis in the Journal of Medical Ethics, a finding also supported by another researcher.
Naik wrote,

"Why the backpedaling on more and more scientific research? Some scientific journals argue that the increase could indicate the journals have become better at detecting errors. They point to how software has made it easier to uncover plagiarism.

"Others claim to find the cause in a more competitive landscape, both for the growing numbers of working scientific researchers who want to publish to advance their careers, and for research journals themselves.

"'The stakes are so high,' said the Lancet's editor, Richard Horton. 'A single paper in Lancet and you get your chair and you get your money. It's your passport to success.'"

Naik continued, "The apparent rise in scientific fraud, said Dr. Horton 'is a scar on the moral body of science.'"

By about 9 a.m. PDT, the article had attracted more than 200 comments on the Journal's web site. Some readers minimized the problem. Another reader said that to be a credible scientst,

"One must jump (through) many hoops in conforming to proper authorities."

Another commented about problems created by agenda-driven results. Another criticized the peer review process as simply an inexpensive way for scientific journals to fill their pages. Reader Daniel Viel said, "Bottom line: this is big business. A tremendous amount of money involved every time a study 'pushes' drugs."

New Stem Cell Agency Chair Discloses More than $3 Million in Investments

The new chairman of the California stem cell agency, Jonathan Thomas, last week reported that he has more than $3 million in investments, including holdings in an enterprise that invests in "distressed debt" and in a consulting firm that teaches businesses how to "out-behave the competition."

Thomas' statement of economic interests -- required by state law – disclosed that the bond financier has more than $1 million invested in Saybrook Capital of Santa Monica, Ca., a firm that he co-founded. Thomas is currently a partner in the firm, which deals with "distressed debt," including government bonds. He has said he will continue to be involved with the business while he also serves the part-time (80 percent) chairman of CIRM at a salary of $400,000.

In his statement, Thomas also reported that as of taking office on June 23 he had a more than $1 million investment in the Saybrook Opportunity Fund and another $1 million-plus holding in LRN, a Los Angeles-based firm that provides "legal/ethical" consulting.

LRN was founded in 1994 by Dov Seidman, an attorney and author of the book "How." On the firm's web site, Seidman said he started LRN "with a powerful vision that the world would be a better place if more people did the right thing." Since then, the firm says it has consulted with 500 companies including Pfizer, Johnson & Johnson, eBay, 3M and Walt Disney.

We asked Thomas about he came to be involved in LRN. Scott Tocher, counsel to the CIRM chair, replied via email that Thomas "knew the gentlemen who founded the company and thought it was a very interesting business model and on that basis made his investment."

Thomas' holdings also include shares in 71 different companies for a total that could range from $206,000 to $1.4 million. Most of the holdings were less than $10,000 each. Eight ranged between $10,001 and $100,000. The state disclosure law requires reporting of investment values only in broad ranges.

Thomas disclosed holdings in four pharmaceutical companies: Allergan, Gilead Sciences, Pfzer and Watson Pharmaceuticals. The investments ranged from $2,000 to $10,000. A similar investment was reported in Thermo Fisher Scientific, which makes stem cell research equipment.

Pfizer is deeply involved in stem cell research, including a $100 million commitment in the United Kingdom. The Pfizer effort includes a collaboration with Peter Coffey at University College of London. Last fall, CIRM directors awarded Coffey $4.9 million to lure him to UC Santa Barbara. Coffey is also involved in a joint $24 million research program backed by CIRM and the UK.

Thomas reported income of between $10,001 and $100,000 each from Saybrook and CSI Management Limited. Tocher said CSI is the contracting affiliate for CSIP Group of Los Angeles, a private equity firm with a primary focus on China.

Thomas' statement shows that he had a more than $100,000 share in the gross income of Saybrook Capital. Tocher said that state law required the disclosure "regardless of whether or not JT actually received any income. As is typical of private equity firms, not all income is distributed for a variety of reasons (reserves, co-investment, etc.)."

The statement also disclosed Thomas' $3,239 investment in Advanced Cell Technology of Santa Monica, Ca., a human embryonic stem cell research firm. Thomas last month sold the ACT stock at what he said was a "significant loss."

All CIRM board members are required to file economic disclosure statements, which are used to help determine whether they can vote on matters that come before the governing board or even take part in discussion. The disclosure statements for board members and top executives at CIRM can be found here. The agency began posting them on its web site just this spring. Thomas' statement is not yet posted but you can find it below. Jonathan Thomas Statement of Economic Interests

Rao Leaving the Golden State for NIH

California stem cell researcher Mahendra Rao is returning to the NIH after five years as vice president at Life Technologies in Carlsbad, Ca.

NIH Director Francis Collins yesterday announced that Rao will be director of the NIH Intramural Center for Regenerative Medicine. The new center is an effort by the NIH to speed development of stem cell therapies.

Rao left the NIH in 2006 because he was restricted in his work on human embryonic stem cells. He said he could not do the job he was hired to do so he left.

While in California, Rao was connected to the Buck Institute for Age Research in Northern California and was involved in the activities of the California stem cell agency.

The NIH did not announce Rao's salary.

$250,000 Stem Cell Agency Performance Audit to Skip its Scientific Performance

When is a "performance audit" not a performance audit? Answer: When the California stem cell agency commissions it.

Under a new law, the $3 billion state research effort is required to conduct its first-ever "performance" audit this year and again every three years. Under the law, CIRM could have stipulated that the audit would include scientific performance, but it has chosen not to do so.

Instead, the audit will primarily examine "policies and procedures" for issuing contracts, grants and treatment of intellectual property to determine how well the agency is doing.

Admirable goals but certainly not even close to a full measure of CIRM's performance. Most would agree that the paramount measure is whether the agency has made good on the promises of the 2004 election campaign that created it. To do that would require an examination of CIRM's scientific program and the results it has generated.

The agency plans to pay $250,000 for the audit, selecting a bidder next month. The deadline for firms to present their bids is Friday. At least 10 firms have expressed an interest in the contract. They include Teeb Lead Project Management Solutions, Capital Partnerships Inc. (also dba The Resources Company), Crowe Horwath LLP, KPMG LLP, IntelliBridge Partners, Moss Adams LLP, Level 4 Ventures, Inc., Thompson, Cobb, Bazilio& Associates, PC; Moss Adams LLP, Strategica, Inc., and Sjoberg Evashenk Consulting, Inc.

The requirement for the audit was contained in legislation authored by State Sen. Elaine Alquist, D-San Jose. When she introduced her bill last year, she said CIRM is "essentially accountable to no one."

Alquist initially would have placed the performance audit in the hands of an independent, third party, the state controller, instead of CIRM itself. The controller, the state's top fiscal officer, is chairman of the only state body, the Citizens Financial Accountability Oversight Committee, specifically charged with evaluating the performance of the stem cell agency and its board. Introduction of the legislation came after Controller John Chiang and the committee unanimously called for more accountability at CIRM.

The legislation  also originally provided that the audit would include CIRM's strategic policies and plans, which would have brought scientific matters under scrutiny.

But as the bill moved through the legislature, CIRM was successful in amending it to remove the "strategic policies and plans" language. Also inserted was language that the audit did not need to cover scientific performance, which gave CIRM more control of the scope of the audit.

However, CIRM took the matter further this summer. In its RFP for the audit, the agency misstated the statute, telling potential bidders that the law bars an examination of scientific performance, when in fact it does not.

Here is CIRM's language from the RFP:

"The statute specifically excludes scientific performance from the scope of the audit."

Here is the language from the law:

"The performance audit shall not be required to include a review of scientific performance."

Asked for a comment, CIRM defended the RFP characterization. Melissa King, executive director of the CIRM board, said in an email,

"The statement is correct because it is intended to convey that a scientific review is expressly excluded from the required audit areas. Furthermore, most government accounting firms do not have the expertise to conduct a scientific review. That is one of the reasons we have asked the IOM (Institute of Medicine) to conduct a study."

The $700,000 IOM study is more far-reaching, but has also been commissioned by CIRM. The IOM has a reputation for independence. However, any examination that is paid for by the agency that is the subject of the scrutiny will always face questions about its objectivity. It goes to the old saying about he who pays the piper, calls the tune.

Both the performance review and the IOM study are certain to become election campaign documents in a couple of years. CIRM survives only on money that the state borrows – bonds. And the agency is aiming for voter approval of another multibillion dollar bond measure to continue its operations beyond about 2017. To win support, CIRM and its backers undoubtedly will ballyhoo what it presumes will be favorable findings to bolster its bid for more cash.

When viewed in the context of a ballot campaign, CIRM efforts to limit the scope and shape the findings of either the performance audit or the IOM study will also undoubtedly damage their credibility.

Friday Deadline for Nominations for IOM Panel Studying the California Stem Cell Agency

If you have not yet made nominations for the 14-member Institute of Medicine panel that will assess the operations of the $3 billion California stem cell agency, this is the last week that you will have a chance to do so.

Friday is the deadline for the IOM's call for nominations.

The institute is looking for "expertise in (but not limited to) stem cell research, developmental biology, bioethics, research administration, financial structures for biomedical research, program evaluation, economics and finance, business administration, and intellectual property."

Adrienne Stith Butler, the IOM study director, said this morning that she has received about 200 nominations so far, which she said is about normal for studies that she has worked on.

You can read more about the $700,000, 17-month study here, including the formal call for nomination.

California Stem Cell Agency Chair Sells Interest in Advanced Cell Technology

Jonathan Thomas, at right, at his first CIRM board meeting in June.  Outgoing
Chairman Robert Klein is at left and co-Vice Chairman Art Torres in center. 

The new chairman of the $3 billion California stem cell agency, Jonathan Thomas, has sold "at a significant loss" the 17,046 shares he held in a California-based stem cell firm.

In response to a query from the California Stem Cell Report, Thomas, a bond financier in Los Angeles, said that his stock in Advanced Cell Technology of Santa Monica, Ca., was sold recently at 19 cents a share or a total of $3,239. Over the last 12 months the stock price of ACT has ranged from four cents to 27 cents. Thomas did not disclose size of the loss he took on his investment.

Thomas additionally said the firm in which he is a partner, Saybrook Capital, also of Santa Monica, sold all 11,364 shares it held in ACT at $0.1856 a share. Thomas said in an email,

"To put the sales in context from a volume standpoint, ACT has had a three month average daily trading volume of over 4.9 million shares. With these sales, I have no remaining investment of any kind in ACT stock. All sales were at a significant loss."

Thomas will remain a partner at Saybrook while serving as the part-time (80 percent) chairman of CIRM.

Prior to his election as chairman of CIRM, Thomas publicly disclosed his interest in ACT, which is only one of two companies in the United States with a clinical trial underway involving a human embryonic stem cell therapy(see here, here and here). He said in a statement to CIRM directors last spring,

"As I proceeded through my career in law and finance, I took particular interest in stem cell research and looked for a company to work with in that arena. In 2000, I began tracking Advanced Cell Technology (or "ACT"), a then fledgling-company pursuing therapeutic products from embryonic stem cell research. After extensive review of their intellectual property portfolio and lengthy due diligence, I led an early round financing to cover the company’s operating expenses. I have tracked ACT over the years and am familiar through it with the ups and downs typical of the biotechnology industry. Now, 11 years later, ACT has two of the three products derived from embryonic stem cell research currently in clinical trials. It will be interesting to see how things play out."

ACT moved its official headquarters to California after passage in 2004 of Prop. 71, the ballot measure that created the state's stem cell research effort. ACT has applied for grants from the stem cell agency, but never received one. At one point, an ACT researcher publicly complained about conflicts of interest in the grant review process. CIRM, however, gave short shrift to the complaint.

ACT reportedly applied for a loan from CIRM in its recent $50 million clinical trial round. But the company was not identified as a winner when directors approved a loan to Geron in May. However, ACT is reportedly in line for an award later this year from CIRM, according to industry scuttlebutt.

Under state law, Thomas is required to file a statement of his economic interests within 30 days of assuming his position. Thomas was sworn in on June 22. He told the California Stem Cell Report on Saturday that he is "just finishing up getting all the data together. It will be good to go in the next few days."

$150,000 Buyout at Stem Cell Agency in Management Shuffle

Even minor reorganization of an enterprise can come at a price. At the California stem cell agency, rejiggering its financial management generated a $150,000 buyout for the vice president of operations.

The payment was made when the position was eliminated and a new financial management structure created, shifting more authority to the office of the chairman of the $3 billion agency and away from CIRM President Alan Trounson. All of which was done this spring, prior to the election of Jonathan Thomas as the new chairman of CIRM.

Earlier this month, we asked CIRM whether any severance or other payments had been made to John Robson when he left the agency after his job was done away with. Melissa King, executive director of the board, replied,

"When the board approved John's appointment in June 2008 (see June 27, 2008 transcript at (pages) 233-243), it included a separation payment of $150,000 if John were terminated without cause within 60 months of his appointment. This separation payment was intended to compensate John for forgoing pension benefits from his former employer to accept the position at CIRM, where his new pension benefits would not vest for 5 years (60 months) As you know, as part of CIRM's recent reorganization, the position of vice president for operations, which John held, was eliminated. Consistent with the terms of John's appointment, CIRM made a separation payment of $150,000 to John."

Under the new structure approved in early May, a chief financial officer/director of finance will report to both Thomas and Trounson. Previously, the vice president of operations reported directly to Trounson. The move adds to the controversial dual executive arrangement at CIRM, which State Controller John Chiang, the state's top fiscal officer, has said "severely compromises" oversight at the agency.

The reorganization plan said,

"The director of finance will be jointly appointed by the president and the chair and will support, and report jointly to, the president and the chair. The president and the chair will be jointly responsible for employment and compensation decisions relating to the director of finance."

The new structure also places 12 persons out of 53 paid staff at CIRM partly or totally in the office of the chair. The total includes both the chairman and one of the vice chairs, who are both on salary.

CIRM has not yet posted a job opening for the new position. At last report, the chairman and president have not yet been able to agree on a job description.

Correction

An item July 28, 2011, dealing with California coverage of the dismissal of the suit against the NIH incorrectly referred to an article in the San Diego Union-Tribune. That article was published prior to the dismissal.

Legal Prognostication: Challenge to NIH Stem Cell Funding to End in 2013

A Stanford law professor is predicting that the legal fulminations about federal funding of human embryonic stem cell research will be resolved in 2013 in favor of the NIH.

That "best guess" comes from Hank Greely, who has been pondering stem cell legal issues for a number of years.

Writing on the Law and Biosciences Blog on the Stanford Law School web site, Greely issued the usual legal caveats and then said,

"But my best guess is that, sometime in 2013, the Supreme Court denies cert in this case and this question mark over human embryonic stem cell research funding is ended – though there may certainly be other questions raised between now and then.

"It is tempting to say 'all’s well that ends well.'  The judiciary seems to be headed to making a decision in this matter that is both (in my view) clearly legally correct and good policy.  But those who have suffered from the last 11 months of scrambling, uncertainty, and expense might have a different view.  It is one of the costs of our system of government – happily, in this case, so far, not a terribly high cost."