Stem cell agency: Following the money — and its performance

One year ago this month, a $5.5 billion wave washed over California’s ambitious stem cell agency and left it refreshed and renewed for another decade or so of searching for “miraculous” treatments for a host of deadly, incurable afflictions.

Officially known as the California Institute for Regenerative Medicine (CIRM), the agency has seized its new role with alacrity — at least when it comes to awards. It is now on a pace to hand out $38,000 an hour, 24 hours a day, seven days a week.  That would amount to $519 million in awards between this time last year and the end of the agency’s current fiscal year in June.

“We really have a bright future ahead of us leveraging our successes.” — Maria Millan

It’s a “new era” for CIRM, said the president and CEO of CIRM, Maria T. Millan, on Tuesday. She declared that the agency’s new, just-approved strategic plan will “deliver the full potential of regenerative medicine” and lead to “transformative” stem cell therapies.

That is a far cry from the fall of 2020 when CIRM was literally planning to close its doors if voters rejected Proposition 14, the ballot initiative that refinanced the agency. Failure of the measure would have terminated the largest state-financed stem cell research effort in the nation. And it would have ended what is a historical first, the creation of a major,  state-run stem cell research program in the Golden State.

Proposition 14 provided more than $5.5 billion. The 17,000-word measure also launched the agency on a broader, new course of financing cutting-edge science plus assigning it the formidable tasks of attempting to ensure the affordability of $2 million therapies and funding an $80 million community care centers building program.

“We really have a bright future ahead of us leveraging our successes,” said Millan 12 months ago, just after the vote on Proposition 14 was certified. Since then, she has been crafting a five-year strategic path to secure that future.

Not discussed in CIRM’s plan, however, is the fact that the agency is yet to fulfill 2004 voter expectations.

Approved this week by the 35-member CIRM board, the plan includes the new affordability effort and the community care centers. It also promises new data-sharing and collaboration programs to strengthen the entire field. It contains a strong and increasing emphasis on diversity. It aims to create knowledge networks and technology competency hubs and build a skilled and diverse workforce. It vows to speed clinical trials to final federal approval of treatments and make them available for widespread use.

All of which would be embedded in financing research that promises “one-and-done” cures and “transformative regenerative medicine.” That expression includes such things as gene and stem cell therapies, along with tissue-engineered products to repair, replace, or regenerate organs, tissues, cells, genes and metabolic processes,

Not discussed in CIRM’s plan, however, is the fact that the agency is yet to fulfill 2004 voter expectations that CIRM would produce what some have described as “magical” cures that would be widely available to the public for afflictions ranging from diabetes to cancer.

Asked whether California voters are impatient with CIRM’s failure to back a generally available stem cell therapy, the agency replied this week in a statement, “No. If they had been they would not have voted to approve Proposition 14.

CIRM plans to put the state of California at least part way into the business of manufacturing cell therapies via partnerships with industry.

“The fact that they did approve it during a time of pandemic and economic uncertainty shows they understand that developing therapies takes time, and it also showed that they appreciated all we have achieved in the last 17 years,” CIRM said in an email. (The full text is available on the California Stem Cell Report.)

Manufacturing Cures and Silos
The strategic plan is called “Real Life.” In it, CIRM acknowledges the obstacles that are hindering large scale production of therapies that would be available generally.

“The field of regenerative medicine is advancing rapidly, driven by novel research tools and technologies that generate terabytes of data on human biology but has to date resulted in few demonstrably effective treatments for devastating diseases,” CIRM says.

“Several factors contribute to the limited scientific advancement in these areas, including:

1) Lack of attention and financial support (from non-profit and industry sectors) for high-risk/high reward research and therapy development, particularly in disease indications that are not commercially viable (i.e., rare diseases) or are complex (i.e., central nervous system-related diseases), and

2) The siloed nature of biomedical research and development.”

To help overcome some of the manufacturing hurdles, CIRM plans to put the state of California at least part way into the business of manufacturing cell therapies via partnerships with industry. The “Real Life” plan says:

“CIRM will establish a statewide manufacturing network comprising academic process development and GMP (good) manufacturing (practices) facilities as well as industry manufacturing partners to support the needs of a rapidly growing regenerative medicine industry in California, including workforce development.

CIRM’s manufacturing aspirations are aimed at accelerating the commercialization of research that it has financed over the last 17 years.

“The network will de-risk the development of transformative regenerative medicine therapies,” CIRM says, “advance the development and adoption of manufacturing technology platforms, promote adoption of quality standards such as quality-by-design, and educate, train, and employ a diverse California workforce.”

CIRM has yet to allocate funds for specific segments of its strategic plan, but its manufacturing network could cost a bundle. However, CIRM is also likely to require co-matching funds from partnering businesses and not-for-profit institutions.

Ronnie Priyank

“Bubble Babies” and Intellectual Property
CIRM’s manufacturing aspirations are aimed at accelerating the commercialization of research that it has financed over the last 17 years. One example involves a three-year-old from the Sacramento, Ca., suburb of Folsom — Ronnie Priyank.

“When Ronnie was born, he seemed like a happy, healthy baby. But within a few days, a newborn screening test diagnosed him with X-linked SCID, a rare immune disorder that is often fatal within two years. Fortunately, doctors told his parents about a CIRM-funded clinical trial conducted by UC San Francisco and St. Jude Children’s Hospital,” CIRM says in its strategic plan.

The case is a telling example of what policy experts call a “wicked problem,” one that is complex and intractable.

Ronnie’s genetic abnormality was corrected by doctors. A new blood supply repaired his immune system.  “He is now a happy, healthy three-year-old boy who loves going to school with other children,” CIRM reports.

However, another case of a severe immune deficiency treatment has not ended so well. It created a difficult and unpleasant situation for CIRM this year, not to mention the families of 20 children.

The case is a telling example of what policy experts call a “wicked problem,” one that is complex and intractable. Its elements include the ultimate purpose of public funding of medical research, the search for profits, plus ethics and the lives of babies born without the ability to fight off even minor infections that could take their lives.

It is not a problem that is isolated to CIRM but encompasses much of the regenerative medicine business. And it could have major implications going forward for CIRM.

At the center of the situation is a rare genetic affliction often called the “bubble baby” disease, which is fatal if left untreated. First reported last May by Capitol Weekly and the California Stem Cell Report, it involves not only CIRM, but UCLA and the University of California’s system for licensing or selling research results, in this case, to a London firm called Orchard Therapeutics.

Over the years, CIRM has backed the cell and gene research by Donald Kohn of UCLA with $43 million. He has been working in the field for more than 30 years and has received funding from many other sources.  UCLA says Kohn’s treatments, which are still in clinical trial, have saved the lives of 70 persons.

Some years ago, UCLA licensed exclusive rights to a Kohn treatment to Orchard. The rights do not belong to CIRM or Kohn but to the UC system. However, in 2020 Orchard quietly dropped the therapy in favor of potential treatments that it deemed would be more profitable.

Costs of cell and gene therapies could range upwards of $2 million, according to current estimates.

The families with the 20 children with the bubble baby disease were shocked and angry. They asked Orchard for “compassionate use” of the therapy, but the company turned them down.

This month, a subcommittee of the CIRM that deals with intellectual property moved to tackle the intellectual property process that helped to create the Orchard situation. The initial step gives the subcommittee a specific role in such disputes, but the committee indicated more is likely to be done this coming year.

A $2 Million Affordability Challenge
The agency’s new affordability and accessibility effort was slow to start this year. Proposition 14 called for appointments to the CIRM affordability panel to be made by early March. The 17 positions were not completely filled until October. The committee did not have its first meeting until last month. Nonetheless, the panel does have a sweeping scope and something in the neighborhood of $155 million from Proposition 14 to help come up with solutions.

The ballot measure charges the panel with satisfying Proposition 14’s mandate that CIRM “establish and oversee” programs to help make its yet-to-be commercialized stem cell and gene therapies “available and affordable” for all Californians.

Costs of cell and gene therapies could range upwards of $2 million, according to current estimates. The affordability issue is far from new in the cell and gene therapy world. And the financial and ethical questions raised by affordability have already received a vast amount of attention internationally from industry and academics.

The chair of the affordability panel is former state legislator Art Torres, who also serves on the board of Covered California and the UC board of regents

Affordability is close to the heart of Robert Klein, the Palo Alto developer who sponsored both Proposition 14 of 2020 and Proposition 71 of 2004, which created CIRM. Klein was responsible for inserting the new affordability/accessibility language in Proposition 14.  He told CIRM’s affordability panel earlier this month:

“Getting the cost of those therapies down to where they are possible economically for coverage by our California programs…is a challenge that is critical for every family, but also for the state.

“Unless we can get these therapies to be accessible and affordable, we cannot really deal with the burden of chronic illness over the next decade in California, much less the decades that follow.”

The chair of the affordability panel is former state legislator Art Torres, who also serves on the board of Covered California and the UC board of regents. (Other members of the panel can be found here.)

Beefing up Diversity and Equity
Over the past year, CIRM directors have focused sharply on diversity, equity and inclusion matters. In October, they inserted diversity and equity language into its mission statement, which now reads as a result: “Accelerating world class science to deliver transformative regenerative medicine treatments in an equitable manner to a diverse California and world.”

One change that Duron championed is a diversity, equity and inclusion score on all applications from scientists for some of CIRM’s billions.

CIRM’s new equity push began about two years ago. CIRM Director Ysabel Duron has given it regular, personal attention. She has insisted consistently this year that CIRM do more, particularly as it spends its $5.5 billion.

Duron wants the diversity/equity performance of awardees to be concretely measured and scored. One change that she championed is a diversity, equity and inclusion score on all applications from scientists for some of CIRM’s billions.

Just this Tuesday at a CIRM board meeting, Duron said the strategic plan needed stronger and more specific language than an ambiguous word like  “diverse.” Instead, CIRM should use language that would immediately tell people of color that CIRM was ready to serve them.

“It is both our moral and ethical duty to recognize equity and inclusion,” Duron told her fellow directors last fall. Specific language delivers a message, she said, “It means me.It means my family. It means my community.”

Royalties so far, however, have totaled only $557,292 as of last month.

CIRM’s approach to the issue is likely to become more aggressive in 2022 as the agency refines and expands its approach.

CIRM’s Death Warrant
Proposition 14 did more than provide a much-needed cash infusion, courtesy of Klein, who took personal charge of writing the measure. Proposition 14 also contained CIRM’s death warrant. No more funding is provided after the $5.5 billion is gone, a fact that is almost never discussed at CIRM strategy sessions.

Proposition 14, however, did create something of a possible future revenue stream for the agency. It requires that royalties from CIRM-funded inventions go to assisting with affordability issues involving CIRM-backed therapies. Prior to approval of the ballot measure, those funds went into the general fund of the state, which is used for everything to paying state prison guards to running the state pesticides department.

A study financed by stem cell backers in 2004 estimated that royalties could run into the billions. Royalties so far, however, have totaled only $557,292 as of last month.

CIRM, which can receive gifts and raise money, could also align itself in the future with a non-profit entity that could serve as a possible vehicle to continue its existence if additional state funding is not available when the current $5 billion run out. Klein founded and is the head of such an organization, Americans for Cures.

CIRM could also stretch out its life by slowing the pace of its spending while it looks for a savior or awaits results that could stimulate voter approval of more billions. Another possibility is seeking funding from the legislature, but that could be a difficult task. Lawmakers might want to fiddle with the agency’s independence.  CIRM operates outside of the control of the legislature and the governor. Its funds flow directly to the agency without going through the normal state budget process.

The increase plus turnover in board members has left the board with a substantial number of members who are unfamiliar with CIRM’s past activities

CIRM currently relies on state borrowing (bonds) to survive. It is limited to borrowing no more than $540 million a year. Its original funding in 2004 provided $3 billion. Proposition 14 added the $5.5 billion. With interest on the state bonds, the total cost of its work is estimated to be about $12 billion.

Another bond measure to refinance CIRM is problematic. Proposition 14 was narrowly approved by 51 percent of voters, well below the 59 percent in 2004. Without treatments that resonate with voters, another ballot measure could be in trouble, but an election is a very long way off.  There is also the question of who might put up the many millions needed to qualify an initiative for the ballot and finance the campaign 10 years from now. Klein, 76,  took that on in 2004 and 2020, providing millions himself and raising more.

New Faces and a New Chair for CIRM
CIRM used to have 29 persons on its governing board, a size that some regarded as unwieldy and unnecessary. It was raised to 35 by Proposition 14, which is close to the number of seats in the state Senate (40). The increase plus turnover in board members has left the board with a substantial number of members who are unfamiliar with CIRM’s past activities or the sometimes difficult process of operating in a very public arena.

CIRM staff has changed significantly in the last several years as the result of the wind-down prior to Proposition 14. The number of employees dropped from more than 60 to less than 30 during that time. But new hires have come aboard. CIRM expects to have 55 employees by the end of June and likely more in the coming years. The ramp-down, ramp-up roller coaster, nonetheless, has resulted in the loss of institutional memory and diverted energy away from the core of CIRM’s work. Only two employees remain from CIRM’s earliest years.

CIRM CEO Millan has been with the agency since 2012 and CEO since 2017. The chair of the governing board, Jonathan Thomas, and Vice Chair Art Torres will be termed out this year. The board’s governance committee is expected to meet in January to discuss the replacement process, in which they only have an advisory role.

CIRM is now heavily engaged in supporting gene therapy, a burgeoning field that was on a scientific backburner in 2004

Statewide elected officials, such as the governor and state treasurer, nominate candidates to be voted on by the full board. The official qualifications for the chair are narrowly drawn — so narrowly drawn, in fact, that in 2004 it was widely reported that only one person fit the legal bill — Robert Klein, the man who sponsored and oversaw the drafting of the initiative that created CIRM.

Klein left the board in 2011, and Thomas succeeded him in a contested election on a 14-11 vote.

76 Clinical Trials, Gene Therapy, Conflicts of Interest
With the exception of failing to produce a widely available stem cell treatment, CIRM has chalked up an impressive record by virtually all assessments. It currently is helping to finance 76 clinical trials, an accomplishment that would not have been believed back in 2004. More than 3,200 patients are involved in those trials, Many others are enrolled in trials at CIRM’s first-in-the nation Alpha Clinics.

CIRM is now heavily engaged in supporting gene therapy, a burgeoning field that was on a scientific backburner in 2004. CIRM is backing new-since-2004 research using reprogrammed adult stem cells. It has moved far beyond supporting controversial human embryonic stem cell research, which was the reason for its being in 2004, although that area remains part of CIRM’s portfolio.

Conflict of interest issues have dogged the agency since its inception. The problems are built into CIRM by the ballot initiative

(In 2004, former President George Bush had restricted federal funding of human stem cell research, causing alarm and dismay in the scientific community. Some scientists even left the country to continue their work. In California, others supported the creation of the stem cell agency and campaigned vigorously for Proposition 71.  Bush’s restrictions were lifted in 2009, leading some to question whether CIRM was still needed.)

CIRM is not without its flaws. The most recent evaluation of it came in a state-required performance report released this fall. Paid for by CIRM itself, the $242,000 report recommended improvements in CIRM operations, including tracking royalties and in its information technology. Back in 2012, CIRM heard from the National Academy of Medicine in a $700,000 study, also paid for by CIRM. The prestigious body recommended far-reaching changes including reducing the size of the board and overhauling the grant award process. CIRM did not look kindly on the recommendations, including those dealing with conflicts of interest, perceived and otherwise.

Conflict of interest issues have dogged the agency since its inception. The problems are built into CIRM by the ballot initiative. Virtually all the parties who stood to benefit from CIRM’s largess were given a seat at the table where the money is handed out (the governing board). Directors cannot vote on awards to their institution, but they vote on and participate in creation of awards programs and approving the rules for how the money is handed out.  An analysis by the California Stem Cell Report and carried on Capitol Weekly showed that as of the summer of 2020, 80 percent of the  $2.7 billion in awards at that time went to institutions that had links to past or current representatives on the board.

This fall the board repealed one of its own rules aimed at minimizing conflicts of interest. Eliminated were regulations that required board members to leave the room during meetings involving discussions on matters where they had a conflict of interest. Such a requirement is common, however,  among local governments and a number of state agencies even they do not necessarily hand out billions of dollars.

The $8.5 billion that CIRM will have spent by the time the cash runs is a lot of money. It shrinks rapidly, however…”

(For more on the “leave-the-room” requirements in California, see here and here.)

“Boiling the Ocean” and More
Proposition 14’s vast new vision for CIRM, however, may threaten to overwhelm the program. Indeed, that concern was expressed by some directors earlier this year when they warned about trying to “boil the ocean.”  Many new avenues could be pursued under the terms of the ballot initiative, but even the ones dictated by Proposition 14 would challenge the grasp of any organization. Beyond the affordability effort, they include research involving mental health, “therapy delivery,” personalized medicine and “aging as a pathology.“ That is not to mention a greater emphasis on supporting “vital research opportunities” that are not stem cell-related.

Proposition 14 also directs the agency to fund research training programs, but does not specify the amount that should be spent. CIRM has allocated $66 million this fiscal year for education and training. That necessarily means less money for research and product development. Few like to argue against training and education. But it is unlikely that voters, in approving the creation of CIRM in 2004, thought it meant that hundreds of young persons would be receiving financial assistance for their academic studies.

The $8.5 billion that CIRM will have spent by the time the cash runs is a lot of money. It shrinks rapidly, however, when individual clinical trial grants run as high as $20 million and companies receive more than $70 million without producing a commercial therapy, as is the case with a San Diego firm called Viacyte. That is not to mention mandates from the proposition that lock in spending. That includes the $1.5 billion that must go for diseases affecting the brain and nervous system, regardless of whether better opportunities exist in another field for actually producing a cure for some other terrible affliction.

How CIRM juggles these sorts of issues and even more complex questions will be an existential test for the enterprise and its leaders. If they make good bets about the science and the direction of the industry, both of which require a global perspective, and if they have a generous dollop of luck, all that will go a long way in determining whether CIRM will survive after the dollars run out in another decade or so.
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Editor’s Note: David Jensen is a retired newsman and has followed the agency since 2005 on his newsletter, the California Stem Cell Report.