California’s stem cell agency confronts uncertain future

C. Randal Mills, the 45-year-old CEO of California’s $3 billion stem cell research program, is a man who loves his milestones.

A private pilot, he charts his course in the air from one specific point to the next. Three years ago, Mills brought that same sort of navigation to the state stem cell agency. Miss one of the agency’s milestones, and — if you’re a stem cell scientist — you may not crash and burn, but you could lose millions of dollars in research funding from the state.

Since the agency’s inception, it has spent money at the rate of $22,000 an hour. But it has yet to finance a stem cell therapy that  is available to the general public.

Mills has left an indelible stamp on the agency with his emphasis on concrete, measurable results. But he is resigning from the research program at the end of June in the midst of what some say is its “last stage.” His surprise departure to head the world’s largest bone marrow donor organization shocked many in California’s stem cell community. And it added to the unease about its future along with the future of possible stem cell therapies.

The California Institute for Regenerative Medicine (CIRM), as the agency is formally known, expects to run out of cash for new awards in just three years, which is a blink of an eye in biotech research. Since the agency’s inception, it has spent money at the rate of $22,000 an hour. But it has yet to finance a stem cell therapy that is available to the general public. Nonetheless, there is talk of a new, $5 billion stem cell bond measure on the November 2018 ballot.

CIRM was created by California voters in 2004 when they approved a 10,000-word ballot initiative, Proposition 71. Voters also provided the agency with $3 billion in borrowed money (state bonds) that flows directly to the agency, untouched by the governor or the Legislature. The bond financing roughly doubles the cost of the research because of the interest expense.

Passage of the California initiative triggered a fresh wave of optimism and headlines that spoke of a new California gold rush — this time in biotech.

The $34 million ballot campaign 13 years ago generated expectations that miraculous stem cell therapies were right around the corner. More than 40 Nobel Prize-winning scientists and actors such as Michael J. Fox campaigned for it. Christopher Reeve, who portrayed Superman but was later paralyzed in an accident, was featured in a TV ad that appeared after his death.

“Stand up for those who can’t,” said Reeve from his wheelchair, calling on voters to support Proposition 71.

The agency came into being at a low point for the field of stem cell research. President George W. Bush had restricted federal funding for research using human embryonic stem cells. Researchers were disheartened. Younger scientists shied away from the field because of the funding uncertainties.

Passage of the California initiative triggered a fresh wave of optimism and headlines that spoke of a new California gold rush — this time in biotech. While the gold rush is yet to be seen, the agency can point to a number of markers that it says show the program was worth the effort.

What particularly excites Mills and patient advocates are the dramatic and emotional stories of the handful of patients who have benefited from CIRM-connected clinical trials.

Independent, authoritative voices assessing the performance of the agency are almost non-existent. The Legislature has no oversight of the enterprise nor does the governor…

Evangelina Padilla Vaccaro is one. Evangelina is alive today as the result of work at UCLA that has saved the lives of more than 30 persons afflicted with a fatal, rare immune disorder. She is perhaps the only four-year-old ever to address the governing board of the stem cell agency.

“Thank you,” she whispered to the board at a meeting last December. Evangelina’s mother said more, her voice cracking,  “Thank you for keeping my family complete.”

CIRM has pumped $52 million into the immune disorder research, which had been already underway for decades. However, only a handful of people can participate in the CIRM-connected clinical trials, such as Evangelina’s, because of their experimental nature. Both the federal Food and Drug Administration, which ultimately controls the trials, and researchers move slowly to bring risky therapies to the general public.

The December meeting highlighted the personal success stories that can be found in the work financed by the agency. But four months later the prestigious scientific journal Nature carried a gloomier take. It published a piece on CIRM with a headline that described the agency as being in its “last stage” and facing its “final test.”

“CIRM has made California a world leader in stem cell research, attracting some of the most talented scientists to the state to develop new treatments and funding world-class research facilities … “ — CIRM

The agency, however, is not yet ready for hospice care. Recently asked to cite the five most important things that Californians should know about the agency and its future, Kevin McCormack, senior director for communications, responded with much more. (The complete text of his statement can be found here.)  His short list:

1)  “Research we have supported has cured more than 30 children of a fatal rare immune disorder. That same approach has also cured a young man of another rare immune disorder and is now being used to help find a cure for sickle cell anemia – a condition that affects more than 100,000 people in the US, most of them African Americans.

2)   “We have funded 29 projects in clinical trials for a variety of diseases including heart disease, cancer, diabetes, HIV/AIDS, spinal cord injuries and the leading cause of vision loss and blindness in the US.

3)  “We are focused on adding another 40 new clinical trials by 2020, including rare diseases and those affecting children.

4)   “We place patients at the heart of everything we do and every decision we make. Nothing gets done at CIRM, including what we fund and how clinical trials are designed, without the input of patients and patient advocates. They know best what needs to be done and their voices are essential in making decisions about treatments that could change their lives, even save their lives.

5)   “CIRM has made California a world leader in stem cell research, attracting some of the most talented scientists to the state to develop new treatments and funding world-class research facilities in which the research is conducted free from federal restrictions.”

Independent, authoritative voices assessing the performance of the agency are almost non-existent. The legislature has no oversight of the enterprise nor does the governor, a condition permitted legally by the ballot initiative. The initiative did create a body called the Citizens Financial Accountability and Oversight Committee, which meets once a year to consider the agency’s finances. In recent years, it has been less than aggressive.

Jim Lott is a member of that group, which is chaired by the state controller. Over the years, however, Lott has expressed dissatisfaction with some aspects of the agency. Lott, who was executive vice president for decades of the Hospital Association of Southern California, said in an interview that the agency has done “a really good job in seeding programs.”

But he also described the ballot initiative as a “very expensive tease.” Lott said, “They teased the public. They teased us with with Proposition 71. And they did not deliver on the tease, and I don’t want them to be able to get away with that again.”

According to calculations by the California Stem Cell Report, about 90 percent of the agency’s awards have gone to institutions that are or have been represented on the governing board.

If CIRM is to continue, he said it should be wrapped into the regular structure of state government and funded on a normal, annual budget basis. He also said the governing board should become advisory instead of currently making decisions on each application for state money.

“We need to do this in a more responsible and accountable way,” Lott said.

The most comprehensive review of the agency came in 2012 when the Institute of Medicine (IOM) reported the findings of its 17-month study of the agency. The IOM is a highly regarded national organization that provides studies on science, health and medical issues. The stem cell agency governing  board commissioned the study at a cost of $700,000.

(The IOM has been renamed the Health and Medicine Division of the National Academies of Sciences, Engineering, and Medicine.)

Harold Shapiro, former president of Princeton University and chairman of the IOM study, said in 2012 that the agency has done a “remarkably good job” overall in giving the state a prominent position in regenerative medicine. But he said the stem field has changed and the agency needed to change with it.

Currently, the top 10 recipients of CIRM largesse all have ties to its governing board.

When Shapiro appeared before the board to present the findings, some CIRM directors bridled at the study’s far-reaching recommendations, many of which dealt with the built-in conflicts of interest on the board. The IOM proposals would have removed all board members from the grant review process and limited them to voting on a slate of applications rather than individual applications. More disclosure of personal conflicts of interest, including health matters, was also recommended.

“Far too many board mem­bers represent organizations that receive CIRM funding or benefit from that funding. These com­peting personal and professional interests com­promise the perceived independence of the ICOC (the CIRM governing board), introduce potential bias into the board’s decision making and threaten to undermine confidence in the board,” the IOM report said.

According to calculations by the California Stem Cell Report, about 90 percent of the agency’s awards have gone to institutions that are or have been represented on the governing board.

Currently, the top 10 recipients of CIRM largesse all have ties to its governing board. The institutions are Stanford University, $320 million; UCLA, $275 million; UC San Diego, $177 million; UC San Francisco, $143 million; UC Davis, $129 million; USC, $110 million; UC Irvine, $106 million; City of Hope, $72 million; Cedars-Sinai Medical Center, $62 million, and Gladstone Institutes, $61 million.

“We changed the way our board votes to ensure there would be no more concerns about the perception of conflict of interest.” — CIRM

The ballot initiative gave virtually all the institutions that were significant players in stem cell research a seat at the board table. The 29 board members cannot vote on applications from institutions that they are tied to. But they do set the rules, standards and scope of the grant programs.

In response to the IOM, the board approved what were termed “dramatic changes” in voting and other procedures to ease the perception of conflicts of interest. Shapiro called the changes “significant.”

The agency said last week,”We changed the way our board votes to ensure there would be no more concerns about the perception of conflict of interest. By preventing heads of institutions who could receive stem cell funds from voting on any funding issue, we took that off the table so that we can focus on our main goal, helping patients.”

The conflict case that has attracted the most public attention, however, did not involve directors, but Alan Trounson, Mills’ predecessor as president of agency. Seven days after Trounson left his CIRM post in 2014, he was appointed to the board of StemCells, Inc., a Newark, Calif. firm that was awarded more than $40 million in funding while Trounson was president of the agency. Trounson ultimately received $435,000 in total compensation for his duties on the StemCells, Inc., board. Trounson has denied any wrongdoing.

The Fair Political Practices Commission initiated an investigation and said in a 2015 letter to Trounson there was “insufficient evidence to demonstrate” a legal violation.

The loss of Mills has triggered concerns among some scientists that more CIRM employees will begin to look for work elsewhere. Mills has identified the risk of losing employees in his strategic plan. He has talked about finding ways to keep people on board, but nothing has been publicly disclosed.

On May 2, when Mills announced his coming departure to lead the National Marrow Donor Program in Minneapolis, the agency coupled the news with designation of an interim president, Maria Millan. She is currently the CIRM vice president for therapeutics. The agency’s directors will discuss finding a permanent replacement at a closed-door meeting in July.

Mills said in an interview that Millan, a physician who has been with the agency since 2012, is the obvious choice to succeed him. Prior to joining CIRM, she served as a vice president and acting chief medical officer of StemCells, Inc., and was director of the pediatric organ transplant program at Stanford.

CIRM’s general counsel, James Harrison is also leaving at the end of June. His announcement came in March, prior to Mills’ resignation. Harrison is a partner in the Oakland law firm of Remcho, Johansen & Purcell and wrote part of the stem cell initiative. Harrison worked under a contract between his firm and CIRM. He has been associated with the agency since its inception and has been a key leader with influence well beyond narrow legal issues.

Today CIRM is down to its last $650 million, having committed $2.2 billion for awards with the remainder going for operational expenses. The $650 million sounds ample, but when clinical trials are receiving $20 million in a single award, the money can go fast.

Coming to the financial rescue of CIRM may be Robert Klein, the Palo Alto multimillionaire real estate investment banker who led the 2004 campaign and became the agency’s first chairman. He says he is ready to back a $5 billion bond issue for California voter approval in November of 2018. Americans for Cures, his nonprofit group, which shares space in Klein’s Palo Alto headquarters, plans to poll California voters this fall, with the expectation that 70 percent of them will back the agency.

Klein did not respond to emailed questions for this article. But he made an appearance earlier this year at a CIRM-related event at the City of Hope in Duarte, Ca. Klein declared that a medical revolution is underway. And he said that the state of California now has the “opportunity and privilege” to “lift the human condition” if it will continue support of its 12-year-old stem cell research effort.
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Ed’s Note:  David Jensen has published more than 4,000 items since 2005 dealing with California stem cell matters on his blog, the California Stem Cell Report. He formerly worked for The Sacramento Bee, UPI and spent 1975-6 working as a press aide for Gov. Jerry Brown in his first term in office.