CIRM Directors Audiocast Down

The Internet audiocast of today's meeting of the governing board of the California stem cell agency has been down for more than 30 minutes. CIRM says it is attempting to solve the problem.

CIRM Directors Pleased with Performance Audit Findings

The $3 billion California stem cell agency received a "very favorable" performance audit report compared to other government agencies, CIRM directors were told today.

Representatives of Moss Adams, which was paid $234,944 by CIRM for the study, made the comments during a presentation today to the agency's 29 directors. During their comments, CIRM executives and directors focused on the favorable aspects of the findings of the six-month study.

CIRM Chairman J.T. Thomas said the report showed that CIRM is "doing better than being on the right track." Co-vice chairman Art Torres said,

 "Comparatively we have done very well."

The report praised the professionalism of the CIRM staff – "a high caliber group" – and noted the seven-year-old agency is both "ramping up and ramping down" at the same time – a reference to the end of state bond funding for CIRM in 2017.

Prior to the presentation, CIRM President Alan Trounson said the staff would review the findings and come up with a plan for the board at its July meeting. The agency is already implementing some of the recommendations.

The audit was required by a recent state law that also allowed CIRM to hire more than 50 persons, a cap imposed by Proposition 71, which created the agency. The audit found a need for improvement in 27 areas and made recommendations. Of the 20 recommendations with the highest priority, half involved how CIRM manages its information, much of which is needed for good decision-making. The audit did not assess the scientific performance of the agency.

The Moss Adams report, performed by the Seattle firm's San Francisco office, said,

"CIRM board members and senior management do not receive regularly updated, enterprise-level performance information. The ability to evaluate performance against strategic goals is critical to effective leadership and program monitoring, evaluation, and reporting. CIRM does not currently have a formal performance reporting program."

In addition to decision-making information, Moss Adams called for improvements in the agency's long-troubled grants management system, better grant outcome tracking, development of a results-based communications plan, creation of a comprehensive, formal business development plan, formulation of a comprehensive information technology plan that would include steps to establish clear responsibility for CIRM's website and improved monitoring of invention disclosure forms from grantee institutions.

Last week, in a long overdue move, the agency hired a director for information technology, who is expected to solve many of the problems cited in the audit.

State law requires another performance audit in a few years. 

CIRM Board Opens Today's Meeting

Today's meeting of the governing board of the $3 California stem cell agency is now underway. Chairman J.T. Thomas is giving his report. We will carry stories as warranted today.

Live Coverage of Tomorrow's California Stem Cell Meeting

The California Stem Cell Report will provide live coverage of tomorrow's meeting of the governing board of the $3 billion California stem cell agency. Directors are expected to make major decisions about the agency's future direction, hear the results of the first-ever performance audit and award about $95 million in grants or loans.

The meeting will be held near the San Francisco airport with another public teleconference location at UC San Francisco. Los Angeles will also have two public teleconference locations. Another will be in La Jolla.

The meeting will be audiocast live on the Internet, which the California Stem Cell Report will monitor from its base in Panama near the Pacific entrance to the Panama Canal.

Instructions for listening in on the audiocast can be found on the agenda along with specific addresses for the public teleconference locations. The meeting is scheduled to begin at 9 a.m. PDT.  

Michael J. Fox Backs Away From Stem Cell Cure for Parkinson's

It was not exactly a case of "Back to the Future," the hit movie starring Michael J. Fox, but it did offer a reflection on the past.

It involves the actor's changing views on stem cell research in connection with Parkinson's disease, which he has had since the 1990s.

Fox's 2004 Ad

Early on, Fox was well-known for his support of human embryonic stem cell research. ABC News recently described him as having become "one of the country’s most visible advocates for stem cell research." In California, Fox was a prominent promoter of the ballot initiative, Proposition 71, that created the $3 billion California stem cell agency in 2004. "

He filmed a TV commercial that was aired widely during the 2004 campaign to create the stem cell agency, declaring,

 "It could save the life of someone you love."

Today he is considerably less confident. In an interview last week with ABC, he cited "problems along the way." Fox said,

“It’s not so much that [stem cell research has] diminished in its prospects for breakthroughs as much as it’s the other avenues of research have grown and multiplied and become as much or more promising. So, an answer may come from stem cell research but it’s more than likely to come from another area.”

Third Researcher Appealing Grant Rejection to Stem Cell Agency Board

The director of robotics and biosurgery at UC Davis is appealing rejection of his application for a $4.9 million grant from the California stem cell agency.

The scientist, W. Douglas Boyd, noted that his proposal was given a scientific score of 67, which was one point below the cutoff for most grants approved by CIRM's Grants Working Group. Thirteen grants fell in the 68 to 53 range, including Boyd's. Reviewers approved four in that range, including two with scores of 53.

Boyd's letter was brief, focusing on a letter of support from an Indiana firm, Cook Biotech, Inc., that would supply the "material and technical expertise to create a new bioengineered cardiac patch

material."

The appeal letter, along with other appeals(see here and here), will be given to CIRM directors in the agenda material for their meeting tomorrow in San Francisco. The board does not have to act on the petitions or discuss them. Researchers can also appear before the board to make a case.

Claire Pomeroy, CEO of the UC Davis Health Systems, is a member of the CIRM board. She will be barred from taking part in any discussion of Boyd's application or voting on it.

Stem Cell Agency Hires Tech Chief to Solve a Myriad of Problems

In a move that was long overdue, the $3 billion California stem cell agency last week hired a director of information technology to straighten out key problems ranging from its grants management system to how it handles its website.

The new hire comes as the CIRM governing board faces the results of its first-ever performance audit, which is markedly critical of how the agency handles its information. Half of the audit's 20 highest priority recommendations for improvement focus on information deficiencies, including critical information necessary for CIRM executives to determine the agency's performance.

Solving those problems will fall on the shoulders of Bill Gimbel, who is no stranger to CIRM. He has been working with the agency as an information technology advisor since 2010 through a contract with Infonetica, Inc., of Pleasanton, Ca., according to CIRM spokesman Kevin McCormack.  Gimbel is now the first staff person in a chief technology position at CIRM since October 2007, when about 25 percent of CIRM employees left.

Bill Gimbel

A graduate of MIT, Gimbel, who will be paid $180,000 annually, has a broad range of experience in computer technology and software dating back to 1992. According to his Linkedin web site, he was most recently director of IT at Infonetica. He lists himself as owner of aptReader, an app for reference books. He has also worked for LearningExpress and Scholastic, Inc.

The stem cell agency has been wrestling with information technology issues for years. The critical grants management system has been an issue at least since 2007, when directors were told its costs would not exceed $757,000. No figures for the total spent since then have been made public by CIRM, which is attempting to build a custom system, but the amount clearly and easily surpasses the 2007 estimate, based on some of the outside consulting costs. Although the agency hopes to resolve many of the problems by the end of this calendar year, the grant system was the target of considerable attention by Moss Adams, the firm that prepared the performance audit.

Over the years, CIRM directors have received intermittent, sketchy CIRM staff reports about the grants management system, but the Moss Adams discussion is the most comprehensive.

Among other things, the Moss Adams report said in bureaucratically delicate language,

 "Integration of website content management has not been an integral part of the GMS (grants management system) development process, which could result in suboptimal operational efficiency and effectiveness.

"Grants management system development is effectively managed at a tactical level, but it lacks dedicated, strategic governance and oversight, which has resulted in an elongated development process and requirements conflicts."

Moss Adams said,

"The new grants management system intellectual property module, currently under development, does not include provisions to address commercialization activity."

The performance audit additionally said,

"CIRM board members and senior management do not receive regularly updated, enterprise-level performance information. The ability to evaluate performance against strategic goals is critical to effective leadership and program monitoring, evaluation, and reporting. CIRM does not currently have a formal performance reporting program."

Moss Adams continued on other information technology topics:

"Data and document access are inefficient as a result of CIRM operating without a document management system.....In most cases, CIRM staff cannot access information without human interface. Information is stored in multiple locations, which are not linked or indexed."

The audit said that the agency has tried to solve its information problems without a plan. 

 "CIRM’s information system needs have been met by a variety of tools, including in-house developed applications, off-the-shelf applications, databases, and spreadsheets, most of which are not integrated," the audit stated.

One of the effects of all this is much wasted time when CIRM's tiny staff tries to extract information from the hodge-podge of systems. It is time that cannot be spared as the workload increases in the next few years, as it is certain to do. 

CIRM's 29-member board is scheduled to consider the performance audit at its meeting this Thursday. 

Painful Decisions Coming Up at Stem Cell Agency

The Sacramento Bee today ran a piece by yours truly in its California Forum section.

Here is an excerpt. You can find the entire article here.

"They're talking about pain at the $3 billion California stem cell agency. And mortality. But not the end of life as you and I know it.

"They're talking about the pain that comes from cutting off millions of dollars for scientists. They're talking about what will happen when the state stops borrowing money to finance stem cell research – a final-breath moment that arrives in about five years....

"CIRM's changing priorities create 'stark tension,' said one board member, Michael Friedman, CEO of the City of Hope in the Los Angeles area, in January. 'We're going to have to make some really painful and difficult decisions,' he told directors.

"CIRM's success – or lack of it – will play a critical role in its future finances, whether they are based on another bond measure or private support."

San Diego Biotech Firm Appeals Rejection of Cancer Stem Cell Grant

A San Diego biotech firm, Eclipse Therapeutics, whose multimillion dollar grant application was rejected by reviewers at the California stem cell agency, is asking the agency's board to overturn the decision next Thursday.

Eclipse, a spinoff from Biogen Idec, said it is reducing its request from $3.5 million because it has raised $2 million since it applied for the grant six months ago. However, its appeal did not state specifically how much it was now requesting from CIRM. The research involves cancer stem cells.

The company's appeal said that during the period following submission of its application, it has accomplished all of the activities that CIRM had identified as the first milestone in the research project. Eclipse also said it has accomplished a number of activities in milestones two and three. The firm said that it is now accelerating its IND filing by one year.

Eclipse was formed in March 2011 with $2 million in seed funding from City Hill Ventures, also of San Diego, according to a Bioworld article by Marie Powers. The co-founders are Peter Chu, now president of Eclipse, and Christopher Reyes, chief scientific officer. Chu and Reyes ran Biogen Idec's cancer stem cell program. They are also the applicants for the CIRM grant.

Their appeal carried a routine cover letter to the CIRM board from CIRM President Alan Trounson. He made no comment on the worthiness of the request. On an earlier appeal from Stuart Lipton of Sanford-Burnham, Trounson's cover letter said Lipton's letter was "without merit."

Eclipse said its proposal received a scientific score of 58 out of 100 from CIRM reviewers. CIRM, however, has not released the company's score. Two other proposals with scores of 53 were approved by reviewers.

For several years, CIRM has been sharply criticized for its failure to fund businesses in a significant way. It is currently moving to engage them more closely. If Eclipse's appeal is successful, it will be one of less than 20 business to be funded without a nonprofit partner. Businesses have received only about 4 percent of CIRM's $1.3 billion in awards to 494enterprises.

Appeals from rejected applicants are included in the agenda material presented to the CIRM board, but the board does not have to act on them or discuss them. Researchers can also appear before the board to make a case.

Burnham's Lipton Appeals Rejection of $5 Million Grant Application

Sanford-Burnham researcher Stuart Lipton is seeking to overturn rejection of his application for a $5 million grant from the California stem cell agency, declaring that reviewers misinterpreted the proposal and relied partly on "grantsmanship" instead of science.

Lipton's proposal deals with strokes and is one of 22 rejected by CIRM's reviewers in a $95 million round that comes before the agency's directors next Thursday.

Lipton's letter to CIRM yesterday said some of the reviewers' criticism was "completely unfounded," "incorrect" or "in error." The two-page letter went into specific scientific detail.

In a cover letter to the CIRM board, CIRM President Alan Trounson said Lipton's appeal was "without merit." He did not go into details but said CIRM staff is prepared to discuss it next Thursday.

The scientific score on Lipton's grant was not disclosed by CIRM, but it appears to be between 62 and 53. Two grants ranked at 53 were approved by reviewers. Appeals from rejected scientists are included in the agenda material presented by the board, but the board does not have to act on them or discuss them. Researchers can also appear before the board to make a case.

Kristiina Vuori, president of Sanford-Burnham, is a member of the CIRM board. She will be barred from taking part in any discussion of Lipton's application or voting on it.

CIRM's Improving Openness

The California stem cell agency this week once again posted in a timely fashion important information dealing with matters to be decided next Thursday by directors of the $3 billion stem cell agency.

The agency's actions are a marked improvement in openness and transparency compared to the practices prior to the election last June of J.T. Thomas as chairman of the CIRM board. Previously, background material on multimillion dollar matters was not available much of the time until shortly before the directors meeting, making it virtually impossible for interested parties or the public to comment or attend the sessions. Even CIRM directors would complain from time to time about the laggard performance.

According to the agenda, next week's meeting in San Francisco will include approval of $95 million in new grants, consideration of the first-ever performance audit of  which made 27 recommendations for improvement, action on the first-ever CIRM directors' code of conduct along with conflict of interest rules, changes in its loan policy and consideration of the agency's strategy for the next five years.

In addition to the meeting site in San Francisco, a public teleconference location will be available at UC San Francisco, two in Los Angeles and one in La Jolla. Specific addresses can be found on the meeting agenda.

Conflict of Interest: CIRM to End Contract with Consultant Linked to Grant Recipient

The California stem cell agency will not renew a contract with a "special advisor" who has been nominated to the board of directors of a firm that is sharing in a $14.5 million grant from the agency.

She is Saira Ramasastry, managing partner of LifeSciences Advisory, LLC, of Emerald Lake Hills, Ca. Ramasastry has worked for CIRM since May of 2010. Last month, she was nominated to the board of Sangamo BioSciences, Inc., of Richmond, Ca. Her responsibilities with CIRM have included "industry analysis and consultation." Sangamo cited her experience with CIRM in its press release on her nomination. She was also employed as a consultant by Sangamo, according to the firm.

Ramasastry's dual roles raise obvious conflict of interest questions. The case highlights the issues that can arise between CIRM and the biotech industry as the agency moves to engage industry more closely. CIRM's response additionally demonstrates a lack of awareness of the potential for serious mischief or worse when dealing with consultants.

The California Stem Cell Report asked CIRM on May 6 for comment on the Sangamo-Ramasastry matter. The questions included whether Ramasastry disclosed to CIRM her work for Sangamo and whether CIRM took any action per the agency's conflict of interest code. CIRM did not respond to the question of whether Ramasastry ever disclosed her ties to Sangamo, which expects to receive $5.2 million from the CIRM grant if it runs a full four years.

Here is the text of CIRM's reply today from spokesman Kevin McCormack.

"Saira Ramasastry was an independent contractor. As required by law, we do ask independent consultants to complete Form 700s(statements of economic interests) if they participate in an agency decision making role. Her role did not fall into that category - she was identified as a 'special advisor' in connection with our external review process - and so she did not have to fill out a Form 700. Her contract with CIRM comes to an end at the end of June, and she will not be elected to Sangamo's board of directors until July. Obviously once she is a member of the Sangamo board she will not be consulting or advising CIRM because of our strict conflict of interest rules."

(Editor's note: The board election is June 21, according to the company, not July.)

Our take: CIRM is heavily dependent on outside contractors. Expenditures for their services are the second largest item in CIRM's operational budget, exceeded only by salaries and benefits of regular employees. The responsibilities of outside contractors cover a wide range of sensitive tasks including computer system security, development of software that deals with proprietary information from grant recipients, analysis of confidential business operations of grant and loan applicants and much more.

The agency needs to know who their consultants are working for besides CIRM. Whether they make decisions for CIRM is beside the point. Gathering information that is not normally accessible to the public can be extremely valuable to businesses and their competitors as well as applicants for CIRM's $3 billion. In Ramasastry's case, she was privy to a great deal of confidential or economically useful information during her work on CIRM's external review and likely much more.

The use of California's Form 700 is hardly adequate to assess conflict of interest issues involving private consultants. The form was developed in the 1970s to deal with elected officials primarily and provides only the grossest sort of look at financial holdings and income.

CIRM's current move to embrace industry requires more scrutiny of conflicting interests – not less. NextThursday the CIRM board will deal with some of its conflict ofinterest rules. It is fine opportunity to ask for a sharper analysis of conflict issues and consultants with an eye to strengthening CIRM regulations and ensuring protection of the agency and its grantees' work – not to mention the interests of the people of California.

Scripps CEO Joins Stem Cell Agency Board; Love Leaves

Michael Marletta
Scripps Photo

State Treasurer Bill Lockyer has appointed Michael Marletta, president and CEO of the Scripps Research Institute, to the 29-member board of directors of the $3 billion California stem cell agency.

Marletta fills the seat of Floyd Bloom, also a Scripps executive, who resigned last year. Scripps has received $45.3 million in funding from CIRM.

In a letter yesterday to the stem cell agency, Lockyer said Marletta is a member of the National Academy of Science, American Academy of Arts and Sciences and the Institute of Medicine. Marletta joined Scripps in 2011 and became president in January.

Prior to that, he was at the University of California, Berkeley, where he once served as chairman of the department of chemistry, among other roles. An item on the Scripps web site said Marletta "focused his research on the intersection of chemistry and biology. He is acknowledged as a pioneer in discovering the role of nitric oxide, a critical player in communication between cells."

The CIRM board has another vacancy to fill. Ted Love resigned last month after serving on the board since its inception in December 2004. CIRM said Love, executive vice president of Onyx Pharmaceuticals, resigned for personal reasons. State Controller John Chiang is considering a number of candidates to replace him. Love was the only African-American on the board.

$95 Million in California Stem Cell Grants: Preview the Spending

For those interested in how the California stem cell agency is going to spend its next $95 million, you can check out short digests today of the 19 research grant applications, including reviewer comments, that are virtually certain of receiving the cash. 

The applications came in what CIRM calls its "early translational III" round, which is scheduled to be acted on by the CIRM board May 24 in San Francisco.

Digests of reviewer comments are part of the directors' meeting agenda. They include scientific scores, a statement from the applicant and a summary of what reviewers had to say during their closed door sessions. But you won't find the names of the applicants, their institutions or businesses. The stem cell agency conceals the names of the winners until after the board acts. Names of the unlucky ones are not disclosed by CIRM. The agency says it does not want to embarrass anybody including the institutions involved.

However, persons familiar with the area of science involved may well be able to discern at least some of the names of applicants from the information contained in the summaries.

Scientific scores of the successful applicants ranged from 88 to 53. Nine grants scored higher than 53 but were rejected by reviewers(the Grants Working Group). The panel turned down 22 applications overall. The CIRM board has final authority on applications, but has almost never rejected a positive decision by reviewers. Sometimes, however, it will overrule a negative decision.

One successful application that was scored at 53 involved ALS. The $1.7 million proposal was approved for "programmatic reasons," according to the summary. Often, programmatic motions for approval are made by CIRM board members sitting on the review panel. However, the summary did not disclose who made the motion or the vote. The summary said,

"The programmatic reasons provided were that ALS is a devastating disease that is not well-represented in CIRM's portfolio."

The other successful application that scored at 53 sought $6.3 million for research involving heart disease. The summary did not clearly identify the specific reason for approving the grant on a programmatic motion. But it said,

 "The GWG (grants working group) ... advised as a condition for funding that the applicant consult additional vector specialists with translational and clinical experience to select a more appropriate vector to move this program towards the clinic." 

Again CIRM withheld the vote on the motion and the name of the person who made the motion.

Applicants who have been rejected by reviewers can appeal to the full board. So far no appeals have been publicly posted by CIRM. The success rate on such appeals is mixed.

The translational round was open to both academics and businesses, which have received a tiny fraction of CIRM's $1.3 billion in spending so far. Some businesses have complained publicly and, as well, to a panel of the Institute of Medicine that is evaluating CIRM's performance.

The California Stem Cell Report yesterday asked CIRM for the number of businesses that applied in the translational round, including the pre-application process, which is used to whittle down the total number of applications. The request included total numbers as well. CIRM spokesman Kevin McCormack declined to produce the figures prior to the CIRM board meeting, saying they "won't be ready" until after the session.   

IP to Grant Oversight: Study Calls for Host of Improvements at California Stem Cell Agency

The $3 billion California stem cell agency is laboring under a range of problems that include protection of its intellectual property and management of its nearly 500 grants plus an inadequate ability to track its own performance, a seven-month study said yesterday.

The performance audit by the Moss Adams accounting firm of Seattle, Wash., made 27 recommendations for improvements, including more effort to ease strain connected to the agency's controversial dual executive arrangement. The study said that the nearly eight-year-old agency has many "opportunities" to "enhance performance reporting and decision making, strengthen effectiveness and efficiency, retain essential human resources and leverage technology."

In response to the report, the stem cell agency said, "(M)anagement concurs with the findings and recommendations....The recommendations are focused and constructive. CIRM is already implementing many of these recommendations, and we will be investigating the others in the coming months."

The performance audit is the first ever made of the California Institute for Regenerative Medicine. The audit is required by state law and was commissioned by the agency at a cost of $234,944. For years, the agency for years had resisted calls for a performance audit until it sought legislative approval in 2010 for removal of a 50-person cap on its staff. Originally, the performance audit legislation would have put the study in the hands of the only state body charged with oversight of the agency and its board. CIRM, however, was successful in lobbying to have that provision removed.

The 54-page report identified once again a number of issues that have troubled the stem cell agency for some years. Moss made 12 top priority recommendations, many of which dealt with information technology and grants management. Many of the recommendations focused on providing better and faster information on performance outcomes, which the audit said has been slow to come and hard to generate.

The report said,

"Key performance information is not readily available to CIRM leadership and other stakeholders on an ongoing basis. CIRM board members and senior management do not receive regularly updated, enterprise-level performance information. The ability to evaluate performance against strategic goals is critical to effective leadership and program monitoring, evaluation, and reporting."

The audit stated,

"CIRM does not effectively communicate outcome-based performance internally or externally. As such, CIRM does not focus on performance metrics as part of its (staff) meeting process."

The report additionally said,

"CIRM does not have an integrated financial information system....The use of spreadsheets results in labor intensive processes to generate reports and respond to information inquiries, since data must be pulled from multiple spreadsheets, a process that may be prone to error. ...Spreadsheets are not linked to each other or a master report. CIRM does not have a comprehensive list of spreadsheets or instructions for how to maintain the files or generate reports from them."

Moss Adams said that CIRM needed to do a better job in "bond forecasting," a reference to the California state bonds that finance virtually every aspect of the agency's operations. CIRM directors were caught by surprise a few years ago when they suddenly learned the agency was up against a major cash crunch.

Some of the recommendations will require more work from CIRM grantees and their technology transfer offices in an effort to track intellectual property and grant outcomes. The report also recommended a speed-up in CIRM's review of progress reports from grant recipients, which have been lagging completion by several months.

The dual executive arrangement, which was written into law by Prop. 71, has troubled CIRM since nearly day one. CIRM's own external review panel also identified it as problem two years ago. The executive structure is virtually impossible to change because of the political difficulty in making alterations in the ballot initiative.

Moss-Adams said,

"The working relationship between the chairman’s office and the president’s office has vastly improved over the past year, but there are still opportunities for improvement."

The performance audit recommended,

"Make every effort to manage and operate as one cohesive organization, while recognizing the varying roles, responsibilities, and authorities that exist with positions in both the chairman’s office and president’s office."

One of the top 12 recommendations involved CIRM's public relations/communications effort. CIRM Chairman J.T. Thomas told directors last June that the agency was in a "communications war."

Moss-Adams said,

"CIRM does not have a communication plan, and there is lack of clarity on how to address mission-based communication to CIRM’s various target audiences, especially the general public....The best way to facilitate results-based communications is to 1) quantify goals and outcomes in CIRM’s strategic plan and 2) report on achievement of those goals and outcomes by enhancing CIRM’s annual report with additional performance-based information."

Another performance assessment of the stem cell agency is also underway. It is being conducted by the prestigious Institute of Medicine and is costing CIRM $700,000. That report is expected this fall.

CIRM's board of directors is scheduled to consider the Moss Adams report at its meeting May 24.

Our take: While the findings and recommendations of the performance audit were delicately worded in many cases, they brought out issues that need to be addressed, many of which have been around for a great deal of time. At their meeting next week, CIRM directors should act very directly on the recommendations. They can do that by requiring a written report each month from CIRM Chairman J.T. Thomas and CIRM President Alan Trounson on the specific steps that they are taking to implement the performance audit's recommendations. Otherwise, the inevitable drift will set in.

California Budget Slashing Misses Stem Cell Agency

The $3 billion California stem cell agency dodged the governor's financial knife today.

This morning, Gov. Jerry Brown announced sweeping cuts throughout California state government as he attempted to close a new, $15.7 billion deficit. A report in the Los Angeles Times said the governor was "grabbing any spare change available." But this afternoon, in response to a query, Kevin McCormack, CIRM's spokesman, said,

"The answer is no, we won't be affected."

The question arose because California's financial picture is much bleaker than it was just four months ago. And the stem cell agency's only real source of cash is money borrowed by the state -- general obligation bonds.

Under Prop. 71, which created the agency in 2004, the bond funds flow directly to the agency without intervention by the legislature or the governor. However, Brown has been chary of additional bond sales since they create an increasing burden in the form of interest costs. Those costs must be financed out of money that otherwise might go to the University of California, K-12 schools and medical help for the poor.

Under an agreement arrived at last year, CIRM has what amounts to a $225 million line of credit with the state, which should take care of its needs until January. The cash is coming from short-term borrowing by the state instead of bonds.

The Brown Administration has cut back on bond borrowing and intends to cut more this fall. According to the state Department of Finance, the cost of borrowing has declined $173 million this fiscal year, down to $5.2 billion. CIRM's share of the debt service is more than $200,000 a day.  

Correction

The StemCells, Inc., item earlier today incorrectly stated that the disease team applications will come before the board of the California stem cell agency later this month. In fact, they are scheduled to come up at the board meeting in late July.

StemCells, Inc., Hoping for as Much as $40 Million from California Stem Cell Agency

StemCells, Inc., said today it has applied for as much as $40 million in funding from the California stem cell agency for two projects dealing with Alzheimer's disease and cervical spinal cord injury.

The announcement came in a news release dealing with the publicly traded firm's quarterly earnings. The applications are part of a $240 million round expected to be acted on in late July by the board of the $3 billion California stem cell agency. Funding for businesses in the disease team round is expected to come through a loan.

StemCells, Inc., of Newark, Ca., said,

"In January 2012, we submitted two applications to the California Institute of Regenerative Medicine (CIRM) for 'Disease Team Therapy Development Research Awards,' one for Alzheimer's disease and one for cervical spinal cord injury. A research award may be up to $20 million, payable over four years, to fund preclinical and IND-enabling activities with the aim of starting human clinical trials within a four-year window."

Applications in the round were reviewed behind closed doors in April. CIRM also has a policy of not releasing the names of applicants until its board acts and then only if an applicant is approved. CIRM says it does not want to embarrass firms that do not win approval. That includes individual researcher names as well as the names of such institutions as the University of California.

During discussion of grant applications by the CIRM board, directors are not told the names of the applicants, just the number of the application. If board members have conflicts of interest on specific applications, they are barred from voting on and discussing the application. The names of applicants have occassionally slipped out. Sometimes their identities can also be discerned by information contained in the summaries of the reviews of the applications, which become available on the CIRM web site shortly before the directors act. The summaries normally carry scientific scores and recommendations for funding.

Most companies seeking funding from CIRM do not identify themselves in advance, although they do if they appeal a negative decision by reviewers. The board has ultimate authority for approval of grants but has almost never rejected a recommendation for funding by reviewers.

StemCells Inc. was founded by Irv Weissman of Stanford, who sits on its board of directors. Weissman is also on its scientific advisory board along with Fred Gage of Salk and David Anderson of Caltech. Weissman and Gage have won substantial grants from CIRM. 

StemCells Inc.'s stock price closed at 92 cents yesterday. Its 52-week high was $8.20, and its 52 week low was 70 cents.

Here is a link to an analyst's report on the company.

(Editor's note: An earlier version of this item incorrectly stated that the disease team round will be acted on later this month.)

Correction

The "stem cell lawyers" item May 9 incorrectly stated that CIRM is expected to have six lawyers on staff in the next fiscal year. The agency expects to have a legal team of six (four lawyers and two assistants). 

$2.4 Million for State Stem Cell Lawyers: Too Much or Not Enough?

The California stem cell agency is spending $2.4 million a year on lawyers, a figure that one agency director has described as "awfully bloated."

More than one dollar out of every ten that CIRM spends on its operations goes for legal advice, and the subject came up at a meeting last month of a meeting of its directors' Finance Subcommittee. The issue triggered a sharp exchange revolving around a proposal to hire an additional attorney to deal with intellectual property issues.

In the next fiscal year, the agency expects to have legal team of six (four lawyers and two administrative assistants) on board out of a total CIRM staff of 60. It also has three outside lawyers or firms under contract at an annual cost of $1.1 million. Overall, CIRM is spending 13 percent of its $18.5 million operational budget on legal matters. Its budget for legal services will increase $50,000 next year.

CIRM's proposed budget includes a cut in external legal contracts to help finance the addition of another staff attorney. Elona Baum, CIRM's general counsel, is also advancing an additional proposal this month that would pay for another staff attorney indirectly through CIRM loans to business, thus avoiding problems with the 6 percent legal cap on the agency's budget.

At the April 2 meeting of the Finance Subcommittee April 2, Art Torres, CIRM's co-vice chairman and an attorney himself, vigorously questioned the addition of another lawyer. In an exchange with Baum, Torres said,

"Well, wait a minute. We already have you. We have Ian. We have Scott. We have James. What more do we need to add more to our legal services budget, which looks awfully bloated."

Baum and CIRM President Alan Trounson defended the addition of a staff lawyer. Both cited the need to protect intellectual property and promote commercialization of CIRM-funded inventions. Trounson and Baum said grantee institutions are failing to do so. Consequently, they said, the stem cell agency is "at risk."

In one exchange, Torres said,

"There are current counsels within the UC and Stanford and USC that ought to be taking care of this for their grantees."

According to the transcript, Trounson replied,

"Well, they're not – you know, this is not being taken care of in a way which is -- which is -- which is reasonable to the organization here. and I think it's putting the organization at risk...."

Baum cited an "a very in-depth" memo that she said justified hiring an additional attorney. Following the meeting, the California Stem Cell Report asked for a copy of the memo.

It consisted of a one-page job description. Dated March 5, it was written by Baum and directed to Trounson. It described the duties of the new lawyer but not the justification for hiring the person. In addition to IP work, duties including 350 hours of work to "provide increased certainty of commercialization rights," 250 hours for due diligence in the grant award process, 200 hours of work on genomics and reprogrammed adult stem cell efforts. The memo calls for 690 hours on business transactions including 150 hours to administer the loan program and 200 hours on agreements with companies seeking to relocate to California.

Much of the committee discussion focused on the need for legal expertise on IP issues, which Baum said the agency lacked.

CIRM first took a crack at hiring an IP attorney in 2008, seeking both a consultant and a fulltime staff attorney. A fulltime staffer was never hired. However, Nancy Koch was hired as an IP consultant for six months at $150,000 and has been with the agency since. Koch was deputy general counsel of Chiron Corp. and its successor Novartis Vaccines and Diagnostics, Inc. During 11 years at Chiron/Novartis, Koch was responsible for a wide range of intellectual property matters including litigation and licensing. Her current contract is for $250,000 for a year but would be reduced to help provide cash for a staff attorney. Baum said last month that Koch is primarily involved now with collaborative arrangements with other countries.

Our take? It is commonplace to be critical of lawyers, their profession and their numbers. CIRM, however, is an unprecedented agency operating in uncharted scientific waters with an enormous reponsibilility for generating a return for the state. It is engaged with firms that will be negotiating aggressively to cut the most beneficial deal possible for themselves – not for California taxpayers, who are paying the freight. CIRM must protect the state's interests. And first-rate IP lawyers do not come cheap. In 2008, the agency was lowballing when it offered $150 an hour. If CIRM fails to generate a financial return for the state, critics are sure to say that it was overmatched legally when it dealt with the private sector. On the other hand, the agency is sure to be battered by contemporary critics for its battalion of barristers.

The issue of a new hire went unresolved last month, and it was turned back to a handful of directors and staff to solve. CIRM directors will deal with it again at their meeting later this month.

A final footnote: Philip Pizzo, a CIRM director and dean of the Stanford medical school, was part of the meeting during which Trounson identified Stanford as failing to take of care of some of its IP responsibilities. Pizzo said towards the end of the meeting, "If Stanford is going to be referenced, we ought to be clear that we've got all the facts correct about what Stanford does or doesn't do."

Pizzo said Stanford does a "great job."

(An earlier version of this item said incorrectly said that CIRM would have six lawyers on staff next year.)