San Diego Biotech Firm Appeals Rejection of Cancer Stem Cell Grant

A San Diego biotech firm, Eclipse Therapeutics, whose multimillion dollar grant application was rejected by reviewers at the California stem cell agency, is asking the agency's board to overturn the decision next Thursday.

Eclipse, a spinoff from Biogen Idec, said it is reducing its request from $3.5 million because it has raised $2 million since it applied for the grant six months ago. However, its appeal did not state specifically how much it was now requesting from CIRM. The research involves cancer stem cells.

The company's appeal said that during the period following submission of its application, it has accomplished all of the activities that CIRM had identified as the first milestone in the research project. Eclipse also said it has accomplished a number of activities in milestones two and three. The firm said that it is now accelerating its IND filing by one year.

Eclipse was formed in March 2011 with $2 million in seed funding from City Hill Ventures, also of San Diego, according to a Bioworld article by Marie Powers. The co-founders are Peter Chu, now president of Eclipse, and Christopher Reyes, chief scientific officer. Chu and Reyes ran Biogen Idec's cancer stem cell program. They are also the applicants for the CIRM grant.

Their appeal carried a routine cover letter to the CIRM board from CIRM President Alan Trounson. He made no comment on the worthiness of the request. On an earlier appeal from Stuart Lipton of Sanford-Burnham, Trounson's cover letter said Lipton's letter was "without merit."

Eclipse said its proposal received a scientific score of 58 out of 100 from CIRM reviewers. CIRM, however, has not released the company's score. Two other proposals with scores of 53 were approved by reviewers.

For several years, CIRM has been sharply criticized for its failure to fund businesses in a significant way. It is currently moving to engage them more closely. If Eclipse's appeal is successful, it will be one of less than 20 business to be funded without a nonprofit partner. Businesses have received only about 4 percent of CIRM's $1.3 billion in awards to 494enterprises.

Appeals from rejected applicants are included in the agenda material presented to the CIRM board, but the board does not have to act on them or discuss them. Researchers can also appear before the board to make a case.

Burnham's Lipton Appeals Rejection of $5 Million Grant Application

Sanford-Burnham researcher Stuart Lipton is seeking to overturn rejection of his application for a $5 million grant from the California stem cell agency, declaring that reviewers misinterpreted the proposal and relied partly on "grantsmanship" instead of science.

Lipton's proposal deals with strokes and is one of 22 rejected by CIRM's reviewers in a $95 million round that comes before the agency's directors next Thursday.

Lipton's letter to CIRM yesterday said some of the reviewers' criticism was "completely unfounded," "incorrect" or "in error." The two-page letter went into specific scientific detail.

In a cover letter to the CIRM board, CIRM President Alan Trounson said Lipton's appeal was "without merit." He did not go into details but said CIRM staff is prepared to discuss it next Thursday.

The scientific score on Lipton's grant was not disclosed by CIRM, but it appears to be between 62 and 53. Two grants ranked at 53 were approved by reviewers. Appeals from rejected scientists are included in the agenda material presented by the board, but the board does not have to act on them or discuss them. Researchers can also appear before the board to make a case.

Kristiina Vuori, president of Sanford-Burnham, is a member of the CIRM board. She will be barred from taking part in any discussion of Lipton's application or voting on it.

CIRM's Improving Openness

The California stem cell agency this week once again posted in a timely fashion important information dealing with matters to be decided next Thursday by directors of the $3 billion stem cell agency.

The agency's actions are a marked improvement in openness and transparency compared to the practices prior to the election last June of J.T. Thomas as chairman of the CIRM board. Previously, background material on multimillion dollar matters was not available much of the time until shortly before the directors meeting, making it virtually impossible for interested parties or the public to comment or attend the sessions. Even CIRM directors would complain from time to time about the laggard performance.

According to the agenda, next week's meeting in San Francisco will include approval of $95 million in new grants, consideration of the first-ever performance audit of  which made 27 recommendations for improvement, action on the first-ever CIRM directors' code of conduct along with conflict of interest rules, changes in its loan policy and consideration of the agency's strategy for the next five years.

In addition to the meeting site in San Francisco, a public teleconference location will be available at UC San Francisco, two in Los Angeles and one in La Jolla. Specific addresses can be found on the meeting agenda.

Conflict of Interest: CIRM to End Contract with Consultant Linked to Grant Recipient

The California stem cell agency will not renew a contract with a "special advisor" who has been nominated to the board of directors of a firm that is sharing in a $14.5 million grant from the agency.

She is Saira Ramasastry, managing partner of LifeSciences Advisory, LLC, of Emerald Lake Hills, Ca. Ramasastry has worked for CIRM since May of 2010. Last month, she was nominated to the board of Sangamo BioSciences, Inc., of Richmond, Ca. Her responsibilities with CIRM have included "industry analysis and consultation." Sangamo cited her experience with CIRM in its press release on her nomination. She was also employed as a consultant by Sangamo, according to the firm.

Ramasastry's dual roles raise obvious conflict of interest questions. The case highlights the issues that can arise between CIRM and the biotech industry as the agency moves to engage industry more closely. CIRM's response additionally demonstrates a lack of awareness of the potential for serious mischief or worse when dealing with consultants.

The California Stem Cell Report asked CIRM on May 6 for comment on the Sangamo-Ramasastry matter. The questions included whether Ramasastry disclosed to CIRM her work for Sangamo and whether CIRM took any action per the agency's conflict of interest code. CIRM did not respond to the question of whether Ramasastry ever disclosed her ties to Sangamo, which expects to receive $5.2 million from the CIRM grant if it runs a full four years.

Here is the text of CIRM's reply today from spokesman Kevin McCormack.

"Saira Ramasastry was an independent contractor. As required by law, we do ask independent consultants to complete Form 700s(statements of economic interests) if they participate in an agency decision making role. Her role did not fall into that category - she was identified as a 'special advisor' in connection with our external review process - and so she did not have to fill out a Form 700. Her contract with CIRM comes to an end at the end of June, and she will not be elected to Sangamo's board of directors until July. Obviously once she is a member of the Sangamo board she will not be consulting or advising CIRM because of our strict conflict of interest rules."

(Editor's note: The board election is June 21, according to the company, not July.)

Our take: CIRM is heavily dependent on outside contractors. Expenditures for their services are the second largest item in CIRM's operational budget, exceeded only by salaries and benefits of regular employees. The responsibilities of outside contractors cover a wide range of sensitive tasks including computer system security, development of software that deals with proprietary information from grant recipients, analysis of confidential business operations of grant and loan applicants and much more.

The agency needs to know who their consultants are working for besides CIRM. Whether they make decisions for CIRM is beside the point. Gathering information that is not normally accessible to the public can be extremely valuable to businesses and their competitors as well as applicants for CIRM's $3 billion. In Ramasastry's case, she was privy to a great deal of confidential or economically useful information during her work on CIRM's external review and likely much more.

The use of California's Form 700 is hardly adequate to assess conflict of interest issues involving private consultants. The form was developed in the 1970s to deal with elected officials primarily and provides only the grossest sort of look at financial holdings and income.

CIRM's current move to embrace industry requires more scrutiny of conflicting interests – not less. NextThursday the CIRM board will deal with some of its conflict ofinterest rules. It is fine opportunity to ask for a sharper analysis of conflict issues and consultants with an eye to strengthening CIRM regulations and ensuring protection of the agency and its grantees' work – not to mention the interests of the people of California.

Scripps CEO Joins Stem Cell Agency Board; Love Leaves

Michael Marletta
Scripps Photo

State Treasurer Bill Lockyer has appointed Michael Marletta, president and CEO of the Scripps Research Institute, to the 29-member board of directors of the $3 billion California stem cell agency.

Marletta fills the seat of Floyd Bloom, also a Scripps executive, who resigned last year. Scripps has received $45.3 million in funding from CIRM.

In a letter yesterday to the stem cell agency, Lockyer said Marletta is a member of the National Academy of Science, American Academy of Arts and Sciences and the Institute of Medicine. Marletta joined Scripps in 2011 and became president in January.

Prior to that, he was at the University of California, Berkeley, where he once served as chairman of the department of chemistry, among other roles. An item on the Scripps web site said Marletta "focused his research on the intersection of chemistry and biology. He is acknowledged as a pioneer in discovering the role of nitric oxide, a critical player in communication between cells."

The CIRM board has another vacancy to fill. Ted Love resigned last month after serving on the board since its inception in December 2004. CIRM said Love, executive vice president of Onyx Pharmaceuticals, resigned for personal reasons. State Controller John Chiang is considering a number of candidates to replace him. Love was the only African-American on the board.

$95 Million in California Stem Cell Grants: Preview the Spending

For those interested in how the California stem cell agency is going to spend its next $95 million, you can check out short digests today of the 19 research grant applications, including reviewer comments, that are virtually certain of receiving the cash. 

The applications came in what CIRM calls its "early translational III" round, which is scheduled to be acted on by the CIRM board May 24 in San Francisco.

Digests of reviewer comments are part of the directors' meeting agenda. They include scientific scores, a statement from the applicant and a summary of what reviewers had to say during their closed door sessions. But you won't find the names of the applicants, their institutions or businesses. The stem cell agency conceals the names of the winners until after the board acts. Names of the unlucky ones are not disclosed by CIRM. The agency says it does not want to embarrass anybody including the institutions involved.

However, persons familiar with the area of science involved may well be able to discern at least some of the names of applicants from the information contained in the summaries.

Scientific scores of the successful applicants ranged from 88 to 53. Nine grants scored higher than 53 but were rejected by reviewers(the Grants Working Group). The panel turned down 22 applications overall. The CIRM board has final authority on applications, but has almost never rejected a positive decision by reviewers. Sometimes, however, it will overrule a negative decision.

One successful application that was scored at 53 involved ALS. The $1.7 million proposal was approved for "programmatic reasons," according to the summary. Often, programmatic motions for approval are made by CIRM board members sitting on the review panel. However, the summary did not disclose who made the motion or the vote. The summary said,

"The programmatic reasons provided were that ALS is a devastating disease that is not well-represented in CIRM's portfolio."

The other successful application that scored at 53 sought $6.3 million for research involving heart disease. The summary did not clearly identify the specific reason for approving the grant on a programmatic motion. But it said,

 "The GWG (grants working group) ... advised as a condition for funding that the applicant consult additional vector specialists with translational and clinical experience to select a more appropriate vector to move this program towards the clinic." 

Again CIRM withheld the vote on the motion and the name of the person who made the motion.

Applicants who have been rejected by reviewers can appeal to the full board. So far no appeals have been publicly posted by CIRM. The success rate on such appeals is mixed.

The translational round was open to both academics and businesses, which have received a tiny fraction of CIRM's $1.3 billion in spending so far. Some businesses have complained publicly and, as well, to a panel of the Institute of Medicine that is evaluating CIRM's performance.

The California Stem Cell Report yesterday asked CIRM for the number of businesses that applied in the translational round, including the pre-application process, which is used to whittle down the total number of applications. The request included total numbers as well. CIRM spokesman Kevin McCormack declined to produce the figures prior to the CIRM board meeting, saying they "won't be ready" until after the session.   

IP to Grant Oversight: Study Calls for Host of Improvements at California Stem Cell Agency

The $3 billion California stem cell agency is laboring under a range of problems that include protection of its intellectual property and management of its nearly 500 grants plus an inadequate ability to track its own performance, a seven-month study said yesterday.

The performance audit by the Moss Adams accounting firm of Seattle, Wash., made 27 recommendations for improvements, including more effort to ease strain connected to the agency's controversial dual executive arrangement. The study said that the nearly eight-year-old agency has many "opportunities" to "enhance performance reporting and decision making, strengthen effectiveness and efficiency, retain essential human resources and leverage technology."

In response to the report, the stem cell agency said, "(M)anagement concurs with the findings and recommendations....The recommendations are focused and constructive. CIRM is already implementing many of these recommendations, and we will be investigating the others in the coming months."

The performance audit is the first ever made of the California Institute for Regenerative Medicine. The audit is required by state law and was commissioned by the agency at a cost of $234,944. For years, the agency for years had resisted calls for a performance audit until it sought legislative approval in 2010 for removal of a 50-person cap on its staff. Originally, the performance audit legislation would have put the study in the hands of the only state body charged with oversight of the agency and its board. CIRM, however, was successful in lobbying to have that provision removed.

The 54-page report identified once again a number of issues that have troubled the stem cell agency for some years. Moss made 12 top priority recommendations, many of which dealt with information technology and grants management. Many of the recommendations focused on providing better and faster information on performance outcomes, which the audit said has been slow to come and hard to generate.

The report said,

"Key performance information is not readily available to CIRM leadership and other stakeholders on an ongoing basis. CIRM board members and senior management do not receive regularly updated, enterprise-level performance information. The ability to evaluate performance against strategic goals is critical to effective leadership and program monitoring, evaluation, and reporting."

The audit stated,

"CIRM does not effectively communicate outcome-based performance internally or externally. As such, CIRM does not focus on performance metrics as part of its (staff) meeting process."

The report additionally said,

"CIRM does not have an integrated financial information system....The use of spreadsheets results in labor intensive processes to generate reports and respond to information inquiries, since data must be pulled from multiple spreadsheets, a process that may be prone to error. ...Spreadsheets are not linked to each other or a master report. CIRM does not have a comprehensive list of spreadsheets or instructions for how to maintain the files or generate reports from them."

Moss Adams said that CIRM needed to do a better job in "bond forecasting," a reference to the California state bonds that finance virtually every aspect of the agency's operations. CIRM directors were caught by surprise a few years ago when they suddenly learned the agency was up against a major cash crunch.

Some of the recommendations will require more work from CIRM grantees and their technology transfer offices in an effort to track intellectual property and grant outcomes. The report also recommended a speed-up in CIRM's review of progress reports from grant recipients, which have been lagging completion by several months.

The dual executive arrangement, which was written into law by Prop. 71, has troubled CIRM since nearly day one. CIRM's own external review panel also identified it as problem two years ago. The executive structure is virtually impossible to change because of the political difficulty in making alterations in the ballot initiative.

Moss-Adams said,

"The working relationship between the chairman’s office and the president’s office has vastly improved over the past year, but there are still opportunities for improvement."

The performance audit recommended,

"Make every effort to manage and operate as one cohesive organization, while recognizing the varying roles, responsibilities, and authorities that exist with positions in both the chairman’s office and president’s office."

One of the top 12 recommendations involved CIRM's public relations/communications effort. CIRM Chairman J.T. Thomas told directors last June that the agency was in a "communications war."

Moss-Adams said,

"CIRM does not have a communication plan, and there is lack of clarity on how to address mission-based communication to CIRM’s various target audiences, especially the general public....The best way to facilitate results-based communications is to 1) quantify goals and outcomes in CIRM’s strategic plan and 2) report on achievement of those goals and outcomes by enhancing CIRM’s annual report with additional performance-based information."

Another performance assessment of the stem cell agency is also underway. It is being conducted by the prestigious Institute of Medicine and is costing CIRM $700,000. That report is expected this fall.

CIRM's board of directors is scheduled to consider the Moss Adams report at its meeting May 24.

Our take: While the findings and recommendations of the performance audit were delicately worded in many cases, they brought out issues that need to be addressed, many of which have been around for a great deal of time. At their meeting next week, CIRM directors should act very directly on the recommendations. They can do that by requiring a written report each month from CIRM Chairman J.T. Thomas and CIRM President Alan Trounson on the specific steps that they are taking to implement the performance audit's recommendations. Otherwise, the inevitable drift will set in.

California Budget Slashing Misses Stem Cell Agency

The $3 billion California stem cell agency dodged the governor's financial knife today.

This morning, Gov. Jerry Brown announced sweeping cuts throughout California state government as he attempted to close a new, $15.7 billion deficit. A report in the Los Angeles Times said the governor was "grabbing any spare change available." But this afternoon, in response to a query, Kevin McCormack, CIRM's spokesman, said,

"The answer is no, we won't be affected."

The question arose because California's financial picture is much bleaker than it was just four months ago. And the stem cell agency's only real source of cash is money borrowed by the state -- general obligation bonds.

Under Prop. 71, which created the agency in 2004, the bond funds flow directly to the agency without intervention by the legislature or the governor. However, Brown has been chary of additional bond sales since they create an increasing burden in the form of interest costs. Those costs must be financed out of money that otherwise might go to the University of California, K-12 schools and medical help for the poor.

Under an agreement arrived at last year, CIRM has what amounts to a $225 million line of credit with the state, which should take care of its needs until January. The cash is coming from short-term borrowing by the state instead of bonds.

The Brown Administration has cut back on bond borrowing and intends to cut more this fall. According to the state Department of Finance, the cost of borrowing has declined $173 million this fiscal year, down to $5.2 billion. CIRM's share of the debt service is more than $200,000 a day.  

Correction

The StemCells, Inc., item earlier today incorrectly stated that the disease team applications will come before the board of the California stem cell agency later this month. In fact, they are scheduled to come up at the board meeting in late July.

StemCells, Inc., Hoping for as Much as $40 Million from California Stem Cell Agency

StemCells, Inc., said today it has applied for as much as $40 million in funding from the California stem cell agency for two projects dealing with Alzheimer's disease and cervical spinal cord injury.

The announcement came in a news release dealing with the publicly traded firm's quarterly earnings. The applications are part of a $240 million round expected to be acted on in late July by the board of the $3 billion California stem cell agency. Funding for businesses in the disease team round is expected to come through a loan.

StemCells, Inc., of Newark, Ca., said,

"In January 2012, we submitted two applications to the California Institute of Regenerative Medicine (CIRM) for 'Disease Team Therapy Development Research Awards,' one for Alzheimer's disease and one for cervical spinal cord injury. A research award may be up to $20 million, payable over four years, to fund preclinical and IND-enabling activities with the aim of starting human clinical trials within a four-year window."

Applications in the round were reviewed behind closed doors in April. CIRM also has a policy of not releasing the names of applicants until its board acts and then only if an applicant is approved. CIRM says it does not want to embarrass firms that do not win approval. That includes individual researcher names as well as the names of such institutions as the University of California.

During discussion of grant applications by the CIRM board, directors are not told the names of the applicants, just the number of the application. If board members have conflicts of interest on specific applications, they are barred from voting on and discussing the application. The names of applicants have occassionally slipped out. Sometimes their identities can also be discerned by information contained in the summaries of the reviews of the applications, which become available on the CIRM web site shortly before the directors act. The summaries normally carry scientific scores and recommendations for funding.

Most companies seeking funding from CIRM do not identify themselves in advance, although they do if they appeal a negative decision by reviewers. The board has ultimate authority for approval of grants but has almost never rejected a recommendation for funding by reviewers.

StemCells Inc. was founded by Irv Weissman of Stanford, who sits on its board of directors. Weissman is also on its scientific advisory board along with Fred Gage of Salk and David Anderson of Caltech. Weissman and Gage have won substantial grants from CIRM. 

StemCells Inc.'s stock price closed at 92 cents yesterday. Its 52-week high was $8.20, and its 52 week low was 70 cents.

Here is a link to an analyst's report on the company.

(Editor's note: An earlier version of this item incorrectly stated that the disease team round will be acted on later this month.)

Correction

The "stem cell lawyers" item May 9 incorrectly stated that CIRM is expected to have six lawyers on staff in the next fiscal year. The agency expects to have a legal team of six (four lawyers and two assistants). 

$2.4 Million for State Stem Cell Lawyers: Too Much or Not Enough?

The California stem cell agency is spending $2.4 million a year on lawyers, a figure that one agency director has described as "awfully bloated."

More than one dollar out of every ten that CIRM spends on its operations goes for legal advice, and the subject came up at a meeting last month of a meeting of its directors' Finance Subcommittee. The issue triggered a sharp exchange revolving around a proposal to hire an additional attorney to deal with intellectual property issues.

In the next fiscal year, the agency expects to have legal team of six (four lawyers and two administrative assistants) on board out of a total CIRM staff of 60. It also has three outside lawyers or firms under contract at an annual cost of $1.1 million. Overall, CIRM is spending 13 percent of its $18.5 million operational budget on legal matters. Its budget for legal services will increase $50,000 next year.

CIRM's proposed budget includes a cut in external legal contracts to help finance the addition of another staff attorney. Elona Baum, CIRM's general counsel, is also advancing an additional proposal this month that would pay for another staff attorney indirectly through CIRM loans to business, thus avoiding problems with the 6 percent legal cap on the agency's budget.

At the April 2 meeting of the Finance Subcommittee April 2, Art Torres, CIRM's co-vice chairman and an attorney himself, vigorously questioned the addition of another lawyer. In an exchange with Baum, Torres said,

"Well, wait a minute. We already have you. We have Ian. We have Scott. We have James. What more do we need to add more to our legal services budget, which looks awfully bloated."

Baum and CIRM President Alan Trounson defended the addition of a staff lawyer. Both cited the need to protect intellectual property and promote commercialization of CIRM-funded inventions. Trounson and Baum said grantee institutions are failing to do so. Consequently, they said, the stem cell agency is "at risk."

In one exchange, Torres said,

"There are current counsels within the UC and Stanford and USC that ought to be taking care of this for their grantees."

According to the transcript, Trounson replied,

"Well, they're not – you know, this is not being taken care of in a way which is -- which is -- which is reasonable to the organization here. and I think it's putting the organization at risk...."

Baum cited an "a very in-depth" memo that she said justified hiring an additional attorney. Following the meeting, the California Stem Cell Report asked for a copy of the memo.

It consisted of a one-page job description. Dated March 5, it was written by Baum and directed to Trounson. It described the duties of the new lawyer but not the justification for hiring the person. In addition to IP work, duties including 350 hours of work to "provide increased certainty of commercialization rights," 250 hours for due diligence in the grant award process, 200 hours of work on genomics and reprogrammed adult stem cell efforts. The memo calls for 690 hours on business transactions including 150 hours to administer the loan program and 200 hours on agreements with companies seeking to relocate to California.

Much of the committee discussion focused on the need for legal expertise on IP issues, which Baum said the agency lacked.

CIRM first took a crack at hiring an IP attorney in 2008, seeking both a consultant and a fulltime staff attorney. A fulltime staffer was never hired. However, Nancy Koch was hired as an IP consultant for six months at $150,000 and has been with the agency since. Koch was deputy general counsel of Chiron Corp. and its successor Novartis Vaccines and Diagnostics, Inc. During 11 years at Chiron/Novartis, Koch was responsible for a wide range of intellectual property matters including litigation and licensing. Her current contract is for $250,000 for a year but would be reduced to help provide cash for a staff attorney. Baum said last month that Koch is primarily involved now with collaborative arrangements with other countries.

Our take? It is commonplace to be critical of lawyers, their profession and their numbers. CIRM, however, is an unprecedented agency operating in uncharted scientific waters with an enormous reponsibilility for generating a return for the state. It is engaged with firms that will be negotiating aggressively to cut the most beneficial deal possible for themselves – not for California taxpayers, who are paying the freight. CIRM must protect the state's interests. And first-rate IP lawyers do not come cheap. In 2008, the agency was lowballing when it offered $150 an hour. If CIRM fails to generate a financial return for the state, critics are sure to say that it was overmatched legally when it dealt with the private sector. On the other hand, the agency is sure to be battered by contemporary critics for its battalion of barristers.

The issue of a new hire went unresolved last month, and it was turned back to a handful of directors and staff to solve. CIRM directors will deal with it again at their meeting later this month.

A final footnote: Philip Pizzo, a CIRM director and dean of the Stanford medical school, was part of the meeting during which Trounson identified Stanford as failing to take of care of some of its IP responsibilities. Pizzo said towards the end of the meeting, "If Stanford is going to be referenced, we ought to be clear that we've got all the facts correct about what Stanford does or doesn't do."

Pizzo said Stanford does a "great job."

(An earlier version of this item said incorrectly said that CIRM would have six lawyers on staff next year.)

Biotech Biz Alert: California Stem Cell Agency Altering Loan Policies

The California stem cell agency is in the midst of making significant changes in its lending regulations, but says it is not part of an effort to transfer a $25 million loan to Geron to another company.

That does not mean, however, that the agency is not going to transfer the loan at some point. CIRM says it already has the authority to do so.

Talk has surfaced from time to time at CIRM meetings about the likelihood of helping to continue with the hESC clinical trial that Geron abruptly abandoned last fall. The surprise termination of Geron's hESC program came only a few months after CIRM and Geron signed a $25 million loan agreement in August. Geron is trying to sell off its hESC business, although Geron's hESC team has already left the company, according to industry reports.

Modification of the CIRM loan regulations has been underway for some time. Tomorrow the CIRM directors' Intellectual Property and Industry Subcommittee will consider the latest proposals.

Some of the changes deal with relinquishment and transfer of loans. The modifications explicitly give CIRM President Alan Trounson the ability to transfer a loan without having to go through additional reviews or seek board approval. Other changes are also designed to clarify and remove ambiguities in the transfer arrangement, which may well be necessary in order to make a transfer acceptable to a buyer of the Geron assets.

Geron paid off the loan last fall but it is not clear whether that action would preclude a transfer. At one point earlier this year, Trounson said he was involved in helping to find a buyer, but it is not clear whether any CIRM official is currently involved. Geron has hired  Stifel Nicolaus & Co. to help peddle the hESC business.

CIRM's loan changes are complex. The agency has not yet put together in one place a straightforward rationale and explanation of all the modifications. Nonetheless, biotech and stem cell firms should pay close attention to the proposals. They could mean the difference between the infusion or loss of millions for a company's research.

The proposals are expected to go before the full CIRM board later this month. Then they will be subject to the state's administrative law process, including a period for public comment.

Tomorrow's meeting has public teleconference locations in San Francisco, Los Angeles, La Jolla and two in Irvine. Specific addresses can be found on the agenda.

Advisor to CIRM Nominated to Board of CIRM Grant Recipient Expecting $5 Million from Agency

A "special advisor" to the $3 billion California stem cell agency has been nominated to the board of directors of Sangamo BioSciences, Inc., a firm that is sharing in a $14.5 million grant from the state research enterprise.

She is Saira Ramasastry, managing partner of Life Sciences Advisory, LLC, of Emerald Lake Hills, Ca., and who also has worked as a consultant to Sangamo. Ramasastry's ties to CIRM go back to at least May of 2010, when she served as a consultant for the panel that CIRM hired to review its operations. The panel strongly recommended that CIRM engage industry more warmly. Since then Ramasastry's contracts with CIRM have totalled $65,000. Her current $25,000 contract describes her work for CIRM as "industry analysis and consultation."

Ramasastry's website says she serves as "a special advisor to CIRM in industry engagement initiatives and strategic projects." Her firm also offers expertise to life sciences firms in "strategic alternatives advisory, strategic options analysis, tailored business development solutions and innovative financing strategies."

In a news release April 30 announcing her nomination, Sangamo said Ramasastry has worked as a consultant to the Richmond, Ca., company. William Ringo, chairman of Sangamo's board of directors, said,

 "Saira's extensive experience in global healthcare investment banking and strategic advisory consulting will bring valuable financial, commercial assessment and business development skills to our board."

Compensation for Sangamo directors in 2011 ranged from $75,000 to $35,000 for those who served a full year plus stock options. 

Sangamo is sharing in a $14.5 million, four-year grant from CIRM with the City of Hope in Los Angeles dealing with an AIDS- related lymphoma therapy. The grant was approved in 2009. Sangamo expects to receive $5.2 million from the grant if it runs for the full four years. As of the end of 2011, the firm has received $2.4 million, according to its financial documents. In March, Ellen Feigal, CIRM senior vice president for research and development, said the effort is due for an evaluation late this year.  Earlier this year, CIRM terminated one $19 million grant in the same round after it failed to meet milestones.

Sangamo's board is scheduled to vote on Ramasastry's nomination on June 21. 

The California Stem Cell Report has asked Ramasastry if she has any comment for publication. We are also querying CIRM and Sangamo. Their comments will be carried verbatim when we receive them.

Our take? Ramasastry's consulting work with both CIRM and Sangamo demonstrates again the tiny size of the world of stem cell science. It also raises questions about conflicts of interest involving CIRM and industry. Can a consultant in such a position serve two masters and serve them both equally well? CIRM's interests are not necessarily the same as Sangamo's, which is a publicly traded firm working diligently to generate profit and financial returns for its shareholders. To do that, it needs capital from its financial "backers," including CIRM. The stem cell agency, however, is in the business of getting the results that it wants from Sangamo. If not, the grant can be cancelled. Working for both the stem cell agency, whose paramount obligation is to the people of California, and a recipient of the agency's millions is incompatible.

Kudos to CIRM: Stem Cell Agency Sticks with Full Financial Disclosure

A key panel of directors of the $3 billion California stem cell agency yesterday voted unanimously to retain full public disclosure of the financial interests of its directors and top executives.

The director's Governance Subcommittee bypassed a proposal that would have substantially weakened disclosure at a time when the agency is moving closer to industry in an effort to develop cures.

"Because of CIRM's unique mission and the agency's longstanding commitment to transparency," said Kevin McCormack, the agency's spokesman, "they believed that CIRM should continue to set an example by requiring the broadest disclosure of members of the board and high level staff."

Currently CIRM board members and top executives must disclose all their investments and income – in a general way – along with California real property that they hold. Under the rejected changes, disclosures would have instead been required only "if the business entity or source of income is of the type to receive grants or other monies from or through the California Institute for Regenerative Medicine." 

The proposed changes would also have relieved CIRM officials of reporting investment in or income from venture capital or other firms that may be engaged in financing biotech or stem cell enterprises, since the firms do not receive cash from CIRM or engage in biomedical research.

The subcommittee's action will go before the full CIRM board later this month, where it is expected to be ratified. 

Our take? The Governance Subcommittee took the right action and is to be commended for going beyond the letter of the law. The integrity and credibility of CIRM are paramount. As the California Stem Cell Report wrote last week, narrowing disclosure would only have engendered suspicion and unnecessarily raised questions about the conduct of the agency as it embarks on an aggressive push for stem cell cures.

Researcher Alert: First Look at Proposed Rules for California's Stem Cell Bank

The California stem cell agency today unveiled initial details of how it plans to run its $30 million bank of reprogrammed adult stem cells.

The proposed regulations are the first step this year in the $3 billion agency's project to make IPS cells available worldwide at low cost. It is part of an effort to stimulate the science and develop commercial cures by removing research roadblocks.

As Amy Adams, CIRM's communications manager wrote earlier this year on the agency's research blog,

"One way for CIRM to accelerate research is by creating more of a library system for stem cells – except we don’t want the cells back."

The agency expects to issue its first RFA next month in the stem cell banking initiative, which consists of three grant rounds to be approved by the CIRM board no later than Feburary of next year.

To clear the way for the first round, CIRM plans to revise its IP regulations to ensure that they don't hamper the distribution of stem cells in its bank and their wide use.  The revisions will come before the CIRM directors' IP/Industry Subcommittee next Tuesday. The six-member panel is co-chaired by co-chaired by Stephen Juelsgaard, former executive vice president of Genentech, and Duane Roth, CEO of Connect in San Diego, a nonprofit that supports tech and life sciences entrepreneuers. Sites where the public can participate in the meeting will be available in San Francisco, La Jolla, Los Angeles and two in Irvine.

Under the new IP rules, CIRM will retain ownership of the cells in its bank instead of the grantee, as the current IP rules state.

In a memo to directors, Elona Baum, general counsel for the agency, said,

"This permits CIRM to have complete control of this valuable resource and is consistent with the practice of NIH’s Center for Regenerative Medicine which is also creating a repository for iPSC lines and derived materials."

Baum also said,

"The (current) IP regulations were drafted to address conventional drug discovery activities and did not contemplate creation of a comprehensive repository of cell lines intended for broad distribution. As a result, the IP regulations contain a number of provisions which are either not applicable or worse could impede the success of the hiPSC bank. For instance, IP regulations permit the exclusive licensing of CIRM funded inventions and technology. This would be counterproductive to the goals of the hiPSC repository which are predicated on wide spread access."

Baum provided the following summary of the $30 million banking initiative:

"These lines will serve as valuable tools in drug discovery and will be available to researchers worldwide. The Tissue Collection RFA No. 12-02 will fund clinicians and other scientists to identify, recruit and consent sufficient numbers of affected individuals within a disease population so as to effectively represent the disease’s manifestations. Tissues will be collected and appropriate clinical, medical or diagnostic information, will be obtained to enable informed discovery of disease-related phenotypes and drug development activities using hiPSC-based models. These tissue samples will be provided (without charge) to the recipient of the CIRM hiPSC Derivation Award (RFA No. 12-03) for the production of the hiPSC lines. Once derived, characterized and released, the lines will be deposited in the CIRM hiPSC bank funded under RFA No. 12-04."

Specific addresses for the public meeting locations can be found on the agenda.

ACT and CIRM Together on Eye Research Webinar

Executives of Advanced Cell Technology, which has been repeatedly rejected for funding by the $3 billion California stem cell agency, will participate this week in the agency's Internet "webinar" on research involving the human eye.

ACT, which is engaged in the only hESC clinical trial in the nation, was held up earlier this month (see here and here) at an Institute of Medicine hearing as a prime example of the California's agency's failure to fund the stem cell industry in any significant way.

Gary Rabin, CEO of ACT

Nonetheless, three ACT execs are scheduled to be online for the CIRM session on Wednesday: Gary Rabin, the CEO of ACT; Matthew Vincent, director of business development, and Edmund Mickunas, vice president of regulatory affairs. The webinar will deal with regulatory issues with the FDA and clinical trials involving the eye.

Also on the panel are Samuel Barone, medical officer with the FDA, and Mark Humayun, professor of opthamology at USC, who is the PI on a $16 million macular degeneration grant from CIRM.

So what is the significance of ACT's participation in the CIRM event? If the relationship between ACT and CIRM has been touchy, this sort of cooperation is probably a good sign for both. For one, CIRM could have hardly staged the webinar without ACT, given the subject matter. But if the agency did not want to engage ACT, it could have simply done nothing about setting up a webinar in which the firm would participate.

Does this mean that ACT is going to receive a handsome grant or loan from CIRM? CIRM has established procedures (RFAs, peer review, etc.) for approval of funding, and ACT would have to go through that process unless CIRM does something very unusual.

Wednesday's event is aimed at researchers and is likely to be technical. Persons interested in taking part must register in advance.

California Stem Cell Agency Wants to Weaken Financial Disclosure for Execs and Board

The $3 billion California stem cell agency, which is moving to engage the biotech industry ever more closely, is proposing a major weakening of the financial disclosure requirements for its board of directors and executives.

The move comes as the agency is also seeking to raise cash from the private sector to continue the state research effort's existence.  CIRM's dimming of transparency runs counter to government trends nationally for more disclosure rather than less, including regulations enacted last year by the NIH.

The proposed changes will be considered next Thursday by the CIRM directors' Governance Subcommittee, which will have public teleconference sites in San Francisco and Irvine and two each in Los Angeles and La Jolla.

Currently CIRM board members and top executives must disclose all their investments and income – in a general way – along with California real property that they hold. Under the changes, disclosures would instead be required only "if the business entity or source of income is of the type to receive grants or other monies from or through the California Institute for Regenerative Medicine." CIRM offered no explanation of what it means by "of the type to receive" funds from the agency.

The proposal further narrows disclosure in connection with income or investments in enterprises that provide facilities or services used by CIRM. With the removal of the requirement for reporting all investments, CIRM's changes also specified disclosure of income and investments connected to business entities (nonprofits are not mentioned) that are engaged in biomedical research or the manufacture of biomedical pharmaceuticals.

The new code would appear to give CIRM directors and executives wide personal latitude in determining what should be disclosed. The current language simply states that "all" investments, etc., must be disclosed. That language originated in the 1974 ballot initiative that created the state disclosure requirements. The initiative's intent was to give the public and interested parties access to key information that would allow them to determine what forces are at work in government and whether conflicts of interests exist – as opposed to simply trusting the assertions of officials without additional substantiation.

The new code also appears to relieve CIRM officials of reporting investment in or income from venture capital or other firms that may be engaged in financing biotech or stem cell enterprises, since the firms do not receive cash from CIRM or engage in biomedical research. While the code appears to provide more reporting freedom for board members and executives, it also may indirectly impose a burden on them to determine whether any of their investments may involve biomedical research or enterprises that could possibly receive funds from CIRM at some point

Earlier this week, the California Stem Cell Report asked the stem cell agency about such issues. Kevin McCormack, CIRM's new senior director of public communications and patient advocate outreach, replied that the changes were "proposed" by the state Fair Political Practices Commission, which oversees state disclosure laws.

He said the FPPC says agencies "should tailor their disclosure categories to type of work performed by the agency." McCormack cited as examples the State Board of Education and the state retirement system.

As for the specific changes in CIRM's code, McCormack said,

"Because these are the types of entities that are likely to create potential conflicts of interest, we believe the disclosure categories are appropriate."

McCormack did not comment on whether the proposed code would give board members more reporting latitude or whether it relieve them of reporting investments tied to the financing of biotech or stem cell firms. (The text of his response can be found here.)

The California Stem Cell Report is querying the FPPC concerning its policy regarding disclosure codes. CIRM's new code is expected to go before the the full CIRM board in late May. The changes are subject to review by the FPPC and then must formally go through the state administrative law process during which the public can comment and the code modified before final adoption.

Our take? The proposed changes are not in the best interests of CIRM or the people of California. The absence of transparency and disclosure only breeds suspicious speculation of the worst sort. The agency is already burdened by conflicts of interest that are built in by the ballot measure that created it in 2004. Nearly all of the $1.3 billion that CIRM has handed out has gone to institutions linked to CIRM directors. Weakening disclosure at a time when the biotech industry will become more closely tied to CIRM inevitably raises questions about financial linkages – present and future – between CIRM directors and executives and industry. For the past seven years, CIRM directors and staff have been able to comply with more complete disclosure. They should continue to do so for the life of the agency, which will expire in less than a decade unless it finds additional sources of cash.

Text of CIRM Response on the Weakening of Financial Disclosure Requirements

On April 24, the California Stem Cell Report asked the state stem cell agency about its proposed changes in its requirements for financial disclosures from its officials. Here are the key elements from that query with the stem cell agency's response following.

The agency was invited to respond to the following: "The new code appears to give discretion to the employee to determine what enterprise is 'the type to receive grants or other monies' from CIRM. Additionally, it would not appear to require disclosure of an investment with or income from, for example, Kleiner Perkins, which is a major investor in iPierian, which holds $7 million in CIRM grants and could well be a future applicant...(T)he weakening of the code comes at a time when the agency is moving to cozy up to industry and looking to raise funds to continue its existence, all of which raises even greater conflict of interest issues than earlier in CIRM's existence."

Here is the text of the response April 25 from Kevin McCormack, CIRM's new senior director for public communications and patient advocate outreach.

"In answer to your question, we are proposing changes to the Conflict of Interest Code based upon recommendations from the California Fair Political Practices Commission (FPPC). The Political Reform Act requires state agencies like CIRM to review their Conflict of Interest Codes every two years.  The FPPC, which is charged with enforcing the Political Reform Act, is responsible for reviewing and approving CIRM's Conflict of Interest Code.  In preparation for this review, CIRM's counsel met with the FPPC staff who suggested the proposed amendments which are the subject of the upcoming Governance Subcommittee meeting.  The proposed amendments to CIRM's Conflict of Interest Code are consistent with the FPPC's position that agencies should tailor their disclosure categories to type of work performed by the agency.  For example, CalPERS's conflict of interest code requires CalPERS officials to disclose investments in, and income from, entities that are of the type with which CalPERS contracts and entities in which funds administered by CalPERS could be invested.  Likewise, the State Board of Education requires its members to disclose investments, business positions, and income from a publisher, manufacturer, or vendor of instructional materials, or services offered to educational institutions in the State of California and investments, positions of management and income from any private school in the State of California.  Similar to these codes, the FPPC proposed that CIRM's Code be tailored to the nature of CIRM's work.  Thus, the FPPC proposed that CIRM require its board members and high-level employees to disclose investments in, and income from, entities that are of the type with which CIRM would contract or from which CIRM could procure goods or services as well as investments in, and income from, biotech and pharmaceutical companies.  Because these are the types of entities that are likely to create potential conflicts of interest, we believe the disclosure categories are appropriate.  It is important to remember, however, that this is a preliminary proposal.  CIRM will seek input from the Governance Subcommittee, the Board, and members of the public before seeking approval of the amendments."

California Stem Cell Agency Launches $30 Million Plan to Lure Industry

Just one week after the $3 billion California stem cell agency was sharply criticized for its failure to adequately support biotech firms, the agency formally kicked off a $30 million effort to engage industry more closely.

The initiative, in the works since the middle of last year, was heralded as the beginning of a "new era" for CIRM, which is moving to transform into cures the stem cell research it has funded over the last seven years. The agency has scheduled a webinar for April 25 for prospective applicants.

CIRM's press release, crafted by the agency's new PR/communications director, Kevin McCormack, yesterday quoted CIRM President Alan Trounson as saying,

"This initiative is a major new development in the progress towards providing new medical treatments for patients by engaging the most effective global industry partners."

Elona Baum, the agency's s general counsel and vice president of business development, said the program "represents a new era for CIRM."

Under the RFA, the agency will award up to $10 million each for three grants or loans. The program, however, is not limited to businesses. Non-profits may apply as well. Representatives from industry have complained about a strong tilt on the part of CIRM towards academic and non-profit research enterprises. The CIRM board is dominated by representatives from those two sectors.

The program grew out of recommendations in November 2010 from an "external review" panel put together by CIRM that said the agency needed to do better with business. The refrain was heard again directly from stem cell firms at last week's hearing by the Institute of Medicine on the stem cell agency's performance. According to CIRM's figures, businesses have received $54 million in grants and loans since 2005, the first year the CIRM board approved grants, out of a total of $1.3 billion.

Only one news outlet has written a story so far about the posting of the RFA and the press release, as far as can be determined.

Ron Leuty of the San Francisco Business Times said,

"The most likely candidates to attract industry funding would be CIRM’s 'disease team' grant winners, who face a deadline of 2014 to bring a project to the point of first-in-human clinical trials. CIRM has weighed options for pushing those projects — there are 13 of them now — deeper into the FDA approval process."

CIRM said in the RFA material,

"The intent of the initiative is to create incentives and processes that will: (i) enhance the likelihood that CIRM funded projects will obtain funding for Phase III clinical trials (e.g. follow-on financing), (ii) provide a source of co-funding in the earlier stages of clinical development, and (iii) enable CIRM funded projects to access expertise within pharmaceutical and large biotechnology partners in the areas of discovery, preclinical, regulatory, clinical trial design and manufacturing process development.

"This initiative requires applicants to show evidence of either having the financial capacity to move the project through development or of being able to attract the capital to do so. This may be evidenced by, for example, (i) significant investment by venture capital firms, large biotechnology or pharmaceutical companies and/or disease foundations; or (ii) a licensing and development agreement with a large biotechnology or pharmaceutical company or a commitment to enter into such an agreement executed prior to the disbursement of CIRM funding.

"The objective of the first call under this initiative, the Strategic Partnership I Awards, is to achieve, in 4 years or less, the completion of a clinical trial under an Investigational New Drug (IND) application filed with the Food and Drug Administration (FDA)."

CIRM has scheduled a webinar on the RFA for prospective applicants for next Wednesday, April 25. It is asking for registration and questions in advance.



(Editor's note: An earlier version of this article did not contain the sentence about businesses receiving $54 million out of $1.3 billion awarded by CIRM.)