Sacramento Bee

Ten of the 29 directors of California’s new stem cell program serve on biotech or pharmaceutical firms’ boards of directors or have extensive holdings in those industries, leading critics to challenge their ability to fairly represent taxpayers in doling out $3 billion in state funds.

Members of the Independent Citizens Oversight Committee, created by voter passage of the stem cell initiative in November, reported interests ranging from real estate to movie production in statements of economic interest filed this week.

Six members, including Sacramento physician Francisco Prieto and University of California, Davis, medical school head Claire Pomeroy, had no reportable interests beyond salaries. Four missed the filing deadline.

But 10 appointees hold board positions or stock in a wide variety of pharmaceutical and biotech firms that opponents of Proposition 71 and consumer advocates said could one day benefit from the state’s financing of stem cell research.

“They need to divest from the market,” said Jamie Court, head of the Foundation for Taxpayer and Consumer Rights. “You can’t make money off the biotech research you are overseeing.”

While other state boards have members of industry, he said, this one will be handing out $3 billion in bond funds that could benefit its own members’ bank accounts.

“If there are conflicts, there are always going to be questions about whether this research is being done for the public’s interest or the pecuniary interests of those serving on the board,” Court said.

Robert Klein II, the board’s chairman and an author of the initiative that created the stem cell program, said the initiative requires members to recuse themselves from votes that affect their personal interests.

He also said those serving on biotech boards and with experience in the industry have the “essential knowledge for us to take this applied science and get therapies to patients.”

Klein, who reported earning $7.6 million from his real estate interests last year, said he divested himself of his biomedical stocks but doesn’t expect others to do the same. He pointed out that the initiative prohibits any holdings in companies conducting the embryonic stem cell research Proposition 71 is supposed to finance.

But only a handful of firms are engaged in that research today, and Proposition 71 opponents said breakthroughs in embryonic stem cell research could benefit the entire biotech and pharmaceutical industries.

The initiative requires that all state money go to public or nonprofit institutes. But biotech firms can partner with them and benefit from their discoveries.

The oversight committee also could fund other types of research, so biotech and pharmaceutical firms not engaged in stem cell research could ultimately benefit, said Deborah Burger, California Nurses Association president, an opponent of the measure.

Edward Penhoet, the committee’s vice chairman and co-founder of two leading biotech firms, called this an “abstract argument.”

“On that basis, you can disqualify everybody on the board,” he said. “You can say it’s good for the state, and if you live here, you can benefit from it.”

Penhoet reported owning at least $3.36 million in stocks and stock options in biotech firms, including more than $1 million each — the maximum required to be reported — in Chiron Corp., Renovis and ZymoGenetics.

He co-founded Chiron and Renovis. He is Renovis’ board chairman and serves on ZymoGenetics’ and Chiron‘s boards.

Penhoet said he doesn’t foresee Renovis or Chiron engaging in stem cell research. If they did, though, he said he would resolve any conflict of interest “one way or the other.”

Penhoet said he’s already stepped down from a part-time teaching position at the University of California to avoid conflicts there and also plans to sell some smaller stock holdings. But he said Chiron and Renovis are “near and dear to my heart,” and he wouldn’t want to sell them.

Penhoet is also a partner in Alta Partners, a San Francisco venture capital firm investing in biotech. Venture capitalists donated about 40 percent of the $27 million raised for the Proposition 71 campaign. But neither Penhoet nor any other Alta Partners employees are listed among the initiative’s contributors.

Penhoet said he’s involved in Alta’s investments only in companies already conducting clinical trials, and no embryonic stem cell trials are under way.

The other venture capitalist on the board is Michael D. Goldberg, managing director at Jasper Capital. He is a partner in 10 venture capital and private equity funds with a value of at least $1.9 million that invest in biotech and high-tech firms.

Among the venture capital funds are five established by Kleiner Perkins Caufield & Byers, a venture capital firm whose partners were among Proposition 71‘s biggest contributors.

Goldberg donated $ 58,256 to the campaign but said Kleiner Perkins had nothing to do with his appointment or his interest in stem cell research.

He also owns more than $ 1 million in stock in the pharmaceutical firm Bristol-Myers Squibb, which he said was part of the payment for purchasing a company he founded. While critics claim pharmaceutical firms could ultimately benefit from California’s stem cell funding, Goldberg said such applications are too far in the future to present any immediate conflicts.

Among other board members:

David Baltimore, California Institute of Technology president, hasn’t filedhis report. But he serves on the boards of biotech giant Amgen and the biotech firm Med Immune Inc. Securities and Exchange Commission reports show he also owns stock in both companies.

Ted Love, president, CEO and director of Nuvelo Inc., reported owning more than $ 1 million each in stock in two biotech firms, Nuvelo and Theravance Inc. He also serves on the board of the drug discovery firm Predix Pharmaceuticals.

Tina Nova, Genoptix president, CEO and director, owns stock worth $100,000 to $1 million in the drug discovery firm Discovery Partners Inc. and serves on the Arena Pharmaceuticals board.

John C. Reed, Burnham Institute president and CEO, serves on the boards of Stratagene Corp., a life sciences company; Isis Pharmaceuticals Inc.; and Idun Pharmaceuticals.

Gayle Wilson, wife of former Gov. Pete Wilson, serves on the board of the biopharmaceutical firm Gilead Sciences Inc. and owns $100,000 to $1 million in stock in the biotech company Boston Scientific Corp.

She sold most of her Gilead stock options shortly before being named to the stem cell panel, making more than $ 700,000, according to SEC filings.