"Totally Baseless" Redux

Don't ever say that the California Stem Cell Report has lost its institutional memory. We do recall, in fact, that we engaged in a bit of "totally baseless speculation" on July 30.

As we warned our readers, our maunderings might lack merit. And so they did. No action that we know of was taken last week on selection of a permanent president for the agency.

We are still wondering about the current role of Spencer Stuart, the executive search firm that was hired to find the new nabob. Spencer Stuart's contract expired May 31. It is now Day 21 since we asked CIRM whether Spencer Stuart is still on the job. No response yet.

The Retroactive $378,000 Edelman PR Contract

The California stem cell agency on Friday is likely to approve a $378,000 annual public relations contract with Edelman, the world's largest independent PR firm.

Going rates for help at Edelman range from $450 an hour for Gail Becker, president of the Edelman's western region, to $70 an hour for unidentified interns. Adam Silber, an Edelman vice president who has been listed as a contact on the CIRM website, goes for $240 an hour.

Compare that to the $43 hourly rate for Nicole Pagano, who is a state government employee and the lead contact at CIRM since April. She and Silber appeared on the scene about the same time.

Of course, Pagano's $90,000 annual salary as senior communications specialist does not include the cost of fringe benefits or a profit, both of which are presumably included in Edelman's rates.

Edelman's responsibilities seem fairly routine, but CIRM seems to be still struggling with making its PR work routine, even with Edelman's help during the last four months. A well-run organization performs most of its work in a routine fashion. If there are major hoohas over regular tasks, an organization is going to be hard-pressed to deal with more difficult issues.

The scope of Edelman's work includes preparing media kits, maintaining contact lists, prepping CIRM officials on media interviews, writing stem cell research backgrounders, dealing with the web site and so forth.

Oddly, Edelman's work does not seem to involve much specifically with radio and TV, which is where most of the public gets its news. In fact, the words "radio" and "television" or "TV" are not even mentioned in the Edelman "scope" document although letters to the editor and editorials are specifically cited. Attention to TV and radio is even more important, given the relative novelty of stem cell issues to the bulk of the public. Some polls show favorable opinion concerning stem cell research, but you can bet most persons would have difficulty describing a stem cell or potential benefits of research. The next few years offer a prime opportunity to shape public opinion when it is most malleable -- when an issue is relatively new and beliefs have not been locked down.

The Edelman contract does not include any Web site construction expenses, although it is the project manager for the site redesign, nor does it include major printing costs. Media kits, FAQs, etc., will have to be printed at additional cost in addition to posting on the CIRM web site.

Approval of the contract by the Oversight Committee will formalize a relationship with Edelman that began in April following an unannounced selection process for PR firms. Losing out in the process were Weber Shandwick Worldwide and Burston-Marsteller.

Earlier Jeff Sheehy, a communications specialist at UC San Francisco who serves on the oversight board, said the size of the Edelman contract was "appalling." He questioned whether the institute was getting anything for its money.

CIRM is requiring weekly reports from Edelman on its accomplishments. But filing paper work is no substitute for diligent oversight and direction. It remains to be seen whether Edelman can produce a record that is better than its first four months as the stem cell agency's PR firm.

Talent, Mumbo-Jumbo and $536,000 Salaries

Salaries are once again a subject of interest at the California stem cell agency, which is trying to put together a rational pay structure for its employees from scientists to clerks.

This is no management mumbo-jumbo matter. If the agency is to attract the talent it needs, it must be willing to put together compensation packages that are at least somewhat comparable to the private sector. Otherwise it could find itself burdened with mediocrities who will linger for years before they ultimately leave, if ever.

The current salary range under consideration runs from $40,000 to $536,000, based on work performed by Alexandra Campe Degg and Dee DiPrieto. Degg works for UC San Francisco in human services but CIRM contracted with the campus for her as its interim human resources officer. DiPrieto is a consultant recommended by Spencer Stuart, the executive search firm hired by CIRM to find a permanent president.

Degg produced a proposal with 10 salary levels. Under it, the chief human resources officer would have a salary range of $78,100 to $140,600. The general counsel would range from $152,500 to $274,500.

DiPrieto performed an initial salary survey with the promise of more information to come in August for the agency's Governance Committee. The survey deals only with salaries and not total compensation or compensation costs, which are significantly larger than salaries.

Depending on their provisions, fringe benefits and related matters can add 33 percent or more to the cost of an employee – beyond his or her salary.

Total compensation is also another matter. Earlier this year, the agency cited salaries at the University of California as a guideline for CIRM. UC is ostensibly a reasonable organization that does not engage in Enron-like compensation deals.

However, when one looks deeper, the UC salary levels cited by CIRM can be misleading. Actual compensation for some positions can run substantially higher than nominal salaries. For example, some years back the highest-earning UC employee had about a $1 million annual paycheck. He was the football coach at UCLA. Last fall, the Wall Street Journal mentioned the $1.2 million salary and bonuses of an ophthalmologist in 1997, also at UCLA. He left the next year to earn more on his own.

When Zach Hall was appointed as interim president of CIRM earlier this year, some critics objected to his $389,000 salary as well as to proposals to pay other top employees in a similar fashion.

We are not critical of Hall's salary or the pay scales developed by Degg or, for that matter, the compensation of the football coach and ophthalmologist. Talent costs money, and the stem cell agency needs as much talent as possible. One can argue about whether any football coach should be paid more than a kindergarten teacher, but that is a subject for another blog.

The stem cell agency will have to live with its salary scale for many years. They are devils to change, once in place. The agency should be forthright about its compensation rationale and information as well as bonus or incentive plans. If side deals are being cut, they should be on the public table, even if they are not strictly CIRM funded.

Salaries are fat targets for critics. Making it all public and accessible is not only good public policy but one way to avoid accusations of back room deals.

Totally Baseless Speculation

We still have not heard from the California stem cell agency about whether Spencer Stuart, the executive search firm whose contract expired two months ago, is still looking for a permanent president for CIRM.

Our request for this routine bit of information is now 13 days old. But there is other news on the presidential front, whose office was expected to be filled by June ("Looking for a New CEO" July 20).

The CIRM search committee has scheduled a meeting for Monday. The public agenda, as usual, gives no indication of whether anything important is likely to occur. However, the meeting comes just a few days before the full Oversight Committee session scheduled for Friday.

Totally baseless speculation could lead one to wonder whether the timing is coincidental. Could a CEO announcement be made next week? But, as we said, that is totally baseless speculation.

Lomax to Sambrano to Sanchez

Three new names have been added to employee rolls at the California stem cell agency, bringing the total of official employees to 17.

The latest CIRM staffers are:

Geoffrey Lomax, senior officer for medical and ethical standards, scheduled to start Aug. 4, salary $120,000.

Gilberto Sambrano, scientific review officer, scheduled to start Aug. 15 , salary $105,000.

Jorge Sanchez, senior executive assistant to the president, started July 12, salary $82,000.

The agency has not yet released information on their professional backgrounds, but we have a query in.

You can see a complete list of all CIRM employees by clicking here. The agency is continuing to hire. Click here for a list of positions available at this date.

Looking for a New CEO

Back in February (see Feb. 25 item on this blog), the California stem cell agency was talking about having a permanent president by June. It is now close to the end of July, and the contract with the executive search firm expired at the end of May.

We have asked the agency about the status of the contract with Spencer Stuart and the presidential search, but have received no reply.

Obviously, there could be a number of reasons for not finding a new president. However, the agency is also seeking to hire a host of important top management executives, ranging from general counsel to communications director. Any new CEO would want to make those decisions and not inherit the baggage of whomever actually makes the decision.

However if the hirings are delayed substantially while the presidential search continues, it just takes that much longer for the agency to get itself firmly settled.

If CIRM chooses to speak to the search issue, we will let you know.

At Sea Again: Intermittent Postings Likely

We are putting out to sea once more in the Gulf of California, also known as the Sea of Cortez. Internet contact will be lost for the most part so we are likely to file items only intermittently, if that, for a short while.

Setting The Record Straight: Less Than Bleak Climate

On July 16, we posted an item, "Greed, Fear and Stem Cells," quoting Ken Haas of Abingworth Management, a venture capital firm specializing in life science biomedical companies.

We received the following response from Haas, who wanted to clarify inaccuracies that he said were in the Wired News article that we quoted. In addition to setting the record straight, he provides insights into the nature of the stem cell industry and investment climate, which he says can hardly be seen as bleak. Here are his remarks:

"While I very much enjoyed browsing your site, the Wired News article referenced in your posting about a talk I gave recently contained numerous inaccuracies that are unfortunately repeated in the California Stem Cell Report piece.

"For starters, I did not speak at the International Society for Stem Cell research annual meeting but rather at a luncheon sponsored by the British Consulate in San Francisco, to which certain annual meeting attendees were invited.

"I was asked to present a realistic view of the current state of venture capital investment in stem cell research and began with an assessment of the general venture capital climate. Among other things: the biotech industry is maturing and investors are beginning to expect the kind of performance that is normally associated with such maturity (e.g., capital efficiency, commercial focus, profitability); Big Pharma, biotech's ultimate customer,is increasingly reluctant to invest in 'pure research'; and venture capital has, in response, moved more toward "later stage" investing.

"In this context, stem cell ventures are 'early'-- the science still has quite a bit to prove, for example, that it can move successfully from in vitro to in vivo, and that reintroduction procedures associated with cell therapies will be safe and effective. There are also significant questions as to what successful business models will look like in this space.

"Nevertheless, I pointed out in my remarks that the principal issue with respect to stem cell investing is timing-- when, not if. On the positive side, there are significant academic initiatives underway in the U.S. (e.g., Stanford), Europe (e.g., Edinburgh) and Asia (e.g., Korea) and major governmental support in places like the U.K. and California (e.g.Proposition 71). As a consequence, venture capital is now closely monitoring stem cell developments and is poised to jump in, though still cautious.

"Specific 'mature' applications (e.g., analogous to bone marrow transplantation) could lead investment activity. Ultimately, the floodgates could well open based on just a few groundbreaking successes, for example, in tissue reengineering, cell therapy, human disease models for testing and target definition, cancer or degenerative diseases, etc.

"The above views on stem cell investment should hardly be seen as "bleak" and are widely held within both the venture and scientific communities. For instance, an article in the July issue of Nature Biotechnology (published after my talk) led with the comment that: 'Biotech companies with business models as diverse as the products they are developing are laboring to move cell-based therapies into the clinic. Without commercial success, however,investors will remain on the sidelines.'"

I concluded my remarks at the luncheon by advising those in the audience who might be seeking to start stem cell ventures to maximize their fundraising chances by coming to us, insofar as possible, with plans that embody mature
science, a credible business model, capital efficiency, commercial focus and a clear regulatory path. In short, stem cell investing, while a bit premature, will surely be an exciting part of our commercial biotech future."

Roger's Reality Check: Polarization, Backlashes and Mistakes

Don't expect research organizations to change the way they do business because California is giving away $300 million a year for stem cell research.

Get used to the outcry from opponents of stem cell research even if they have no likelihood of success. They are going to be with us for a long time.

Don't expect CIRM to create a host of friends with its billion-dollar beneficence. A backlash could easily surface.

Just a few of the thoughts from Roger Noll, a public policy professor at Stanford University who also teaches in the business and economics departments.

Noll, co-author of "The Technology Pork Barrel," wrote a 44-page paper in June on "The Politics and Economics of Implementing State-Sponsored Embryonic Stem-Cell Research" for the Stanford Institute for Economic Policy Research.

The paper provides a good overview of the sticky intellectual property rights issues involving stem cell research generally, as we wrote about July 17. Noll also spoke directly to events in this state. Here are some highlights from his paper.

"As the California experience reveals, setting up a functioning research program is not easy. Establishing an effective state program requires overcoming substantial political and organizational problems. While spending a great deal of money is easy, spending money effectively without causing a political backlash is difficult. Moreover, opponents of (stem cell) research do not go quietly in the night once legislation establishes a program. Instead, they continue to use all means at their disposal – litigation, political participation, and public demonstrations – to stymie implementation of the program."

"Moreover, when programs are thrust upon a state through a ballot initiative, as occurred in California in 2004, unprepared state officials are likely to find themselves tasked to deal with these problems on a fast time schedule, further increasing the probability of a serious mistake in program implementation."

One unusual feature of stem cell policy is its politics, which is characterized by "intense polarization." Noll wrote that on one side "a relatively large number of people...place high priority on all forms of research that (hold) promise of creating effective new treatments." They wind up "pitted against a smaller but still large number of people who accord equally high salience to adopting policies that would prohibit this research."

"Intense polarization of this form means that battles are never won because losers will not accept defeat."

Noll predicted that political polarization "is likely to create significant uncertainty and delay, and thereby vastly increase the implementation costs of the program."

The economist also wrote, "Politics will tend to favor...commercially interesting projects at the expense of more fundamental, long-term projects with much larger expected future payoffs."

And he said, "The licensing income derived from stem-cell research is likely to be a small fraction – less than five percent – of the costs of that research, and is likely not to be substantial for many years."

Finally, Noll pointed out that "Stanford University receives as much revenues in a year as CIRM is likely to spend on external grants over a decade. The lesson here is that CIRM can not expect to have much leverage over either Stanford or the entities that support it. Any attempt to change the way that research organizations do business with an annual expenditure of $300 million is doomed to failure."

Following the Stem Cell Money Trail

Don't expect the health industry to share huge bags of swag with California for its investment in stem cell research.

At least that was one opinion in a piece by reporter Terri Somers of the San Diego Union Tribune Sunday.

She noted that the arguments for Prop. 71 had predicted a big economic bonus for the state, but added that "money is unlikely to materialize, at least any time soon, according to those now charged with the task of creating policy for the institute."

"The idea that any new research today could result in rewards that provide an immediate benefit to California is misguided," Somers quoted Ginger Graham, chief executive of Amylin Pharmaceuticals in San Diego as saying.

"Graham is a member of a task force with the California Council for Science and Technology, a group of academics, business executives and lawyers that the state Legislature has asked to make recommendations for handling the rights to any discoveries that result from research funded through Prop. 71."

Somers also quoted Roger Noll, a Stanford economist on the task force. He "pointed to a paper he wrote about California's intellectual property issues as an example of the challenge the state faces. In 2000, the University of California system spent almost $2 billion on research but received only $74 million in licensing, Noll found.

"'These facts should give pause to state officials who see a potential financial bonanza in the (intellectual property) arising from state-sponsored (embryonic stem cell) research," Noll wrote in the paper.

"'The best advice . . . is not to try to be very innovative in creating agencies and policies to make grants and oversee intellectual property rights,'" he said. "'These programs will not succeed if they ask grant recipients to behave a great deal differently than they are required to behave from other, much larger sources of funds.'"

The Bee: Fire Edelman

The Sacramento Bee weighed in Sunday morning with more on the flap about the California stem cell agency and its public relations contract.

It said in an editorial that the agency should fire the Edelman firm and "deal with the issues that are causing (it) the most grief. Chief among these is (Robert) Klein himself, who continues to act like a micromanaging political campaigner instead of the chairman of a prestigious research institute."

Edelman could be replaced by two state government flacks, The Bee wrote.

The editorial also had this snippet, unreported elsewhere, from last week's meeting:

"Jeff Sheehy, a communications specialist at UC San Francisco who serves on the oversight board, said spending $27,550 a month on public relations was 'appalling,' and questioned if the institute was getting anything for its money.

'Klein replied that without Edelman, the institute wouldn't be able to respond to major news events.

"'The public did not give us bonds to respond to major news events,' Sheehy shot back. 'It gave (them) to us to do research.'"

Greed, fear and stem cells

Have you heard about California's stem cell gold rush?

Some venture capitalists have and they are not necessarily ecstatic – not that their public statements mean much. On the other hand, one stem cell company is publicly quivering with excitement.

Here is its testimony from a piece in Wired News by Kristen Philipkoski.

"'With the passage of Prop. 71 there's been an influx of interest in stem cells,' said Robert Lanza, vice president of medical and scientific development at Advanced Cell Technology in Worcester, Mass.
'We're in a whole new world. We're flush with cash, and just months ago we were struggling as a private company to even make payroll and to keep the phones on.'"

On the other hand, Philipkoski wrote:

"'Some of this stuff still looks like science experiments,' said Ken Haas of Abingworth Management, a venture capital firm specializing in life science biomedical companies.

"Haas gave a bleak outlook for stem-cell companies hopes for venture funding at the International Society for Stem Cell Research annual meeting last month in San Francisco.

"Big pharmaceutical companies aren't funding early research, he said. And VCs have higher expectations in general from biotech firms because they perceive the industry as having graduated from its freshman status. The investment necessary to bring a company public has doubled, Haas said, and the returns have diminished.

"All of these factors combined create a chilly climate for embryonic stem-cell companies, Haas said."

Haas' comments recall a point made to me by a venture capitalist some years ago. He said that VCs make an investment when their greed overwhelms their fear.

Then there is this from a Geron, which raised $40 million in the weeks following the passage of
Prop. 71, is better positioned than many stem-cell firms that don't have deep pockets or profitable partnerships with large pharmaceutical companies. More typical is Burlingame-based VistaGen Therapeutics, a 10-person research firm founded in 1998. CEO Ralph Snodgrass says that the company is using stem cells as a research tool to develop a treatment for a variety of illnesses rather than as the basis for a specific medicine or therapeutic.

"'We want to expand our research efforts, but we are a small firm,' he says. 'We have been contacted by bigger companies, but what is holding us back is our size. We will ramp up as Prop. 71 money becomes available. The effects of these funds across the industry should be dramatic.'"

The $30,000-a-month PR contract: What's it Worth?

Public relations is the business that boondoggle aficionados love to excoriate. It seems -- well -- so useless. And for all their vaunted skills, flacks often seem incapable of defending themselves well.

So perhaps it was no surprise that the California stem cell agency's PR and the huge Edelman PR agency came under fire this week. But there is a tad more to the story than what has surfaced so far.

But first, let's look at what happened at the Oversight Committee meeting on Tuesday.

"Several oversight committee members seemed surprised to learn yesterday that the institute is being billed $27,700 a month for public relations services it receives from Edelman, a national firm. The institute is receiving the bills and services on a monthly basis and isn't paying them until a longer-term contract can be negotiated with Edelman," wrote reporter Terri Somers of the San Diego Union Tribune.

"Committee member Jeff Sheehy, deputy communications director at the University of California San Francisco's AIDS Research Institute, said he was 'shocked' to learn that the institute has been billed for these services since April because he 'just hasn't seen the product.'

"But oversight committee chairman Robert Klein said the institute's one staff member dealing with communications cannot handle the high volume of media calls, public speaking requests and other public relations work."

Reporter Laura Mecoy of The Sacramento Bee also noted that Sheehy was a "little appalled" at the PR situation.

The stem cell agency's PR certainly can stand some improvement. But as a former California governmental and political flack and the recipient of enormous amounts of PR attention over decades of newspaper work, I have a sense that there may be internal issues that could explain some of the lack of product. That said, agency should be doing a better job at this stage of the game.

Some of it is basic stuff, such as assuring that the web site's "what's new" feature actually shows what is new. But where the PR really fell down was losing the positive spin the agency had coming out of the election because of maladroit management and allowing critics to set the terms of the debate. As readers may recall, the agency's first meeting in December ran afoul of questions about its legality, turning what should have have been a celebration into a PR debacle. Since then, the headlines about the agency have been dominated by controversy about its conduct.

Given that background, we can ask whether the nearly $30,000 a month is excessive, ? Probably not. Let's look at some numbers. The agency probably needs at least two PR types and a secretary/administrative assistant. Figure the salary for the head flack at about $100,000, No. 2 at about $90,000 and the assistant at about $40,000. Add one-third or more to that for fringe benefits and you are looking at a total in salaries and benefits of something in the neighborhood of $25,000 and $30,000 a month, which doesn't include the profit that a private firm would need. And the $100,000 salary for the chief spokesperson may be too low to hire the talent needed. Additional PR costs would include printing, phones, work on the Web site and more. We should also note that Edelman's bill does not include the salary of the agency's current spokeswoman, a state employee who has only been on the scene for a few months.

Some times these types of figures come as a shock to newspaper reporters and government PR types. Their salaries are generally lower that what top flight, private sector PR people earn, which is not to say that there are not many top flight PR people in government.

So what does the agency receive for nearly $30,000 a month? The terms of Edelman's working agreement are secret because stem cell chairman Robert Klein says its contract is under negotiation, another PR mistake by the agency and by Edelman. But we can learn something about the scope of the needed PR work by looking at the contract with Red Gate Communications, which resigned from stem cell service earlier this year.

The Red Gate agreement shows that its responsibilities went far beyond fielding reporter calls, emails and writing a handful of press releases. (We should note that some of the agency press releases show nonprofessional earmarks that probably can be traced to others at the agency.)

Here is a partial rundown from the Red Gate contract: develop identity and logo for CIRM, serve as spokesperson for CIRM for all media and editorial boards, manage editorial briefings and interviews, staff all public hearings, prepare op-ed pieces and write editorials, write speeches, prepare the 29 members of the Oversight Committee for media interviews, create CIRM brochures, fact sheets, FAQs, media information kits, newsletters, quarterly reports and Power Point presentations and work on the web site. Public outreach and education, which is sorely needed, also comes under the PR rubric.

To be effective, the top PR person would have to sit in on tens of hours of private CIRM meetings each week in order to be well-informed and speak authoritatively. That person should also be the lead on developing an informational strategy that helps to keep CIRM out of the kind of a corner it has found itself in so much of the year.

Many of the PR chores facing CIRM are routine or would be routine if the agency were not a new and strange entity. Creating a PR program entirely from scratch in an understaffed, fledgling agency is, to say the least, difficult.

Whether Edelman is worth the cost depends on what we see from them and the agency over the next few months.
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If you would like a copy of the Red Gate contract, please send a request to djensen@californiastemcellreport.com. But do it quickly. We are going to sea again soon and will be only intermittently online. For a few more details on the Edelman contract, click here. For a list of all the contracts with CIRM, click here.

Stem Cells and Behind the Scenes Decision Making

Smoke-filled rooms are now passe for public policy making, with the exception of Gov. Arnold's cigar tent in California's Capitol. But at UC Berkeley one bioethicist remains concerned about back rooms, decision making and the recipients of public largess.

The issue is the California stem cell agency and how it does business. The man concerned is David Winickoff, an assistant professor of bioethics and society in UC Berkeley's Department of Environmental Science, Policy, and Management.

Prior to last fall's election, he wrote a piece about Prop. 71, arguing that the agency would be anything but independent, while having the power to set policies for human cloning technology and human-subject research, as well as allocate patents to the private sector.

The subject was revisited recently in an internal piece from the UC Berkeley NewsCenter by Bonnie Azab Powell.

She wrote that Winickoff is bothered "a lot" by what he views as the lack of independence of the stem cell agency.

She quoted Winickoff as saying, "Important decisions are being made in the back rooms of university and industry labs that will have huge effects on people and shape their environments and lives. They aren't open for public scrutiny because they're technical, and it's difficult for people to engage substantively in these issues."

One of his issues involves finding "ways that will facilitate democratic control and decision making, rather than just simply giving technocratic control without accountability."

Powell provided this case from Winickoff as an example of a problem involving private individuals providing something that leads to a commercial product.

"A patient with a rare form of leukemia was treated at UCLA's medical center by a doctor who collected many blood, semen, and hair samples from the patient that were unnecessary for his treatment. Five years later, the patient learned that the doctor had collaborated with a biotech company to derive a potentially lucrative cell line from the patient's diseased spleen cells. The patient, understandably, wondered why the doctor and not the patient was profiting from his biological property. The biotech industry and others filed many "friend of the court" briefs with the California Supreme Court, arguing that according property rights to the patient would bring research to a standstill. The court largely sided with the biotech industry, saying that the plaintiff's property rights did not apply to his spleen cells, although he did have a valid (but much less damaging) claim based on the doctor's failure to obtain informed consent."

Winickoff said, "I'm trying to find that sweet spot where we have more accountability and control over important policy decisions, where we can allow a certain amount of politics in without undermining the ability to make policy at all."

Coming Up

A little later today we will have a look at the $30,000 or so monthly PR bill for the California stem cell agency. Is it too high?

Correction

In the "Nature" item July 14, we incorrectly reported the source as of the information as Nature magazine. The correct publication is Nature Biotechnology. The URL is www.nature.com/naturebiotechnology.

Transparency and Stem Cell "Hooey"

California's stem cell agency is suffering from a reality gap.

On one hand, its chairman and the prime voice of the agency, Robert Klein, promises the highest and best standards of transparency, openness and disclosure, as he did again just on Tuesday of this week.

On the other hand, the agency cobbles together transparency/disclosure regulations -- only under heavy legislative pressure -- that seem to be a far cry from those at John Hopkins University, the New England Journal of Medicine and the Journal of the American Medical Association.

On Tuesday, the stem cell Oversight Committee moved to tighten its transparency rules with the promise of more review to come – certainly a step in the right direction. One must acknowledge all this is difficult territory. Stem cell research remains an infant business with major unresolved, ethical issues. The stem cell agency itself is a bit of bureaucratic chimera –a quasi-business-scientific-governmental beast that has no real parallel.

Complicating the matter is the small and cozy nature of the stem cell community itself. Just how cozy? David Baltimore, a Nobel prize-winning scientist at age 37, is a member of the Oversight Committee of the California stem cell agency. He is also president of Caltech and serves on the boards of biotech firms Amgen and Med Immune Inc. Baltimore recently received a $14 million stem cell research grant from the Bill and Melinda Gates Foundation.

According to reporter Donald J. McNeil of the New York Times, the grant is for the "radical idea that stem cells could be created that could be safely injected into anyone, would populate the immune system and would contain the genetic instructions for initiating attacks on many diseases. If successful, they would make vaccines obsolete."

Baltimore told McNeil, "I imagined this proposal into existence, but I never imagined we could get money for it. It's not the kind of thing the N.I.H. would fund. It's too big, it's too chancy, it's too focused on a particular product. If this was 15 years ago in the biotech industry, this could be the basis of a company, but venture capitalists now are looking for a much quicker payoff."

Under the terms of the grant, the results of the research could be patented for commercial gain, although they would have to made available to poor countries at either free or at low cost.

Which raises a question about Baltimore and stem cell research grants before CIRM. There are legal restrictions on his potential conflicts, and we have no doubt he is a principled man. But persons with competing approaches will be before the agency with requests. Baltimore's stake in the issues will be well known to grant reviewers and fellow committee members. No one may violate the law, but members of the "club" are often unwilling to act in ways that might appear to be injurious to other members of the "club."

CIRM is an unusual agency in that conflicts of interests were built into it. Scientists, business executives and patient advocates are all directly involved as directors. Some even have personal health issues at stake.

Given that situation, it makes it even more important to have maximum disclosure of the economic interests of those who are making decisions, and that extends to members of the working groups.

So far, members of those groups will have to disclose their economic interests only to members of the "club" – in this case CIRM itself. CIRM contends that is necessary because scientists would not be inclined to serve as members of groups if they have to publicly bare their economic souls.

In two editorials earlier this week, The Sacramento Bee described that assertion as "hooey" and "malarkey."

The Bee dug into the current state of economic disclosure by scientists and reported:

"Throughout the scientific world, stem cell researchers are increasingly disclosing their corporate research relationships and stock holdings.

"Some must do so if they want to serve as faculty on Continuing Medical Education courses sponsored by the Johns Hopkins School of Medicine and other medical schools.

"Others must publicly disclose conflicts when their research is published in the New England Journal of Medicine, the Journal of the American Medical Association and other prestigious publications.

"Consider the recent meeting of the International Society for Stem Cell Research, held in San Francisco. Several of the world's top scientists disclosed their corporate ties there as part of the continuing education program."

Because of these disclosures, The Bee shared economic information with its readers about two members of CIRM's grant working group. The following information from The Bee would be secret if CIRM continues its policies or could control the policies of others:

"Let's examine," The Bee wrote, "the situations of Drs. Andrew Feinberg and Jeffrey Rothstein, two of 15 researchers appointed to the committee. Both work for Johns Hopkins, which owns stock in Geron and has a licensing agreement with the California company. According to an article in Scientific American this month, Geron is expected to be one of the main beneficiaries of a new California fund for stem cell research.' That means that Feinberg's and Rothstein's employer could benefit from any grants awarded to Geron."

While the stem cell agency moved forward this week with new transparency rules, several responsible California organizations said they did not go far enough. You can read two of their critiques at these locations: Foundation for Taxpayer and Consumer Rights. Calaware also advocated stronger rules.

One of the premises of Prop. 71 was that it is time to do business in a different way and throw off old, crippling constructs. Government can fund controversial research. And it can partner with scientists and business in innovative ways that benefit all. It is now time for the stem cell agency to fulfill the promise of Prop. 71. It should lead the way with new, forward-thinking transparency rules that enhance public trust, that provide maximum disclosure and that close the stem cell reality gap.

Notes From Nature: Predicting Stem Cell Winners

What firms are best positioned to reap profits from the stem cell harvest?

Nature magazine (www.nature.com) named four in an article by Stephan Herrera in its July issue. Here is what he had to say.

"Of course, it's still early days to predict those companies whose position is consolidated best for success. But with their clear advantage in terms of intellectual property positions and current stage of investment and product development, firms like Geron in Menlo Park, California, Osiris Therapeutics in Baltimore, Maryland, NeuroNova in Stockholm and ES Cell International in Singapore will be hard to catch."

Herre also had this to say about venture capitalists.
"Investors, like HealthCap in Stockholm, Allen & Company in New York and MPM in San Francisco, have refused to let the politics and uncertainly of stem cells keep them away. They have an early advantage of those who (quite understandably in this risk-averse, late-stage climate) have steered clear of the field."

Transparency, Money and Management

The directors of the California stem cell agency delivered a message to Robert Klein on Tuesday.

Irritated by the lack of consultation and information on the agency's budget and spending, they restricted the size of personal service contracts to $100,000 that can be let by Klein and agency employees without board approval. The Oversight Committee also created a governance committee to deal with how the agency does its business.

The agency has spent $2 million so far this year, including more than $1 million in contracts with outside firms or agencies. Earlier some Oversight Committee members expressed displeasure about learning first about the contracts from non-agency sources. That triggered a bit of a flap concerning Klein's management (see "Murky Money" on this blog June 14).

Reporter Laura Mecoy of The Sacramento Bee and Terri Somers of the San Diego Union Tribune covered the management flap as well as other issues in their stories this morning.

Mecoy focused primarily on the Oversight Committee's approval of rules to "open more meetings, disclose more information about its grant awards and tighten its conflict-of-interest rules."

Somers led with the news that the California treasurer's office is "preparing to sell $200 million in bond anticipation notes to start funding the institute's first round of grants and first full year of operations."

She said the schedule calls for the notes to be issued prior to September so that the board can make grants for training programs that months. Twenty-six California institutions have expressed an interest in the multimillion dollar grants, but CIRM has refused to release their names.

The agency adopted its new rules on openness and disclosure following heavy pressure from the California legislators, led by Sen. Deborah Ortiz, D-Sacramento, a strong backer of Prop. 71 and chair of the Senate Health Committee. More changes in the area of conflicts of interest are scheduled to come up at the August meeting.

CIRM was quick to issue a press release on the Tuesday action, posting one by mid-afternoon. Klein said in that statement, “Sen. Ortiz has committed intense energy and passion to this important task of ensuring that California has the highest and best public transparency, conflicts provisions, and legislative oversight of any state or federal program in our nation. This is an ongoing process and we will continue to listen to the input of the legislature and the public to ensure the finest standards for medicine, ethics, and competitive peer review in every aspect of our stem cell program.”

The agency summarized the new rules as:
"broadening conflict of interest provisions for working group members;
"providing earlier public availability of working group funding recommendations;
"requiring comprehensive reports to the State Legislature summarizing grant awards and recipients;
"ensuring increased public access to meetings of the Standards Working Group and the Facilities Working group;
"and providing public access to the Grants Working Group, except for discussions related to scientific and medical evaluations of grant applications and other mission critical exceptions."

The California Stem Cell Report will have more on the transparency and conflict issues on Thursday.

The Price of Eggs

One of the famous examples of excess during California's 1849 Gold Rush was the price of eggs, something over a dollar each, according to legend.

Today the price of eggs is being set by the California stem cell agency – at least the price of human eggs from women.

That price appears to be zero.

No real surprise there because Prop. 71 banned payment for human eggs except for direct expenses. But some folks are not entirely happy.

Reporter Edie Lau of The Sacramento Bee wrote about the egg economics earlier this month. She said that Robert Klein, chairman of the stem cell agency, said "the payment ban was intended as a safeguard against women - especially poor women - feeling pressured or enticed to sell their eggs." He said employers should help out.

Lau reported on a meeting of the Scientific and Medical Accountability Standards Working Group of the stem cell agency, formally known as the California Institute for Regenerative Medicine.

She wrote that some witnesses were not pleased with CIRM's position.

"'I don't know why you put (yourselves) in a position to not compensate for time and effort,' said Jose Cibelli, a stem cell researcher at Michigan State University. 'It's something you will come to regret.'

"Ann Kiessling, a Harvard University biologist who runs an independent, nonprofit center that solicits egg donors specifically for stem cell research, predicted that some women who wish to provide eggs will be unable to if, for example, they aren't reimbursed for lost wages.

"'All normal, healthy subjects that undergo any research in this country are compensated for their time,' she said."

Lau continued:

"Klein, who also sits on the standards working group, did not respond to criticism of the rule during the meeting, but said in an interview that the prohibition cannot be changed, nor should it.

"'It is a more challenging provision, but it provides us with a higher ethical standard,'" Klein said.

"He said he hopes employers will support employees who wish to donate eggs, and continue to pay them as some employers do for jury duty. 'It's a public service to society,' Klein said."

You don't have to be Milton Friedman (the Nobel-winning free market economist who lives in San Francisco) to understand that if human eggs become sought after, their price will rise, regardless of Prop. 71. Another human product -- blood -- is purchased regularly at very low prices, but it is a common commodity. The market for human eggs and their price are yet to be determined. But there is no doubt that a statutory attempt (a la Prop. 71) to set a price (commonly known as price-fixing) will fail.

Coming Up

Later today we will have a report on Tuesday's meeting of the Oversight Committee, brought to you from a semi-remote anchorage in the Sea of Cortez in Mexico.

Correction

On July 8, we reported about a contract that Red Gate Communications had with CIRM. Red Gate resigned from the contract and was not terminated by CIRM.

CIRM's Million Dollar Outside Contracts

Legal and public relations advice, legislative lobbying and grant procedures – all are part of the $1.6 million mix of outside contracts that the California stem cell agency has quietly let since the beginning of the year.

It is not surprising that the agency has gone to the private sector, and it is likely to do more of it in the future. The fledgling bureaucracy is limited to only 50 employees by law.

Use of private consultants and service has some virtue. Properly done, it is a way to handle start-up and special costs without creating a large bureaucracy that is hard to change as needs change. At the same time, use of private consultants, some of whom have access to sensitive information, raises issues about potential conflicts. None of the consultants seem to be required to meet the same conflict-of-interest standards as CIRM's own employees.

That means CIRM must exercise careful oversight of the consultants, which requires a critical eye that may not fit with the startup team ethos of the new agency. The handling of the contracts also may provide some insight into how the agency is likely to proceed in the future as it hands out hundreds of millions of dollars in research grants.

The contracts have triggered some criticism from Oversight Committee members, who have complained about learning about them in the media(see "Murky Money" on June 14). And only one of the contracts (the executive search agreement) seems to have been let in what might be considered a normal competitive process.

Reporter Laura Mecoy of The Sacramento Bee was the first to disclose the total value of contracts. We have written about the $10,000-a-month lobbyist (May 5) and the now terminated contract with Red Gate Communications for public relations work("Hello to Edelman" April 22). Mecoy noted that her total did not include a figure for the Edelman PR contract, which the agency said was still under negotiation. One source indicated to us that it could be in the neighborhood of $700,000 annually, which would presumably include building a community education program from scratch.

Here is a look at some of the other contracts:

$350,000 one-year contract with the state controller's office for various support services for 2005, ranging from personnel to setting up computer networks.

$320,000 seven-month contract with the law firm of Remcho, Johansen and Purcell of San Leandro CA to act as general counsel with rates up to $300 an hour, plus expenses. The total on this contract was raised from an original $100,000.

$165,000 contract, plus expenses, for the Spencer Stuart search for a CIRM president and assistance with a search for a chief scientific officer. The contract was scheduled to end by May 31. The firm could be in for a substantial bonus if CIRM hires other persons turned up in the CEO search for non-CEO positions.

$70,000 six-month contract with Constance Atwell of Pinehurst NC to provide advice concerning development of policies and procedures for grant management. Atwell's contract has an interesting "trust me" provision regarding possible conflicts of interest. The contract states that Atwood "affirms that to the best of (her) knowledge there exists no actual or potential conflict between the consultant's family, business or financial interest and the services provided under this agreement...." Atwell is a retired grants manager from NIH.

Intermittent Reports: Wandering the Sea of Cortez

As all sailors must from time to time, we have hoisted anchor. This time to venture out into the Sea of Cortez for a number of weeks. Our new anchorages will be in remote desert locations where few people live and even land-based electricity is not to be had. That means reports will be be more intermittent on the California Stem Cell Report.

For those of you interested in such matters, we have been following the affairs of the California stem cell agency and posting reports via WiFi access here in romantic Old Mexico. Our WiFi link was from the cockpit of our sailboat, which was in a marina, to a a commercially provided antenna about ½ mile away. Cost of the service: About $18 US a month. Prior to that we used free WiFi service available in cantinas and restaurants in our location near Guaymas.

We are departing Guaymas to sail to the Baja California peninsula. We expect to use cellular data service (GPRS) to browse the Web and file reports. If that does not serve well, we will use an Internet cafe, which is much more cumbersome and slow, primarily because one must download the information, cart it off to the HQ of the California Stem Cell Report (a 39-foot Freedom cat-rigged ketch), digest the brew, write, retrace our steps to the Internet cafe and post the nuggets.

Meanwhile, if you see of items of interest, please alert me at djensen@californiastemcellreport.com or just by filing a comment by clicking on the word "comment," which follows this item. Thank you.

Rebel Stem Cell Directors Not Happy with Klein

Dissident directors of the California stem cell agency took a crack at chairman Robert Klein, who barely fended off their move earlier this week.

The rebellion occurred at a little-noticed meeting Monday night of the agency's new legislative subcommittee and was reported exclusively this morning in a column by Stuart Leavenworth, associate editor of The Sacramento Bee and the only journalist attending the session.

The issue that triggered the flap was the chairmanship of the committee, according to Leavenworth.

"Although Klein convened the subcommittee assuming he would chair it, he quickly confronted an internal coup," Leavenworth reported.

Stem cell Oversight Committee member Joan Samuelson "bluntly suggested that Klein is becoming a political liability."

"'Bob has become a lightning rod and it is a difficult thing to deal with,' she said."

Another Oversight Committee member Jeff Sheehy said, "We are getting killed by the press. We are getting killed by the Legislature. We are getting killed by people who support us."

Leavenworth continued:

"The subcommittee has good reason to be angry. In recent months, Klein has hired lobbyists and public relations firms without consulting his fellow board members. A millionaire developer from the Bay Area, he has picked some of his personal aides to be institute employees. At one point he proposed an organizational chart that gave him his own exclusive staff, including the institute's legal counsel.

"All the while, Klein and the institute have treated all critics as enemies. Although embryonic stem cell research faces opposition from conservative Christians, some of the institute's most vocal critics have been groups such as Common Cause and Californians Aware, who do not oppose stem cell research but want the agency to operate more openly.

"There are also critics such the Pro-Choice Alliance Against Proposition 71, whose leaders fear the biomedical industry holds too much sway over this public body.

"After more than an hour of heated debate, the subcommittee deadlocked 5-5 on a motion that would effectively demote Klein as the institute's political leader.

"That's when Edward Penhoet, founder of Chiron Corp. and vice chair of the institute's oversight board, stepped in to give Klein a one-vote margin. Penhoet's participation was somewhat surprising, given that the institute, in its prior press release, didn't even list him as a legislative subcommittee member.

"In the end, Klein was saved not by his fellow patient advocates, but by a Southern California contingent of industrialists and academics who serve on the institute's oversight board. These included Tina Nova, CEO of a San Diego biomedical firm; Dr. John Reed, president of the La Jolla-based Burnham Institute; Susan Bryant, dean of biological sciences at UC Irvine; and Richard Murphy, president of the Salk Institute. (Murphy is also a director of the California Healthcare Institute, a biomedical industry group that has lobbyied against tougher conflict-of-interest rules for the stem cell program.)"

Separately, The Bee editorialized on the agency's new disclosure requirements.

"Sen. Deborah Ortiz, D-Sacramento, deserves credit for nudging California's institute in the right direction with her proposed constitutional amendment, SCA 13. Senate President Pro Tem Don Perata, bowing to pressure from Klein's allies, Sens. Joe Dunn and Jackie Speier, has now put that measure on hold. He shouldn't bury it, however," The Bee wrote.

"Within the stem cell institute, eminent doctors and patient advocates are staging a rebellion against Klein....If lawmakers keep the pressure on, the truly independent members of the institute's oversight committee may feel emboldened to go beyond Klein and his marginal policy enhancements. At that point, critics will no longer be tempted to describe the institute as a 'quasi-public agency.'"

Leavenworth's column demonstrated the value of diligent reporting (as in sitting through yet another tedious meeting). It will be interesting to see what other media do to play catch-up.

Gurgling as Money and Brains Drain to the West

"The idea that if you throw money at it, people will come is true. Money talks." -- Zena Werb, a cell biologist at UCSF.

Just one quote from a fine overview of what California institutions are doing regarding the $3 billion stem cell bonanza in the Golden State.

Reporter Betsy Mason of the Contra Costa Times wrote:

"California's universities and research institutions are scrambling to position themselves for Prop. 71 funds. Nearly every institution in the state with its hands in the stem cell game or aspiring to join it is creating jobs for people experienced with the gifted little cells. Scientists are adamant that the healing potential of stem cells is real. But the stem cell field is itself in the embryonic stage and has very few senior scientists, perhaps just a couple of dozen, capable of heading a strong research group and training budding scientists. The draining sounds can already be heard gurgling through this small pool as California tries to satisfy its new appetite for the science.

"UCSF hopes to hire up to eight stem cell researchers in the next few years; Stanford is looking for five or six; UC Berkeley just hired one and is looking for at least one more; UCLA wants to fill its recently created stem cell institute with a dozen researchers; and UC San Diego hopes to bring on as many as 10.

"'Having a source of funds like this, which has suddenly come available to people only in the state of California, is a major benefit,' said Arnold Kriegstein, the director of UCSF's stem cell biology program. 'I get a lot of e-mail from people all over the world who are interested in coming to California.'

"The fierce competition within California for the top candidates will intensify as other states fight to keep their researchers. "The handful of people who are already doing this research can write their own ticket if they're good," said Randy Schekman, a stem cell researcher at UC Berkeley.

"Last month, Stanford managed to reel in two big catches, including Stefan Heller of Harvard. Heller was the first to identify adult stem cells in the inner ear of a mammal, and is at the top of his field."

Mason also quoted Mathew Lensch, an embryonic stem cell scientist at Harvard. "Now everybody asks if you're going to California. You want to talk about brain drain? The whole country's tilting to the west."

Stronger CIRM Standards Attract Little Notice

The California stem cell agency is moving forward with stronger conflict of interest standards in the wake of legislation that would have forced a ballot fight over even tougher standards.

A new legislative committee of the agency approved the new rules Monday night. And in an unusual move, the agency issued a midnight-hour press release announcing the action. The full Oversight Committee will consider the rules July 12 and is likely to approve a version of them.

The legislative committee's action has attracted little media notice, probably because it appeared to be a foregone conclusion. But the timing also discouraged coverage: an evening meeting that ran up against newspaper deadlines.

The standards approved by the committee had an interesting twist. To be changed, they would require a supermajority vote – 70 percent – of the Oversight Committee. That is the same vote requirement for a change of Proposition 71 itself by the legislature three years after passage – an irritating issue for some legislators.

According to CIRM's press release, the proposed standards would:

Require "divestment by ICOC members of financial investments in any business entity with more than 5% of its annual budget in stem cell therapies and in any business organization receiving a grant"

Broaden "conflict of interest provisions for working group members"

Provide "earlier public availability of full disclosure of working group funding recommendations"

Require "comprehensive reports to the State Legislature summarizing grant awards and recipients"

Ensure "increased public access to meetings of the Grants Working Group, the Standards Working Group and the Facilities Working group"

Provide "increased access to working group records"

The agency's press release also contained the following:

"'We are always striving to enhance our policies, and remain grateful for the support of Senators Perata, Ortiz, Speier, and Dunn,' said ICOC Chair Robert Klein. 'It is critical to public confidence in the CIRM that there be a clear understanding: we are building the finest standards for medicine, ethics, and competitive peer review in every aspect of the stem cell program. Our hope is that our collaboration with the public and the Legislature will create a model to serve as the standard for stem cell research in the nation.'

"Zach Hall, Ph.D, the Interim President of the CIRM, said a number of the standards that the subcommittee will recommend to the ICOC on July 12th in Irvine surpass the stringency of the National Institutes of Health and University of California standards."

New Jersey Lessons for California

While California is just embarking on a $3 billion stem cell research effort, New Jersey has already poured hundreds of millions of dollars into the biotech biz in its state. And it is considering pumping another $380 million into stem cell research.

New Jersey's efforts and its difficulties have some obvious implications for California. Reporter Clint Riley of the Record in New Jersey provided some perspective on the situation in the Garden in a couple of articles.

He reported on Sunday: "New Jersey's partnership with biotech is already running into problems. It is cloaked in secrecy and riddled with the potential for conflicts. Its goals are at times nebulous."

On Monday Riley wrote, "Secrecy is important to the biotech industry, in both its business and research incarnations. After all, this is a world where the sole ownership of ideas is the basis of profits. The picture is more complicated on the public side of the biotechnology partnership.
In particular, a closed-door culture poses significant challenges for those concerned about conflicts of interest."

His reports detail examples of where New Jersey's public interests and those of the private sector do not necessarily coincide. He also noted that New Jersey ponied up $500,000 for promotion at the 18,000-attendee BIO 2005 conference mentioned in the item below.

The articles make interesting reading for those following the affairs in California.

California "Gold Rush" Discussions at Stem Cell Conferences

This a busy week for biotech conferences around the county, including two that will pay some special attention to California.

In San Francisco on Thursday, California stem cell chairman Robert Klein is scheduled to be the keynote speaker at the meeting of the International Society for Stem Cell Research at the Marriott Hotel.

The society reports that San Francisco, CIRM and various universities are "rolling out the red carpet" for 2,000 delegates. Cost for registration at the conference is $720 at this late date. Sponsorship of the session at which Klein is speaking cost $15,000.

Back east, a huge biotech industry conference, BIO 2005, is expected to attract 18,000 persons in Philadelphia. The program is much larger and California is relegated to lesser prominence.

A panel on Tuesday will discuss CIRM, including an appearance by a member of the stem cell agency's Oversight Committee, Edward Holmes, vice chancellor of Health Sciences and dean of the UC San Diego School of Medicine. Title of the panel is "The New Gold Rush?"

He will share the platform with Tom Okarma, Ph.D., M.D., President, CEO & Director, Geron Corp. and Bob Hariri, Ph.D., President, Celgene Cellular Therapeutics. Chairing the panel will be Alan Lewis, Ph.D., President, Celgene San Diego and Joe Panetta, President & CEO, BIOCOM.

Registration for the conference is now $1,995.

It is not likely that a member of the public can just drop by to take in one of these sessions involving California public employees. This is not unusual. Gubernatorial appearances as well as those involving other public officials generally have limits on who may attend. Nonetheless, such policies have always struck me as a bit of a departure from the idea that government should be close to the people.

No Nasty Fall Election on Stem Cell Agency

Californians are not likely to get another chance this fall to vote on the California stem cell agency, which is a probably a good thing.

It would have been a nasty tussle, although there is a very slim chance that a ballot measure might emerge. As we noted in an item earlier this year, it would not have been in the best interests of the agency to have what basically amounts to a vote of confidence on CIRM.

This fall's election is likely to draw high participation from the right and far right, which would mean strong opposition to stem cell research. A ballot measure would have created a bully pulpit for foes of the program, and, regardless of the election outcome, the agency would have been savaged.

For now, the issues behind SCA13 will move forward in the form of a forthcoming letter to the agency expressing concerns of Democrats in the legislature.

News that the measure by Sen. Deborah Ortiz, D-Sacramento, has been put aside was broken by reporter Kevin Yamamura of The Sacramento Bee. The Associated Press did a brief version of the piece which then appeared on other newspaper web sites. But it appears that no other major California newspapers have matched Yamamura's story.

Instead of bringing SCA13 to a floor vote, he reported, "Democrats in the upper house...agreed to send a letter to the oversight committee insisting that the panel take action on its own by its July 12 meeting.

"Ortiz said lawmakers have agreed to pursue SCA13 if the oversight committee does not take action that resolves the Legislature's concerns. The letter being drafted would note that the Legislature could pursue SCA13 for the June 2006 ballot, though Ortiz still wants to leave open the possibility of putting the proposal before voters in November. She said she believes the Legislature has until August to put SCA 13 on the November ballot, if necessary.

"Ortiz had lined up support for SCA13 from the 15-member Senate Republican Caucus, but she needed at least 12 Democrats to sign on to the proposal to meet a two-thirds vote requirement.

"'There were a handful of (Democratic) members ready to support me on moving this off the floor," Ortiz said. 'But many others requested that we hold it, position it for June '06 and in the meantime send a fairly comprehensive letter outlining the policy concerns and acknowledging a desire by the Democratic caucus to move this forward in the future.'

"Senate President Pro Tem Don Perata, D-Oakland, said last week after a lengthy caucus meeting that Senate Democrats were in support of SCA 13, but he said there were strategic concerns about placing it on the November ballot.

"Ortiz described those concerns as 'mainly, how we can anticipate the messages that will be conveyed in the election and whether our resources, time and messaging should be prioritized to defeat initiatives problematic to Democrats.'"

Yamamura quoted stem cell chairman Robert Klein as saying, "We look forward to reviewing the letter and have benefitted greatly from the input of Sens. Perata, Ortiz, Dunn, Speier and their staffs, among others."

David Serrano Sewell, a member of the Oversight Committee and of the agency's legislative subcommittee, said he expects the stem cell panel to take some action on regulations by its July meeting. The legislative panel meets Monday to discuss changes in regulations.

Serrano Sewell said of Ortiz, "She has had a profound influence on the committee. We were going to make these changes, but if we have this (Ortiz proposal) out there, we're more motivated to do it. The issues she has raised are important."

However, the agency has record of strong opposition to Ortiz' issues, dating back to shortly after last fall's election. Technically it is possible later this summer for Ortiz to place a measure on the ballot should the agency be recalcitrant. But the position of the Democratic caucus is that they have more important political fish to fry in this fall's electoral battle with the governor.

Correction on Pomeroy Position

Based on incorrect information on the CIRM website, we erroneously described Claire Pomeroy's position at the UC Davis medical school in the item below. She is currently vice chancellor for human health sciences and dean of the UC Davis School of Medicine -- not executive associate dean.

Murky Money Matters, Disgruntled Directors

The burn rate at the California stem cell agency is about $300,000 a month and likely more. The agency already owes private businesses or other state agencies more than $300,000 after its first five months of life.

The spending is picayune compared to the $100s of millions the agency plans to lavish on stem cell research in California. But how the agency is handling information about its spending is triggering a bit of flap that touches on the credibility of a bureaucracy whose retort to critics is often "trust us."

Even directors of the agency are in the dark about how the agency spends its money, a fact that surfaced at the Oversight Committee earlier this month.

The exchange was not reported by the mainstream media which nearly always focuses on the current highest profile controversy.

According to a transcript of the meeting, the issue came up following discussion of the $5 million Dolby donation. Dr. Claire Pomeroy, executive associate dean of the UC Davis School of Medicine, then raised questions about the agency's budget as well as the $1 million in contracts it has authorized.

"If I was giving a donation of $5 million, I would probably want to see the budget of the organization to which I was donating. and I wonder what was told to them (the Dolbys) about our budget, and I wonder when we might as a board be seeing a budget," said Pomeroy, who has both an MBA and MD.

In response, Chairman Robert Klein referred to a "cash flow" budget that purportedly had given useful financial information. The only significant financial information in that document, however, was that the agency had a $3 million loan from the state that would be gone by November. It contained no breakdown on spending even in major categories.

Pomeroy then brought up the contracting issue. "It was somewhat disconcerting to have to learn from the newspaper(an article by reporter Laura Mecoy of The Sacramento Bee) that we have, in fact, given out over a million dollars in consulting contracts that I personally wasn't aware of and don't feel like I'd been informed about. Hopefully we'll be able to know about those."

Klein replied, "Doctor, we have not given out a million dollars in consulting contracts. The question is if we, as I believe, what the figures are, is if all of the legal fees with litigation were spent and all of the going through the end of the year, they extended out contracts through the end of the year that are not in existence yet, and are going to be brought to this board, for example, on the media public education contract is under review right now, is on a month-to-month basis, and will come to this board actually for review. So I learned from the article that there were some projections that, in fact, assume expenditures that, in fact, are not fully committed expenditures."

"That's good to hear," Pomeroy said. "And then when we get the data, we'll be able to respond when those kind of statements are made. It would be good to have that."

Klein said, "Yes. And I will hope that our governance committee will undertake that as one of their first objectives."

At least one other director indicated some unhappiness with budgetary information. And it is fair to say that they likely reflected unexpressed sentiments of some others on the 29-member board.

Upcoming: More on the Stem Cell Agency's Budget

We expect to have more information on the California stem cell agency's recondite budget dealings in a posting Wednesday.

Stem Cell Stakeholders Need the Financial Skinny

Californians know little about the budget or the spending of the California stem cell agency.

Officials have reported that money will run out in November unless more money is forthcoming. That was before the $5 million Dolby donation, which is presumably on its way.

Some details of spending by the agency have been published on this blog, including information about public relations programs and lobbying. Today reporter Laura Mecoy reported that "records requested by The (Sacramento) Bee that show (the agency) has contracted to spend up to $561,000 more than the $1.1 million previously reported for outside consultants and lawyers.

"The newly released records also show that the institute has $302,227 in debts or payments it has delayed to other state agencies, its law firm and others until it could get additional financing."

None of this is surprising. But given the public responsibilities of the agency and its pledge of openness and accountability, it is surprising that we have not seen a budget or least some sort of recap of spending from the agency. We understand that at least one Oversight Committee member is irritated at that failure.

It is also simply good government and good business to give the stakeholders the financial facts.

Bustamante Opposes SCA13

The Sacramento Bee carried a brief item on the lieutenant governor and SCA13. Here is the full text:

"In a last-minute lobbying effort, Lt. Gov. Cruz Bustamante sent a letter last week to senators urging them to block Sen. Deborah Ortiz's plan to impose new restrictions on the state's stem cell agency.

Bustamante has long backed the agency and had a close relationship with stem cell committee Chairman Robert Klein II, who adamantly opposes Ortiz's proposal. Klein gave $52,400 to Bustamante's campaign account in 2003.

"'Klein didn't ask him to write the letter," said Bustamante spokesman Stephen Green. "It's an issue (Bustamante) feels very strongly about.'"

Currently there is one vacancy on the stem cell agency's Oversight Committee, which Bustamante is due to fill soon with an appointee.

World Map Link Repaired

Thanks to the alert reader who told us about the bad link on the world stem cell map. It has been fixed.

More on Reality: Summoning Up the Troops

The blog.bioethics.net is warning of the peril posed by "over-eager salesmen" of stem cell cures, citing an article by a California researcher as opening the door for critics.

Written by the editors of the American Journal of Bioethics, the blog said:

"Today, dozens of children and others who argue - like us - for stem cell research are held up as potential recipients of embryonic stem cell-derived therapy, as though the big worry is that they will not receive their embryo pills next year and will suffer as a result. You don't have to have a long memory to see how dangerous these views can be. Just think back to gene therapy, and the clamor of folks to enroll in early, non-therapeutic trials because of the perceived magic of anything genetic. The very idea of 'gene therapy research' is an oxymoron, if you think about it, as was argued by Nancy King and others.

"Well, in California the arguments in favor of stem cell research are often a big more, um, dramatic than other places, and as a consequence the infractions of the 'do not promise therapies to subjects who will not be getting them yet' rule are more problematic. And it doesn't get worse than this one, by A Scientist In Irvine (Peter J. Bryant), who writes the San Francisco Chronicle to let us know that among the victims of unenlightened stem cell research are the soldiers in Iraq, who won't get their stem cell therapies and will die as a result. It isn't that the argument is wrong, and it certainly isn't that the argument isn't creative, it's that the argument is premature - and in some ways the point to make about stem cell research is that it will transform medicine entirely, including producing therapies that one day will not require the use of embryos, therapies that could never have been produced without the use of this research. Yes that will one day help soldiers. But the promulgation of this 'get it now or else' thing just makes it easier for the opponents of stem cell research to paint stem cell researchers as over-eager salesmen of therapeutic misconception."

For more on this subject, see the "reality check" item below.

Check Out World Stem Cell Map

We have added some new links to this blog and restored some of the old ones that were lost when we reformatted. The links are annotated as well. A couple of nifty ones are the maps of stem cell research and the world stem cell map. If you have suggestions for additional links, please send them djensen@californiastemcellreport.com or just click on "comment" below.

Reality Check on a "Recipe for Trouble"

A Harvard stem cell researcher has weighed in with a reminder about the tedious nature of scientific research, especially regarding stem cells.

It stands in contrast to the contentions of officials from the California stem cell agency that their enterprise is a life-and-death matter. Certainly it is important to get on with stem cell research. But the time line on development of stem cell therapies is years, perhaps decades. And then there is the old saw about slowing down so you can go faster.

This is not to demean or diminish the needs of those living with diseases that may be alleviated with stem cell therapy.

David A. Shaywitz, an endocrinologist and stem-cell researcher at Harvard University, wrote in an article that appeared in the Washington Post and the San Francisco Chronicle:

"Advocacy groups must ...level with their stakeholders and explain why treatments based on stem cells will take such a long time to materialize."

He added, "At the same time, these organizations must continue to push scientists to work harder and achieve results faster, encouraging investigators to keep in mind the patients in whose name the research is being conducted (and funded)."

Shaywitz addressed California specifically:

"The explicit expectation of rapid clinical progress -- a key component of California's stem-cell initiative, for example -- is a recipe for trouble. If embryonic stem cells are rushed into clinical trials before the solid science has been done, the resulting fiasco could easily doom the entire future of the field."

"The truth is that science -- good science -- can be maddeningly slow," the stem cell researcher said.

Special Insights vs. Possible Special Interests

The building blocks are slipping into place. The California stem cell agency has approved the membership of its facilities working group, including four high-powered "real estate specialists."

The law requires that four members of the group be persons with special knowledge of the real estate industry. What that means is that they have deep roots and ties to the real estate business. Nothing wrong with that. They will bring special insight and knowledge that can be very useful to CIRM. It also means that they may have financial interests that may conflict with the interests of the people of California. Under the current CIRM rules, the people of California will never know what those interests might be. They have to trust the agency and the appointees.

The agency issued a press release on the appointments which said:

“Building research facilities for stem cell research will be a top priority for the CIRM. Current federal restrictions on use of laboratory equipment and space add a special urgency to the mission of the Facilities Working Group,” said Interim President Zach Hall, Ph.D. “This outstanding team of experts will ensure that California stem cell researchers will have high-quality laboratories built in a cost-effective manner.”

"The 11-member Scientific and Medical Research Facilities Working Group makes recommendations to the ICOC that governs on interim and final criteria, requirements and standards for applications for, and the awarding of, grants and loans for buildings, building leases, and capital equipment. The Facilities Working Group will also make recommendations to the ICOC on oversight procedures to ensure grantees’ compliance with the terms of an award."

Here is a look what the agency has to say about the four:

"David Lichtenger is President and Chief Executive Officer of Integrity Office Solutions (IOS), which he founded in 1999. Over the past 20 years, Lichtenger has been personally involved in the planning, design, and construction of over 10 million square feet of projects. IOS project management includes: real estate site and lease evaluation, needs analysis, architectural design, engineering, construction, technology, furniture, A/V, security and relocation services with a guaranteed price and schedule completion date. Projects have included many types of facilities: mission critical data centers, biotechnology and engineering laboratories, clean rooms, medical facilities, offices and manufacturing facilities. IOS serves clients across business sectors: technology, medical device, biotechnology, consulting, financial, healthcare, manufacturing, and non-profit. Prior to IOS, Lichtenger was involved in various real estate development projects."


"Edward M. Kashian of Fresno is the CEO and founder of Lance-Kashian & Company, one of the Central Valley’s leading firms in real estate development, asset management and property management. It has served California since 1964, developing regional shopping centers, office complexes, industrial projects and pioneering master-planned corporate communities. Kashian was a partner in the first “power center” built in the country, which still exists in Fresno. Currently he is the managing partner for River Park Properties, developers of River Park Shopping Center, the co-managing partner for Fancher Creek Properties, LLC, a general partner of Kashian Enterprises and the Fresno Historic Chinatown, LLC."

Deborah Hysen is currently Project Director for the California Performance Review, adjunct to the Department of General Services (DGS). She is responsible for start-up and day-to-day functions of this comprehensive review of government established by Governor Arnold Schwarzenegger in 2004. Hysen previously served as Acting Chief Deputy Director at DGS, where she directed the operations of 14 operating divisions and offices providing services to state agencies throughout California, including the Division of the State Architect, Real Estate Services, Office of Public School Construction and Procurement. As a Senior Property Manager at Insignia Commercial Group, she established and implemented policies and procedures that governed the financial performance of the Citibank Building in Los Angeles, a one million square foot Class “A” high-rise. Hysen was previously a property manager for Columbia Savings and Loan, followed by three years as General Manager of Optima Capital Management.

"Albert “Rusty” Doms was CEO and President of his company, Karsten Realty Advisors, from 1972-1994. The company provided real estate investment management services for pension funds and development management services. Before running Karsten, Doms spent six years at Economics Research Associates performing market research and financial feasibility studies for real estate and recreation properties. Mr. Doms has spent several years in service to his community and volunteering for non-profit organizations in various roles, such as Pomona College, the Children’s Bureau, the Los Angeles Building Authority, St. John’s Health Center Foundation, and the Project Advisory Committee for Los Angeles County."

For more details on their professional background see this link.

A Retrospective on Prop. 71 in Houston

If you are looking for a hot time this weekend – stem cell wise – check out Houston.

The Stem Cell Policy and Advocacy Summit gets underway there beginning tomorrow. The Genetics Policy Institute, which is sponsoring the conference, says, "This is a critical time for the advocacy community to develop winning strategies to overcome Draconian legislation and secure adequate funding for research."

South Korea's Woo Suk Hwang will appear. Also scheduled is a look at California post-Prop. 71, including a talk by Jim Battey of the NIH. The political consultant behind the Prop. 71 campaign, Paul Mandabach, and others involved in the campaign will be appearing as well.
You can read more about the conference here.

Effort to Shunt SCA13 Fails

The proposed ballot measure to tighten oversight of the California stem cell agency has survived a move to sidetrack it back into a legislative committee. The legislation remains on the Senate floor and could come up for a vote as early as Thursday (June 9).

Sen. Joe Dunn, D-Santa Ana, who has made his legislative bones chewing up energy companies, Wednesday futilely attempted to have the proposal sent to the Judiciary Committee, which he chairs, although the bill has already cleared three legislative committee.

CIRM and Sen. Deborah Ortiz, D-Sacramento, are at loggerheads over her proposed constitutional amendment. Ortiz supported Prop. 71, which created the stem cell agency, but believes the agency should be more accountable and open and ensure that therapies developed with state funds are available to all. The agency believes her measure, SCA13, would cripple the agency and delay cures that could save lives.

One of the key CIRM arguments holds that SCA13 would endanger the issuance of the $3 billion in bonds to fund research. But the state's bond counsel, Orrick, Herrington & Sutcliffe, denies that in a very brief June 7 memo to Ortiz and stem cell chairman Robert Klein.

If you are truly a policy wonk, here are the two salient paragraphs from the memo:

"As drafted, we do not believe the new Section 9(a) (of SCA13) would be an impediment to the issuance of bonds by the State. This is based on the inclusion of the term 'seek to ensure' in the measure, which changes this from a prescriptive rule to a statement of intent or aspiration. We do not believe officials at the ICOC would have a difficulty certifying that they will be seeking the results set out in Section 9(a), although of course we cannot speak for them. We understand the language circulated at the ICOC meeting yesterday (Monday) morning did not include the words 'seek to.' In the absence of those words, we would continue to believe, as stated in a prior Memorandum to (an aide to Ortiz), that such a provision in Article XXXV would be a significant problem for the issuance of bonds.

"Nothing in the proposed Section 9(a) interferes with the ability of the State to issue tax-exempt bonds. As we have stated numerous times in writing and in conversations with you, the final determination of our ability to opine on the tax exemption of any particular issue of State bonds will depend on many factors, including the exact terms of intellectual property conditions which are included with grants or loans made by the CIRM."

The Bee: State Bond Counsel Says No SCA13 Problem

California's bond counsel says the proposed stem cell ballot measure will not interfere with the ability of the state to issue stem cell research bonds, contrary to the position taken by CIRM.

The Sacramento Bee Wednesday disclosed the existence of the memo from Orrick, Herrington & Sutcliffe. The Bee said in an editorial, "(Sen. Deborah) Ortiz has worked to amend her measure so it would have no possible impact on the issuance of stem cell bonds. The state's bond counsel - Orrick, Herrington & Sutcliffe - confirmed that point Tuesday when it issued a memo stating: 'Nothing in the proposed Section 9(a) interferes with the ability of the state to issue tax-exempt bonds.'"

The piece also discussed the opposition of Democratic senators, Sens. Jackie Speier, D-Hillsborough, and Joe Dunn, D-Santa Ana, to SCA13. Dunn is reportedly seeking to have the measure removed from the Senate floor and sent to the Judiciary committee he chairs. The measure has already been through three Senate committees.

The Bee said, "Dunn and Speier have built their reputations on consumer protection, accessible health care and open government. But Monday, they blatantly pandered to stem cell czar Robert Klein II, who orchestrated a lobbying campaign Monday against Sen. Deborah Ortiz, D-Sacramento, and her SCA 13 measure.

"Ortiz's measure, among other things, would guard against public funds going to companies that secretly set up consulting and stock deals with scientists who recommend the funding.

"This is not just an abstract concern.

"As Dunn knows, the energy giant Enron secretly paid researchers at Harvard to churn out reports extolling the deregulation scheme that California ultimately adopted. Those conflicts came to light only after California became mired in an energy crisis Enron helped create."

Dunn has been heavily involved into looking to energy issues related to the California electricity crisis of a few years back.

Chron Makes Stem Cell News Easier to Find

The San Francisco Chronicle is aggregating its stem cell coverage online, a move that should be emulated by other California newspapers and news sites. Now if the SFGate would only put an RSS feed on the package so that it would alert "stemmies" automatically when updates are made. You can see what appears to be all of the 2005 stem cell stories that have appeared in the paper by just going to this link. The package goes back to Jan. 4 and also includes editorials, another useful feature.