Washington Biotechnology
& Medical Technology Annual Report, 2006

Research

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Since 1980, these research universities and non-profit organizations have attracted over $25 billion into Washington State -- mostly federal research and training money focused on health science- and environmental-related basic research -- $2.2 billion in 2005 an increase of 5% over 2004. Importantly, nearly one-half of the more than 230 private and publicly traded biotechnology and medical device firms in the state are founded on technologies developed at these institutions. Also important are the collaborative research, faculty consulting and clinical study relationships these and other Washington institutions have with numerous companies, both in-state and out-of-state.

University Research

During the fiscal year (FY) ending June 30, 2005, the UW received $996 million in grant and contract awards an increase of 4% over FY 2004 and the largest dollar amount the university has ever received in one year. Of this amount, $792 million or 80% of the total, came from federal agencies. The remaining $203 million, 20% of the total, was provided by awards from industry, private foundations, associations, non-federal governmental and public agencies, and the state of Washington. This represents an increase of about $7.6 million in non-federal funding over the previous fiscal year. (see UW Annual Report, 2005 - 1.2 mb PDF).

The University has federal grant expenditures in excess of $80 million annually and total research expenditures in excess of $150 million annually. Fifty-four percent of WSU research ($81 million) is supported by federal sponsored funding, 25 percent ($37 million) by non-federal sponsored funding, 16 percent ($24 million) by state of Washington appropriations, and 5 percent ($8 million) by federal land-grant appropriations.

Federally Financed R&D Expenditures at Universities & Colleges, 2004 (millions of dollars)

Rank Institution Total Academic S&E 1 Johns Hopkins University 1,229.4 2 University of Washington 625.2 3 Stanford University 541.6 4 University of Michigan 521.3 5 University of CA San Diego 465.6 6 University of CA Los Angeles 461.1 7 University of Pennsylvania 435.3 8 University of Wisconsin, Madison 434.4 9 MA Institute of Technology 427.5 10 University of CA San Francisco 418.9 41 OR Health Sciences University 206.2 81 OR State University 104.2 111 WA State University 74.9 138 University of Oregon 43.6 216 Portland State University 13.2 389 Oregon Institute of Technology 1.3 ________________________ Source: National Science Foundation, Academic R&D Expenditures, August 2006. Non-Profit Research Organizations The state of Washington is home to twenty-two life science related non-profit research organizations that employ more than 4,000 individuals across the state (data excludes Children's Hospital and Regional Medical Center, Swedish Medical Center, and PNNL where specific biotechnology and medical device employment is not readily available). The Fred Hutchinson Cancer Research Center is the state's largest non-profit research organization with 2,600 employees or 66% of the total, including three Nobel laureates, and revenue of more than $286 million (FY 2004). These non-profit organizations are fundamental to the research and development of biotechnology and medical technology nationally, as well as internationally. Select non-profit research organizations are described in the following.. Allen Institute for Brain Science -- The Allen Institute was established in 2003 with $100 million and named for Paul G. Allen a Microsoft co-founder. The inaugural project of the Institute is the Allen Brain Atlas (ABA) that provides high quality gene expression data at a cellular resolution through the publicly accessible ABA Application. The Atlas project aims to further scientific discovery in the field of neuroscience through the development and public release of the ABA Reference Atlases —- providing greater than 400 structure detail in both the sagittal and coronal planes. The Allen Brain Atlas will be the cornerstone of 21st century brain science with researchers around the world leveraging information from the Brain Atlas to gain insights into some of the most profound and challenging questions facing science in this century. Benaroya Research Institute at Virginia Mason (BRI) -- The research laboratories at BRI focus on molecular and cellular biology of diabetes, arthritis, immunology, genomics, cardiovascular research and cancer, with a clinical research program which conducts approximately 200 clinical trials annually, primarily Phase II-III medication and device trials, in 25 different subspecialty areas. BRI operates on $20 million annually, funded through research grants awarded by the National Institutes of Health, the Juvenile Diabetes Research Foundation, the National Cancer Institute, the American Heart Association, a variety of other national and regional foundations, as well as by individual philanthropic gifts. Fred Hutchinson Cancer Research Center (FHCRC) -- The FHRCR is an independent, nonprofit biomedical-research institution and is one of 41 National Cancer Institute-designated comprehensive cancer centers nationwide. The "Hutch" pioneered bone marrow transplantation and performs more bone marrow transplants than any other institution in the world. Today, the Hutch with 2,600 employees, including including three Nobel laureates, is Washington State's largest non-profit research organization. The Center's cancer prevention program is the largest in the world, with more than half a million people around the globe participating in Hutchinson Center studies aimed at reducing cancer incidence and death. Institute for Systems Biology (ISB) -- The ISB founded in 2000 by Alan Aderem, Ruedi Aebersold, and Leroy Hood, is an internationally renowned non-profit research institute dedicated to the study and application of systems biology. ISB's goal is to unravel the mysteries of human biology to identify strategies for predicting and preventing diseases such as cancer, arthritis and AIDS. To date, ISB has been awarded over $140 million in funding, including nearly $95 million in federal grants, $11.5 million in industrial collaborations, almost $9 million in foundation support, $21 million in private contributions, and more than $5 million in corporate contributions. Pacific Northwest National Laboratory (PNNL) -- PNNL is one of nine U.S. Department of Energy national multiprogram laboratories. PNNL scientists and engineers have produced many innovations in the areas of health, environment, energy, and national security. The PNNL which had FY 2005 revenue of $725 million conducts about 2,000 technology development projects annually for 1,800 government and commercial clients. In 2005, PNNL received 53 U.S. and 83 foreign patents. Since 1965, PNNL has received a total of 1,383 U.S. and foreign patents. Pacific Northwest Research Institute (PNRI) -- PNRI (originlly Pacific Northwest Research Foundation) was founded by Dr. William Hutchinson, Sr., brother of Seattle baseball star Fred Hutchinson. The Foundation was among the first private non-profit biomedical and clinical research institutes in the Northwest. It helped create and establish the Fred Hutchinson Cancer Research Center in 1972. Today, PNRI conducts pioneering research into the mechanisms of disease, and its work in cell biology, genetics, and immunology is focused on preventing and curing diabetes and cancer. Program for Appropriate Technology in Health (PATH) -- PATH's is a non-profit institution dedicated to improving the health of women and children throughout the world. PATH, with 19 offices in 14 countries, has been designated by the World Health Organization (WHO) as a Collaborating Center in three technical areas: Research in Human Reproduction; Acquired Immune Deficiency Syndrome (AIDS); and Hepatitis B Vaccination. As a Collaborating Center, PATH provides technical assistance to WHO and to ministries of health. PATH is also home of the Children's Vaccine Program with the support of the Seattle-based Bill & Melinda Gates Foundation. Seattle Biomedical Research Institute (SBRI) -- SBRI is the largest independent, non-profit research institute in the U.S. focused solely on the world’s most devastating diseases, including malaria, HIV/AIDS and tuberculosis. The mission of SBRI is to conduct targeted research leading to the prevention, diagnosis and cure of global infectious diseases, responsible for the deaths of 14 million people each year. SBRI’s discoveries have resulted in promising leads for vaccines and drug targets, as well as seminal contributions to scientific knowledge. WA Non-Profit Organizations, Total Revenue, 2005 (millions of dollars) Organization $ Amt. Allen Institute for Brain Science $15.9 Benaroya Research Institute at Virginia Mason $17.0 Fred Hutchinson Cancer Research Center $306.5 Institute for Systems Biology $23.9 Pacific Northwest National Laboratory $725 Pacific Northwest Research Institute $7.2 Program for Appropriate Technology in Health $105.4 Seattle Biomedical Research Institute $18.7 $ Total $1.2 b

Leading Independent Nonprofit Institutional Recipients of Federal Obligations
for Science & Engineering R&D, FY 2003 (dollars in thousands)

The mission of the Gates Foundation's Global Health program is to ensure that people in the developing world have the same chance for good health as people in the developed world and they are pursuing this goal through grants to organizations like Seattle's Program for Appropriate Technology in Health (PATH), and Seattle Biomedical Research Institute, both internationally renown organizations supporting improved healthcare in the developing world.

Private Sector Research

Leading Washington's biotechnology and medical device industry are companies that are publicly traded on U.S., Canadian and European stock exchanges or are subsidiaries of larger corporations with access to capital. In 2004, the twenty-two publicly traded biotechnology and medical device companies headquartered in the state invested more than $493 million in R&D, an increase of 19% or more than $79 million from 2003.

Biotechnology R&D investment alone accounted for more than $455 million an increase of 22% or more than $83 million from 2003. Medical device companies invested $38 million a decrease of 44% or more than $4 million from 2003.

Importantly, this data excludes the state's largest biotechnology biotechnology company -- Amgen (formerly Immunex), and medical device companies such as Agilent (Hewlett-Packard), Philips Medical Systems (formerly ATL), Medtronic (formerly PhysioControl), and Spacelabs Medical due to their acquisition by firms from outside the region and subsequent lack of publicly available data. This also excludes the R&D conducted at more than 200 small- and medium size private companies, where data is not publically available.

• Private Sector R&D
• Publicly Traded Companies
• U.S. Owned Subsidiaries
• Foreign Owned Subsidiaries

Washington Nobel Laureates

To date, Washington State has produced six Nobel Laureates, and it is individuals such as these and others with an innovative idea and entrepreneurial spirit combined with the state's world-class research institutions, the region's financial wealth and quality of life that makes Seattle and Washington State a leading biotechnology and medical device research and development center.

Walter Brattain, AT&T's Bell Laboratories 1956 Nobel Prize in Physics for discovery of the transistor effect. Brattain received his B.S. degree from Whitman College in Walla Walla and a M.A. degree from the University of Oregon. (Photo: Walter Brattain, © The Nobel Foundation).

E. Donnall Thomas, Fred Hutchinson Cancer Research Center 1990 Nobel Prize for Medicine for discoveries concerning organ and cell transplantation in the treatment of human disease. (Photo: E. Donnall Thomas, courtesy Fred Hutchinson Cancer Research Center).

Edmund Fischer and Edwin Krebs, University of Washington 1992 Nobel Prize for Medicine for their discoveries on reverse protein phosphorylation. (Photo: Edmund Fischer and Edwin Krebs, © The Nobel Foundation).

Leland H.Hartwell, Fred Hutchinson Cancer Research Center 2001 Nobel Prize for Medicine for discoveries of key regulators of the cell cycle. (Photo: Leland Hartwell, courtesy Fred Hutchinson Cancer Research Center.)

Linda B. Buck, Fred Hutchinson Cancer Research Center 2004 Nobel Prize for Medicine for discoveries of odorant receptors and the organization of the olfactory system. (Photo: Linda Buck, courtesy Fred Hutchinson Cancer Research Center).

Congressional Support

Senators Jackson and Magnuson, nicknamed the "Gold Dust Twins" for their ability to attract federal money, represented Washington in the U.S. Congress for an ammassed total of eighty-nine years, and during that period their rise to seniority leadership (a combined sixty-four years in the Senate) resulted in a growing stream of federal dollars into Washington State significantly impacting biotechnology and life science related research and development locally, as well as nationally.

In 1972, Magnuson helped secure federal funds through the NCI to establish the Fred Hutchinson Cancer Research Center, and in 1973, he received the Albert Lasker Public Service Adward for his outstanding leadership and support of medical research and health legislation for the people of the U.S. Notably, the University of Washington’s health Science Center, established in 1970, is called the Warren G. Manguson Health Sciences Center.

State Support

The WBBA in collaboration with other technology associations in the state were instrumental in the passage, subsequent expansion and continuation of tax incentves that support the development and expansion of the biotechnology and medical device industry in Washington State.

R&D Tax Credit & Sales and Use Tax Exemption

In 1994, the Legislature in collaboration with the WBBA and other state technology associations enacted the R&D credit and sales and use tax exemption programs into law (RCW 82.04.4452). The Business and Occupation (B&O) tax applies to qualified research and development expenditures other than for capital improvement purposes (RCW 82.04.4452). An annual credit of up to $2 million is allowed for businesses that perform research and development in Washington in specified high technology categories, and meet the minimum expense requirements.

The sales and use tax deferral program was established for research and development expenditures and pilot scale manufacturing facilities in selected high technology activities. In 1995, the Legislature waived the tax repayment requirement for firms that continue to use the high tech facility for eight years, thus converting the tax deferral into an exemption. Businesses are eligible for a sales/use tax deferral/exemption if they start new R&D or pilot scale manufacturing operations or expand or diversify a current operation by expanding, renovating or equipping an existing facility anywhere in Washington.

These tax incentives were the result of many years of work by numerous individuals from the private sector, the WBBA, the Department of Trade and Economic Development, the Legislature, the Governor's office and the Department of Revenue. The continuation of these incentives is of critical importance as more and more states develop incentive and research-based programs (e.g. stem cell) to support industry and attract out-of-state firms that may be expanding, and or starting new companies.

Life Sciences Discovery Fund Authority

Life Sciences Discovery Fund Authority was created in 2005 as an agency of the state and governed by a board of trustees. The Authority was established as an account in the State Treasury and a total of $350 million in forthcoming tobacco settlement funds will be used to attract an additional $650 million in private capital. The $1 billion fund will be used to help finance groundbreaking research and development of biomedical and other scientific advances to ease human suffering and make Washington a center for these activities. The Authority can make grants to entities pursuant to contract for the promotion of life sciences research to be conducted within the state.

Given increasing competition from other states, it is more important than ever that Washington's political leaders, local, state and federal, not take for granted the state's current position and previous advancements and accomplishments by individuals such as Senators Jackson and Magnuson. It was the long-term investment of capital in non-profit research facilities, and the state's institutions of higher education by Senators Jackson and Magnuson that have made Washington State one of the premier biotechnology centers in the world and sustaining our state's research foundation remains central to the continued diversification of Washington State's increasingly technology-based economy.

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