Stem cell agency chooses new board chair amidst funding uncertainty

SOUTH SAN FRANCISCO – Vito Imbasciani is a man of many parts. Pianist, linguist (English, French, Italian Spanish, German), surgeon, urologist, combat physician, musicologist and head of the $440 million state Department of Veterans Affairs – all of that, at least so far.

Come March 28, Imbascani is scheduled to be sworn in as the new chairman of the $12 billion California stem cell agency – an 18-year-old state program to develop revolutionary treatments for such things as brain and blood cancers, heart disease, diabetes, sickle cell disease, spina bifida, incontinence, blindness, arthritis, HIV, stroke, epilepsy and much more. In all, a host of afflictions that affect about half of the families in California, according to agency backers.

All the while the work proceeds at the agency, it labors under a voter-approved, financial death sentence – most likely the only state department perched in that unenviable position. Depending on the rate of spending by the agency, known officially as the California Institute for Regenerative Medicine (CIRM), its cash will run out in about 10 years or so, courtesy of the ballot initiative that gave birth to it in 2004.

Back then, Proposition 71 provided $3 billion. Another ballot initiative, Proposition 14 of 2020, saved CIRM from going broke with $5.5 billion more to fund research. No additional cash is authorized under state law.

The 2004 initiative campaign was much criticized for its hype. It all but ignored the slow nature of scientific research and led voters to believe that miraculous stem cell therapies were right around the corner. While few doubt that CIRM has made a major contribution to the field, it has yet to back a stem cell therapy that is available for widespread use. CIRM has funded 87 clinical trials, however, which are the last hurdle before a therapy can go to the general market.

Back then, Proposition 71 provided $3 billion. Another ballot initiative, Proposition 14 of 2020, saved CIRM from going broke with $5.5 billion more to fund research. No additional cash is authorized under state law.

Imbasciani, whose annual salary will be $569,000 during a six-year term, thinks highly of the agency’s progress so far. “CIRM is non-pareil in its repertory of scientific and clinical investigations and its ability to fund both,” he told the agency’s 35-member governing board here last Thursday.

Imbascani’s comment came in his only public statement during the campaign to elect a new chair for CIRM. On Thursday, he defeated his only opponent, Emilie Marcus, a biomedical strategist at UCLA, on a 19-12 vote of the board. (See the end of this article for links to their statements and resumes, more details about the quiet campaign, legal responsibilities of the chair and more.)

Imbasciani is jumping right into the CIRM arena. “My first activities (this week) will likely be the very mundane chores of arranging for a computer and phone and migrating over calendar and contacts,” he told Capitol Weekly, “to be followed by discussions with outgoing chair (Jonathan Thomas) and vice chair, (former state lawmaker Art Torres) and starting the pleasant work of learning more in-depth how the (CIRM) Working Groups do what they do.”

The financial underpinnings of the agency need some attention as well. Imbasciani’s more than five pages of remarks last week covered a range of issues. He particularly cited the current financial condition of the state, which faces a $20 billion budget shortfall as a result of the current difficult financial environment.

CIRM is not funded out of the state budget but depends on money borrowed by the state (bonds) to survive. Rising interest rates, implications of the federal debt ceiling stalemate and the state budget deficit do, however, affect the bond market.

“This translates into a potential difficulty for CIRM in the short term,” Imbasciani said. “CIRM is not immune from the adverse effects of these downward pressures…In short, CIRM’s slice of the state’s bond pie must be secured.

“A reliable and predictable funding stream is crucial to CIRM’s sustainability. The recession of 2009 caused such constraint on the state’s bond capacity and led directly to cutbacks within CIRM of basic science project funding. Everyone on this board doubtless realizes the damage that interrupted funding can do to maintaining the necessary continuity of both our research teams and our clinical trials.”

Imbasciani, who was nominated by Gov. Gavin Newsom, raised 12 questions that he plans to explore concerning CIRM. In one form or another, six of the questions involve the financial sustainability of CIRM.

Imbasciani indicated he would begin talks with the state treasurer’s office — prior to taking office — about an early sale this spring of bonds for CIRM. Bonds are the lifeblood of the stem cell agency. It is entitled to $540 millon annually that flows directly to CIRM without tinkering by lawmakers or the governor.

“Everyone on this board doubtless realizes the damage that interrupted funding can do to maintaining the necessary continuity of both our research teams and our clinical trials.”

CIRM stands out among the 50 states in terms of stem cell and gene therapy research. With CIRM, California has the largest scientific research funding program of any state in the nation. The use of borrowed money for scientific research is also unique to California. Plus the state research effort is the first in the history of the state.

The use of state bonds means that CIRM’s research is more expensive than pay-as-you-go financing. With the interest on the borrowed money, the estimated cost of CIRM to taxpayers rises to an estimated $12 billion, according to 2020 calculations. That estimate, however, did not foresee today’s much higher interest rates.

By state standards, CIRM is tiny in terms of employees, numbering only about 50 currently, only 15 more than the number of persons who sit on its governing board. The agency has a nominal legal cap of 70 on the number of employees, although there are loopholes that could allow more.

CIRM’s operational budget for such things as salaries, office space, etc. is limited to 7.5 percent of its total bond funding. For the 2022-23 fiscal year, the operational budget hit only $26 million. CIRM handed out $347.5 million in awards during the 2022 calendar year, including $46.8 millon for education and $72 million for infrastructure.

Waiting until 2032 could put CIRM on the edge of a financial cliff, but it may take that long to come up with results that will resonate with voters.

Its spending rate is currently slow as it still works to ramp up after ramping down prior to 2020. Increased funding of clinical trials, which are expensive, could heavily tap its resources. Ultimately, however, CIRM’s critical task is to get money out the door. Research and development of therapies do not occur unless someone pays for them.

Refinancing CIRM when its cash dribbles to an end could come through another ballot initiative campaign, which would cost tens of millions of dollars to mount. CIRM cannot legally conduct such a campaign or spend state money on one. But it is legally permitted to write another one.

Fifty-nine percent of the voters in 2004 supported the creation of CIRM. In 2020, only 51 percent favored refinancing the agency with more billions. If backers of CIRM want to sustain the effort they will be looking at a campaign in a presidential election year, such as 2028 or 2032. Multibillion-dollar ballot measures have a better record of success in presidential election years because of the larger voter turnout. Waiting until 2032 could put CIRM on the edge of a financial cliff, but it may take that long to come up with results that will resonate with voters.

Below are links to related information on the election for chair, which began nine months ago and was absent the hurly-burly of traditional electoral contests. No public comments on the candidates were received by the agency during the campaign.

• Imbasciani’s and Marcus’ only public statements made during the race
• Resumes from Imbasciani and Marcus
• Legal responsibilities of the chair
• Gavin Newsom rebukes agency about conduct of the election

Jensen is a retired newsman and has covered CIRM since 2005 on his newsletter, The California Stem Cell Report, which has published more than 5,000 items.