Problems With CIRM's $1 Million, Free HQ Lease

Back in 2005, the California stem cell agency snagged a free, 10-year lease for office space in San Francisco to house its $3 billion effort.

But today something is amiss. All the details are not clear, although CIRM is looking at having someone set up a nonprofit to handle the lease, according to our source. We understand that the agency cannot afford to assume additional expenses because of a 3 percent cap on administrative overhead, which is locked into state law by Prop. 71, the measure that created the agency.

According to the most recent auditor's report on CIRM, the city of San Francisco provides about “20,000 square feet of premium office space free of charge” through November 2015. The value of the office space and “other incentives” was $1 million for the year ended last June 30.

Currently CIRM has 42 employees. It is limited, again by Prop. 71, to no more than 50.

In addition to the office space is the question of parking, now free for CIRM staffers. One estimate places the cost of parking as high as $600 a month in San Francisco, although it can drop below $400. For 50 employees, that could mean $360,000 a year.

San Francisco Mayor Gavin Newsom, CIRM Chairman Robert Klein and Terry Fancher of Stockbridge Capital Partners announced the signing of the free lease with some ballyhoo on June 24, 2005. A city news release said the lease was “critical” to San Francisco's successful, $18 million bid to win the CIRM headquarters. Fancher's Stockbridge Partners, a real estate investment fund, donated the space.

We asked CIRM last month about the lease issues. Don Gibbons, chief communications officer for CIRM, replied,

“We have no problem with Stockbridge and are not seeking to change the lease, which has six years remaining. However, we have had very preliminary discussions with the City regarding how the lease and related costs could be handled in the future. One option that has had very tentative discussion is a non-profit to own the office space, which would allow us to avoid these costs now as well as in the years beyond the current lease.”

Use of a nonprofit in such a fashion does have a precedent in state government. More than one governor has lived in a house in Sacramento owned by such a group, which provided the home to the chief executive of the Golden State at little or no cost.

Inside Stem Cell Funding: The Cost of Making a Grant

How much does it cost to give away $230 million? Something more than $173,000 or about $12,000 for each of the 14 awards in the recent disease team round from the California stem cell agency.

Those are conservative figures based on a document posted Sunday on the CIRM Web site. The report said it could have cost up to $280,000 to approve all the grants in the disease team round if the new “PreApp” review had not been in place. That figure would have climbed to $300,000 or so if you add in about $20,000 for the cost of the CIRM directors' meeting. (We have also added $20,000 to the $152,500 figure reported for PreApp disease team process).

We say our calculations are conservative because the $20,000 figure was reported several years ago, and it is not clear whether it includes all travel and meeting expenses for the directors and staff. The calculations also do not include interest expense, which would perhaps double the total cost of each grant. Interestingly, the debt financing of research makes CIRM grants much more costly to taxpayers than NIH grants.

The main point, however, of the CIRM PreApp report dealt with a staff recommendation that the process be continued in the future. The excellent, 10-page document covered nearly all the bases on the PreApp process, including comments from reviewers, applicants, staff and more. CIRM directors will consider the recommendation to continue the process at their meeting tomorrow and Thursday.

What is missing is an analysis of whether the process removes the CIRM directors, who legally have final say on grants, even further from the approval process. Already, reviewers make the de facto decisions on grants. Directors almost never overturn positive or negative decisions by reviewers. CIRM staff, however, probably made an overt decision not to even dip a toe into that sensitive area.

Here are some of the other conclusions from the report, in addition to cost savings, concerning the virtues of PreApp:

• It “encouraged many new successful applicants – more than 50% of applicants had never previously applied for a CIRM grant.”
• Several reviewers “indicated that the overall quality of applications reviewed after the PreApp process was better than without PreApp.”
• Most applicants (87 percent), when given a choice between limiting the number of applications submitted per institution and an open submission of PreApps, preferred the PreApp process.

The pre-screening process was begun about a year ago to deal with problems handling large numbers of applications. Indeed, CIRM was swamped by more than 200 applications in one round several years ago. Handling those kinds of numbers can require more than one meeting of the grant review group, whose scientist members are all from out of state. Beyond the expense, the travel time required for four meetings a year places a professional burden on reviewers.

Here is how the PreApp process works. Each initial proposal is assigned to three external reviewers, who receive electronic copies of the proposals. No meeting of the external reviewers is held, and they do not see each other's reviews. Following the external review, CIRM science officers evaluate the proposals. A CIRM review meeting is then held with attendance limited to appropriate science officers, review officers, legal staff and the president of CIRM, Alan Trounson.

According to CIRM, the proposals are “ordered according to the level of enthusiasm across all reviewers with those having a unanimous recommendation to invite on top and a unanimous recommendation not to invite at the bottom.”

CIRM said,

“The PreApps were considered and discussed taking into account any discrepancies among reviewers. For each application, the science officers took a majority vote to invite or not invite the applicant to submit a full application. The CIRM President and CIRM CSO (chief scientific officer)do not participate in the vote unless the Science Officers are at a tie.”

The report is a forthright and clear explanation of the PreApp process that should be required reading for all potential applicants. It also could serve as a model for other background information on all items on the CIRM directors' agendas.

Venture Capitalist, Bankers to Weigh In on $500 Million Loan Program

The California stem cell agency is promising an interesting cast of characters for its meeting tomorrow concerning its fledgling $500 million biotech loan program.

Representatives from Proteus Venture Partners, VitaPath Genetics, Inc., Burrill & Co. and Silicon Valley Bank have been invited to appear, according to a document posted today.

Duane Roth, chairman of the CIRM Loan Task Force, says that the panel of CIRM directors will review the initial loan policy and terms in light of feedback from potential applicants. It may well be that significant changes in the loan program will be forthcoming.

Also added to the agenda are links to the loan administration policy and terms.

Info Dribbling Out for CIRM Directors Meeting Wednesday

Directors of the $3 billion California stem cell agency meet in only two days, but only just now are details beginning to emerge about what they plan to decide and why.

On Friday, the skimpy directors agenda was virtually barren of background information on the CIRM Web site. Some information for the public, businesses and researchers began to appear yesterday and more today.

Now up is a 10-page report supporting continuation of the triage process for grant applications, an $80 million proposal for early translational grants, a one-page status report on the CIRM budget (no evident problems), the routine CIRM annual audit and appointment of an administrative chairman for the group that makes the de facto decisions on CIRM grants.

CIRM staff has nominated John Sladek, professor of pediatric and neuroscience at the University of Colorado, as the administrative head of the Grants Working Group, on which he has served on for about two years.

Missing from the agenda is any background information on the proposed salary increase for Vice Chairman Art Torres, who has been paid $75,000 a year for half-time work. He has been in the position since last March.

Also missing:

• The chairman's report, which has never been available but which often contains important information
• Wording of proposed changes in how the grant reviewers operate
• Justification for new action on a $16 million disease team grant to Don Cleveland of the Ludwig Institute, Samuel Pfaff of Salk and Lawrence Goldstein of UC San Diego
• Background on the proposed modification of terms of the $230 million disease team round
• Wording and justification for a change in the conflict of interest appeals policy, which CIRM describes as a “correction”
• And the rationale for creation of a directors subcommittee on communications with the public, including the media.

Failure to post background material in time for interested parties, including businesses and researchers, to react with well-considered comment has plagued CIRM for some time. That, despite the California constitutional “guarantee” that the public has “the right of access to information concerning the conduct of the people's business.”

As the Sunlight Foundation of Washington, D.C., points out,

“Public oversight, civic participation and electoral engagement—the stuff of democratic accountability—all depend on a transparent, open government.

“Indeed, transparency and openness are the very foundations for public trust; without the former the latter cannot survive.”

The foundation also notes,

“Information cannot be considered public if it is available only inside a government building, during limited hours or for a fee. In the 21st century, information is properly described as 'public' only if it is available online, 24/7, for free, in some kind of reasonably parseable format. Almost all of our public sphere is now online, and our public information should be there, too.”

The CIRM directors meeting begins at 4 p.m. Wednesday at Stanford with an offsite teleconference location at the City of Hope in the Los Angeles area. The meeting will be audiocast on the Internet, but no public participation is possible through the Internet. However, it is possible to send comments via the Internet to CIRM officials using this email address: info@cirm.ca.gov. You can ask that email comments be read by staff during the public comment period, but there is no guarantee that will occur. Details of the audiocast and City of Hope address are available on the agenda.

Art, Bill, Nadia and Stem Cell Billions

The vice chairman of the $3 billion California stem cell agency, Art Torres, today will return to his old roots as a campaigner when he hits the hustings on behalf of the wife of the state treasurer, Bill Lockyer.

Torres(at left), who is up for a pay increase at the CIRM board meeting next week, will be “pounding the pavement” in Hayward for Nadia Lockyer, who is running for a seat on the Alameda County Board of Supervisors, according to an item on the Political Blotter.

Torres, former chairman of the state Democratic Party, and Bill Lockyer are friends and served together for many years in the California Legislature. Lockyer is also instrumental in matters of money for the stem cell agency. He is the person who presides over the sale and allocation of state bonds, which are virtually the only source of funding for CIRM.

Josh Richman wrote on the Political Blotter that Torres was quoted in a Nadia Lockyer news release as saying that he is proud to support her candidacy.

Torres also said,

“I have had the pleasure of knowing her ever since she was a young person who was intent on serving her community and making a difference. Over the years, Nadia has proven herself as a leader who has consistently fought to empower her community, and Alameda County will greatly benefit from her dedication, hard work, and enthusiasm.”

All politics is local – that's the way the old saying goes. In this case, it also reaches into the laboratories of the more than 300 researchers whose work is financed by the California stem cell agency -- not to mention the hundreds more expected to be funded in next several years, as well as their institutions and businesses.

Changes Upcoming in $500 Million State Biotech Loan Program?

California biotech firms looking to dip into a new $500 million source of capital would be well-advised to sit in on a meeting next week of the state's stem cell agency.

A group of its directors – the Loan Task Force – meets next Wednesday at noon on the Stanford University campus to discuss the state of the unprecedented lending program and, more specifically, the loan terms. The session offers a golden opportunity to learn about the program, influence its direction and chat with key figures at the $3 billion funding agency.

The loan program is clearly in its formative stages. CIRM only approved its first loan --- $20 million loan to Novocell, Inc., of San Diego – a little more than a month ago.

Curiously, while CIRM has embarked on an effort to become more friendly to the biotech industry, it has provided little public information about the specifics to be discussed next week. That's the sort of stuff, however, that is needed to draw busy executives to the task force meeting to provide valuable input on the program and to encourage them to seek funding.

With three business days left before the task force meeting, the agenda states only that the panel will hear a presentation and discuss loan terms.

In order to provide more information to businesses, the public and other interested parties, the California Stem Cell Report yesterday queried Duane Roth, chairman of the task force and vice chairman of the stem cell agency, about next week's meeting.

Roth, a San Diego businessman, told us that the meeting will include a review of the initial loan policy and terms in light of feedback from potential applicants. He indicated that the session will focus on items that need further review or adjustment. Those specifics and any others identified at the meeting would come back to the task force and then the full CIRM board for action on later dates. It is fair to say that significant changes could be in the works.

The biotech loan program is significantly different than ordinary commercial lending. It specifically targets firms that otherwise could not raise cash or secure conventional financing. The idea is provide help to firms that are in what is known as the financial “valley of death.”

For more on the biotech loan program, click on the label “biotech loans” at the end of this article. You can find a list of members of loan task force here.

CIRM Approves $300,000 More for Tech Help, Including Grant Management

The Governance Subcommittee of the California stem cell agency yesterday approved spending an additional $300,000 for technology assistance as it wrestles with its $1.2 million – and growing – grants management system.

A $100,000 increase was okayed for Turner Consulting Group of Washington, D.C., and a $200,000 extension for 25by7 of Santa Monica, Ca., according to a CIRM spokesman. Turner began work August 2008 on the grants management system under a $120,000 contract. Increases were approved last February and September. With the latest increase, the value of the two-year contract now stands at $350,000. Turner's contract is scheduled to end next June but may well be extended.

25by7's original $175,000 contract for network, server and desktop support began one year ago. Under the action yesterday, the contract was extended for one year, bringing its two year total to $375,000.

CIRM expects to seek additional information technology help next year.

The directors subcommittee also heard a report on the system designed to oversee $3 billion in grants and loans. It was first public accounting of how much has been spent on the grant management system, which CIRM has described as "a risk." No details were available concerning directors' comments.

Coming Up at CIRM: Grant Triage and More Cash for Training, Translational Research

Directors of the California stem cell agency will meet Dec. 9-10 to consider a pay increase for one of its two vice chairmen and to give away more money for training at state and community colleges.

The agenda for the meeting at Stanford University was posted yesterday on the CIRM Web site. As usual, only the sketchiest information is currently available on the matters to be considered, but more is expected to posted over the next few days.

CIRM did not specify the amount of the increase proposed for Art Torres, who has served as a vice chairman for eight months. Currently he receives a $75,000 salary for what is supposed to be a half-time job. Our impression, however, is that he putting in considerably more effort than that.

Torres, former head of the state Democratic Party and longtime state legislator, brings to the board political know-how and connections along with state government expertise that are found nowhere else at CIRM.

Duane Roth, a San Diego businessman, is the other CIRM vice chairman. He has declined a salary.

The board is expected to act on additional grants in the “Bridges” training program. The board last January put off funding some applications in the so-called tier two category because of CIRM's financial difficulties, which are now resolved through June 2011.

Grant applicants may be interested in an item dealing with conflict of interest appeals on applications. The board is scheduled to make an unspecified “correction” concerning such appeals.

Of special interest to applicants is a CIRM staff recommendation to continue the triage or pre-application process on grants. The procedure was used on the disease team round and involves initial staff and outside reviewer screening of brief grant proposals. Only those applicants who make that cut may apply for grants.

Also on tap is approval of a round of “early translational” grants and creation of a board of directors “Subcommittee on Communications with the California Public” and a “Task Force on Public Media.” The task force would be derived from the communications subcommittee.

If you have comments for the directors on these proposals, you can send them directly to CIRM at mking@cirm.ca.gov. If you would like to comment on them for the benefit of readers of the California Stem Cell Report, you may do so by clicking on the word “comments” at the end of this item. Anonymous comments are permitted.

New Figures Show CIRM Spending $1.2 Million-plus for Grant Management

In its first-ever public accounting of spending for its grant management system, the California stem cell agency this week disclosed it has already laid out more than $1.2 million, with substantially greater expenditures to come in the near future.

Overseeing CIRM's largess is no small task. The agency has approved 320 grants and one loan worth more than $1 billion. It is expected to approve another $2 billion over the next five or so years – more if it can secure funding beyond its current bonding authorization of $3 billion.

The amount CIRM is spending for grant management, not including state staff time, is tiny compared to the total portfolio. However, grant management is critical for the agency, which labelled the task as a “risk” as recently as last June.

In a new staff report prepared for a meeting Wednesday of the CIRM directors' Governance Subcommittee, the agency said it has made “considerable headway” since last spring. But CIRM said additional work will be needed, including a decision on whether to buy additional software or develop it in-house with the use of more consultants.

More immediately, the staff asked directors for approval of an additional $300,000 for technology assistance, extending and expanding two existing contracts with Turner Consulting of Washington, D.C., and 25by7 of Santa Monica, Ca. Some of the increases will cover costs in addition to grant management.

CIRM did not offer a total for past grant management spending in the documents it prepared for its directors. Nor did it predict the ultimate cost. The California Stem Cell Report compiled the $1.2 million figure from two new documents on the CIRM Web site. The first was a report on grants managements expenditures through June 30, 2009. The second was a report on all spending on outside contracts through Sept. 30, 2009, including additional funds for grant management.

The report on grant management is the most complete explanation of the status of the system, which was supposed to cost no more than $757,000, directors were told in October of 2007. But by spring of 2008, CIRM began hiring outside consultants to deal with the issue.

The contract at that time involved Grantium of Ottowa, Canda. CIRM staff said.

“However, that effort failed because CIRM's needs continued to evolve rapidly beyond the original scope, so the two parties mutual agreed to terminate the contract in 2009.”

CIRM cannot solve its technology issues in-house because Prop. 71, written by CIRM Chairman Robert Klein and others, capped the CIRM staff at 50 employees. The grant report said that “it has long been clear” that the agency faced critical problems because of the hiring cap.

Currently, 48 percent of CIRM's staff (20 out of the current 42 employees) is involved “centrally in some part of the grant life-cycle,” which includes everything from applications to standards enforcement,

The agency, however, does not have a single information technology staff person dedicated to grants management, according to its report. It had one in 2005-6, but he resigned. Currently CIRM has five grant management officers compared to one in 2006-7.

CIRM staff began “compliance site visits” in 2008-9 when it had 295 grants awarded, completing eight visits that fiscal year. CIRM expects to see 230 progress reports from grant recipients during the current fiscal year, compared to 16 in 2006-7.

CIRM posted the reports on the grant management system and the contract extensions on its Web site last Wednesday. The public can participate in next Wednesday's Governance meeting at teleconference locations in San Francisco, Palo Alto, Los Angeles(2), Stanford, Irvine and La Jolla. Specific addresses can be found on the agenda.

The item below contains additional links to additional information concerning CIRM grant management.

CIRM Grant Management Info and Costs

Here is a rundown on key documents related to CIRM's $1.2 million-plus expenditures on its grant management system.

Articles from the California Stem Cell Report

Cost Overruns and Candor from CIRM – May 29, 2008

Vagueness in CIRM budget, June 2009, with some info on the system:“The budget does not appear to contain a straight-forward accounting of all the past costs associated with the Grantium program or the projected cost of the new system. It appears to be something in the neighborhood of $610,000.”

CIRM's Troubled Grant Management System: A $1 Billion Oversight Matter – July 13, 2009

CIRM Grant Oversight Receives $150,000 Boost – July 22, 2009

California Courts and CIRM: Both Troubled by Technology Problems – Oct. 25, 2009

CIRM Documents

Transcript, CIRM directors meeting, October 2007, during which CIRM staff said the cost would not exceed $757,000

CIRM document describing grant management system as a risk – June 2009

First public accounting of CIRM expenditures on grant management system, November 2009

Buying BMWs and Grant Oversight

Revocation of three grants by the California stem cell agency has sparked a modest exchange of comments on TheScientist.com Web site.

Jef Akst wrote, on Nov. 16, about CIRM's grant oversight in an article headlined, “When does oversight overstep?”

Here is a sample from two comments.

Terry Iorns:

“I agree with others in the areas of be able to pursue serendipity and whether proper terms of oversight were apparent to the researcher, but I don't think getting the grant is a blank check to do any kind of research.

“I see no difference in using the funds to pursue unrelated research and using the funds to buy a BMW.”

Anand Rajan KD:

“'Taxpayer money' is just an euphemism for people to poke their nose into what is not their business in the first place. If at all - like the previous poster noted - there can be financial administrative oversight. You can look out for any scientist buying a BMW with his grant money, but if he is doing experiments with the money you gave him, where is the problem?”

How to Handle Pesky Media Types

What do you do when a cranky reporter comes calling and asks questions you do not want to answer or cannot?

One prospective contractor with the California stem cell agency today provided a fine example of how to deal with such a situation. We are offering it as a model that can be used by scientists, government officials and business men and women alike.

After we posted our item today involving Turner Consulting Group of Washington, D.C., we emailed a note to the firm, alerting it to the piece and asking two questions about the size of the proposed contract with CIRM and the nature of the work, none of which CIRM has yet disclosed.

Here is the verbatim response from David Cassidy, vice president of the firm:

“Hello David,

“Thank you for your e-mail, and for mentioning us in your blog. We are avid bloggers ourselves; feel free to browse http://blog.tcg.com if you haven't already!

“Your questions regarding CIRM are best addressed by that agency, if you'd like to invite them to do so.

“By the way, you may be interested to know that our very latest figures (yet to be published) show that we've saved the federal government $199 million. Our goal is to save US taxpayers $1 BILLION by 2016, by supporting our government clients with superior technology and management consulting services.

“Thanks,
“Dave”

Cassidy did not answer our questions, but he delivered a response that served the best interests of his company, deferring to CIRM, which probably will wind up paying Turner a lot of money.

Cassidy acted within hours of the initial query, which is very important in an era when information moves at cyberspace speed. Prompt response is especially important with mainstream media, which is constantly producing a product for Web sites that change hourly in addition to the normal print and broadcast efforts. Failure to respond and late responses mean unanswered questions in a reader's mind, often reflectively unfavorably on an organization.

Cassidy's email was polite, reflecting a personal, professional and organizational confidence that would be likely to accrue to Turner's benefit.

Finally, Cassidy threw out some diversionary meat, a tactic that helps throw the running dogs of the media off the scent. His email contained two pieces of fresh – and fresh is important – information (Turner's blog and the $199 million cost savings). Even if the new material does not make it into print, questioning media types often find such stuff palliative.

Our query could have been handled reasonably in other ways as well. But Turner's response more than filled the bill, given that it wisely deferred to CIRM, and creates a benign foundation on which to build.

CIRM Directors to Discuss Agency's Management of $1 Billion in Grants

A panel of directors of the California stem cell agency is slated to be briefed early next month on the “at risk” system that it uses to oversee more than $1 billion in grants to more than 300 California scientists.

In June, CIRM staff warned that the grant management system was troubled. Its complete costs have not been reported publicly although directors were told in 2007 that the amount would be no more than $757,000. CIRM has since severed its contract with the original contractor and hired additional consulting and technology help.

Grant management and others issues related to CIRM's information technology are on the agenda of the Governance Subcommittee of the agency's board of directors on Dec. 2. The information posted on the agency's Web site is skimpy at this point, but hopefully will be supplemented before the long Thanksgiving weekend.

Also to be considered is the addition of Turner Consulting Group and 25by7 to CIRM's outside contractors, who together account for the second largest category of spending, $3.1 million, in the agency's operational budget. CIRM must rely on non-state employees because of the 50-person cap on its staff, a limit that is embedded in state law by Prop. 71, which created CIRM.

The 25by7 firm is appears to be a technology support business with operations in San Jose, Santa Monica, Los Angeles and New York. The one-sentence item on the CIRM agenda says directors will be asked to approve a contract with 25by7 for network, server and desktop services. No value for the contract was available on the CIRM Web site.

Also up for approval is a contract with Turner, again with no value specified. No details were provided on the nature of Turner's work nor was it identified beyond its name. Turner may well be the Washington, D.C., information technology firm that says that it saved the government more than $166 million through its work, which includes grants management. Its clients include the NIH, the National Science Foundation and the USDA.

The Governance meeting will be available for public participation at a number of locations throughout the state. Specific addresses can be found on the agenda.

ACT Seeks hESC Clinical Trial

Advanced Cell Technology has become the second U.S. company to seek permission to begin clinical trials for a therapy based on human embryonic stem cells.

The Santa Monica, Ca., firm said yesterday that it has applied to the FDA to start trials aimed at reversing vision loss with retinal cells created from the stem cells.

The firm, which has labs in Massachusetts, is only the second business to seek to perform clinical trials involving hESC. Geron, another California company, was the first, but its efforts are now on hold until late next year because of FDA safety concerns.

Neither of the firms has received funding from the California stem cell agency. ACT, however, moved its headquarters to California, partly to seek funding from CIRM.

The firm's announcement received modest news coverage. Steve Connor of the Independent in Great Britain quoted Robert Lanza, ACT's chief scientific officer as saying,

"'We've seen absolutely no adverse effects whatsoever in any of the preclinical experiments and our cells are more than 99.9 per cent pure. We certainly expect them [the FDA] to come back with comments and questions but our hope is that we will start sometime early next year. We're optimistic and certainly confident in our own data. We've been in dialogue [with the FDA] and we know what was on their mind and what they wanted us to do. We're hoping, assuming no hitches, to begin early next year, perhaps March."

Here are links to additional coverage: Los Angeles Times, Science, Nature, MassHighTech.

Scripps' Loring Teams with International Stem Cell Corp.

The Scripps Research Institute and scientist Jeanne Loring are collaborating with International Stem Cell Corp. of Oceanside, Ca., to study parthenogenic stem cells and their potential therapeutic use, it was announced today.

In a news release from the company, Loring, director of the Center for Regenerative Medicine at Scripps, said,

“"Parthenogenetic cell lines are uniquely valuable for our quest to understand the genetic and epigenetic processes that control stem cells. We are excited about the opportunity to collaborate with scientists at ISCO."

International Stem Cell said its scientists have derived a type of cell found in the human eye from parthenogenetic stem cells that may have application in treatment of macular degeneration. The company said it and Loring and will study these cells as part of the collaboration.

Kenneth Aldrich, chairman of International Stem Cell said,

“Our intent is to begin to provide these parthenogenetic stem cell lines to advance the field of regenerative medicine, as well as to commercialize our cells for cell transplant therapies.”

The firm has applied for grants from the California stem cell agency, but so far has not been successful. CIRM, however, is currently trying to link more closely with industry.

Biotech Firms: The Undead of Capitalism?

The Wall Street Journal today did not describe biotech companies as zombies but it might as well have.

That, despite an increasingly brighter financial picture for the biotech business.

All this was contained in a piece by Brett Arends. He said the good news – the brighter picture – is the bad news. He wrote that the biotech industry, which includes stem cells, is “incredibly popular with many private investors,” but is a “risky area with very mixed results.”

Arends said,

“It's hard enough to value a profitable company that makes widgets or coffee. How do you value a speculative science project that may not come to fruition for years, if ever? ...(A)nalysts in the sector sometimes talk about 'the probability-adjusted net present value of peak sales,' essentially guessing how much a company might make off a drug at peak sales, lowering that value to reflect how long it will take to get there, and then calculating the probability that a drug will make it through clinical trials and win approval.”

He continued,

“And then there's the dormancy risk—few biotech companies go bankrupt....Many of them just go nowhere.”

Sort of like zombie enterprises, the undead of capitalism.

Arends quoted Don Collins of Ironwood Capital Management as saying,

"They don't have any debt, so there is no one to force them out of business. So as the cash dwindles, the companies just shrink and shrink and shrink, until they have three guys working there and a business development manager going out looking for money.. They can stay like that for a long time.'

“Old biotechs, in other words, never die.”

The WSJ article pointed out that the average retiurn on a biotech IPO since 2001 has been minus 18 percent. Between 1995 and 2000, it was a meager 8.44 percent. You could have earned more investing in plain old bonds or cash.

Arends concluded,

“Capitalism famously depends on 'creative destruction,' in which bad or weak companies get weeded out. The strong survive. The best industries in which to invest are often those which have been starved of capital for a generation—think gold and oil. The worst, in turn, are often those like biotech, where it's all too easy to get capital without showing results.”

Something for the California stem cell agency to think about as it kicks off its unprecedented, $500 million biotech loan program, which optimistically projects “profits” of $100 million despite default rates of up 50 percent.

(The WSJ may have restricted the Arends article to subscribers. If you cannot access it, send an email to djensen@californiastemcellreport.com, and we will send the article to you.)

CIRM Releases Bank Info That It Once Withheld

The California stem cell agency late today released information on a $250,000 contract with Square 1 bank that the agency previously had refused to disclose at the request of Square 1.

The move was prompted by inquiries from the California Stem Cell Report about the withholding of the information, which is public record and should have been released earlier.

Don Gibbons, chief communications officer for CIRM, said in an email,

“After your inquiry, we contacted Square 1 to see if they would reconsider their request to treat the pricing information as confidential, in the interest of public disclosure. Square 1 has agreed that we should produce an unredacted copy of attachment B to the contract, but they would like to note that they sought to protect the pricing information because they do regard it as proprietary (i.e., it is not known to their competitors and could give them a competitive advantage), but that they will waive their objection to producing the information in the interests of transparency. The unredacted document is attached.

“CIRM staff initially redacted the pricing information at Square 1’s request, but we remain responsible for deciding whether to honor such requests. We could have asked Square 1 to waive its request before we produced the document. In retrospect, we should have slowed down and taken the time to do that.”

CIRM is to be commended for pushing forward with its effort to release the information. Square 1 did the right thing as well, even though it contends the information should be proprietary. We wrote earlier about the implications for CIRM in connection with failing to comply with state public record law.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., was harshly criticial of the earlier censorship of the Square 1 contract. Following the release of the information, he said,

“I'm glad CIRM is doing the right thing. I hope the staff learns something from this experience.”

One of the downsides for many businesses in dealing with the state is that it does require disclosure of information that many business would like to keep out of the public gaze. But there can be great benefits as well. In the case of Square 1, this initial contract gives it a leg up on competitors in terms of securing much a more lucrative, long-term contract with CIRM for its fledgling, $500 million biotech loan program.

The current contract will serve as a baseline for future arrangements. Square 1 and CIRM staff will be working together to smooth out the process and build relationships that will be valuable in the future. The linkage between Square 1 and the $3 billion stem cell agency, the world's largest source of funding for human embryonic stem cell research, will also enhance the bank's prestige and ability to secure additional profitable business.

It is also likely that the fee structure, as now disclosed by CIRM, will be modified in future arrangements, which will require a new, public bidding process.

The redacted contract can be found here. The newly released information can be found here.

CIRM's Openness Failures Raise Broader Questions

The chairman of the California stem cell agency, Robert Klein, frequently is given to declaring that the $3 billion research effort adheres to the highest standards of openness and transparency.

Recently, however, the agency has had difficulty even complying with the basic state public records law and the state Constitution's public access guarantees, much less achieving a higher level of performance.

The specific instances are relatively minor, but they raise important questions concerning the conduct of the public's business. How is CIRM, which cannot operate without outside contractors, overseeing their efforts? Is CIRM becoming too cozy with industry? And how can CIRM maintain its credibility unless it is forthright about its affairs?

One longtime CIRM observer, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., described as “outrageous” CIRM's most recent failure to comply with the open records law.

In response to a query, he said,

"CIRM's lawyers need to learn who their client is when they are employed at a public agency. It's the citizens of California, not vested special interests."

The two most recent cases involving CIRM's failure to comply with state public records law both concern contracts with private firms. The first is a $100,000 contract with Levin & Co., of Boston, Mass., to help search for candidates for the position of vice president for research and development. The second involves a $250,000 contract with Square One Bank to conduct a financial review of Novocell, which was approved for a $20 million loan by CIRM directors last month.

In the case of Levin, the censored material involved 16 pieces of information including its legal business name, address, whether it is a partnership or corporation, name of the person signing the document and his or her title along with his signature and date of the signing. Even the names of those categories were blacked out.

(See page 14 of the contract for a look at the redaction. A blank copy of the state form involved can be found here.

Previously CIRM had posted such information for other companies voluntarily on its Web site, so we had assumed that the redactions were a mistake and consequently did not write about the matter. (After we questioned the redaction, CIRM ultimately provided the material it had chosen to withhold.)

Then came the response to our Oct. 16 request for a copy of the contract with Square One bank. It was another relatively routine matter, although it involves the start-up stages of a $500 million biotech loan program that is expected to have default rates up to 50 percent.

The copy of the contract showed that it was capped at $250,000, but that information had been reported earlier. Censored was the following information: underwriting fee to be paid per loan, annual service fee, warrant administration fee and the legal fee to be paid by CIRM to Square One

Such information is public record and commonly disclosed by state agencies. Otherwise, invoices to CIRM and payments by the agency containing that information would be cloaked in secrecy.

On Nov. 8, we asked CIRM for the legal justification for not providing the Square One fee information. Yesterday (Nov. 16), Don Gibbons, chief communications officer for CIRM, replied with one sentence,

“From our legal team: The redactions were made at the request of Square 1 Bank, based on its determination that the fee structure is confidential and proprietary.“

In response, we emailed Gibbons,

“I assume that your response ...means that the lawyers agree that the material is confidential under state law. It does not directly say that, however. Please let me know if CIRM lawyers think otherwise.”

Gibbons' complete reply:

“We let all contractors make initial decisions on what is proprietary. Square One made the decision that the structure of their fees, not the ultimate amount paid, was proprietary. In the interest of transparency, we have asked them to reconsider that decision.”

As of this writing, we have received no further response from Gibbons. Also yesterday, we asked Square One about its justification for censoring the information, but have received no response. (We will carry its response verbatim if we receive one.)

As Consumer Watchdog's Simpson indicated earlier, CIRM's actions raise questions about the management of its outside contractors, which are essential to the agency's operations. CIRM would cease to function without its outside help. It is restricted by an ill-considered provision in Prop. 71 to only 50 employees. Currently the cost of contracting is the second largest item ($3.1 million) in its operational budget, just behind salaries and benefits.

In the case of Square One, CIRM's attorneys should have told the firm that its request did not comply with state law. CIRM should have then released the entire document. In our case, we have had decades of experience with public record law and can generally tell when there is a flagrant violation. But other members of the public are likely to accept whatever CIRM, driven by desires of its suppliers, deigns to pass along.

The contracts signed by Levin and Square One are state documents. CIRM is required by law to determine what is public or confidential, not the outside contractors. Certainly they can and should be consulted, but their wishes must not be blindly followed. To do so is to open CIRM to unnecessary legal challenges by foes of stem cell research.

Failure to be forthright also raises questions about other areas of CIRM that bear attention, such as the problems with the software that is critical to the oversight of what is now a $1 billion grant portfolio along with the $250,000 federal lobbying contract with Tony Podesta, also heavily censored and we suspect unnecessarily so.

Managing outside contractors has always been difficult for government, both at the state and national levels. The stories of abuses are legion, whether it is a Defense Department boondoggle or fouled up databases at the state Department of Motor Vehicles. CIRM must make it clear to its contractors that the agency's needs must be met and that the interests of the taxpayers do not necessarily coincide with those of the contractors.

Some Question CIRM Grant Oversight as Excessive

The California stem cell agency is receiving “mixed reviews” for its oversight of its research grants, which now total $1 billion, according to an article today in The Scientist magazine.

Commonly governmental agencies are chastised for failing to ensure that taxpayer funds are spent effectively. In this case, the stem cell agency is being faulted -- by some -- for being too tough.

The case in point is the termination -- first reported by the California Stem Cell Report -- of three out of more than 300 grants. The amounts are tiny compared to the $3 billion that CIRM expects to give away, accounting for only $1.8 million in a $46 million round approved in 2007.

The Scientist article by Jef Akst said,

“Clearly, funding agencies need to offer some oversight of grants to avoid misuse of funds. But can there be too much of a good thing? “

She continued,

“There are mixed reviews among the scientific community about whether CIRM's close watch of their grantees is a good thing. To some, it is an important practice for public funding agencies such as CIRM to show the taxpayers that their money is going towards productive and fruitful research. 'I think the oversight is outstanding,' said John Simpson, the stem cell project director at the advocacy group Consumer Watchdog in California. 'It shows that they're not asleep at the switch. CIRM is functioning as both a grant making agency [and] also something of a steward of the funds it hands out.'

“But others say this kind of intense supervision can burden investigators -- and the science itself. 'In theory, it's a terrific thing,' agreed David Kaplan of Case Western Reserve University in Ohio, who has written about the peer review system at NIH. "To have the granting agency being involved enough to be helpful to their grantees, I think that is a terrific idea. The problem with that kind of a system is that you can be too intrusive. That eliminates that kind of serendipity [in scientific discovery].'“

Akst wrote that CIRM's “short timeline” may lie behind its grant monitoring, which is more rigorous than performed by the NIH.

She said,

“While the NIH will exist for many years to come, CIRM has a 10-year lifespan, as approved by California voters in 2004. 'CIRM has very defined goals,' said the Burnham Institute for Medical Research's Huei-Sheng Vincent Chen, another SEED grant recipient. '[They] wanted something within 10 years so they have to be more aggressive.'"

The Scientist magazine also chose to publish the names of the scientists whose grants were terminated. Their names are by law public record. Only one of the three scientists spoke with Akst, John Cooke of Stanford.

Akst's story said,

"'I anticipated that they would be happy with that [new] proposal,' Cooke recalled. 'But] they weren't happy.' In January 2009, after a second, more detailed progress report, follow up phone discussions, and a petition for reconsideration from Cooke, CIRM revoked his second year of funding -- nearly half of what he had originally been awarded -- citing the new directions his research had taken.

'I can understand their reasoning,' Cooke said. 'I just wish I had understood that that applied to the SEED grants.'"

Last month, CIRM approved $230 million for 14 grants up to $20 million each that appear to require even more rigorous oversight than earlier rounds. Some CIRM directors said publicly that they expect to see some of the latest grants terminated early because they will fail to meet the required benchmarks.

You can find a list here of all the items published on the California Stem Cell Report concerning the terminated grants. They include comments from the other two scientists, who we have chosen not to identify for previously discussed reasons.

$30 Million Available for Immunology Research

The California stem cell sweepstakes began another round this week with a $30 million jackpot for about 20 researchers.

CIRM is looking for applications from both research institutions and businesses as well as proposals for scientific collaboration with researchers from Germany and Australia.

This round will finance “transformative” research into cell transplantation immunology. The hope is that it will lead to development of immune tolerance of pluripotent stem cell derivatives and potential correction of autoimmunity.

Mandatory letters of intent are due Dec. 15. Winners should expect checks in the mail next summer.

Applications and details can be found here.

A Look at Tucson's Calimmune and $20 Milllion

The global headquarters of Calimmune, Inc., which shares in a $20 million grant from the California stem cell agency, stands on one of the more unlovely thoroughfares in Arizona.

The three-year-old firm is only a short walk on East Broadway in Tucson from O'Reilly Chevrolet and a Burger King. While Calimmune's address may not electrify folks on Wall Street, it has a pedigree that it is hard to quibble with.

By one account, Calimmune was founded by David Baltimore (see photo), a former member of the board of directors of the $3 billion California stem cell agency. Baltimore also is a Nobel Prize winner and former president of Caltech. Other accounts state that Irvin Chen, director of the UCLA AIDS Institute, was a co-founder.

Late last month, California's stem cell agency approved a $20 million grant to Chen and Geoff Symonds, chief scientific officer of Calimmune, a little-known company with no Web site but a laboratory in Australia, lab space in Pasadena, Ca., and more facilities soon to come at UCLA.

CIRM said the grant was aimed at generating an FDA application in four years for a clinical trial “to treat HIV/AIDS using an RNA interference approach to modify the patient’s blood-forming stem cells. When transplanted back, those cells will produce T cells that are resistant to HIV infection.”

The proposal echoes Calimmune goals articulated earlier on the Web site of Grayhawk Capital, a private equity investment company in Phoenix, Az., that has cash in Calimunne. Some initial research involving Symonds and UCLA was published last February with partial funding from Johnson & Johnson in Australia.

In response to email queries, Calimmune's CEO, Louis Breton, told the California Stem Cell Report that Symonds will perform his CIRM-funded work in California. He said the closely held firm is aware that CIRM is barred from funding out-of-state grants. Breton did not respond to questions about the number of Calimmune employees and their locations, although he said he anticipated more hiring for the CIRM grant. He said the Tucson location houses a small administrative staff. The company is incorporated in Delaware.

As for Calimmune's funding, we asked Breton whether any originated with Johnson & Johnson. Until the last year or so, Symonds was senior research director at Johnson & Johnson Research Pty Ltd. in Sydney, Australia, where the Calimmune lab is located. According to one report earlier this year, he holds more than $10,000 in Johnson & Johnson stock. At least one of the other Calimmune scientists in Australia worked as well for Johnson & Johnson until February. Breton, however, said none of the company's funding originated with Johnson & Johnson. Grayhawk did not respond our email query.

A Johnson & Johnson company document said in 2008 that the purpose of the Johnson & Johnson research operation involving Symonds was “to identify new medical discoveries in Australia and facilitate their commercial development into new products for Johnson & Johnson.”

CIRM reviewers were enthusiastic about Chen and Symonds disease team project. A CIRM summary of the application said,

“Reviewers stated that the resources and investigators are outstanding and the team is superb, both scientifically and in therapy development. The Disease Team comprises a collaboration between two complementary groups, one academic and one corporate. Each brings unique expertise to the project, with the academic group providing scientific know-how and proof of concept and the corporate group providing expertise in biologics development and commercialization. The team leaders are accomplished, highly productive investigators with a demonstrated track record in the field of HIV research, gene therapy, and/or clinical drug development. Key members of this team made the initial scientific observations leading to their hypothesis and demonstrated proof of concept in tissue culture and relevant models. A subset of the team has direct experience with a gene therapy trial in humans.”

Rundown on Grant Termination Stories

Our grant termination story last week is continuing to draw readers. However, other stories were carried as far back as last April. Here is a complete list of articles on the subject.

April 24, 2009
CIRM: Some Scientists' Grants to be Pulled
Some researchers who have been funded by California's $3 billion stem cell agency are going to lose their grants because of a lack of progress, according to a top CIRM official.

June 14, 2009
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.

June 17, 2009
CIRM Pulls Three Grants from Researchers
SAN DIEGO -- The California stem cell agency tonight said it has terminated three research grants for lack of progress, but declined to release immediately the names of the researchers or the institutions involved.

Nov. 2, 2009
CIRM Scrutinizes Grantee Performance: The Tale of Three Terminations
Playing the rich uncle to California stem cell researchers is unquestionably satisfying, but the folks at the state's $3 billion stem cell agency sometimes bear messages for scientists that may be less than warmly received.

Text of Csete's Description of CIRM Grant Monitoring

CSCR Withholds Names of Terminated Grantees to Avoid Unnecessary Harm
The California Stem Cell Report is not naming the three scientists whose grants were terminated by the state's stem cell agency because doing so would unnecessarily damage their reputations.

CIRM as Regulator, Compliance Enforcer
In addition to handing out $3 billion in grants to California stem cell researchers, CIRM is also a regulator, monitoring the conduct of its grantees' research to ensure they adhere to the agency's stringent ethical standards.

Nov. 5, 2009
More on the Tale of Three Terminations
Some confusion has arisen in connection with a story in the Scientist magazine concerning our account of the termination of three grants by the California stem cell agency. In an attempt to clarify the situation, we are providing more information on the decision by the California Stem Cell Report to withhold the names of the researchers and also on the actions of the California stem cell agency.

Torres Hails CIRM Innovation, Leadership

The Sacramento Bee last week carried an op-ed piece by Art Torres, co-vice chairman of the $3 billion California stem cell agency, touting the virtues of CIRM, its innovation and the wisdom of the California electorate.

Torres, a former state legislator and former head of the state Democratic party, said,

"(The) drive to innovate is what led voters to create the California Institute for Regenerative Medicine and its charter to invest in stem cell research. The goal was clear: Keep California, its universities and biotech industry on the forefront of this most promising area of innovation in health care."

Torres focused particularly on CIRM's ambitious, $230 million disease team grant and loan effort, the largest research round in the agency's history.

Torress said,

"There are no other funding organizations in the country that are able to make this kind of investment in stem cell innovation."

He continued,

"We don't yet know what researchers will discover. But we do know that, whatever they discover, this new approach to science means we will be able to turn it into viable treatments for people much, much faster than ever before. That will move stem cells from the promise of new therapies to delivering on that promise for the people of California.

"And that's exactly what the voters wanted when they created CIRM: for it to reflect the innovative leadership that is this state."

Torres" piece drew only three comments online from readers. All were negative.

Off-topic: No White Whale

Regarding our Oct. 29, 2009, off-topic item about a whale attack on a sailboat, it now appears that it was a mere collision -- not an assault.

You can read the latest information in Latitude 38. See the "real story" item on this page. There is no guarantee that the story won't change again.

More on the Tale of Three Terminations

Some confusion has arisen in connection with a story in the Scientist magazine concerning our account of the termination of three grants by the California stem cell agency.

In an attempt to clarify the situation, we are providing more information on the decision by the California Stem Cell Report to withhold the names of the researchers and also on the actions of the California stem cell agency.

CIRM was slow to release the information, which by state law is public record, but the agency did not withhold it. Here is the string of events.

Last June, I was at the CIRM board meeting at which Marie Csete , then CIRM's chief scientific officer, gave her account of how the CIRM SEED grants were monitored. (CSCR carried the text of her remarks and those of directors in the four related items posted this week.)

At the meeting, I asked both the CIRM attorney, James Harrison, and the chief communications officer, Don Gibbons, for the names. They asked for a week or so delay in providing them in order to be sure the researchers had been told their names were public record and to discuss the matter with CIRM's executive committee. Given the potential impact on the researchers, that seemed appropriate.

Some weeks passed, and I still had not heard back. So I queried Gibbons by email concerning the names. He ultimately provided information that led to their identification.

Over the decades that I have spent as a reporter and editor, my practice then and now is to publish the names of individuals involved in public matters. In the case of CIRM, the agency leads an unprecedented, $6 billion (including interest) experiment with taxpayer dollars that could have a major impact on science, making it all the more important that the agency be critically examined.

That said, it is incumbent on journalists to consider the personal and professional impact of the publication of names on the individuals involved, many of whom are secondary to the matter at hand. In marginal cases, editors and reporters should weigh the pros and cons of such publication and whether the potential damage outweighs the possible public good. In this case, some of the questions for me were: Will better policy result if the individuals are identified? Was there wrongdoing? Is it unfair to single out these individuals while others who may be involved in more serious misdeeds (say for example, possibly some NIH grant recipients) remain anonymous?

Given current practices surrounding government research grants, public disclosure of the names in this case would carry a great potential for harm to the individuals and little public benefit. The problem is largely created by NIH grant monitoring practices, among others. As I understand it, the NIH rarely, if ever terminates a grant for lack of progress. When NIH grants are terminated, they appear to involve cases of malfeasance or some sort of wrongdoing. Such does not appear to be the case involving the three CIRM grants. However, the perception in the scientific community, right or wrong, is certain to be colored by the NIH approach. I also think it is fair to say that many CIRM researchers are not accustomed to CIRM's monitoring, particularly the three researchers, all of whom have long and respected careers.

Probably the most important question raised by this case is: Why does the NIH give away money and not monitor the grant progress much as CIRM does? CIRM Director Floyd Bloom, former editor-in-chief of Science magazine, said that under NIH practices a researcher is free to "change directions, convert personnel into equipment funds, and essentially re-program the proposed project." It may be stretching it a bit, but some folks from Enron and WorldCom are serving prison time for doing much the same thing.

As for CIRM's openness and transparency, given decades of experience with California state government, it is not much different than many state agencies, which is not a high hurdle. CIRM certainly could do better, especially considering the conflicts of interest that are built into its board.

The agency has pledged to adhere to the highest standards of openness but has fallen short of that measure, which goes beyond mere legal requirements. For example, CIRM's 29 directors and additional top management must file statements of economic interest under the state's conflict of interest laws. The governor of the state of California posts his statement online along with the top officials in his administration. CIRM does not meet that standard. Instead, interested parties must make a specific request for a public record that is not on the CIRM Web site. Responses on records requests sometimes take weeks and weeks. CIRM refuses to disclose in any form the economic interest reports from the reviewers who make the de facto decisions on grant applications. That makes it all but impossible for grant applicants or the public to determine if conflicts exist. CIRM also regularly fails to post important background material well in advance of its directors meeting, meaning that interested parties do not have enough time to comment intelligently or make plans to attend the meetings. More examples could be cited.

The Scientist story has generated little comment on its Web site, but one remark caught my eye today. Rafaela Canete-Soler said,

“The (monitoring and termination) policy at the CIRM seems to me timely and appropriate. By the tone of the article and the sentiments of the researchers, I can only express my admiration for them, as well as for CIRM and the way the evaluation seems to have taken place. We all know that projects and ideas do not always work the way that we had planned.

“I once heard that changes for the best almost always happen first in California, then in the United States and then in the rest of the world. The policy of NIH of liberty to take the research where it leads you does not appear to be sustainable any longer. For a very simple reason: resources are finite. Priorities and objectives, particularly those proposed by researcher, and for which they are funded, are to be followed up and nurtured within the framework of a sound and healthy competition system.”

The Podesta Watch: White House Visits, Red Shoes and 61 Percent Gains

Tony Podesta, the California stem cell agency's man on the Potomac, is making news again, largely for flashy fundraising and access to the Obama White House.

Podesta was hired as a federal lobbyist by CIRM last February under a 10-month, $240,000 contract. California state agencies, rarely if ever, hire federal lobbyists, although the state does maintain a lobbyist on the state payroll in Washingon.

Podesta visited the White House five times in six months, but the clients were not identified. Our guess is that they did not include CIRM. So far, CIRM Chairman Robert Klein has not reported publicly to his board of directors on what California taxpayers are receiving for their money. Podesta's contract with CIRM is due to expire in December but could be extended.

Here is a rundown on recent Podesta stories:

“Podestas Rule Washington and Obama Guest List” – US News and World Report – The story says it shows “the power of the Podesta family. Between them, Obama adviser and former Clinton Chief of Staff John Podesta; his brother, lobbyist Tony Podesta; and Tony's lobbying wife Heather made 25 visits. By comparison, House Speaker Nancy Pelosi made one visit.”

“Holdouts to Obama's Vow to Change” – Commentary by Albert R. Hunt, formerly of the Wall Street Journal and now of Bloomberg, “Heather and Tony Podesta are conscientious objectors to the culture of change in Washington. The husband and wife, with separate lobbying firms, are raking in millions from the insurance and drug industries, tobacco companies and corporate interests fighting changes to labor laws or the overhaul of the student-loan program.” In New York Times also.

Tony Podesta Scoops Up Nearly $19 million in Third Quarter, Up 61 percent – National Journal

"Tony Podesta has happy feet for 65th birthday” – Washington Examiner - Podesta and friends celebrate his birthday at a high-profile fete wearing red shoes.

“Big money buys seats at lawmakers' dinner tables” – Washington Times --Heather Podesta, wife of Tony and a lobbyist herself, throw fundraiser at her $2 million home

Then there is this paean to Heather Podesta in the Washington Post in August that had, as they say, tongues wagging along the Potomac.

Releasing the names of the White House visitors was a first. The Bush administration refused to do so. Initially Obama adopted that position but wisely changed his mind. The release of the list attracted a great deal of coverage because of its novelty but that will diminish.

Here is a link to the White House list of Podesta visits.

As readers may recall, we have raised questions about the effectiveness and propriety of CIRM's efforts to become a player in Washington politics. We do not object to CIRM making its voice heard in Congress nor particularly in Sacramento. But CIRM has more than enough laundry to take care of in the Golden State. Attempting to become a major influence in Washington will require funds and time that CIRM cannot afford.

Here is a link to one article on the subject. You can also search on the terms “podesta” and “lobbying.”

Scientist Magazine Picks Up Grant Termination Story

The Scientist magazine today picked up our report on the termination of three grants by the California stem cell agency.

In a piece by Jef Akst, the magazine said CIRM “giveth and it taketh away.”

The Scientist piece, which credited the California Stem Cell Report, did not add a great deal to our report, but Akst wrote,

"'Termination is a last option,'" CIRM's chief communications officer Don Gibbons wrote in an email to The Scientist. 'We first work with grantees who are not progressing to get them back on track.'"

Nature on Disease Team Round: The Race is On

Nature magazine has published another piece on the California stem cell agency's ambitious, $230 million disease team round, calling it the “starting gun” to confirm the promise of stem cells.

The Nov. 2, 2009, story by Erika Check Hayden said that some researchers around the country say the grants and loans will benefit the field as a whole. She also carried a comment from the former chairman of the CIRM grants review group, Stuart Orkin. Orkin resigned his post last November and did not participate in the review of the disease team grants.

Hayden wrote,

“Other researchers have welcomed the awards, but note that many of the projects test ideas that are similar to work being funded elsewhere.

"'The general [new-grant] portfolio strikes me as being similar to what is going on elsewhere,'" says haematologist Stuart Orkin of the Children's Hospital Boston in Massachusetts. 'I don't see anything radically different from what I see people thinking about in other institutions, but it's great to have the funding to do it.'

“For instance, two of the grants will fund work to develop monoclonal antibodies — targeted biological drugs that are already approved for many indications — to target cancer cells. Another grant will try to use a patient's own cardiac stem cells to repair damage from heart attacks, a controversial approach that is already being tested in patients. A fourth grant aims to modify patients' bone-marrow cells to correct the genetic defect that causes sickle-cell anaemia, then implant the cells back into patients.

“A similar approach has been used to treat severe combined immunodeficiency disorder. 'That would have been called gene therapy before, instead of stem-cell therapy, and there are a number of people doing that,' Orkin points out.”

The magazine also carried an item last week on its blog.

Don Gibbons, chief communications officer for CIRM, has pointed out that the grants received more coverage than we reported last week. We found another story in a local paper in Los Angeles, the Daily News, and one on a Los Angeles radio station, KPCC. The Daily News story was reprinted in the Contra Costa Times. Other stories appeared elsewhere as well.

In our reporting on news coverage of CIRM events, we rely on Internet search engines, which are not perfect and sometimes slow. Plus we do not necessarily mention every news report in our items, just the ones of interest with higher impact or interesting reporting or commentary.

CIRM has a standing invitation to comment on any subject, including accounts of CIRM news coverage, on the California Stem Cell Report. We have told the agency on more than one occasion we will carry their commentary verbatim, a practice that is not found in the mainstream media.

Correction

The “stem cell web” item Nov. 1, 2009, incorrectly reported that only one reporter was present at the CIRM disease team news conference, based on information provided by a person who was also present. CIRM says two other reporters from local outlets were also on the scene.

CIRM Scrutinizes Grantee Performance: The Tale of Three Terminations

Playing the rich uncle to California stem cell researchers is unquestionably satisfying, but the folks at the state's $3 billion stem cell agency sometimes bear messages for scientists that may be less than warmly received.

That's when they become regulators and stewards of the public's money. Particularly when they exercise that responsibility in a more rigorous way than is the practice at the NIH.

CIRM is not making much of the fact that it has revoked three grants because of a lack of progress. It took us more than a month to secure the identities of the researchers who fell under CIRM's scrutiny. The agency, however, should take pride in its oversight. It enhances the credibility of the $3 billion agency and serves notice to all grantees that CIRM is more than a sugar daddy and takes its responsibilities seriously.

Only four months ago, CIRM directors heard a report on monitoring of grants that merits attention following approval of the largest research grant round in the agency's five-year history. The $230 million in disease team grants pose special challenges for the tiny agency. Its staff, currently without a chief scientific officer, will be called on to make go, no-go decisions on continued funding as researchers hit or miss bench marks in projects involving as much as $20 million.

One can only imagine the ruckus if CIRM staff recommends that funding be halted on a $20 million, four-year grant involving such high-profile and respected institutions as UC San Francisco, UCLA, Stanford, Salk and City of Hope, among others.

CIRM opened the window a bit on its oversight of grants at the board meeting in San Diego last June. Marie Csete, then chief scientific officer for CIRM, described in a positive fashion her office's monitoring of the $45 million SEED program, the first ever research grants by CIRM. She said CIRM's efforts saved some grants that would have perished. But it took a question from director Ricardo Azziz, chairman of the Department of Obstetrics and Gynecology at Cedars-Sinai Medicial Center, to bring out the information that three grants had been terminated.

As for the issues raised during the monitoring, Csete said,

“In general, I have to say it was slow progress. It wasn't bad progress. And it allowed us to identify some issues that are, I think, endemic with a new agency and new ideas. Institutions had trouble getting lines for their investigators. People had trouble hiring post docs who were able to do the work. We had trouble getting some of the (grants) out the door for various reasons.”

CIRM director Floyd Bloom, former editor of Science magazine and executive director, science communication, at Scripps, praised Csete and her staff's work. He said,

“This kind of nurturing, interactive relationship with the PIs's is absolutely unique in the grant world. And so I think it's a wonderful thing that you've instituted. It's going to be a tremendous amount of additional work on your staff to be able to do that, but it's highly commendable, and it's going to make the difference between success or failure, particularly for these intermediate level of successful early experiments where they have to be encouraged to go on and push.”

We spoke by telephone with two scientists whose grants were revoked and exchanged email with the third, who was out of the country. None are particularly pleased about losing their grants, but their comments offer insight into the process. We are not identifying them in this piece. To do so would place an unnecessary onus on them, given the current practices in the scientific grant community and the different monitoring procedures at the NIH. None of the issues with the grants appear to involve malfeasance.

One of the researchers said he was “bitter” about CIRM's action, declaring it caused a “huge uproar” at his institution. (Prior to our conversation, we had heard unconfirmed reports about significant unhappiness on the part of recipient institutions.) This researcher said CIRM's monitoring practices were a departure from those of the NIH, which allows “the liberty to take the research where it leads you.” Nonetheless, he continues to support CIRM.

Another scientist said he parted “amicably” with CIRM but confirmed that its practices are different than the those of the NIH. (The NIH has not responded to our queries concerning how many grants it has revoked for lack of progress.)

This researcher told us,

“I think that it is very important for CIRM to closely monitor its grantees. As a California taxpayer, I want to know that state revenues supporting the CIRM effort are well utilized. Furthermore, CIRM (and its grantees) need to make good on the promise of translating the science of stem cell biology into novel therapies.”

The third told us in an email that his grant had been “prematurely terminated.” He said the work has been completed without the CIRM support and the research accepted for publication in a prestigious journal next year. He also called CIRM a “great organization” and expressed the hope that it will lead to “great cures.”

The round of grants that Csete reported on involved only $45 million, substantially less than the $230 million in the disease team round. The stakes are now much larger. Powerful teams, some international, will be at work. Impending clinical trials will also create a vision of handsome profits, in addition to hoped-for prestige and accolades. CIRM directors have indicated they expect some of the disease team grants to fail. But revoking funds for one of those grants or loans will require a lot of steel on the part of the CIRM staff.

Csete abruptly resigned from CIRM after the June meeting. Her departure and the workload at CIRM likely meant that some of the monitoring efforts were pushed back. Most of the work is done by science officers, but at crucial points, it requires the intervention of CIRM's highest level scientist.

In the wake of Csete's departure, CIRM President Alan Trounson created a new position, vice president for research and development. A search firm has been hired for $100,000 to help recruit a candidate who will make go, no-go decisions on the disease team round along with other grants. Trounson is hoping to find someone with substantial experience in the biotech industry.

Whoever fills the job should not only be something of a scientific diplomat but also be able to face the big dogs of stem cell science and tell them no. CIRM's first responsibility is to generate results for the people of California and to serve as ardent stewards of the public's money.

(Below is a transcript of the entire discussion by the CIRM board in June concerning Csete's monitoring effort. Also below is a piece concerning our decision not to publish the names of the scientists whose grants were revoked as well as another item dealing with CIRM's efforts to ensure compliance with its ethical and research standards.)

Editor's note: The California Stem Cell Report first published an item on the termination of CIRM grants last April. Here is a rundown on all the stories published on this site as of Nov. 9, 2009, concerning grant termination.