A Look at What Lies Ahead for the $5.5 Billion California Stem Cell Ballot Measure

Editor's note: This is an extended version of a piece by yours truly regarding the landscape of the ballot campaign for the initiative to refinance California's $3 billion stem cell agency. A shorter version appeared yesterday on Capitol Weekly, the well-regarded, online news service that deals with California governmental and political news. This version includes more on such things as campaign fundraising, justification for the agency and the overall political environment.

A $5.5 billion stem cell bond measure qualified yesterday for the November ballot, but the campaign to win voter approval is facing an array of hurdles that its supporters never envisioned last summer when they were formulating the initiative. 

Call it the Covid-19 crunch. The pressures include a $54 billion hole in the state budget, looming cuts involving schools and medical assistance for the poor, unemployment now standing at more than three million and predictions by the Federal Reserve that things could get worse. Even California’s famed Rosebowl is facing losses of up to $20 million. 

That is not to mention that the wealthy folks who support such things as stem cell research are also feeling a squeeze from Covid. These are the donors who are usually called upon to help finance what is predicted to be a $50 million campaign on behalf of the measure.

All in all, it is not an environment that would seem to support what some will argue is unnecessary spending. 

The initiative is largely aimed at saving the state stem cell agency from financial extinction. Formally known as the California Institute for Regenerative Medicine (CIRM), voters provided it with $3 billion in state bonds in 2004 to finance research and development of stem cell therapies. Today that cash flow is dribbling to an end. CIRM will begin shutting its doors next fall without a major financial infusion. 

Little noticed so far, however, is how the initiative will also expand the scope of the agency and allow CIRM to venture into arenas that some will argue are a bit remote from scientific research. 

Not unexpectedly, the campaign, Californians for Stem Cell Research, Treatment and Cures,” was pleased with placement of the initiative on the fall ballot. The campaign issued a news release quoting Robert Klein, a Palo Alto real estate developer and chairman of the campaign, as saying, “During the past decade, California has made incredibly thoughtful investments and significant progress along our journey to developing therapies and cures, for diseases and conditions like diabetes, age-related blindness, cancer,  epilepsy, Parkinson’s, Alzheimer’s, and heart disease.

He continued, “It is critical to California families that this vital therapy development pipeline continue to be funded. Our state has always been a leader in medical and scientific research and therapy development, ranking second in the world when evaluated as a nation. Continuing to fund that mission is essential to the health of our families while stimulating the economic recovery for California, with good paying jobs, created by this program.”

The news release also quoted Sandra Dillion, a clinical trial participant and cancer patient advocate. She said, “Since I was diagnosed with a rare form of blood cancer in 2006, there has been a tremendous amount of advancement in research and discovery that has allowed me to be here today, sharing my story, in large part due to the California Institute for Regenerative Medicine supporting the science that saved my life.

 “Without California’s investment in advancing stem cell research and cures, I would not have the same energized, healthy life that I have been able to once again experience.”

The Center for Genetics and Society in Berkeley, Ca., which opposed the 2004 initiative that created CIRM, offered a different perspective.  In response to a query, Marcy Darnovsky, executive director  of the group, told Capitol Weekly that the initiative “does little to ease the serious concerns about CIRM that have been voiced for years by the Center for Genetics and Society, other public interest advocates, and researchers, and echoed by several policy bodies. 

“It does nothing to address CIRM's built-in conflicts of interest, or its lack of legislative oversight -- despite it being an agency supported wholly by public funds. The new proposition makes some things worse; for example, it outsources critically important decisions about ethical standards to an unaccountable national committee. 

“While stem cell research is valuable, there are no longer federal limits on its funding, which was the justification in 2004 for asking California voters to allocate the first multi-billion-dollar pot of money. In the meantime, that campaign's shameless over-promising and hype set the stage for the hundreds of under-regulated commercial stem cell clinics now offering unapproved ‘treatments’ that have caused tumors and blindness.  

She continued, “Today, California faces an enormous budget deficit and proposals to slash high-priority social programs that benefit all of us. It remains to be seen whether voters will approve a new multi-billion-dollar measure for CIRM, instead of investing in healthcare, housing, jobs, education, and other pressing needs.”

CIRM declined to comment on the announcement that the measure had qualified for the ballot. The agency’s governing board is scheduled to discuss  the initiative at a meeting Friday and approve a contingency plan if it fails to pass. 

California is still only beginning to reckon with the economic impact of Covid crisis on services ranging from schools to health care for the poor.  Gov. Gavin Newsom has already announced a $54 billion shortfall in the budget. Lawmakers this week sent him a budget for the next 12 months that papers over the worst problems and assumes the federal government is likely to help out later this year, perhaps during the fall election season. 

If federal funding fails to surface, the fate of the ballot measure could become entangled in voter concern over public priorities. Some voters are likely to ask: Should scientists at well-endowed Stanford University, which is the No. 1 recipient of CIRM funding ($388 million in all), receive more millions while poor people throughout the state are squeezed still further on health care?

One CIRM director, Jeff Sheehy, who has served on its governing board since day one, recently raised scientific and public policy questions. In a May email to the California Stem Cell Report, he said, “I'm not sure that the board has a clear, coherent view of the scope of CIRM's research.  And I am not sure the board has a clear idea of what the scientific mission of CIRM should be in the event that new funding comes from the voters.

"I would note as an aside that CIRM has never submitted its scientific program, including all grants made and their impact, to a rigorous, independent scientific review.  In short, I don't think we really know at CIRM where we've been and where we want to go.  We have anecdotes…."(The ellipses are Sheehy’s.)

The multibillion dollar size of the measure -- $7.8 billion with interest payments on the bonds -- is only one financial issue for the initiative’s backers. In 2017, Klein estimated the cost of the campaign at about $50 million, but has more recently declined to update that figure. The 2004 campaign cost about $34 million. 

Paying for all the accoutrements of a campaign seeking the favor of 20 million voters -- TV ads, website, direct mail, etc. -- will require major campaign contributions at fa time when even the wealthy are feeling the Covid crunch. The financial markets, where much of the wealth of the well-to-do resides, are erratic and more than usually unpredictable. Even prior to Covid, an effort by CIRM to raise $200 million in private funding was unsuccessful. 

At the same time, biomedical companies are increasingly interested in stem cell product development, which they shied away from in 2004.  Just this spring, Gilead Sciences, Inc., of Foster City, Ca., bought a firm backed directly and indirectly by CIRM with $45 million. The purchase price was $4.9 billion, a deal that would have been unheard of in 2004. 

 The agency saw the deal as a validation of its judgment and work, a reason for Californians to vote to sustain CIRM’s operations. But others see the rising private sector investment as easing the need for additional funding from California taxpayers. 

The changing nature of the political scene on a national level could also come into play in the fall. In 2004, also a presidential election year, conservative and fundamentalist forces that might have launched a strong anti-stem cell campaign were more focused on re-electing George Bush. This year a strong California turn-out against President Trump could mean more support for the stem cell agency. Gone too are the Bush administration restrictions on federal funding of human embryonic stem cell research, a rallying cry in the 2004 campaign.  

Klein has said he has a poll that shows that 70 percent of Californians support stem cell research. But he has declined to provide a copy of the poll or provide the name of the firm that performed the work. 

 

One of the products that CIRM has supported successfully over the years is hope. Indeed, its new slogan in 2018 was “Something Better Than Hope.” It was emblazoned on the CIRM annual reports in 2018 and continues to appear on CIRM documents.

The agency has a flock of videos of patients appearing at its meetings over the last 15 years and asking for more research. It gives them hope, they say, during the sometimes tearful, emotional appeals. They are powerful presentations that are available on the Internet and are likely to generate support from many voters. 

To date, the agency is helping to support 63 clinical trials, a number that Klein and CIRM supporters would have scoffed at in the early days. The total cost of trials is high and even the $3 billion goes only so far. Clinical trials are the last and key stage before the Food and Drug Administration approves a stem cell treatment for widespread use. The 2004 campaign raised expectations that such treatments were just around the corner. So far, that has not proven to be the case. Nor has the agency yet generated a stem cell treatment that can be used widely.

Society’s experience with Covid-19, however, could generate a positive sentiment for more research aimed at treating the full array of afflictions that bedevil us. The campaign makes it clear on its home page that is the goal and promise of the stem cell initiative -- “to accelerate development of treatments and cures for life-threatening diseases and conditions that affect someone in nearly half of all families.

It is a “motherhood-and-apple pie” argument that is hard to disagree with. November 3 will tell us whether the voters of California do. 

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Media Coverage: Political and Research Implications of hESC Ruling

Here are some excerpts and links to interesting coverage of yesterday's federal court ruling on stem cell research.

Text of the judge's ruling from the Washington Post.

Wall Street Journal, reporters Laura Meckler, Gautam Naik and Brent Kendall on election year politics and more.

"It also could inject the divisive issue into election-year politics and spark discussion in Congress whether to try to nullify the decision by writing new legislation.... 

"The government is spending about $137 million on human embryonic stem cell research this year and is projected to spend about $126 million next year. It's unclear whether the judge's decision would affect currently funded projects. Stem-cell advocates were calling on the government to appeal the decision and seek to have the preliminary injunction nullified....

"A significant amount of stem-cell research will go forward thanks to private funding and the state of California's ambitious stem-cell initiative, which isn't affected by Judge Lamberth's ruling. The California group (CIRM) spends $250 million annually on stem-cell research, with some 30%-40% of the money directed to embryonic stem-cell research."

Los Angeles Times, reporters Karen Kaplan and Naom Levy, on legal view of ruling.

"UCLA law professor Russell Korobkin, an expert on stem cell legal issues, said the ruling was "a terrible decision."

“By considering all research part of an unbreakable continuum, the decision implies that the Dickey-Wicker Amendment has no limits, which is an unconvincing interpretation, Korobkin said. 'It suggests that by conducting research on an acorn a scientist would also be conducting research on an oak tree, because acorns come from oak trees,' he said.”

New York Times, reporter Gardiner Harris, on feeding stem cells and politics of the decision.

"'I have had to tell everyone in my lab that when they feed their cells tomorrow morning, they better use media that has not been funded by the federal government,' said Dr. George Q. Daley, director of the stem cell transplantation program at Children’s Hospital Boston, referring to food given cells. 'This ruling means an immediate disruption of dozens of labs doing this work since the Obama Administration made its order.'

“In his ruling, Chief Judge Royce C. Lamberth of the U.S. District Court for the District of Columbia wrote that his temporary injunction returns federal policy to the “status quo,” but few officials, scientists or lawyers in the case were sure Monday night what that meant. Dr. Daley was among those who said they believed that it meant that work funded under the new rules had to stop immediately; others said that it meant that the health institutes had to use Bush Administration rules to fund future grants....

“The ruling could prove politically tricky, since it returns to public attention the politically divisive issue of abortion and research politics. President Obama made support for the research a signature part of his campaign, and he over-turned the Bush Administration’s more restrictive policy in the first two months of his administration.

“Polls show that the public generally supports embryonic stem cell research, and Judge Lamberth’s ruling — while a surprising legal setback for one of the administration’s signature scientific policies — could prove politically beneficial for the administration by reminding votes of a popular decision.”

CIRM still open for business -- Ron Leuty, San Francisco Business Times, The Associated Press(AP story appeared in The Sacramento Bee, San Diego Union-Tribune and other papers)

Washington Post story, reporters Rob Stein and Spencer Hsu

"'This is devastating, absolutely devastating,' said Amy Comstock Rick, immediate past president of the Coalition for the Advancement of Medical Research, a group of patient organizations that has been lobbying for more federal funding.

"'We were really looking forward to research finally moving forward with the full backing of the NIH. We were really looking forward to the next chapter when human embryonic stem cells could really be explored for their full potential. This really sets us back,' Rick said. 'Every day we lose is another day lost for patients waiting for cures.'"

CBS News on ruling and “snowflake adoptions”

California Stem Cell Agency Deplores Ruling Nixing Fed hESC Research

A federal judge today put a temporary halt to federal funding of research involving human embryonic stem cells in a move that makes clear the importance of alternative funding sources such as the California stem cell agency.

Some had questioned the relevancy of the state's $3 billion research effort after the Obama administration restored cash for hESC grants. Critics said California was no longer needed because the feds were back in the game. But despite the ruling today, the state can proceed with its research because it is not constrained by the federal law cited in the court action.

Today's ruling is not a final decision in the case and is likely to be appealed. But it could mean that NIH funding in this controversial area will be stymied for some time, depending on the legal skills of its attorneys. Meanwhile, California will remain the largest source of hESC funding in the nation, although it has been moving into other areas as well. In fact, some have criticized the agency for not continuing to focus intensely on hESC research, which was the justification for spending $3 billion that was presented to voters in 2004.

In a statement, CIRM said it “deplored” the ruling, declaring that it was “immoral.” CIRM said its research would continue unabated, but noted that today's ruling will have a major negative impact elsewhere.

CIRM President Alan Trounson said,

“The decision is a deplorable brake on all stem cell research. Many discoveries with other cell types, notably the so-called reprogrammed iPS cells, would not happen without ongoing research in human embryonic stem cells. This decision leaves CIRM as the most significant source of funding for human embryonic stem cells in the U.S.”

CIRM Chairman Robert Klein said,

“It would be immoral to unnecessarily delay the critical medical research that is vital for human embryonic stem cell therapies to reach patients suffering from chronic disease and injury. We must remember that the microscopic cells used for this research would otherwise be thrown away by in vitro fertilization clinics, by couples that had finished their family planning.”

CIRM's statement said,

“Under this decision, even research using on the hESC lines approved by President George W. Bush will be halted.

“However, CIRM will continue to fund research on all hESC lines recognized by the Bush administration as well as newer lines approved by the National Institutes of Health during the past eight months. This points to the importance of CIRM’s California model of sustained funding in this field that promises to create thousands of jobs in California as well as improved therapies for patients in Californian and around the world.

“With federal funding uncertain, CIRM will continue providing a stable source of funding for those researchers who have committed their labs to pursuing new therapies based on work with human embryonic stem cells. Through this ongoing funding, CIRM expects to be able to continue to leverage California’s investment through its Collaborative Funding Partners, grant-making agencies in seven countries and Maryland and New York.”

The statement continued,

“CIRM will also continue to fund research with other types of stem cells, particularly progenitor cells that can create many cell types and other pluripotent cells such as induced Pluripotent Stem cells (iPS cells). However, it is important to note that work in all these cells types requires insights gained through work with hESCs to proceed with maximum efficiency. hESC research informs the entire field.”

Little Noticed Stem Cell News

In the wake of the president's job speech last week, up popped this comment from writer Matthew Yglesias , author of "Heads in the Sands."

"I can’t help but think that the American economy has performed sluggishly ever since George W. Bush gave a speech to Congress successfully calling for a ban on human-animal hybrids. Clearly we need to deregulate this vital sector and win the future with chimera stimulus."

A tip of the hat to Pete Shanks at the Center for Genetics and Society in Berkeley for flagging the item, which is, we think, tongue in cheek.

Text of BioWorld Article on CIRM Loan Program

Here is the text of a piece on the CIRM biotech loan proposal that ran Aug. 7, 2008, in BioWorld Perspectives.

Red Flags Remain in Plan to Help Biotechs

By David Jensen
BioWorld Perspectives Contributing Writer

Editor's note: David Jensen is the publisher of the California Stem Cell Report and has written more than 1,700 items involving CIRM since 2005.

California wants to help biotech enterprises navigate through the industry's famed financial "valley of death" with a $500 million loan program.

It comes at a good time for the bio biz. Money is tight, but in the Golden State, one agency has $3 billion to spread around for research and clinical trials. The cash comes from the California Institute for Regenerative Medicine (CIRM), the state's unprecedented stem cell research funding organization.

It was created less than four years ago under Proposition 71, a California ballot initiative that surfaced in reaction to President George W. Bush's restrictions on human embryonic stem cell research. Using funds from California state bonds, CIRM has already handed out more than $554 million in grants. Today, the agency is the largest source in the world for funding for human embryonic stem cell research.

Biotech Loans and Controversy

But CIRM is not without controversy. Recently some disgruntled grant applicants have complained of unfairness in reviews. Some in the biotech industry object to CIRM's rules for sharing the wealth from any state-financed therapies. And there is at least one catch to CIRM's plans to loan $500 million to biotech firms. Recipients of the state's bounty are going to need a California connection — probably a fairly strong one — since state law says CIRM's cash must be spent generally in California. But it probably wouldn't be too hard for an enterprising business to accommodate those needs if it wants, let's say, a $25 million loan.

Policies for the biotech loan program are likely to get the go-ahead next week from CIRM's board of directors. The main reason for its expected approval is CIRM Chairman Robert Klein, a multimillionaire real estate investment banker who has served in his state stem cell role without pay since 2004. His real estate background has taught him the value of financial leverage, which is exactly what the loan program is about.

The loan effort is Klein's brainchild, conceived as a way to not only help biotech enterprises (both for-profit and nonprofit), but also to extend the life of the state's stem cell effort. It is limited by law to only 10 years of state bond funding and currently has no other source of income.

According to a PricewaterhouseCoopers report commissioned by the agency, Klein's plan could generate at least a $100 million profit, although state government delicately avoids the use of the word "profit." The earnings then could be channeled back into more grants and loans. With expectations that default rates could soar as high as 50 percent in some cases, that seems to be almost too good to be true. There are skeptics, but not many public ones.

Firms Found in the 'Valley of Death'

The reason for high defaults? The loan program would target firms that otherwise could not find financing because they are wallowing in the "valley of death," a loose term that describes the financially difficult period between grant and "angel" financing and funding from venture capitalists.

PricewaterhouseCoopers performed an analysis of the proposal based on assumptions provided by the agency. They included a $500 million portfolio, disbursed over a seven-year period, loans up to $5 million, interest rates ranging from prime plus 2 percent to 4 percent with possible warrant coverage from 10 percent to 100 percent. Pricewaterhouse concluded, "Total assets of the program could increase from $500 million to between $600 million and $1 billion over 10 years."

Klein, however, has indicated that changes are likely in those assumptions. During a May meeting of CIRM's Finance Subcommittee, he indicated larger loans should be given and other changes be made to improve the proposal.

"It may take a very significantly sized loan, even on a matching fund basis, for companies to get through the preclinical, Phase I, and Phase II and Phase IIb stage before private capital would be prepared to step in," he said.

Klein said he plans to bring in Ed Penhoet, vice chairman of CIRM, co-founder of Chiron Corp. and currently a venture capitalist, to beef up his call for hefty loans.

Reception of the loan program by industry has generally been favorable. But some have raised questions. Menlo Park, Calif.-based Geron Corp., for example, said the loan sizes initially assumed in the Pricewaterhouse analysis were too small.

Red Flags in an Innovative Plan

Other hurdles remain as well. The Consumer Watchdog group of Santa Monica, Calif., has expressed concern about potential conflicts of interest. The nonprofit advocacy organization cited the possible use of delegated underwriting. CIRM Director Duane Roth, as well, has raised a flag about potential conflicts involving underwriters. Klein had suggested the use of underwriters because of the small size of the CIRM staff (between 30 and 40 persons) and its lack of lending expertise.

At one point, Klein cited Fannie Mae as an example of how underwriting could be used with biotech loans. But given the recent financial news about the Federal National Mortgage Association, it seems unlikely he will mention that enterprise again.

CIRM's biotech loan plan seems innovative, filling an important need in the biotech industry. The plan, however, does involve a substantial risk of public funds that has not been fully explained in a straightforward manner. Given today's difficult economic times and unease about aggressive lending practices, a clear explanation is certainly in order. The public, California lawmakers and industry should understand how it is possible that CIRM can turn a profit with default rates as high as 50 percent and the risks involved.

CIRM is a young government department and should move with caution in order to maintain public trust. Major failures in a biotech loan program could damage CIRM's credibility and cast a pall over its other important activities, including grants, ethical research standards and intellectual property policies.

Notes:
Here are links to more information about the biotech proposal.
The California Stem Cell Report (search on the label "biotech loans"):
http://californiastemcellreport.blogspot.com
The California Institute for Regenerative Medicine:
www.cirm.ca.gov
PricewaterhouseCoopers report (in three parts):
Phase I (loan financial model): www.cirm.ca.gov/meetings/pdf/2008/050608_item_3a.pdf
Phase II – Gap Analysis, Capital Provider Feedback and Financial Model: www.cirm.ca.gov/meetings/pdf/2008/050608_item_3b.pdf
Phase III – Loan model scenarios: www.cirm.ca.gov/meetings/pdf/2008/050608_item_3c.pdf
Transcripts of the Biotech Loan Task Force: www.cirm.ca.gov/transcripts/default.asp
Agendas of the Biotech Loan Task Force: www.cirm.ca.gov/meetings/2008/default.asp
The agendas have links to multiple documents dealing with the plan.

CIRM Directors To Take Crack at Budget and Stem Cell Legislation

Next week, the $3 billion California stem cell agency will air for the first time the proposed spending plan for its upcoming fiscal year, which begins only 11 days following the budget session.

A draft of the proposed budget has not yet been posted on the agency's website for next Thursday's meeting of the Finance Subcommittee of CIRM's directors. The panel has also scheduled an informational presentation on the proposed $500 million biotech loan program, including discussion of "portfolio policies" and use of consultants. Background information on that presentation is also not yet available.

In another meeting next week, the directors' Legislative Subcommittee is scheduled on Friday to consider state legislation aimed at ensuring affordable access to CIRM-financed therapies. That measure, SB1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Apple Valley, has passed the state Senate and is now before the Assembly Health Committee.

The bill would also require an outside study of CIRM to completed by about this time next year, with recommendations for changes in the agency's structure and procedures.

CIRM has not yet taken a position on the bill, but has opposed similar legislation in the past.

Also up for consideration by CIRM directors is other state legislation (AB2381) aimed at compelling CIRM to follow through on a Prop. 71 requirement to give preferential treatment to California businesses. The bill by Assemblyman Gene Mullin, D-San Mateo, has passed the Assembly and is scheduled to be heard June 25 in the Senate Health Committee, chaired by Kuehl.

CIRM is moving on its own to deal with legislative concerns about failure to comply with Prop. 71, but CIRM's proposal seems to leave the door open to more competition from businesses from out-of-state than Mullin's measure.

Other legislation scheduled to be considered by CIRM directors is AB2663 by Assemblyman Mervyn Dymally, D-Compton, and AB2296, another Mullin bill. The Dymally measure, now in the Assembly Health Committee, would provide for Medi-Cal coverage of stem cell clinical trial expenses, under certain conditions. Mullin's 2296, which passed the Assembly 76-0 and is now before the Senate Judiciary Committee, seeks to deter what its backers believe is an alarming increase in attacks on scientists who use animals in research. The measure is sponsored by the University of California.

CIRM has not posted any proposed positions or analysis of any of the measures. But you can find the latest legislative staff analysis on the bills on the following links: SB1565, AB2381, AB2663, AB2296.

The CIRM committee has also scheduled a "consideration of status" of federal stem cell legislation, including the stem cell bill vetoed by President Bush nearly a year ago.

The main meeting locations of both CIRM committees is San Francisco, but remote teleconference locations are available. For the legislative group, they include Sacramento, Irvine and Elk Grove. For the finance group, they include Pleasanton, Irvine, Berkeley and Carlsbad. The specific addresses can be found via the agenda links in the second and third paragraphs of this item.

'Less Than a Drop in the Bucket' -- Dueling Perspectives on California's First Stem Cell Royalty Check

California is counting its first royalties from a 13-year-old effort to develop stem cell cures and has declared that it hopes that the check will be the first in a flood of payments.

Others, however, warn of the dangers of over-excitement about the $190,345.87 payment from the City of Hope, saying that it is "less than a drop in the bucket" compared to the cost of the $3 billion California Institute for Regenerative Medicine or CIRM, as the state stem cell agency is formally known.

Here is a longer look at the two perspectives in the wake of Monday's royalty report.

John McCain, Washington Times photo

 The royalties were generated from a $5.2 million award in 2012 to the City of Hope for research involving a potential therapy for glioblastoma, one of the deadliest forms of brain cancer and the type afflicting U.S. Sen. John McCain. 

"A little piece of history" is how Kevin McCormack, senior director for communications for the  stem cell agency, described the royalty in an email. He also wrote on the agency's blog,

"It’s the first of what we hope will be many such checks, helping repay, not just the investment the state made in the field, but also the trust the voters of California showed when they created CIRM."

McCormack continued,

"Maria Millan, CIRM’s President & CEO, says the amount of the payment is not the most significant part of this milestone – after all CIRM has invested more than $2.5 billion in stem cell research since 2004. She says the fact that we are starting to see a return on the investment is important and reflects some of the many benefits CIRM brings to the state."

Asked for comment on the payment, John M. Simpson of Consumer Watchdog in Santa Monica, Ca., who was deeply involved in the development of the agency's initial intellectual property rules, said,

“Once again it’s clear that Proposition 71 (the ballot initiative that created the agency) was oversold by its sponsors. Despite campaign hype, it’s only now that we are seeing the first royalty payment and a rather modest one at that."

Bernard Munos

Bernard Munos, a senior fellow at FasterCures. a think tank aimed at speeding medical research, elaborated at more length in his response to a query by the California Stem Cell Report. He said,

"The $200,000 check from City of Hope should be acknowledged, but it only represents 0.02% of the $1.1 billion in royalties that were promised to California taxpayers -- and does not even cover the annual salary of CIRM’s part-time vice chairman.

"It is also unclear how the licensing (by the City of Hope) of a discovery to a New York-based company, Mustang Bio, Inc., will generate jobs and investment in California, as proponents of CIRM originally promised voters. 

"The world has changed since 2003 when George W. Bush severely restricted government-funded research on embryonic stem cells. The Obama administration lifted those restrictions, and regenerative medicine has diversified into many lines of research that have taken the field well beyond the embryonic vs. adult stem cell debate of the early days, which gave CIRM its initial impetus. Looking ahead, it is unclear whether CIRM still has a role to play. 

"Regenerative medicine offers enormous promises, and Californians may indeed want to leverage that opportunity by supplementing federal funding with their own. We have proposed a way to do this, as an alternative to developing plans to extend CIRM with another $5 billion in California bonds, to be paid out of the state’s general fund. 

"Whenever a multi-billion dollar fund is created, it tends to attract all kinds of people who want a piece of it. Unless strong governance is in place with clear rules on how the money must be disbursed, some of it is likely to fund projects that don't get the scrutiny they should, or even lie outside the organization's remit. Inadequate governance has been a problem at CIRM, as documented by reports from the Institute of Medicine -- now the National Academy of Medicine -- and others. Before consenting to an extension of CIRM's mandate, Californians should look at the returns they have gotten, and are likely to get (or not) from CIRM's past investments, and should demand an independent assessment of whether these investments are consistent with what they were promised and with CIRM's mission."

Marcy Darnovsky, FIXED photo

Marcy Darnovsky, executive director of the Center for Genetics and Society, in Berkeley, Ca., said in her email,

"Many Californians voted to establish CIRM because they believed the promises that its backers were making: that we'd soon see revolutionary medical breakthroughs, that our state would get back a billion dollars or more in royalties, that the agency would be run by an 'independent' board. Almost a decade and a half later, none of that has come to pass. 

"The rules and regulations about royalty returns to California are confusing and unclear, and need to be made far more transparent. But it's hard not to ask whether this first royalty payment is anything other than theater, meant to assuage and allure voters now that CIRM is talking about another ballot measure for $5 billion more from the public purse.

"The royalty check from City of Hope is less than a drop in the bucket. It's almost as if you loaned someone $3000 (at your own expense) because they promised to do some good work and pay you back $1000. Years later, they haven’t finished the work but they are offering you twenty cents instead of $1000, and asking for thousands more."

The debate over what Millan has called the "value proposition" of the agency's work is likely to intensify over the next two years. CIRM expects to run out of cash within that period and is pinning its hopes for survival on a proposed $5 billion ballot initiative on the November 2020 ballot -- a campaign that should excite some considerable interest if it is not heavily overshadowed by the presidential election that year.

NY Times: CIRM Moves Away From hESC

The New York Times today reported that the California stem cell agency has made a “tacit acknowledgment that the promise of human embryonic stem cells is still far in the future.”

Reporter Andrew Pollack wrote that only 4 of the 14 disease team projects approved by CIRM today involve embryonic stem cells. He said,

"The others will use so-called adult stem cells or conventional drugs intended to kill cancer stem cells, which are thought to give rise to tumors."

Pollack continued,

“The grants thus represent a departure from the program’s original mission. California voters approved the 10-year, $3 billion effort in 2004 largely to get around restrictions on embryonic stem cell research imposed by the administration of President George W. Bush.”

Pollack asked CIRM Chairman Robert Klein about the emphasis on non-hESC projects in the disease team round at news conference today. Klein said that the commitment to voters was to “pursue the very best cell type for each disease.”

Nature magazine also pointed out today that the disease team round involved few grants using hESC.

CIRM IP Legislation Faces Tall Hurdle

The following – written by yours truly -- appeared today in The Sacramento Bee as an op-ed piece. We will bring you more details of CIRM's current legislative efforts on Monday.

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Nearly three years ago, California voters created a unique and nearly autonomous agency that set the state on a $3 billion foray into embryonic stem cell research. Under the terms of Proposition 71, voters told the new California Institute for Regenerative Medicine to hand out $300 million annually in hopes that the grants would lead to cures for everything from diabetes to cancer.

Voters also told legislators not to mess with the institute at least for three years. Now that time is nearly up. And two powerful legislators are mounting the first effort -- under the terms of Proposition 71 -- to intervene in the institute's affairs.

The stakes are enormous and involve potentially billions of dollars of profits from stem cell therapies and cures.

The legislation was introduced last month by the chair of the Senate Health Committee, Sheila Kuehl, D-Santa Monica, and the Republican caucus leader in the Senate, George Runner of Antelope Valley. Their Senate Bill 771 is aimed at ensuring that California receives a healthy return on its investment and that state-funded cures are affordable and accessible.

But the senators face an extraordinary obstacle. Under Proposition 71, their legislation requires not just a majority vote to pass -- not just a supermajority vote (two-thirds) -- but a super, supermajority vote of 70 percent. That means 13 senators can kill the bill.

California's biotech industry and the institute are probably already compiling a list of their 13 best friends in the Senate. The state's leading biomedical organization, the California Healthcare Institute, is unhappy with the stem cell institute's intellectual property rules for sharing the wealth, declaring that they provide "a substantial disincentive" for creating commercial cures.

The rules determine who owns the results of the state-funded research, in other words, the intellectual property. They also determine how the intellectual property may be used and who, including the state, will receive royalties and under what conditions.

The California Healthcare Institute has not taken a position on Kuehl's bill but has indicated that it does not want to be hamstrung.

Runner and Kuehl, however, have an unlikely source of support. That's the legacy of the less-than-adroit legislative maneuvers by California stem cell Chairman Robert Klein. Much as President Bush's decision to limit funding for stem cell research spawned Proposition 71, Klein's actions ironically have fostered an environment conducive to the Kuehl bill's success.

Klein not only irritated some lawmakers, but some members of the stem cell institute's Oversight Committee as well. They were not pleased by his broadsides, such as denouncing the former chair of the Senate Health Committee, Deborah Ortiz, D-Sacramento, as an "ongoing threat." That message was delivered last year in a widely disseminated e-mail to patient groups via Klein's nonprofit advocacy group, Americans for Stem Cell Therapies and Cures.

The stem cell institute has attempted to strengthen its legislative ties. It took the unusual step, for a state agency, of hiring a private lobbyist, the well-connected Nielsen, Merksamer, Parrinello, Mueller & Naylor for $4,100 a month. More recently, the institute reached out to lawmakers and legislative staff, sending delegations to Sacramento twice last month, including Zach Hall, the institute's president, and Ed Penhoet, vice chair of the Oversight Committee and head of its intellectual property task force.

Kuehl has a tall hurdle to clear -- the 70 percent vote, not to mention the governor. She is stepping into a complex arena -- intellectual property -- where little unanimity exists, as the institute has discovered. But even if the bill fails, it will help to provide broader input on policies about intellectual property, developed during sparsely attended hearings. The measure additionally will serve as an important test of the institute's openness and political savvy.

While the agency is uniquely independent, California lawmakers are capable of creating much mischief when they feel their constituencies have been slighted. And that is mischief that the institute should avoid, so it can focus on its primary mission, as the institute proclaims, "turning stem cells into cures."

Monty Python, $3 billion and Stem Cells in the Golden State

Inquisition scene from Monty Python, photo CIRM/Daily Mail

The headline today from California was nearly irresistible:

"The Spanish Inquisition and a tale of two stem cell agencies"

Not only that, but the headline appeared over an article involving Monty Python, the $3 billion California stem cell agency and the lesser,  $38 million United Kingdom's Regenerative Medicine Platform(UKRMP). 

The "Inquisition" article ran on the California agency's blog. The author was Kevin McCormack, senior director of communications for the California Institute for Regenerative Medicine(CIRM), as the agency is formally known. 

His topic? How the UK and California efforts have performed, according to an article by Stanford's Irv Weissman and Fiona Watt of King's College London, who is a member of the CIRM scientific advisory board, currently "on hold," according to McCormack.  The Watt-Weissman piece was recently published and buried behind a paywall in Cell Stem Cell.

McCormack noted that the article cited location and politics as important in both operations. He wrote, 

"CIRM was created by the voters of California in 2004, largely in response to President George W. Bush’s restrictions on the use of federal funds for embryonic stem cell research. UKRMP, in contrast was created by the UK government in 2013 and designed to help strengthen the UK’s translational research sector....

"Inevitably the two agencies took very different approaches to funding, shaped in part by the circumstances of their birth – one as a largely independent state agency, the other created as a tool of national government.

"CIRM, by virtue of its much larger funding was able to create world-class research facilities, attract top scientists to California and train a whole new generation of scientists. It has also been able to help some of the most promising projects get into clinical trials. UKRMP has used its more limited funding to create research hubs, focusing on areas such as cell behavior, differentiation and manufacturing, and safety and effectiveness. Those hubs are encouraged to work collaboratively, sharing their expertise and best practices."

Irv Weissman, photo wapiti-waters

Weissman and Watt said it was "not unexpected" that CIRM still has not produced a therapy for widespread use. They cited the sometimes decades-long time frame for transforming basic research into a therapy.

Which is where Monty Python comes in, said McCormack. The two scientists picked up a famous line from the British comedy series:

“Nobody expects the Spanish Inquisition – because our chief weapon is surprise.”

Fiona Watt, photo Watt Lab

McCormack wrote,

"They use that to highlight the surprises and uncertainty that stem cell research has gone through in the more than ten years since CIRM was created. They point out that a whole category of cells, induced pluripotent stem (iPS) cells, didn’t exist until 2006; and that few would have predicted the use of gene/stem cell therapy combinations. The recent development of the CRISPR/Cas9 gene-editing technology shows the field is progressing at a rate and in directions that are hard to predict; a reminder that that researchers and funding agencies should continue to expect the unexpected."

Prop. 14 News Coverage: Los Angeles Times and Politico Take a Crack at the Stem Cell Measure

A $5.5 billion ballot measure to save the California stem cell agency from financial extinction popped up in coverage this week in the Los Angeles Times and Politico, a national political and government news service. 

Both pieces raised questions about the agency and its history, not to mention whether it fits with California's current government priorities.

The proposal is Proposition 14. It would provide the billions to the agency,  expanding its scope significantly into such areas as mental health and therapy delivery that are not necessarily related to stem cells. 

In his piece, George Skelton, a longtime political columnist for the Times, the largest circulation newspaper in the state, noted that the agency was funded in 2004 with $3 billion, which is now running out. Skelton wrote, 

"That’s a ton of money for a little-noticed agency that provides a questionable state service. But many of the research projects have been very worthwhile." 

In the article, the Proposition 14 campaign, headed by Palo Alto developer Robert Klein, also continued its pattern of making exaggerated or misleading claims.  

"If we don’t continue the state funding, lots of facilities would have to close their doors,” says Kendall Klingler, the Proposition 14 spokeswoman....

"'We have more than 90 stem cell trials underway,' she says.

"The agency does have a record of some success: funding research that has led to treatments approved by the Food and Drug Administration (FDA) for blood and bone marrow cancers, for example."

Regarding the number of clinical trials funded by the research program, the agency itself only claims 64. The additional 30 or so trials are not funded by the California Institute for Regenerative Medicine (CIRM), as the agency is officially known. They utilize a piece of CIRM-financed research, however tiny, someplace along the way. And not necessarily a significant piece. 

The FDA treatments mentioned are not stem cell treatments, which is what was promised by the 2004 campaign. The agency has not funded any research that has resulted in a stem cell therapy that is available to the general public. 

And it is simply not accurate to say that "lots" of stem cell facilities partially financed with CIRM cash will be closing. All of them are occupied and fully in use. The recipients of the facilities grants, such as Stanford and UC San Francisco, are exceedingly unlikely to close the buildings.

Skelton concluded that CIRM has "failed to live up to its original hype." He said, 

"It was aloof to Sacramento, and not subject to oversight by the Legislature and governor. There’s been a lack of transparency.

"There was also an odor of interest conflicts among agency board members who seemed to steer grants toward their own institutions, even though they recused themselves from voting."

(In the interest of full disclosure, I worked for Skelton in the Capitol bureau of United Press International in the 1970s when he was bureau chief there.)

Over at Politico, Victoria Colliver wrote,  

"It's not clear that the Yes on 14 campaign's $15 million, even with a campaign that features actor Seth Rogen as “Stemmy the Stem Cell," will get the job done.

"'We’re running against Covid-19. That’s our real opposition,” said Robert Klein, the wealthy real estate investor and attorney who authored both measures and is the main funder of Prop. 14, along with Dagmar Dolby, the widow of inventor and sound engineer Ray Dolby.

"The differences between 2004 and 2020 are stark.

"Back then, Klein and other proponents had a ready-made argument by pointing to President W. Bush's prohibition on federal funding for embryonic stem-cell research, a stance supported by the religious right. In the nation's biotech capital — with an electorate dominated by Democrats and independent voters that support abortion rights — stem-cell backers made the case that California needed to step in to keep research alive.

"Many of the promises made 16 years ago, including its projections in royalties and state revenues from new treatments, have not borne out. Funding from the agency has supported more than 60 clinical trials, but CIRM has yet to fund a single stem-cell therapy approved by the U.S. Food and Drug Administration for widespread use."