Stem cell agency facing new challenges

Photo from the California Institute for Regenerative Medicine

A little more than five years ago, visions of seemingly magical stem cell cures danced in the minds of California voters. Lured by the promise of human embryonic stem cells and the intransigence of the Bush administration, Californians voted to borrow $3 billion and give it away to scientists to come up with therapies for ailments ranging from Alzheimer’s to diabetes.

In approving Prop. 71, voters repudiated the Bush administration ban on funding of human embryonic stem cell research. The voter initiative also created the California Institute for Regenerative Medicine (CIRM), an enterprise unlike any in state history and one that is uniquely independent of the governor and the legislature. It is also an agency that is facing a new set of challenges as it enters its second five years of existence.

As of today, CIRM has approved slightly more than $1 billion in grants and one loan. That averages out to $48,000 an hour since the state treasurer first sold (on Oct. 4, 2007) California stem cell bonds, the agency’s only significant source of cash and a stream that flows directly to CIRM – unimpeded by California budget concerns. More than 300 California researchers are enjoying the agency’s largess. California research organizations and universities have engaged in a $1 billion plus lab building spree, fed by $271 million in CIRM seed money. And CIRM directors have seen $916 million go to institutions to which they have links.

No cure or therapy is yet ready for patients, despite campaign rhetoric that seemed to ignore the slow and tedious nature of scientific inquiry, not to mention the required approval by federal authorities.

This year, CIRM is facing challenges involving money, manpower and performance, along with legislation that is aimed both at enhancing the agency’s accountability and transparency and ensuring that Californians have affordable access to stem cell therapies that they have financed.

A leading state Senate Democrat, Elaine Kontomina Alquist of San Jose, a supporter of Prop. 71 and chair of the Senate Health Committee, earlier this month introduced the legislation. She said that the agency is “essentially accountable to no one given the way the initiative was written.”

Introduction of the measure followed a smattering of negative newspaper commentary about CIRM and a call by a sister state panel to CIRM for more openness. The group, the Citizens Financial Accountability and Oversight Committee (CFAOC), was also created by Prop. 71 and is chaired by State Controller John Chiang, the state’s top elected fiscal officer.

The committee unanimously endorsed many of the recommendations last year of the Little Hoover Commission, the state’s good government agency, to make CIRM’s practices more transparent and accountable to the public.

The stem cell agency responded to both the legislation and the oversight committee’s recommendation with “announcements” on its Web site ( In a carefully worded statement, CIRM defended its processes and challenged thethe committee’s authority to conduct performance audits.

CIRM directors are expected to consider Alquist’s bill, which requires a 70 percent vote of both houses and the signature of the governor, at their March 11 meeting in Sacramento. However, CIRM Chairman Robert Klein, a Palo Alto real estate investment banker; vice chairmen Duane Roth, a San Diego businessman with ties to the biotech industry, and Art Torres, former state Democratic Party chairman, have already sent a five-page letter to Alquist, declaring that her bill is unnecessary. It is a position that the CIRM board has agreed with in previous years as the agency has successfully opposed other legislation.

Alquist’s measure would ordinarily be headed for a gubernatorial veto, like the previous measures, if it were not for a bit of collateral damage that has emerged from Prop. 71. In an effort to convince voters they were not spawning another ungainly government bureaucracy, Klein and company wrote into the proposal not only a spending limit but a cap on the number of employees at 50. Klein now concedes that the cap was unrealistic. CIRM President Alan Trounson, who was lured from Australia to head the agency at a $490,008-a-year salary, told directors in December that the agency “can’t do the job properly” in some areas.

As a result, Alquist has included in her bill removal of the 50-person cap, which some might think would convince Klein, who for better or worse is the dominant force at the agency, of the wisdom of some of her other proposals.

The letter by Klein and the two other CIRM leaders said, however, the agency is looking at alternative ways to bypass the 50-person cap. Such a move would avoid legislative horse-trading but would raise questions about whether CIRM is violating the spirit of Prop. 71 if not the letter.

The legislation is only the latest challenge this year for the stem cell agency. Klein dearly wants to deliver on the promises of the Prop. 71 campaign, which he directed. Klein pushed hard for a $230 million effort last fall, the agency’s largest research round, aimed at bringing– within four years – therapies to the first stage of the federal approval process.

Klein knows that CIRM’s financial resources are not endless. It has bonding capacity for another $2 billion, but that can be eaten up quickly by $200 million grant rounds or perhaps even larger ones. He is now pushing for participation in the financing of clinical trials that can run into hundreds of millions of dollars each.

In a few years, tangible results from such efforts can be paraded before lawmakers and the governor to seek additional bond funding. CIRM could also use its success stories to generate contributions from wealthy philanthropists or the biotech industry.

In addition to the 50-person cap, Prop. 71 has “blessed” the stem cell research effort with built-in conflicts of interests. Seventeen members of its 29-member board of directors have ties to the institutions that have enjoyed CIRM’s bounty. The situation prompted the prestigious science magazine Nature to editorialize in 2008 about what it called “cronyism” on the CIRM board. As of this month, $916 million has gone to organizations that have links to past or present CIRM board members. The recipients include Stanford, multiple University of California campuses, the University of Southern California, the City of Hope and Salk, Scripps and Burnham institutes, all in La Jolla. Individual board members are barred from voting on grants to their institutions. But the board approves the concepts for grants and sets their rules as well as overseeing the administration of the grants.

The conflicts are not going away. It is all but politically impossible to change the structure of the board to remove the conflicts.The institutions represented on the board were powerful research centers prior to Prop. 71. It is only reasonable to think that they would receive the lion’s share of CIRM cash. Meanwhile, CIRM executives are looking for closer relationships with the biotech industry to help speed cures into the clinic, a move that poses additional conflict possibilities. Indeed, CIRM President Trounson expects to hire a new vice president of research and development soon with an industry background at an annual salary that could reach $332,000.

Controller Chiang’s committee made one recommendation that could help innoculate CIRM against perceptions of self-dealing and conflict – posting of the directors’ statements of economic interest and their CIRM expenses online. At least it would make it very publicly clear just who stands to benefit. Both Gov. Arnold Schwarzenegger and Chiang have begun the online posting practice for their top aides.

CIRM has not responded to the recommendation for online postings. In its letter to Alquist, it said it is “California’s most accountable state agency.”

Klein, who has led the agency since its very beginning, also presents another challenge for CIRM with his announced plans to step down in December. Klein has been far more than a figurehead. He has represented CIRM nationally and internationally. (He found Trounson down under.) Klein’s hand has been felt deep inside the agency, and he has built a reputation for micromanagement. With his departure, the agency will also be losing significant bond financing expertise. So far directors have done little public succession planning, a matter that Alquist’s bill would require.

Recently two UC San Francisco academicians published a study on CIRM funded by the National Science Foundation. It said that CIRM will have a “significant” impact on commercial and academic biotech research in the United States. But the study said that measuring the agency’s success is a “challenge for the future.”

How CIRM performs over the next year could well have a major impact on that future.

Jensen is a retired newsman who has written nearly 2,500 pieces on CIRM since 2005 on his Web site, the California Stem Cell Report . He has also written for other publications on the subject, including Wired News, The Sacramento Bee, Fierce Biotech and BioWorld.

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