Scripps Confirms Marletta's Plan to Leave as President

The Scripps Research Institute has confirmed the departure of Michael Marletta as its president in a 72-word statement, but details about who will replace him and when are yet to emerge.

The move was announced this morning at a meeting at the 2,900-employee institute in La Jolla. Later, Scripps released its terse statement. Not mentioned were any proposals to deal with the financial plight of the renown biomedical research organization, which is the issue at the root of Marletta's resignation.

Bradley Fikes and Gary Robbins of the San Diego U-T have more details and background. Here is the Scripps statement, which is oddly worded, seeming to leave open the possibility of Marletta remaining at Scripps. Fikes and Robbins nonetheless report that four scientists at the morning meeting said Marletta is resigning.

"The Scripps Research Institute (TSRI) Board of Trustees has announced that Dr. Michael Marletta has indicated his desire to leave TSRI and the Board is working with Dr. Marletta on a possible transition plan. Should Dr. Marletta depart TSRI, the Board will work to make any transition to new leadership the highest priority. Any such transition will engage all key constituencies in a dialogue about the future direction of this storied institution."

Scripps Research President Resigns Following Financial Problems at the Institute

Michael Marletta today resigned as head of The Scripps Research Institute, one of nation’s leading biomedical research organizations, in the wake of an aborted, $600 million merger with the University of Southern California.

Bradley Fikes and Gary Robbins of the San Diego U-T reported that the announcement of his resignation came at a meeting this morning at the La Jolla facility. They wrote that no successor has been named.

Marletta joined Scripps in January 2012. His resignation came in the wake of financial problems at the institute, which is operating this year under a $21 million deficit. Leading members of the faculty called for his removal after the proposed merger came to light. 

Scripps has not yet made a formal announcement on its Web Site. 

California's Far-Reaching Alpha Stem Cell Clinic Plan Likely to Take a Hit

The new president of the California stem cell agency today recommended cutting $5 million from the agency’s ambitious Alpha stem cell clinic plan, declaring that the proposal’s $70 million cost is “not clearly justified.”

If the agency’s board goes along with the recommendation at Thursday’s meeting, it will be the first time the $3 billion agency has so radically and retroactively reduced a proposal in its nearly 10-year history.

Randy Mills

In a memo posted early today on the agency’s Web site, Randy Mills, who joined the agency in May, said,  

“While all of the aims of the concept plan are individually laudable, it is my firm belief that the proposal as written is too broad and overly complex to be successful. In a word, it lacks focus. As a result of its overly wide-ranging scope, I also believe that there is a real possibility of incurring significant duplicative costs. Following a thorough review and conversations with senior members of the CIRM team, it is my opinion that the $70 million price tag is not clearly justified in terms of the benefits it will deliver to the people of California.”

The Alpha stem cell clinic program was heavily promoted by the former president of the stem cell agency, Alan Trounson. It is aimed at making the Golden State the world’s “go-to” location for stem cell therapies.

Mills said, however, that a $15 million component creating a data/information center should be stripped from the plan and whittled down to $10 million.

He said the center’s efforts to combine aspects of clinical operations, data sharing, education/marketing and lobbying for insurance coverage of stem cell therapies would create an “unwieldy program.” Instead, he said the Alpha effort should focus on early stage clinical operations  – “efforts directly related to high quality stem cell clinical trials.”

Mills’ proposal comes late in the game for the Alpha awards. Applicants have already submitted their proposals. The review of the applications was originally scheduled to occur last month. However, in one of his first public acts, Mills postponed the review, which is now scheduled for September.  The reason for the delay, the agency said in June, was the difficulty in finding reviewers.

However, the information center component is contained in a separate RFA and could be easily discarded. The only damage would be the time that the five applicants spent on preparing their applications, which is no small task, and the work that the CIRM staff has done so far.

Mills told the board in the memo,

“I realize that making this recommendation after the submission of applications for the CIMC (the data center) is not optimal. However, given the magnitude of the spending proposed, not sharing this critical assessment with the board would be a greater disservice. I believe that these recommendations are not only fiscally responsible, but more importantly, give the program the greatest chance of success to accomplish our mission of getting stem cell treatments to patients in need.”

Mills is also recommending alterations in the clinical portion of the Alpha plan, which involves eight separate applications, all of which are likely to have come from institutions with representation on the stem cell board.  Mills said he wanted  “a staged approach to funding, where we evaluate with proper metrics, the effectiveness of the program in a limited number of sites before expanding.”

Mills’ Alpha memo does not appear to envision modifying the RFA, so presumably the staged funding would be dealt with in negotiations following board action on the applications, which will probably occur later this year.  Up to five awards are scheduled to be made.

Mills’ Alpha cuts are virtually certain to be approved by the board. Rejection of his recommendations would amount to a vote of no-confidence in Mills and would likely result in his resignation. (On Thursday, however, he assured the board he would not quit if it did not go along.)

Even earlier this year, Mills, who has made his career in business, demonstrated his parsimony. Trounson’s proposed operations 2014-15 budget for the agency was submitted in early May at $17.9 million, an increase of 9.5 percent increase over estimated 2013-14 spending. Mills sliced the spending plan to $17.3 million, maintaining it at virtually same level as last year – lower if inflation is factored in.

(An earlier version of this item incorrectly stated that Mills wanted to cut the program by $15 million.)

Creating Critical Mass at a California Stem Cell Consortium

News about the California stem cell agency is dominated by such matters as $70 million Alpha stem cell rounds and clinical trials but other significant activities occur below that high level surface.

One such event is the creation of a state-of-the-art imaging facility at the Sanford Consortium in the San Diego, a facility that was built with the help of a $43 million award from the stem cell agency.

According to Terri Somers, a spokeswoman for the imaging facility,

“It is the only commercial location within California where these high-powered imaging modalities are available to researchers under one roof, along with pharmacology expertise and a deep reference library.”

The facility was opened last fall by Molecular Imaging, Inc., of Ann Arbor, Mich. While it provides services to the stem cell researchers at the consortium, its services are also available to researchers throughout the state, both private and academic.

Edward Holmes, president of the Sanford Consortium, said in a statement,

“We believe that in vivo imaging will play a critical role in tracking the effects of stem cells, and accelerate first-of-their-kind therapies to treat and cure some of the world’s most debilitating diseases.”

The facility includes one of the world’s most powerful MRIs, a PET, SPECT, CT, ultrasound and other molecular imaging technologies. It additionally provides as access to hundreds of disease models and a decades-deep expertise in pharmacology, according to the company.

Somers said,

“These technologies have been developed and leveraged in academic settings. Some global pharmaceutical companies have embraced the technologies as well, creating core-imaging facilities. However, drug companies don’t have this capacity on all their campuses, and none are in Southern California, making access for researchers here problematic.”

With the facility at Sanford, these services are more readily available to cash-strapped biotech companies on the entire West Coast.

Backers of the stem cell agency argue that one of its benefits has been to help build the critical mass in California that is necessary to support and attract stem cell research. The addition of the Molecular Imaging Center at the Sanford Consortium appears to be part that continuum. 

Los Angeles Times: California Stem Cell Agency Rife with Conflicts and Unrealistic Expectations

The Los Angeles Times, California’s largest circulation newspaper, is carrying a piece this weekend about “cronyism,” conflicts of interest and “inflated expectations” at the state’s $3 billion stem cell agency.

The column by Pulitzer Prize-winning writer and author Michael Hiltzik used this month’s Trounson Affair as a starting point to dissect the situation at the California Institute for Regenerative Medicine (CIRM), as the agency is formally known.

Trounson was appointed to the board of StemCells, Inc., of Newark, Ca., on July 7, just seven days after leaving the agency. StemCells, Inc., holds a $19.4 million award from the agency.  CIRM has ordered a full review of the situation and barred its staff from communicating about StemCells, Inc., matters with Trounson. 

But even before Trounson’s appointment, there were issues involving StemCells, Inc.(See here and here.)  Hiltzik said,

 “The relationship already reeked of cronyism.”

Hiltzik wrote,

“Trounson's move comes as CIRM must begin looking to the future, but any discussions about extending the agency's life span will have to address the flaws created by Proposition 71 (the ballot initiative that created the agency in 2004). Among them is the program's very structure, and even its scientific goals.”

Hiltzik continued,

“How bad are the conflicts? When the board considered a proposal earlier this year to spend $16 million to attract three star scientists to California, so many members had to recuse themselves that only nine were left to vote. (Six ended up voting in favor.)

“When conflicts of interest are so rife that only one-third of your board can weigh in on a major policy issue, that's tantamount to not having any board at all.”

Some of the issues at the agency have to do with the ballot campaign that created it in 2004, an election in which California voters were led to believe that miraculous stem cell therapies were imminent.

Hiltzik wrote,

“Programs like CIRM are always susceptible to inflated expectations.

"”Since Big Science needs great public support it thrives on publicity,’ the physicist Alvin Weinberg, a veteran of the Manhattan Project, wrote in a famous 1961 article in "Science" about the drawbacks of big-money scientific research. He added: ‘The inevitable result is the injection of a journalistic flavor into Big Science which is fundamentally in conflict with the scientific method.... The spectacular rather than the perceptive becomes the scientific standard.’"

Hiltzik acknowledged the contributions that CIRM has made to stem cell science.

“CIRM-funded labs have produced genuine achievements. But the agency tends to delineate its progress in buildings built, papers published, and big-name scientists lured to California. But the specific cures promised by the Proposition 71 campaign haven't materialized, which doesn't surprise anyone steeped in the realities of the scientific method.”

Hiltzik concluded,

“Even if one believes the need for California to devote $3 billion to a narrow, extremely speculative field of science, the Trounson case and other CIRM administrative missteps have made clear that Proposition 71 created the wrong framework to manage a complex research effort. The initiative left the public with no way to tell if its money has been well spent, and no accountability if it hasn't.

“Moreover, the program deprived potentially more promising research efforts of resources and contributed to the general impoverishment of California's entire higher-education system. If its sponsors have the audacity to ask taxpayers for even more money under the same terms as Proposition 71, the reply should be a resounding ‘no.’ If the voters are gullible enough to repeat the same mistake they made in 2004, there's no cure for them.”

The Hiltzik column appeared online last night. It is scheduled to appear in the Sunday print edition of the Times, which says it has a combined print and online reach of 4 million readers. 

California-funded Stem Cell Diabetes Treatment Edges Forward

CIRM video

The California stem cell agency’s $39 million investment in a possible therapy for diabetes moved forward this week with the announcement that the treatment could enter clinical trials as early as next month.

ViaCyte, a San Diego, Ca., firm, and the agency announced yesterday that the firm has applied with the FDA to start the testing to determine whether the product is safe in human beings. The Juvenile Diabetes Research Foundation, which is also funding the ViaCyte product, said the therapy was “potentially transformative.”

Randy Mills, president of the $3 billion stem cell agency, said in a press release,

“This is good news for ViaCyte and is a clear sign of the progress they are making. Filing for an IND is a crucial step along the path to bringing a stem cell treatment to patients. CIRM will be working with them and supporting them every step of the way to try and make this happen as quickly, and as safely, as possible.”

The agency described the treatment like this:

“Viacyte’s approach uses a thin plastic pouch, containing an immature form of pancreatic cells that, when implanted under the skin, are designed to mature and become insulin-producing and other cells needed to regulate blood glucose levels. These cells are able to sense when blood glucose is high, and then secrete insulin to restore it to a healthy level. In effect this is designed to mimic the glucose regulating functions of the pancreas, which, in people with T1D(type one diabetes), no longer works. This approach was shown to be effective in extensive preclinical testing in models of the disease.”

Paul Laikind, president of ViaCyte, told Bradley Fikes of the San Diego U-T that if “all goes smoothly” the initial stage of the clinical trials could begin next month or in September. Fikes also quoted the first chairman of the stem cell agency, Robert Klein, whose son has diabetes, as saying,

"This is an exciting day for the father of any son or daughter who has Type 1 diabetes."

The therapy, which is based on human embryonic stem cells, could take years to successfully complete all of the necessary clinical trials. Only one out of 10 possible therapies that enter clinical trials enters the marketplace.

StemCells, Inc., Says Patient Endangerment Charges Lack Merit

StemCells, Inc., said late today that charges that is endangering patients in clinical trials have no merit and that the company’s primary concern is the safety of its patients.

The Newark, Ca., company was responding to a lawsuit filed earlier this week that alleges the firm is manufacturing human cells in a process that puts “patients at risk of infection or death.”

The suit was filed by Rob Williams, a former senior manager at the publicly traded company. Williams said he was unlawfully fired by StemCells, Inc., after bringing the stem cell quality issues to the attention of senior management.

Earlier today, the California Stem Cell Report asked the company for comment. Ken Stratton, general counsel, responded. Here is the text of his reply.

“As you know, StemCells, Inc. is engaged in the research and development of cell-based therapeutics and is currently sponsoring clinical studies of potential therapies for spinal cord injury, AMD and pediatric neurological disorders as well as conducting pre-clinical studies in Alzheimer’s disease.  The pre-clinical AD studies, but none of the clinical studies, are partly funded by CIRM.

“The Company has reviewed the complaint filed by Mr. Williams, a former employee whose employment was terminated for performance deficiencies, and finds no merit to the allegations. The Company has retained Littler Mendelson as its litigation counsel and intends to defend itself vigorously in court.

“You should know, the elements of manufacturing practices that concerned Mr. Williams were immediately and carefully reviewed by the Company.  The Company’s primary concern has always been, and will continue to be, the safety and tolerability of stem cell transplantation in its clinical trials. Over the years, we have consulted with multiple experts in the field and we believe our processes, procedures and controls, as fully described in our regulatory filings, are appropriate for a company at our early stage of clinical development and comport with applicable guidelines and regulations.  To date, no patients participating in the Company’s clinical studies have experienced any product related safety concerns.

“We hope you find this information helpful.”

California Stem Cell Agency Examining Lawsuit Alleging Patient Endangerment and 'False Certification'

The California stem cell agency today said it is reviewing a lawsuit involving the recipient of a $19.4 million award that alleges the firm is manufacturing human cells in a process that puts “patients at risk of infection or death.”

The most serious allegations against StemCells, Inc., of Newark, Ca., involve its clinical trials. The stem cell agency’s $19.4 million research award to StemCells, Inc., does not involve human beings, only initial development of a possible therapy for Alzheimer’s over the next three years. Both the clinical trials and the Alzheimer’s research use the same proprietary cells, HuCNS-SC.

The company said in a 2013 press release,

"We know from the preclinical work that our proprietary HuCNS-SC cells survive in the toxic environment of the Alzheimer's disease brain and restore memory under the regulation of the host." 

The lawsuit was filed by a former senior manager, Rob Williams, of the publicly traded StemCells, Inc. He alleged he was fired after complaining about the cell problem to senior management.

In addition to possible injury, the lawsuit said that “the use of adulterated stem cells lots could skew patient test results, effectively jeopardizing data behind years of clinical trials and research.”  

The lawsuit said that StemCells, Inc., receives

“…millions of dollars in government funding, including grants from the California Institute for Regenerative Medicine (CIRM). As part of certifications that Defendants made and, on information and belief, continue to make, to the State of California in order to obtain such funding, Defendants represent that their manufacturing processes yield stem cells that are ‘safe for human stem cell transplantation.’ Additionally, in order to secure CIRM funding, Defendants represented and represent that the company follows current Good Manufacturing Practices (cGMPs) promulgated by the U.S. Food and Drug Administration (FDA), a set of standards designed to protect the public from dangers to consumer/patient health and safety. Plaintiffs protected activity, as described above, included efforts to stop, complaints about and refusal to engage in or cover up violations of these standards, and by extension the false certifications submitted to the government, certifications that the company used and uses in order to secure substantial funding.”

The lawsuit also alleged that StemCells, Inc., violated FDA standards and provided false information to the FDA, which has not yet responded to queries from the California Stem Cell Report.

In response to a query, Kevin McCormack, spokesman for the $3 billion stem cell agency, said the agency was carefully reviewing the lawsuit.

Williams attorney, Daniel Velton, has not responded to queries about whether he or Williams informed the FDA of the issues raised in the lawsuit.

StemCells, Inc., did not respond to queries about the matter. (Late yesterday, the firm said the allegations have no merit. See full text here.)

The company was founded by Stanford researcher, Irv Weissman, who sits on its board and is chairman of its scientific advisory board. His wife, Ann Tsukamoto, is executive vice president. Last week the stem cell agency announced that it was conducting a full review of its activities with the firm after it appointed the agency's former president, Alan Trounson, to its board seven days after he left the agency. 

Here is a copy of the lawsuit, which was first reported by Elizabeth Warmerdam of Courthouse News Service.

California Lawsuit Charges StemCells, Inc., with Putting Patients at Risk

A former senior manager at StemCells, Inc., which holds a $19.4 million award from the California stem cell agency, has filed a lawsuit alleging that “deficiencies in the company's cell lines put patients at risk of infection or death during clinical trials.”

The charges were contained in a suit by Rob Williams in Alameda County court, according to an article on Courthouse News Service written by Elizabeth Warmerdam. Williams is suing for wrongful termination, retaliation and violation of the California False Claims Act.

According to the article, the complaint said that StemCells, Inc., of Newark, Ca., says its stem cells are safe for human transplantation.  Warmerdam continued,

“Williams says he was hired as the company's senior manager of manufacturing in December 2013 to oversee its manufacturing facility, where stem cell cultures are cultivated for use in clinical trials.

“'Shortly after beginning his employment, plaintiff noted poor sterile technique, failure to adhere to current Good Manufacturing Practices in the company's manufacturing process, and substantial deficiencies in the company's Manual Aseptic Processing of HuCNS-SC (Human Central Nervous System Stem Cells) cell lines - failure and deficiencies that put patients at risk of infection or death during ongoing clinical trials,’ Williams says.

“Williams claims he also saw manufacturing deviations during cryopreservation of Working Cell Bank lots, leading to numerous stem cell lots with dangerously high numbers of damaged cells.

“'Knowing that these cells were to be injected into human patients, and that the high level of damaged cells and the possibility of contaminating microorganisms could cause serious harm to patients, plaintiff immediately took his concerns to upper management. He also noted that the use of adulterated stem cells lots could skew patient test results, effectively jeopardizing data behind years of clinical trials and research,’ the complaint states."

It was not immediately clear whether Williams’ allegations directly involve the work being funded by the California stem cell agency(see here, here and here), which has been asked for comment on the lawsuit.  The California Stem Cell Report has also asked the publicly traded company for a comment, although the article said the firm did not respond to a query by Courthouse News Service.

 (Late yesterday, the firm said the allegations have no merit. See full text here.)

The lawsuit said that Williams was told to conceal his finding from unspecified reports and that he was suspended shortly thereafter. It said that he sent emails to upper level management about his concerns and that he was fired a few weeks later.

Williams’ Linked In profile said that he has 15 years industry experience, including nearly six years as a senior manager at Alvine Pharmaceuticals and three at Johnson&Johnson.

Williams is seeking unspecified punitive damages from StemCells, Inc.

Courthouse News Service is a Pasadena-based national news service for lawyers and the news media.

A Nature Post Mortem on the Scripps-USC deal and Faculty Rebellion

The journal Nature took a look this week at the vicissitudes at The Scripps Research Institute, including its now defunct, $600 million merger with USC as well as the Scripps faculty uprising.

The July 15 piece was written by Erika Check Hayden, who reported,

“Scripps faculty members…felt that the (USC) deal sold them short. In interviews, they noted Scripps’ coveted ocean-front location: La Jolla is one of the priciest zip codes in the United States. The $15-million annual payments over 40 years offered by USC would be the equivalent of a $250-million mortgage, they say. That would not even cover one year of the institute’s operating expenses, which were $400 million in 2013.

“’It didn’t make a lot of sense financially,’ (Scripps researcher Martin) Friedlander says  ‘You can’t ignore a $20-million deficit, but there are many other creative ways of addressing the financial shortfall. We certainly do not have our backs against the wall.’”

The nearly done deal with USC came about because of Scripps’ financial plight. The faculty took umbrage when they learned about it late in the game and called for the removal of President Michael Marletta. The deal then collapsed, and Scripps said it is going to look at unspecified alternatives.

Hayden has interviews with a number of folks, including both from within and without Scripps. She concluded,

“Marletta has said that he is seeking more donations for Scripps, but is disadvantaged by being a relatively recent arrival; he was chair of the chemistry department at the University of California, Berkeley, until 2010.

“’Philanthropy is about long-term relationships with your donors; it’s not something where you just turn the spigot and say, ‘OK, we’ll go out and raise a billion dollars’,’ says Salk president William Brody, who initiated his institute’s fund-raising campaign soon after arriving in 2009.

“Still, Brody and other observers say that Scripps should be able to find a way out of its current dilemma that does not involve dissolution or losing its independence.

“’If they can stick to their knitting and stay the course, they will be successful,’ Brody predicts.”

California Stem Cell Agency to Alter $70 Million Alpha Clinic Proposal

The California stem cell agency is moving to revise a significant component of its $70 million plan to create one-stop Alpha clinics aimed at establishing the Golden State as the leading location worldwide for stem cell therapies.

Details of the changes that will be considered at the July 24 meeting of the agency’s board are not yet available. However, they deal with creation of a $15 million data and information management center that would be involved in clinical trial support, outreach and education and “development of healthcare economic resources.” The last area would involve efforts to convince insurance companies and the government to pay for what are likely to be very expensive treatments. 

The Alpha clinic applications were scheduled to be reviewed last month behind closed doors by the agency’s out-of-state reviewers. However, the June review was postponed shortly after Randy Mills became the new president of the agency. The agency said it was having difficulty getting qualified reviewers.  The review is now set for mid-September.

The Alpha clinic proposal has been championed for several years by the agency’s former president, Alan Trounson, who is now involved in a conflict-of-interest flap. Last week, he was appointed to the board of StemCells, Inc., of Newark, Ca., which is the recipient of a $19.4 million award from CIRM. The agency has launched a review of all activities involving the publicly traded firm and banned CIRM employees from speaking to Trounson about StemCells, Inc., matters.  

Mills began his presidential duties May 15 at which time Trounson was designated as a senior scientific advisor. Early in May, Kevin McCormack, CIRM spokesman, said that Trounson would remain with the agency until June 30. McCormack said that Trounson would  “help shepherd through a number of projects and commitments he has made,” which some assumed included the review of the Alpha applications in June.

McCormack did not response to a question on June 6 about whether Trounson would be participating in the review.

Eight, unidentified major institutions are competing for the Alpha clinic awards. Five are specifically shooting for the information management center.  StemCells, Inc., is not expected to be involved because of the terms of the RFA, but Stanford University is quite likely to be among the applicants.

Stanford scientist Irv Weissman, founder of StemCells, Inc., and currently a member of its board and chairman of its scientific advisory board, is head of the Palo Alto school’s Institute of Stem Cell Biology and Regenerative Medicine.

The CIRM board meeting will be held in Millbrae but two teleconference locations, where the public can participate, will be available in Los Angeles  and one in La Jolla. Specific locations can be found on the agenda.

More California Stem Cell Cash Likely for UC Irvine and UCLA

Two researchers at different University of California campuses look to be slated next week for additional cash for their research into Huntington’s Disease and corneal problems.

Applications for more cash are scheduled to be acted on July 24 at the CIRM board meeting in Millbrae in the San Francisco Bay area.

Leslie Thompson (left) and patient advocate Frances Saldana
Gene Veritas photo

Leslie Thompson of UC Irvine is up for additional “bridge” funding for her efforts to develop an hESC therapy for Huntington’s Disease. She received $3.5 million in 2010.  Amount of the bridge funding was not specified in the material posted online today.

Her latest progress report said,

“We have now selected a GMP grade hNSC line that will be carried forward for further testing in both rapidly progressing and slower progressing HD mice, as well as in mouse preclinical dosing studies. Taken as a whole, progress supports the feasibility of the CIRM-funded studies to transplant differentiated hESCs into HD mice for preclinical development with the ultimate goal on initiating IND-enabling activities for HD clinical trials.”

Sophie Deng
UCLA photo

Patient advocates for Huntington’s Disease have been particularly active at CIRM board meetings and at UC Davis, which has developed a major research effort dealing with the affliction.

Sophie Deng of UCLA is up for additional funding to take her research involving corneal disease to another stage. She received $1.5 million in 2010 for her translational research. Amount of the additional funding also was not specified today by the agency. The amounts for both researchers is likely to surface later this week.

San Francisco Business Times: California's Trounson Affair Damages Likelihood of Future Stem Cell Funding

The San Francisco Business Times yesterday said the Trounson Affair is the “latest embarrassment” for the $3 billion California stem cell agency and threatens its attempts at securing additional funding.

In an opinion piece, reporter Ron Leuty wrote,

“California's stem cell research funding agency needs a home run to score more public funding. Instead, a conflict-of-interest problem is giving it the wrong kind of attention.”

Leuty was referring to the appointment of Alan Trounson, the former president of the agency, to the board of StemCells, Inc., of Newark, Ca., which holds a $19.4 million award from the California Institute for Regenerative Medicine (CIRM), as the agency is formally known. The appointment came just seven days after Trounson left the agency.

Randy Mills, the new president of the agency, has ordered a full review of agency activities involving the publicly traded StemCells, Inc. Agency employees have been barred from discussing StemCells, Inc., matters with Trounson.

Trounson and the company gave no notice to the agency about the pending appointment. Leuty wrote, 

“He apparently never discussed the move, CIRM spokesman Kevin McCormack said, even as an agency attorney briefed him before his departure on what he could and could not do after leaving CIRM.”

Leuty continued,

“CIRM spokesman McCormack said Trounson's decision ‘had nothing to do with us. The conflict wasn't started by us.’ 

“That may indeed be the case, but religious and financial opponents of CIRM won't let voters see it that way. Despite the progress of various research programs but CIRM grant winners, that combination may force the Democratic Party and Gov. Jerry Brown not to support a 2016 ballot measure to re-fund the agency. 

“The Trounson Affair is yet another strike that deepens a perception problem that threatens to distract voters from the win CIRM desperately needs.”

The Business Times story comes as StemCells, Inc., this morning announced it planned to raise $20 million by selling more than 11 million shares to two "well-recognized biotechnology investors." The company's stock price dropped nearly 8 percent in trading this morning and stood at $1.86 at about 7:30 a.m. Pacific Daylight Time. The share price was at $2.31 last Monday when Trounson's appointment was announced.

The Trounson Affair and its Financial Fallout

 StemCells, Inc., the California business founded by Stanford scientist Irv Weismann, seems almost certainly to have done a serious financial disservice to itself and its shareholders.

Alan Trounson
San Francisco Business Times photo

One week ago today, the publicly traded Newark, Ca., firm cast a dark shadow over its dealings with a $19-million benefactor, the California stem cell agency. The issue arose when the company appointed the former president of the research effort, Alan Trounson, to its board of directors, only seven days after the Trounson left the agency's employment.

Trounson earned $490,008 annually at the agency. Last year, directors of StemCells, Inc., received up to $99,800 each for their part-time efforts.

The Trounson announcement caught the agency by surprise, as it pointedly noted last week in a statement. Randy Mills, the agency's new president, expressed concern about a possible conflict of interest and ordered a “full review” of activities involving StemCells, Inc. Staffers and board members were banned from communicating with Trounson regarding StemCells, Inc.

Like most small biotech firms, StemCells, Inc., is in perennial need of cash. The firm has no products that generate significant income. Rather, it is in an almost constant fund-raising mode, either by selling stock, borrowing or securing awards, such as the $19.4 million “forgivable loan” from the $3 billion stem cell agency, formally known as the California Institute for Regenerative Medicine(CIRM). The award is basically a grant because it does not have to be repaid unless a product derived from the research reaches certain income thresholds.

But now StemCells, Inc., has damaged its relationship, probably irreparably, with the agency. The firm's chances of securing additional funding have to be rated nearly non-existent.  Putting aside purely business issues for the moment, the primary question for the agency now is whether it can trust StemCells, Inc. The company could not bring itself to notify – in advance – an enterprise with which it has a $19-million relationship about an event of importance to that enterprise. CIRM is likely to be wondering whether StemCells, Inc., can now be trusted to be forthright about other matters, such as results of its research or difficult problems that it faces in reaching the benchmarks laid out in its agreement with the agency.

Even prior to the Trounson announcement, StemCells, Inc., had a checkered history with the agency. The $19.4 million award  for Alzheimer’s research was rejected twice by CIRM’s prestigious reviewers. The 29-member CIRM board approved it on only a 7-5 vote in 2012 after heavy lobbying by the agency’s first chairman, Robert Klein. It was the first case of such public lobbying by Klein after he left the board.

It was also the first time the board had approved an application rejected twice by its reviewers. Almost universally, the board goes along with negative recommendations from its reviewers, saying it does not have enough information to override their decisions.

Pulitzer Prize-winning business columnist Michael Hiltzik of the Los Angeles Times later said the award was “redolent of cronyism.”

Approval of the award came during a grant round in 2012 that also saw StemCells, Inc., receive  another big award from the CIRM board -- $20 million. But that research received a high score from reviewers and was recommended by them.  Both awards required equal matching funds from the StemCells, Inc. – a total of about $40 million from a business that at the time was burning through $5 million a quarter and had only $10.4 million in liquid assets.   The financial capabilities of the firm were not discussed in public by the CIRM board. 

After eight months of negotiations with CIRM, the firm decided to take only the money for the project twice rejected by reviewers,  CIRM had no choice about whether it could fund the higher rated project, which is now in a clinical trial. That development came as the agency was urgently pushing to participate in clinical trials that would fulfill the promises to voters who created the agency in 2004 and help boost its drive for financing beyond 2017, when money for new awards runs out.

Trounson recused himself from the 2012 public discussions of the StemCells, Inc., applications because of his relationship with Weissman, who is a member of the company's board and chairman of its scientific advisory panel. Last January, Trounson strongly backed a $40 million award to a Stanford-led consortium that also involved one of Weissman's top associates. 

Beyond CIRM, the Trounson affair will also raise questions for StemCells, Inc.,’s efforts at private financing. The firm will now have to answer difficult questions about the appointment as it seeks loans or stock sales. The appointment could also play a role in the possible sale of the firm’s research to a Big Pharma company. One of the hopes of small biotech companies is that they will be purchased by a larger enterprise that wants to acquire their research. That is a common way for early investors to reap their profits.  But those big companies do not want unnecessary baggage in the deal.

The stock price of StemCells, Inc., last Monday hit $2.31. It dropped to $2.05 by the end of the week. The price has ranged from $1.15 to $2.43 over the last 52 weeks.

The company lists five analysts that follow its activities. Last week one recommended a buy and the others rated the stock as“outperforming.” Two of the analysts’ companies have financial relations with StemCells, Inc. The others may as well but that could not be immediately determined.

On July 2, prior to the Trounson announcement, The Street.com, which is not listed by the company as an analyst, said,

“TheStreet Ratings team rates STEMCELLS INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate STEMCELLS INC (STEM) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and generally high debt management risk."

The California Stem Cell Report last Monday asked StemCells, Inc., and Trounson for comments on the controversy about his appointment. They will carried verbatim when they are received. 

The Stem Cell Take on the World Cup: Chalk Up One for California

Angel Di Maria
Photo Franny Schertzer

The $3 billion California stem cell agency scored big in this week’s coverage of what is one of the biggest sporting events on Earth – the World Cup.

One would not think soccer and stem cells are a natural combination. But an internationally celebrated player for Argentina, Angel Di Maria, pulled them together. He got banged up a bit and is trying a stem cell treatment so he can bounce back for tomorrow’s final match between Argentina and Germany, which is expected to be viewed by more than 3.2 billion people.(Yes, billion is correct.)

Kevin McCormack
Photo Fog City Journal

Yesterday, California’s much less well known stem cell agency got into the game, so to speak. Kevin McCormack, the agency's lead PR “striker” – that's a soccer term – wrote about Di Maria on the agency’s blog.  McCormack sounded a warning about the coverage of the Di Maria treatment as well as lowering expectations that Di Maria’s stem cell treatment might do any good.

McCormack’s item is what led to the big mainstream media score. Lenny Bernstein of the Washington Post saw McCormack’s item on the Internet  (score one for the impact of social media on stem cell PR) and contacted McCormack, who has  played soccer himself as well as engaging in a little boxing and squash.

The result was a nicely done story in the Washington Post that had a strong emphasis on what the stem cell agency had to say about dubious stem cell treatments along with a mention of the California agency's size and reach.

Bernstein also wrote,

“McCormack and others express concern that when pro athletes and other celebrities have unproven treatments, it sends the rest of us weekend warriors out in search of the same. Here a good bit of blame goes to us in the media. A 2012 analysis conducted for the journal Molecular Therapy showed that 72.7 percent of the media coverage of athletes and stem cell therapy didn’t address whether the treatment works, and 42 percent referred to alleged benefits. Only 5.7 percent of the stories brought up possible safety issues and risks.”

Why does all this accrue to the agency’s benefit?  Number one is that it portrays the agency in a favorable light. Number two: it makes more people aware of what the agency does. Number three: the Post syndicates its stories and Bernstein piece is likely to get play in other papers. Four, the article will turn up for years in future searches by writers looking at the use of stem cell therapies by athletes. Five, it is a rare case of coverage involving the agency by a major and respected East Coast newspaper. Six, because the article deals with sports, it will reach a large audience that normally would avoid stem cell news.

California’s stem cell research effort is well-known among certain tiny, insular circles. But it is all but invisible to the public at large in California. If the agency is to secure additional funding (money runs out in less than three years), it needs to be known widely and favorably for good work. The Washington Post is an example of the type of recognition that needs to be replicated many times if the agency wants to secure a new future. 

California Stem Cell Conflict Case Covered by Los Angeles Times

The Los Angeles Times today published a brief story on the Trounson-StemCells, Inc., affair, declaring that the California stem cell agency was taking steps deal with a “risk of conflict of interest.”

Amina Khan wrote the piece, which included quotes from John M. Simpson of Consumer Watchdog of Santa Monica, Ca., who said,

“The thing smacks as if this is StemCells, Inc., giving a payback to (Alan) Trounson(former president of the agency) after the agency awarded $19 million to StemCells Inc. That’s just the way it looks. And I think they have to explain quite clearly why that is not the case.”

Trounson was appointed to the board of StemCells, Inc., of Newark, Ca., last Monday.  StemCells, Inc.’s directors received as much as $99,000 in 2013.

Khan carried little new on the situation, although the issue was undoubtedly new to virtually all of 1.4 million readers of the Times, the state’s largest circulation newspaper.

Biopolitical Times: Trounson-Weissman-StemCells, Inc., Affair is 'Shameful'

The headline on the Biopolitical Times story said it all: “Shameful Conflicts of Interest Involving California’s Stem Cell Agency.”

The piece by Pete Shanks of the Center for Genetics and Society in Berkeley, Ca., dealt with the former president of the agency, Alan Trounson, and StemCells, Inc., which holds a $19.4 million award from the agency, along with Irv Weissman, the Stanford researcher who founded the firm and who now sits on its board.

Trounson was named to the StemCells, Inc., board on Monday, seven days after he left the agency. Yesterday the agency, formally known as the California Institute for Regenerative Medicine(CIRM), launched a “full review” of all activities involving StemCells, Inc. The agency also banned its staff and board fromcommunicating with Trounson about matters involving the publicly traded firm.  

Shanks wrote,

“Let's be blunt: This looks like a pay-off. Technically, what Trounson and Weissman and StemCells, Inc., just did may not be illegal. But it's shameless.”

Shanks pointed out that the problems with conflicts of interest at the agency are nothing new. As far back as 2004, they were noted prior to passage of the measure that created the state research effort. Their importance was noted by major supporters of the measure, including Weissman.

Weissman was quoted in Nature in September 2004 as saying,

“We want to avoid even the appearance of a conflict.”

Shanks concluded,

“CIRM should take a long look at its practices and procedures, which have never served the agency well — and especially should consider its obligations to the public, who fund it. There can be practical difficulties in balancing expertise and objectivity; the best scientists in any field do tend to know each other well. All the more reason to be especially careful. This kind of obviously problematic conflict of interest can and should easily be avoided.”

Scripps-USC Deal is Dead; Cash Problems Remain

The $600 million merger of The Scripps Research Institute with the University of Southern California has been quietly put to rest, but the issues behind it – money, money and money -- are still very much alive.

Scripps announced the termination of the proposed deal yesterday in a three-paragraph statement. Bradley Fikes and Gary Robbins of the San Diego U-T, who have been on this story like a dog on a bone, wrote,

“James Paulson, who chairs the Department of Cell and Molecular Biology, praised the decision in an email to U-T San Diego.

“'This is a very positive step taken by the board and Dr. (Michael) Marletta(president of Scripps),’ Paulson wrote. ‘It clears the slate to look at all possible options to secure the future of TSRI, and will undoubtedly be welcomed by the faculty.’”

Faculty leaders had called for the removal of Marletta, declaring that they lack confidence in him. Scripps is running a $21 million deficit for the fiscal year ending Sept. 30. It also has come up short in philanthropic contributions while federal funding for research has shrunk.

UC San Diego earlier expressed an interest in some sort of arrangement with Scripps, which is reknown for its biomedical research. But little information has surfaced on whether that possibility has advanced. 

California Stem Cell Agency Bans Some Communications with its Former President; Conflict of Interest Feared

The California stem cell agency today banned its employees and governing board from communicating with its former president, Alan Trounson, about matters involving StemCells, Inc., which holds a $19.4 million award from the state program.

Citing the need to protects its integrity and prevent conflicts of interest, the agency also ordered a full review of all agency activities linked to the publicly traded,  Newark, Ca., firm.

Today’s action followed Monday’s appointment of Trounson to StemCells, Inc.’s, board of directors. The announcement came only seven days after Trounson’s departure from the agency.  Members of the StemCells board received as much as $99,800 in total compensation in 2013.

Trounson’s relationship with StemCells, Inc., and its founder, Stanford researcher Irv Weissman, has come under sharp criticism. John Simpson of Consumer Watchdog of Santa Monica, Ca., a longtime observer of California stem cell affairs, said this week that Trounson’s appointment “calls into question not only his ethics, but unfortunately casts a shadow over CIRM and its award process as well.” 

Simpson said,

“Whether it’s true or not, this has every appearance of being a payback for the money CIRM paid out to Irv Weissman and Stanford University. StemCells Inc. and Stanford have received more than $300 million from CIRM — more than any other researchers.”

Weissman has received $34.7 million in grants from the stem cell agency, which is formally known as the California Institute of Regenerative Medicine (CIRM). Stanford has received $281 million.

In its announcement today, Randy Mills, the agency's new president, said,

“CIRM was created by the people of California to help accelerate stem cell treatments to patients with unmet medical needs.  Our responsibility is to them. So it is essential that we conduct these efforts with fairness and integrity. We take even the appearance of conflicts of interest very seriously.”

The agency also said that it was sending a letter to Trounson and StemCells, Inc.,  “reminding them of the legal limitations that apply to Dr. Trounson under state law.

“Although it is permissible for Dr. Trounson to accept employment with a CIRM-funded company, state law prohibits him from:

“1.  Communicating with Board members and CIRM employees on behalf of Stem Cells, Inc. for the purposes of influencing any administrative action, including the award or revocation of a grant or loan, involving Stem Cells, Inc. for one year following the termination of his employment with CIRM; and
“2. Assisting Stem Cells, Inc. in responding to a Request for Applications in which Dr. Trounson was involved as a CIRM employee or assisting Stem Cells Inc. with its existing loan.”

The agency said that it did not know that Trounson was going to be appointed to the StemCells board and only learned about it through the press release Monday morning.

The $19.4 million award to StemCells, Inc., occurred under unusual circumstances.  Robert Klein, the first chairman of CIRM, lobbied on behalf of the award, which was rejected twice by the agency’s respected reviewers.  Despite reviewer actions, the board approved the award on a 7-5 vote. (See here, here and here.)

Trounson’s relationship Weissman came under question also in the $40 million stem cell genomics award earlier this year. The No. 2 person in Weissman’s Stanford stem cell institute was involved in that award. However, the agency has not yet signed a final agreement involving that proposal.

The agency did not mention any awards beyond those involving StemCells, Inc., in its review.

The San Francisco Chronicle carried a story this afternoon on the agency's ban regarding Trounson.

Stephanie Lee wrote in the Chron,

“'It’s a pity that Trounson and StemCells Inc. simply don’t get it,' Simpson said. 'A full review of CIRM activities relating to StemCells Inc.,  as Mills pledged, is absolutely essential and the results must be made public as soon as available.'”

Bradley Fikes of the San Diego U-T quoted CIRM Chairman Jonathan Thomas as telling his board members,

"The announcement (by StemCells, Inc.)raises serious and obvious concerns on a number of fronts." 

Watchdog Says Trounson-StemCells, Inc., Connection Casts 'Shadow' Over California Stem Cell Agency

The San Francisco Chronicle today carried a story on the appointment of Alan Trounson, former president of the $3 billion California stem cell agency, to the board of  StemCells, Inc., which has received $19.4 million from the research program.

Trounson’s appointment came only seven days after he left state employment. Last year, members of the firm's board received as much as $99,800 in cash and company stock, as reported by the California Stem Cell Report yesterday.

Chronicle reporter Stephanie Lee today wrote that the agency's funding was "pivotal" for StemCells, Inc. On Saturday, in an overview of the stem cell agency, she quoted Martin McGlynn, CEO of the publicly traded company, as saying,

 “We would not have been able undertake another program, and certainly one as challenging and as risky as Alzheimer’s, were it not for the fact that (the agency) was willing to provide funding for us.”

Lee also quoted John Simpson of Consumer Watchdog of Santa Monica, Ca., a longtime observer of the agency, on the matter. Simpson said that Trounson’s joining of the board “calls into question not only his ethics, but unfortunately casts a shadow over CIRM and its award process as well.”

Simpson continued,

“Whether it’s true or not, this has every appearance of being a payback for the money CIRM paid out to Irv Weissman (an eminent Stanford researcher and founder of StemCells, Inc.) and Stanford University. StemCells Inc. and Stanford have received more than $300 million from CIRM — more than any other researchers.”

Simpson said that Trounson should have waited two years before joining a company that had received funds from the stem cell agency.

Lee said that StemCells, Inc., filed a document with the federal Security and Exchange Commission that said said,

 “There was no arrangement or understanding between the Company and Dr. Trounson pursuant to which he was selected as a director of the Company.”

Lee said the Newark, Ca., company declined to comment. The California Stem Cell Report yesterday asked StemCells, Inc., Weissman and Trounson for comment as well as the stem cell agency.  Their remarks will be carried verbatim when they are received.

Ron Leuty of the San Francisco Business Times also wrote a piece on the matter yesterday.