Asterias Stock Price Jumps Nearly 13 Percent Today Following hESC Therapy News

The California stem cell agency and Asterias Biotherapeutics today picked up a modicum of news coverage in connection with an advance on a spinal injury therapy that was once hailed as historic.

The news about the Menlo Park, Ca., firm’s clinical trial received major attention in the San Francisco Chronicle and more modest coverage in the San Francisco Business Times and on the ipscell.com blog.  

The news also helped to push the Asterias stock price up nearly 13 percent since yesterday to close at $3.08 today. The stock closed at $2.43 Tuesday, the day before the company released the clinical trial news, according to Google Finance.

Stephanie Lee’s piece in the Chronicle contained some history about the potential therapy, dating back to when it was developed by Geron and then abandoned. Geron was the first firm to win approval of a clinical trial for a human embryonic stem cell (hESC) treatment.

Lee also had a couple of interesting tidbits, including the fact that the stem cell agency’s $14.3 million award to support the trial will cover half its costs. Lee also reported,

“Geron treated severe injuries in the thoracic region of the spinal cord, which runs along the back. Asterias is targeting injuries that originate in the neck, citing an outside study that suggests injuries in this area are easier to treat.”

Enal Razvi
Select Biosciences photo

Lee additionally quoted Enal Razvi, managing director of Select Biosciences U.S., an international life sciences consulting firm with its U.S. headquarters in Fremont, Ca.,  as saying,

"This is just the start of a trial, not the approval of a drug, which are two very, very different things in this space…(but) this helps things go to the next level." 

The Chronicle story was the No. 1 story late afternoon today in Google news search results using the term "stem cell," ranking ahead of the STAP news out of Japan.

Paul Knoepfler, a UC Davis scientists who writes the ipscell blog, carried a Q&A with Jane Lebkowski, president of research and development at Asterias, who discussed another hESC product. She said,

“A second Asterias product is AST-VAC2, which are human embryonic stem cell derived dendritic cells. These cells are modified to express telomerase, a protein typically expressed in cancer cells. The aim is to use these telomerase expressing dendritic cells to stimulate immune responses against cancer cells. We are now preparing for clinical trials with this product.” 

That effort could well find its way to additional funding from the California stem cell agency if it meets the four-point criteria of the new president, Randy Mills, of the $3 billion research program.

In the San Francisco Business Times piece, Ron Leuty noted that the initial five-patient safety trial showed that “spinal cord injuries in four the patients had shrunk.” Leuty wrote,

“Whether that means Geron’s treatment is working in those patients is an open question. Geron’s study looked only at acute, or new, spinal cord injuries, so some of the results could be connected to normal healing over time.”

California's Stem Cell Trial for Spinal Cord Injury Moves Forward

A California firm, backed by $14.3 million in state cash, today announced that it has received a federal go-ahead to advance its clinical trial involving a human embryonic (hESC) therapy for cervical spinal cord injury.

Asterias Biotherapeutics, Inc., of Menlo Park, said in a press release that it is currently selecting clinical trial sites and expects to enroll patients beginning early next year. The trial is the continuation of an effort that Geron abandoned in 2011 for financial reasons.

Pedro Lichtinger, president and CEO of Asterias, said,

  “We are especially enthusiastic about working with our new partner, (the California Institute for Regenerative Medicine or CIRM), in executing this clinical trial. The FDA clearance provides Asterias with imminent access to the previously announced $14.3 million CIRM grant, which provides non-dilutive funding to support both the clinical trial and other product development activities for AST-OPC1.”

The phase 1/2a trial will involve doses of up to 10 times higher than what was used earlier. Up to 13 patients will be treated within 14 to 30 days after their injury occurred. The hope is that it will be easier to detect the efficacy of the treatment with such dosages.

As for the early stage trial involving five patients, the company said,

“These five patients were administered a low dose of two million AST-OPC1 cells and have been followed to date for 2 to 3 years. No serious adverse events were observed associated with the delivery of the cells, the cells themselves, or the short-course immunosuppression regimen used.  There was no evidence of expanding masses, expanding cysts, infections, cerebrospinal fluid leaks, increased inflammation, neural tissue deterioration or immune responses targeting AST-OPC1 in these patients.  In four of the five subjects, serial MRI scans performed throughout the 2 to 3 year follow-up period indicate that reduced spinal cord cavitation may have occurred and that AST-OPC1 may have had some positive effects in reducing spinal cord tissue deterioration.”

Asterias was awarded the cash by the California stem cell agency in May. (See here and here.)

Randy Mills, president of the stem cell agency, said today,

“This is exactly the type of treatment, focusing on an unmet medical need, that CIRM was created to address.”

Katie Sharify, one of the patients involved in the trial when it was started by Geron, said in the CIRM press release,

“A lot remains unknown about human embryonic stem cells and that's exactly why this research is so important. The scientific community is going to have a much greater understanding of these stem cells from the data that will be collected throughout the study and I'm glad to have been a part of this advancement."

Earthquakes and Scientific Research: California's Exposure to Damage

The 6.1 earthquake today in Northern California once again demonstrated the vulnerability of scientific research in the Golden State to disruption by tremor.

As of Sunday morning, no research institutions – stem cell or otherwise -- reported damage from the quake. However, it was still early in the process of assessing the full impact of the temblor.

The closest stem cell research facility to the quake epicenter is the Buck Institute, located in Novato, which is roughly 15 miles from the epicenter.  A spokeswoman for Buck, which holds $34 million in awards from the California stem cell agency, said she had received no immediate reports of damage..

In response to a question from the California Stem Cell Report, Kris Rebillot said,

“I have not heard anything from our facilities staff about damage. The Buck is on pretty stable bedrock. I live in Petaluma which is closer to quake. No damage there.”

Later she reported that a walkthrough showed "no discernible damage."

The likelihood of severe shaking from an earthquake
is shown on this state map. The greatest potential is
marked by lavender with red and orange as less
 intense. The epicenter of the Napa quake was near
the north end of San Francisco Bay. 

 California is riddled with earthquake faults, many of which lie beneath or close by major research institutions, including Stanford, UC Berkeley and UC San Francisco. Institutions in the south are in the same situation as well.

Problems that arose in the aftermath of today’s quake included lack of power, lack of water and natural gas leaks from pipelines. 

The situation recalled a lesser event that left one Southern California stem cell research institution without its normal power.  The institution, which will remain unnamed, had a backup generator that also failed. Fortunately the situation was caught before irreparable harm occurred.

The focus during events like today’s quake in Napa is on major damage and injury. But research institutions can suffer significant harm from what appears to be relatively minor damage – laptops smashing to floors, servers toppling, delicate instruments flying off tables, animal cages falling over and breaking and so forth.

Today’s event served notice that researchers should double-check their safety measures and physical security of important equipment and ensure that all data is backed up well offsite where it would not be destroyed by a quake.  That would include data at the California stem cell agency, which is headquartered in San Francisco.

Stem Cell Blowback on the Ice Bucket Challenge

Virulent opposition to research involving human embryonic stem cells is surfacing anew in the wake of the vast attention attracted by the Ice Bucket Challenge.

Sarah Pulliam Bailey wrote on Religion News Service that the objections have “gone viral” on the Internet because the beneficiary of the watery fundraising, the ALS Association, finances research involving human embryonic stem cell (hESC) lines.

For those of you who are not tuned into the icy effort, it involves celebrities and others pouring frigid water over themselves and challenging others to do likewise and donate to the ALS Association.  About $16 million has been raised so far and is still growing. Photos, news stories and blogs all chronicle the challenge on the Web.  A search this morning on the term “ice bucket challenge” turned up 57.2 million hits.

Our readers might ask how this involves the $3 billion California stem cell agency. The answer is that hESC research is the primary reason for the existence of the agency. It was created in 2004 by California voters after former President Bush restricted federal funding for research involving hESC.  Ironically Bush has participated in the challenge(see video above).

Bush’s restrictions, since lifted by President Obama, generated major controversy in the scientific community and raised fears that efforts to develop what seemed to be nearly magical therapies would wither and die. Without that concern, voters would have been unlikely to approve the measure, Proposition 71, and campaign contributors would have been unwilling to open their checkbooks.

The stem cell agency, however, has turned away from hESC research. Less than 250 of its 622 awards have gone to that field, according to the agency. Instead the agency is backing adult stem cell research, once an anathema to the organization, along with experiments involving reprogrammed adult stem cells. Leaders in the stem cell field, however, say human embryonic stem cells remain the scientific gold standard. (No figures were immediately available on the dollar value of the hESC awards.)

Continued funding of hESC research is linked to the agency’s search for alternative sources of cash as its current financing winds down. Efforts to develop a fresh stream from public sources will run up against the controversy involving hESC experiments, one of the reasons for the lack of interest by Big Pharma. The hESC opposition could also have an impact on development of private sources of funding who may not want to become embroiled in the flap, which can lead to picketing and public protests involving entities that support hESC research.

Kevin McCormack, senior director for the stem cell agency’s public communications, wrote about the ice bucket fad last week on the agency’s blog. He said it “shows how a little bit of creativity can create so much more interest in a disease, and the people suffering from it, than any amount of well-meaning, more traditional attempts at education.” And he poured a bucket of water over his head.

Nonetheless, the opponents hold their views with great passion and zeal and have little respect for hESC science. Here is what one person said today in a comment posted on the Religion News Service article. The individual was identified only as “jamadan.”

“My father died of ALS 6 years ago. My father was and my family is ‘pro-life’, meaning we believe abortion to be murder and embryonic research akin to Nazi medical testing on dead camp victims. Nothing can make us ‘accept’ abortion or anything that benefits from it. Not even our own lives. I think you’ll find that true for all Christians, who by definition, must be pro-life.” 

For other commentary involving objections to the Ice Bucket Challenge, see here, here and here.

(A footnote: This item marks the first video appearance of former President Bush and Kevin McCormack on this blog.)

California Edges Forward with $39 Million Stem Cell Diabetes Effort

California’s $39 million bet on a new stem cell therapy for diabetes today moved a notch ahead today with word that the treatment's developer has received federal approval to begin a clinical trial.

“Very encouraging news” was how the new president of the state stem cell agency, Randy Mills, described the announcement by Viacyte, Inc. “Exciting” was the word used by Jonathan Thomas, chairman in a pressrelease from the California Institute of Regenerative Medicine (CIRM), as the $3 billion agency is formally known. CIRM began financing Viacyte six years ago.

The go-ahead by the FDA was for an early stage trial aimed at testing safety and preliminary efficacy for treatment for type 1 (juvenile) diabetes. While the move is a good sign, only one out of any 10 potential therapies that begin a trial emerges as a full-blown treatment.  That statistic is for ordinary treatments – not therapies based on human embryonic stem cells (hESC). No hESC therapy has ever been commercialized, and they face unique regulatory and financial obstacles.

CIRM’s press release described the treatment like this:

“ViaCyte’s approach uses a thin plastic pouch, containing an immature form of pancreatic cells, to mimic the blood glucose regulating function of the pancreas. When the device is implanted under the skin these cells are designed to become insulin-producing and other cells needed to regulate blood glucose levels. It is believed that these cells will be able to sense when blood glucose is high, and then secrete insulin to restore it to a healthy level.” 

In addition to the news release, the stem cell agency ran a blog item on the announcement, which is useful, since there is more than one audience for the news. The agency did not link to the press release from Viacyte, which noted that the Juvenile Diabetes Research Foundation also supported the research.

Paul Laikind, president of Viacyte, said in his press release that he was “pleased” by the FDA action.  That was the most ebullient word in the company’s announcement, which focused on the more technical aspects of the potential therapy.

In news coverage, Bradley Fikes of the San Diego U-T wrote that the company has said the treatment could serve as a “virtual cure” for type 1 diabetes, which afflicts more than two million persons in the United States.

'De-risking' Stem Cell Therapy with Government Cash and Assistance

Nature Biotechnology this month took a crack at what it called “therapies of the state,” three government- financed efforts at turning stem cells into cures.

The piece by Beth Schachter discussed “thorny technical challenges,” safety issues and regulatory and IP risk – not to mention the dreaded “reimbursement” risk. (Reimbursement is a PR euphemism that revolves around industry fears of losing money.)

Greg Bonfiglio
Proteus photo

In addition to California’s $3 billion effort, Schachter wrote about Cell Therapy Catapult in the UK and Canada’s Center for Commercialization of Regenerative Medicine, whose board is chaired by Greg Bonfiglio, who is also founder and managing partner of Proteus Venture Partners of Palo Alto, Ca.

Schachter said that all three are to attempting to “de-risk the perilous process of advancing cell therapies that show potential in animal studies through human testing to commercialization.”

The Nature Biotech piece said that until recently Big Pharma and venture capitalists have steered clear of the cell therapies coming out of academia. Schachter wrote,

“For one thing, big pharma’s business model is very different from what is needed to translate cell therapies into practice. The pharma model involves mass manufacturing of products that can be stored in warehouses and distributed through pharmacies to large markets of patients. Cell therapies, on the other hand, may be highly individualized, are incompletely characterized, are expensive to produce, have a short shelf life and onerous supply chain, must be transplanted into patients by skilled healthcare workers and have complex regulatory requirements. These challenges, along with a dearth of cell-therapy successes, have kept away investors, too.”

As for the stem cell agency in California, Schachter wrote,

“In developing (its) extensive program, the CIRM has, in a sense, been standing in for the National Institutes of Health (NIH). It has also been taking the role that venture capital might have assumed, had the US government given the go-ahead on human embryonic stem cells, thereby building a robust preclinical/translational research program. As Bonfiglio it, ‘CIRM galvanized the industry, putting regenerative medicine on the map, both in terms of what the politicians and the lay people saw and in terms of maintaining scientific training in that arena.'” 

Schachter said that it is not clear how long taxpayer cash will be needed or wanted. She wrote,

“Also not clear is how each of the governments will assess the success or failure of these programs. How will governments know when the time is right to wean the programs from public monies? Will they consider job creation, the number of companies spun out, or launching successful products in the marketplace? Given the complexity of cell therapies and regulatory uncertainty, none of these things may happen for decades. Perhaps a better measure is whether any of the companies created gets traction with big pharma. That might indicate that the commercial promise of these therapies is finally evident.”

Scientist/Parkinson's Advocate With Biotech Background Appointed to California Stem Cell Agency Board

A retired San Diego scientist with a background in the biotech industry was named this week to the 29-member governing board of the $3 billion California stem cell agency.

David Higgins
Parkinson's Association photo

David Higgins, who is also president of the San Diego Parkinson’s Association, was appointed by State Controller John Chiang, replacing Joan Samuelson, who resigned from the board earlier this year.  Samuelson had been a member of the board since 2004.

Higgins fills a slot designated for a patient advocate for Parkinson’s Disease. He was diagnosed with Parkinson’s Disease in 2011.

The stem cell agency press release yesterday on the appointment emphasized Higgins’ personal and family perspective on the affliction. Chiang was also quoted as saying,

“As a trained molecular biologist, his involvement in drug development and business operations places him in a unique position, understanding both science and process.”

Higgins has worked at Invitrogen, Chiron and Idun Pharmaceuticals. Most recently he was executive vice president for business development and head of U.S. operations for BioMedica, Inc., a UK-based gene therapy company.

Higgins is currently a business/scientific advisor to iDiverse, Inc., a Del Mar, Ca., a gene technology firm that markets to biopharmaceutical firms as well as companies involved in fuel ethanol and industrial enzymes.

Higgins brings a perspective not found elsewhere on the board because of a variety of community service activities.

He serves on the executive committee of the Center for Ethics in Science and Technology in San Diego. He was once president of the board of the ACLU for San Diego and Imperial counties. He also served as foreman of the San Diego County Grand Jury, a 19-member citizens watchdog group, in 2006-7..

Higgins said in the CIRM press release,

“One thing I feel strongly about is that, yes I’m the Parkinson’s patient advocate on the board, but first and foremost I’m an advocate for everyone and I want to make sure that we spend our money wisely, and that we use our resources to identify and nurture the most promising stem cell projects across all target diseases.”

Higgins earned his Ph.D. in molecular biology and genetics from the University of Rochester followed by a postdoctoral fellowship at the National Cancer Institute.

The agency's board now has three vacancies on it left by the departure of Marcy Feit, Michael Goldberg and Robert Birgeneau. 

$40 Million California Stem Cell Genomics Agreement Signed; A Checkered Past

The California stem cell agency and a Stanford-led consortium have reached agreement on a $40 million stem cell genomics project that triggered complaints about irregularities, unfairness, score manipulation and the role of its then president, Alan Trounson.

The agreement was concluded last month with Stanford, UC Santa Cruz and the Salk Institute in La Jolla, five months after the award was approved by the governing board of the $3 billion agency, which is known as CIRM. The final signature came July 2 when Santa Cruz signed. Salk signed on June 26 and Stanford June 18, according to Kevin McCormack, a spokesman for the agency.

The effort is aimed at paving the way for therapies tailored to a patient’s genetic make-up and positioning California as a world leader in stem cell genomics.

Trounson’s role came under fire when he recommended approval of the Stanford application. The agency’s blue-ribbon grant reviewers, whose advice is rarely rejected by the CIRM board, also recommended funding three competitors. 

The round had a checkered history as a result of a conflict of interest involving scientist Irv Weissman of Stanford and scientist Lee Hood of Seattle, who own a ranch together in Montana. Trounson, who has visited the ranch as Weissman’s guest, recruited Hood to review the applications, including Stanford’s proposal which then specifically included Weissman.

The Stanford application that was ultimately approved did not include Weissman.  Michael Clarke, the No. 2 person in Weissman’s stem cell program at Stanford, was included, however, and was praised by name by Trounson during board consideration of the Stanford application. (See here for discussion of conflicts preceding the board action.)

Seven days after leaving CIRM at the end of June, Trounson was named to the board of directors of StemCells, Inc., of Newark, Ca., which holds $19.4 million in awards from the agency. The firm was co-founded by Weissman, who now sits on its board.  The Trounson appointment surprised the agency and triggered a rash of bad publicity for CIRM. (See here and here.)

The agency’s new president, Randy Mills, banned CIRM employees from communicating with Trounson about StemCells, Inc., matters and announced that he would not accept employment from CIRM grantees until one year after he leaves the agency.

Another Perspective on the Trounson Flap: Columnist Lists It as Example of 'Possible Corruption'

The $3 billion California stem cell agency was mixed up with some bad company this week – part of the fallout from last month’s Trounson Affair. 

The agency was lumped together with some ne’er-do-wells in a column in California newspapers that was headlined:

“California state government awash in corruption, conflict of interest”

The piece was written by Tom Elias, a middle-of-the-road, longtime columnist whose work appears twice weekly in 93 newspapers with a circulation of 2.2 million. Elias wrote,

“To some, it seems almost as if California has lately become New Jersey West. Incidents of possible corruption and conflict of interest are seemingly exposed at least once a month these days, with almost no consequences for anyone involved.”

Top on his list was the business involving Trounson, who left the California stem cell agency June 30. Seven days later, he was appointed to the board of StemCells, Inc., which holds $19.4 million in awards from the agency, formally known as the California Institute for Regenerative Medicine (CIRM).

Second on Elias’ list was a case involving a consultant at another state department that was reminiscent of another situation at the stem cell agency. Elias said,

“A month earlier, this column caught the state Energy Commission earmarking more than $28 million in ‘hydrogen highway’ grants for a new company co-founded by a consultant who only months earlier drew the map determining where hydrogen refueling stations will go and then trained commission staff on how to evaluate grants.

“No conflict of interest there, the commission insisted. Right.”

The case at CIRM involved a “special advisor” by the name of  Saira Ramasastry, managing partner of Life Sciences Advisory, LLC, of Emerald Lake Hills, Ca. In 2012, she was named to the board of Sangamo BioSciences, Inc., a publicly traded firm based in Richmond, Ca. At the time of her appointment to the board, the firm shared in a $14.5 million grant from the agency. She also worked as a consultant to Sangamo.

Since then, Sangamo has received another $6.4 million from CIRM. The president of Sangamo, Edward Lanphier, told the agency last January,

“We wouldn't be where we are today without you.”

In 2013, Ramasastry received $99,662 in cash and stock options from the company, according to its filings with the Security and Exchange Commission.

The New, Official Life Expectancy of the California Stem Cell Agency

Randy Mills' calculations on cash for future CIRM funding

Randy Mills, the new president of the $3 billion California stem cell agency, rewrote some of the agency’s history last week and extended the life span of the now nearly 10-year-old enterprise.

All that talk about the agency running out of money for new awards in 2017? Bushwa, he basically said. “It’s simply not true,” he told the directors of the agency at their meeting in Millbrae.

Mills' comments appeared to be directed at media stories, including those on this Web site, that mention the 2017 timetable. However, the date was not concocted by the writers of those stories. It came directly from the agency itself, which has never challenged it until Mills did last week. The timetable was even referenced as recently as December 2013 by the agency’s directors.

Randy Mills

That said, Mills’ view of the spending possibilities for the California Institute for Regenerative Medicine(CIRM), as the agency is formally known, is not inaccurate. It comes from his fresh, business-oriented analysis of the agency’s finances. It is based on different assumptions than those used previously by the agency.  His perspective does not appear to assume, for example, that all the grant rounds approved in concept by the board will go forward at their existing levels.

A case in point came last week when Mills recommended and the board approved slicing $5 million out of a $15 million component of the agency’s Alpha clinic RFAs. It was the first time that the board has so heavily cut a previously approved "concept" figure.

The agency's last major review of the cash available for awards occurred at last December’s board meeting. CIRM Chairman J.T. Thomas said at the time, 

“We now find ourselves with the reality that, having started with $3 billion, we are down now to how to deploy our last $600 million….”

Pat Olson, executive director of scientific activities, said,

“There’s essentially $950 million yet to be awarded, 321 (million) of the concept approved and the 629 (million) of the future.”

Steve Juelsgaard

Steven Juelsgaard, a CIRM board member and former executive vice president of Genentech, however, looked at the numbers with basically the same view as Mills. Juelsgaard, who has been chipping away at some of the financial assumptions of the agency, said,

“So we’ve been talking for the longest time as if we have three to four years worth of money to spend, right? I asked myself, well, why is that true? Who made that decision that it’s three to four years? That length of time is driven by how quickly we spend our money, not by anything else. So if we spend our money more slowly, we could go for six years or eight years or whatever the number is that you want to pick. It’s all a matter of burn rate.”

Enter Mills five months later as president. By last week, he was telling board members that, yes, they have enough money to give out awards until 2020 at a rate of $190 million a year.  He said that about $1 billion is available.  

“We will be able to fund most anything that meets our criteria.”

Of course, if the agency spends more than $190 million a year, the money will run out faster. And the  agency is engaged in clinical trials and commercialization efforts, which are far more expensive than basic research.

But Mills’ 2020 timetable has some significant advantages even if it slows the pace of awards. It gives the agency substantially more time to arrange some sort of financing for the future. Currently its only real source of funding is state bonds. Its ability to authorize those bonds ends in 2017, according to the agency. Currently Thomas is examining the possibility of some sort of private-public financing arrangement. Asking voters to approve another bond measure has not been ruled out, but it could be problematic politically.  The additional time would improve the possibility that clinical trial results would emerge that would resonate with the public as well as with private funding sources.

While Mills paints a rosier financial picture than the agency previously offered, he also has demonstrated a clear fondness for focused austerity. It fits with the mood of the board. Juelsgaard, who is chairman of the agency’s Finance Subcommittee, is also attempting to bring a sharper financial perspective to the agency at a time when directors are clearly feeling a pinch.  

Gone are the days when $120 million was added with modest discussion to one round of grants. No longer is the governing board throwing another $23 million at already hefty efforts to lure stem cell stars to California labs.

Instead last December, after directors were told that only $629 million out of $3 billion was left uncommitted, CIRM Director Jeff Sheehy, in a comment echoed in tone by other board members, said,

“I just think all of us are starting to get concerned about the burn rate. We’re just flying through the money.”

 One of Mills’ first public actions involved the agency’s $17 million annual operational budget, which is limited by state law. On top of those limitations, in May he whittled the spending plan down to the point where it could be described as less than the previous fiscal year, given inflation.

Also in May, when directors were considering elimination of what was left of the $57 million researcher recruitment program, Mills basically disengaged himself from support of the effort. He told directors,

“It’s not that I don’t like the concept of recruiting great people….It’s just we have to make sure we recruit the people we need.”

Mills' actuarial exercise was not the first involving CIRM's mortality. Back in 2004, it was widely believed that the agency had only a 10-year life, a belief held by some of its staffers, which would have meant this year would have been the agency's last. That misconception grew out of the agency's 10-year authorization to issue bonds. That authorization is now commonly believed to have begun in 2007 because that was the year litigation about the agency was ultimately resolved. It may well be that the date of CIRM's final reckoning will change once again before its last check goes out the door.

California Stem Cell Agency and the Revolving Door: A Need for More Safeguards

The revolving door and related conflict of interest issues remain open at the $3 billion California stem cell agency despite the pledge by its new president, Randy Mills, to refrain from taking a job with a recipient of the agency’s largess for at least a year after he leaves.  

Mills’ action last week came in response to the controversial appointment of the agency’s previous president, Alan Trounson, to the board of StemCells, Inc.(SCI),  just seven days after he left the agency.  The firm was awarded $19.3 million while Trounson was its top executive.  Last year, members of the SCI board received as much as $99,000 in stock and cash. 

Mills’ move applied only to himself and excluded other members of the agency’s staff. He said they should not be denied the ability to seek employment with businesses or research organizations that the agency has funded.

John M. Simpson of Consumer Watchdog of Santa Monica, Ca., said, 

"The high profile Trounson Affair  focuses attention on CIRM’s potential revolving door problem that the agency needs to deal with.  Randy Mills' pledge not to take a job with a company funded by the agency for at least a year after leaving is a good step.  There  should be such a formal policy covering all employees. “Serious thought should also be given to the implications of employees leaving for jobs with non-profit entities that CIRM has funded and what safeguards are necessary.”

State laws do exist to deal with revolving door situations, but some consider them weak. (See here for an explanation of the laws.) Trounson’s appointment is an example of the circumscribed nature of the laws. Mills said the agency's “severely” limited investigation into the appointment did not show any illegal activities. Simpson said a more rigorous, independent investigation was needed. 

Mills’ move did send a clear message about his own views on some ethical matters and set a tone that should be helpful at the agency. Some employees might also view it as an example to emulate.

Playing a role in the revolving door concerns is the financial future of the agency. It is facing its effective financial demise in 2017 when funds for new awards are scheduled to run out, according to longstanding calculations by the agency itself. Last week Mills cast that financial picture in a more optimistic light. (The California Stem Cell Report will have more on his analysis in the next few days.)

Nonetheless, as the money runs out and there is no assured refinancing in sight, some employees are naturally going to be considering other employment. Three employees have departed or announced they are leaving since Mills was named. The move of Natalie DeWitt, who was a top aide to Trounson, was already reported by the California Stem Cell Report. DeWitt went to work for researchers at Stanford who have received about $5 million from the stem cell agency.

Elona Baum, general counsel and vice president for business development , this month left her $298,000-a-year job to take a position at Coherus Biosciences of Redwood City. The company yesterday refused to disclose her job title or whether she had already started work. Kevin McCormack, senior director for public communication for the agency, said he did not know her job title. He said the company “has no funding from us or any other business with us.”

The Coherus Web site says the company was founded in 2010 and is “the leading biologics platform company developing biosimilar(generic) therapeutics for global markets.”

The third employee scheduled to leave is Celeste Heidler, financial services officer. McCormack said she is retiring. The agency has posted an opening for her position.

McCormack said it has not been determined whether Baum’s position will be filled.  In addition to legal matters, she played an important role in relations with the biotech and stem cell industry.

Consumer Watchdog’s Simpson said more needs to be done to clear the air concerning the Trounson appointment.

In response to a query, he said,

“There must also be a deeper probe into Trounson’s relationship with StemCells Inc, and it its executives and directors.  Margaret Prinzing’s report, a small step in the right direction, only looked back as far as May 1.  Trounson’s relationship with StemCells Inc. since at least the beginning of 2012 should be examined and the investigation should be conducted by an entity not as closely tied to the agency as the Remcho, Johansen & Purcell firm.  I think the Citizens Financial Accountability Oversight Committee, chaired by the state controller would do a good job."

The committee is the only state entity charged with oversight of the stem cell agency. The governor and legislature have no legal ability to control its operations since it was created by a ballot initiative that specifically spelled out that they had no role.

Los Angeles Times: Flawed Investigation Magnifies California Stem Cell Scandal

The Los Angeles Times is carrying another column excoriating the $3 billion California stem cell agency, and it involves the same set of players, the agency’s former president and a San Francisco area stem cell company.

The headline on the column by Pulitzer Prize-winning columnist and author Michael Hiltzik says

 “California’s stem cell scandal gets worse.”

The piece is up on the Web site of the Times, which is California’s largest circulation newspaper, claiming 4 million readers online and in print on Sunday. Hiltzik's column is also circulated to other newspapers around the nation. 

Hiltzik dug into this week’s investigation by CIRM, as the agency is known, involving the appointment of Alan Trounson, the former president of the agency, to the board of StemCells, Inc.(SCI), earlier this month, just seven days after he left the agency. The publicly traded company has been awarded $19.3 million by the agency under unusual circumstances. Trounson is expected to receive compensation for his work on the board. Last years, members of SCI board received as much as $99,000 in stock and cash.

On Thursday, the agency’s new president, Randy Mills, reported the results of what he described as a “severely” limited investigation conducted by the board’s longtime outside counsel. Mills said there was no evidence that Trounson committed any illegal acts in May or June.

Hiltzik said the investigation itself was flawed by conflicts of interest. He wrote,

“To begin with, CIRM placed the investigation in the hands of its law firm, San Leandro-based Remcho, Johansen, and Purcell. The Remcho firm is the antithesis of an objective, independent party; its lead partner on the CIRM account, James Harrison, has been a CIRM insider from the start. He helped draft Proposition 71. He's been counsel to the agency or its governing board since 2005.

“As it turned out, Harrison couldn't conduct the investigation himself, because he was involved in some of the transactions with Stem Cells Inc. under review. Instead of hiring an independent law firm to do the job, CIRM allowed the review to be turned over to Harrison's own partner, Margaret R. Prinzing.

“Trounson hasn't been available for comment; Prinzing reported that he was back in his Australia home, and she herself communicated with him by email. Stem Cells declined Friday to our request for comment. We've reached out for comment to the law firm, and will update if we hear back.”

Hiltzik said the time frame was much too narrow. He said the probe should have gone back to the events of the summer of 2012, when StemCells, Inc., was awarded the cash with the help of the former chairman of the stem cell agency, Robert Klein.  It was the first time Klein lobbied the board after leaving it. It was the first and only time the board has approved an application rejected twice by its blue-ribbon reviewers.  

Hiltzik wrote,

 “Trounson didn't speak on the Stem Cells application during that September meeting. But he did weigh in on another Alzheimer's proposal from researchers at USC and UC Davis, which had received a higher score from the reviewing panel. That proposal, like the Stem Cells application, had already been rejected once by the CIRM board, and had come back on appeal.

“At the September meeting, Trounson told the CIRM board that the scientific reviewers had misgivings about whether the USC/UC Davis proposal was sufficiently stem-cell oriented to fit within CIRM's portfolio. He didn't speak out against the application, but merely passed along the grant reviewers' doubts. ‘It remains questionable, and I think you have to decide yourselves on it,’ he told the board.

“It isn't clear whether approval of that proposal necessarily would have killed the Stem Cells application--theoretically, both could have been approved. But the board then was looking for one Alzheimer's project to fill out its disease-therapy portfolio, and Stem Cells got the nod. The board rejected the USC/UC Davis application, 10-4.

“In any case, Trounson plainly was participating in discussions that carried possible implications for his future employer, as far back as 2012.”

Hiltzik also wrote that SCI “may be standing on shaky financial ground,” based on the details disclosed in the memo on the results of the investigation. Among other things, the memo said that the firm had failed to meet financial standards in its contract with CIRM but was still seeking a partial payment anyway.

Hiltzik’s summary:

“Here's what we know so far: A well-connected company with questionable finances and a research proposal of uncertain scientific validity has received favorable treatment from CIRM. An investigation of the relationship between the firm and CIRM's management was placed in the hands of a law firm inextricably entwined with management, and given an inappropriately narrow scope. The unanswered question burning a hole through CIRM's credibility is whether Stem Cells Inc. got its money because its research was promising, or because it knew the right people.”

(The Times also carried a short news piece late Friday dealing with the Trounson affair. The article by Amina Khan said the agency is continuing in "damage-control mode." It recounted Mills pledge not to accept employment with a CIRM grant recipient until one year after he leaves the agency. The story also referenced the Hiltzik column.)

(Editor's note: The above parenthetical material was not contained  in the original version of this item. An earlier version this item also incorrectly said the Hiltzik column was expected to be published in print on July 27.)

A USC Researcher's Perspective on the Grant Round Involving StemCells, Inc.

A USC scientist late today sent an email that dealt with the 2012 decisions that resulted in the award of $19.3 million to StemCells, Inc., by the California stem cell agency. The award was made on a close vote (7-5) despite being rejected twice by the agency’s reviewers.

It was the first time that the agency’s 29-member board had approved an application that was turned down twice by its respected reviewers. 

The circumstances surrounding the award were unusual in other respects, and we are providing links to stories carried by the California Stem Cell Report at the time to provide additional context. The links are at end of the scientist’s email.

The author of the note is Lon S. Schneider, a professor of psychiatry, neurology and gerontology at the Keck School of Medicine at USC.  He was co-PI on an application in the same round as the StemCells, Inc., proposal. His application was rejected by the CIRM board despite having a higher score than the StemCells, Inc., application. 

Then-CIRM President Alan Trounson recused himself from the public discussion of the proposal by StemCells, Inc., because of his relationship with Stanford researcher Irv Weissman, who sits on the company’s board.  This month, Trounson was named to the StemCells, Inc., board seven days after leaving the stem cell agency, triggering a flap over conflicts of interest.

Here is Schneider’s note:

“In view of the CIRM’s comment today that they commissioned their own lawyers to investigate and find no conflicts, I thought that I’d share some thoughts with your readers based on my experiences with CIRM.  An investigation of CIRM’s actions during the last month or so would – almost by definition – not reveal a serious conflict because the alleged conflicting behavior would have occurred at the time that the StemCells, Inc. contracts were awarded, if it happened at all.  Bending milestones after a contract is awarded and when one’s foot is out the door is of little concern and can be corrected.

“My interest in Mr. Trounson’s alleged actions is that my colleague and I submitted an Alzheimer's disease grant that was scored higher than StemCells’ Alzheimer’s grant in the same funding cycle. Yet, StemCells’ appeal was funded, while our appeal was not even accepted as an appeal application.  Our recourse was to protest during the public comments part of the CIRM board meeting at which StemCells’ was awarded their contract.  In my opinion, Mr. Trounson and the CIRM staff were clearly antagonistic to us and strongly supportive of StemCells.  Board members were not aware of our appeal.  Indeed, the Alzheimer’s disease advocate on the CIRM board, Leeza Gibbons, who was well-rehearsed in her advocacy for StemCells, Inc, had to be informed during a break on what our grant was about so that she could support it as well.

“StemCell’s sinecure for Mr. Trounson reinforces my opinion that the StemCell/CIRM arrangement was – let’s say -- interesting.  No doubt, others will disagree and point out why our proposal – although rated higher than StemCells – was deficient and should not have been funded while StemCells’ should have been and was.  They, of course, may have a point, and I will continue to believe that the StemCell contract was awarded in no other way than with probity. I thought I would nevertheless share these observations.”

Here are links and excerpts from the 2012 articles.

StemCells, Inc., Wins Another $20 Million From California Stem Cell Agency

Following a second impassioned pitch by its former chairman, Robert Klein, the governing board of the California stem cell agency approved a $20 million award to a financially strapped biotech firm, StemCells, Inc., of Newark, Ca.

An Unseemly Performance: Former Chair of Stem Cell Agency Promotes $20 Million Research Proposal

Bob Klein is nearly an icon in the history of the $3 billion California stem cell agency. And when he appeared before its governing board last month and aggressively touted a $20 million grant proposal already rejected by agency reviewers, his actions raised eyebrows.

Arm-twisting and Emotion: Stem Cell Directors Move to Reform Appeals on Multimillon Dollar Grants

Frustrated with politicking, “arm-twisting,” lobbying and “emotionally charged presentations,” the governing board of the $3 billion California stem cell agency today approved short-term changes in its grant appeal process and ordered up a study to prepare long-term reforms.

California Stem Cell Firsts: From Emotional Appeals to $40 Million Awards

During the last few months, the $3 billion California stem cell agency, which is approaching its eight-year anniversary, has chalked up a number of important firsts.

California Stem Cell Agency Scores on Early Coverage of Today's Trounson Story

Two media outlets were quick today to write about the Trounson Affair and the reaction from the California stem cell agency, but did not note what the agency itself described as the limited nature of its investigation into the matter.

They focused on what Randy Mills, the new president of CIRM, promised regarding his future employment and acceptance of gifts and travel. The upshot was a PR plus for the agency, which has been caught in a “bit of stink” since Alan Trounson, its former president, was named to the board of directors of a firm that has received $19.4 million from the agency.

John M. Simpson of Consumer Watchdog of Santa Monica, Ca., who has been sharply critical of the Trounson appointment, released a statement, declaring,

"CIRM President Randy Mills clearly recognizes the importance of ethics and personal integrity.  His formal agreement to refuse employment with a company CIRM has funded for at least a year after his departure proves he understands the potential for conflict and is committed to maintaining a high standard of integrity.   

"His action helps correct the damage  done to CIRM’s standing by former President Alan Trounson rashly and inappropriately joining the board of StemCells Inc, a mere week after leaving the agency.

 "Meanwhile, CIRM should make public all emails and letters between Trounson, StemCells Inc, and its employees and directors.” 

Ron Luety of the San Francisco  Business Times wrote that Mills’ action stopped short of rebuking Trounson.  Luety also said that Mills’ response seemed like a “no-brainer” but appeared necessary.  Simpson was quoted along with Mills.

Bradley Fikes of the San Diego U-T also quoted Simpson. Fikes additionally wrote,

“Mills made the right decision, said Jeanne Loring, a CIRM-funded stem cell researcher at The Scripps Research Institute.

"’There's a difference between what is legal and what is ethical,’ said Loring, who attended the meeting. ‘And he's going to be pushing the needle a lot more toward the ethical side without worrying whether he can get away with stuff.’"

It was Kevin McCormack, senior director of public communications for the agency, who told CIRM directors late in the meeting that the agency had been caught in a “bit of a stink” this past month as a result of the coverage. 

Law Firm Memo on Trounson Investigation

Here is the memo provided by Remcho, Johansen & Purcell concerning its limited investigation of Alan Trounson and his contact during May and June with StemCells, Inc. It contains additional details and the names of persons interviewed.

 Here is one paragraph that deals with what CIRM might have done had they known Trounson was in contact with the firm concerning employment. The full text follows.

“Dr. Trounson contacted Martin McGlynn, SCI’s President and Chief Executive Officer, on May 1, 2014 to set up a meeting to discuss his future plans. Based on a calendar entry, it appears that Dr. Trounson and Mr. McGlynn met on June 4, 2014. On June 9, 2014, SCI offered Dr. Trounson a seat on SCI’s Board of Directors, subject to the Board’s approval. SCI made the appointment on July 7, 2014. Had SCI notified CIRM at the time of its offer to Dr. Trounson, CIRM would have taken steps to wall Dr. Trounson off from any involvement in decisions relating to SCI.”

  Remcho Memo on Trounson Investigation by DavidJensen

Limited Trounson Investigation Shows No Evidence of Illegal Conflicts

The California stem cell agency said today that its "severely" limited investigation found no evidence that its former president, Alan Trounson, attempted to influence action on behalf of StemCells, Inc., during June of this year.

Randy Mills, the new president of the agency, said the inquiry involved examination of documents, emails and interviews with staffers of the California Institute of Regenerative Medicine(CIRM), as the agency is formally known. But he noted that the investigation was "severely" constrained because it involved only internal CIRM activities and interviews with Trounson. The agency does not have subpoena power or the ability to scrutinize StemCells, Inc.'s internal records.

Mills said that the inquiry covered a period beginning June 9 when Trounson was offered a position on board of StemCells, Inc., a publicly traded firm based in Newark, Ca. The firm has received $19.4 million from CIRM. Trounson's appointment was announced seven days after he left the agency on June 30. The agency was not notified in advance about Trounson's appointment. Directors of StemCells, Inc., were paid up to $99,000 during 2013.

The investigation also disclosed, Mills said, that StemCells, Inc., in June requested and received special funding and other financial benefits from the agency despite its failure to meet the milestones specified under its contract with CIRM.

Mills said a full report on the investigation would be made available to the public. The inquiry was conducted by an attorney, Margaret Prinzing, with the law firm that is the long-time general counsel to the board, Remcho, Johansen&Purcell of San Leandro, Ca.

A number of board members expressed concern about the negative publicity that resulted from the Trounson appointment. Chairman Jonathan Thomas said the probity of the agency was of "paramount importance."

CIRM Director Michael Friedman, CEO of the City of Hope, said that the situation could have been managed better if Trounson and the company had disclosed to the agency the possible hiring at the time it was first discussed.

Another director Jeff Sheehy, a communications manager with UC San Francisco, admonished recipients of CIRM awards to exercise some discretion in connection with conflicts of interest and to respect the people of California.

Mills said that as a result of the inquiry he was going to go beyond state law dealing with conflicts and revolving door employment. He said he would not accepts gifts or travel from enterprises with financial connections to CIRM even when permitted by state law. Mills also pledged not to accept employment with a CIRM award recipient until at least one year after leaving CIRM, another standard that exceeds state law.

Following today's meeting, the agency issued a press release about Mills' decision. The release did not mention the investigation into the Trounson Affair.

Mills said the standards applied only to himself. He said he did not want to block possible employment of CIRM staffers by CIRM grant recipients in the future.

It was not known when the Trounson investigation report would be available. Here are the slides that Mills used for a variety of purposes at today's meeting. His summary of the investigation is contained within the slides, beginning on slide 6. His signed pledge regarding conflicts is also contained in the slides.

   California Stem Cell Agency Slides on Trounson Investigation FINAL by DavidJensen

California Stem Cell Agency Directors Conclude Meeting

Directors of the California stem cell agency adjourned their meeting today at 12:09 p.m. PDT. A story on the discussion of the Trounson Affair will be carried shortly.

$1.2 Million for UC Stem Cell Researchers

Directors of the California stem cell agency today approved $1.2 million for two University of California researchers to continue pursuing their work on Huntington’s Disease and corneal problems.

The awards went to Leslie Thompson of UC Irvine and Sophie Deng of UCLA. Thompson received $505,717 for her work on Huntington’s Disease (see here and here). Deng received $699,983 for her eye research (see here and here).

$5 Million Sliced from California's Ambitious Alpha Stem Cell Clinic Program

Directors of the California stem cell agency today cut $5 million from their $70 million plan to create a series of Alpha stem cell clinics aimed at making the Golden State the leading location in the world for stem cell therapies.

On a 6-1-1 vote, the directors trimmed the effort, much touted by former agency President Alan Trounson. Eliminated was a data/information center whose tasks would have included marketing and patient education. The center also would have worked on strategies to persuade the federal government and insurance companies to pay for what are expected to be enormously expensive treatments.

The board has 29 members. However, only eight were allowed to vote because of conflicts of interest among the others. 

The cut by the board of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known, came after its new president, Randy Mills, recommended scaling back the effort. He told the board the plan was not “clearly justified.”

He said in a memo,

“The proposal as written is too broad and overly complex to be successful. In a word, it lacks focus.”

Mills proposed that a refined RFA be reissued with $10 million in funding, which the board approved. It was the first time that the board had retroactively revised a concept plan and directed that an RFA be reissued.  

The Alpha clinic concept first surfaced publicly in 2011. Trounson and two other CIRM executives promoted the plan in a scientific journal financed by the stem cell agency. (See here and here for more.)

Trounson wrote that the scientific community owes it to persons suffering from diseases “to rapidly implement the best and safest practices for cell therapy clinical trials and move toward fast-tracking in therapies where safety and efficacy has been proven.” Nature Medicine said it would be the first-ever “clinical trials network focused around a broad therapeutic platform.”

Eight institutions have applied for the main portion of the award, which is designed to make California a one-stop shopping center for stem cell therapies. The hope is that patients will be attracted from throughout the world. Up to five awards are scheduled to be made for those clinics.

A separate RFA deals with the data center. Five institutions have applied in that RFA, including some also involved in the main portion.  The agency has already received all of the applications in both categories. Based on testimony today, it appears that UC San Diego, the City of Hope and Stanford have all submitted applications in the data center round. 

Although the applicants have not been identified by the agency, virtually all are likely to be represented by persons sitting on the CIRM governing board because of the nature of the concept plan and the RFA.

Review of the applications is scheduled for this September but was originally scheduled for June. In one of his first public actions, Mills delayed the review. The agency said it needed more time to secure knowledgeable reviewers, who must come from out-of-state.

Reduction of the size of the proposal will free cash for other research efforts. Directors are feeling increasingly pressed by financial issues. The agency is scheduled to run out of cash for new awards in less than three years. It is looking into some sort of public/private combination of financing that will allow it to continue in the same fashion beyond 2017.

The CIRM board approved the original Alpha concept in July 2013. At the time, the plan was hailed by the directors, who spent little time discussing the data center that was revised today.

Earlier items on the California Stem Cell Report incorrectly indicated that the effective reduction proposed totaled $15 million instead $5 million.

CIRM Says No Ilegality in Trouson Affair

The California stem cell agency today said its limited investigation has determined that no laws were violated when the StemCells, Inc., which holds a $19.3 million award from the agency, appointed the agency's former president to the company's board.

More on this later.