Washington BioHistory...The Microsoft Effect

Microsoft Corporation, headquartered in Redmond, WA, a suburb of Seattle, is the worldwide leader in software for personal and business computing. It can arguably be said that Microsoft, co-founded in 1975 by Bill Gates and Paul Allen, has impacted the computer industry, and businesses and individuals throughout the world, like no other company in history, and the story is far from over.

Needless to say, the direct and indirect economic benefits to the Seattle area and the state of Washington that come from having Microsoft Corporation headquartered in the state are considerable:

• Microsoft employs more than 89,000 people worldwide, more than 47,000 in the U.S. and more than 38,000 in the Seattle area alone.

• According to a company commissioned study by economist Richard Conway Jr., for every person the company employs, another 3.4 jobs are created.
• Microsoft's revenue at the end of June 30, 2007 totalled $51.12 billion with net income of $14.07 billion.
• The company occupies more than 11 million square feet of property in the greater Seattle metropolitan area.
• The average age of the Microsoft employee in the U.S. is 36.9 years.

Microsoft co-founders Bill Gates and Paul Allen are among the wealthiest individuals in the world depending upon the value of their stock holdings at any given time. According to "Forbes" magazine (2006), Gates alone is worth an estimated $50 billion dollars, Paul Allen $22 billion dollars, and Steve Ballmer, company president, $13 billion dollars. In addition, it is estimated that Microsoft, through stock options granted employees, has produced more than 5,000 millionaires, most of whom live in the Seattle area.

At a National Press Club luncheon Gates was asked: "If you could not invest in Microsoft, what company would you invest in?" Gates answered: "(An) area that I'm very excited about is biotechnology. Other than these information tools, the greatest opportunity right now is revolutionary advances in medicine, that through understanding DNA and other advances and understanding biological systems, will be very rapid in the next several decades. It's an area where it's very hard to pick out who the winners and losers will be-a lot of companies with kind of confusing names. But I think if you can sort through that, you'll find there's some wonderful investments in that sector."

The result, Gates, Allen and other current and former employees of Microsoft are actively investing in biotechnology companies and non-profit research organizations in the Seattle area and elsewhere.

An important example is the recruitment of Leroy Hood from Caltech to the University of Washington (UW). In October 1991, Dr. Hood, best known for his work developing automatic gene sequencing machines, was appointed Chair of the newly created Department of Molecular Biotechnology. Notably, the recruitment of Hood would not have been possible were it not for a $12 million gift to the UW from Bill Gates used to create the new department within the UW's medical school.

In addition, Dr. Hood recruited a number of leading scientific researchers to the UW, and has been involved the founding of several Seattle area biotechnology companies, along with the establishment of the Institute for Systems Biology, a new non-profit research institution located in Seattle.

• The Hood Effect

Other past and present Allen and Gates related biotechnology investment in the Seattle area biotechnology and medical device industry include:

• Allen Institute for Brain Science -- The Allen Institute was established in 2003 with $100 million and named for its founder Paul G. Allen. 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 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.
• Bill and Melinda Gates Children's Vaccine Program -- The Bill and Melinda Gates Children's Vaccine Program works to ensure that all children receive the full benefits of new, lifesaving vaccines without undue delay. The Program focuses on vaccines that protect children against respiratory, diarrheal, and liver disease.  The Program is operated with the guidance of a Strategic Advisory Council, composed of international experts in vaccinology and vaccine introduction. It is managed by a Secretariat based at PATH.
• Corixa Corporation, founded in 1994, a NASDAQ listed research-based biotechnology company committed to saving lives and preventing diseases by understanding and directing the immune system, was acquired by GlaxoSmithKline (GSK) in April 2005. Castle Gate, LLC, a Bill Gates investment partnership provided Corixa with up to $50 million of equity capital under a credit line, and share and warrant ownership equaling 14.6 percent of the company. The GSK acquisition was structured as a cash for stock transaction with Corixa shareholders receiving $4.40 per common share representing a total value of approximately $300 million.
• Darwin Molecular Corporation, established in 1992, and acquired by Chiroscience R&D/Celltech in 1996, (now part of UCB) was focused on the discovery and development of small molecule drugs and related diagnostics with a therapeutic focus on immune and inflammatory disease. In addition to Allen and Gates, other prominent individuals involved in company's founding included Ronald Cape, founder of Cetus Corporation, David Galas, former head of the Human Genome Project, and George Rathmann, former Chairman of ICOS Corporation and Chairman Emeritus of Amgen, Inc.
• ICOS Corporation, founded in 1990, and acquired by Eli Lilly and Co. in 2006 for $2.1 billion, was a NASDAQ biotechnology company dedicated to bringing innovative therapeutics to patients. At its founding, the largest shareholders were Bill Gates, then director, Chairman and CEO of Microsoft and George Rathmann, then Chairman of ICOS Corporation.
• Program for Appropriate Technology in Health (PATH) -- PATH 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. In June 1999, the William H. Gates Foundation announced a $50 million gift to PATH for the establishment of the Malaria Vaccine Initiative (see Bill and Melinda Gates Children's Vaccine Program).
• Rosetta Inpharmatics, Inc., established in 1996, and acquired by Merck & Co. in 2004 for $540 million, is a bioinformatics company working to transform the drug discovery process through its integrated system of informatics tools, biological platforms, and data sets derived from microarray technologies. Co-founders of Rosetta include Lee Hood, Leland Hartwell, President and Director, Fred Hutchinson Cancer Research Center, and Steven Friend, former Director of Molecular Pharmacology, at the Hutchinson Cancer Research Center.

Notably, Bill Gates, Paul Allen and other current and former Microsoft employees have had and will continue to have an enormous impact with their charitable donations to non-profit organizations, educational institutions and others in need locally, as well as globally. The following are examples.

• Bill and Melinda Gates Foundation -- Bill and Melinda Gates hope to make an enduring contribution toward increasing access to innovations in education, technology, and global health. The world's largest philanthropic organization, based in Seatte, WA has about $29 billion in assets. In 2006, Warren Buffet the world's second-richest person announced that he will merge his fortunes with those of the Gates Foundation to support finding solutions for global health and education. It is estimated that Buffet will give away 85 percent of his estimated $44 billion fortune to the Gates Foundation.
• Paul Allen/Vulcan, Inc. -- Paul Allen has created a number of organizations that fund charitable groups and projects serving the Pacific Northwest, including the Arts, Education, Forest Protection, Medical Research and Music. All are administered through Vulcan. Inc., Allen's management company in Bellevue, WA.

Steve Burrill of Burrill & Company in San Francisco, a private merchant bank focused on life science companies, commented at an Oregon Bioscience conference in May 1999 that one of the big advantages for future biotechnology financing in the Pacific Northwest will be when all of the Microsoft millionaires get old and discover the life saving benefits of biotechnology.  If the preceding is indicative of what we may expect, the Seattle area and Washington state, as a whole, is very fortunate to have Microsoft located in the region.

In his June 19, 1996, column, "Like software, biotechnology will change the world," Microsoft Chairman Bill Gates commented on the potential of biotechnology. "I expect to see breathtaking advances in medicine over the next two decades, and biotechnology researchers and companies will be at the center of that progress," said Mr. Gates. "The biggest breakthroughs in medicine will result from the mapping and understanding of the human genome." Mr. Gates noted that he believed that the emerging medical revolution is no less important than the changes in information technology.