NEWS OF THE W EEK
J OHN D. ROBERTS
RESEARCH FOUNDATIONS CUT BACK FUNDING: Declining endowments
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HE CAMILLE & HENRY DREYFUS Foundation announced last month that it is suspending three of its scientific research funding programs due to endowment losses. In the wake of the global financial crisis, other foundations are also facing difficult choices, but not all are cutting back. The Dreyfus Foundation will honor current awards but will not accept new applications for two programs to fund starting faculty or for a program to promote emeritus faculty working with undergraduate students. The move is “to secure the foundation,” which has no source of income other than what comes from endowment investments, says the foundation’s executive director, Mark J. Cardillo. The foundation’s endowment was worth about $120 million at the end of 2007. Cardillo declined to specify how much the fund lost in recent weeks, but executives of other foundations say they are generally seeing endowment declines of about 20%. The Petroleum Research Fund (PRF), managed by the American Chemical Society, also warned last month that it may have to postpone funding of 2009 proposals to 2010. A clause in the PRF trust agreement mandates that the fund can use only investment income—it cannot withdraw endowment funds—if the endowment drops below $400 million, which it did on Oct. 10. Like other foundations, PRF normally distributes annually 5% of a three-year rolling average of endowment value.
The Welch Foundation and Howard Hughes Medical Institute (HHMI), however, are not cutting programs at this time, representatives say. “We realize that basic research in particular is a long-term process, so we don’t like to start and stop,” Welch President Norbert Dittrich says. The Welch endowment was $614 million and HHMI’s was $17.5 billion as of Aug. 31. The Keck Foundation declined to comment on how the economic climate might affect its programs. The Research Corporation for Scientific Advancement (RCSA) is also maintaining its grant programs and will launch two interdisciplinary research initiatives this year, President James M. Gentile says. Prior to September, the RCSA endowment was about $170 million. RCSA is trimming administrative costs through measures such as freezing salaries. The RCSA board did debate cutting programs at a board meeting on Nov. 1, Gentile says, but ultimately it decided that in a difficult science funding climate, it is imperative that the board maintain current funding levels. “We sucked it up and said we have to continue funding, even if we do have to spend some of our endowment funds,” Gentile says. He adds that “foundations are caught between a rock and a hard place, between being a foundation in perpetuity and a foundation in needy times.”—JYLLIAN KEMSLEY
Caltech emeritus chemistry professor John D. Roberts (center) poses here with undergraduates who participated in his summer research program, which has been supported in part by Dreyfus and PRF awards.
STOCK MARKET Biotech firms drop initial public offerings amid economic upheaval The downturn in financial markets has stemmed the flow of capital for biotechnology start-ups, bringing initial public offerings (IPOs) of stock to a standstill. Some financing still trickles in through private equity, venture capital, and partnering investments, but at levels about half of what they were in 2006 and 2007, San Francisco merchant bank Burrill & Co. reports. According to the firm, 2008 is shaping up to be one of the industry’s worst years for IPOs, in contrast to 2007 when they generated more than $2 billion. So far this year, only Sunrise, Fla.-based
BioHeart has held an IPO, raising just $6 million. About 16 biotech companies have withdrawn their IPOs in 2008, according to investment research firm Renaissance Capital. Aldagen, CyDex Pharmaceuticals, Phenomix, and Xanodyne Pharmaceuticals canceled just last month. Last week, Cardiovascular Systems Inc. (CSI) pulled its IPO and opted instead to merge with Louisville, Colo.-based Replidyne. “Given the uncertainty regarding timing of a market recovery, we believe that this transaction offers the best opportunity at this time for continued growth and
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for our company to gain access to the public capital markets,” CSI CEO David L. Martin said in announcing the deal. A handful of biotech firms—including Aegerion Pharmaceuticals, Alimera Sciences, BioTrove, and Omeros—have filed for IPOs, but it’s uncertain whether they’ll move forward. Other biotech companies are laying people off (see page 24). “After roughly 40 years, where biotech companies have had reasonably easy and inexpensive sources of capital, the world has changed for them and it is going to get much more difficult,” Burrill CEO G. Steven Burrill says.—ANN THAYER
