The Royalty/IP Angle on California's Proposed $150 Million Stem Cell Powerhouse

California's stem cell agency was born in 2004 with promises to voters of up $1.1 billion in royalties from new, effective and lucrative therapies. At the time, however, creation of a unique, $150 million, public-private stem cell company was not even a gleam in anybody's eye.

This Friday, the agency is scheduled to act on details of the financing structure for such a company with the hope of luring industry into a deal with the Oakland-based agency. The bold and risky proposal -- dubbed ATP3 -- has raised questions, including some from readers of this report, about how the intellectual property (IP) and royalty provisions would work.

The California Stem Cell Report last week queried the California Institute for Regenerative Medicine (CIRM), as the agency is formally known, and again this week about the matter, which is a tad complicated but very important indeed. To be clear from the start, CIRM does not own any IP, just the rights to some royalties which would flow to the state's overall budget.

Here is what Kevin McCormick, senior director of communications, told us today via email:

"It is very complex as its something completely new.  

"For the royalties that the (research) grantees negotiate with ATP3, the (state's) general fund will take a percentage of the licensing revenue that the grantees received.  All revenue-sharing fees go to the general fund. 

"If the ATP3 Newco (the hypothetical company) “takes over” a current CIRM grant and becomes the grantee of record, it has the same rights as any other grantee.  For CIRM 2.0 awards, there is an option right to convert the grant to a loan.  Under a loan, the payback of the loan returns to CIRM.  For CIRM 1.0 awards, no such conversion right exists.
If the ATP3 convertible note is sold, the proceeds of such sale will return to CIRM. (The agency plans to use $75 million in convertible notes to help finance the company). In such a case, the grantees’ revenue-sharing obligations will still exist.

"Here is an example:

"Grantee X has a cell therapy which was developed under a closed Disease Team 1 grant and is in Phase I clinical trial under a current CIRM 2.0 CLINI grant.  NEWCO licenses the cell therapy IP and data from Grantee X.

"A)  If Newco decides to take over the current CLINI grant, it will become the Grantee of record for the CLINI grant and have revenue-sharing obligations to the General Fund for that grant (which may be converted to a loan).  Grantee X will have a separate revenue-sharing obligation to the General Fund for the closed Disease Team 1 grant.  In this scenario, the General Fund may have two sources of revenue from the two different grants.

"B)  If Newco decides not to take over the current grant, then Grantee X will have revenue sharing obligations under both of the grants back to the general fund."

Last week McCormick also addressed some of the issues involving what might be considered the "yield" on the state's proposed $75 million investment with a partner that would also put up $75 million to create the company. He said,

"In addition to the state general fund, David, we would also identify CIRM, potential grantee/researchers and developers, academic institutions in the state, and more broadly the citizens of California.  CIRM will benefit in the event the program is successful, ensuring additional funds are available to CIRM to leverage CIRM research programs across the spectrum.  Existing and future grantees, researchers and institutions will benefit by opening up commercialization opportunities and providing a path forward for development of CIRM-funded research. As for the general fund, by providing an avenue for commercial exploitation of existing CIRM-funded IP (which are subject to existing revenue sharing rules under CIRM’s IP policies), the general fund will benefit by the commercial success of these projects that might not otherwise occur."

Excerpts from the Birth of ATP3: California's $150 Million Plan for a Stem Cell Company

Here are excerpts from the transcript of the California stem cell agency meeting Dec. 17, 2015, at which its directors approved the concept for a $150 million public-private partnership. The concept was part of the agency's spending plan for the next five years. Details of the financing and term sheet were disclosed last week and are scheduled to be approved a meeting on Friday.

Randy Mills, president of California Institute for Regenerative Medicine (CIRM), as the agency is formally known:

"We have a lot of things in this (strategic) plan that are new for a funding agency to attempt, but this one (ATP3) stands out even for this plan. Here the concept is that we have a whole bunch of technology. We have 300 or so different programs at CIRM. As we said, only 8 percent of our academic programs currently have industry partners. So how do we fix that? 

"We thought about a number of different ways, but one of the ways is just to go directly and do it. We thought, well, what would happen if we put out a call for basically the creation of a new entity or a new company that would be a California-based company that could take these technologies and aggregate them and focus on developing and commercializing stem cell-specific technologies?

"So the idea is here we would put out a call that would require a successful applicant to put together a business plan that would describe what types of technologies from our portfolio that they would like to aggregate and the synergies associated with those, a great management team that could actually make that happen in a successful way, and then, very importantly, a tremendous amount of upfront capital that they're going to commit.  

"I think we had in this concept $75 million in upfront capital that they're going to commit into taking these technologies and driving them forward. Then we would then partner with them on actually a very efficient basis to help fund some of that research going forward. Again, the idea being what we would have at the end is an entity, basically a powerhouse in the state of California that have these technologies that they're actively commercializing. It would be an outflow for new technologies that are coming out of CIRM that need an industry home and obviously create jobs and expand the tax base for California. And then, lastly, but most importantly, be a vehicle for getting the final span of this bridge where we go from late stage research actually through commercialization so patients can benefit from them. Again, Dr. Millan is going to talk more about this. I don't want to completely steal her thunder, but it's a cool part.”

Maria Millan, senior director of medical affairs, who spoke later:

“We have identified and we know as a field that there is a lack of industry pull for stem cell therapeutics. Although CIRM has invested approximately $2 billion so far in developing a portfolio of approximately 300 technologies, we know that only 6 percent of CIRM's academic projects have been licensed by industry. And in discussions with the University of California system, we know that of the 3,400 technologies being marketed, we're not even talking about all technologies, but just those that are being actively marketed, less than 2 percent of those are stem cell programs.

"So we are proposing to the board today an initiative, the ATP3 initiative, as a means of engaging industry by creating an opportunity for top-tiered leadership and management teams to come in and competitively be evaluated in their ability to form an entity which would aggregate CIRM's most promising technologies. By aggregation, it would offer multiple shots on goal on these product development candidates which increases the probability of success, so called de-risking the proposition. And what we anticipate is this would make it more significantly palatable and actually incentivize industry to come in in partnership. In addition, what's baked into this initiative is that CIRM would leverage its capacities in terms of administrative review structure and advisors to help this entity come up with the best possible portfolio. And CIRM would continue to be involved by funding the development of these in-licensed technologies.

"So as a general structure, the accelerating therapies to public private partnership, ATP3, the major goal of this is to get the CIRM-funded stem cell technology candidates to the patients, get the technologies to the patients, and how do we do that? We pull industry in, we get a private partner through this competitive process who will in-license, develop and drive toward commercialization the aggregated portfolio. And as I just stated, CIRM will be actively involved in this and choosing and enabling the licensing and in helping to fund these program's developments.

"In addition, the researchers would have continued funding for the advancements of their project. just to back up a bit, when these in-licensed programs come in, they come in with current funding for these programs to go to a certain value inflection point. if they're chosen by CIRM and by the ATP3 awardee to come into their portfolio, then the project would get additional funding. For universities, by design of this initiative, there would be a demand creation for out-licensing cirm-funded technologies and, therefore, a greater opportunity for financial return which then could go on to fund future projects and efforts. And for citizens of California, as Dr. Mills stated, this is an opportunity to create a therapeutic powerhouse that increases the likelihood of getting stem cell therapeutics to the patients.

"The private partner or the awardee, the applicant, could be an established company, a spin-off, or a new company altogether that's formed by a team of professionals that have come out of either pharma, biotech, or could be investors. They will be judged on and will propose an exceptional business plan to aggregate these technologies, give the rationale for this, propose how this will create value and bring return to the stakeholders. And they would come in with a leadership team that would be judged on their track record and their strength that they bring to the initiative and the likelihood they'll be able to execute on the business plan and bring about the goals of this initiative. The entity will be required to come in with significant investment upfront and utilize this to execute on the business plan while CIRM will fund the support of the development of the in-licensed projects.

"The CIRM award is anticipated to be approximately $75 million of funding over a five-year period. It could be in the form of a loan, but the applicant, the awardee, would be required to match the total award amount, regardless of how much of the loan they take on, dollar for dollar upfront. The awardee would also be required to comply with the pricing access and march-in provisions of CIRM's IP regulations and to provide the licensor of the CIRM projects with the right of first refusal should they decide to shelf or cease development of that particular technology." 

$150 Million 'Powerhouse:' California Discloses Financing Details on New Stem Cell Company

CIRM graphic

Highlights
A California first
De-risking therapy development
Selling off the notes
Possible IPO

California's stem cell agency this week unveiled details of a far-reaching and unique proposal to create a $150 million, public-private company to speed commercialization of stem cell therapies and bring them into widespread use.

The proposal by the California Institute for Regenerative Medicine(CIRM), as the $3 billion agency is formally known, is believed to be a first in California history in terms of its size and scientific scope. It goes well beyond any such stem cell efforts involving other states.

The agency hopes to lure business into its stem cell game with a $75 million loan with invitingly lenient terms. CIRM's private partner would have to repay only 50 cents on each dollar of the loan. However, the partner would be required to match the loan with its own $75 million contribution.

Randy Mills, president of the agency, says the goal is to create a "powerhouse" company that would step up development of stem cell therapies that have been slow to emerge. It would "de-risk" the effort because of the state contribution.  The CIRM proposal also envisions the possibility of the enterprise issuing publicly traded stock, which could mean huge profits for initial investors, such as CIRM would be.

The project -- dubbed ATP3 -- comes before a special panel of CIRM's governing board directors next Friday at a meeting in Oakland. The panel is expected to review and approve a proposed term sheet for the financing so that the agency can post a request for applications very soon.

The meeting is public. The agency normally also has teleconference locations elsewhere in the state available for public participation along with a listen-only, toll-free audiocast.

In a memo to the committee, Neil Littman, the agency's business development officer, said,

"The overarching objective of ATP3 is to encourage industry involvement in cell therapy through the creation of public-private partnership that advances existing high quality CIRM-funded stem cell technologies toward commercialization. 

"Our main objective in structuring the terms of the award was to strike a balance between ensuring a financial return to CIRM and thus the citizens of California while at the same time ensuring the attractiveness of the award to encourage industry participation.... Although CIRM is not a venture capital firm or a traditional investor and is willing to bear significantly higher levels risk, the risk should be commensurate with the potential reward. Thus, if we are successful in creating a valuable stem cell enterprise in the State of California, it is appropriate that CIRM and the citizens of California participate in the financial upside."

The loan would be issued in the form of convertible notes that the agency could convert to stock if that seems more profitable than a loan. Littman wrote,

"This award is unique, and provides for the establishment of a new, for-profit California-based entity, which if successful, may command a significant future valuation."

Littman continued,

"A convertible note financing is commonplace in the biotechnology and venture capital community, and allows the note holder to participate in the upside should the issuer become a valuable entity. On the downside, the note holder is protected by the debt portion of the instrument, and could choose not to convert should the issuer perform poorly."

Structuring the investment as a convertible loan prevents the agency from violating a law that prohibits the state from owning stock in a private company.  The agency could sell the note to another investor that could be willing to pay more than the amount owed on the note because it can be converted to stock.

The proposed terms also stipulate that the loan would be issued in three separate notes. Each note could be transferred or sold separately, providing more opportunities for the state to profit.

The plan to create the new company also strikes at another issue that CIRM's Mills has spoken about repeatedly -- the reluctance of private companies and investors to engage in stem cell therapy development. In December, he told directors that only about 6 percent of the CIRM-financed research programs (totaling roughly $2 billion) has private partners. The reason, he said, is that the private sector is put off by the financial risks involved in stem cell development.

The new effort would also allow the private partner to pick through the CIRM portfolio to select research that would be potentially profitable -- excluding research that already has a private partner.

Here are links to the presentation slides on the proposal, Littman's memo and the proposed term sheet. For earlier items on the initial discussion of the plan last December, see here and here.

Watch for more coverage of this plan next week here on the California Stem Cell Report.

$2 Million for External Contractors at California Stem Cell Agency

California's stem cell research program next Monday will review the roughly $2 million it spends annually on outside contractors, but don't expect any fireworks.

The subject will come before the Governance Subcommittee of the agency's directors at a meeting scheduled only for one hour.

Since Bob Klein left as chairman of the $3 billion agency in 2011, the number of contractors and their cost have dwindled significantly.  In recent years, the Governance Subcommittee has rarely raised serious questions about the contracting.

The latest list of contractors and the size of their contracts has not yet been posted by the agency on its Web site. But here is a link to the most recent list that has been made public. It is from December of last year.

Also on tap is proposal to boost a contract this year with The Mitchell Group of Agoura Hills, Ca., from $249,000 to $345,000.  An agency memo said,

"The programmers supplied by Mitchell work on the CIRM Grants Management System and on the CIRM public website. Under CIRM 2.0 and the Strategic Plan, CIRM’s Grants Management System has needed extensive renovations to keep pace with the accelerated pitching machine. CIRM’s public website has also required renovations to display the new CIRM Funding Opportunities and to meet the requests for advanced navigation and graphics." 

The public will have a chance to listen to the meeting via a toll free audiocast. Interested parties can participate at teleconference locations in Oakland and La Jolla. More details can be found on the meeting agenda.

We'll Be Back Soon: The Lure of the Sea is Calling

The California Stem Cell Report will be going dark for a week or so while it takes a slow boat along the west coast of Mexico.

The passage is south from Mazatlan aboard the sailing vessel Hopalong, which has been the home of this writer and his spouse for nearly 18 years south of the border, from Mexico to Panama. For you cinematic types, Hopalong left Marina Mazatlan as another sailing vessel called Cassidy arrived. Hopalong is named after the TV cowboy, who famously admonished children not to call police officers coppers.

But when Cassidy gets into town, Hopalong has to get out. Much too confusing.

California Stem Cell Board Finishes Today's Business

Directors of the California stem cell adjourned their meeting this afternoon at 2:39 p.m. PDT. This concludes our coverage of today's session.

California Awards $37 Million for Stem Cell Research; Parkinson's Grant Deferred After Emotional Session

Directors of the California stem cell agency today approved nearly $37 million for translational stem cell research into possible therapies for afflictions ranging from cancer to Canavan disease.

The vote came routinely after a lengthy and sometimes emotional discussion involving an $8 proposal for Parkinson's disease from Scripps Institute in La Jolla that was rejected by the agency's grant review group.

Their voices cracking and tears welling up, persons with the disease appealed to the agency's directors to provide "a future without fear, a future with hope."

Cassandra Peters, who was diagnosed with Parkinson's 15 years ago, told stem cell agency president, Randy Mills, via a phone link to San Diego,

"I hope that I have the opportunity to kneel in front of you and say thank you."

On an 8-4-2 vote, the board ultimately sent the application from Jeanne Loring, head of the stem cell program at the Scripps Institute, back to reviewers for an accelerated re-examination of her proposal, which was submitted last Nov. 20. It was reviewed on Feb. 11 behind closed doors and given a score of 70, well below the cutoff of 85.

This week, Loring said in a letter to the board that new information, including comments from the FDA, has emerged since November that will satisfy the concerns of reviewers. CIRM officials estimated it would take about two months to have the proposal re-examined. Then it would have to come back to the board for final action.

Loring's proposal and the others were reviewed under new procedures that are aimed at providing more, regular opportunities for researchers to apply for funding. Old procedures for appeals have been scrapped after failing to deal with the emotional appeals that have been generated for awards over the last decade.

Some board members were concerned that the exception granted for Loring today would stimulate a fresh wave of public pitches by scientists and patients whose proposals have not fared well with reviewers. The board is reluctant to second-guess its reviewers. Agency directors do not see the full applications for cash, just the same review summaries seen by the public, with the exception of proprietary information, which the board can see during executive sessions.

While seven other translational awards were approved, the board rejected another effort to fund research that was rejected by reviewers. In this case, the application scored only two points below the cutoff.

Speaking after the long debate on Loring's proposal, Thomas Kremen of Cedars-Sinai and Olympic gold medalist Jason Lezak appeared to appeal to the board to overturn the rejection. The board, however, did not discuss the application or respond to their comments.

All seven winning institutions in this round all had ties to members of the governing board of the agency, formally known as the California Institute for Regenerative Medicine (CIRM). However, those board members are not allowed to vote on such applications. About 90 percent of the $1.98 billion in CIRM awards has gone to institutions with links to past or present CIRM board members.

Randy Mills, president of the agency, said in a press release,

“Many of the programs we are funding today are focused on helping find treatments for diseases that affect children, often in infancy. Because many of these diseases are rare there are limited treatment options for them, which makes it all the more important for CIRM to focus on targeting these unmet medical needs.”

Here is a link to the agency's press release on today's meeting, which includes the names of the recipients.

California Okays $7.3 Million for Stem Cell Research Related to Duchenne's and Immunodeficiencies

Directors of the California stem cell this morning awarded $4.3 million to researchers at UC San Francisco and $3 million to Capricor, Inc., of Beverly Hills for clinical trial-related research for therapies connected respectively to an extremely rare immunodeficiency affliction and Duchenne's disease.

The larger award was ratified on a 10-3 vote after questions arose about whether sufficient patients could be recruited for a clinical trial, additionally a concern of the agency's grant reviewers who earlier approved the application, also on a split vote.

The agency has already provided $3.9 million for the UCSF research. The lead scientists on that effort were Morton Cowan and Jennifer Puck. The treatment is aimed at the "bubble boy" immunodeficiency disease. The agency's summary of the application review said that the research "could lead to a lasting cure" for that version of the affliction.

The Capricor award was approved on a 13-0 vote after Jeff Sheehy, a member of the governing board, said it was "pretty much a pure CIRM product," referring to the initials of the stem cell agency, formally known as the California Institute for Regenerative Medicine.

Capricor, a publicly traded firm, has already received $19.8 million from the agency to develop stem cell heart treatments, The $19.8 million came on top of earlier, related funding for research at Cedars-Sinai that hit $7 million.

The treatment is aimed at Duchenne muscular dystrophy cardiomyopathy using a Capricor product called CAP-1002.

California's expected action on the two awards was first reported by the California Stem Cell Report on March 8.

Directors of the California Stem Cell Agency Open Meeting

The meeting of the governing board of the California stem cell agency began at 9:10 a.m. PDT this morning with the roll call and pledge of allegiance.

Ethics to Eye Disease: Presentations This Morning at California Stem Cell Agency Meeting

Here are links to a couple of presentations on the agenda for today's meeting of the governing of the $3 billion California stem cell agency.

Ethics presentation by James Harrison, general counsel to the agenda: Topics include conflicts of interest and financial disclosure requirements.

Briefing on eye disease, clinical trial projects backed by the agency.

Read All About It! Gavel-to-gavel Coverage of Today's California's Stem Cell Agency Session, Researchers to Receive $44 Million

Check in right here all day-long on the California Stem Cell Report for all the news and information out of the meeting this morning of the governing board of the $3 billion California stem cell agency.

Directors are slated to give away $44 million for a variety of research projects, maybe more if two researchers are successful in overturning rejections of their proposals by the agency's reviewers.

Also on tap is examination of the agency's eye disease clinical portfolio, the first such thorough-going review. An ethics presentation is scheduled as well, dealing with public disclosure of  board member's financial interests and conflict-of-interest rules.

Going for the Gold: Pitches for $12.5 Million in Rejected Stem Cell Research Applications

Highlights

New scoring system

IOM team member appeal

New information on application

Olympic gold medalist, one of “America’s Top Doctors” and the head of the Scripps Institute’s stem cell program are lobbying the California stem cell agency this week to fund requests for $12.5 million in research grants. 

The two different grants have been rejected by the agency’s blue-ribbon reviewers, who meet behind closed doors and and make decisions without disclosing publicly their financial and professional interests. However, the proposals will come before a public meeting tomorrow of the governing board of the $3 billion agency for official ratification of reviewer actions.

Directors of the agency, officially known as the California Institute for Regenerative Medicine(CIRM), have been loath to override reviewers’ decisions, especially in the past couple of years. Plus this week's applications were considered under a new scoring system, which cuts off funding at a scientific score of 85. In the past, the agency has approved awards that were scored as low as 61.

Jeanne Loring, director of the Center for Regenerative Medicine at Scripps, wrote the board to seek funding for her $8 million application (TRAN1-08468) for a treatment involving Parkinson's disease. The proposal was scored at 70.

But first, here are details on the other application (TRAN1-08527). It seeks $4.5 million for research on a treatment for tendon and ligament injuries, something that the agency has not yet funded, according to the three letters supporting the application. The proposal was scored at 83, two points below the cut off. In the past, board members have noted that such small scoring definitions are statistically insignificant.

The identity of the applicant has not been released by the agency. Its practice is to withhold that information until the board acts, although there are notable exceptions to that policy.

Cato Laurencin, UConn photo

One of the letters of support came from Cato Laurencin, an eminent orthopedic surgeon at the University of Connecticut and who is listed as one of “America’s Top Doctors.” Laurencin also served on the Institute of Medicine’s team that conducted a $700,000 study of the California stem cell agency. 

In the letter dated yesterday, he said hundreds of thousands of persons suffer from tendon and ligament injuries. (All letters are clumped under the same URL.)  Laurencin wrote, 

"This seems to me like a marvelous opportunity to support an excellent study with tremendous potential clinical impact on patients in California and throughout the United States."

Jason Lezak, an Olympic swimmer with four gold medals, said in his letter that there is a "clear need" for legitimate research and treatment for such injuries, given the appeal of untested stem cell treatments attracting patients here and abroad.

 

A CIRM document shows that while the application had an overall score of 83, its median score was 85 with scoring ranging from 75 to 92. 

In her March 11 letter, Loring focused on "signicant new information" concerning her application that

Jeanne Loring, Scripps photo

was submitted Nov. 20 of last year. The proposal was not reviewed until Feb. 11.

Loring said, 

"Between November and February, we generated new information that was not available to the GWG(grant review group). Importantly, we also received guidance from the FDA that alleviates the major concerns of the reviewers."

Her nine-page letter itemized reviewer concerns and provided her responses. She wrote, 

"In summary, based on our new data, our DNA sequencing publication, the recent approvals of two of our quality control-focused CIRM grants, and feedback from our meeting with the FDA, we believe that we are ready to proceed on our pilot studies to inform our IND-enabling studies. Some of the GWG concerns conflict with the guidance given by the FDA, and had the GWG been aware of the feedback we had received from the FDA, many of their concerns would have been addressed."

Loring's scientific and median scores were identical: 70. Scoring ranged from 60 to 80. 

David Higgins
 Parkinson's Association photo

The San Diego-based Summit4StemCell group has strongly supported Loring's research and raised funds for it. Representatives from the group have attended a number of CIRM board meetings, laying out the urgency of their needs. One meeting last year became emotional and left some CIRM representatives uneasy and irritated. (See here and here.)

The 29-member CIRM board includes one patient advocate from the Parkinson's community, David Higgins of San Diego. 

Of the $1.9 billion that the agency has handed out, $44 million has gone for Parkinson's. The relatively meager rate of funding was a long a sore point for the first Parkinson's patient advocate on the CIRM board, Joan Samuelson, who has since left the board as her affliction advanced. 

Listen in on the $3 Billion California Stem Cell Agency; $44 Million Meeting Available on the Internet

People around the world will have a chance to follow every minute this week of the meeting of the governing board of the $3 billion stem cell agency, which is expected to give away $44 million to chase therapies for everything from cancer to Canavan disease.

The session in Millbrae near San Francisco International Airport will be available on the Internet and by phone, including display of the charts and presentations being used during the day-long session. The phone link is audio only and is available toll-free. Full directions for listening are available on the agenda. 

For those who want to comment live on Wednesday, they will have to be on the scene or at one of three remote locations, all of which are located in La Jolla. Specific addresses again are available on the agenda. 

In addition to the research awards, the board is scheduled to be briefed on the agency's ambitious clinical trial effort, which could be interesting. However, the agency has not posted any background material on the briefing as of this writing. Here is a link to what the agency has on its Web site concerning the clinical effort.

Also on the agenda is a closed-door evaluation of the agency's president, Randy Mills, who was hired in April 2014.

Update on California's Bob Klein: Former Chair of Stem Cell Agency at White House dinner, in Reno Apartment Construction Deal

Robert Klein, who is regarded by some as the father of California’s $3 billion stem cell research effort, surfaced in the news this week both in the White House and Reno.

Robert Klein, White House
news pool photo

The occasion in the White House was a state dinner last night honoring Canadian Prime Minister Justin Trudeau. The Reno event was approval of a $90 million bond issue to finance an apartment development in Nevada backed by Klein, who is a Palo Alto real estate developer and the first chairman of the California stem cell agency.

The Web site, thisisreno.com, said in a "sponsored post" March 8 about the bond financing:

"Robert Klein, the Co-Managing Partner of Sierra Summit LLC and President of Klein Financial Corporation, emphasized, “The project will bring high-quality architecture and a village design with the apartments developed in 12-, 18-, and 26-unit buildings, and courtyards, greenways, and recreational centers built into the project site plan.”

No news involving Klein emerged from the White House dinner, attended by about 200 persons, with the exception of his name on a list of guests.

Klein's stem cell visibility has diminished substantially since he left his post in 2011, replaced by the current chairman, Jonathan Thomas. Occasionally, Klein is mentioned in the media as promoting another bond issue for the stem cell agency that could total as much as $5 billion.

The agency subsists on money borrowed by the state (bonds), which roughly doubles the cost of the research because of interest expenses. The agency expects to run out of cash for new awards in 2020. It has no source of funding beyond that date, but is exploring possibilities.

California Stem Cell Researchers Expect $44 Million in Awards from the State Next Week

California's stem cell research agency next week is expected to hand out more than $44 million for attempts to find therapies for everything from cancer to diabetes.

Scheduled to be approved at the $3 billion agency's board meeting next Wednesday are nine applications, most of which are termed translational, meaning that they are attempting to move from basic research to a level where they might be suitable for clinical trials.

Two of the awards are more advanced, and are discussed in an item on the California Stem Cell Report yesterday. They total $7.4 million. Seven translational awards are up for action, totalling $36.8 million. All were approved earlier behind closed doors by the agency's reviewers.

An eighth application for $2.9 million to study a 2nd generation vaccine for the treatment of glioblastoma was also approved by reviewers. However, an agency document said board action is being deferred "to review material new information."  Asked whether questions had been raised "about the nature of the action by the grant review group," Kevin McCormack, senior director of communications, replied, 

"No, this has to do with information that has come to us that might affect the recommendation" of the review group.

Twenty-two applications seeking a total of $59 million were rejected.

None of the applicants was identified by the agency, which withholds that information until the board acts.

However, the agency posted more detail about the review process, scoring and voting than it has in the past. The review summaries and the additional material consumed 85 pages for all of the applications, including those rejected.

The review also marked the first use of new procedures that cut off awards on applications that received a scientific score of less than 85. In the past, awards were made for some applications that ranked in the 60s, including this one that was scored at 61.

In the past, some of the researchers whose applications have been rejected have appeared before the board to request that reviewer decisions be overturned. It was not clear whether that would occur under the new procedures.

Formal appeals are limited to demonstrable conflicts of interest and are pursued in private,  under the agency's rules. However, applicants are not told the names of persons who review their applications, making it difficult to determine whether conflicts exist.

California Stem Cell Agency to Award More Than $7 Million for Duchenne and 'Bubble Boy' Afflictions

Highlights
Capricor, UCSF win
Duchenne, "bubble boy" affliction targeted
Board linkage to recipient enterprises

The California stem cell agency is set next week to make two awards totaling $7.4 million to a Beverly Hills stem cell firm and to scientists at UC San Francisco for late stage research into therapies for rare diseases.

The largest award, $4.3 million, appears to be going to a team in San Francisco that has already received $3.9 million for its research. The lead scientists on that effort were Morton Cowan and Jennifer Puck. 

The latest award involves the "bubble boy" immunodeficiency disease. The agency's summary of the application review said that the research "could lead to a lasting cure" for that version of the affliction. 

The review said the treatment would modify a gene "to become normal by addition of a correct copy of the Artemis/DCLRE1C DNA repair gene (Art)." The goal of the grant is to complete nonclinical efficacy studies and set the stage for a clinical trial in 18 months.

Meeting behind closed doors earlier this year, the agency's blue-ribbon, out-of-state grant reviewers narrowly approved the application on 8-6-1 vote, meaning eight favored the award,  six thought the application needed improvement and one voted for denial. The governing board of the agency, formally known as the California Institute for Regenerative Medicine (CIRM), has a decade-long record of going along with its reviewers' positive funding decisions. Reviewers are not required to publicly disclose their economic or professional interests.

Also approved by reviewers was a $3.4 million award to Capricor, Inc., a firm that has already received $19.8 million from the agency to develop stem cell heart treatments, The $19.8 million came on top of earlier, related funding for research at Cedars-Sinai that hit $7 million. The lead scientist on those efforts was Eduardo Marban, who co-founded the firm with his wife, Linda. She is now president of the firm. He is chairman of the scientific advisory board.  

Capricor will add $2.3 million in matching funds to what CIRM provides to finance a clinical trial of the firm's treatment for Duchenne muscular dystrophy cardiomyopathy using a product called CAP-1002. The review summary said the treatment is "intended to stop fibrosis and potentially initiate regeneration following administration."

No therapies exist for treatment of cardiomyopathy for persons with Duchenne, according to the review summary.

The reviewers voted 12-1-0 to approve the award. 

Capricor is publicly traded. Its stock closed today at $2.18. Its 52-week high was $10.68 and its low was $1.88.

CIRM's governing board includes representatives from Cedars-Sinai and UC San Francisco. About 90 percent of the $1.9 billion awarded by CIRM has gone to enterprises with links to past or present board members.

CIRM does not disclose the names of award recipients until after the full board acts. The California Stem Cell Report identified the applicants on the basis of publicly available information. 

Ten Days in March: Is the $3 Billion California Stem Cell Agency Measuring Up?

Highlights

'Success metrics'

Next week's board meeting

Discouraging public attendance

But amply open in many ways

One of the more admirable aspects of the California stem cell agency’s plan for spending its last $900 million is its attention to careful measurement of the agency’s own performance.

The “success metrics” are tucked away at the end of the agency’s new, 47-page strategic plan. They lay out the criteria for determining how well each team at the agency is doing. The metrics range from the number of conflict of interest appeals to the number of clinical trials completed at Alpha clinics. Based on decades of experience with state agencies, the California Stem Cell Report can attest that such attention to performance is rare among state departments.

The agency's measurements also include the “number of board meeting documents posted with ten-day lead time.” Which is where the March 16 meeting of the governing board of the stem cell agency comes in.

On Saturday, the agency posted on its Web site the agenda for the meeting, a good 11 days ahead of the session in Millbrae, near San Francisco International Airport. The agency plans to give away millions of dollars, perhaps tens of millions. It will review the status of its ambitious and risky clinical trial program, which has seen a sharp upsurge in the last year or two. At least that is what can be deduced from the cryptic agenda items, the longest of which consists of only 26 words.

Total missing, as of this writing, are any documents supplying the details essential for understanding what the agency is actually doing.

The board meetings are the single most important public events of the agency. The agency professes to want to see greater public turnout at the sessions. But without adequate notice and some sort of meaningful information, the public, stem cell firms, scientists and patient advocates cannot make plans to attend the meetings even if they might have a deep impact on their lives.

On Feb. 9, Kevin McCormack wrote on the agency's blog about a CIRM meeting dealing with gene editing. He said,

“(Bioethicist) Alta Charo said this is not just a question for scientists, but something that could potentially affect everyone and so there is a real need to engage as many groups as possible in discussing it

"‘How and to what extent do you involve patient advocates, members of the disability rights community and social justice community – racial or economic or geographic.  This is why we need these broader conversations, so we include all perspectives as we attempt to draw up guidelines and rules and regulations.’”

Those sentiments pretty much apply to all that the agency does. It is spending $6 billion of California taxpayers’ money, including interest, on research that is yet to produce a commercial therapy, despite the facile promises of the ballot campaign that created it in 2004. It is financing experiments in areas that are new to medicine, some of which involve serious risk and ethical considerations.

All of which might seem to be issues that would engage many persons and enterprises. But the best way to discourage involvement by those not embedded in the agency is to withhold information until it is too late to respond. If interested parties don’t know what is going on, how can they offer suggestions and criticism, some of which might be useful and help the agency succeed in its endeavors? Not to mention helping to build support for continued funding beyond 2020, when the agency expects to run out of cash.

Additionally, the agency basically hides the schedule of its public meetings on its Web site. They are virtually invisible on the agency’s home page, buried at the bottom in teeny lettering under a heading of “about CIRM” -- one of 11 subjects such as “mission” and “history.”

In many ways, CIRM is more than amply open and transparent. Its board meetings are audiocast on the Internet and by phone. Its committee sessions are now available live online as well, an improvement that began during the last few months. Transcripts of the sessions are also available online, albeit sometimes months after the sessions.

The CIRM Web site is laden with a variety of material. The agency’s excellent blog, The Stem Cellar, produces daily reports that chronicle CIRM affairs as well as research developments elsewhere.  Interested persons can sign up for email alerts on various CIRM matters. Eventually, most of background information on board meeting agendas is posted online, although sometimes only a day or two ahead of the session.

Nonetheless, CIRM can and should do a better job of telling California what its governing board is up to and what the agency is thinking and doing. One key and long neglected tool is to provide more detailed information -- well in advance -- about the issues that come before the 29-member board that hands out the cash and establishes the priorities for one of the most ambitious stem cell programs in the world.

Champion of Stem Cell Research: Nancy Reagan Hailed by California Stem Cell Leader

The chairman of California’s $3 billion stem cell research effort yesterday weighed in with a tribute to Nancy Reagan and her support for human embryonic stem cell research.

Jonathan Thomas said,

“With the passing of former first lady Nancy Reagan the California Institute for Regenerative Medicine has lost a good friend and a champion of stem cell research. Mrs. Reagan was an advocate for stem cell research for many years and her voice was an important one in helping ensure the passage of Proposition 71. Her call to protect the ability of scientists to ‘pursue medical miracle possibilities’ echoed the feelings of millions of Americans looking to stem cell research for help in battling deadly diseases. We, and patients everywhere, were fortunate to have such a great champion for the work that we do.”

Nancy Reagan’s backing of hESC research began in the spring of 2004 with an unsuccessful effort to convince former President Bush to rescind his restrictions on federal funding of hESC research.

An Associated Press story said at the time,

"'It's hard to overstate or overestimate the power of her impassioned plea for the Bush administration to reform its stem cell policy,' said Daniel Perry, president of the Coalition for the Advancement of Medical Research. "She's given permission for very conservative, anti-abortion Republicans to disagree with Bush. It's a courageous stance against a president of her own party."

Newsweek magazine also carried a piece about her efforts.

Royalties and California Stem Cell Research: $1.1 Billion Promise Still to be Fulfilled

California’s 11-year-old stem cell research effort was born with the extravagant promise that it would generate something like  $1.1 billion in royalties that would flow into the Golden State’s coffers.

None of that bonanza has yet surfaced, but there is no doubt that scientific research generally has the potential to generate economic value for state entities. A case in point was news this morning in the Los Angeles Times that the sale of drug rights (intellectual property or IP) held by UCLA will generate “hundreds of millions of dollars.”

The story by Teresa Watanabe said the deal involved a prostate cancer drug developed at the campus. She reported,

“Royal Pharma, a New York-based pharmaceutical company, paid $1.14 billion for royalty rights to the drug known as Xtandi. It was the largest-ever technology transfer deal involving a University of California invention.”

 California’s $3 billion stem cell agency is not involved in the UCLA-Royal Pharma arrangement. However, the agency, known formally as the California Institute for Regenerative Medicine (CIRM), has acquired other bits and pieces of IP as the result of the $1.9 billion that it has given to researchers over the last decade.

So far the agency has not been able to turn that IP into cash largely because no therapies have reached the marketplace, although the agency has a number of clinical trials underway.

Back in 2005, the royalty promises made during the ballot campaign that created the stem cell agency came under fire as the result of actions by the man who headed the campaign, Robert Klein. He also served as the agency’s first chairman.

Bernadette Tansey, writing in the San Francisco Chronicle, reported,

“The billion dollars in royalties that voters were told could flow to the state if they passed California's $3 billion stem cell research funding initiative in 2004 may turn into an empty promise.”

Stuart Leavenworth, then editor of The Sacramento Bee’s editorial pages, wrote,

“In marketing this initiative, proponents said the state would receive not only miracle cures and reduced medical costs, but also up to $1.1 billion in royalties from new stem cell innovations.

“Now we are learning that this promise, at best, was misleading. At worst, it was a cynical ruse.”

The issue turned on whether tax-exempt bonds would be used to finance the agency, which depends solely on state borrowing. Federal tax laws restrict the use of such bonds. To date, however, no tax-exempt bonds have been used to support CIRM, according to last report.

The use of taxable bonds, however, raises the cost of borrowing and the cost of the research. Estimates in 2004 were that that the total cost of the agency would exceed $6 billion, including the interest on the borrowed $3 billion. No revised, upward estimate has been made public, if it exists.

The issue of the agency’s IP, its possible value and protection has surfaced only intermittently over the years. The most recent mention came last November in the agency’s plan for spending its last $900 million. (The agency expects to run out of cash for new awards in less than four years.)

The agency’s five-year plan said that it would “demand creation (from universities)  for the out-licensing of CIRM-funded technologies with a greater opportunity to achieve a financial return.” Aligned with that is a $75 million proposal to partner with specific enterprises and give them pick of the agency’s best research that does not currently have a partner. (See here and here.)

Relationships with universities can be touchy at the agency because its governing board includes top executives from virtually all of the major, academic stem cell research centers in California. Sometimes those board members can be protective of the interest of their institutions, which have received hundreds of millions of dollars in agency cash over the years.

For those who want to dig more deeply into CIRM’s IP policy, the regulations can be found here and here.