California Stem Cell Agency Budget Up 4.6 Percent, Topping $17 Million

During the past couple of years, the California stem cell agency has vastly improved the way it budgets the relatively tiny amount it spends on operational expenses.

At one point a few years back, its operational budget was often all but incoherent to the public and to at least some members of its governing board. (See here, here and here.) But times have changed. The process for its operational budget, which amounts to about $17 million for the 2013-14 fiscal year, is now more transparent and better organized.

The long overdue improvements can be credited to the hiring of Matt Plunkett in December 2011 as its first chief financial officer in its eight-year history, as well as the efforts of CIRM directors Michael Goldberg and Marcy Feit. Goldberg, a venture capitalist, is chairman of the board's Finance Subcommittee and Feit, CEO of Valley Healthcare in Pleasanton, Ca., is vice chair. Plunkett, however, left the agency suddenly last summer and the agency has no plans to replace him. CIRM Chairman J.T. Thomas says Plunkett put new financial systems in place that can be operated without a CFO.

Interested readers can get a glimpse of what is upcoming for CIRM spending beginning in July in documents prepared for the Monday meeting of the governing board's Finance Subcommittee meeting. The agenda, however, lacks a much-needed explanation and justification for the spending. All that is presented now for the public are raw numbers and a PowerPoint presentation, which is no substitute for a nuanced, written overview.

Nonetheless, here are the basics. The budget proposed for 2013-14 stands at $17.4 million, up 4.6 percent, according to California Stem Cell Report calculations, or $771,000 from forecast expenditures for the current year. The budget represents the cost of overseeing $1.8 billion in grants and loans and preparing new proposals and reviews of applications for hundreds of millions of dollars in additional awards.

The largest budget component is for personnel – $12.1 million, up from $10.7 million. Second largest is outside contracting at $2 million, down from $2.9 million for the current year, continuing a trend away from outside contracts, which once were burgeoning.

One interesting area includes “reviews, meetings and workshops,”- which are expected to cost $1.8 million this year. Next year, they are budgeted for $2 million. Some might look askance at those sorts of expenditures for “meetings.” However, that includes the fees and expenses for scientific reviewers for multi-day meetings in the San Francisco area, which is a high cost area, and other large gatherings. However, the figure does not include travel for reviewers, who come from out of the state and even from overseas.

Examples of the meeting costs include a three-day grant review session last September at the Claremont Hotel in Oakland that cost $44,019. A two-day meeting at the same hotel for the 29-member CIRM governing board cost $34,424. (These figures and others involving outside contracts can be found on the agenda of the board's Governance Subcommittee meeting April 10.)

The agency also dissected the budget from different perspectives on expenditures. The spending plan includes $2.0 million for the office of Chairman Thomas and $1.6 million for the office of President Alan Trounson. Comparable figures for actual spending this fiscal year were not provided, however, by CIRM for the Finance Subcommittee meeting. The size of the chairman's budget reflects the controversial dual executive nature of management at CIRM, which has come under repeated criticism, including from the recent blue-ribbon report by the Institute of Medicine.. However, the arrangement is locked into state law as the result of the ballot measure, Proposition 71, that created the stem cell agency in 2004.

Legal expenses are budgeted at $2.2 million with public relations and communications running slightly more than $1 million. The scientific office, as one might expect, consumes much larger amounts, with basic research, translational research, grants review and grants administration budgeted at $4.7 million. The development side of the scientific office, which focuses on pre–clinical and clinical research, is slated for $3.4 million. The agency did not offer comparable figures for the current year.

Under Proposition 71, the agency can legally spend only 6 percent of its $3 billion in bond funding for operational expenses. At one time the agency had a 50-person staff cap, but that was altered several years ago by the legislature. The most recent figures show it has 54 employees. However, this month's budget documents did not list the number of staff for this year or next.

The stem cell agency also reported that it expects to spend an additional $1 million a year for rent beginning in 2015, when a free rent deal provided through the city of San Francisco expires. The city put together a $18 million package to attract the CIRM headquarters in a bidding war with other California cities. The agency has never produced a public accounting of whether it has received full value on the package.

The proposed budget is likely to be approved by the Finance panel next week without significant changes and then by the full board late in May.

The public can participate in the Finance meeting at two locations in San Francisco one each in Irvine, Pleasanton, La Jolla and Berkeley. Specific locations can be found onthe agenda.

Meager California Biotech Representation in Governor's China Trip

California Gov. Jerry Brown and a flying squad of business types visited China last week, beating the drum for the Golden State in an effort to raise billions of dollars in investments.

Some 90 persons were involved in the governor's delegation, but representation was meager from California's renown biotech sector and none at all from the $3 billion California stem cell agency, which has a collaboration underway with Chinese scientists. It may have been the only state agency with a formal collaboration agreement with China prior to Brown's visit.

According to many reports, the Chinese government regards growth of its biotech industry as one of its core economic efforts. Within that sector, biomedicine ranks as the most important and fastest growing, according to an Italian Trade Commission report. Stem cell research is especially important, according to this Canadian study. Indeed, some scientists in China are eyeing a Nobel Prize in the field (See here or here.)

California would seem to be well placed to take advantage of that situation, given its substantial biotech industry and community, which is only rivaled by Massachusetts. Add to that the existence of the unique California stem cell agency, which has funded a $1.5 million study by Holger Willenbring at UC San Francisco that also involves research by Lijian Hui at the Shanghai Institutes for Biological Sciences, which is separately funded by that country to the tune of nearly $1 million.

A look at the list of those traveling to China with the governor showed two representatives who could be considered from biotech: Joe Panetta, head of BioCom, a life science industry organization in Southern California, and Michel Baudry, dean of the Graduate College of Biomedical Sciences, Western University of Health Sciences in Pomona, Ca..

We queried Baudry before he left for China about the situation. Here is the full text of his reply.

“I do not know how this set of delegates were selected. What I do know is that this is the first of several delegations of California business delegates going to China with Governor Brown, and that more trips are scheduled. The focus of this first trip is Energy and Environment, and this might be why there is no biotech delegates in this trip. I am quite sure that they will participate in the following trips.”

Meanwhile, the folks in Richmond on San Francisco Bay are waiting to hear about plans of a major but unnamed Chinese biotech company for the 53-acre, former Bayer Healthcare Campus.

(Following the posting of this item, Ron Leuty of the San Francisco Business Times gave us a heads up on the latest on the site. He reported in March that Joinn Laboratories, a Chinese contract research organization, purchased the site. Leuty said that its plans are vague about future development, but that it may lease some of the space.)

StemCells, Inc., Nails Down Controversial, $19 Million Award from California Stem Cell Agency

The stock price of StemCells, Inc., price today jumped as much as 9 percent after the company disclosed it had finally concluded an agreement with the California stem cell agency for a $19.3 million forgivable loan for research twice rejected by the agency's scientific reviewers..

The stem cell agency governing board seven months ago approved the loan to the Newark, Ca., firm. But the cash was withheld until the financially strapped company could demonstrate that it could match the size of the loan, as promised in its application.

The StemCells, Inc., (SCI) application was nixed two times in 2012 by the agency's scientific reviewers who gave it a score of 61. In a controversial move, the 29-member board approved the award in early September on a 7-5 vote after former agency chairman Robert Klein intervened publicly on behalf of the firm. It was the first time that Klein had lobbied the board publicly on behalf of an application. It was also the first time that the board approved an application that was rejected twice by its reviewers, a panel of internationally recognized stem cell scientists.

In a press release, Martin McGlynn, CEO of StemCells, Inc., said,

"With CIRM's support, we are now able to lay the groundwork that could result in the world's first neural stem cell trial in Alzheimer's patients."

Both the company and the $3 billion state research agency were tight-lipped about the nature of the matching funds from the company, which reported losses of $28.5 million in 2012 on revenues of $1.4 million.

In a brief response to questions from the California Stem Cell Report, McGlynn said, 

 “At this time, we do not intend to elaborate any further on the contents of our press releases or public filings pertaining to the SVB (Silicon Valley Bank) or CIRM(the stem cell agency) loans.”

Earlier this week, the company reported receiving a $10 million loan from Silicon Valley Bank. Both McGlynn and the stem cell agency did not answer a question about whether those funds are being used to back the award from California taxpayers.

The agency confirmed that the firm was providing $19.3 million in matching resources. But Kevin McCormack, senior director of public communications, did not provide any specifics on the nature of the match. He only said,

“The matching  requires them to demonstrate they have enough funds necessary to fund SCI’s share going forward as well as their own operations and other commitments.”

The award was originally for $20 million. We have queried the agency about the smaller figure announced today.

The company's stock price rose as high as $1.87 earlier today after closing at $1.71 yesterday. It stood at $1.77 at the time of this writing. Its 52 week high is $2.67, and its 52 week low is $0.59. The loan from Silicon Valley Bank gives the bank warrants to purchase 293,531 shares of the company at $1.70 over the next 10 years.

The 10-year loan from CIRM is low risk for the company, which said its “obligation to repay the loan will be contingent upon the success” of the research. If a product is developed, it will take years before it could hit the market.

The award to StemCells, Inc., put the stem cell agency in a touchy situation involving the company's decision last month to reject an additional $20 million award from the agency.( It was the first time a recipient has rejected an award.) Neither the company nor the agency would give a reason for the rejection of the loan for a spinal injury project . However, the award also required a $20 million match, which undoubtedly tested the company's resources.

The spinal injury application was scored at 79 by agency reviewers and was routinely approved by the board. With its withdrawal by the company, the agency, which prides itself on funding only the best science, was left supporting research (StemCells, Inc.'s Alzheimer's project) judged significantly inferior by reviewers with its score of 61.

In response to a question about that situation, CIRM's McCormack said,

“Our goal is to always fund the best, most promising science. This is not the first time that our board has voted to fund a project that the Grants Review Group had not recommended (this has happened in around 2% of cases) The board did so for a number of reasons, not the least of which is that this was the first disease team application that had a goal of  moving a promising stem cell therapy for Alzheimer's towards clinical trials.”

The round in question, however, had another application dealing with Alzheimer's which was scored at 63, two points higher than the one from StemCells, Inc. Reviewers also did not recommend funding that application.

The action last September by the agency board came only after it publicly said the funds would not be distributed until the StemCells, Inc., could show it could provide the match, still another first for the agency.

The award triggered a column in the Los Angeles Times by Pulitzer Prize winning writer Michael Hiltzik, who said in October that  the process was “redolent of cronyism.” He said a “charmed relationship” existed among StemCells, Inc., its “powerful friends” and the stem cell agency.

StemCells, Inc., was founded by Stanford researcher Irv Weissman, who was a major fundraiser for Proposition 71, which created the stem cell agency in 2004. Klein headed the ballot campaign, which spent more than $30 million to win voter approval. Weissman sits on board of directors of StemCells, Inc., and holds 124,608 shares in the firm, including 8,630 he reported this month receiving.

Modest Approval from Long-time Stem Cell Agency Critic

Of all California's newspapers, The Sacramento Bee, the only daily paper in the state capital, has long been the most critical – editorially – of the Golden State's $3 billion stem cell research agency.

Today, however, the newspaper gave a modest nod of approval to the agency's modest efforts to clean up its built-in conflicts of interest, which have been cited as a major flaw by the prestigious Institute of Medicine.

The headline on the Bee's editorial today said,

“Stem cell agency finally addresses potential for conflicts”

The piece said that Jonathan Thomas, chairman of the agency, “has taken important steps in reducing the potential for conflicts within this agency.”

The editorial continued,

 “He hasn't gone as far as we would like, or that independent outside reviewers have recommended....But he's achieved what's possible, at least for now, and the board may empower him to go further.”

The Bee referred to action last month in which the agency's governing board decided, among other things, that 13 of the 15 board members linked to recipient institutions could not vote on any grants, although they could participate in discussion of applications. Twenty-nine persons sit on the board. In a $700,000 report commissioned by the agency, the Institute of Medicine recommended a fully independent board.

The Sacramento newspaper said, 

“We think Thomas and the oversight board should go further and adopt the Institute of Medicine recommendations. But that is politically unlikely. As is now obvious, it will be up to the Legislature to fully remove representatives of funding-eligible institutions from being involved in decisions about grants that could come back to them.

“Thomas, to his credit, recognizes that his compromise may not be the perfect solution. He wants to test out the new policy for a year, and see how it works. There's a lot riding on the outcome. CIRM is expected to run out of funds in 2017, and while philanthropy and foundation money could extend that for a few years, supporters of California stem cell research clearly want to go back to the ballot to seek additional funding. To make that case, CIRM supporters can't afford any more scandals about insider dealing. The next year will reveal whether it is on the right track.”

StemCells, Inc., Rejects $20 Million from California Stem Cell Agency

When does a financially struggling biotech company turn down a $20 million “forgivable loan?”

When it is StemCells, Inc., of Newark, Ca., and the cash is being offered by the $3 billion California stem cell agency. The research program has handed out nearly 600 awards, and it is the first time that a recipient has rejected funding.

That's the latest development in a stem cell saga that began publicly last July and that involved unusual personal lobbying by the former chairman of the Golden State's stem cell research agency. The high point of the saga may have come in September when the agency's governing board finished awarding StemCells, Inc., $40 million in two different awards. But there was a catch. StemCells Inc., had to match that figure with $40 million of its own.

Late last month, StemCells, Inc., threw in the towel on the $20 million awarded on its cervical spinal cord injury application. In comments to analysts March 21, Rodney Young, chief financial officer of the publicly traded company, said:

“The funding would have been in the form of a forgivable loan, however, we have elected not to borrow these funds from CIRM(the stem cell agency).”

According to the Seeking Alpha transcript of the conference call with analysts, Young said,

“You may also recall that last September, CIRM approved a separate application under the same disease team program for Alzheimer's disease, which was also for up to $20 million in the form of a loan. We remain in confidential negotiations with CIRM regarding the terms and conditions that would attach to this loan.”

The company provided no explanation for rejecting the cash, either in the conference call transcript or in its press release.

During the conference call, StemCells, Inc., reported continuing losses. For 2012, net losses totaled $28.5 million compared to $21.3 million in 2011. Revenue for 2012 was $1.4 million compared to $1.2 million in the previous year.

The awards last year to StemCells, Inc., founded by Stanford's eminent researcher Irv Weissman, stirred up a bit of a ruckus. The spinal injury award was handed out routinely in July. Scientific reviewers gave it a score of 79 and recommended funding. It was another matter on the Alzheimer's application. It was scored at 61. Reviewers said it did not merit funding. But the company publicly appealed to the full board, which sent the application back for more examination. It was rejected again. Nonetheless, in September, the 29-member board approved the award on a 7-5 vote, bypassing a rival Alzheimer's application scored at 63. It was the first time in the eight-year-history of the agency that its board approved an application that was rejected twice by reviewers.

Approval came only after strong lobbying by Robert Klein, former chairman of the board. Klein was also chairman of the ballot campaign that created the agency, and Weissman, who holds stock in StemCells, Inc., and sits on its board, was a major fundraiser for the campaign. 

The Los Angeles Times' Pulitzer Prize-winning columnist, Michael Hiltzik, wrote in October that  the process was “redolent of cronyism.” He said a “charmed relationship” existed among StemCells, Inc., its “powerful friends” and the stem cell agency.

As for the remaining $20 million award, Martin McGlynn, CEO of StemCells, Inc., expects “quick” action on finally securing the cash.

Here is an exchange that came during the March conference call between McGlynn and analyst Kaey Nakae of Ascendiant Capital Markets.

Nakae: “Okay. Just 2 more questions. I guess the first one, as it relates to CIRM. In deciding to decline the funding for spinal cord yet continuing to pursue the funding for Alzheimer's, is there a difference in what you're getting from them in terms of potential terms and conditions that allow you to proceed on one and not the other, or is it the fact that you're already in human with -- in spine, and still very preclinical with Alzheimer's?”

McGlynn: :”I think you're very definitely -- you're getting at some important criteria when one considers how to fund programs whether you use debt or equity, etcetera. So I wouldn't disagree with anything that you've outlined or surmised. But I just would pray your indulgence until we're finished, the negotiations with CIRM, which are coming to a close and we expect those to resolve pretty quickly with regards to the Alzheimer's program. And then quite frankly, we can be way more forthcoming and way more disclosive with regards not only to our decisions, but to our thinking.”

StemCells, Inc., was trading at about $1.65 at the time of this writing, down slightly from the previous day. Its 52-week high is $2.67 and its 52-week low $0.59.

Gone Sailing

The California Stem Cell Report will go dark for a couple of weeks or so as we make our way across the bounding main to Mexico. As many of you know, yours truly lives on a sailboat (15 years come June 1) that shuttles about the Pacific south of the American border. We have spent nearly two years in Panama and are now working our way back to Mexico where the chiles are hot and the frijoles “rico.” Look for fresh coverage either late this month or early April.  

Cyberspace Makeover at California Stem Cell Agency

California's $3 billion stem cell agency has performed a well-done makeover on its most important public face – its web site, which is chock-a-block full of useful information for researchers and the unwashed alike.

At cirm.ca.gov, one can find the very words of its directors as they wrestle with everything from grant approvals to conflicts of interest. Scientists can be seen telling the story of their accomplishments. Money can be followed, and summaries of reviews of grant applications read, both those approved and those that did not pass muster.

The web site of the California Institute of Regenerative Medicine (the formal name of the agency) is the place where the stem cell program really meets the public. News stories are important, but infrequent. Day to day, however, thousands of interested persons seek out information that the folks at CIRM HQ, just a long throw from the San Francisco Giants ballpark, bring to cyberspace.

Each month, said Amy Adams, major domo of the web site, 15,000 to 17,000 “unique viewers” visit online. She told the California Stem Cell Report in an email,

“We're up about 25 percent year over year in unique viewers to the site. A lot of that growth comes from search, and the rest is from traffic driven through our blog and Facebook.” 

The numbers are not huge compared to those chalked up by major media sites. But they are significant given that there are only a few thousand people worldwide who are deeply and regularly interested in stem cell research. Many more, however, are stimulated to look into the subject from time to time, either because of news stories, personal, disease-related concerns or simple interest in cutting edge science. Engaging those readers, who can spread the CIRM story, and winning their approval is critical for the agency as it faces the need to raise more millions as it money runs out in the next few years.

CIRM has mounted much information online over its short life. So much that good tools are needed to navigate the site. Decisions about what should go on the home page are critical. With the makeover, the agency now has a long-needed, home-page link to its meetings , especially those of its governing board, which are the single most important events at the agency.

The redesign is crisp and clean. The new, white background makes it easier to read and is comfortable for readers long conditioned to the black-on-white print of the books, newspapers and magazines. The video image on the home page is larger, which helps attract viewers. The site has long had a carload of videos, some of which contain powerful and emotional stories from patients.

Adams used CIRM staffers to test the new features. She reported,

“I've had people inside CIRM (who have been beta testing this site) tell me that they are finding content they'd never seen before because the site is so much easier to navigate.”

Adams and the CIRM communications team also have pulled together important information on each grant on a single page, including progress reports. You can find a sample here on a $1 million grant to Stanford's Helen Blau.

Adams said,

 “Now people can not only read about what our grantees are hoping to accomplish, they can read about what has actually been accomplished with our funding.”

Adams said another new feature is downloadable spread sheets of information that can be manipulated by readers offline. She said,

“Most places on the site where you see tables, you can now download those tables to Excel. You'll notice the small Excel icon at the lower left of the table. This feature has long been available for the searchable grants table. Now you'll see it on all the tables of review reports (see here for example http://www.cirm.ca.gov/application-reviews/10877) on the disease fact sheets (see here http://www.cirm.ca.gov/about-stem-cells/alzheimers-disease-fact-sheet) and other places throughout the site. This is part of an effort to make our funding records more publicly available.”

CIRM's search engine for its web site still needs work. A search using the term “CIRM budget 2012-2013” did not produce a budget document on the first two pages of the search results. A search on the term “Proposition 71,” the ballot initiative that created CIRM, did not provide a direct link to its text on the first two pages of search results.

Also missing from the web site, as far as I can tell, is a list of the persons who appointed the past and present board members as well as the dates of the board members' terms of office. The biographies on some of the 29 governing board members come up short. In the case of Susan Bryant, her bio does not mention that she is interim executive vice chancellor and provost at UC Irvine. Links also could be added to board members statements of economic interest. A list of CIRM staff members (only slightly more than 50 persons) and their titles could be added.

As for CIRM's count of visitors, CIRM uses Google Analytics tools. Adams said,

“A unique visitor is Google's definition (it's one of the metrics they provide). It's a visit from a unique IP (internet protocol) address. So, if you visit our site multiple times from one IP address during a day, you count as a single unique visitor. (Editor's note: It is possible to have more than one visitor from the same IP address.)

“We get ~23,000-25,000 visits per month, or ~16,000-18,000 unique visitors. Page views are on the order of 65,000 a month.”

Our take: The redesign of the web site is a worthy effort and enhances CIRM's relationships with all those who come looking for information. The agency is to be commended and should continue its work to improve the site and its connections with the public.

California Stem Cell Directors to Finalize IOM Response Next Week

Directors of the California stem cell agency will meet March 19 in Burlingame to complete action on their response to blue-ribbon recommendations for sweeping changes at the eight-year-old research enterprise.

CIRM Chairman J.T. Thomas last week told the San Diego U-T editorial board that he regarded approval as “largely ministerial.”

Thomas has been visiting newspaper editorial boards around the state, touting his plan, which was initially approved by the board in January. The main focus has been on its provisions dealing with conflicts of interest, which would have 13 of the 29 governing board members voluntarily remove themselves from voting on any grant applications. The 13 are linked to recipient institutions. Two other board members linked to recipient institutions also sit on the board.

About 90 percent of the $1.8 billion that has been awarded by the CIRM board has gone to institutions linked to past and present members of the board.

In December, the Institute of Medicine cited major problems with conflicts at the stem cell agency. It recommended creation of a new, independent majority on the board, which would mean that some members would lose their seats. The IOM report also recommended a host of additional changes that have become eclipsed by the controversy about conflicts, which were built into the board by Proposition 71, the ballot measure that created it in 2004.

An analysis in January by the California Stem Cell Report of the IOM report, which CIRM commissioned at a cost of $700,000, showed that agency's response fell far short of what the IOM proposed to improve the agency's performance.

Also on the agenda for the March 19 is approval of applications in a $30 million effort by the agency involving reprogrammed adult stem cells. The agency said the goal of the initiative is “to generate and ensure the availability of high quality disease-specific hiPSC resources for disease modeling, target discovery and drug discovery and development for prevalent, genetically complex diseases.”  

San Diego Newspaper Hails Stem Cell Agency and IOM Response

The $3 billion California stem cell agency hit it big in San Diego today, finally scoring an editorial that said “arguably” the agency's largess has made the state “the world leader in medical research.”

The San Diego U-T, the largest circulation newspaper in the area, said the big headline about the eight-year-old agency is “the potential for transformative medical breakthroughs.”

The editorial noted that the agency has long been criticized in connection with conflicts of interest. About 90 percent of the $1.8 billion the agency has awarded has gone to institutions linked to current and past members of its board of directors.

But the agency “is finally taking the criticism seriously,” the newspaper said. It cited proposals that would, if approved later this month, have 13 members of the agency's governing board voluntarily abstain from voting on any grants that come before the board. Twenty-nine persons sit on the board. The thirteen are connected to recipient institutions. Two other board members are linked to recipient institutions.

The stem cell business is no small matter in San Diego, which is one of California's hotbeds of biotech and stem cell research. The stem cell agency has awarded about $338 million to San Diego area institutions and businesses. Four executives from San Diego area institutions sit on the CIRM board.

The newspaper's editorial said,

“There remains a residue of cynicism about CIRM. Critics say the agency board did the minimum necessary to avoid an intervention by the Legislature – and also acted to buff the agency’s image should it seek more bond funding from California voters before its present funding runs out in 2017, as is now projected.

“These views may have some merit. But on balance, we think the California Institute for Regenerative Medicine has – at long last – responded properly to the fair criticism it faced. Instead of being exasperated by CIRM, more people should be excited about the great work it is doing.”

The editorial followed a meeting involving the editorial board of the newspaper, CIRM Chairman Jonathan Thomas and Larry Godlstein, director of the UC San Diego stem cell program. The meeting was part of a CIRM campaign to generate newspaper support for the agency's response to sweeping recommendations from a blue-ribbon study by the Institute of Medicine. The San Diego editorial is the most effusive so far.

The newspaper's biotech reporter, Bradley Fikes, sat in on the meeting and Saturday posted video excerpts from the discussion, including a brief written summary of the content of each clip.

Public Banned from 'Best Stem Cell Meeting in the World'

“The best stem cell meeting in the world” is underway today in San Francisco – conducted at taxpayer expense – but the public is barred from attending.

More than 500 persons are at the meeting at an undisclosed location, including some representatives of biotech firms. And the meeting is even being written about on the internet by a blogger. But the $3 billion California stem cell agency says the public is not allowed in because some of the information is “proprietary.”

CIRM President Alan Trounson addressed the meeting earlier this week and declared it was “the best stem cell meeting in the world,” according to UC Davis researcher Paul Knoepfler, who is reporting from the session on his blog.

The attendees consist almost entirely of the recipients of taxpayer-funded grants given by the stem cell agency  although a number of businesses have been brought in.. CIRM, which is paying for the gathering,  says of the annual sessions,

 “The purpose of meeting is to bring together investigators funded by CIRM, to highlight their research, and encourage scientific exchange and collaboration.”

Kevin McCormack, spokesman for the agency, today said the public was barred from the meeting, which ends tomorrow, because “so many presentations/talks (are) using proprietary information.”

That rationale is nothing new in the world of science. But there is no chance of maintaining secrecy about anything that is truly proprietary when hundreds of people have access to it in this sort of forum. No penalties exist for disclosure, plus the whole point of the session is to share information.

Yesterday we wrote briefly about the importance of transparency and openness in government, and make no mistake about it, the stem cell agency is a government operation. We doubt that anything egregious is underway at the session, but closing it to the public is a reminder about where the agency's priorities lie.  

Good News, Bad News and the California Stem Cell Agency

A few weeks ago an anonymous reader admonished the California Stem Cell Report to be more positive about the $3 billion agency and its efforts to develop the cures that its backers promised California voters more than eight years ago.

The comment was thoughtful and pointed out that “almost all the time” the agency “has done the right thing.” The reader made the remarks in the context of continuing coverage of the Institute of Medicine (IOM) report that found there were major flaws in CIRM's operations. (The reader's comment can be found here at the end of the post.)

Given the reader's remarks, it seems a good time to review the operating principles and biases of the California Stem Cell Report.

Bias No. 1: Openness and transparency come first in any government operation. They are fundamental to the integrity of all government enterprises. Bias No. 2: The California stem cell agency is generally doing a good job at funding stem cell research. We generally favor all manner of stem cell research. 

Regarding our operating principles, the goal is report news and information about the agency along with analysis and explanation. One key to understanding what this blog does is to understand what news is. News by definition is almost always “bad” as opposed to “good.” News deals with the exceptional. It is not news that millions of drivers commute to work safely each day on California freeways. It is news when one is killed in a traffic accident.

The California Stem Cell Report also tries to fill information voids. We understand that the stem cell agency believes certain information is not in their best interests to disclose. Such is always the case with both private and public organizations. However, it is generally in the public interest to see more information rather less, particularly information that an organization would rather not see become public.

Analysis and explanation of what the stem cell agency does is rare in the California media and even less seen nationally or internationally. This blog focuses primarily on the public policy aspects of the agency – not the science. The agency is an unprecedented experiment that brings together big science, big government, big academia, big business, religion, morality, ethics, life and death in single enterprise – one that operates outside the normal constraints of state agencies. No governor can cut CIRM's budget. Nor can the legislature. Even tiny changes in Proposition 71, which created CIRM, require either another vote of the people or the super, super-majority vote of both houses of the legislature and the signature of the governor. All of this is the result of the initiative process – a well-intended tool that has been abused and that has also created enormous problems for the state of California that go well beyond the stem cell agency.

Then there is the funding of the agency, which basically lives off the state's credit card. All the money that goes for grants is borrowed and roughly doubles the actual expense to taxpayers.

Since January 2005, we have posted 3,452 items on the stem cell agency because we believe the California Institute for Regenerative Medicine (CIRM) is an important enterprise – one that deserves more attention that it receives in the mainstream media. Our readership includes persons at the NIH, the National Academy of Sciences, most of the major stem cell research centers in California, academic institutions in the Great Britain, Canada, Norway, Germany, Russia, China, Australia, Singapore and Korea – not to mention the agency itself and scientific journals.

We do not attempt to replicate what the California stem cell agency itself does, which is to post online a prodigious amount of positive stories and good news about the agency. To do so would serve no useful public purpose and would simply be repetitive. That said, there is room to acknowledge the work that the agency does, particularly the staff, but also the board. We try to point that out from time to time.

The California Stem Cell Report also welcomes and encourages comments, anonymous and otherwise. Directors and executives of the agency have a standing invitation to comment at length and have their remarks published verbatim, something almost never seen in the mainstream media.

Finally, given the questions raised by the Institute of Medicine about disclosure of potential conflicts of interests, the author of this blog and his immediate family have no financial interests in any biotech or stem cell companies, other than those that may be held by large mutual funds. We have no relatives working in the field. We do have the potential personal conflicts, cited generally by the IOM in connection with some CIRM board members, involving relatives who have afflictions that could be possibly be treated with stem cell therapies in the distant future.   

LA Times: Stem Cell Agency Conflict-of-Interest Response Only a Bandage

The Los Angeles Times yesterday modestly praised the $3 billion California stem cell agency for taking some limited steps to deal with its longstanding conflict of interest issues.

But the newspaper, which has the largest circulation in the state, said that was more was needed if the agency plans to have a life after 2017, when funds for new awards run out.

The Times editorial said,

“After years of resisting all criticisms of its operations, the California Institute for Regenerative Medicine is finally listening — a little.“

The editorial continued,

“Yet the agency isn't exactly embracing an ethical overhaul. It's doing just enough to address the criticisms without triggering any oversight from the Legislature. The modifications are more a bandage than a cure. Like a bandage, they will probably do, but only for a limited time.”

The board plans to have 13 board members with ties to recipient institutions voluntarily refrain from voting on any grants that come before the board, not just the ones to their institutions.

The Times said December's blue-ribbon report from the Institute of Medicine identified the make-up of the board as the “single biggest problem” at the agency. The editorial cited figures prepared by the California Stem Cell Report that show that about 90 percent of the $1.8 billion that the board has awarded has gone to institutions linked to current or past members of the board. Fifteen out of the 29 current board members have ties to recipient institutions.

The editorial concluded,

“If the stem cell institute is just a temporary agency that will last until its public funding runs out — it plans to give its last grants with existing funds in 2017 — its planned reforms will probably be enough. But if the institute wants to be a permanent part of the research landscape — and possibly ask for more public funding — voluntary recusals are an inadequate patch. The agency's leaders should admit that the original setup was flawed and seek a true fix. “

Reader Says Open Grant Reviews to Public

An anonymous reader this afternoon filed a comment on the “Prieto on Disclosure" item. Here is an excerpt from the comment from the reader, who has obviously been following the stem cell agency for some years,

“Confidential peer review is just an excuse for secrecy. Any CIRM observer has seen that scientists are more than willing to discuss and argue about their grants before the ICOC (stem cell board) if they think that will get them funded.”

You can read the entire comment by clicking on the word “comment” at the end of the Prieto item.   

CIRM Director Prieto on Disclosure of Reviewer Financial Interests

A member of the governing board of the $3 billion California stem cell agency is weighing in on an item on the California Stem Cell Report that called for public disclosure of the financial interests of the scientific reviewers, who make 98 percent of the decisions on awards by the agency.

Francisco Prieto, a Sacramento physician and a patient advocate member of the board, said in an email:

“ It seems to me there's a bit of 'damned if we do and damned if we don't' here. If the ICOC (the agency governing board) decides to listen to some of the members of the public who come to our meetings and overrule a recommendation of the Grants Working Group(GWG), we're slammed for letting emotion trump science, or bowing to special interests. If we just accept the rankings of the GWG and approve all their recommendations, we're criticized for not being truly independent.  I think we don't do it often (for good reason) but should and do retain the right to look at other factors besides those our scientific reviewers do, and make our own decisions about funding. We are ultimately responsible, not the scientific reviewers. 

“As for the issue of their disclosure of personal conflicts of interest, from what I've read of the NIH processes, ours are no less strict. The NIH requires that reviewers disclose any conflicts to their institutions which I believe must disclose them to the NIH, but I have not seen anything requiring them to disclose all their personal financial & other interests publicly, as we (ICOC members) have to.  When we were assembling our group of reviewers initially, the fear was that many of the best scientists would turn us down if we required them to make the kind of personal disclosures we have to. I don't know how many we might actually lose if that were the case, but as you know we do require them to disclose to CIRM, and they have to leave the room when any application for which they have a conflict is discussed.”

Our take: Prieto is right about the board being perched on the horns of a dilemma, which has a lot to do with Proposition 71, which created the agency, and American scientific traditions, which place an extraordinary value on the “integrity” of the review process. In this case, integrity refers to adherence to reviewers' scientific judgments.

Proposition 71 placed the legal authority for grant approvals in the hands of the CIRM board, which has overridden decisions by reviewers in only 2 percent of the cases since 2005. However, that was enough, with at least one high profile case coupled with public appeals, to cause the Institute of Medicine to raise concerns about the integrity of the CIRM grant review process. Traditionally, peer reviewers are deemed to be the most capable of making the scientific decisions about grant applications, rather than a board appointed by University of California chancellors and elected state officials.

Yet, if the board concedes the decisions to the grant reviewers, state law is likely to require public disclosure of their financial interests, a move that the board has opposed for years. Former CIRM Chairman Robert Klein repeatedly advised the board during its public grant approval processes that reviewers' actions were only ”recommendations” and that the board was actually making the decisions. However, it has long been apparent that the reviewers were making the de facto decisions. A CIRM memo in January confirmed that, producing the 98 percent figure.

The issues involving disclosure by reviewers, integrity of peer reviews, the language of Proposition 71 and state law are difficult and may, in some cases, be at odds.

However, it makes little difference what the NIH is doing. It is a much different organization and has had a history of conflict of interest problems that it has been trying to work through.

The trend in the academic and scientific research community has been towards more public disclosure rather than less because of many well-documented instances of problems. What is at stake is the public's faith in scientific research and the integrity of public institutions.

Our thanks to Prieto for his comments on this important subject.  

California Stem Cell Agency: Comparing the Critiques

State Controller John Chiang has posted a useful, side-by-side comparison of critiques of the $3 billion California stem cell agency, including the Institute of Medicine(IOM) study, along with the responses from the agency.

Chiang, the state's top fiscal officer, has additionally posted the initial remarks Jan. 23 by CIRM Chairman Jonathan Thomas before the stem cell agency governing board on his plan to deal with the sweeping recommendations of the IOM.

Regardless of one's opinion of the board's response to the IOM, Thomas adroitly handled the discussion and vote, not a small accomplishment given the size of the board (29 members) and the legal restrictions involving public meetings. Under state law, Thomas could not lobby significant numbers of the board in advance of the meeting. He was restricted to engineering the approval in a public session, which can easily take on a life of its own given the unwieldy size of the board and the necessity for public comment.

As for the documents posted by Chiang, he is chairman of the Citizens Financial Accountability and Oversight Committee, the only state body specifically charged with oversight of the agency and its board. The web site for the committee is the only location on the Internet where Thomas' prepared remarks and the comparison can be found.

Chiang's comparison chart includes not only the IOM study, but last year's performance audit and the Little Hoover Commission study in 2009. Missing, however, is the state auditor's report in 2007 and its recommendation that the agency seek an attorney general's opinion on whether scientific grant reviewers must file a public financial disclosure form.

Here are links to the various documents: Thomas' prepared comments, Power Point chart used by Thomas, comparison chart of various studies and the transcript of the Jan. 23 meeting during which the governing board approved its response.

California Stem Cell Agency Bonds On Sale in March

Early next month, the state of California will sell $2.7 billion in bonds, a tiny fraction of which will go towards the California stem cell agency.

It is all part of an arrangement that currently involves short-term borrowing as well to keep the cash pipeline at CIRM properly filled.

To refresh some of you, the agency subsists off money that the state borrows (bonds) instead of going to the legislature annually for financial support. While that avoids competing against school children, the poor, the University of California, state colleges, parks, highways and other interests seeking state funding, it also means that the cost of a $20 million grant is something closer to $40 million because of the interest expense.

The California Stem Cell Report last week asked the state treasurer's office about the bond sale March 12-13 and what it means for the stem cell agency. Here is what Tom Dresslar, spokesman for the treasurer, replied in an email.

“CIRM’s funding needs now are met via the issuance of commercial paper (CP).  They’re authorized a certain amount of CP periodically.  Then we work with them on a regular basis to issue the commercial paper on an as-needed basis.  Last fall, they were authorized $160 million of CP.  We will issue the first $27 million under that authorization (this) week.  This spring, CIRM is scheduled to receive another $100 million authorization. The Department of Finance , consulting with CIRM officials, determined the $100 million would be needed to meet CIRM’s funding requirements through the end of 2013.

“Now, here’s where it gets a little complicated.  The state pays down the CP with bond proceeds.  The March ....bond sale includes $60 million of stem cell bonds.  Those proceeds won’t provide new money for CIRM, but will pay down the CP proceeds CIRM already has used.”

Proposition 71, which created the stem cell agency in 2004, authorized bond sales for stem cell research for only 10 years. CIRM's financial timekeepers say the clock started running when the first bonds were sold. The upshot is that the agency will run out of money for new grants in less than four years.

City of Hope Exec Will Leave California Stem Cell Agency Board

Michael Friedman
City of Hope photo

The governing board of the $3 billion California stem cell agency will lose another one of its veteran members this year – Michael Friedman, the CEO of the City of Hope in the Los Angeles area.

He will join Claire Pomeroy in leaving the board. Pomeroy is resigning as vice chancellor of Human Health Services at UC Davis this spring to become president of the Lasker Foundation in New York.. Friedman is retiring at the end of this year.

Both have been on the CIRM board since its first meeting in December 2004. Pomeroy was appointed by the UC Davis chancellor. Friedman was appointed by the state treasurer.

No names have surfaced concerning likely successors. However, the UC Davis chancellor is required by law to appoint an executive officer from the campus. The new dean at the UCD medical school would seem to be the most likely candidate.

To fill Friedman's seat, Treasurer Bill Lockyer must appoint an executive officer from a California research institute. The tradition on the board has been for particular institutes to hold particular seats on the board. The major exception is the Salk Institute, which lost a seat on the board a few years back.

Both UC Davis and the City of Hope have benefited enormously from CIRM largess. UC Davis has received $131 million and the City of Hope $51 million. Although Friedman and Pomeroy have not been allowed to vote on grants to their institutions, their presence and the presence on the board of other executives from beneficiary institutions has triggered calls for sweeping changes at the agency.

A blue-ribbon report by the Institute of Medicine said “far too many” board members are linked to institutions that receive money from CIRM. The institute recommended that a new majority of independent members be created on the board.

According to compilations by the California Stem Cell Report, about 90 percent of the $1.8 billion the board has awarded has gone to institutions with ties to past and present board members. Fifteen of the 29 members of the board, which has no independent members along the lines suggested by the IOM, are linked to recipient institutions.

The agency has $700 million remaining before money for new awards runs out in less than four years.  

Monitoring the Cash and IP at the California Stem Cell Agency

The $3 billion California stem cell agency appears unlikely to make any changes in who gets the cash from any commercial products that its research grants help finance despite recommendations from the Institute of Medicine(IOM).

The subject will come up next Wednesday during a meeting of the intellectual property subcommittee of the governing board of the stem cell agency. Intellectual property (IP) simply determines ownership rights and the share of any revenue from therapies that result from research.

CIRM staff has prepared a briefing paper with recommendations for next week's meeting, which has teleconference locations in La Jolla, Los Angeles, two in Irvine along with the main site in San Francisco.

The document summarized two key IOM recommendations in this fashion:

“Because CIRM is a new institution without a track record to reassure stakeholders, and because its finite funding timeline means as yet unknown agencies will be enforcing these policies years down the road, CIRM should “propose regulations that specify who will have the power and authority to assert and enforce in the future rights retained by the state” in CIRM IP, specifically referring to march-in rights, access plans and revenue sharing....

“Second, as other sources of funding become more prevalent, the agency should “reconsider whether its goal of developing cures would be better served by harmonizing CIRM’s IP policies wherever possible with the more familiar policies of the BayhDole Act.”

Here are the CIRM staff recommendations.

“CIRM staff has engaged in preliminary discussions several years ago with other agencies regarding future enforcement of CIRM’s regulations and agreements. Staff proposes to restart those discussions and return to the Subcommittee (or the Board) with a formal proposal to address future enforcement of CIRM’s IP regulations.”

“In light of the IOM’s own recognition that it may be premature to assess whether CIRM’s regulations will act as a deterrence to future investment, the fact that a number of CIRM’s regulations have been codified in statutes and CIRM’s positive progress in its industry engagement efforts to date, although quite early, CIRM staff proposes to continue to monitor this area and not to pursue any changes at this time.”

The director's subcommittee is unlikely to diverge significantly from the staff proposal, which was dated Feb. 14 but not posted on the CIRM website until Feb. 20.   

UC Davis stem cell scientist Paul Knoepfler is a man of many parts. Not only does he thrash around in petri dishes, but he also dabbles in graphics. In this case, a cartoon about grant reviews and conflicts of interest. Above is the the first frame of the cartoon. You can see the whole story on his blog at this location.

Half-full, Half-empty Editorial on California Stem Cell Agency

The California stem cell agency's editorial road show paid off a bit again this week with a mildly approving editorial in the Oakland Tribune.

The Feb.18 piece said that the presence of Jonathan Thomas, a Los Angeles bond financier, as chairman of the $3 billion agency has improved things, compared to the reign of Bob Klein, who “built a protective shield” around the agency's governing board and prevented action to deal with obvious conflict-of-interest problems.

The newspaper also said that “to some extent” the agency has brought “cutting edge” scientists to the state and helped boost the stem cell field.

That was the half-full side of the editorial. The half-empty side included the headline.

“California must get its stem cell house in order”

The editorial continued:

“...{T)he agency must prove that it understands how to properly handle the public's money. …. If the stem cell agency can establish a record as a good steward of public dollars to finance brilliant science, it can continue to play a useful role in stimulating and guiding research to bring the potential cures from stem cell research to fruition.

“If it cannot do that, it will be just another expensive Tyrannosaurus rex.”

Thomas and company are knocking on editorial doors around the state in hopes of building support for the board's modest – some might say inadequate – response to recommendations for sweeping changes at the agency.