Text of Reconsideration Letter From Cascade

Here is the text of the reconsideration letter from Cascade concerning its application for a grant from the California stem cell agency.

July 3, 2008
Mr. Robert Klein, J.D.
Chairman, ICOC Committee
210 King Street
San Francisco, CA 94107
Re: Request for Reconsideration - New Cell Line Development RFA 07-05 Review Process

Dear Committee Member:
Last Thursday evening, 26 June 2008, I had the pleasure of appearing before your Committee, officially on behalf of Cascade LifeSciences (See Exhibit A) and perhaps unofficially as a voice for industry, regarding our expectations and experience with the RFA and Grant Review noted above. To quote Mark Twain, “I apologize for the length of my letter; I did not have time to write a shorter one.” Three minutes to comment on a $1MM decision is remarkably challenging. For the benefit of the Committee and with the luxury of a written response, let me see if I can more clearly articulate our expectations, experience and suggestions going forward.

First, I would like to start at the beginning. Prop. 71 is a very innovative and groundbreaking paradigm shift in the funding of research. We applaud the CIRM mission and the stewardship of the Committee. The mission statement of Prop. 71 makes very clear that although science is a laudable goal it is not the end game. Products that treat, cure, or enhance our lives are the end game. Fast forward 10 to 15 years and I would like to be so bold as to suggest that the ultimate arbiter of the success of CIRM or Prop. 71 will be PRODUCTS. Not research achievements, not publications, not patents, not even Nobel Prizes. All of these are important milestones that will advance our efforts and may even contribute to the economy of California. But “John Q. Public” will only benefit directly by the development of innovative stem cell related PRODUCTS that I believe will change medical approaches to disease in fundamental ways.

In the interest of full disclosure, I prefer to admit my biases up front. I have a bias toward products. I am also a lawyer, the Chief Business Officer of Cascade LifeSciences, and a taxpayer. My product bias has been cultivated over 20 years with two of the San Diego biotech pioneers, Hybritech and IDEC. (See Exhibit B, Background). What I know about Stem Cells I have learned, but what I know about product development, I have lived.

I believe that industry and CIRM share the same goal of enhancing product development. Although funding cutting edge research and academic inquiry are part of the larger goal, I believe that industry will be the ultimate conduit through which products must run the clinical, regulatory and marketplace gauntlet.

RFA 07-05 and Cascade’s Expectations

Upon understanding that CIRM was opening up funding under the RFA process to for-profit entities, we were quite pleased and encouraged. Funding critically important translational research that can neither be funded by the NIH nor is of interest to all but a very few private investors seems prudent and product focused.

The specific language in the Objective of RFA 07-05 perhaps set our expectation too high:

Page 1 -- Somatic cell nuclear transfer (SCNT) , a method for reprogramming that is well-established in several mammalian species, has not yet been achieved with human cells, but recent success has been reported in non-human primates. " [This is Dr. Mitalipov's work published in Nature and exclusively licensed by Cascade]

Page 2. "The needs may in the future be met by derivation of hESC following SCNT..."

Page 2. "CIRM proposes a new program to address the need for new types and sources of human pluripotent stem cell lines and for the optimization of existing methods for their derivation." To be candid, we believed that the translation of our SCNT primate work into the SCNT generation of hESC was right in the "strike zone" of the RFA as written. The alternate non-embryo sourced approach, iPS is a very important scientific avenue of research and should be funded as well. That said, SCNT is a very compelling opportunity to develop genetically matched cell lines that may lead to human therapeutic products.

Cascade’s Grant Review Experience

Our responses to the Reviewers’ comments are beyond the scope of this letter but are attached as Exhibit C for independent review. For the record, we filed a formal request with Dr. Trounson to rebut the conclusions and comments of the reviews but were told by Staff that there was no such process. We were told that the only avenue for rebuttal would be based on conflict of interest. As the reviewers are anonymous, it is unclear how this would ever be realistic. Two additional points are striking in this regard. First, we now understand that after our departure on Thursday evening, Rusty Gage, one of our esteemed colleagues here in San Diego was allowed to rebut reviewer comments and, hence, did receive funding. We are unclear on how this rebuttal process works and why we were denied any opportunity to dialogue on the merits of our grant application. Second, I understand second-hand that an ICOC member believed my discussion at CIRM was flawed, for example, because I did not address the mistake regarding efficiency of our SCNT. This is unfortunate, as we were told our request for rebuttal was rejected and that we were not allowed to discuss the merit or lack of merit of the specific review of our application but our three minutes was limited to expressing our concerns about the process and our suggestions for improvement from an industry perspective.

By way of example, we would like you to better understand the disconnect between our expectations and our experience with this Grant Review. As you will note in Exhibit C, most of the review comments we received on our Grant Application were factually incorrect. We are unable to reconcile the review committees’ comments with the stated objectives of the RFA, the articulated criteria for review and our actual grant submission.

For example, Reviewer #1 comment was:
"Lack of Novelty, pure translation of the non-human primate work into humans."
This seems to defy logic and the mission of human therapeutics. Moreover, this does not seem to be consistent with the objectives published by CIRM in its RFA, which specifically calls out the "hurdle" of human SCNT as a fundable goal. I would venture to suggest that successful application of SCNT to humans will be a scientific achievement and will be an “above the fold” kind of worldwide news story. Finally, at the CIRM ICOC meeting, Dr. Uta Grieshammer, presented the review committees grant criteria and noted specifically that the review team was advised that "novelty" was NOT a priority for these types of grants.

Also at the meeting, Dr. Trounson announced that no SCNT grants had been funded due to some sort of vague policy concern about access to human oocytes and the challenges this had created in other countries. (We are aware of Grant#R31-00404 related to SCNT that was previously funded).

First, this was "moving the goal posts" after we had submitted our grant application. Second, we appreciate the challenge of securing oocytes but we at Cascade had been fortunate enough to secure a collaboration with La Jolla IVF clinic to supply all the oocytes we need to proceed with our cell line development effort. Moreover, if this was truly the reason for flagging our grant application as non-fundable, CIRM should have just told us that in writing and explained how they were going to proceed, if at all, in the area of SCNT.

A factually incorrect assumption about our “efficiency” may have been the fundamental error that doomed our application. The CIRM reviewer commented:
The ability to generate individualized human embryonic stem cell lines using somatic cell nuclear transfer from either healthy individuals or patients with specific disease states is an exciting and yet technically demanding prospect. To date, no one has successfully cloned human embryonic stem cells, although recently, a group at University of Oregon Heath Sciences Center has successfully derived primate embryonic stem cells, with an efficiency of approximately 0.3%
This is factually incorrect at two levels. First, we are unclear where the reviewer got the 0.3% efficiency rate. This is not a number we have used. Our November 2007 Nature paper calls out 0.66% efficiency at page 497. Our grant application (filed Jan 2008) describes in detail at page 8, "These results represent a significant reduction in the number of oocytes required to produce a single ESC line over previously reported efficiency (from 152 to 30) providing the important foundation to conduct the proposed studies in humans." 1 ESC cell line out of 30 oocytes is actually 3.3%.

I am unclear how this fundamental oversight occurred. Mistake? Miscommunication? Pre-existing bias? Misunderstanding? Suffice it to say, we believe that the incorrect information about efficiency was the driving force behind the reviewers’ comments and failure to fund.

Suggestions and Action Items for Consideration.

Our hope is that thru expressing our concerns and our experience we will be able to make industry (For-Profit) a viable partner in the mission of Prop 71. With that in mind, we would like to suggest the following ideas for review and consideration by the ICOC:

Industry representation on CIRM grant review teams

Formal appeal process or ability to respond in writing to reviewer comments. See, for example, SBIR, STTR, NIH funding for models of review cycles.

Holding the review team to the published review criteria--e.g., novelty is not a priority criteria.

One of the review criteria should always be the impact of the research on the advancement of human product development. If the Rusty Gage review reconsideration is as I understand it, it seems that there is one set of rules for a deservingly prominent scientist and a different set of rules for Cascade LifeSciences/Industry. We also filed a letter with CIRM asking for the opportunity to comment on our grant review and were denied. This seems, without more complete information, to be unfair.

Perhaps separate academic/not-for-profit grant application review from for-profit review. Comparing not for profit grants (institutions that are Grant Writing Machines) with the grant applications of fledgling biotech companies is fundamentally unbalanced.

Although I believe that Industry is a key element of Product development and we desire to work with CIRM to advance the cause, if CIRM’s funding criteria or standards are inconsistent with industry participation or pragmatic product development, we need to know that earlier rather than later.

I am personally and professionally committed to assist CIRM in making industry an equal partner in achieving the mission of Prop 71. I would look for guidance from the ICOC on how we can work through some of these administrative and structural challenges.

Although we are disappointed by the CIRM review and admittedly discouraged by the process, I trust that the agency and the applicants will evolve favorably with time and experience.
As our distinguished Governor would say.............."We'll be Back."
Sincerely,

Kenneth J. Woolcott
Chief Business Officer
Cascade LifeSciences Inc
10398 Pacific Center Ct.
San Diego, CA 92121
kjwoolcott@aol.com
858-945-4667

KJW/rrc
cc: Alan Trounson, President CIRM
Howard Birndorf
Sophia Khaldoyanidi


Exhibit A

Cascade LifeSciences

Founded 2004
San Diego, CA
Howard Birndorf, Chairman
Kenneth Woolcott, Chief Business Officer
Sophia Khaldoyanidi, Ph.D, MD, Chief Scientific Officer
Larry Respess, General Counsel
Exclusive Licensee of Novel SCNT technology developed at Oregon Health Sciences University (OHSU) and published in Nature, Nov 2007. (First successfully SCNT in Primates)
Dr. S. Mitalipov, inventor of SCNT patents and consultant on human SCNT effort.
Exhibit B



KENNETH J. WOOLCOTT


6100 La Jolla Scenic Drive South
2000 First Avenue
La Jolla, CA 92037
Suite 2304
858-454-8496 phone/fax
Seattle, WA 98121
kjwoolcott@aol.com
206-795-4667 phone


GENERAL COUNSEL & LICENSING EXECUTIVE
Strategic Advisor . . . Entrepreneurial Counsel . . . Transactional Architect


Summary: Executive with over 20 years of experience and outstanding accomplishment in the Biopharmaceutical Industry, including 12 plus years of key legal and management responsibilities at IDEC Pharmaceuticals Corporation (now Biogen IDEC) through its growth from a market cap of $50M to a company with a valuation of over $10B. Provided counsel and craftsmanship on over $1B in global corporate alliances and public financings. Contributed legal leadership and team influence in the development and FDA approval of two oncology drugs, RITUXAN (first antibody approved for cancer) and ZEVALIN (first radioimmunotherapy approved for cancer), currently generating annual U.S. sales of over $1.9B. Provided leadership in diverse and challenging roles based on the growth and needs of the organization, for example:

Strategic advisor with entrepreneurial zeal and global biopharma perspective.
Counsel with intra-disciplinary experience, scientific background and a proven track-record of incisive legal analysis and problem-solving.
Executive officer with achievement in operational management, strategic planning, business development, team building, and change agent in development of company’s core values as it grew from 70 to over 800 employees.
General Counsel and Corporate Secretary with broad experience in public company matters, corporate governance, SEC compliance, FDA issues, intellectual property strategy, transactional negotiation and crafting, corporate partner management, litigation management, and government relations.
PROFESSIONAL EXPERIENCE AND KEY METRICS

Woolcott Bioscience Strategies 2002-present
Transactional and Business Development Consulting Services

Chief Business Officer, Cascade Lifesciences Inc 2007 to present

Strategic Advisor 2005 to 2007
Nativis, Inc. San Diego, CA

Acting Vice President, Business Development & General Counsel 2004-2005
Imagine Pharmaceuticals, San Diego, CA




IDEC Pharmaceuticals Corp., San Diego, CA 1989-2002

VP, General Counsel, Licensing Executive and Secretary 1994-2002
General Counsel, Licensing Executive and Secretary 1992-1994
Deputy General Counsel and Secretary 1991-1992
Intellectual Property Counsel 1989-1991

Counsel to approximately $700M in IDEC Public Equity & Debt Financings:

Initial public offering (IPO): (1991--$52 M)
Follow-on equity offerings: (1994 – $8M; 1996 -- $50M; 2000 -- $473M)
“LYONS” convertible debt offering: (1999 -- $113M)

Counsel and negotiator for approximately $300M in corporate alliances from 1991-00, including:

Zenyaku/Rituxan – 1991, $10M SmithKline/CD4 – 1992, $60M
Mitsubishi/B7 – 1994, $12M Seikagaku/CD23 – 1995, $26M
Genentech/Rituxan – 1995, $57M Eisai/gp39/CD40L – 1995, $38M
Kirin, BI, and Chugai/ Upjohn/9AC – 1997, $12M
Expression System – 1995-7, $15M
Schering AG/Zevalin –1999, $47M Nordion /Yttrium – 2000, $20M
Member of core team of executives that led turnaround from $50M valuation and six months of cash in 1994 to pivotal Genentech partnership/cash infusion and over 800% increase in stock valuation in 1995.
Managed key patent litigation (IDEC v. Corixa et al), including selection process for lead counsel and development of declaratory judgment strategy over a multi-year period. Strategically, IDEC prevailed in securing venue in San Diego Federal District Court, while actions in Delaware and Northern District of California were dismissed. In October 2003, summary judgment was granted in favor of IDEC declaring invalid and unenforceable all of Corixa’s subject patents. The case was ultimately settled on favorable terms
Executive Committee level advisor on IND, clinical strategy, Advisory Committee meeting, manufacturing subcontracting and inspection, approval and launch of RITUXAN and ZEVALIN.
Early advocate and adopter of Rule 10b-5 executive stock selling plans, including successful initiation of amendment to California State Securities Laws to conform with provisions of new Federal law
Managed preparation and filing of SEC corporate disclosure documents including crafting of numerous sensitive and challenging press releases.
Managed legal aspects of “Poison Pill” adoption and revision
Lead legal analysis and selection of RITUXAN and ZEVALIN trademarks
Coordinated legal and peer analysis for stock splits 2:1 21 Dec ’99 and 3:1 18 Jan ‘01
Built and managed a high-performance Legal Team of thirteen professionals
Managed Corporate Policy on Insider Trading and Stock Trading Windows
Member of Executive Committee, Corporate Secretary and liaison with Board of Directors
Strong presentation skills and recognized public speaker

Christensen, O’Connor, et al., Seattle WA 1987-1989
Associate


Hybritech, Inc., San Diego, CA 1985-1987

Intellectual Property and Licensing Counsel 1986-1987
Patent Counsel 1985-1986

EDUCATION
George Washington University, Washington, D.C.
Juris Doctorate, 1985
Leader, Save the Night Law School Campaign, 1984
President—Evening Division, Student Bar Association, 1984

University of Maryland, College Park, MD
MS candidate/Chemical Engineering, 1980-81

Pacific Lutheran University, Tacoma, WA
B.S,. Biochemistry, Cum Laude, 1980

PROFESSIONAL ORGANIZATIONS

California State Bar Association
Washington State Bar Association
District of Columbia Bar Association
United States Patent Office
Registered Patent Attorney (#30,824)
American Corporate Counsel Association
Founding Director of San Diego Chapter, 1994
American Association of Corporate Secretaries
Biotechnology Industry Organization
Founder of General Counsel Committee, 2001

COMMUNITY AFFILIATIONS

Burnham Institute for Medical Research, La Jolla, CA
Trustee and Chairman of Technology Transfer Committee., 2004 to present
Basketball Club of Seattle, L.L.P.
Partner, 2002 to 2006
The Jimmy V Foundation for Cancer Research
Friends of V Member
The Starlight Foundation for Children
Freshstart , Inc.




Exhibit C

Rebuttal letter & REQUEST FOR rECONSIDERATION
sophia Khaldoyanidi, ph.d., m.d.,
chief scientific officer
cascade lifesciences, inc.

RL1-00656-1: Generation of human ESC lines using SCNT
Executive Summary Comments
Comment #1: The proposal lacks a detailed description of how the resultant cell lines will be assessed and characterized for pluripotency.

Response #1: This concern was raised by the Reviewer #2. However, the description of the pluripotency tests is described on page 5 of the grant application (Step 4 of our protocol). We proposed to evaluate pluripotency of SCNT-ESC lines based on stemness marker expression and both in vivo and in vitro differentiation using standard state-of-the art methods. These methods include immunocytochemistry, flow cytometry, quantitative RT-PCR, embryoid body formation and teratoma assay. All these assays are standard in stem cells biology field and are routinely used by the members of our scientific team (see list of publications provided in Part C of this grant application).

Comment #2: No data is presented suggesting that these assays [for pluripotency] are routinely available in the applicant’s laboratory.

Response #2: Due to the space constrains of the Preliminary Results and Feasibility section (2 pages), we have chosen to present the results supporting the novel and scientifically-challenging aspects of the SCNT technology. The concern regarding our ability to run the pluripotency tests was raised by the Reviewer #2 and the rationale for this concern is not clear to us: the assays for pluripotency are standard techniques used in every stem cell laboratory including laboratories leaded by the members of our scientific team. The fact that we are familiar with the standard techniques used in our field is supported by our publications (Part C of this grant application).

Comment #3: The collaborator with the primate cloning expertise proposes to spend 25% of his/her time in the applicant’s laboratory in California. However, reviewers expressed serious concern that it will be logistically difficult for the out-of-state collaborator to be available at the time when the oocytes are donated.

Response #3: Anyone with experience with IVF understands that the day of oocyte harvesting is predicted in advance based on the rigid hormone treatment schedule for each donor. Based on this well known schedule, the travel for Dr. Mitalipov from Portland to San Diego (2.5 hour duration) can be easily planned in advance.

Comment #4: Regarding the source of the oocytes, which will be obtained from an in vitro fertilization (IVF) clinic, one reviewer felt that the procurement of 100 oocytes per year seems reasonably achievable. However, others felt that not enough information is presented in the application to firmly support that the applicant can obtain the high quality eggs.

Response #4: Due to the space constrains, we did not have an opportunity to explain in the body of the grant as to how human oocytes will be obtained. This information is provided very clearly in the letter of collaboration from Dr. Smotrich of La Jolla IVF Clinic (Part C). Dr. Smotrich established a list of young and healthy volunteers who desire to donate oocytes specifically for this SCNT project. All these donors were pre-tested and demonstrated a high oocyte production (20-25 oocytes per cycle) in response to hormonal stimulation. We do not intent to use oocytes that have been obtained for the purpose of IVF treatment and were not used due to poor quality.

Comment #5: If they [Cascade LifeSciences team] have access to 100 eggs, some reviewers argued that it would not be enough to make a cell line in 1 year, given the primate success rates (0.3%).

Response #5: The information on the 0.3% efficiency presented to the Study Section by the Reviewer #2 is factually incorrect. Even if the reviewer was mistakenly relying on our Nov. 2007 Nature publication, that efficiency was reported as 0.66%. More importantly, on pages 5 and 8 of this grant application we provided information that the efficiency of SCNT in primates was 3.3% (1 ESC line per 30 oocytes)

Comment #6: Reviewers mentioned that there is no consideration of how the resultant cell lines, if any, will be distributed to other research groups and under what conditions as requested in the application.

Response #6: This is factually incorrect. This concern was raised by the Reviewer #2. However, this information has been provided on page 10 of the application (last paragraph).
In summary: Our response demonstrates that the Reviewer #2 provided factually incorrect information to the Study Section. In particular, the efficiency (which is an important parameter) was erroneously reported. Moreover, despite the challenges others may legitimately face in securing oocyte donors, we were able to secure reliable and excellent source of oocytes to advance our work in humans. Finally, to suggest our proposal is not novel is a flawed conclusion as Human SCNT is a stated goal of the RFA and the stated RFA review criteria specifically noted that “novelty” was NOT a measure for funding. As a result of these factual errors and an unknown change in SCNT funding philosophy in mid-review, our project received a non-fundable score. We requested an opportunity to rebut. We were denied.
REQUESTED ACTION: We respectfully request that the ICOC reconsider our grant application for funding.

CIRM's Grant Review Process: Complaints About Errors and Appeals

California's stem cell agency has pumped out more than $554 million in awards for stem cell research, but this year grumbling has emerged about its secretive awards process, which officially does not permit rebuttal in the case of errors and allows appeals only in the case of conflicts of interest.

On Sunday, reporter Terri Somers of the San Diego Union-Tribune became the first mainstream media writer to examine the issue in some detail.

Somers used June's meeting of the CIRM board of directors to discuss the subject, including additional interviews with researchers.

Somers wrote that CIRM is

"...basing its funding decisions on recommendations from panels of scientists who sometimes make significant factual errors in their reviews of grant requests, some applicants say.

"Yet there is no way for applicants to point out or rebut the errors – at least not through a formal appeals process, such as the one used by the National Institutes of Health.

"'I cannot tell you how frustrating it is to get turned down for a grant and have no recourse other than to shred it and all the time you spent doing it,' said Jeanne Loring(see photo), a researcher at the Scripps Research Institute in La Jolla.

Somers said CIRM has no plans to change its policies concerning appeals or error. She quoted CIRM Chairman Robert Klein as saying the NIH appeal process is too slow for CIRM. He said an NIH appeal can take as long as two years.

Somers did not raise the closed-door nature of the grant reviews as an issue, but applicants do not have access to the proceedings. Nor do apparently many of them know that they can appear publicly before CIRM directors and ask them to change the recommendations of scientific reviewers or even write a letter to that effect.

Directors have final authority on grant approval but generally ratify decisions of the scientific reviewers, without even officially knowing the identities of the research applicants. Their identities are withheld but in many cases can be discerned through the public summary of reviewers' comments.

Somers quoted one CIRM director, Jeff Sheehy of the University of California, San Francisco, about the review process. Sheehy is also a patient advocate member of the CIRM grant review group and played a role last month in airing concerns by one scientist, Fred Gage of the Salk Institute.

Sheehy told Somers:

"We may have missed some good science, but I don't think we have funded (bad science)."

While CIRM does not plan changes in its review process, Klein did tell Somers about one option for disgruntled applicants. She wrote:

"If a scientist wants to rebut an error of fact of great scientific importance, he or she should point it out to institute President Alan Trounson or Chief Scientific Officer Marie Csete, Klein said.

"Those scientists could then sort out the issue with the reviewers and decide whether it needs to be brought to the board's attention, he said."

Our take: If that is CIRM policy, all applicants should be informed about that possibility as they apply. Fairness and the appearance of fairness are critical to CIRM's credibility.

Here is a link to a detailed critique by one applicant and our report from the June meeting of CIRM directors.

Klein's Possible Salary: Comments From CIRM

The question of a salary, possibly exceeding more than $500,000, for the chairman of the California stem cell agency is a "non-issue" and a "non-reality," according to the agency's chief communications officer.

In an interview with the Marc Strassman of the Etopia News Channel, Don Gibbons explained that Robert Klein has not yet decided whether to ask CIRM board of directors whether they want to pay him for his work at the state agency. Klein, a multimillionaire real estate investment banker, refused to take a salary when he was elected to his post by directors in 2004.

More recently, however, Klein has more than once indicated that the question of a salary for both him and the vice chairman, Ed Penhoet, is something that the board is likely to have to deal with.

Last month, we asked Penhoet, who is a California venture capitalist and one of the co-founders of Chiron, about his position on taking a salary. He replied:

"I don't think it's appropriate for me to comment on personnel matters ( including my own)."

In the Etopia interview, Gibbons additionally discussed CIRM's opposition to legislation designed to ensure affordable access to CIRM-financed therapies. He also noted that 56 research papers have been published so far by CIRM grantees.

You can hear the 10-minute Gibbons interview here.

Nosing Around for Stem Cell Millions

More camels are trying to crawl into the hundred-million-dollar, California stem cell supplier tent.

But just how many and which camels ultimately will end up enjoying the bounty of the Golden State is very much up in the air.

Both the state's $3 billion stem cell agency and the California Legislature have different approaches to defining California supplier for the purposes of research funded by CIRM. Prop. 71 requires CIRM grant recipients to give purchasing preference to California businesses. However, the measure failed to define exactly what a California supplier is.

So nearly four years after passage of Prop. 71, the state is trying to deal with the issue. The question drew a small platoon of business representatives to the two-day meeting last week of the board of directors of the agency. The meeting ran long and no resolution appeared imminent, so there was little public testimony but plenty of private discussions.

CIRM, the various interested parties and a representative from the office of Assemblyman Gene Mullin, D-San Mateo, basically said they need more time to negotiate the issue and talk with each other.

Mullin's supplier definition bill, AB 2381, is now before the Senate Appropriations Committee after easily winning Assembly approval. The measure was originally supported by Invitrogen, which has now backed away. Instead, it is supported by Becton, Dickinson and Co., ThermoFisher Scientific and the Advanced Medical Technology Association.

Here is the key wordage in the July 2 version of the measure. Following that language is the last available public language from CIRM. Be aware that these definitions could change with rapidity. If you want to have a hand in the debate, contact Mullin's office and CIRM soon.

"'California supplier' means any sole proprietorship, partnership, joint venture, corporation, or other business entity that meets any of the following criteria:
"(A) The owners or policymaking officers are domiciled in California and the permanent, principal office or place of business from which the supplier's trade is directed or managed is located in California.
"(B) A business or corporation, including those owned by, or under common control of, a corporation, that meets all of the following criteria:
"(i) Has owned and operated a manufacturing facility or research facility located in California that researches, develops, builds, or manufactures products for life sciences research, continuously during the five years prior to submitting a bid or proposal to provide supplies to a California Institute of Regenerative Medicine (CIRM) grantee.
"(ii) Has been licensed by the state on a continuous basis to conduct business within the state during the five years prior to submitting a bid or proposal to provide supplies to a CIRM grantee.
"(iii) Has continuously employed California residents for work within the state during the five years prior to submitting a bid or proposal to provide supplies to a CIRM grantee.
"(C) The entity produces, builds, or manufactures a product or products in California and for the specific product or products that are used by CIRM facilities grantees.
"(2) For purposes of qualifying as a California supplier, a distribution or sales management office or facility does not qualify as a manufacturing or research facility."

Here is the CIRM language from last week:

"'California supplier' means any sole proprietorship, partnership, joint venture, corporation, or other business entity:
"(1) whose permanent, principal office or place of business from which the supplier’s trade is directed or managed is located in California; or
"(2) that includes a business unit, division or subsidiary whose permanent principal office or place of business from which the unit, division or subsidiary’s trade is directed or managed is located in California, for the specific product or products that are sold by the unit, division or subsidiary to CIRM grantees; or
"(3) that employs at least one-third of its total employees in California; or
"(4) that produces, builds, or manufactures a product or products in California for the specific product or products that are sold to CIRM grantees; or
"(5) that sells a product or products in California, for the specific product or products that are sold to CIRM grantees, so long as the supplier certifies that at least 50% of the cost of the product is attributable to activity undertaken in California."

Kuehl on Klein Salary and CIRM Legislation Prospects

California state Sen. Sheila Kuehl says she doesn't mind if the chairman of the $3 billion California stem cell agency solicits private funds to pay his own salary, although she says the agency should be barred from accepting cash from applicants.

However, the question of private solicitation for salaries is probably moot. CIRM Chairman Robert Klein has told John M. Simpson, stem cell project director for the Consumer Watchdog group, that he has backed away from the solicitation plan. Simpson told the Etopia News Channel Wednesday that Klein now thinks his proposal is not a good idea.

Kuehl, D-Santa Monica, heads the state Senate Health Committee and is co-author of legislation, SB 1565, aimed at ensuring affordable access to CIRM-financed therapies. CIRM directors officially opposed the legislation last week.

She made her comments regarding Klein in an interview with Etopia News. She also said she is "very satisfied with the progress" of CIRM. On the federal level, she said that changing federal restrictions on funding for human embryonic stem cell research may not even be in the top 10 priorities of Barack Obama.

Kuehl said he has heard "no negatives" from the governor's office on her CIRM bill, which is now in the Assembly Appropriations Committee and close to final passage. Unless Big Pharma bends the governor's ear, she expects the measure to be signed into law.

The bill has had easy going in the legislature. No lawmaker has voted against it.

You can hear Kuehl's 19 minute interview here.

Fresh Comment

Larry Ebert has posted a comment on the "salary freeze" item.

Video Overview of CIRM: From Bob Klein to Stem Cell Beneficiaries

John M. Simpson, stem cell project director for the Consumer Watchdog group, and yours truly participated in a video teleconference interview earlier today with Marc Strassman of the Etopia News Channel concerning the California stem cell agency.

The nearly 44-minute session includes a discussion of CIRM's accomplishments, some of its problems, intellectual property issues, Prop. 71 campaign promises, the possible salary for CIRM Chairman Robert Klein and much more.

You can see it all right here.

CIRM Salary Freeze: Sharing the Pain

The California stem cell agency's budget contained a little surprise last week – one that was not contained in the proposed spending plan presented to its Finance Subcommittee.

The proposal for the fiscal year that began today imposes a salary freeze through December. It is not a move that is financially necessary at the $3 billion agency, but one designed to show CIRM's fiscal responsiveness.

John M. Simpson, stem cell project director for the Consumer Watchdog group, commented on the freeze, which CIRM executives said the staff had agreed to. Simpson wrote on his group's blog:

"This is a sensible PR gesture by an agency who's leadership too frequently in the past has not seemed to understand that it is part of state government. Kudos for the step."

Simpson continued:

"It's difficult to know the exact financial impact. The proposed fiscal 2008-09 budget includes $250,000 for merit and cost-of-living increases. How much of that falls in this calendar year and how much comes in 2009 is not clear.

"Nonetheless -- as with many things in life -- it's the thought that counts . And this was a good one."

The reason for freeze? To show "solidarity" with the rest of the state and share the pain of the fiscal extremis in which California finds itself.

Simpson said that CIRM could go a little farther, demonstrating true fiscal leadership and cut by 10 percent the salary of any CIRM staffer making more than $190,000 a year.

Our take? With 10 years experience as business editor of a large daily newspaper and roughly that many years also as labor union representative, I am skeptical of salary freezes. They disproportionately affect employees at the lower pay scales, who have more difficult economic times, particularly with today's rising energy and food costs.

In the case of CIRM, the staff really has no choice concerning the freeze. Management wants it. Drag your feet, and you are not a team player or worse.

CIRM staffers are relatively well-paid by state standards so a case can be made that a freeze is reasonable. Symbols are powerful. An even more powerful symbol – a 10 percent pay cut for CIRM execs -- is suggested by Simpson, but we suspect that will remain a suggestion – not a reality.

Cascade LifeSciences Critiques CIRM Grant Review Process; Questions Raised about Fairness and Facts

Cascade LifeSciences of San Diego is one of the few companies to appear at a meeting of the board of directors of the $3 billion California stem cell agency in connection with rejection of its grant application.

Kenneth Woolcott, chief business officer of the firm, expressed dismay last Thursday night concerning CIRM's scientific grant review process. Among other things, he said that reviewers appeared not to have read the application very carefully.

Following the meeting, we emailed him and asked if he would like to comment further with an eye to making constructive suggestions for changes in the review process. We are asking CIRM if it has any comment on Woolcott's remarks, the text of which follows:

"We were disappointed by the CIRM review and discouraged by the process. I trust that the agency and the applicants will evolve favorably with experience. As our distinguished Gov would say..............'We'll be Back.'

"Our real hope is that through expressing our concerns we will be able to make industry (For Profit) a viable partner in the mission of Prop. 71.

"The mission statement of Prop. 71 makes very clear that although science is a laudable goal it is not the end game. Products that treat, cure, or enhance our lives are the end game. Fast forward 10 to 15 years and I would like to be so bold as to suggest that the ultimate arbiter of the success of CIRM or Prop 71 will be PRODUCTS. Not research achievements, not publications, not patents, not even Nobel Prizes. All of these will advance our efforts and are important metrics and may even contribute to the economy of California. But John Q. Public will only benefit directly by the development of innovative stem cell related PRODUCTS that I believe will change medical approaches to disease in fundamental ways.

"I am a lawyer and the CBO of Cascade LifeSciences, but I am also a taxpayer. I also have an industry bias cultivated over 20 years with two of the San Diego biotech pioneers, Hybritech and IDEC. What I know about stem cells I have learned, what I know about product development I have lived.

"I believe industry and CIRM share the goal of product development. Although cutting edge science and academic excellence are part of the goal, we believe that industry must be the conduit through which PRODUCT run the clinical, regulatory and marketplace gauntlet.

--------
(Editor's note: Here is a brief sketch of the firm provided by Woolcott.)

"Cascade LifeSciences

"Founded 2007
"San Diego, CA
"Howard Birndorf, Chairman
"Kenneth Woolcott, Chief Business Officer
"Sophia Khaldoyanidi, Ph.D, MD , Chief Scientific Officer
"Larry Respess, General Counsel
"Exclusive Licensee of Novel SCNT technology developed at Oregon Health Sciences University (OHSU) and published in Nature, Nov 2007. (First successfully SCNT in Primates)
"Dr. S. Mitalipov , inventor of SCNT patents and consultant on human SCNT effort.

----------

"Our Expectation

(Editor's note: Woolcott's detailed comments follow.)

"CIRM RFA 07-05: New Cell Line Awards

"Page 1, Program Objectives --'Somatic cell nuclear transfer (SCNT), a method for reprogramming that is well-established in several mammalian species, has not yet been achieved with human cells, but recent success has been reported in non-human primates.' [This is Dr. Mitalipov's work published in Nature and exclusively licensed by Cascade]

"Page 2. 'The needs may in the future be met by derivation of hESC following SCNT...'

"Page 2. 'CIRM proposes a new program to address the need for new types and sources of human pluripotent stem cell lines and for the optimization of existing methods for their derivation"

"Cascades Reasoned Expectation:

"Translation of our SCNT primate work into the SCNT generation of hESC is right in the 'strike zone' of the RFA. We were very pleased the CIRM had seen the wisdom of opening up the grant process to industry to help fund this critically important translational research that can neither be funded by the NIH nor is of interest to all but a very few private investors.

"Cascades Competitive Appreciation.

"iPS is a very important scientific avenue of research but SCNT is a very competitive alternative especially for PRODUCTS that are intended for human use.

"Cascades Experience with the Grant Review

"Grant review comments were factually incorrect. Not a matter of subjective scientific debate. Hence, the conclusions were fundamentally flawed. For example, reviewer #1 comment was 'lack of novelty, pure translation of the non-human primate work into humans.' This seems to defy logic and the mission of human therapeutics. Moreover, this does not seem to be consistent with the objectives published by CIRM in its RFA, which specifically calls out the 'hurdle' of human SCNT as a fundable goal.

"A second example of a reviewer's factual error is the comment 'The ability to generate individualized human embryonic stem cell lines using somatic cell nuclear transfer from either healthy individuals or patients with specific disease states is an exciting and yet technically demanding prospect. To date, no one has successfully cloned human embryonic stem cells, although recently, a group at University of Oregon Heath Sciences Center has successfully derived primate embryonic stem cells, with an efficiency of approximately 0.3[s1] %.' This is factually incorrect at two levels and we are unsure of where the reviewer got the 0.3% efficiency rate. Our November 2007 Nature paper calls out 0.66% efficiency at page 497. Our grant application (filed Jan 2008) describes in detail at page 8, Confidential, non-published information, 'These results represent a significant reduction in the number of oocytes required to produce a single ESC line over previously reported efficiency (from 152 to 30) providing the important foundation to conduct the proposed studies in humans.' One ESC out of 30 oocytes is actually 3.3%.

"As we all know development of therapeutics for the monkey population is a very low margin business. [Sorry could not resist]

"Moreover, at the CIRM IROC meeting Dr. Uta Grieshammer, specifically presented the review committees grant criteria and noted specifically that the review team was advise that 'novelty' was NOT a priority for these types of grants. Also at the meeting, Dr. Trounson announced that no SCNT grants had been made due to some sort of vague policy concern about access to human oocytes and the challenges this had created in other countries. First, this was 'moving the goal posts' after we had submitted our grant application. Second, we appreciate the challenge of securing oocytes but we at Cascade had been fortunate enough to secure commitment from LJ IVF clinic to supply all the oocytes we need to proceed with our effort. Moreover, if this was truly the reason for flagging our grant application as non fundable, CIRM should have just told us that in writing and explain how they were going to proceed, if at all, in the area of SCNT.

"We filed a formal request to rebut the conclusions and comments of the reviews but were told there was no such process. We now understand that after our departure on Thursday, Rusty Gage, one of our esteemed colleagues here in San Diego was allowed to rebut reviewer comments and did receive funding. We are unclear on how this rebuttal process works and why we were denied any opportunity to dialogue on the merits.

"We are now told that my discussion at CIRM was flawed because I did not address the mistake regarding efficiency of our SCNT. This is unfortunate, as we were told our request for rebuttal was rejected and that we were not allowed to discuss the merit or lack of merit of the specific review of our application but our 3 minutes was limited to expressing our concerns about the process and our suggestions for improvement from an industry perspective.

"How did this happen? Mistake? Miscommunication? Misunderstanding? Bias?

"Suggestions and Action Items for Consideration

"Industry representation on CIRM grant review teams

"Formal appeal process or ability to respond in writing to reviewer comments. See, SBIR, STTR, NIH funding for models of review cycles.

"Holding the review team to the published review criteria--e.g., in this RFA, novelty is not a priority criteria.

"One of the review criteria should always be the impact of the research on the advancement of human product development.

"If the Rusty Gage review reconsideration is as I understand it, it seems that there is one set of rules for a deservingly prominent scientist and a different set of rules for Cascade LifeSciences. We also filed a letter with CIRM asking for the opportunity to comment on our grant review and were denied. This seems, without more complete information, to be unfair.

"Perhaps separate academic/not-for-profit grant application review from for profit review. Comparing not-for-profit grants (institutions that are grant writing machines) with the grant applications of fledgling biotech companies is fundamentally unfair. Anyone who knows me will tell you I am a basketball fan. Using that sport as an analogy, this is like the USA basketball team of young college players competing against the Soviet National Team of grown men that had played together for four years. We all know how that worked out.

"Although I believe that industry is a key element of product development, and we desire to work with CIRM to advance the cause, if their funding criteria or standards are inconsistent with industry participation or pragmatic product development, we need to know that earlier rather than later.

"I am personally and professionally committed to assist CIRM in making industry an equal partner in achieving the mission of Prop. 71. I would look for guidance from the ICOC (CIRM's board of directors) on how we can work through some of these administrative and structural challenges.

"Hope this helps. It is a complex issue for industry as well as for CIRM."

Novocell First Business to Score CIRM Cash

The California stem cell agency chalked up a couple of firsts this past week.

The agency approved its first grant to a California business and its first grants for research into the area of reprogramming adult stem cells.

Novocell of San Diego, Ca., won the business grant. The amount was small -- $48,950. It went for a disease team planning effort.

Reporter Terri Somers of the San Diego Union-Tribune wrote:

"Novocell's Chief Science Officer Edward Baetge will lead a team that will receive a $48,950 planning grant to chart a course for tackling diabetes. The company has shown it can coax stem cells to develop into insulin-producing pancreatic beta cells. The team will seek a larger grant to purify the cells and scale up production of them so they can be moved into clinical trials."

Some of the folks at CIRM and on its board of directors had to be disappointed that more companies did not receive positive funding decisions from the Grants Working Group. Twelve companies had applied for the new cell grants and nine for the disease team grants.

Several directors have noted in the past that it is companies that most directly bring therapies to the marketplace – not academic institutions.

Coming up, however, are other rounds of grants where businesses can compete against nonprofit and academic institutions for California cash. They include the $20 million tools and technology round. CIRM received 140 letters of intent to apply for those grants, including 50 from businesses.

Earlier this year, news of successful research involving reprogramming adult stem cells triggered questions about whether CIRM could or would fund grants in that area. Prop. 71 tilts CIRM's priorities heavily towards hESC research, but it has always had the capability of funding stem cell research in whatever area it desires.

Proof that came on Thursday when CIRM's board of directors ratified decisions to fund a number applications involving reprograming.

Meager Coverage of CIRM Meeting

News coverage appeared light this morning of the two-day meeting of the California stem cell agency and its approval of $24 million in research grants.

We detected only four stories, two in daily newspapers and two in business journals. All were written by reporters who did not attend the meeting Thursday and Friday in Burlingame, Ca., which is located souith of San Francisco.

Given the largely routine nature of meeting, the scope of the coverage was not surprising. Mainstream media are also facing an economic squeeze that has resulted in coverage cutbacks.

Terri Somers of the San Diego Union-Tribune had the lengthiest piece, which focused on the $5 million in grants to enterprises in her area in Southern California. She wrote that Novocell of San Diego was the first company to receive research funds from CIRM.

Steve Johnson had a brief piece in the San Jose Mercury News that said that slightly more than half the grants went to San Francisco Bay area institutions.

The other stories appeared in the East Bay Business Times (San Francisco Bay area publication) and the San Diego Business Journal.

Correction

The "CIRM News Release" item below incorrectly stated that no companies were announced as being funded in the news release from CIRM on its awards for new cell lines and disease team planning grants. The item should have said no companies were awarded new cell line grants.

CIRM Hires John Robson from McGill as Vice President

BURLINGAME, Ca. -- The California stem cell agency has hired John A. Robson, associate dean of faculty affairs at McGill University in Montreal, as vice president for operations at the $3 billion state enterprise.

CIRM President Alan Trounson said Robson will be his top aide. Robson will be responsible for all administrative and operational aspects of the institute and support the work of the Facilities Working Group.

The appointment will free Trounson to get out more often into the stem cell community, confer with scientific and biotech researchers, track research and build collaborative efforts.

The appointment required approval of salary and other employment terms by CIRM's board of directors. The panel approved annual compensation of $310,000 with relocation expenses of $60,000 paid out over five years. It also provided for a payment of $150,000 if Robson is terminated without cause within five years. CIRM also agreed to pay for moving 23,000 pounds of household goods from Montreal to California.

At McGill, Robson's responsibilities included strategic planning, capital campaign planning and recruiting and administrative policy development. Prior to joining McGill, Robson was a faculty member and neuroscientist at the State University of New York, Upstate Medical University in Syracuse.

More details are available in CIRM's press release.

CIRM News Release on Grants.

BURLINGAME, Ca. -- Here is a quick link to the news release by CIRM on approval of $24 million in grants Thursday night. It contains the identities of the winners. One company received a disease team planning grant, but no company received a new cell line grant.

(Editor's note: An earlier version of this item stated incorrectly that the news release did not report any company as receiving a grant.)

More California Dough -- $23 Million -- Rolls Out the Door for Stem Cell Research

BURLINGAME, Ca. -- Directors of the California stem cell agency Thursday night approved $23 million for research grants to develop new cell lines, including reprogramming efforts.

However, they put off until today approval of about $1 million in disease planning grants.

The agency did not announce the names of the 16 winners out of the 50 applicants for new cell line grants. But all of those recommended for funding by scientific reviewers were routinely ratified. Another two grants that reviewers did not think warranted approval for scientific reasons were also approved.

The directors of the $3 billion agency decided to give cash to the two on the basis of "programmatic" and other reasons.

All of the recipients and their grant reviews can be found here, minus their names. The approved applications are color-coded with either white or grey.

The new stem cell round of grants was the first opportunity for businesses to receive research cash from CIRM. Twelve firms applied. But scuttlebutt at the meeting was that none of the businesses won grants. CIRM Chairman Robert Klein declined even to say whether any businesses were in the "recommended for funding" category, when asked by John M. Simpson, stem cell project director for the Consumer Watchdog group.

Ken Woolcott, chief business officer of Cascade Life Sciences of San Diego, Ca., appeared before CIRM directors to express dismay about the grant process. His firm was not recommended for funding. While he did not ask for reconsideration, he said "reviewers simply did not read our application (No. 656) very carefully." He said that with NIH grants, applicants get a chance to respond to reviewers' comments prior to final action – something that CIRM does not formally provide. Woolcott said the firm's "experience was very different from our expectations."

The public review of the Cascade application said the research was "based on a collaboration between the applicant and the only group known to have successfully cloned primate cells." Reviewers expressed concerns that the firm could not get enough human eggs for its work, among other comments.

The two "programmatic" grants won approval after two unusual pitches were made on their behalf. One emotional appeal came from Judy Robertson of Sacramento, Ca., a Huntington's Disease advocate. She has lost four members of her family, including her husband to the disease. The family has donated $500,000 to UC Davis for a Huntington's clinic.

She complained that the review was "factually incorrect." The board discussed the assertion at some length, including comments from audience and staff, without reaching a conclusion on the accuracy of the information. Ultimately, the board approved the grant because it appeared to want to include Huntington's in CIRM's "program."

CIRM Director Jeff Sheehy made an appeal for funding the other of the two "programmatic" proposals. He read a letter from Fred Gage of the Salk Institute, stoutly defending the application. Directors had the letter before them but it was not available to the public, which Klein said was a mistake. Sheehy carried the day, and the Gage grant was approved on a 9-7 vote with one abstention. (The committee officially has 29 members, but only 17 were present and qualified to vote Thursday night.)

Sheehy's reading triggered a discussion not only of the merits of the application but of the sanctity of the review process, which was reminiscent of the flap in January when Childrens Hospital of Oakland Research Institute was the first applicant to publicly appeal a negative decision by scientific reviewers. Childrens was ultimately unsuccessful in that effort

By law, directors have the right to make the final decision on grants. However, they have approved 168 grants since 2004 and rejected only one recommended by scientific reviewers. Any applicant may appear before directors or write an appeal, a fact not well known to applicants. Few have appealed. Presumably they have not done so either out of ignorance or because they do not want to offend an agency which holds the key to their professional lives.

Some CIRM directors were uncomfortable with the Childrens Hospital appeal, and some were still uncomfortable Thursday night.

Oswald Steward, a CIRM director and chairman of the Reeve, Irvine, Resarch Center, UC Irvine, raised the issue of fairness in connection with Sheehy's reading of the Gage letter. Steward said other rejected applicants may not have understood that they could also seek to overturn a negative decision by scientific reviewers.

Marcy Feit, a CIRM director, president of ValleyCare Health Systems of Livermore, Ca.,and a member of the Grants Working Group, said she would "hate to see us redo those reviews." She said was against an "extensive rebuttal process" because it would "undermine" reviewers.

CIRM President Alan Trounson told directors they should accept that reviewers do a "reasonable job" and that disappointed applicants will naturally find fault with the system, which may sometimes include incorrect information. He warned that overturning scientific reviewers decisions could mean the loss of the reviewers, who are already being worked hard.

In January, directors seemed to be looking to CIRM staff for a proposal on how to deal with appeals from applicants. However, other chores, including a $1.1 billion lab building effort, have consumed a great deal of time. We suspect the appeal process may gain more attention in the very near future.

As for the names of the grant recipients and CIRM's take on Thursday night's soirée(It was a thrill a minute!), look for a press release on the CIRM website later today.

The Multi-Million Supplier Debate: CIRM's Current Definition

The California stem cell agency today posted its latest crack at defining which California businesses receive a preference in terms of purchases by recipients of the agency's roughly $3 billion in grants.

Discussion of the definition will come up at tomorrow's meeting of the CIRM board of directors but do not expect any final resolution. California lawmakers have their own thoughts about the matter. Their decision will take precedent over the wishes of CIRM if the legislators have enough votes.

Here is the key portion of the latest CIRM definition of California supplier, which says that it means

"...any sole proprietorship, partnership, joint venture, corporation, or other business entity::

(1) whose permanent, principal office or place of business from which the supplier’s trade is directed or managed is located in California; or
(2) that includes a business unit, division or subsidiary whose permanent principal office or place of business from which the unit, division or subsidiary’s trade is directed or managed is located in California, for the specific product or products that are sold by the unit, division or subsidiary to CIRM grantees; or (3) that employs at least one-third of its total employees in California; or
(4) that produces, builds, or manufactures a product or products in California for the specific product or products that are sold to CIRM grantees; or
(5)that sells a product or products in California, for the specific product or products that are sold to CIRM grantees, so long as the supplier certifies that at least 50% of the cost of the product is attributable to activity undertaken in California."

The material on the CIRM site also shows what language has been changed.

Consumer Watchdog: CIRM Budget Needs More Explanation

Consumer Watchdog's John M. Simpson says a deeper explanation is needed of the proposed operational budget for California's $3 billion stem cell research agency.

The organization is set to routinely approve this week a 46 percent increase in spending to a total of $13 million, all of which is probably justified. But Simpson says CIRM has failed to provide sufficient details, and a clearer explanation is needed.

He cited the "other travel" budget item, which is up 287 percent from the current fiscal year – from $144,000 to $558,000. Simpson said on his organization's blog,

"If the average trip costs $3,000 they've got a budget budget for 185 trips or 4 trips per employee for the year. CIRM would average more than three people on the road every week of the year and that doesn't include travel to ICOC meetings."

Simpson wrote,

"I'm not saying the increases are unjustified; I just don't know."

Simpson also noted CIRM's recurring failure to post background information in a timely fashion in advance of its meetings. Regarding tomorrow's meeting of CIRM's board of directors, he noted that as of 4 p.m. Tuesday, "at least ten agenda items that reasonably would require a written explanation lacked documents."

Simpson pointed to the state controller's office as example to emulate. Controller John Chiang is chairman of a committee that has financial oversight responsibilities for CIRM. Simpson wrote,

"The board's next meeting is at 1 p.m., July 7, in San Diego. Since last week the agenda, with all relevant documents, has been available on the controller's website.

"That's how good, open government works."

More Info Disclosed For CIRM Meeting Thursday, Friday

The California stem cell agency has begun posting background information for its meeting at the end of this week, including scores and review summaries of applications for $26 million in grants.

As usual, the names of the applicants are hidden by CIRM until after the board of directors formally ratifies the decisions of the review panel. Only once has the board rejected a positive recommendation by its reviewers.

The agency is also posting other information for its meeting in two days. Topics with support material include: the proposed 2008-09 budget, changes in the grants administration policy, small gifts to CIRM and changes in the bylaws of the Grants Working Group.

Here are links to the new cell line scores and the disease planning team scores.

Klein's Lobbying Group Opposes Affordable Access Bill

The private stem cell lobbying group run by Robert Klein, who also serves as chairman of the $3 billion state stem cell agency, is formally opposing legislation aimed at ensuring that state-financed therapies are affordable and accessible to Californians.

The opposition of Americans for Cures was noted today in the legislative staff analysis of SB1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley.

The legislation cleared the Assembly Judiciary Committee today on a unanimous vote. No lawmaker has voted against the proposal in either house. It now goes to the Assembly Appropriations Committee and from there to the Assembly floor. It has already passed the state Senate.

The staff analysis said that Klein's group, Americans for Cures,

"...believe that access and affordability are best addressed by creating larger pools of affordable healthcare insurance, and that policies should accelerate cures, rather than discourage them. It is important to note that the intellectual property provisions in this bill that the opposition contend will create disincentives to commercialize drugs and therapies are very similar to the current and proposed regulations promulgated by the ICOC."

Klein is president of Americans for Cures, which shares the same address as his real estate investment banking firm in Palo Alto, Ca. It is extremely unusual for the head of a state government agency to also lead an advocacy group whose interests are in the same arena as the agency's. Americans for Cures has denied that it is a lobbying group, although it attempts to influence legislation and government decision-makers.

Klein told the Legislative Subcommittee of CIRM's board of directors last week that patient advocacy groups nationwide would be lobbying California legislators on SB1565. It is our recollection that he did not mention the role of his own group, which has nationwide ties with advocacy groups.

The staff analysis also added more information about an independent state body, the Little Hoover Commission, that would be requested under the bill to examine CIRM with an eye to coming up with recommendations, particularly in relationship to the built-in conflicts of interest on its board. The analysis said,

"The Little Hoover Commission is uniquely positioned to review conflicts and make recommendations for improved governance.

"An independent state oversight agency established in 1962, the Little Hoover Commission's role differs in three distinct ways from other state and private-sector bodies that analyze state programs. Unlike fiscal or performance audits, the Little Hoover Commission's studies look beyond whether programs comply with existing requirements, instead exploring how programs could and should function in today's world. The Little Hoover Commission produces reports that serve as a factual basis for crafting effective reform legislation and follows through with legislation or administrative changes to implement its recommendations.

"In addition to the public hearings the Little Hoover Commission holds to develop findings and recommendations, hearings are held and progress reports are issued in the years following the initial report until the Little Hoover Commission's recommendations have been enacted or its concerns have been addressed. These processes uniquely position the Little Hoover Commission to review possible conflicts and make recommendations for improved governance of CIRM and the ICOC, thus helping ensure better accountability to Californians for their $6 billion investment."

At its meeting Thursday and Friday, the board of directors of CIRM is expected to formally oppose SB1565.

Defining Which Businesses Get an Edge in CIRM Research Purchases

The "five-year threshold" language in the California supplier bill dealing with CIRM-funded research is now available online.

For those of you who don't want to click through, here is the text in question:

"'California supplier' means any sole proprietorship, partnership, joint venture, corporation, or other business entity that meets any of the following criteria:
"(A) The owners or policymaking officers are domiciled in California and the permanent, principal office or place of business from which the supplier's trade is directed or managed is located in California.
"(B) A business or corporation, including those owned by, or under common control of, a corporation, that meets all of the following criteria:
"(i) Has owned and operated a manufacturing facility or research facility located in California that researches, develops, builds, or manufactures products for life sciences research, continuously during the five years prior to submitting a bid or proposal to provide supplies to a California Institute of Regenerative Medicine (CIRM) grantee.
"(ii) Has been licensed by the state on a continuous basis to conduct business within the state during the five years prior to submitting a bid or proposal to provide supplies to a CIRM grantee.
"(iii) Has continuously employed California residents for work within the state during the five years prior to submitting a bid or proposal to provide supplies to a CIRM grantee.
"(C) The entity produces, builds, or manufactures a product or products in California and for the specific product or products that are used by CIRM grantees.
"(2) For purposes of qualifying as a California supplier, a distribution or sales management office or facility does not qualify as a manufacturing or research facility."

For more on this see this item.

CIRM Directors to Give Away Millions, No Details Available

With only two days left before the board of directors meeting of the $3 billion California stem cell agency, its public agenda is nearly bereft of any significant information for the public, other than cryptic references.

It is not a trivial matter. CIRM directors plan to give away $26 million at the end of the week and authorize another $60 million in grant programs. Neither of those figures can be detected, however, by examining the "topline" of the directors' agenda.

Indeed, the fact that CIRM's board of directors is meeting is not even of enough significance to be posted on CIRM's home page – although the directors will also be dealing with FDA concerns about hESC clinical trials, how California businesses could benefit to the tune of hundreds of millions of dollar from CIRM research as well as the agency's 46 percent increase in its operating budget.

For those of you not totally familiar with CIRM, it is an arm of the state of California – not a "quasi-public" agency as it has sometimes been described. It is enshrined in the state Constitution. It is subject to the public records and open meetings laws of the state, which declare that the public has a "broadly construed" right to access to information about state governmental matters.

However, CIRM is denying the public and interested parties any timely, specific knowledge of the matters to be decided this Thursday and Friday in Burlingame, Ca., a longstanding CIRM practice for directors meetings, with a few exceptions. Nor will the public have a chance to listen in or participate in the actual meeting via the Internet or teleconferencing, technologies easily accessible to CIRM.

Meetings of the full board of directors of the agency have never been broadcast via the Internet or via teleconferencing. However, directors subcommittees are widely available via teleconferencing in many specific locations in California and even a couple of times in Australia. But those have been a matter of convenience for directors – not the public.

Twenty-eight items are on the agenda this week. As of Tuesday, only one item has an Internet link to background information. Bob Klein, chairman of CIRM, has repeatedly pledged to comply with the highest standards of openness and transparency. Nonetheless, the agency has been generally plagued with a failure to post background material sufficiently in advance of meetings to give the public or interested parties a chance to decide whether to attend the directors' meeting or even formulate a cogent response. At several points, even CIRM directors complained about the not getting material in time.

Our understanding is that the responsibility for the board of directors' agenda lies with Chairman Klein. We are asking Klein for comment on this state of affairs.

(If you want information about the $26 million grant programs mentioned in the second paragraph of this item, you can find it on the California Stem Cell Report – not on CIRM's agenda. The $60 million proposed grant program is the only item that is linked via the agenda. You can find information on that program here.)

Will CIRM Directors Fulfill Prop. 71 Promises?

SAN FRANCISCO -- The California stem cell agency is maintaining a "watch" position on legislation aimed at pushing it into compliance with a state law that could mean hundreds of millions of dollars for California businesses.

At issue is a requirement in Prop. 71 – ballyhooed during the 2004 campaign – that CIRM set standards to ensure that the recipients of nearly $3 billion in grants purchase goods and services from California suppliers "to the extent reasonably possible."

Those standards still have not been set, nearly four years after creation of the stem cell agency. Because of the delay, some biotech companies and lawmakers pressured the agency earlier this year to move more rapidly. To make it clear that they were serious, legislation was introduced setting the standards in state law in the absence of CIRM setting its own standards through regulation.

That bill, AB 2381 by Assemblyman Gene Mullin, D-San Mateo, has easily passed the Assembly and is now before the Senate Health Committee on Wednesday, where it is virtually certain to pass.

On Friday, the Legislative Subcommittee of the CIRM board of directors discussed Mullin's bill, ultimately deciding to continue to watch its progress. The discussion was a bit muddled because Mullin proposed changes in the legislation only a few days before the Friday meeting. They involve a "five-year threshold" for suppliers, but no text of the proposed changes was available at the San Francisco CIRM headquarters. One Sacramento-area teleconference location, however, seemed to have a copy of the latest proposal. No members of the public had access to the Mullin changes.

CIRM Chairman Robert Klein said a five-year threshold for suppliers would discourage companies from moving to California as well as putting new companies at a disadvantage.

CIRM director Susan Bryant, from a teleconference location at UC Irvine, read other suggested "supplier" language from the University of California system. Again, no text was available at the meeting site at CIRM headquarters.

Meanwhile, it was disclosed during the meeting that James Harrison, outside attorney for CIRM, has begun work on separate standards for suppliers and grant recipients involved in the agency's $1.1 billion lab construction effort. Speed is critical in that effort because recipients are required to complete their lab buildings in two years or face penalties.

Later this week, CIRM directors will address the supplier questions during their meeting in Burlingame, Ca. No background information or text of what they are to consider is yet available to the public on the agenda for the meeting, which begins in two days.

California's Big Biotech Loan Program Headed for Approval in August?

SAN FRANCISCO -- The California stem cell agency's proposed $500 million biotech loan program seems to be headed for August action by the agency's board of directors, but not before size of the program, conflict of interest questions and underwriting issues are resolved.

The Finance Subcommittee of CIRM's board of directors discussed the proposal briefly on Friday, identifying policy questions that remain to addressed by the subcommittee. CIRM Chairman Robert Klein, who originated the plan, said the size of the program was critical. Without sufficient bulk, the size of individual loans would be limited. Klein said that clinical trials involve "very large loans."

CIRM Director Duane Roth said that directors also have to address potential conflict of interest questions that might arise during the loan-making process, a concern echoed by John M. Simpson, stem cell project director of the Consumer Watchdog group.

Klein also said that CIRM does not a large enough staff or expertise to handle a loan program. He said it would have to involve some sort of financial underwriting, similar to the type of underwriting practices at Fannie Mae, the housing loan organization.

No documents from CIRM about the program were available at the meeting or before it.

CIRM Directors Nix Kuehl Legislation

SAN FRANCISCO -- The California stem cell agency is preparing to oppose legislation designed to ensure that Californians have affordable access to therapies developed with taxpayer funds.

Too restrictive and premature. That was the sentiment at today's meeting of the Legislative Subcommittee of the board of the directors.

They were talking about SB1565 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley. The measure has passed the Senate and faces a hearing in the Assembly Judiciary Committee. No lawmaker has voted against the bill.

Directors pointed out that they already have an affordable access plan in place in their regulations for CIRM-financed therapies. They argued that the legislation would require each product to go before the legislature to determine a price.

Kuehl's measure is a response in part to widespread consumer unhappiness with the high cost of health care and industry pricing of therapies. But Claire Pomeroy, a CIRM director and dean of the UC Davis School of Medicine, said that CIRM's policy "cannot overcome the dysfunction" of the healthcare system. She said the legislature should give CIRM "the opportunity to do the right thing."

CIRM President Alan Trounson said that locking affordability provisions into state law would cripple CIRM's ability to negotiate prices and drive the industry away from developing therapies for diseases with small numbers of patients.

CIRM directors also reacted sharply to a provision in the Kuehl/Runner bill that would make it easier for CIRM to finance research that does not use human embryonic stem cells. The provision seems to play into the hESC vs. adult stem cell debate. CIRM Chairman Robert Klein said that Runner said the change was "very important" to Republican members of the state Senate.

Presumably, recent research developments that demonstrated that adult stem cells can be reprogrammed to take on the pluripotent characteristics of hESC lie behind the proposed change. However, directors said much more work needs to be done before that method can be shown to provide cells that truly match the characteristics and usefulness of embryonic stem cells.

Kuehl's bill also would request a study of CIRM by an independent body that would report back to the legislature next year at this time with recommendations for changes, including dealing with the built-in conflicts of interest at CIRM. One CIRM director is currently under investigation for violating the state's conflict of interest laws. And the board of directors is dominated by members from institutions that are benefiting to the tune of hundreds of millions of dollars in research grants.

Directors said that they understood that the state's Little Hoover Commission has already indicated it is going to perform the inquiry, regardless of the fate of the Kuehl bill.

Directors did not have a quorum at today's meeting and thus could not vote on a position on the legislation. However, their sentiments will come before the full board of directors next week, which is certain to oppose the Kuehl measure.

Here is the latest legislative staff analysis of the measure and the CIRM staff analysis, which we should note was well done.

We will have more later on other legislation discussed today by the Legislative Subcommittee.

Half-Million Salary for Klein?

SAN FRANCISCO -- Back in the early days of the California stem cell research effort, its newly elected chairman – millionaire real estate investment banker Robert Klein -- said he would not accept a salary for his work.

Now that is changing. He could be drawing a salary as high as $508,750, perhaps as early as this year. But the money may not come from state coffers.

The question of salaries for both the chairman of CIRM and the vice chairman came up during Thursday's hearing on the agency's budget for 2008-09.

John M. Simpson, stem cell project director for the Consumer Watchdog group of Santa Monica, Ca., asked whether the budget included salaries for the chairman and the vice chair.

The answer was no. But Klein, who has held his post since December 2005, said, "It's true at some point this issue needs to be addressed."

He said that personally he would like to see "non-taxpayer dollars" used for salaries for the chairman and vice chairman rather than using funds that could be used for research. He indicated that he would not be averse to raising private funds for salary purposes.

The vice chairman of CIRM is Ed Penhoet, also a multimillionaire. He does not accept a salary. We are querying him on his position on salaries.

Coming Up

Directors of the California stem cell agency later today will consider state legislation affecting CIRM. We will have a report on that meeting late this afternoon Pacific Daylight Time.

$13 Million Approved for CIRM Operations

SAN FRANCISCO -- The Finance Subcommittee of the California stem cell agency Thursday approved a 46 percent increase in its 2008-09 budget, which will total $13 million and push staffing close to the legal limit of 50.

The panel of CIRM directors made no changes in the budget that was presented by CIRM staff. Their questions largely centered on clarifying line items in the budget.

CIRM Chairman Robert Klein and director Jeff Sheehy both defended an increase in travel that seems to be up at least 287 percent from the current year, for a total of $558,000. However, that figure is for "other travel." Travel expenditures are also lodged in other budget areas, but were not broken out for Thursday's meeting.

Citing this week's agreements with Canada and the Australian state of Victoria, Klein said more collaboration is expected internationally. He indicated that travel is expected to both Great Britain and Washington, D.C. -- this to deal with federal stem cell legislation and regulation.

Klein said the agency "really needs to have our science teams to have access to leading-edge research." He said meetings with other scientists help CIRM prepare grant proposals that effectively target the most promising areas of research. Sheehy said that while some persons tend to regard travel as something of a boondoggle, "The conferences are very important. This is really work."

John M. Simpson, stem cell project director for the Consumer Watchdog group of Santa Monica, Ca., praised the budget generally but said more detail was needed for it to be fully understood.

The budget is well within Prop. 71 limits, according to CIRM, based on average allowable allocations. Those allocations showed that CIRM will be spending $1.8 million next year on legal expenses, up from $1.2 million this year. That includes its own legal staff and outside legal contracts.

The budget goes to the full board of directors next week, where it is expected to be approved.

We have asked CIRM to provide a breakdown of travel expenses in all categories and a breakdown on external contracts. We will carry that information when we receive it. We also asked Klein to clarify the organizational changes noted in the budget. He said he would get back to us on the language in the spending plan.

Differences in Old, New Versions of Budget Appear Minor

A quick, line-by-line examination of the old and new proposed budgets for CIRM for 2008-09 (see item below) shows only tiny differences in the two documents.

We could be wrong, but none of the major figures appears changed. In fact, the only change we could detect is under the "accomplishments" section.

The old document (posted a couple of days ago) said CIRM "awarded" $167 million in facilities grants to eight institutions. The new document says CIRM "awarded" $195.8 million in grants to eight institutions.

All of which raises a probably picayune question concerning the figures. Why are they different from those announced in May when a CIRM press release said its directors "voted to distribute" $271 million to 12 institutions. Our assumption is that the figures in the budget document actually represent checks going out to the institutions, and that four still have not been actually funded. But we could be wrong, and we have asked CIRM about the numbers.