2002 Annual Report - Industry Development · PDF file2002 annual report • 1 • north...

the north carolina biotechnology center

2002 Annual Reporta y e a r o f t r a n s i t i on

cont ent s

1 Biotechnology What It Is and Why It’s Important

2 Quick Facts About North Carolina’s Biotechnology Community

3 The North Carolina Biotechnology CenterA Catalyst for Economic Development

4 Message from the Chairwoman

5 Presidents in Transition

6 Accomplishments Core Programs and Services

10 Accomplishments Special Initiatives

14 Grants and Loans Awarded

18 Organizational Chart

20 Board of Directors

21 Financial Statements

Please visit us on the Web:

• www.ncbiotech.orgNorth Carolina Biotechnology Center

• www.hamnercenter.org Charles Hamner Conference Center

• www.ncgbc.org North Carolina Genomics and Bioinformatics Consortium

• www.forestbiotech.org The Institute of Forest Biotechnology

2 0 0 2 a n n u a l r e p o r t • 1 • n o r t h c a r o l i n a b i o t e c h n o l o g y c e n t e r

Biotechnology is improving our economy and our quality of life. Look around North Carolina, and you’ll see biotechnology

at work. In Asheville an AIDS patient takes a promising new drug developed by a Durham biotechnology company. A farmer in Greenville plants soybeans engineered to resist an herbicide, helping him control costly weeds. In Charlotte a homemaker uses laundry detergent containing stain-cutting enzymes produced at a plant in Franklinton. A multiple sclerosis patient in Winston-Salem takes a genetically engineered drug made in Research Triangle Park to slow the progression of her disability. In the port of Wilmington a cargo ship uses a Raleigh company’s bacterial bioreactor to clean its oily bilge water. And a laid-off textile worker in Sanford gets retrained for a high-paying job with a new biomanufacturing plant.

What is the technology that brings us these benefits? Contrary to its name, biotechnology is not a single technology but a collection of new technologies, all of which use living cells and their molecules to make new products, improve existing products, and solve problems. Major techniques of biotechnology include genetic engineering, monoclonal antibody technology, bioprocessing, cloning, and cell and tissue culture. Using these and other technologies drawn from genetics, immunology, biochemistry, microbiology, molecular biology and other life sciences, researchers are able to improve the health, traits and products of organisms for our benefit.

North Carolina is well suited to gain from biotechnology. Its traditional industries – especially agriculture, food and medicine – are the very ones that biotechnology can most enhance. North Carolina also has the necessary resources to develop biotechnology, including a tradition of technological development, two large research parks, leading research universities, four medical schools, major

federal research labs, a progressive business climate, long-term governmental support, an extensive community college system, a highly trained work force, abundant natural resources and the nation’s first state-sponsored biotechnology center.

North Carolina is home to the South’s largest and most dynamic biotechnology industry and is among the country’s top five biotechnology states. More than 150 companies work in biotechnology, employing 17,000 people and generating revenues of about $3 billion. Another 75 companies provide contract research and testing services to the industry, employing 15,000 people and earning $5 billion in annual revenues.

Even greater returns await us. As this R&D-intensive industry matures, it is adding a thriving product-manufacturing component. This transformation is yielding beneficial new products and generating thousands of new jobs. Within the next 20 years, biotechnology and related bioscience technologies are projected to generate $24 billion in annual product sales and employ more than 125,000 people in North Carolina.

b i o t e c h n o l o g y

What It Is and Why It’s Important

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Biotechnology Growthi n n o r t h c a r o l i n a

2 0 0 2 a n n u a l r e p o r t • 2 • n o r t h c a r o l i n a b i o t e c h n o l o g y c e n t e r 2 0 0 2 a n n u a l r e p o r t • 3 • n o r t h c a r o l i n a b i o t e c h n o l o g y c e n t e r

• North Carolina ranks among the top five bio-technology regions in the United States, along with San Francisco, Boston, San Diego, and Maryland.

• North Carolina has more than 150 biotechnology companies that generate about $3 billion in an-nual revenues.

• These companies employ about 17,000 North Carolinians and represent an annual payroll of more than $850 million.

• Of the state’s 150 biotechnology companies, 47 are publicly held. Nine of the public compa-nies are headquartered in North Carolina, and they have a combined market capitalization of about $2 billion.

• About one-third of the state’s biotechnology companies are major, multinational biotech-nology companies. These include Ajinomoto, Bayer CropScience, BASF, Bayer, BD, Biogen, Diosynth, GlaxoSmithKline, Syngenta, Novozymes, Novo Nordisk Pharmaceutical Industries, bioMérieux, Sphinx Labs, and Wyeth-Lederle Vaccines and Pediatrics.

• About two thirds of the state’s biotechnology companies are smaller, home-grown companies. The North Carolina Biotechnology Center has seed-funded 62 of these early stage companies with low-interest loans totaling about $8 million, helping them raise more than $550 million in other funding.

• North Carolina is a worldwide leader in agricul-tural biotechnology and is second nationally to California. Three of the world’s largest agricul-tural chemical companies – Bayer CropScience, BASF and Syngenta – have major biotechnology R&D facilities in the state. Altogether, North Carolina is home to 15 ag biotech companies that employ about 2,500 people.

• In addition to its 150 biotechnology companies, North Carolina has the world’s greatest concen-tration of CRO and testing companies. Its 75 companies generate annual revenues of about $5 billion.

• These CRO and testing companies employ about 15,000 North Carolinians and have a collective payroll of about $750 million.

• Four of the world’s largest CRO and testing com-panies – LabCorp, Quintiles Transnational, PPD and aaiPharma – are headquartered in the state and have a combined market capitalization of about $10 billion.

• Altogether, more than 32,000 North Carolinians work at biotechnology companies and CRO/testing companies, representing a payroll of more than $1.6 billion. These workers pay more than $100 million in income taxes to the State of North Carolina each year.

• The biotechnology industry in North Carolina is growing 10 to 15 percent a year. By 2025 as many as 125,000 North Carolinians are projected to work in biotechnology, and annual revenues should approach $24 billion.

• Many of the new jobs created in biotechnol-ogy will be in biomanufacturing, the making of biological products such as drugs, diagnostics, vaccines, vitamins, amino acids and enzymes. Already, about 4,000 North Carolinians work at biomanufacturing plants encompassing more than 1.2 million square feet, with another 800,000 square feet under construction.

• Almost 5,000 faculty conduct research in the life sciences at North Carolina’s colleges and universities, providing the scientific expertise and infrastructure to drive the state’s biotechnology industry.

• Each year, North Carolina’s universities, federal labs and non-profit institutes conduct more than $1 billion of sponsored research in the life sci-ences, placing North Carolina among the top five states.

• Five of the state’s major universities – Duke, East Carolina, North Carolina, North Carolina State, and Wake Forest – are collectively investing more than $800 million in new genomics and bioinfor-matics research programs.

q u i c k f a c t s

About North Carolina’s Biotechnology Community


When biotechnology began crystallizing as a new industry in the 1970s, leaders in North Carolina realized it could

bring substantial economic and societal benefits to the state. The state’s General Assembly studied the opportunity for a year and concluded that North Carolina needed a dedicated organization to stimulate the development of biotechnology. The North Carolina Biotechnology Center was born in 1981 as the nation’s first state-sponsored biotechnology initiative.

Initially a part of state government, the Center was reconstituted in 1984 as a private, non-profit corporation, giving it greater flexibility. As a neutral, non-partisan organization, the Center is well positioned to catalyze interactions among industry, academia and government for technological development. Working with these groups, the Center is active at all points in the movement of biotechnology from the laboratory to the market.

The Center’s mission is to provide long-term economic benefit to North Carolina through support of biotechnology research, development and commercialization statewide. A 53 -member staff works toward five goals:

• strengthen North Carolina’s research capabilities in its academic and industrial institutions

• foster North Carolina’s industrial development

• inform and educate the public about biotechnology

• develop mutually beneficial partnerships among all parties involved in moving biotechnology from research to commercialization

• establish for North Carolina a leadership role in biotechnology and its commercialization.

The Center does not conduct laboratory research. Instead, it works to strengthen the research capabilities of North Carolina’s companies and universities. This strategy avoids duplication of effort and uses limited resources more efficiently.

The Center’s original budget for fiscal year 2002 was approximately $9.2 million, based upon a State appropriation of nearly $5.3 million. As a result of State budget reversions, the budget was reduced by $732,042 by the end of the fiscal year. Other sources of income included return on investments, corporate and foundation support of specific programs, and other program revenue.

The Center is located in an award-winning 40,000- square-foot headquarters building at 15 T.W. Alexander Drive in Research Triangle Park.

For more information, visit the Center online at www.ncbiotech.org.

t h e n o r t h c a r o l i n a b i o t e c h n o l o g y c e n t e r

A Catalyst for Economic Development


Bond

The 2001–2002 fiscal year was a time of transi-tion for the North Carolina Biotechnology Center and the state’s biotechnology industry.

Dr. Charles E. Hamner, the Center’s president and chief executive officer since 1988, retired on March 31, 2002. During his 14 -year tenure, Dr. Hamner worked tirelessly and effectively to make

North Carolina a national leader in biotechnology and gained extraordinary results and respect. Few leaders better combined vision, common sense and trust. He left us well prepared for North Carolina’s next stage of biotechnology leadership.

A thorough and careful national search for that new leadership yielded the best possible outcome: the appointment of a

smart, skillful, and nationally respected new Center president and CEO, Leslie Alexandre, Dr. P.H. We always want the best for North Carolina, and in Dr. Alexandre we have again gained it.

Information about these two dynamic leaders is given on page 5 of this Annual Report.

This change in leadership coincides with changes in the biotechnology industry and in North Carolina’s economy that offer both challenges and opportunities.

North Carolina in 2002 faced its greatest budget crisis ever, following a downturn in the national economy. The General Assembly was forced to cut appropriations to government agencies and non-profit organizations throughout the state. The Center absorbed three budget reversions totaling $732,042, or about 14 percent of its original $5.27 million appropriation. The reductions forced the Center to suspend or limit some of its programs.

Center funding cutbacks come at a time when other states are outspending North Carolina in biotechnology development. Our state is at risk of losing its competitive edge in this essential area of economic development. Therefore, it’s an important goal of the Center to increase its state appropriation and to augment it with additional funding from other sources so we can strengthen our competitiveness and capitalize on the opportunities at hand.

m e s s a g e f r o m t h e c h a i r w o m a n

One of those opportunities is biomanufacturing. North Carolina has established itself as an early leader in this sector with the recruitment and expan-sion of companies such as Bayer, Biogen, Diosynth RTP, DSM Catalytica Pharmaceuticals, Novozymes and Wyeth Lederle. As more biotechnology drugs, vaccines and other biologicals come to market, the need for biomanufacturing capacity will expand worldwide. This presents a great opportunity for North Carolina to create thousands of high-paying jobs at a time when traditional manufacturing jobs in this state are declining.

The greatest challenge is to prepare skilled workers who can operate biomanufacturing plants efficiently and in compliance with FDA standards. The Center’s BioWork program is vitally important. A partnership with the state Community College System and industry, BioWork provides an introductory course that prepares workers for jobs in bioprocessing. Five community colleges offered the course in 2002, serving 281 students, and more students are expected to enroll in 2003 as additional community colleges offer BioWork.

Other opportunities and challenges await us in ge-nomics, proteomics and bioinformatics. The Center in 2002 worked to strengthen North Carolina’s resources in these fields through its North Carolina Genomics and Bioinformatics Consortium. The Consortium and its 79 associate companies and institutions collaborated with MCNC to begin de-veloping a North Carolina BioGrid that will provide a shared high-performance computing network for genomics researchers throughout the state. It also sponsored a two-day Education Summit for educa-tors to brainstorm strategies for improving teaching and training in the underlying fields of science and math. These efforts are crucial to the state’s long-term competitiveness in biotechnology.

The economic development opportunities that biotechnology offers our state are clear and compelling. The Center is fortunate to have a highly capable staff, a dynamic new chief executive, an effective Board of Directors, and two decades of experience that will help our state capitalize on these opportunities in the years ahead.


Alex andreHa mner

In 2002 the Center bade farewell to its longtime president and CEO, Dr. Charles E. Hamner, and said hello to its new leader, Dr. Leslie Alexandre.

Hamner, president and CEO of the Center since 1988, re-tired on March 31. Following a national search, Alexandre was named as his successor in June and was to begin the job on August 1.

“The timing is right,” said Ham-ner. “After 14 years of productive partnership with so many won-derful people in North Carolina, a refreshment of management is needed as we enter the new era of genomics, bioinformatics and proteomics.”

When Hamner joined the Center in February 1988, the state had a fledgling biotechnology industry. Today, North Carolina is among the nation’s top five biotechnology states with more than 150 biotechnology companies and 75 contract research and testing companies employing more than 32,000 people and generating combined an-nual revenues of more than $8 billion.

Under his leadership, the Center strengthened the state’s biotechnology infrastructure by investing more than $50 million in the state’s universities; seed-funding 62 startup companies; creating a $26 million venture capital fund for new companies; building a permanent headquarters building and conference facility; providing biotechnology workshops for more than 1,000 high school teachers; creat-ing the new North Carolina Genomics and Bioinformatics Consortium; and helping recruit several biotechnology companies to North Carolina, including Biogen and Diosynth, two major biomanufacturing companies that have created nearly 1,000 new jobs and continue to expand.

Hamner’s replacement, Leslie Alexandre, is a veteran health care professional with extensive public and private experience in national health policy, government affairs, communications, marketing and business development.

“I’m looking forward to the challenges and opportunities of this position,” she said. “North Carolina is the na-tion’s fourth largest biotechnol-ogy state, and the Biotechnol-ogy Center is essential to the industry’s continued develop-ment here. I’m excited about developing relationships with all of the Center’s constituen-cies and working with an exceptional staff and board of directors to expand North Carolina’s leadership position in this vital industry.”Before committing to the Center, Alexandre, 44, was as-sistant director for industrial relations at the National Cancer Institute, where she was responsible for building relationships with the private sector and encouraging scientif ic collaborations with industry to accelerate cancer research.

Prior to joining the National Cancer Institute in 1999, Alexandre was vice president of corporate affairs and marketing at Oncormed Inc., a biotechnology company in Gaithersburg, Md., and was a government affairs rep-resentative for health policy at EDS in Washington, D.C. She previously held senior policy positions with two U.S. senators – Dave Durenberger of Minnesota and John Heinz of Pennsylvania – and also developed a successful health care consulting practice in Los Angeles serving Fortune 100 clients.

Born in Vancouver, Washington, Alexandre grew up in San Mateo, California. She obtained an undergraduate degree in community health administration from the University of California, Davis, and a master’s degree in public health and a doctor of public health degree, both from the University of California, Los Angeles.

Presidents in transition


science and technology development

The Science and Technology Development Program strengthens the biotechnology research capabilities of North Carolina’s universities and institutions through grants and intellectual-exchange programs. In 2002 the Program:

• awarded five grants totaling $579,205 to help three North Carolina universities acquire multi-user research facilities and equipment. These awards, made through the Institutional Development Grants Program, are listed on page 15.

• awarded $300,000 to support research collaborations between six biotechnology-related companies and five universities. The funding was provided by the Collaborative Funding Assistance Program, cosponsored by the Kenan Institute for Engineering, Technology and Science. These awards are listed on page 14.

• awarded a $224,095 grant for multidisciplinary research in protein folding at the University of North Carolina at Chapel Hill. The award, made through the Multidisciplinary Research Grants Program, is listed on page 15.

• supported conferences, symposia and workshops on the scientific aspects of biotechnology. These awards, made through the Biotechnology Event Sponsorships Program, are listed on page 17.

• supported five intellectual-exchange organizations: the North Carolina Plant Molecular Biology Consortium, the North Carolina RNA Society, the Triangle Virology Association, the Smaller Eukaryotes Group, and the Biochemistry and Enzymology Group.

• Maintained databases on university researchers and research facilities in North Carolina to encourage research collaborations across disciplines and universities.

a c c o m p l i s h m e n t s

business and technology development

The Business and Technology Development Program helps biotechnology companies with financing, technology assessment, technology transfer, business plans, networking opportunities, venture capital placements, marketing strategies, strategic partnerships, site locations and professional referrals. In 2002 the Program:

• provided loans totaling $449,972 to three young biotechnology companies for product research and development. These awards, provided through the Small Business Research Award Program, are listed on page 14.

• awarded loans totaling $70,000 to help five young biotechnology companies with their business-development activities. These loans, provided through the Business Development Award Program, are listed on page 14.

• provided $25,000 to help a university researcher determine the commercial feasibility of his new technology. The award, provided by the Proof of Principle Awards Program, is listed on page 14.

• cosponsored Biotech 2002, the annual meeting of the state’s biotechnology community, which attracted about 1,000 people for a day of networking, exhibits and presentations.

• cosponsored the Biotechnology Roundtable, a monthly gathering of biotechnology executives who network and hear presentations.

• provided more than 100 biotechnology companies and entrepreneurs with professional referrals, technical and business advice, relocation assistance, technology transfer expertise and other assistance.

Biotechnology begins with ideas and ends with commercial products. The Center accelerates this process by sponsoring core programs and services that strengthen the state’s capabilities in biotechnology research, business and education. Following are accomplishments of the Center’s core

programs and services in 2002.

Core Programs and Services


Science & Technology Development

Business & Technology Development

Education & Training Program

Forest Biotechnology Initiative

Genomics & Bioinformatics

Other Programs

p r o g r a m s

educ ation and tr aining

The Education and Training Program promotes work force preparedness and public understanding of biotechnology through teacher training, teaching materials, grants programs, needs assessments and other activities at all educational levels throughout North Carolina. This year, the Program:

• partnered with the state’s Community College System and biotechnology companies to refine and deploy a BioWork course that prepares workers for entry level jobs in biomanufacturing plants. The course reached 281 students at five community colleges.

• awarded five grants totaling $71,704 to strengthen biotechnology education and training programs at two universities, one college, one community college and one high school. These awards, made through the Education Enhancement Grants Program, are listed on page 16.

• awarded four grants totaling $13,468 to help four schools integrate biotechnology lessons and labs into the biology curriculum. These awards, made through the Biotechnology Education Mini-Grants Program, are listed on page 16.

• sponsored three summer workshops throughout the state that prepared 43 middle school, high

Forty-three teachers took Center-sponsored workshops in 2002 to improve their biotechnology teaching skills.

north carolina biotechnology center

2002 Program Funding


The Genomic RevolutionA $25,000 grant from the Center was instrumental in bringing the acclaimed Genomic Revolution exhibit to the North Carolina Museum of Natural Sciences in Raleigh for a five-month run in 2002.

Additional Center funding enabled 743 students from four middle schools and thirteen high schools throughout North Carolina to tour the exhibit with 61 teachers.

Created by the American Museum of Natural History, the Genomic Revolution is the most comprehensive exhibit ever presented on

the burgeoning f ield of genomics. Visitors to the exhibit learned about extraordinary scientific developments — including medical therapies, geneti-cally modified foods and cloning — and their effects on biodiversity, natural history and our everyday lives.

The 7,500-square-foot exhibit fo-cused on understanding the genome — all the genetic material in a set of chromosomes of an organism — and genetics, the scientific study of heredity. It also examined the social, cultural, legal and medical ramifications of the federal government’s Human Genome Project, a decade-long effort to identify all the genes in human DNA.

The exhibit ran at the museum from April 20 to September 2, 2002.

Sixty-one North Carolina science teachers brought 743 students to the Genomic Revolution exhibit in Raleigh to learn about genomics in our everyday lives.


More than 154,000 people learned about biotechnology at the BioFrontiers exhibit at the 2001 State Fair in Raleigh. The Center was a sponsor and exhibitor.

school and college teachers to teach about the science, applications and issues of biotechnology.

• provided travel expenses for 61 teachers and 743 students from 17 high schools and middle schools to tour The Genomic Revolution exhibit at the North Carolina Museum of Natural Sciences.

charles hamner conference center

The Center’s 19,000- square-foot Charles Hamner Conference Center is a local, state and national hub for meetings on the science, business and issues of biotechnology. It also serves clients from outside the biotechnology community.

In 2002 the facility provided space, catered meals, and audiovisual support for 15,404 guests at 1,216 meetings. To further increase awareness of its services and availability, the Conference Center established a dedicated Web site (www.hamnercenter.org) and hosted the Greater Durham Area Chamber of Commerce’s “Business After Hours” program.

The Conference Center was renamed in honor of Dr. Charles Hamner, the Biotechnology Center’s president and CEO, who retired in March 2002 after 14 years in the position.

libr ary and information services

The Center’s full-service library provides Center staff and people in business, academia and government with the latest information on commercial biotechnology. In 2002 the Library responded to 894 requests for business information and statistical data. Library staff worked on 239 research projects during the year, arranged 121 interlibrary loans and provided educational videotapes on biotechnology to 71 North Carolina teachers for use in the classroom. About 205 visitors did their own research in the library.

corpor ate communic ations

The Center’s Corporate Communications staff informs the public about biotechnology, the Center’s role in developing it in North Carolina, and the advantages of doing biotechnology business in the state. These messages are communicated through the newsletters Techne and BT Catalyst, other publications including this Annual Report, Web sites, media relations, trade shows, visitor briefings and meeting presentations. The staff also worked with the North Carolina State Fair to plan and execute the first year of the Fair’s two-year BioFrontiers exhibit on biotechnology. The exhibit featured educational displays and presentations by biotechnology-related companies and organizations that reached more than 154,000 fairgoers.

2 0 0 2 a n n u a l r e p o r t • 1 0 • n o r t h c a r o l i n a b i o t e c h n o l o g y c e n t e r 2 0 0 2 a n n u a l r e p o r t • 1 1 • n o r t h c a r o l i n a b i o t e c h n o l o g y c e n t e r

In addition to managing its ongoing core programs and services for the biotechnology community, the Center continually scans the horizon for new opportunities to sharpen North Carolina’s competitiveness in biotechnology. In recent years, the Center has identified opportunities to strengthen the state’s

genomics, proteomics and bioinformatics infrastructure, encourage the beneficial use of biotechnology in the forestry industry, provide more venture capital for startup companies, improve the biotechnology programs of the state’s public, historically minority universities, help Western North Carolina use biotechnology to strengthen its traditional industries, and establish a strong working relationship with the international biotechnology community.

Following are some of the accomplishments of those special initiatives in 2002.

a c c o m p l i s h m e n t s

Special Initiatives

north c arolina genomic s and bioinformatic s consortium

The Center created the North Carolina Genomics and Bioinformatics Consortium L.L.C. in 2000 to strengthen the state’s scientific, educational and business resources in genomics, proteomics and bioinformatics. Associates of this wholly owned Center subsidiary include more than 70 companies, universities and non-profit organizations. The Consortium enables these associates to share information and resources, plan strategic initiatives, and form alliances so they can accomplish together what they could not individually.

In 2002 the Consortium:

• Began developing a database of companies, research facilities, research projects and university faculty involved in genomics, proteomics and bioinformatics in North Carolina.

• Worked with MCNC to plan and develop a North Carolina BioGrid to provide shared computational and data management resources needed for research and education in genomics, proteomics and related sciences in North Carolina.

• Sponsored a two-day Education Summit that enabled more than 80 science educators to discuss how North Carolina can improve teaching and training in genomics, proteomics and bioinformatics at high schools, community colleges and four-year colleges and universities.

Dr. Wesley Bonds, assistant professor of chemistry and physics at Western Carolina University, shows the results of a DNA-sequencing exercise done by high school students. He was one of about 80 North Carolina educators who participated in an Education Summit held in May 2002 by the Center-sponsored North Carolina Genomics and Bioinformatics Consortium. The Summit started a statewide dialogue among educators about how to better prepare students for college study and careers in genomics, proteomics and bioinformatics. Bonds told participants that North Carolina needs to introduce hands-on, inquiry-based DNA amplification, sequencing and analysis exercises into its high school biology curriculum. Such activities are highly rewarding for the students, stimulate their interest in science and prepare them well for future scientific studies, he said.


Dr. Robert C. Kellison, who has 35 years’ experience in academic and industrial forestry, was named acting executive director of the Institute of Forest Biotechnology in April 2002.

institute of forest biotechnology

The Center along with research, policy, public interest and forestry industry groups, created the Institute of Forest Biotechnology in 2000. The mission of the free-standing international organization, housed initially at the Center, is to work for societal, ecological and economic benefits from appropriate uses of biotechnology in forestry worldwide.

Among its many activities in 2002, the Institute:

• Hired Dr. Robert Kellison as acting executive director until a permanent executive can be hired. Kellison, who has 35 years’ experience in academic and industrial forestry, has been closely involved with the Institute since its formation and serves on the executive committee of its board of directors.

• Began strategic planning for fund-raising to support programs and activities.

• Sponsored a day-long workshop at the Center where 42 scientists, industry executives, policymakers and environmental representatives brainstormed ideas for a Heritage Trees Program.

IndustryA.M. Pappas & Associates, LLC

Arsenal Digital Solutions

Bayer CropScience

Bayer HealthCare

Becton, Dickinson & Company

Biogen

Campbell Alliance

CaroTech, LLC

Cogent Neuroscience Inc.

DNA Sciences Laboratories, Inc.

EMC Corporation

Flad & Associates

The Freelon Group, Inc.

Gentris Corporation

GlaxoSmithKline Inc.

Health Decisions, Inc.

IBM

Incellico, Inc

LabCorp

Lines Technologies Corporation

MWG Biotech, Inc.

NBBJ North Carolina, Inc.

Nonlinear USA Inc.

O’Brien/Atkins Associates, P.A.

Paradigm Genetics

PharmaLinkFHI, Inc.

PPD Inc.

Quintiles, Inc.

RCH Products, Inc.

Ribonomics, Inc.

RMF Engineering, Inc.

Saffron Technology, Inc.

SAS Institute

Sigma-Aldrich Corporation

Silicon Graphics, Inc.

Sun Microsystems, Inc.

Syngenta

Tecan US, Inc.

Telajet Corporation

UniversityDuke University

East Carolina University

Elizabeth City State University

NC A&T State University

NC Central University

NC Community College System

NC State University

UNC–Chapel Hill

UNC–Charlotte

UNC–Greensboro

UNC–Wilmington

Wake Forest University

Western Carolina University

Winston-Salem State University

Service Genome Consortium for Active Teaching

Kenan Institute for Engineering, Technology & Science

MCNC–NC Supercomputing Center

NC Association for Biomedical Research

North Carolina Biosciences Organization

Parker, Poe, Adams & Bernstein LLP

RBC Centura Banks, Inc.

Research Triangle Foundation of North Carolina

Research Triangle Institute

Small Business & Technology Development Center

Wake County Economic Development

Womble Carlyle Sandridge & Rice, PLLC

Wyrick Robbins Yates & Ponton, LLP

Support Burroughs Wellcome Fund

CIIT Centers for Health Research

National Humanities Center

National Institute of Environmental Health Sciences

National Institute of Statistical Sciences

North Carolina Biotechnology Center

Nuffield Council on Bioethics

U.S. EPA National Health and Environmental Effects Research Laboratory

north carolina genomics and bioinformatics consortium members


Three members of the Center-sponsored Steering Committee to Strengthen Biotechnology in Western North Carolina share a light moment at a May 2002 luncheon near Asheville. Pictured from left to right are Jack Cecil, president of Biltmore Farms; Dr. John Bardo, chancellor of Western Carolina University; and Ray Bailey, president of Asheville-Buncombe Technical Community College. They were among about 100 people who heard the Committee’s report suggesting 11 ways to build a biotechnology community in the region.

2000

b i o t e c h n o l o g y / b i o s c i e n c eCourse Enrollment: 1994–2001

2001

Historically Minority UniversitiesBiotechnology/Bioscience Program Initiative

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t The program will seek to use biotechnology to help restore the American chestnut and other tree species threatened by various diseases.

• Sponsored a session on the science, applications and issues of forest biotechnology at the international BIO 2002 exhibition and meeting in Toronto in June.

north c arolina bioscience investment fund

To provide more venture capital for North Carolina’s young biotechnology companies, the Center created the North Carolina Bioscience Investment Fund L.L.C. in 1998 with $10 million from the state’s General Assembly and $16 million from North Carolina banks, corporations and foundations. The $26 million Fund, professionally managed by Eno River Capital of Durham, makes early stage investments in North Carolina bioscience companies.

By the end of June 30, 2002, the Fund had invested $20 million in nine companies and attracted almost $57 million in co-investments from other sources. In the seven deals the Fund led, $34 million in co-investments was attracted from other sources including large funds such as Sprout, Wakefield, and Nora Mosley.

historic ally minorit y universities biotechnology progr am initiative

The Center in 2002 concluded the eighth and final year of its effort to strengthen the biotechnology programs of the state’s historically minority public universities. Since the initiative began in 1994, the number of students taking bioscience courses at the six universities tripled to more than 3,000, and the number majoring in biological sciences increased from about 150 to more than 850. The number of faculty members recruited or trained to teach bioscience courses grew from six to 68.

During the program’s eight-year period, the General Assembly appropriated about $10 million to the Center, which in turn awarded grants to the universities for hiring and training faculty, equipping labs, developing curricula and recruiting students. The Center handed off the program to the University of North Carolina System’s General Administration in July 2002.

In 2002, the Center awarded six grants totaling $60,000 to the six universities: Elizabeth City State University, Fayetteville State University, N.C. A&T State University, N.C. Central University, the University of North Carolina at Pembroke, and Winston-Salem State University. The grants are listed on page 16.

Biotechnology in Western North C arolina

A Center-sponsored committee of 15 leaders in Western North Carolina in 2002 concluded a year-long study of how biotechnology can enhance


North Carolina and the state of Andhra Pradesh, India, formalized an 18-month agreement to exchange information that will benefit each state’s biotechnology industry.

About 80 people attended the signing ceremony. In the photo above, seated from left to right are Dr. Charles Hamner, now retired president and CEO of the Biotechnology Center; N.C. Department of Commerce Secretary Jim Fain; former North Carolina Governor Jim Hunt; Chandrababu Naidu, chief minister of Andhra Pradesh; and W. Steven Burke, senior vice president for corporate affairs and external relations. Standing from left to right are Dr. Veeraindar Goli, Director, Bio-Technology International (BTI), which organized the chief minister’s visit and was a sponsoring host; Richard Martin, advisor to BTI; Dr. Bhaskar Venepalli, director, BTI; Chacko Verghese, managing director, BTI; and Dr. Vipin Garg, president and CEO of Tranzyme Inc., and advisor to BTI.

the economic, academic, environ-mental and cultural life of the region. The Steering Committee to Strength-en Biotechnology in Western North Carolina issued a report listing 11 rec-ommendations for using biotechnol-ogy as an economic and community development tool.

The report was introduced at a May luncheon in Enka attended by more than 100 business, academic and civic leaders in the region. Speakers included Lieutenant Governor Beverly Perdue, U.S. Congressman Charles Taylor, North Carolina Department of Commerce Secretary Jim Fain, Biltmore Farms President Jack Cecil, and Committee Chair Dr. John Bardo, chancellor of Western Carolina University.

To jump-start biotechnology development in the region, the Center pledged $25,000 to fund a biotechnology coordinator’s position, and Asheville-Buncombe Technical Community College agreed to house the position on its campus in Enka. A-B Tech will also begin offering the Center-developed BioWork course, which offers introductory training in bioprocessing for the biomanufacturing industry.

International Rel ations

As North Carolina’s biotechnology industry matures and brings products to market, it will increasingly need international partners to help those products gain entrée to large markets outside the United States. North Carolina is also a popular site for global companies with U.S. operations, such as BASF, Bayer, Diosynth, GlaxoSmithKline, Novozymes, Organon Teknika and many others. Therefore, the Center places a high emphasis on maintaining positive relationships with international governments, institutions and biotechnology companies.

In 2002 senior executives from the Center gave presentations in Austria, England and Scotland, and participated in the State’s European trade mission, giving

presentations and calling on companies in Finland and Germany. The Center also represented the State in the fourth year of its five-year technology-exchange agreement with the German state of North-Rhine Westphalia and its biotechnology center, Bio-Gen-Tec NRW. In addition, the Center represented the State in adding another international partner, the Indian state of Andhra Pradesh. Chief Minister Chandrababu Naidu, North Carolina Secretary of Commerce Jim Fain, and Dr. Charles E. Hamner, the Center’s President and CEO (now retired), signed an 18-month agreement for cooperation between the two states, with former North Carolina Governor Jim Hunt attending the ceremony.


The North Carolina Biotechnology Center awarded 58 grants and loans totaling about

$1.9 million to universities, companies and other organizations in 2002.

small business research award progr am

Athenix Corp., Durham

Dr. Nadine Carozzi • $150,000 • “Isolation and Characterization of Microbes Containing Novel Genes for Biomass Conversion.”

BioMachines Inc., Morrisville

Scott Jacobs • $149,972 • “The BioMachines’ BioBlox Microfluid Processor Chip (MPC), an Innovation in Microfluid Handling.”

Sylvanus Environmental Testing Inc., Pittsboro

Dr. Stephen B. Friedman • $150,000 • “Development of a Testing Technology Using Nucleic Acid Binding Reagents.”

business development award progr am

BioMarck Pharmaceutical Ltd., Raleigh

Mr. Thomas Roberg • $15,000 • “Business Plan, Licensing, Patent Work.”

CytoSpect Pharma Inc., Research Triangle Park

Dr. Pablo Scolnik • $15,000 • “Business Development Program for a Biotechnology Start-Up.”

Nanolytics Inc., Raleigh

Dr. Richard Kouri • $15,000 • “Nanolytics Business Development.”

PhytoMyco Research Corp., Greenville

Dr. Ven Subbiah • $10,000 • “Business Development for Pharmaceuticals and Nutraceuticals.”

g r a n t s a n d l o a n s a w a r d e d i n 2 0 0 2

Sylvanus Environmental Testing Inc., Pittsboro

Dr. Stephen Friedman • $15,000 • “Development of Synthetic Antibody Reagents.”

sbir bridge fund progr am

Artecel Sciences Inc., Durham

Dr. Jeff Gimble • $75,000 • “Hematopoietic Support by Adipose-Derived Stem Cells.”

proof of principle awards progr am

East Carolina University

Dr. Arthur P. Bode, Department of Pathology • $25,000 • “Proof of Concept Studies with Lyophilized Canine Blood Cells in Animal Trauma Transfusion.”

coll abor ative funding a ssistance progr am

Duke University Medical Center and Skin Research

Dr. Christopher Shea, Department of Pathology • $30,000 • “Development of Topical Antioxidants to Prevent UV Photoinjury.”

East Carolina University and Endacea Inc.

Dr. S. Jamal Mustafa, Department of Pharmacology • $60,000 • “A Novel Drug for Asthma With Dual Action.”

North Carolina State University and Bayer Corp.

Dr. Clay Clark and Dr. Stefan Frazen, Department of Molecular and Structural Biochemistry • $60,000 • “Plasmin Characterization Spectroscopic Analyses of Denaturation Compared with Biological Activity.”


Program Initiative Grants $49,000

Institutional Development Grants $579,205

Multidisciplinary Research Grants $224,095

Education Enhancement Grants $71,704

Biotechnology Education Mini-Grants $13,468BioWork Award Program $20,900

Small Business Research Award $449,972

Business Development Award $70,000

SBIR Bridge Fund $75,000

Proof of Principal Awards $25,000

Collaborative Funding Assistance $300,000

HMU Biotechonlogy Program Initiative $60,000

Biotechnology Meeting Grants $11,500

Biotechnology Event Sponsorships $10,750

University of North Carolina at Chapel Hill and Paradigm Genetics Inc.

Dr. Alan M. Jones, Department of Biology • $30,000 • “Tissue-specific Silencing and Expression of Plant Genes.”

University of North Carolina at Chapel Hill and Schwarz Pharma

Dr. Harold Kohn, Department of Pharmacy • $60,000 • “R-N-Benzyl-2-acetamido-3-methoxypropionamide (Harkoseride) Sites and Mechanism of Drug Function.”

Wake Forest University and Kucera Pharmaceutical

Dr. Gregory Kucera, Department of Internal Medicine • $60,000 • “Phospholipid Carrier Molecules for the Delivery of ARA-C.”

institutional development gr ants progr am

North Carolina State University

Dr. William Thompson and Dr. George Allen, Department of Botany • $39,830 • “Applied Genomics and Plant Improvement Facility.”

University of North Carolina at Chapel Hill

Dr. Jeffrey M. Macdonald, Department of Biomedical Engineering • $100,000 • “Metabolomic Facility.”

Dr. Winston C. Patterson, Program in Molecular Cardiology • $112,500 • “Ultrasound Biomicroscopy VS40 System: A Tool for High Throughput, Non-invasive Evaluation of Animal Models.”

Dr. David P. Siderovski, Department of Pharmacology • $140,000 • “Multi-user Surface Plasmon Resonance Biosensor System.”

Wake Forest University

Dr. David Busija and Dr. Judy Aschner, Department of Physiology and Pharmacology • $186,875 •

“Simultaneous Patch Clamp and Confocal Imaging System for Enhancing Cardiovascular Research and Training.”

multidisciplinary research gr ants progr am


Dr. Marshall Edgell, Department of Microbiology and Immunology • $224,095 • “Testing Hypothesis about Proteins Using High-throughput Methods.”

biotechnology meeting gr ants progr am

Biomedical Engineering Society

Dr. George A. Truskey, Department of Biomedical Engineering, Duke University • $10,000

• “Fall 2001 Annual Meeting of the Biomedical Engineering Society.”

north carolina biotechnology center

2002 Grants and Loans by Program



Dr. R. Balfour Sartor, Center for Gastrointestinal Biology and Disease • $1,500 • “Symposium: Fibrogenesis and Inflammation of the Gut.”

educ ation enhancement gr ants progr am

Carteret Community College

Meg Rawls • $3,000 • “Brassicas and Biotechnology.”

Elon University

Dr. Helen Kreuzer and Dr. Linda Niedziela • $9,739 • “Incorporation of Polyacrylamide Gel Electrophoresis and Western Blotting into Laboratory Courses of the Biology and Chemistry Departments.”

N.C. Wesleyan College

Dr. Rodney Austin • $10,157 • “Enhancing the Biochemistry Laboratory Experience Through Biotechnology.”

Campbell University

Dr. Timothy Bloom • $43,808 • “Bioprocessing as a Pharmaceutical Sciences Capstone Course.”

Bertie High School

Bruce Boller • $5,000 • “Facilitating Inquiry-based Learning.”

biotechnology educ ation mini - gr ants progr am

Carolina Friends School, Durham

Blythe E. Dyson • $4,730 • “Hands-on Experiments with Recombinant DNA Technology.”

Clayton Middle School, Clayton

Lori L. Stroud • $2,312 • “Case of the Crown Jewels Module.”

Hawfields Middle School, Mebane

Juliana T. Hauser • $1,426 • “Biotechnology Module.”

North Carolina School of Science and Math, Durham

Amy Sheck • $5,000 • “Biotechnology Lab Equipment.”

biowork award progr am

Durham Technical Community College

Penny Gluck • $5,000 • “Spring 2002 BioWork Course.”

Johnston Community College

Joy Callahan • $3,005 • “Fall 2001 BioWork Course.”

Joy Callahan • $2,895 • “Spring 2002 BioWork Course.”

Vance-Granville Community College

Garland Elliott • $5,000 • “Fall 2001 BioWork Course.”

Garland Elliott • $5,000 • “Spring 2002 BioWork Course.”

historic ally minorit y universities biotechnology progr am initiative

Elizabeth City State University

Dr. Ronald H. Blackmon, Department of Biology • $10,000 • “Eleanor Nunn Lectureship in Biotechnology.”

Fayetteville State University

Dr. Valerie Fleming, Department of Natural Sciences • $10,000 • “Eleanor Nunn Lectureship in Biotechnology.”

North Carolina A&T State University

Dr. Marihelen Glass, Department of Natural Resources and Environmental Design • $10,000 •

“Eleanor Nunn Lectureship in Biotechnology.”

North Carolina Central University

Dr. Goldie S. Byrd, Department of Biology • $10,000 • “Eleanor Nunn Lectureship in Biotechnology.”

University of North Carolina at Pembroke

Dr. Leonard Holmes, Department of Chemistry and Physics • $10,000 • “Eleanor Nunn Lectureship in Biotechnology.”

Winston-Salem State University

Dr. Kim H. Tan, Project Strengthen • $10,000 • “Eleanor Nunn Lectureship in Biotechnology.”


biotechnology event sponsorships progr am

Duke University

Dr. Kenneth Kreuzer, Cell and Molecular Biology Graduate Training Program • $1,000

• “Minisymposium: Cellular Trafficking and Signalling.”

Duke University Medical Center

Kimberly Johnson, Cancer Center • $1,000 • “Critical Assessment of Microarray Data Analysis (CAMDA 02).”

Dr. Kevin Olbrich, Division of Plastic, Reconstructive, Maxillofacial and Oral Surgery • $1,000 • “2002 North Carolina Tissue Engineering Interest Group Meeting.”

North Carolina Academy of Science

Dr. Susan Stephenson, Meredith College Department of Biology and Health Science • $1,500

• “99th Annual Meeting of the North Carolina Academy of Science.”

North Carolina Small Business and Technology Development Center

John P. Ujvari • $1,000 • “Small Business Innovation Research Opportunities for North Carolina Biotechnology Businesses.”

North Carolina State Fair

Heather Overton, N.C. Department of Agriculture • $2,000 • “BioFrontiers.”

North Carolina State University

Dr. Robert Anholt, W.M. Keck Center for Behavioral Biology • $500 • “Seminar Series 2001– 2002.”

Triangle Consortium for Reproductive Biology

Dr. William C. Wetsel, Duke University Medical Center • $750 • “Annual Meeting: Critical Periods in Reproduction.”

Triangle Virology Association

Dr. Frederick J. Fuller, North Carolina State University • $1,000 • “Spring Symposium.”


Dr. H. Shelton Earp III and Dr. Albert S. Baldwin, Lineberger Comprehensive Cancer Center • $1,000

• “26th Annual UNC Lineberger Comprehensive Cancer Center Symposium – Developmental Biology: Implications for Human Cancer.”

progr am initiative gr ants

Laboratories for Learning

Dr. Andrew Rothschild • $2,000 • “BioSummer 2002.”

North Carolina Association for Biomedical Research

Karen Hoffman • $15,000 • “New Program Initiatives and Ongoing Programs.”

North Carolina State Museum of Natural Sciences

Betsy Bennett • $25,000 • “Traveling Exhibit: ‘The Genomic Revolution.’”

North Carolina State Museum of Natural Sciences

Bonnie Smith • $7,000 • “Genomic Revolution in N.C.: An Economic and Educational Forecast.”


north carol ina b iotechnology center

Program Structure and Task Areas

FinancialOperations

AdministrativeSupport Services

HumanResources &Compensation

• Finance andAccountingManagement

• Purchasingand MaterialManagement

• BudgetDevelopment& Monitoring

• Audits &Compliance

• WordProcessing

• Project andLogistical Support

• DatabaseManagement

• Telephone System

• NetworkAdministrationandMaintenance

• Training• Internet• Database Services• Application

Management

Contracts& FacilityServices

• Grants andContractsAdministration

• FacilitiesMaintenance& Security

• Audits &Compliance

• GrantInformationManagement

InformationSystems

• PersonnelManagement

• Compensation& BenefitsManagement

• Legal &RegulatoryCompliance

Science &BusinessDevelopment • NC Genomics

&BioinformaticsConsortium, LLC

C O R E P R O G R A M S

Library &InformationServices

CorporateCommunications

Conferenceand EducationFacility

Graphic DesignServices

• Public Affairs• Government

and CorporateRelations

• CorporateDevelopment

• ConferencesandWorkshops

• Video Services

• InformationCollection

• InformationRetrieval

• InformationDissemination

• Graphic Designfor Printand Web

• Corporate Identity• Print

Purchasing

Corporate Affairs& ExternalRelations • Special Projects

• Internationaland StrategicPartnerships

C O R P O R A T E A D M I N I S T R A T I O N

CorporateAdministration& CFO • Coordination &

Oversight• Fiduciary

Management• Subsidiary

Operations

Board of Directors

President & CEO

ManagementTeam (COO)

Science &TechnologyDevelopmentProgram

Education& TrainingProgram

Business &TechnologyDevelopmentProgram

• UniversityDevelopment

• GrantsPrograms

• IntellectualExchangePrograms

• GrantsPrograms

• K-12 andUndergraduateEducationPrograms

• WorkforceDevelopment

• PublicEducation

• TechnologyTransfer

• EconomicDevelopmentFinance Program

• BusinessDevelopment& Recruitment

• Business Services

C O R P O R A T E S E R V I C E S

ExecutiveServicesManager


b o a r d o f d i r e c t o r s

Dr. Enriqueta C. Bond, Chairwoman President The Burroughs Wellcome Fund

Dr. Leslie AlexandrePresident & Chief Executive OfficerNorth Carolina Biotechnology Center

Mr. John AtkinsPresident & Chief Executive OfficerO’Brien/Atkins Associates, PA

Dr. Robert BellInterim PresidentChemCodes Inc.

Dr. Joseph BonaventuraResearch Director, Professor of Cell BiologyMarine Biomedical CenterDuke University Marine Laboratory

Ms. Molly Corbett Broad PresidentGeneral AdministrationUniversity of North Carolina

Dr. Richard H. DeanSenior Vice President for Health AffairsWake Forest University School of Medicine

Dr. Mark D. DibnerPresidentBioAbility

Mr. Robert EubanksPresident & Chief Executive OfficerFranklin Street Partners

Mr. Jim Fain, IIISecretaryNorth Carolina Department of Commerce

Ms. Adele Fine PrincipalDocuSource of North Carolina

Dr. Heinrich GuggerPresident & Chief Executive OfficerParadigm Genetics Inc.

Dr. Victoria Franchetti HaynesPresident & Chief Executive OfficerResearch Triangle Institute

Dr. Jeffery L. HouptDean, School of Medicine andChief Executive Officer, UNC HealthcareUniversity of North Carolina at Chapel Hill

The Honorable John Jackson HuntFormer State Legislator

Mr. John A. IrickPresident, NCBIO and Senior Vice President for Corporate & Business DevelopmentBiolex

The Honorable Robert B. Jordan IIIPresidentJordan Lumber Company

The Honorable Martin Lancaster PresidentNorth Carolina Community College System

Dr. James G. MartinCorporate Vice PresidentCarolinas HealthCare System

Dr. William F. MarzluffDean of Research and Professor & Executive Associate Department of Biochemistry & BiophysicsUniversity of North Carolina at Chapel Hill

Dr. John Maselli Retired Senior Vice PresidentPlanters LifeSavers

Mr. R. David MillerDirector, Research & Development PolicyGlaxoSmithKline

Dr. James MoeserChancellorUniversity of North Carolina at Chapel Hill

Mr. Samuel B. MooreVice President, Research & DevelopmentBurlington Chemical Company Inc.

Dr. Charles MorelandVice Chancellor for Research, Outreach & ExtensionNorth Carolina State University

Dr. Marvin K. MossProfessor, Center for Marine Science University of North Carolina at Wilmington

Dr. Paul V. Phibbs, Jr. Professor & ChairmanDepartment of Microbiology & ImmunologySchool of MedicineEast Carolina University

Mr. Milton PrincePresident, Grassy-Ridge Farm Inc. President & Chief Executive OfficerCoastal Carolina Ginns

Mr. James O. Roberson PresidentResearch Triangle Foundation

Ms. Sally Shuping RussellGeneral PartnerIntersouth Partners

Dr. James SiedowVice Provost for ResearchDuke University

Mr. Sam R. SloanSenior Vice President for DevelopmentCharlotte Christian School

Mr. Robin Alton Suggs Executive DirectorYellow Creek Botanical Institute Inc.

Mr. Clay ThorpGeneral PartnerCatalysta Ventures

Dr. Robert S. TimminsRetired PresidentOrganon Teknika Corporation

The Honorable E. Norris TolsonSecretary of RevenueNorth Carolina Department of Revenue

The Honorable Tim Valentine Former U.S. Representative

Dr. P. Kay WagonerPresident & Chief Executive OfficerIcagen Inc.

Dr. Johnny Wynne Associate Dean for Research & Director, NC Agricultural Research ServiceNorth Carolina State University

staff to the board

Ms. Lori L. GreensteinAssistant Secretary and Assistant TreasurerNorth Carolina Biotechnology Center

Mr. Robert SpearmanCounsel & Assistant SecretaryParker, Poe, Adams & Bernstein


The Board of DirectorsNorth Carolina Biotechnology Center and Subsidiaries:

We have audited the accompanying consolidated statements of financial position of the North Carolina Biotechnology Center and Subsidiaries (the Center) as of June 30, 2002 and 2001, and the related consolidated statements of activities and changes in net assets and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Center’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the North Carolina Biotechnology Center and Subsidiaries as of June 30, 2002 and 2001, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

August 15, 2002

f i n a n c i a l s t a t e m e n t s

Independent Auditors’ Report


Consolidated Statements of Financial Positionye ars ended june 30 , 2002 and 2001

Assets 2002 2001

Cash $ 796,775 720,886

Investments (note 3) 27,321,054 32,149,575

Receivables:

Accrued interest receivable 62,508 176,938

Miscellaneous receivables 101,849 110,306

Receivable from North Carolina Bioscience Investment Fund 27,850 27,850

Loan receivable (note 4) 75,000 75,000

Notes receivable (notes 2 and 4) 2,179,468 1,930,063

Allowance for uncollectible notes receivable (notes 2 and 4) (2,179,468) (1,930,063)

Total receivables 267,207 390,094

Other assets 8,213 45,795

Property, plant, and equipment, net (note 5) 4,873,882 5,166,983

Total assets $ 33,267,131 38,473,333

Liabilities and Net Assets

Accounts payable and accrued expenses $ 124,950 142,980

Grants/contracts and notes payable (note 6) 4,056,435 8,017,131

Deferred revenues 1,145,481 1,447,629

Total liabilities 5,326,866 9,607,740

Net assets:

Unrestricted net assets:

Designated for specific purposes (note 1(d)) 27,644,578 27,997,719

Undesignated 195,475 754,128

Temporarily restricted (note 1(d)) 100,212 113,746

Total net assets 27,940,265 28,865,593

Total liabilities and net assets $ 33,267,131 38,473,333

See accompanying notes to consolidated financial statements.


Consolidated Statements of Activities and Changes in Net Assetsye ars ended june 30 , 2002 and 2001

2002 2001

Unrestricted revenues, gains, and other support:

Grants and contracts —

State of North Carolina $ 4,840,574 7,645,976

Note repayments 284,959 1,034,192

Interest (note 7) 778,847 1,788,389

Hamner Conference Center 378,229 410,359

Net unrealized gain (loss) on investments 126,736 (279,875)

Other, net 70,161 814,559

Net assets released from restrictions 156,783 81,520

Total unrestricted revenues, gains, and other support 6,636,289 11,495,120

Expenses and losses:

Science and technology development:

Institutional development grants 573,331 1,714,486

Multidisciplinary research grants 223,908 (73,001)

Collaborative funding program 126,145 195,203

Academic research initiation grants (75,942) 960,560

Economic development loan programs 540,093 834,487

Hamner Conference Center 536,304 462,632

Library and information services 262,855 232,896

Forest biotechnology initiative 242,636 45,116

Workforce training project 204,795 254,343

Genomics and bioinformatics program 108,486 219,405

Intellectual exchange activities 57,459 61,796

Education and training program grants 44,109 220,955

Public HMU program initiative 32,203 1,150,549

Biotechnology event grants/sponsorships 26,211 59,250

Other programs 20,000 24,936

Program management 2,751,863 2,812,086

General and administrative 1,873,507 1,876,395

Loss on sale of property and equipment 120 9,557

Total expenses and losses 7,548,083 11,061,651

Change in unrestricted net assets (911,794) 433,469

Temporarily restricted revenues:

Contributions 143,249 96,250

Net assets released from restrictions (156,783) (81,520)

Change in temporarily restricted net assets (13,534) 14,730

Change in total net assets (925,328) 448,199

Net assets, beginning of year 28,865,593 28,417,394

Net assets, end of year $ 27,940,265 28,865,593



Consolidated Statements of Cash Flowsye ars ended june 30 , 2002 and 2001

2002 2001

Cash flows from operating activities:

Change in total net assets $ (925,328) 448,199

Adjustments to reconcile change in total net assets to net cash (used) provided by operating activities:

Depreciation 304,366 325,188

Loss on sale of property and equipment 120 9,557

Net unrealized (gain) loss on investments (126,736) 279,875

Equity in loss from North Carolina Bioscience

Investment Fund 244,602 231,544

Increase (decrease) in cash due to changes in:

Grants/contracts receivable — 25,666

Notes receivable (249,405) 45,838

Allowance for uncollectible notes receivable 249,405 (45,838)

Accrued interest receivable 114,430 77,344

Miscellaneous receivables 8,457 (83,219)

Other assets 37,582 (39,217)

Accounts payable and accrued expenses (18,030) 55,387

Grants/contracts and notes payable (3,960,696) 1,062,969

Deferred revenues (302,148) 793,992

Net cash (used) provided by operating activities (4,623,381) 3,187,285

Cash flows from investing activities:

Proceeds from sale of property and equipment 600 —

Purchase of property and equipment (11,985) (60,512)

Proceeds from sale of investments 68,414,678 81,439,233

Purchase of investments (63,704,023) (85,309,205)

Net cash provided (used) by investing activities 4,699,270 (3,930,484)

Net increase (decrease) in cash 75,889 (743,199)

Cash, beginning of year 720,886 1,464,085

Cash, end of year $ 796,775 720,886

Supplemental schedule of noncash investing and financing activities:

During the year ended June 30, 2002 and 2001, the Center received $0 and $168,266 in stock as repayment on notes issued under the economic development finance program, respectively.



(l) Organization and Summary of Signific ant Accounting Policies

(a) Organization and PurposeThe North Carolina Biotechnology Center (the Center) was incorporated in 1984 for the purpose of furthering economic development in North Carolina through education, research and commercial development in biotechnology. The Center aids the biotechnology-related efforts of researchers, businesses, state and federal governments, and other agencies primarily through awards of research grants restricted to specific programs.

The North Carolina Bioscience Ventures, LLC (Ventures) is a wholly owned subsidiary of the Center which is used to account for a special $10 million appropriation to the Center from the State of North Carolina. The purpose of the appropriation and establishment of Ventures is to promote the development of the bioscience industry in North Carolina. The appropriation remains in Ventures until funds are drawn down by the North Carolina Bioscience Investment Fund, LLC (BIF). The BIF is responsible for investing funds of the Center along with funds from other investors into portfolio companies.

The North Carolina Genomics and Bioinformatics Consortium (Consortium) is a wholly owned subsidiary of the Center. The purpose of the Consortium is to bring together the key elements of research, development, commercialization and support infra-structure in North Carolina that use or develop genomics, pro-teomics or bioinformatics in order to plan strategic research and development initiatives, and build infrastructure, synergy and community among its associates.

(b) Basis of Accounting and PresentationThe consolidated financial statements have been prepared using the accrual basis of accounting.

Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Center and changes therein are classified and reported as follows:

Unrestricted net assets – Net assets that are not subject to donor-imposed stipulations.

Temporarily restricted net assets – Net assets subject to donor-imposed stipulations that may or will be met either by actions of the Center and/or the passage of time.

Revenues are reported as increases in unrestricted net assets unless use of the related asset is limited by donor-imposed re-strictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit do-nor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been ful-filled and/or the stipulated time period has elapsed) are reported

as reclassifications between the applicable classes of net assets.

(c) Principles of ConsolidationThe consolidated financial statements include the financial state-ments of the North Carolina Biotechnology Center and its whol-ly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

(d) Significant Accounting PoliciesThe following significant accounting policies have been used in the preparation of the consolidated financial statements:

Cash and InvestmentsThe Center invests funds not immediately needed for day-to-day operations in short-term investments, primarily certificates of deposit and commercial paper, consistent with guidelines established by the Board of Directors. These guidelines require that the Center invest only in certain financial instruments considered to be both conservative and adequately diversified. A cash management advisory committee and an equity invest-ment advisory panel periodically review the Center’s investment portfolio.

The equity method of accounting is used to account for certain equity investments where the Center’s ownership is considered to be more than minor. The BIF represents Ventures’ invest-ment in the North Carolina Bioscience Investment Fund, LLC. Equity investments include private equity investments in biotechnology/bioscience companies and venture capital funds.

Investments are generally recorded at fair value. In the case of certain less marketable investments, principally private equity investments which are not accounted for on the equity method, investments are carried at the lower of cost or fair value. For these less marketable securities, the determination of fair value requires the use of estimates. Because of the inherent uncertain-ty in the use of estimates, fair values that are based on estimates may differ from the fair values that would have been used had a ready market for the investments existed.

ReceivablesAn allowance for uncollectible receivables has been provided for notes receivable. The Center’s other receivables are considered to be fully collectible.

Property, Plant, and EquipmentProperty, plant, and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of five years for furniture, fixtures and equipment and thirty years for the Center’s permanent headquarters.

Recognition of Grant Awards and Grants PayableGrant awards and the corresponding grants payable are recog-nized at the time the grant award is approved by the Executive Committee of the Board of Directors.

Notes to Consolidated Financial Statementsjune 30 , 2002 and 2001


Net AssetsCertain unrestricted net assets have been designated for specific purposes by the board of directors. At June 30, 2002 and 2001, unrestricted net assets designated for specific purposes consisted of the following:

2002 2001

Fixed assets $ 4,873,882 5,166,983

Building renovations and repairs 3,683,599 3,427,577

Future economic development investment 5,803,788 5,304,429

Stocks and equity investments 11,690,267 12,090,655

Other 1,593,042 2,008,075

$ 27,644,578 27,997,719

Temporarily restricted net assets are available for various Center programs including plant molecular biology and the RTP Biochemistry Club.

ContributionsContributions, including unconditional promises to give, are recognized as revenues in the period received. Conditional promises to give are not recognized until they become uncon-ditional, that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value.

Temporarily Restricted Net Assets Released from RestrictionsBy holding events and meetings, purchasing training supplies, and performing data gathering / dissemination, the Center re-leased $156,783 and $81,520 of temporarily restricted net assets from donor imposed restrictions in 2002 and 2001, respectively.

Recognition of FundingFunds are granted periodically from private and public agencies for specific purposes or to aid the Center’s general operation and sustain its continued existence. Funds appropriated for spe-cific purposes, including grants for Public Historically Minority Universities and Agricultural Research Funds, are deemed to be earned and reported as revenue when the Center has incurred expenditures in compliance with the grant agreement. Such amounts received, but not yet earned, are reported as deferred revenues.

The Center received 73% and 67% of its unrestricted revenues from the State of North Carolina in 2002 and 2001, respec-tively.

Functional Allocation of ExpensesThe costs of providing the various programs and activities of the Center have been summarized on a functional basis in the state-ments of activities and changes in net assets. Certain general and administrative expenses totaling $971,341 and $856,881 for

the years ended June 30, 2002 and 2001, respectively, have been allocated among the programs and activities benefited.

Income TaxesThe Center is exempt from payment of income taxes under the provisions of Section 501 (c)(3) of the Internal Revenue Code, except for any unrelated business income. Since there was no unrelated business net income during 2002 and 2001, no provi-sion for income taxes has been made. The Center has requested a ruling from the Internal Revenue Service that Ventures’ op-erations are consistent with its Section 501 (c)(3) tax status. As a single member limited liability company, the Consortium is a disregarded entity for income tax purposes.

Use of EstimatesThe preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make es-timates and assumptions that affect the reported amounts of as-sets and liabilities and disclosure of contingent assets and liabili-ties at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

ReclassificationsIn certain instances, amounts previously reported in the 2001 consolidated financial statements have been reclassified to con-form to the 2002 presentation. Such reclassifications have no effect on the change in net assets or total net assets as previously reported.

(2) Economic Development Investment Fund

Through its Economic Development Finance Program, the Center supports research and development projects of young and growing biotechnology/bioscience companies that may not yet qualify for conventional forms of financial assistance. Since 1988, most awards to companies have been in the form of notes, and all amounts, including interest, are to be repaid in full within one to seven years of the date of the notes.

The Center accounts for these awards as expenses upon ap-proval by the Executive Committee, thus recording a 100% reserve on the related notes receivable as these awards are paid out. Management of the Center does not believe it has adequate information to estimate a more precise allowance for uncollect-ible notes receivable since the companies’ ability to repay the amounts is contingent on their ability to survive as profitable entities. The Center records revenue (note repayments) in the year the award is repaid. Note repayments of $284,959 and $1,034,192 were received in 2002 and 2001, respectively. Interest income is not recognized for financial reporting purposes until it is collected.


(3) Investments

The aggregate values of investments at June 30, 2002 and 2001 were as follows:

2002

Cost

Gross unrealized

gains

Gross unrealized

losses Fair value

Stocks $ 299,628 — (233,207) 66,421

Certificates of deposit 2,350,000 — — 2,350,000

Commercial paper 15,408,411 — — 15,408,411

BIF 7,703,163 339,059 — 8,042,222

Equity investments 1,763,113 — (309,113) 1,454,000

$ 27,524,315 339,059 (542,320) 27,321,054

2001

Cost

Gross unrealized

gains

Gross unrealized

losses Fair value

Stocks $ 299,628 — (86,548) 213,080

Certificates of deposit 4,150,000 — — 4,150,000

Commercial paper 20,045,313 — — 20,045,313

BIF 6,447,765 — (243,449) 6,204,316

Equity investments 1,536,866 — — 1,536,866

$ 32,479,572 — (329,997) 32,149,575

The BIF represents Ventures’ equity-method investment in the North Carolina Bioscience Investment Fund, LLC. In 2002, the Ventures’ share of the BIF’s net income totaled $337,906 which is recorded in the consolidated statements of activities and changes in net assets as an unrealized gain of $582,508 and program management expense of $244,602. In 2001, the Ventures’ shares of the BIF’s net loss totaled ($474,993) which is recorded in the consolidated statements of activities and changes in net assets as an unrealized loss of ($243,449) and program management expense of $231,544.

In connection with Economic Development Finance awards, the Center receives the right to purchase stock in various biotechnology/bioscience companies. As of June 30, 2002, the Center received warrants to purchase 219,705 common shares and 42,500 preferred shares with exercise prices ranging from $0.30 to $600 per share. These warrants expire at various dates through 2012. Value has not been attributed to these warrants; accordingly, they are not reflected in the consolidated financial statements.

As of June 30, 2002, the Center has capital contribution com-mitments to the BIF and various venture capital funds totaling $2,127,625. These funds will be invested in future years as capital calls are made by the various venture capital fund managers.

(4) Loan and Notes Receivable

Loan and notes receivable at June 30, 2002 and 2001 consisted of the following:

2002 2001

Loan Receivable:Loan receivable dated October 15, 1998 from Eno River Capital, L.L.C. Interest is payable along with the principal in one lump sum on October 15, 2005. Interest rate is 6.25% per year on the unpaid principal balance. $ 75,000 75,000

Notes receivable:Notes receivable from various state biotechnology companies under Economic Development Finance awards. Interest rates on these notes vary from 6.50% to 8.25%. Generally, principal and interest are payable one to five years from the execution of the note. Due dates range from 2002 to 2005. $ 594,894 647,851

Notes receivable from various state biotechnology companies under Small Business Innovation Research awards. Interest rates on these notes vary from 4.00% to 10.50%. Generally, principal and interest are payable one to five years from the execution of the note. Due dates range from 2002 to 2007. 79,973 157,473

Note receivable from a state biotechnology company under the Collaborative Funding Assistance program. Interest rate on this note is 8.25%. Principal and interest are payable in 2002. 16,000 40,000

Notes receivable from various state biotechnology companies under Business Development Awards. Interest rates on these notes vary from 6.25% to 11.00%. Generally, principal and interest are payable one to three years from the execution of the note. Due dates range from 2002 to 2005. 83,774 57,514

Notes receivable from various state biotechnology companies under Small Business Research Awards. Generally, principal and interest are payable one to seven years from execution of the note. Due dates range from 2006 to 2009 1,294,195 961,592

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2002 2001

Notes receivable from various state universities under Patent Funding Assistance awards. These notes bear a flat interest fee of $2,000. Principal and interest are payable upon transfer, assignment, or license of patent for compensation. 23,583 23,583

Notes receivable from various state universities under Proof of Principle Awards. Generally, principal and interest are payable within five years, if the technology or intellectual property is sold, transferred, assigned or licensed. However, there is no interest if paid in the first year. 87,050 42,050

2,179,468 1,930,063

Less allowance for uncollectible notes receivable (2,179,468) (1,930,063)

Notes receivable, net $ — —

(5) Propert y, Pl ant, and Equipment

A summary of property, plant, and equipment at June 30, 2002 and 2001 follows:

2002 2001

Building $ 7,305,069 7,305,069

Furniture, fixtures, and equipment 1,598,161 1,590,497

8,903,230 8,895,566

Less accumulated depreciation 4,029,348 3,728,583

Property, plant and equipment, net $ 4,873,882 5,166,983

(6) Gr ants/Contr ac ts and Notes Payable

The Center has committed grants and contracts to various research programs, primarily through major universities and biotechnology companies located in North Carolina. Grants/contracts and notes payable at June 30, 2002 are expected to be paid as follows:

Year ending June 30: Total

2003 $ 3,440,515

2004 615,920

$ 4,056,435

(7) Interest Income

Interest income of $654,754 and $1,559,472 was earned during the years ended June 30, 2002 and 2001, respectively, primar-ily by investing in certificates of deposit and commercial paper. Interest income collected on notes and loans receivable in 2002 and 2001 totaled $124,093 and $228,917.

(8) Benefit Pl ans

The Center has a defined contribution money purchase pension plan covering all qualified employees who have completed one

year of service. The Center’s contribution is 11.00% of pre-tax compensation for eligible employees. Employees are fully vested in the plan assets upon participation. Approximately $245,000 and $203,000 was contributed to the plan during the years ended June 30, 2002 and 2001, respectively. The plan is self-directed, with the majority of participants electing mutual funds. Additionally, after six months of employment, all regular employees are eligible to participate in a 403 (b)(7), tax-deferred supplemental retirement plan. Participants may contribute sub-ject to prevailing Internal Revenue Service regulations.

(9) Oper ating Lea ses

The Center has acquired the right to use the land on which its building is constructed through an operating lease agreement which expires on December 31, 2089 with another nonprofit organization, the Triangle Universities Center for Advanced Studies, Inc. (TUCASI). Title to the land remains with TUCASI.

Payments to TUCASI under the agreement are at the nominal rate of $1 per year, and the Center pays all costs of insurance, taxes, and maintenance as defined in the lease agreement.

(10) Subsequent Events

The Center’s equity investments include private equity invest-ments in biotechnology/bioscience companies and venture capital funds. Subsequent to June 30, 2002, the fair value of its private equity investments decreased approximately $895,000 based upon factors not known prior to the date of the consoli-dated financial statements. This decrease in value has not been reflected in the accompanying consolidated financial statements. Given the level of risk associated with these securities it is at least reasonably possible that changes in the fair values of other pri-vate equity investment securities will occur in the near term and that such changes could materially affect the amounts reported in the Center’s consolidated financial statements and schedules.

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m i s s i o n s t a t e m e n tThe Center’s mission is to provide long-term economic benefit to North Carolina through support of biotechnology research, development and commercialization statewide.

f i v e m a i n g o a l sStrengthen North Carolina’s research capabilities in its academic and industrial institutions

Foster North Carolina’s industrial development

Inform and educate the public about biotechnology

Develop mutually beneficial partnerships among all parties involved in moving biotechnology from research to commercialization

Establish for North Carolina a leadership role in biotechnology and its commercialization

chamblee graphics printed 1,000 copies of this annual report at a cost of $3,214 . it was designed at the north carolina biotechnology center with adobe indesign 2.0.1 , adobe photoshop 6.0.1 , and macromedia freehand 9.0.1 on a macintosh. the annual features adobe garamond and meta plus typefaces. it was printed on 80# fox river coronado sst

white cord cover and 80# fox river coronado sst vellum text.

10/2001 02-078 ca

15 t.w. a le x a nder dr i v e • r ese a rch tr i a ngle pa r k, north c a rol ina 27709 - 3547 usawww.ncbiot e ch .org • www.hamnercent e r .or g • www.ncgbc .org • www.for e s tb iot e ch .org

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