More Info on CIRM's Finances and its Federal Patent Lobbying Position

The California stem cell agency today posted several major background information pieces for its board meeting, including details and justification for its proposed budget and an analysis dealing with its endorsement of industry-backed patent protection legislation.

The documents came as the agency is scheduled to begin a two-day meeting tomorrow in San Diego, which can heard via the Internet(instructions on the agenda).

We have not had a chance to read all the material carefully, but the budget documents go a long way in answering the questions we raised on Friday and presumably the earlier requests for more details from CIRM board members.

The budget material includes more year-to-year comparisons, a commentary explaining some of the assumptions in the budget, a justification for extensive travel and more. All of the items can be found through links on the agenda

In addition, Nancy Koch, one of CIRM's outside attorneys, wrote a three-page analysis of a Federal Trade Commission report last week that dealt with many of the issues involved in the federal patent legislation on biotech therapies.

Koch wrote:

“Lengthy market exclusivity periods (like those proposed by Rep. (Anna) Eshoo in HR 1548), according to the FTC, are not necessary and could actually dampen innovation.”

The Eshoo bill has been endorsed by the CIRM board, which is likely to vote again on the measure during its meetings during the next two days.

Koch performed a careful analysis of the FTC study, reaction to it and its impact on the CIRM position, including exploration of the FTC report's assumptions and weaknesses.

She wrote that the FTC “analysis sidesteps the financially daunting circumstances faced by smaller companies.”

Koch said,

“For CIRM, this last point is particularly significant. Even if the FTC's prediction were generally correct, stem cell research and the market for stem cell therapies would seem to fall outside the agency's analysis.”

Whether you agree or disagree with Koch's analysis or the budget justification and plans, all are important tools for CIRM directors tomorrow. The information also adds significantly to the understanding of the public and parties interested in CIRM's $3 billion operation.

Webcast of CIRM Board Meeting This Week

Here are instructions for listening to the Web audiocast of the Wednesday and Thursday meetings of the board of the California stem cell agency, according to Melissa King, executive director of the board.

On Wednesday, to access the live event or archive, use this URL:
http://65.197.1.15/att/confcast
Enter conference ID#101434  Then click go.

On Thursday, to access the live event or archive, use this URL:
http://65.197.1.15/att/confcast
Enter conference ID# 101436.  Then click go.

The $10 Billion Patent Litigation Bill

As the directors of the $3 billion California stem cell agency this week reconsider their endorsement of an industry-backed, patent protection bill, they may want to think about some of the issues raised in an article in Monday's Wall Street Journal headlined “Why Technologists Want Fewer Patents.”

The opinion piece was written by L. Gordon Crovitz, former publisher of the Journal, and discusses the current state of patent law and intellectual property.

He wrote,

“The Patent Office now gets some 500 million applications a year, leading to litigation costs of over $10 billion a year to define who has what rights. As Judge Richard Posner has written, patents for ideas create the risk of 'enormous monopoly power (imagine if the first person to think up the auction had been able to patent it).' Studies indicate that aside from the chemical and pharmaceutical industries, the cost of litigation now exceeds the profits companies generate from licensing patents.”

Crovitz continued,

“The Supreme Court may decide that more progress would be made with narrower definitions of what is patentable. A book on the U.S. approach to patents, 'Jefferson vs. the Patent Trolls' by Jeffrey Matsuura, makes the key point that 'intellectual property rights were not goals in and of themselves, but were instead a mechanism through which society attempted to facilitate creative collaboration.'"

Some of you may recall that zealous stem cell patent protection has blocked research at Childrens Hospital of Orange County. And some have pointed to excessively tight control of IP as a main reason why nearly all biotech companies have been unprofitable for decades.

The three scientists who founded the company, Stem Cells Inc. of Palo Alto, Ca., which holds the patents in the Childrens Hospital case, have never spoken publicly on the issue, and we do not expect to hear from them.

It is unclear whether the Crovitz piece is available to non-subscribers. If you would like a copy, please email djensen@californiastemcellreport.com.

More on Klein's 2010 Departure Plans

Plans by Robert Klein, chairman of the California stem cell agency, to step down from the post in 2010 drew coverage Monday from the San Francisco Weekly.

Peter Jamison quoted Don Gibbons, chief spokesman for CIRM, as saying Klein plans to rededicate himself to his real estate investment business.

Gibbons was quoted as saying,

"He can't afford to take a second term. It's a huge financial commitment for him to do this, because he cannot run his business at anywhere near full capacity. He's been saying this internally for a very long time."

Jamison wrote,

“Gibbons said Klein may continue to be involved with CIRM in some way after 2010, noting that he would have to be appointed if he were to remain on the agency's governing board.“

CIRM Goes to Washington: Patents, Tornados and Bench Warming

As California stem cell directors this week consider once again their federal lobbying efforts, the Wall Street Journal offers an insight into just what it takes to have an impact in the august halls of Congress.

Can you say $27.6 million?

That's what a coalition of financial services organizations spent during the first quarter to change an accounting rule – albeit an important one – and lobby on other issues. The coalition also pumped $286,000 into the campaign organizations of lawmakers on a key committee.

Compare that to the $240,000 CIRM is spending for a federal lobbyist for 10 months work.

The issue that is coming up this week is CIRM's support for industry-backed legislation dealing with creation of generic biotech therapies. The agency currently has endorsed a measure by Rep. Anna Eshoo, D-Palo Alto, but has taken no position on a competing measure by Rep. Henry Waxman, D-Los Angeles, a far more important and powerful lawmaker.

The generic issue is complex enough on its own. But it apparently is going to be wrapped into the Obama administration's health plan, which Waxman will be carrying in the House. The rationale is that generic biotech therapies will cut costs, thus helping to trim the mammoth price of the health care deal. If the generic therapies are delayed because of industry-sought patent exclusivity, it means higher health care costs, according to supporters of the Waxman approach.

John Carroll of FierceBiotech recently wrote:

“Waxman has been pushing a bill that provides a five-year window of market exclusivity for biologics, something the biotech industry views with the kind of alarm a farmer feels when he sees a tornado heading for the barn. But there are a lot of numbers in play on the Hill. A competing bill offers 14 years of exclusivity and the president's budget proposal for 2010 pencils in a seven-year period.“

A Wall Street Journal blog this spring said the time may be ripe for a compromise and noted that some Big Pharma companies are warming to the idea of selling the copy-cat drugs themselves. The blog drew 18 comments, some of which indicated a high level of industry insight.

CIRM directors are oozing into a significant – for CIRM – federal lobbying role. But it is tiny in the world of Washington. Some on the board are concerned about mission creep and wasting time, money and focus on an effort where CIRM will never be more than a bench-warmer, if that. Directors are dealing with lobbying in what California stem cell Chairman Robert Klein calls an “incremental” fashion. Certainly CIRM can legally lobby Congress and probably should in some cases. But directors have never had a full-blown discussion on when, where and why.

CIRM Pulls a Grant, Aggressive Monitoring Reported

In what appears to be a first, the California stem cell agency has pulled at least one grant from one of its researchers, apparently because of a lack of progress.

Don Gibbons, CIRM's chief communications officer, confirmed the action in response to a query from the California Stem Cell Report.

Gibbons refused to disclose the identity of the researcher or the institution, declaring that more details would be forthcoming in a report to the CIRM board of directors from President Alan Trounson at its meeting in San Diego on Wednesday and Thursday.

We asked CIRM about the withdrawal after we were told by another source that one grant had, in fact, been been pulled and some “push-back” was coming from institutions. At the last CIRM board meeting in April, a report on grant monitoring was on the agenda but was removed with no explanation.

Here are the questions we directed to Gibbons last week.

“Can you confirm or deny that a grant has been pulled?
“Are institutions pushing back in any form whatsoever?
“Are any of the board members involved in any way whatsoever in reactions to monitoring of grantees' progress?
“What was the reason for removal of the monitoring item from the agenda last month?
“Will it be rescheduled?
“Do you have any other comments on this general subject? “

Gibbons replied,

“Yes, we have pulled at least one grant, but the leadership of the science office uniformly reports they are not getting push back from the institutions. No board members were involved in the process. The last board agenda was jammed so plans were made to include the progress reports in the President’s Report for the upcoming meeting. You can hear the details then.”

(The last board meeting ended at 1:24 p.m. on April 29, which is early for most board meetings.)

Gibbons has not responded to an additonal question on June 10 seeking the identity of the researcher and the grant number, both of which are public record.

Marie Csete, chief scientific officer for CIRM, and her staff have been aggressive in checking progress on CIRM grants, we have been told. Some grantees have been surprised and have complained that the NIH does not follow the same practice.

CIRM is to be lauded for monitoring the grants carefully. While strong oversight of grants may be bothersome to some researchers, institutions and perhaps some CIRM directors, it is a healthy practice that should stand CIRM in good stead when it faces its skeptics.

Snippets: Creation of Stem Cell Argonauts, Klein and Biotech Outsourcing

Klein Farewell, Sort Of – Robert Klein's not-so-imminent departure as chairman of the California stem cell agency has received no major media attention. But the San Francisco Business Times picked up the story, citing both this Web site and Consumer Watchdog. You can read the Times piece here. Here is a link to The Pluripotent blog on which Michael Scott wrote, “Get ready my popcorn and nachos, waiting for the scene when Bob Klein dumps CIRM, CIRM gets all cried out, and begs her man back.”

Is State Stem Cell Funding Necessary? – Yes, is the answer from Susan Solomon, CEO of the New York Stem Cell Foundation. She gave the response in a speech Friday. While she did not talk about the effort in California, some have asked whether CIRM is needed, given President Obama's moves on stem cell research. She said the proposed federal hESC guidelines are likely to be more conservative than many had hoped. And she said federal funding for the most advanced human embryonic stem cell research will remain limited. The text of Solomon's speech was carried on the Huffington Post.

Sending California Biotech Jobs to China? – Or is it business-building international collaboration? Ask Tergegen of San Diego about the experience. Or ask the 46 employees the firm laid off this year. Peter Ulrich, founder and head of Targegen, told Helen Kaiao Chang of the San Diego News Network,

“The trick in biotech is to survive the period of time when you’re not making any money in product sales. Being able to utilize outsourcing to China enables more companies to survive the neo-natal process and grow up to be big companies. Collectively, they will employ a whole lot more people by surviving than not surviving.”

Ulrich was quoted in a piece leading up to Biocom's “CalAsia” conference, which began today in San Diego and runs through Tuesday.

The Stem Cell 'Gold Rush' – Legislation aimed at creating a host of latter-day argonauts for the biotech industry has passed the state Senate and is now before the Assembly. The measure – SB 471 – Sen. Gloria Romero, D-Los Angeles, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, cleared the Senate on a 24-14 vote. The CIRM-backed bill would embed stem cell and biotechnology workforce training in the state's public schools. Mid Valley News quoted Romero as saying,

“California's next Gold Rush will be found in the Petri dishes and laboratories of this great state, but only if we produce the next generation of scientists, technicians and trained professionals capable of translating stem cell research into therapies and cures.”

(The vote in the Mid Valley story was incorrectly reported as 21-12, probably because the roll was held open and more votes were added after the initial approval.)

Stem Cell Research as Economic Development

The New York Times earlier this week wrote about how some regions are courting the biotech industry. The story contained some caveats about the economic impact of biotech research, much less stem cell research.

In a counterpoint to arguments in California that CIRM is a major economic engine, Shaila Dewan wrote,

“...(B)iotech is a relatively tiny industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people, according to BioAbility, a consulting firm in the Research Triangle Park in North Carolina.

“There is no guarantee that if a blockbuster drug materialized, it would be manufactured and marketed in the same place it was developed and tested.

“Joseph Cortright, an economist who has studied biotechnology clusters, gave the example of a promising anti-leukemia compound developed at Oregon Health Sciences University in Portland, where Mr. Cortright is based. 'The economic impact in the Portland area is zero because the rights to manufacture and market this drug were owned already by Novartis,' Mr. Cortright said.”

$41 Million in Stem Cell Training Grants Look Good for CIRM Funding

The California stem cell agency today posted more information about what its board plans to do at its meeting next Tuesday, including what is close to a staff recommendation that $41 million be pumped into training programs at 15 institutions.

The training grants were approved earlier this year, but funding deferred because of CIRM's financial woes. But now that cash is available, CIRM staff urged the board to “seriously consider the resumption of funding” at the earliest possible date.

The memo supporting the move said that researchers need the trainees to continue support of research projects.

The memo said the previous training program, the first grants funded by CIRM, was well-regarded. The staff said,

“CIRM Scholars (trainees) conducted stem cell research in 219 distinct laboratories and produced 221 publications, many in high impact journals.

“Upon completing training, individual CIRM Scholars have moved on to faculty positions at top universities, to scientific positions in biotechnology/pharmaceutical companies, or to further training at laboratories of leading stem cell scientists. Many physician CIRM Scholars are now also practicing medicine with a strong knowledge base of stem cell science. Outstanding examples of CIRM Scholar achievements include: research leading to the founding of a biotechnology company and the research leading to a Phase 1 clinical trial.

“In addition to trainee success, the program has served as a focal point for stem cell research at each of the training institutions and produced an attractive stem cell research environment that has contributed to the recruitment of new faculty as well as top trainees. The research conducted by trainees has spanned the spectrum from basic to preclinical research and, importantly, has accelerated research through synergy with other CIRM funded projects.”

Also posted was a three-page justification for continuing the longstanding contract with Remcho, Johansen & Purcell of San Leandro, Ca., as outside counsel to CIRM at $450,000 a year. James Harrison, an attorney with that firm, has been Remcho's visible and unflappable representative on CIRM matters since 2005.

Remcho charges CIRM $350 an hour for work by Harrison, which the CIRM memo said “is significantly lower than the market rates for firms with similar expertise.” Work done by others at the firm is charged at lesser rates. If Remcho billed $450,000 at the $350 rate, it would amount to about six months of full-time work.

Also on tap next week is a do-over on motions for CIRM support of industry-backed legislation aimed at protecting biotech patents against development of generic biotech therapies. Now available on the CIRM Web site is a memo that summarizes the latest developments in Congress and the White House.

An updated version of the CIRM conflict of interest code is also available and has been placed on the consent calendar as a non-controversial item. Removed from the agenda are the consolidated IP regulations, which are to be considered at a later date. No reason was given for delaying the item.

Still missing are guidelines for a change in board voting procedures that could enhance the powers of the board chairman and information about the leadership and some of the membership of the directors subcommittee that will evaluate Chairman Bob Klein, the two vice chairs and CIRM President Alan Trounson.

CIRM Spending Plan Poorly Documented, Lacking Key Information

The budget presented this week for the $3 billion California stem cell agency is a sad disappointment.

One would expect more from an enterprise that is now overseeing $761 million in state-funded grants. The budget lacks important details needed for the agency's board of directors to determine whether the agency is being properly run. CIRM directors served notice on Thursday they want more, including such basic information as how the spending plan for the next fiscal year compares to actual expenditures this year.

It is easy to regard budget preparation as mindless number-crunching. But a budget reflects the agency's thinking, priorities and direction. It is a key tool for directors. A spending plan should open a window on management's effectiveness. It identifies problems that remain unresolved. Failure to produce a realistic and well-documented budget raises questions about management's abilities in other areas.

Here are some of the highlights from the slim information that CIRM has given to directors and made public on its Web site.

The two-page spending plan for 2009-10 totals $12.98 million. CIRM staff compared that to a $13.4 million plan advanced 12 months ago, a budget that was clearly not on target. CIRM did not provide a current estimate for what its spending will total in three weeks, which is the end of the current fiscal year. However, the most recent CIRM documents available showed that as of the end of March, CIRM had spent only 50 percent of its budget for this year. Parsimony can account for part of that savings. But the disparity between the budget and actual spending shows that the original proposal was flawed, to put it mildly.

The major expense, as usual, for the coming year is salaries and benefits. They amount to $7.4 million and reflect a much-needed increase in staff from 44.5 positions to 47 positions. The agency is capped by law at 50 employees.

The No. 2 spending category is outside contracts at $2.1 million, although that figure seems to be vastly understated. It does not include $853,000 for information technology, most of which appears to be linked to Grantium, its troubled grant management program. The $2.1 million also does not include $208,000 for outside help from other state agencies.

CIRM directors were told in October 2007 that the “complete cost” of Grantium program would be $757,000. The proposed budget appears to allocate $610,000 for Grantium issues, including a $275,000 contract with Kutir Corp. for “development” of the grant management program. Some of the $610,000 may include funds that were included in the original $757,000, but the CIRM budget did not include that information.

The latest information on Grantium dates back to a March report, which included figures only as of December 2008. CIRM reported that it had a $702,000 contract with Grantium running from April 2008 to April 2011. Payments of $28,112 were listed. The March document also reported $389,750 in IT contracts for this fiscal year, including $200,000 to Kutir. (The CIRM Web site redesign appears to have dropped the link to the March outside contracts report. If you are interested in a copy, please email djensen@californiastemcellreport.com.)

If all this about Grantium sounds confusing, that's because it is. The proposed budget sheds no light on the matter.

The largest component of the $2.1 million contracts figure is $945,000 for legal services. That figure is based on our calculations, since CIRM did not provide a total in the category. No total was also provided for “communications/media” services, which ran, by our calculations, $455,000. As with other components of outside contracts, CIRM made no comparisons to actual spending this year or even last year's proposed budget.

Another $250,000 was allotted for an economic impact analysis, which could be classified as public relations since that is one of its prime functions. That contract was originally scheduled to be let during this fiscal year.

One category that raised questions last year was travel, which would total $497,000 for the coming year. The category, however, is not defined and may not include travel by board members to CIRM board meetings. John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., analyzed last year's travel plans, pointing out that they would put CIRM Chairman Robert Klein out of the state on CIRM business for 88 days, CIRM President Alan Trounson 68 days and Chief Science Officer Marie Csete 75 days. Simpson has not yet produced a similar analysis for the latest proposed budget.

The proposed CIRM budget will come before the full board of directors at its meetings next week in San Diego.

Klein to Leave CIRM Chairmanship in 18 Months

The chairman of the $3 billion California stem cell agency said today he would step down from his post at the end of his term in December 2010.

Robert Klein made the announcement to the Finance Subcommittee of CIRM's board of directors, according to John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca.

Writing on his organization's blog, Simpson said that Klein told the directors that he will have spent eight years working on the stem cell endeavor by the end of his term. Klein was also chairman of the 2004 campaign on behalf of Prop. 71 and often says he wrote the ballot initiative.

No apparent successor is in the wings. The post has very specific criteria written in state law, criteria that many believed fit only Klein at the time he was elected to his post by the CIRM board of directors.

Klein's public disclosure of his plans came only six months after he asked for and began receiving a $150,000 salary for half-time work as chairman. Klein, a real estate investment banker with offices in Palo Alto, Ca., previously declined a salary.

The Finance Subcommittee's official business today involved CIRM's budget and financial condition. Klein told the panel he still plans to make an effort to sell state bonds privately to fund the operations of agency. State bonds are virtually the only source of funding for CIRM.

The CIRM staff presented a $12.98 million operational budget for 2009-10, which is a 3 percent decrease from the budget proposed for this fiscal year. CIRM's budget documents posted on its Web site – only one day before today's meeting – did not make any comparisons to actual spending for the current year. But Simpson reported that this year's expenditures are running about 20 percent below the $13.37 million budget approved 12 months ago.

Simpson said directors asked for more details in the spending plan and a comparison to the current year's actual spending when the budget is presented to the full board next week. We will have more on the budget documents on Friday.

Simpson reported the committee lacked a quorum and could not act on the budget. He also said CIRM President Alan Trounson did not attend the meeting.

CIRM Directors Consider Millions in Grants, Industry-backed Federal Legislation and Agency's Budget,

California stem cell researchers are likely to see millions of more dollars come their way next week at the San Diego meeting of the board of the state's $3 billion stem cell agency.

The grant approvals are likely to receive little notice in the media even though the rest of the state is struggling with a $24 billion budget deficit. Funding for CIRM cannot be touched by state lawmakers who are considering major cuts in programs to assist the poor and elderly.

Up for consideration are grants for training programs and early translational research efforts. Funding decisions on those programs were deferred earlier this year when CIRM faced its own financial crisis because of a lack of bond funding, the agency's source of cash. The tension eased this spring when CIRM received a $500 million infusion in the most recent bond sale.

Good arguments exist for a steady stream of cash for research, which cannot sustain itself on feast-and-famine funding. Good arguments also exist for rational state budgeting that is not crippled by ballot measures that have helped to create the state's current fiscal disaster. Prop. 71, which created CIRM, is only one of many measures that have tied the hands of those who are ultimately responsible for making state budget decisions.

Also on tap for the meeting June 17-18 is consideration of the 2009-2010 CIRM budget, which additionally comes before the Finance Subcommittee this Thursday. No information on its budget has been released to the public by CIRM with the Finance meeting only two business days away.

Perhaps the topic of funding CIRM with money from the biotech industry may surface. Certainly the topic of future funding is on the subcommittee agenda.

Directors are also going to take another whack at federal legislation, backed by the biotech industry, to create patent rights to prevent early development of generic biotech therapies. At one point this spring, the board voted to develop support for key principles behind such legislation. Most recently, it decided, however, to endorse an industry-backed bill. After questions were raised about the legality of the board vote, Chairman Robert Klein decided to ask the board to vote again on the matter this month.

Another agenda item: The touchy subject of leadership of the directors committee that will evaluate the performance of Klein, the two vice chairs and CIRM President Alan Trounson.

In April, Klein resisted a motion by board member Jeff Sheehy that the chairs of the Evaluation Committee be the two directors who developed the evaluation procedure, Sherry Lansing, former head of a Hollywood film studio, and Claire Pomeroy, dean of the UC Davis School of Medicine. Other directors were concerned about the composition of the Evaluation Committee, suggesting it provided an appearance of conflicts of interest and “self-dealing.”

Also on the agenda is consideration of new contract with Remcho, Johansen & Purcell of San Leandro, Ca., which has been the outside counsel for CIRM since day one. The contract has never been put out to bid, based on an oral opinion from the State Department of Justice.

Another matter before the board involves guidelines for when the roll call should be held open on votes, a technique much used in the state Legislature but which also ensures that the chairman can find the votes needed when he needs them. More on that in the item below.

Stem Cell Directors Ruffled by Voting Changes

The California Legislature has long had a practice of voting that has kept the wheels of government churning and enhanced the power of already important committee chairman. It is known as “holding the roll open.”

The practice made a controversial debut in May at the California stem cell agency, triggering a sharp exchange between Chairman Robert Klein and some directors.

As a result, the procedure and possible guidelines for its use are now on the agenda next week of the board of directors of the California stem cell agency.

Here is how it works in legislative committees, which are always plagued with absenteeism. A bill is presented to the panel and discussed. A vote is taken. If insufficient votes exist to pass, the chairman of the committee can hold the roll call vote open until the committee adjourns, often hours later. That allows absent lawmakers to pop in and vote without having heard any of the discussion. Lawmakers presenting legislation may also ask to hold the roll open until they can drag in their supporters. Of course, the chairman can close the roll and thus kill a bill.

Because of absenteeism, CIRM has been plagued with an inability to reach the super-majority quorum requirements mandated by Prop. 71. Some of the pressures have eased since limited teleconference participation has been permitted for some members for CIRM board meetings.

Holding roll call votes open would help grease CIRM's wheels, but some directors were not happy with the introduction of the procedure at the May 12 teleconference board meeting. The session involved support of industry-backed federal legislation having to do with patent protection of biotech therapies.

At one point, Director Oswald Steward, chair and director of the Reeve, Irvine Research Center, University of California, Irvine, raised questions about the voting procedure. According to the transcript, Steward said,

“I just don't understand why this process has been invoked now today, and I have to say in a very strange way.”

Other directors joined in with their reservations. Steward then said he was "a little offended" by the voting practice.

At that point, an obviously irritated Klein (based on the audiocast of the meeting), snapped,

"Hold on. Excuse me. Point of order here."

Directors raising issues about the voting procedure included Philip Pizzo, dean of the Stanford School of Medicine; Gerald Levey, dean of the UCLA School of Medicine, and Jeff Sheehy, director for communications, UCSF AIDS Research Institute.

Pizzo caught the flavor of most of the concerns. He said that permitting roll call votes to be held open would affect the “quality of our discussions.”

Pizzo said,

"Whereas, I like the idea of facilitating the process, I think at a subsequent (board) meeting we should discuss it because it does impact on our culture and how we do things."

He continued,

"I think we've been enriched over the years by hearing each other's point of view. I worry that we're going to wind up coming in with prefixed ideas that don't necessarily allow themselves to be attentive to new insights."

Klein did not directly address those concerns in May but said he would put the voting procedure before the entire board next week in San Diego.

While the practice offers some efficiency, differences exist between legislative committees and the CIRM board. Lawmakers could be reasonably well-informed on a measure without hearing the debate. They have in their hands well prior to the committee meetings a thorough-going analysis of bills before the committee, their pros and cons and a list of opponents and supporters. That never happens at CIRM.

CIRM Responds to Report on Future Industry Funding

The California stem cell agency today commented on the item we posted concerning a statement by its president that it is considering funding its future with cash from the biotech industry.

Responding to a request for comment from the California Stem Cell Report, Don Gibbons, chief communications officer for CIRM, said,

“I tried to post this comment twice and your system sent back error messages.

“Two things. We heard the concerns regarding an industry advisory group and that recommendation was removed from the latest draft of the strategic plan update that has been circulating internally the past few weeks. Second, regarding President (Alan) Trounson's musings with the Bloomberg reporter, how does 'in the long run' and 'may try' become 'is.'"

Regarding problems with posting comments, if any readers experience such difficulties, please let me know at djensen@californiastemcellreport.com. The blog is hosted by Google, which provides the templates and mechanism for posting comments. I am more than glad to take up problems with Google on behalf of our readers.

CIRM Eyeing Major Reliance on Industry Cash

The president of the California stem cell agency, Alan Trounson, says it is considering funding its future with money from the biotech industry.

The possibility of a state government agency relying on industry dollars raises significant and new conflict of interest questions concerning the $3 billion effort. CIRM's governing board is already filled with representatives from institutions that have received the bulk of its funding.

Trounson made his comment June 4 in an interview with Bloomberg News. He also told the financial news service that it “wants to get 10 to 12 new therapies into human testing within four years.”

Both the comment about industry funding and human clinical trials appear to be the first public remarks along those lines by CIRM officials. However, we presume that Trounson may have misspoken on the human clinical trials, although Bloomberg has not run a correction as of today (June 8). The Bloomberg article is being circulated nationwide via email by a variety of persons interested in stem cell research.

The stem cell agency, now the largest funding source in the world for human embryonic stem cell research, is unusual financially in California. CIRM relies on state bond funds for its operations and grants. That source of cash is not subject to cuts by the governor or the legislature, only the ability of the state to sell bonds.

CIRM was sold to voters in 2004 as a 10-year program. However, no sunset provision is in place for the agency. It does have a 10-year limit on its bond funding. We have been told that clock started running with the first issuance of its state bonds in 2007.

Here is how Rob Waters of Bloomberg wrote about Trounson's comments on biotech funding for CIRM,

“In the long run, the agency may try to use industry funding to continue operating once its $3 billion in state bond revenue is exhausted by the end of the next decade, he said.”

As far as we know, no California state department relies on donations from private industry for its funding. But CIRM has the unusual capability of creating a nonprofit agency, rare among state departments. A nonprofit could serve as a vehicle for channeling industry funds to CIRM.

CIRM has been edging closer to industry over the last year with the staff's proposed revision of its strategic plan calling for much tighter ties.

Trounson's comments about future reliance on industry funds casts a new and different light on all of the agency's current actions. Is a decision on a grant being made because it will enhance or harm future funding from industry? Will CIRM's standards for its research grants be altered because of the need to be friendly to an important biotech company or a top researcher tied to a biotech firm? Will CIRM create, as is proposed, a special “biotech advisory group” to help evaluate CIRM interaction with industry?

The advisory group is recommended in the revisions to the CIRM strategic plan and has already generated controversy, along with CIRM's direction away from basic research and towards efforts favored by industry.

(You can find CIRM's plans on industry linkages in the draft of the strategic plan, beginning on page 28.)

CIRM already has several representatives from industry on its 29-member governing board. One wonders what would be gained by creation of this new panel, except that it presumably could meet privately and discuss matters that might be deemed inappropriate for airing at board meetings, which are required by law to be public.

The question of the long-term outlook for CIRM came up last month a meeting of the Little Hoover Commission, the state good government agency which has drafted major recommendations for changes in CIRM's structure. The draft proposals suggested CIRM explicitly lay out its plans for sustainability or shutdown. Representatives from CIRM at that meeting did not respond to the comment.

The question of future funding is already on the agenda of the CIRM directors' Finance Subcommittee this Thursday. It would certainly seem that Trounson's comments are suitable for some discussion in that context. The public can take part in the meeting at a number of teleconference locations throughout the state. Their specific addresses can be found on the agenda.

As for Trounson's remarks on human clinical trials, we assume that Trounson was referring to the $210 million disease team grant round, the second largest in CIRM's history. The RFA calls for up to 12 grants with the objective that grantees file an investigational new drug application within four years of the start of the award. Those applications are one step along the way to human clinical trials.

We have asked Don Gibbons, CIRM's chief communications officer, if CIRM has any comment on Trounson's remarks to Bloomberg. We will carry any remarks if Gibbons responds.

Patient Advocate Slams CIRM Reforms as Ludicrous

Patient advocate Don Reed recently presented his views on the Little Hoover Commission's preliminary recommendations for improvements in the operations of the California stem cell agency.

The piece on his blog, stemcellbattles.com, used terms like “worst fears,” “disaster,” “ludicrous” and “politicizing.” Reed said the the agency is highly successful. “Why gut it?” he asked.

Reed has followed the agency since the campaign to create it in 2004. He is vice president for public policy of Americans for Cures, which is the private stem cell lobbying group of the chairman of stem cell agency, Robert Klein. He is only one of two staff members currently listed on the group's Web site.

We do not agree with Reed's analysis of what the Little Hoover Commission is considering, and we think that some of his information is off target. For example, Reed asserts that five audits have determined that CIRM is “open and honest.” In fact, all but of one of those audits had a quite limited scope involving compliance with accepted accounting practices. And as many persons know, compliance with accounting standards does not signify a healthy or open enterprise. One recent case in point is General Motors.

The only audit to go beyond such limited scope was a “performance audit” by the state's auditor, but it also did not examine CIRM's openness or honesty.

Like Reed, we support CIRM's endeavors. But we believe that it is hampered by unnecessarily restrictive provisions in Prop. 71, which are now codified in state law and the state Constitution and virtually impossible to change. Many of those provisions are management minutia that should have been left to the CIRM board to decide. Those include the dual CEO structure, super-majority quorum requirements and a poorly thought-out cap on the number of CIRM employees. That is not to mention the conflicts of interest on the board that were built into the initiative in order to win political campaign support from all the key institutions and businesses.

Reed is attempting to drum up a letter-writing campaign from patient advocates and “true believers” in stem cell research to persuade the Little Hoover Commission to pull back on its recommendations.

While we respect Reed's beliefs, the Little Hoover Commission should pay no more attention to “true believer” letters than the NIH should to the thousands of letters it has received from the religious right opposing its proposed rules on human embryonic stem cell research – at least as far as both rely on faith-based reasoning.

The California stem cell agency is giving away $3 billion in taxpayer funds at a cost of another $3 to $4 billion in interest. Evaluation and support of the effort must be based on hard facts and conditioned on how well it actually meets its public responsibilities and its much-touted adherence to the highest standards of openness and transparency.

CIRM's Finances and Budget to be Examined Next Week

The financial condition of the $3 billion California stem cell agency will come under scrutiny next week at a meeting of Finance Subcommittee of its board of directors, along with CIRM's $500 million biotech loan program.

Leading the agenda is the proposed budget for the upcoming fiscal year, which begins July 1. Also scheduled to be discussed are funding sources and financing stretching into the first half of 2010-2011.

Following a severe financial scare earlier this year, CIRM is currently in safe financial shape for the next 18 months, despite the state's huge $24 billion deficit. That's because CIRM relies on bond financing and received a $500 million booster this spring as a result of a state bond sale. CIRM also cannot be cut by the state legislature or governor because it is constitutionally outside their control as a result of the ballot initiative that created it.

That is not to say CIRM is out of the longer-term woods. Its funding will only last for another 18 months, absent another bond sale.

The agency has approved $761 million in grants, which extend over several years. Its operations budget is tiny in comparison -- only $13.4 million for the current fiscal year.

The largest component of the budget -- $7 million -- goes for the salaries and benefits for CIRM's 40 staffers. The next largest component -- $2.7 million -- is for outside contracts, necessary because of the small staff and special needs of the agency.

Last year, the budget was missing significant details concerning outside contracting and travel, triggering complaints by the Consumer Watchdog group of Santa Monica, Ca.

When some of the details were produced -- days after CIRM directors routinely approved the budget -- John M. Simpson, stem cell project director for Consumer Watchdog, reported that they showed that CIRM Chairman Robert Klein would be out of the state on CIRM business 88 days, CIRM President Alan Trounson 68 days and Chief Science Officer Marie Csete 75 days. The budgeted dollars -- $558,000 -- were up 287 percent from the previous year.

The latest budget documents from CIRM show that it has spent only $104,000 of the $558,000 as of the end of March. In fact, as of that date, CIRM had spent only $6.7 million of the $13.4 million budgeted for operations this year. CIRM officials tout this as indicative of management frugality, which is to be lauded. But the magnitude of the difference raises questions about CIRM's budget justifications last year. It also raises a question about whether CIRM should fill out its staff to the 50 person limit. The small band appears to be overworked, based both on expressions from some board members and top management as well.

Last June, Michael Goldberg, chair of the Finance Subcommittee and general partner of the venture capital firm of Mohr, Davidow Ventures of Menlo Park, Ca., told his fellow directors to expect a more thorough-going budget document than was presented at that time.

The biotech loan program will come up in connection with a review of the response to an RFP for underwriters for the effort. CIRM staff does not have the expertise to run the effort so outside help is needed. The agency hopes to have more than one underwriter because of the conflicts involved in what is a very small financial community.

June 8 is the deadline for proposals with possible award on June 15, only four days after the Finance Subcommittee meeting.

The RFP did not specify an amount that CIRM would expect to pay for handling the $500 million loan program, but it certainly could be lucrative for the successful applicants.

The public can hear and participate in the meeting at a number of teleconference locations including San Francisco, San Diego, Los Angeles, Palo Alto, Pleasanton and Menlo Park. Specific addresses can be found on the agenda, which does not yet contain any links to background material to be presented at the meeting.

CIRM Board Meetings, Attendance and Discounts

The California stem cell agency has negotiated a discount hotel rate for persons who want to attend the June meeting in San Diego of its board of directors.

It is a step -- a first one for CIRM -- in the right direction to help out interested parties who must travel to attend the board meetings. It is also a move that highlights the attendance -- or lack of it -- at meetings of a $3 billion state government enterprise that is now the largest source in the world of funding for human embryonic stem cell research.

But first, the discount rates, whch are not inexpensive: A room for one night will cost $179 for one person compared to the $234 offered Monday afternoon on the Web site of the Sheraton San Diego Hotel & Marina (see photo).

The break may help to encourage attendance, particularly if somebody is looking to put together a holiday in San Diego.

However, attendance by the public, researchers, businesses or other interested parties has been sparse at CIRM board meeetings, to put it mildly. Many times the CIRM staff in attendance outnumbers other attendees, who often total only 10 to 20 persons. A few researchers or company representatives turn up regularly, knowing that $3 billion is not something to sniff at.

But most potential recipients -- be they businesses or academics -- are notably absent, a fact that has surprised us. CIRM board meetings (and those of their working groups and subcommittees) present an exceptional opportunity to talk directly to board members and staff, along with hearing their thinking during formal presentations. We understand that this openness is much different than at the NIH.

Meetings of the CIRM board are not a minor expense. Last time we checked, the cost of sessions of the 29-member board ran about $20,000 each, but that could have changed. Presumably the amount includees travel, cabs, meals, etc., for the board and staff members. The normal California state per diem rate for reimbursement for lodging in San Diego is $110. We assume that CIRM has negotiated that rate at the Sheraton for board members and employees. However, the board also has other, special needs, including meeting rooms, audio equipment, staff support and meals.

This month's meeting is scheduled for the 17th and 18th. The June 17 session is expected to begin late in the afternoon at the hotel and probably extend to about 9 p.m. or 10 p.m. At some point, the board will break for a closed-door dinner. The main business of the session is likely to be consideration of grant applications, but anything could and has come up in the past.

The session the next day is likely to be at San Diego State University, which is about eight miles from the hotel.

Melissa King, executive director of the CIRM board, said indivudals who want to take advantage of the Sheraton discount rate should call 877-734-2726 to make their reservations. She said interested parties must reference the ICOC meeting. (ICOC is the abreviation for the official name of the CIRM board.)

A Research Perspective From a CIRM Scholar

The following article was sent to the California Stem Cell Report by Brigitte Angenieux, 32, a postdoctoral fellow at the David Geffen School of Medicine at UCLA. She studies stem cells and brain tumors and is sponsored by a training grant from the California stem cell agency.

Angenieux's work involves the characterization of the biology of brain tumors to develop better and more efficient treatments. Her project consists of elucidating the genes that are important for the formation, the progression and the mechanism of drug-resistance of brain tumors. She also is interested in determining the relationship between neural stem cells and cancer cells.

She received her Ph.D. from the University of Lausanne, performing research involving retinal stem cells. She came to the United States in 2001. In addition to her research at UCLA, she enrolled in a journalism certificate program through UCLA Extension.

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HOPE AND DISILLUSION

By Brigitte Angenieux

LOS ANGELES -- Nick Orozco, 26, a young researcher, works at the University of California, Los Angeles (UCLA), one of the top 20 international universities. Orozco looks at his cell culture dish with a big smile. His experiment worked after three weeks, a small victory, but he has to redo the experiment three more times. This will take another month or so. His daily routine is a battle between hope and disillusion. Nevertheless he faces this reality with steely resolve because that’s the journey a stem cell researcher endures.

“There is a lot of hope in stem cell research, but I don’t think we understand everything. It takes a lot of time, more than what people are often willing to accept,” said Orozco.

Stem cell research makes headlines almost everyday. Doctors go on TV to explain the great potential of this new treatment. President Obama lifted the ban on federally sponsored stem cell research imposed by President Bush because of personal beliefs and ethical issues in the use of embryonic stem cells for research.

Hollywood stars haven’t shied away from the subject either. Michael J. Fox is a big advocate of stem cell research and its use to treat Parkinson’s disease, which he suffers. Recently, some news agencies have reported that the actress Farrah Fawcett, of the TV show "Charlie’s Angels," traveled to Germany to undergo a treatment to fight the spread of intestinal cancer. On April 6, the Fox News website mentioned Fawcett’s stem cell therapy even though it has been denied by the Fawcett's representatives.

Despite regular reports of breakthrough findings, this cutting edge treatment is still complex and obscure. Where are the cures researchers promised the public? Cancer is still not eradicated from the earth. Alzheimer’s patients are still struggling.

Science is not a straight-forward path, experts say. It requires time and multiple trials. There is no set time for each phase of drug development, but industry representatives commonly say it takes about two to eight years to carry an idea from the laboratory to FDA approval for a marketable drug.

“I think it’s a learning process, a trial and error effort,” said Orozco, who did his undergraduate degree at UCLA in the neurosciences and just applied to a medical school program starting in July. “This needs to be worked out before clinical trials.”

A recent case demonstrated that stem cell research should be applied with caution. An Israeli child suffering from a brain degenerative disease went to Russia for stem cell transplantation therapy. Now, several years after the transplantation, the child has developed cancer.

Dr. Meeyro Choe, 32, a pediatric fellow, took the opposite path of Orozco. She worked in a laboratory for two years between college and medical school. After medical school she took a fellowship and decided to give research another try because she “missed basic research.” She’s working at UCLA in a laboratory doing research on stem cells and cancer. As a doctor she is confronted with a dilemma: treating and answering her patient’s needs for a cure but not at the expense of their safety.

Clinical trials take an average of ten years, according to scientists. They involve three different phases, each testing a specific hypothesis. In phase I, researchers test an experimental drug or treatment for the first time to evaluate the toxicity. In phase II, the drug or treatment is given to a larger group (100 to 300 persons) to evaluate the efficiency. In phase III, the drug or treatment is given to a larger group (1,000 to 3,000 persons) to confirm its effectiveness. Then the drug or the treatment is available to the general public.

“Currently, nine out of 10 experimental drugs fail in clinical trial studies because researchers using lab and animal studies cannot predict how they will behave in people,” said Steve Peckman, associate director of The Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA.

Although the research is time-consuming and complex, it remains intrinsic to the future of medicine as well as the aspirations of such physician-researchers as Meeyro Choe.

“With medicine you can treat hundreds of patients, maybe, but with research you can help many more,” said Choe.

Structural Changes in CIRM? Preliminary Thoughts from California's Good Government Agency

SACRAMENTO – Significant structural changes affecting the leadership of the California stem cell agency would be made under preliminary recommendations of a staff report of the Little Hoover Commission, the state's governmental efficiency organization.

The size of the CIRM board would be reduced from 29 to 15, the dual CEO situation would be eliminated, salaries for the chairman and vice chairman would be halted and the super-majority quorums for board action would vanish.

The proposals, which are not yet official recommendations of the Little Hoover Commission, were unveiled Wednesday at a meeting of the group's CIRM subcommittee. The final report with modifications is likely to come up for approval in June.

Public comment on the plan, however, was severely hampered by the commission's refusal to make the document available to either CIRM or interested parties in keeping with the commission's longstanding practice of not publicly disclosing draft documents. Instead the public and CIRM heard a relatively quick oral overview.

Ironically, one of the charges of the Little Hoover Commission is to examine the transparency of CIRM. However, the commission's practice stands in sharp contrast to CIRM's policy of publicly disclosing its draft documents.

At one point, Stuart Drown, executive director of the commission, said that CIRM has worked hard at transparency, declaring,

"They put all kinds of stuff on the Web."

Other potential recommendations offered Wednesday include removal of the cap of 50 on the size of CIRM staff but retaining the 6 percent overhead limitation along with creation of procedures for possible removal of CIRM board members. Currently none exist under Prop. 71, the ballot initiative that created the $3 billion research effort.

The Little Hoover subcommittee also cited the need for a succession plan for CIRM leadership, including the chairman. It recommended a clear, revised, long-term plan for the organization that would lay out its plans for sustainability or shutdown. CIRM is widely regarded as a 10-year program, but there is no sunset provision on its work, which officially began in 2004.

CIRM Chairman Robert Klein has projected its existence for several years beyond 2014 and has mentioned the possibility of seeking additional bond funding, CIRM's only current source of significant cash. CIRM has the capability of creating a nonprofit organization, an unusual attribute among state agencies. Such an organization could possibly serve as a funding arm in the future.

Drown said a perception remains that the CIRM board is an "insiders' club." In addition to shrinking the size of the board, the initial recommendations suggested appointment of outside, independent individuals, possibly from the scientific community or the public, or both.

The subcommittee clearly shied away from any changes that would require another ballot measure, a procedure mandated by Prop. 71 for certain, major alterations in CIRM. The panel also appeared to be reluctant to recommend modification of the 70 percent, legislative vote requirement for other changes involving CIRM.

That super, super-majority vote standard does not apply to any other function in state government and was created by voter approval of Prop. 71.

Any changes recommended by the Little Hoover Commission would have to clear that 70 percent hurdle or be voluntarily adopted by CIRM -- if that is legally possible. CIRM could not, for example, reduce the size of the board on its own.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., praised the commission's staff for its recommendations and generally expressed support.

Two representatives from CIRM attended the meeting, Don Gibbons, chief of communications, and James Harrison, outside counsel to CIRM. They spoke briefly during the meeting but engaged the commission staff outside on the sidewalk in nearly 100-degree heat following the meeting. Klein sent a letter to the commission, the text of which follows in an item below.

During the session, we expressed our concerns to the subcommittee about its secrecy involving draft reports. We also sent a letter to the Little Hoover Commission concerning the practice. The text of that letter follows the Klein letter.

Individuals interested in making comments about CIRM can send them to the Little Hoover Commission at at littlehoover@lhc.ca.gov.