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Full text of "Biotechnology development : report to the 1985 General Assembly of North Carolina"

LEGISLATIVE 
RESEARCH COMMISSION 



BIOTECHNOLOGY DEVELOPMENT 




REPORT TO THE 

1985 GENERAL ASSEMBLY 

OF NORTH CAROLINA 



TABLE OF CONTENTS 

Introduction 1 

Findincjs ot the Study Committee 4 

Recommendations for the 1985 Legislative Session 9 

Summary of Report and Recommendations 20 

Proceedings of the Study Committee 30 

APPENDICES 40 

A. Membership: Legislative Research 

Commission; Biotechnology Study 

Committee 41 

B. Senate Joint Resolution 620 42 

C. House Joint Resolution 46 

D. Chapter 899, 1983 Session Laws 

(House Bill 1122) 50 

E. Biotechnology: What is it and Why 

is it so Important? 55 

F. Excerpts From the Report of the 

Biotechnology Study Conunittee's 

Economic Advisory Panel 61 

G. Letter of November 19, 1984 From 

Professor Schuette, Summarizing Potential 

Economic Effects of Developments in 

Biomedicine and Forestry 96 

H. Recommended Legislation for the 

1985 General Assembly - Biotechnology 
Development Program 99 

I. Recommended Legislation for the 1985 
General Assembly - Continuation of 
Biotechnology Study 108 



Introduction 

The Legislative Research Commission, originally created 
in 1965 and authorized by Article 6B of Chapter 120 of the 
General Statutes, has the authority, pursuant to the direc- 
tion of the General Assembly, "to make or cause to be made 
such studies of and investigations into governmental agen- 
cies and institutions and matters of public policy as will 
aid the General Assembly in performing its duties in the 
most efficient and effective manner" and "to report to the 
General Assembly the result of the studies made," which 
reports "may be accompanied by the recommendations of the 
Commission and bills suggested to effectuate the recommenda- 
tions." G.S. 120-30.17. The Commission is chaired by the 
Speaker of the House and the President Pro Tempore of the 
Senate, and consists of five Representatives and five 
Senators who are appointed respectively by the Cochairmen. 
G.S. 120-130.10 (a) . 

Chapter 905 of the 1983 Session Laws (House Bill 1142) 
authorized the Legislative Research Commission to study, 
among other subjects, biotechnology development as outlined 
in Senate Joint Resolution 620 (Appendix B, pages 42-45) and 
House Joint Resolution 1282 (Appendix C, pages 45-49) , and 
as specified in Chapter 899 of the 1983 Session Laws (House 
Bill 1122), which created the New Technology Jobs Act 
(Appendix D, pages 50-54) . Section 6 of Chapter 905 author- 
izes a report to the 1984 or 1935 Sessions of the General 



Assembly, or in the alternative permits an interim report to 
the 1984 Session and a final report to the 1985 Session. 
The Biotechnology Study Committee did make an interim 
report. 

The Joint Resolutions referred to above called for the 
study committee to review the projections that biotechnology 
will have a pervasive impact on various industries, as well 
as other areas; to review the steps being taken by other 
states to strengthen their positions in biotechnology; to 
review the present status of and further plans for 
biotechnology programs in the state's universities, the 
North Carolina Biotechnology Center, the Department of 
Commerce, the state's business community, and other organ- 
izations concerned with the development of biotechnology in 
the state; to review the development of the federal guide- 
lines for safe conduct of research and development in this 
area, as well as the experiences of other states that have 
addressed that issue; and, finally, to "determine the short 
term and long term needs for North Carolina to be at the 
forefront of the technological and economic developments in 
the rapidly advancing field of biotechnology." 

The study committee has looked at each of these issues 
and has addressed them, either in its interim report or in 
this final report, and in some cases in both. The recommen- 
dations in the interim report, which were intended to 
fulfill the mandate to the study committee to determine the 
state's short term needs, were adopted by the General 



Asseinbly in the 19B4 Session, although the amounts funded 
were different than those recoimnended . This final report 
expands on some of the information provided in the interim 
report, providing complete answers to all of the questions 
outlined above, and specifically lays out the "long term 
needs for North Carolina to be at the forefront of the 
technological and economic developments in the rapidly 
advancing field of biotechnology." 



Findings of the Study Committee 

The Biotechnology Study Committee makes the following 
findings based upon the testimony of witnesses that have 
appeared before it, the report of its Economic Advisory 
Panel, and other information supplied to it by its staff: 

I. After further study following its interim report, the 
committee feels even more strongly that biotechnology will 
have a pervasive economic impact on agriculture, forestry, 
marine biology and aquaculture, pharmaceuticals, chemicals, 
medical care, pollution control, and many other industrial 
and commercial areas. Furthermore, biotechnology-related 
developments in many of these areas will have positive 
effects on human health and the environment. (For a more: 
complete explanation of biotechnology, see Biotechnology : 
What Is It and Why Is It So Important? , Appendix E, pages 
55-60.) 

II. A carefully planned major state effort in biotechnology 
can bring substantial benefits to every area of the state 
through industrial expansion, increased employment, and 
increased agriculture productivity. This effort can also 
maintain and improve the academic excellence of our public 
and private universities and colleges in science and engi- 
neering. 



III. As stated in the interim report of the committee, many 
other states are keenly aware of the economic significance 
of biotechnology and have undertaken programs to strengthen 
their positions in this area. This competition from other 
states necessitates immediate action on the part of our 
state to maintain our existing competitive edge and to 
achieve a position of national leadership in biotechnology. 

IV. A successful biotechnology development program must 
recognize the need for targeted economic development and 
that economic development in biotechnology depends on our 
having strong academic resources. Commercial applications 
of biotechnology depend on basic research efforts to supply 
knowledge which can be applied to produce solutions to "real 
world" problems and to take advantage of commercial opportu- 
nities. Applied technology cannot exist very long if it is 
riot backed up by basic research. These needs are complemen- 
tary, but the program must be designed in such a way that 
there is also flexibility and independence for the academic 
and commercial sectors so that each is able to respond to 
its own needs as they relate to the goals particular to its 
efforts. 

Such a program must include substantial financial 
support for basic research and teaching, as well as focused 
efforts in applied technology, agriculture, forestry, and 
other commercial activities (using the term in its broadest 
sense) related to North Carolina problems ?rd opportunities. 



It must also include specific components to promote the 
diffusion of biotechnology advances and to spread economic 
development across the state. This combination will form 
the underpinning of our efforts to promote the state as a 
center of excellence in biotechnology, resulting in the 
maintenance of our existing industries, recruitment of new 
ones, and the strengthening of our agricultural base. It 
will also help maintain the strength of our educational 
system. 

This program must also include a cooperative effort to 
frame strategies for economic development that will focus cr. 
opportunities and problems unique to North Carolina and the 
southeast region. This effort should be led by the North 
Carolina Biotechnology Center (NCBC) in consultation with 
appropriate groups, such as the universities, the Departmf^nt 
ol Conutierce, the Department of Agriculture, and the commer- 
cial and agricultural sectors of our state. 

A biotechnology development effort must get underway 
immediately and must be highly visible around the world. It 
should include recruitment of world-class researchers and 
the putting in place of other components of research, 
together with the strengthening of NCBC and additional focus 
on biotechnology in the Department of Commerce and the 
Agricultural Extension Service. It should include the con- 
struction of bioprocess engineering facilities, if the need 
is shown by the study described in Recommendation VI., page 
13. 



V. Significant investments in facilities and equipment 
should include, whenever possible, funding from industry and 
other non-state sources. 

VI. The biotechnology program must include requirements for 
the accountability of all recipients of state funds so that 
the results of the investment can be measured by the General 
Assembly, the Governor, and the people of North Carolina. 

VII. The Department of Community Colleges is in a position 
to provide training for the technicians needed for 
biotechnology-related industries and will maintain its 
flexibility and responsiveness by continuing to work with 
the North Carolina Biotechnology Center, ar it has in the 
past. 

VIII. The Department of Public Instruction is aware of 
activity in biotechnology in the state and will be taking it 
into consideration as it plans for science and mathematics 
education. It is already in communication with the North 
Carolina Biotechnology Center and will continue to work with 
NCBC so that education of elementary and secondary school 
students will keep pace with biotechnology advances as they 
occur. 

IX. The federal government is presently involved in a 
comprehensive multi-agency review of the federal regulatory 



structure as it applies to biotechnology with an expected 
completion date of January, 1985. This would be in suffi- 
cient time for the legislature to assess the adequacy of the 
federal regulations and take action in the 1985 Session if 
it appears necessary to do so. 



Recommendations for the 1985 Legislature 

The Biotechnology Study Committee recommends that the 
actions which follow be taken by the Legislature, the 
appropriate administrative departments, and the other 
entities mentioned below: 

I. North Carolina should undertake a program to support and 
promote biotechnology development in the state which will 
result in strengthening the state's public and private 
universities and colleges, as well as producing positive 
economic benefits which can be spread across the state. The 
components and funding of these efforts are outlined in the 
recommendations which follow. The complete program will 
cover a five year period, but the specific activities for 
the 1985-87 biennium are also indicated. The total cost of 
the five year program is $70,085 million. The cost for the 
1985-87 biennium is $40,235 million, with $18,949 million 
required in FY 1985-86, and $21,286 million in 1986-87. 

II. State funding for activities of the North Carolina 
Biotechnology Center (NCBC) , not including construction of 
facilities, should be increased by appropriating additional 
funds of $4,8 million per year for five years, for a total 
of $24 million of additional money. This would be an 
increase of $9.6 million for the 1985-87 biennium for 
support of the NCBC ' s activities which would include 



determining areas of focus involving opportunities and 
problems unique to North Carolina, enhancing and promoting 
the economic impact of biotechnology research, and promoting 
biotechnology-related economic development throughout the 
state. In cooperation with the Department of Commerce, NCBC 
would expand its activities in areas of direct promotion of 
the state as a center of excellence in biotechnology and, 
with the additional cooperation of the Agricultural Exten- 
sion Service, promote the spread of biotechnology-related 
economic development across the entire state. NCBC would 
expand its programs of competitive basic and applied re- 
search grants to private and public institutions in the 
state, and occasionally to private research scientist 
entrepreneurs. It could also use its funds for faculty 
salary supplements for private and public universities and 
colleges; grants to private and public universities to aid 
in recruiting world-class scientists and engineers; grants 
to develop new university and college courses; grants for 
special equipment in private and public universities and 
colleges; support for limited in-house research; entrepre- 
neurial support; conferences and symposia; coordination and 
mobilization of all biotechnology resources in the state; 
and for the acquisition and maintenance of specialized 
computer software which would be available to the private 
and public universities and colleges and to the private 
sector working in the area of biotechnology. 



10 



III. The Legislature should appropriate $1.12 million for 
use by NCBC to construct a facility to carry on its func- 
tions at the new recommended level. Of this amount, $.112 
million should be allocated for FY 85-86 for planning, site 
acquisition and site preparation, and the balance, $1,008 
million should be allocated for FY 86-87. The total cost of 
the facility is estimated to be $2.24 million, with NCBC 
being required to obtain commitments for the additional 
funding from outside sources before any state funds are 
expended. These commitments must be obtained by June 30, 
1986. It is expected that the facility would be approximate- 
ly 20,000 square feet. 

IV. Funding for the University of North Carolina system 
should be increased by appropriating an additional $4.8 
million per year over five years for a total commitment of 
$24 million of additional funds over current levels, not 
including funding for construction of facilities. This 
would be an increase of $9.6 million for the 1985-87 
biennium. These funds would be used to develop a 
world-class program in biotechnology research and teaching, 
with the focus being on the recruitment of world-class 
scientists and engineers, supported by younger excellent 
researchers. While a portion of these funds would be used 
for the salaries of the newly recruited scientists and 
engineers working in the field of biotechnology, these funds 
would also be used for the other components of such a 



11 



program, examples of which would be support of post-doctoral 
students and graduate students; employment of technical 
personnel; start-up research money for newly recruited 
researchers; new course development; equipment; and any 
other components deemed necessary by the Board of Governors 
to recruit and set up world-class researchers and support 
personnel and for the development of first-rate 
biotechnology teaching and research programs in the univer- 
sity system. 

These funds should be specifically designated for 
biotechnology and should be appropriated to the Office of 
State Budget and Management, where they would be held in a 
nonreverting reserve to be disbursed as needed by the 
Governor, with the advice of the Advisory Budget Commission, 
and after notification to the Joint Legislative Commission 
on Governmental Operations, provided that the conditions for 
release of the funds specified in Recommendation X. are 
complied with. 

No portion of the new money recommended for the five 
year period could be used for maintenance of efforts funded 
prior to FY 85-86. These new funds would, however, be used 
to maintain any efforts begun with them during this five 
year period. 

V. In order to provide space for the new programs imple- 
mented under Recommendation IV, the Legislature should 
appropriate to the Office of State Budget and Management 



12 



for the 1985-87 biennium the sum of $17,155 million, evenly 
divided between the two fiscal years, to be disbursed by the 
Governor, with the advice of the Advisory Budget Commission, 
and after notification to the Joint Legislative Commission 
on Governmental Operations, provided that the requirements 
of Recommendation X. have been complied with. These funds 
could be used for renovation of existing space or construc- 
tion of new space. They could not be used for other capital 
expenditures, such as equipment, which would be funded from 
the appropriations in Recommendation IV., or from other 
sources. 

VI. NCBC should complete a study to determine the merits, 
cost, type and location or locations of partially state 
funded bioprocess engineering facilities in sufficient time 
to present it to the Legislature during the 1985 Session. 
(The formation of the study group, which will include 

university and industry members and employ outside consul- 
tants as needed, has already begun.) 

VII. Depending upon the outcome of the study discussed in 
Recommendation VI above, the Legislature should appropriate 
up to a total of $2.66 million during FY 85-86 and FY 86-87 
for the construction of bioprocess engineering facilities, 
provided that commitments for this purpose equal to twice 
the amount of state funds are obtained from non-state 
sources by June 30, 1986. Funds for FY 85-86 should be $.66 



13 



million for planning, acquisition of a site or sites, and 
commencement of construction. The" balance of state funds, 
$2 million, should be budgeted for FY 86-87. Furthermore, 
when such facilities are in operation, most probably during 
FY 87-88, the Legislature should appropriate up to $250,000 
of state funds per year for their operation. This would 
amount to approximately 25 percent of operating costs, with 
the balance coming from user fees.) 

VIII. The Legislature should provide funding for the 
Department of Commerce to train personnel in biotechnology 
subjects, and for specific targeting of industrial applica- 
tions of biotechnology, for promotion of the state as a 
biotechnology center, for recruitment of new industries 
related to biotechnology, and for programs designed to 
promote biotechnology among existing commercial entities in 
the state. During the five years proposed for this develop- 
mental effort, a total of $200,000 should be allocated to 
the Department of Commerce. Specifically, the 'Legislature 
should appropriate $50,000 for use of the Department of Com- 
merce during FY 86-87, and a similar amount for each fiscal 
year following through FY 89-90. 

IX. Funding for the Agricultural Extension Service should 
also be increased during this promotional effort because the 
rate at which biotechnology developments related to agricul- 
ture and forestry are disseminated to the agricultural and 



14 



forestry interests in the state and put to use by them will 
have a direct effect on the economic payback of the state's 
overall investment in biotechnology. Therefore, a total of 
$200,000 should be allocated to the Agricultural Extension 
Service for this purpose at the rate of $50,000 per fiscal 
year with the first appropriation being for FY 86-87. This 
money would be used to educate farmers about biotechnology 
and to speed the dissemination of biotechnology-related 
agricultural improvements as they become available. 

X. Due to the size of the monetary commitment involved, it 
is necessary to have procedures for accountability and the 
reporting of efforts of all recipients of funding under this 
proposal . 

NCBC, prior to receiving the first funds under this 
proposal, and thereafter on a biennial basis, prior to 
receiving funds appropriated for the succeeding biennia, 
should be required to produce an action plan detailing its 
activities over the coming two years. This action plan 
would be distributed to the General Assembly, the Governor, 
the Advisory Budget Commission, the Department of Commerce, 
the Commissioner of Agriculture, the Secretary of Natural 
Resources and Community Development, the Board of Science 
and Technology, the University of North Carolina Board of 
Governors, the administrations of the Department of Communi- 
ty Colleges and the Department of Public Instruction, and 



15 



the general administrations of the private universities and 
colleges in the state. 

NCBC should require annual reports of the activities of 
its funding grantees and the economic impact or potential 
economic significance of their work. These reports should 
also include the grantees' efforts at disseminating the 
results of their work, where applicable. This information 
should be included in an annual report by NCBC to the 
General Assembly, with a copy being sent to the Governor, 
which details all of NCBC ' s efforts during the preceding 
fiscal year, assesses the over-all economic impact of those 
efforts, and describes the dissemination of developments 
related to biotechnology. This report must be made by 
January 1 each year. 

NCBC should prepare a cost-benefit analysis of its 
activities for FY 85-86 through FY 88-89 so that the econom- 
ic benefit from the state's investment can be quantified. 
This analysis would also be sent to the General Assembly, 
with a copy to the Governor, not later than January 1, 1990. 

As a condition to the release of the funds appropriated 
for the UNC system, the UNC system should be required to 
submit a report outlining the present status of 
biotechnology efforts within its constituent universities so 
that there will be a baseline from which it can later be 
determined how the money has been used. At the same time 
and as a further condition of receiving any of these funds, 
UNC should submit a five-year plan defining its 



16 



biotechnology development program, as best it can based upon 
current perceptions of its needs and expected state and 
other funding, with the understanding that this plan will 
change from time to time. In any event, the report and 
five-year plan should be submitted not later than January 1, 
1986. Thereafter, UNC would be required to update the five 
year plan on January 1, 1987 and on January 1, 1989. In 
preparing the original five-year plan, and in updating it, 
UNC would consult with NCBC, though NCBC's approval of the 
plan is not required. The baseline report, the five year 
plan and its updates, would be sent to the General Assembly, 
with copies going to the Governor and NCBC. 

The Board of Governors would also provide, by January 1 
of each year, a report of the specific activities carried 
out during the preceding fiscal year with the funds provided 
in this plan, as v;ell as the specific activities carried out 
with other funds regardless of the source, and which would 
also include the economic impact of these activities, and 
what efforts have been made at dissemination of the results, 
where appropriate. This report would also be provided to 
the General Assembly, with copies going to the Governor and 
NCBC. 

Both the Department of Commerce and the Agricultural 
Extension Service would also be required to report to the 
General Assembly, with copies to the Governor and NCBC, on 
January 1 of each year, outlining their activities in the 
field of biotechnology during the preceding fiscal year, the 



17 



economic impact of their efforts, and, where appropriate, 
their efforts at dissemination of biotechnology-related 
information. 

XI. The study committee urges the commercial financial 
institutions of the state to be sure they keep pace with 
high technology oriented business efforts in our state by 
maintaining staffs which are attuned to the special needs of 
these businesses. 

XII. The study committee also recommends that the Legisla- 
ture remain cognizant of the link between economic growth 
and programs which provide for start-up and growth financing 
for small businesses, as well as programs that are nurturing 
during the beginning years of these businesses, and that it 
be prepared to respond to these needs as development efforts 
in biotechnology and other high technology areas create more 
and more small businesses. 

XIII. The study committee recommends that the Department of 
Community Colleges and the Department of Public Instruction 
continue to work closely with NCBC so that their respective 
programs will keep pace with the developments in 
biotechnology . 

XIV. The study committee does not recommend any state 
action at this time to regulate the research, development or 



18 



production aspects of biotechnology because the federal 
government is presently involved in a comprehensive mul- 
ti-agency review ot the federal regulatory structure as it 
applies to biotechnology. It is expected that the results 
of this review will be published during January, 1985. It 
is the feeling of the study committee that additional layers 
of regulation should not be added unless efforts on the 
federal level appear to be inadequate. 

XV. The study committee recommends the adoption of the 
legislation included as Appendix H of this report, beginning 
on page 99. 

XVI. The study committee recommends the continuation of the 
study committee for the 1985-87 biennium for the purpose of 
continuing the General Assembly's inquiry into the subject 
of biotechnology in North Carolina, and recommends adoption 
of the legislation included as Appendix I of this report, 
beginning on page 108. 



19 



Summary of Report and Recommendations 

The Biotechnology Study Committee has met nine times 
during the twelve months it has been at work, and has 
received extensive information concerning all of the areas 
it was requested to study. The committee has reached the 
conclusion that a comprehensive biotechnology development 
effort supported by state funds can produce significant 
tangible economic results across the entire state, and at 
the same time ensure that the public and private universi- 
ties and colleges in the state maintain their academic 
excellence. 

Testimony before the committee has shown that the 
effects of what has been termed the "biotechnology revolu- 
tion" will be pervasive on a worldwide basis. North Caroli- 
na is in a unique position to take advantage of the positive 
effect of the developments in biotechnology because many of 
these developments pertain directly to areas already of 
economic importance to the state. These include agricul- 
ture, forestry, pharmaceutical research and production, 
marine biology, food processing and pollution control. In 
addition, there are emerging commercial areas unique to 
biotechnology development, such as bioprocess instrumenta- 
tion and control, where North Carolina is in a good position 
to capture a significant market share. 

There has been agreement by virtually everyone who has 
testified before the study committee, and by the committee's 



20 



Economic Advisory Panel, that North Carolina is in a unique- 
ly favorable position to stimulate biotechnology-related 
development, both academically and commercially, because of 
the strengths of its universities, the existence of busi- 
nesses and industries which can benefit from biotechnology 
and are likely to exploit it, the state's desirable business 
climate, and even its desirability as a place to live. 
Agriculture and forestry, two of the most important and 
geographically well-spread economic forces in our state 
could benefit greatly from focused advances related to them. 
Appropriate skills exist in our work force which can be used 
in areas of commercial development such as biomedical 
manufacturing and bioprocess instrumentation and controls, 
and where new skills are needed, we have the ability to 
teach them in our colleges, universities, and community 
colleges . 

There is competition in other states, and, indeed, in 
other countries. The window of opportunity which exists for 
North Carolina in this area is limited in size and will 
close in a relatively short period of time due to this 
already existing competition. The most significant benefits 
will go to those states which have acted aggressively. 
Therefore, if North Carolina is to take advantage of this 
emerging opportunity, it must act now, and its commitment 
must be visible. The program proposed is for a five year 
period because in testimony before the committee it has been 
estimated that this is the period during which we must 



21 



capture our share of this market or lose out to other 
states . 

The investment of state funds aimed at 
biotechnology-related objectives should be for the attrac- 
tion and support of world-class researchers and for promot- 
ing interaction between universities and industry, bridging 
any gaps between them, so that, where appropriate, the 
results of basic research can quickly benefit industrial and 
agricultural development. In addition, there needs to be 
aggressive promotion of the state as an international center 
of excellence for biotechnology, both academically and 
commercially. 

This two-pronged approach, which recognizes both 
economic and academic development in the area of 
biotechnology, exploits the linkages between them. As one 
of the committee members. Dr. Roy Morse, who heads R. J. 
Reynolds, Inc.'s research and development efforts, pointed 
out, applied technology, no matter how strongly we support 
it, will wither if there is not a strong basic research 
effort as well. On the other hand, applied technology and 
economic development efforts can stimulate academic growth 
because they heighten the interest of the business community 
in contributing financially and intellectually to that 
effort, and create an environment which is attractive to 
world-class researchers as well. 

The program outlined in this report includes substan- 
tial monetary support for basic research and teaching, as 



22 



well as components for focused efforts in applied technolo- 
gy, agriculture, forestry and other commercial activities 
(used in the broadest sense of the word) . It also provides 
the means to promote the diffusion of biotechnology advances 
and to otherwise spread economic development across the 
state. The combination of these components will form the 
underpinning of our efforts to promote the state as a center 
of excellence in biotechnology, maintaining and enhancing 
our existing industries, and recruiting new ones. 

In addition to supporting the spectrum of efforts 
outlined above, the program is designed to show the rest of 
the world that North Carolina has made a commitment to 
biotechnology development because the program is laid out 
with particularity. This is important in attracting both 
industry and world-class researchers. 

This program also provides the means for a cooperative 
effort to frame strategies for economic development which 
will focus on opportunities and problems unique to North 
Carolina and the southeast region. It is contemplated that 
this focus will be provided by the North Carolina 
Biotechnology Center (NCBC) in consultation with appropriate 
groups, such as the universities, the Department of Com- 
merce, the Department of Agriculture, and the commercial 
sector. 

In addition to the recruitment of world-class research- 
ers, the program includes the putting in place of other 



23 



components of research such as younger, but excellent, 
researchers and teachers, equipment, startup research money 
("people and related items" in the table which follows), 
facilities, a strengthening of NCBC, and additional focus on 
biotechnology in the Department of Commerce and the Agricul- 
tural Extension Service. 

There is also a recommendation for the construction of 
bioprocess engineering facilities as part of the development 
program, provided the need is borne out by the study now 
being performed by NCBC. The uses for such facilities 
include the research involved in determining the feasibility 
and methodology of scaling-up from producing a product in 
the laboratory to producing it for consumption, as well as 
other aspects of production technology, A recent report 
prepared for the United States Congress pointed out that the 
United States was comparatively weak in this segment of 
biotechnology development compared to its international 
biotechnology competitors, most notably Japan. That report 
further stated: 

In the next decade, competitive advantage in 
areas related to biotechnology may depend as much 
on developments in bioprocess engineering as on 
innovations in genetics, immunology, and other 
areas of basic science. 

See Commercial Biotechnology; An International Analysis 

(United States Congress, Office of Technology Assessment, 

January 1984) pages 5, 7-8. The study of such facilities 

and the probable construction of them was also recommended 

by the committee's Economic Advisory Panel. See Appendix F 



24 



of this report, pages 63-64. The existence of such facili- 
ties could be extremely attractive to biotechnology-related 
industries seeking to locate production facilities. 

Wherever possible, the programs proposed contemplate 
leveraging of additional non-state funds as suggested in the 
Economic Advisory Panel report. 

Finally, there are extensive provisions for account- 
ability by all recipients of funds under the program so that 
the results of this investment can be followed as the 
program proceeds. 

The investment of state funds over the five year period 
contemplated in this report is outlined in the following 
table: 



25 



FY 



Biotechnology irrogram 
New State Funds Over 5 Years 
(millions) 



5 yr. 
85-86 86-87 87-88 88-89 89-90 Total 



UNC System 
People and 

related items 
Construction of 
facilities 
Total 

NCBC 

All activities and 

administration 
Construction of 
f acil j.ties 
Total 

Bioprocess Engineering 
Facilities 
Construction and 



4.80 4.80 4.80 4.80 4.80 24.00 



17.155 



8.577 8.578 

13.377 13.378 4.80 4.80 4.80 41.155 



4.80 4.80 



.112 1.008 



4.80 4.80 



80 24.00 
1.12 



4.912 5.808 4.80 4.80 4.80 25.12 



equipment 


.66 


2.00 








2.66 


Operation 






.25 
.25 


.25 

.25 


.25 

.25 


.75 


Total 


.66 


2.00 


3.41 


Dept. of Commerce 




.05 


.05 


.05 


.05 


.20 


Ag, Ext, Serv. 




.05 
.10 


.05 
.10 


.05 
.10 


.05 
.10 


.20 


Total 


0.00 


.40 


Grand Total 


18.949 


21.286 


9.95 


9.95 


9.95 


70.085 



26 



In reviewing this program it is important to keep in 
mind that the actual funds invested in the state's 
biotechnology program over the five year period would be 
much higher than shown on the preceding table because of the 
leveraging effect contemplated, and in several instances 
required. With regard to the funding for the UNC system, 
one estimate provided to the study committee was that a UNC 
system program comprised of twenty world-class scientists 
and engineers could result, over a five year period, in 
outside research grants alone totalling $81.85 million. And 
the contemplated leverage effect would not be limited only 
to research grants. There are other areas where outside 
funds would augment the program, such as in monetary support 
of postdoctoral students, grants for acquisition of special- 
ized equipment, and so on. 

It is also important to note that NCBC already has a track 
record of leveraging its state funds with outside funds on a 
dollar- for-dollar basis. It has been estimated that the 
additional $24 million of state funds over the five year period 
would produce more than $20 million in additional non-state 
funds. In order to construct the facilities proposed for NCBC, 
there is a specific requirement in the committee's proposal 
that NCBC must match state construction funds with non-state 
funds on a dollar- for-dollar basis. 

The bioprocess engineering facilities suggested by the 
comjrittee are another example of leveraging state funds. The 
estimated overall cost of such facilities is $8 million. The 



27 



recommendation of the committee provides specifically that 
the $2.66 million of state funds must be matched on a two 
for one basis with non-state funds to produce the total of 
$8 million. Furthermore, it has been estimated that in the 
operation of such facilities, 75 percent of operational 
expenses would come from user fees, with state support 
amounting to only 25 percent. 

This proposal contains funding for the training of 
Department of Commerce personnel in biotechnology subjects 
and for specific targeting of industrial applications in 
biotechnology, for promotion of the state as a biotechnology 
center, for recruitment of industries related to 
biotechnology, and for programs designed to promote 
biotechnology among existing commercial entities in the 
state. This component of the program is important for the 
same reason a sales force is important to any business. You 
can have the best product in the world, but competent and 
aggressive people have to get out and sell it. The study 
committee contemplates Department of Commerce personnel who 
are well versed in the subject area, will use the existence 
of this program to help sell the state as a place for 
biotechnology-related businesses to locate, and who will 
also help promote biotechnology advances among existing 
businesses in the state. The study committee expects the 
Department of Commerce to work closely with NCBC in these 
efforts. This component of a state program was also 



28 



recommended by the study committee's Economic Advisory 
Panel. See Appendix F of this report, pages 64-65. 

The funds proposed for the Agricultural Extension 
Service are important because the economic payback of the 
state's investment related to agriculture and forestry is 
directly tied to the speed with which new developments are 
adopted by the agricultural and forestry interests in the 
state. This was documented by the Economic Advisory Panel, 
which specifically recommended funding for this purpose. 
See Appendix F of this report, pages 64-65, 66-82. The 
proposed funding would be used initially to educate farmers 
and foresters about the coming advances related to 
biotechnology, and as these advances were developed, to 
ensure that they were rapidly put to use. 

The biotechnology study committee believes that the 
program it has proposed strikes a balance between the needs 
of the academic community and the need to produce tangible, 
economic results that will spread across the entire state in 
a relatively short period of time. However, it is important 
to remember that this is a comprehensive program, carefully 
worked out by the study committee, and it is the linkages 
between the various components of the plan which will result 
in a successful state effort. 



29 



Proceedings of the Study Committee 

The Biotechnology Study Committee met a total of four 
additional times after delivering its interim report to the 
1984 Session of the 1983 General Assembly. These meetings 
occurred on September 26, October 15, November 9, and December 
4, 1984. Altogether, the committee met a total of nine times 
during its total term. 

During the May 15, 1984 meeting of the committee, it 
authorized the committee cochairmen to appoint a panel to 
assist the committee in determining whether or not there would 
be sufficient economic returns to justify the cost associated 
with a comprehensive state funded program for biotechnology 
development. If such a program was justified, the committee 
also wanted advice on how the economic benefits could be spread 
across the entire state. Finally, the committee wanted the 
panel to examine the proposals which had been put before the 
committee, as outlined in Appendix F of the committee's report 
to the 1984 Session of the 1983 General Assembly, to determine 
if these proposals would result in economic development or 
whether they should be modified. This panel, which came to be 
known as the Economic Advisory Panel, was appointed by the 
cochairmen in June, 1984. The members of the panel v/ere 
Herbert I.. Schuette , Professor of Business at Duke University, 
who served as chairman; James E. Holmes, a principal of an 
investment banking firm in Winston-Salem and a member of the 
University of North Carolina Board of Governors; Thomas 



30 



Johnson, Professor of Business at North Carolina State 
University; Francis X. Russell, an economist and commercial 
banker in Charlotte; Curtis P. McLaughlin, Professor of 
Business at the University of North Carolina at Chapel Hill; 
Samuel J. Wornom, III, the chief executive officer of a large 
business enterprise with headquarters in Sanford. The members 
of the panel served without compensation. 

The Economic Advisory Panel was assisted by two research 
assistants who were funded by the Biotechnology Study Committee 
and the North Carolina Biotechnology Center. Quentin Lindsey, 
the Governor's Science Advisor, Laura Meagher, then Acting 
Administrator of the North Carolina Biotechnology Center, and 
Steven Rose, Counsel to the Biotechnology Study Committee, 
provided additional assistance to the panel. 

The panel met during the months of July and August and 
issued its report entitled Economic Effects of a North Carolina 
Biotechnology Initiative: A Preliminary Study in September of 
1984. The report was presented to the study committee at its 
meeting on September 26, 1984 at the Fuqua School of Business 
at Duke University. 

Selected portions of the panel's report, including the 
Summary of Findings and Recommendations and some of its analy- 
ses of selected economic sectors of North Carolina and 
quantitative assessments of the likely effects of a 
biotechnology initiative on those sectors, are included in the 
Appendix to this report (Appendix F, pages 61-95) . The panel 
concluded that a significant state funded effort in 



31 



biotechnology could result in a substantial economic payback to 
the state in a relatively short period of time provided there 
was a focus on state specific problems, such as those in 
agriculture and forestry and provided further, that efforts 
were targeted toward specific opportunities that the state 
could take advantage of. For example, one of the computer 
models created by the panel for purposes of its study showed 
that a breakthrough in agriculture biotechnology in even a 
single area, such as corn, could return approximately $42 
million in incremental farming profits over a 15 year period, 
in discounted 1985 dollars. (Appendix F, page 74.) Using 
an industrial example, in the bioprocess 
instrumentation sector, the panel found that the state could 
realize an added payroll of $200 million in 1985 dollars over a 
fifteen year period, provided it focused a significant effort 
on this particular technology. (Appendix F, page 95.) 

These examples are significant because they also address 
the question of whether the economic benefits can be spread 
across the state. That is, a North Carolina specific 
breakthrough in corn production would have economic impact for 
farmers all across the state. A field such as bioprocess 
instrumentation is one where production could be located in 
many areas across the state because the skills needed for this 
type of production either already exist in our work force, or 
could be provided by the community college system. 

At the request of the study committee, some additional 
examples of potential economic benefits were developed after 



32 



the panel's report was made. These concern forestry production 
and an example pertaining to the biomedical sector, a 
diagnostic kit for Rocky Mountain spotted fever. A summary of 
these, prepared by Professor Schuette, is included in the 
Appendix to this report (Appendix G, pages 96-98). 

The specific recommendations of the panel, in addition to 
the recommendation that a North Carolina biotechnology 
development strategy be targeted, included the admonition that 
the degree of success in a biotechnology initiative also depended 
on creating and supporting centers of basic and applied 
research in science and engineering which would be seen as 
sources of excellence in the field of biotechnology. 

Further specific recommendations included the suggestion 
that the costs and merits of a partially state funded 
bioprocess facility be examined, and if justified that it be 
built; that significant investments in plant and equipment by 
the state should, wherever possible, be made jointly with 
industry and other non-state funds; that NCBC should acquire and 
maintain computer software for use by universities and industry 
in biotechnology research and development; that NCBC should 
lead a cooperative effort with appropriate groups, including 
the state's universities, to frame a North Carolina 
biotechnology industry strategy so that specific industry 
segments could be targeted; that the efforts of the Department 
of Commerce, the Agriculture Extension Service, and the 
Agricultural Research Service should be strengthened, and that 



33 



the ability to train production workers and technicians should 
keep pace with the developments in biotechnology industries. 

Perhaps the most significant recommendation of the Econom- 
ic Advisory Panel was that there should be a major increase in 
the funding support for NCBC over that which had been discussed 
by the study committee up to that time, since NCBC would be the 
vehicle for focusing the state's efforts in biotechnology, and, 
in the opinion of the panel, such a focus was necessary in 
order to obtain a substantial economic payback for the state's 
investment, in a reasonable period of time. Recommendation 
#1 of the Economic Advisory Panel suggested that the 
funding for NCBC be increased by $24 million over a five year 
period, and that $6 million be allocated to the state 
university system over that same period for support of faculty 
positions in focused areas of biotechnology. On this 
recommendation, the panel was evenly split. (The panel was 
unanimous on all other aspects of the report.) While all 
members of the panel agreed that the level of funding for NCBC 
should be increased to $24 million as shown in the report, 
there was disagreement on the allocation of funds to the state 
university system. From the testimony of panel members at the 
September 26, 1984 meeting, it appeared that the split had to 
do with the failure of the report to identify the full scope of 
the state university system's funds. Although the report does 
not say that the university system should be limited to $6 
million over the five year period, and testimony at the study 
committee meeting showed that the panel members who favored the 



34 



recommendation felt that the university system would seek 
additional funds from the Legislature on its own, the wording 
of the report did create this perception. Unfortunately, the 
extremely tight schedule of the panel in order to produce the 
report in time for the September study committee meeting lead 
to the printing of the final draft of the report with only a 
telephone review by panel members. It was apparent from 
listening to the discussion at the September 26th study 
committee meeting that the differences raised by some panel 
members could probably have been resolved had more time been 
allowed. 

Nevertheless, the Economic Advisory Panel had performed 
the task which the study committee asked it to do and the 
bottom line was that, in the opinion of the panel, a signifi- 
cant state effort in biotechnology development was justified 
and that the benefits could be spread across the state, but 
that such an effort required not only significant support of 
the state's academic institutions, but a substantially funded 
economically oriented entity to focus and drive the economic 
segment of the development effort. 

The next meeting of the study committee took place on 
October 15, 1984. The focus of that meeting was to attempt to 
pull together once again all of the information the study 
committee had received and to see if there was a basis for 
agreement on the kind of development effort the state should 
make. The committee concluded that when all of the information 
was put together, it was apparent that a two-pronged approach 



35 



to biotechnology development was needed. That is, the state 
needed to make a significant commitment in academic and 
economic development, producing programs that were complemen- 
tary in a desirable way, but which also had flexibility and 
independence so that they could accomplish their particular 
goals. A comprehensive state program must show its support of 
academic and economic development with sufficient particularity 
so that it appears to the rest of the world that North Carolina 
has made a firm commitment to biotechnology development. This 
would aid in commercial recruitment and also create an 
atmosphere that was attractive for recruiting world-class 
researchers . 

At that meeting, the study committee reviewed a 
comprehensive staff proposal embodying academic and economic 
development which, for the most part, resulted in the 
recommendations in this report. 

The North Carolina Biotechnology Center, which by now had 
become an independent non-profit corporation, was supportive of 
this comprehensive approach. The committee then requested that 
the other parties effected by the proposal, including the 
public and private universities, the Department of Commerce, 
the Agricultural Extension Service, the Department of Agricul- 
ture, the Department of Community Colleges, and the Department 
of Public Instruction, be asked to respond to the proposal. 

The November 9, 1984 meeting of the study committee 
involved a review of all of the responses which the committee 
had requested at its October 15 meeting. All of the responses 



36 



of the effected parties were positive and supportive of the 
proposal. There were some suggestions for minor changes in 
the proposal, which the committee adopted. These involved 
deleting funds which had been proposed for the Department of 
Community Colleges to provide coordination for technical 
training of biotechnology workers. The department had 
informed the committee that it felt it could meet these 
needs out of its normal operating budget. In addition, the 
Agricultural Extension Service had proposed beginning its 
funding for dissemination of biotechnology-related develop- 
ments to farmers two years earlier than was originally 
proposed. It was their feeling that if they began to 
educate farmers about the coming advances in biotechnology 
prior to their actual availability, the dissemination of 
those advances when they were ready for use would be much 
quicker, thereby enhancing the payback to the state and 
promoting further the spread of the economic benefits across 
the entire state. The study committee agreed with both of 
these changes. 

The study committee next heard a report from its 
counsel describing the present status of the federal govern- 
ment's efforts to implement a regulatory structure for 
biotechnology research and development. There is in exis- 
tence a committee known as the Cabinet Council Working Group 
on Biotechnology, chaired by Dr. George Keyworth, President 
Reagan's Science Advisor, which includes representatives 
from the National Institutes of Health, the Federal Drug 



37 



Administration, the Environmental Protection Agency, the 
Department of Agriculture, and the Department of Commerce. 
It is the present feeling of the working group that the full 
spectrum of biotechnology-related research and development 
can be regulated within the confines of the existing regula- 
tory agencies. At this time, there is discussion by the 
working group concerning the creation of two new committees. 
One would be an interagency committee which would deal with 
jurisdictional and administrative issues. The second 
committee would be an advisory committee made up of outside 
consultants who would advise the agencies on science related 
issues. The working group expects to publish its findings, 
which will include guidelines for the various agencies 
involved, around January 1, 1985. This will also include an 
analysis of the existing laws and the existing regulatory 
procedures of the various agencies, as they relate to 
biotechnology . 

Meanwhile the Environmental Protection Agency has 
already published interim guidelines for field testing of 
microbial pesticides, because there were some commercial 
entities ready to do such testing who had asked that guide- 
lines first be established. Federal Register, Volume 49, 
Number 202, October 17, 1984, pages 40659-40661. Of course, 
as was pointed out to the committee in its meeting of 
December of 14-15, 1983, there already exists a regulatory 
structure for experiments carried out with federal funds. 
This is administered by the National Institutes of Health's 



38 



Recombinant Advisory Committee (RAC) . See the study commit- 
tee' s Report to the 1983 General Assembly, 1984 Session, 
page 18. 

The study committee then directed its counsel to draft 
a final report embodying the proposal from the October 15 
meeting, taking into account the changes suggested at this 
meeting, as well as the current information on regulation 
and control discussed above, and adjourned with the inten- 
tion of meeting on December 4, 1984, to review the draft and 
adopt a final report. 

The draft of the report was prepared and mailed to the 
committee members in advance of the December 4 meeting in 
accordance with the rules of the Legislative Research 
Commission. The committee held its last meeting on December 
4, 1984, and adopted this report. 



39 



APPENDICES 



40 



APPENDIX A 



MEMBERS 
LEGISLATIVE RESEARCH COMMISSION 1983-84 



House Speaker Listen B. Rarosey 
Chairman 

Representative Chris S. Barker, Jr. 

Representative John T. Church 

Representative Bruce Ethridge 

Representative John J. Hunt 

Representative Margaret Tennille 



Senate President Pro Tempore 
W. Craig Lawing, Chairman 

Senator William N. Martin 

Senator Helen R. Marvin 

Senator William W. Staton 

Senator Joseph E. Thomas 

Senator Russell Walker 



MEMBERS 
BIOTECHNOLOGY STUDY COMMITTEE 



Senator William G. Hancock, Jr. 
Cochairman 

Senator Robert M. Davis, Sr. 

Senator Charles W. Hipps 

Senator Robert B. Jordan, III 

Senator Kenneth C. Royall, Jr. 

Senator William Staton 

Dr. Wendell Allen 

Dr. Roy E. Morse, Sr. 

Mr. William Veeder 

Steven Rose, Committee Counsel 
Jerry Batchelor, Committee Clerk 



Representative Bobby R. Etheridge 
Cochairman 

Representative Sam Beam 

Representative Marie Colton 

Representative John J. Hunt 

Representative J. P. Huskins 

Mr. Charlie Carpenter 

Dr. Frank Hart 

Mr. James E. Gapinski 



41 



B 



APPENDIX B 

GENERAL ASSEMBLY OF NORTH CAROLINA 
SESSION 1983 

SENATE JOINT RESOLUTION 620* 




Sponsors Senators Hancock, Jordan. 



Pef erredtoi Rules and O pe ra ti on of the Senate . 

June 15, 1983 
' A JOINT RESOLUTION AUTHORIZING THE LEGISLATIVE RESKARCH 

2 COMMISSION TO STUDY THE NEEDS FOR THE DEVELOPMENT OF 

3 BIOTECHNOLOGY IN NORTH CAROLINA. 

'' Whereas, biotechnology is a new frontier of science that 

^ will lead to new products and processes worth UO billion dollars 
^ in the year 2000 and that will affect 70 percent of the GNP in 30 
^ years; and 
^ Whereas, biotechnology is already the basis for new 

q 

products in the human and animal health field and has even 
greater potential to lead to new, valuable agriculture and 

forestry products; and 

1 ? 

Whereas, advances in biotechnology will be critical to 

^^ maintaining the health and vitality of the State's traditional 

industries - agriculture and forestry - and of many of its 

developing industries - pharmaceuticals and health care - and 

biotechnology also will be the basis for the development of new 

small businesses; and 

Whereas, a strong educational, research, financial, and 

institutional base is necessary to attract the substantial funds 

20 

21 42 



10 



15 
16 
17 
18 



GENERAL ASSEMBLY OF f^ORTM CAftOUNA SESSION 1983 " 

^ now being invested in biotechnoloqv and to nurture the 

2 developnent of existing industry and new snail businesses; and 

3 Whereas, Horth Carolina has the potential to realir* 
^ economic benefits from advances in biotechnology, bat the 

5 competition is severe aoong the states to attract the investments 

6 and to nurture the growth in biotechnology; and 

7 Whereas, earlier concerns with the safety of 

8 biotechnology research and development have decreased 

9 substantially; 

10 Now, therefore, be it resolved by the Senate, the House of 

11 Representatives concurring: 

12 Section 1. The Legislative Research Commission shall 

13 review the basis of the projections that biotechnology will have 
lU a pervasive impact on industries such as pharmaceuticals, 

15 agriculture, forestry, chemicals, pollution control, and other 

16 areas that the Commission might identify. 

17 Sec. 2. The Comm^ission shall review the devlopment of 
l'^ the federal guidelines for the safe conduct of biotechnology 

19 research and development and the experiences of other states that 

20 have addressed this issue. 

21 Sec. 1. The Commission shall review the steps being 

22 taken by other states to strengthen their education, research, 
^3 financial, and institutional resources in biotechnology. 

2U Sec. U. The Coramission shall review the current status 

'"5 and luturt> plans of the biotechnology programs in North 

^6 Carolina's universities, the North Carolina Biotechnology Center, 
^7 North Carolina companies, the Department of Commerce, and any 

28 

2 Senate Joint Resolution 620 

43 



GENERAL ASSEMBLY OF NORTH CAROLINA S ES S ! O N 1 983 



1 other organizations concern«»d vith nurturinq the devolopraent of 

2 biotechnology in the State. 

3 Soc. S. The Comaission shall determine the short-tera 
U and long-term needs for North Carolina to be at the forefront of 

5 the technological and econoaic developnients in the rapidly 

6 advancing field of biotechnology. 

7 Sec. 6. The CoBBission Bay call apon any State 

8 department or agency to provide it with information pertinent to 

9 its inquiry. In addition, the Commission may invite 

10 repcesentativ«'s of private industry and universities as woll as 

11 experts from other states and the federal government to offer 

12 pertinent testimony. 

13 Sec. 7- The Commission shall appoint a Committee to 
llj conduct the study outlined above. The membership of the 
1^ Committoe shall consist of five members of the House and five 

16 members of the Senate, two representatives of North Carolina 

17 universities with programs in biotechnology, two officials froB 
13 North Carolina companies engaged in research, development, and 

19 production in biotechnology, and two representatives from the 

20 financial community knowledgeable concerning the investment 

21 climate in biotechnology. 

22 Sec. 8. The Commission shall file a report with the 
2^ i";ovprnor and t!ie c^eneral Assembly no later than Hay 1, 19fi4. The 
?h report shall set forth the Study Commission's findings, 
2"^ conclusions, rf^commen dations, and proposed legislation, if any. 

26 At this time, the Commission also mav r^guest that the studv be 

27 continued. 
28 

Senate Joint Resolution 620 ? 

44 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1983 

^ Sec. 9. The Leqislative Services CoBslsslon shall 

2 provide professional and other staff asaistancfi upon the request 

3 of t hp CoBDission. The Coaaission say vish to seek additional 
l» staff assistance froa the north Carolina Biotechnoloqy Center and 

5 the aniversities. In addition, up to twenty-five thousand 

6 dollars ($25,000) of the appropriations in igsa-S"* and 1984-8S to 

7 the Biotechnology Center in "The Mew Technology Jobs Act" shall 
9 be used by the Center to support this study. 

9 Sec. 10. This resolution shall become effective July 1, 

10 1983. 

11 
12 
13 

114 

15 
16 

17 

1ft 
19 
20 
/I 
22 
?3 

26 
.7 



Senate Joint Resolution 620 
45 



APPENDIX C 



□ 



GENERAL ASSEMBLY OF NORTH CAROLINA 
SESSION 1983 

HOOSE JOINT RESOLOTION 1282* 




Sponsors Representative Bob Ether id ge. 



Ref erredto^ Rules and Operation of th e Ho use. 

June 1U, 1983 

1 A JOINT RESOLOTION ADTHORIZING THE LEGISLATIVE FESEAPCH 

2 COHHISSION TO STUDY THE NEEDS FOR THE DEVELOPMENT OF 

3 BIOTECHNOLOGY IN NORTH CAROLINA. 

4 Whereas, biotechnology is a new frontier of science that 

5 will lead to new products and processes worth tO billion dollars 

6 in the year 2000 and that will affect 70 percent of the GNP in 30 
^ years; and 

8 Whereas, biotechnology is already the basis for new 

^ products in the human and aninal health field and has even 
^^ greater potential to lead to new, valuable agriculture and 
^^ forestry products; and 

'^ Whereas, advances in biotechnology will be critical to 

'3 naintaining the health and vitality of the State's traditional 
^'' industries - agriculture and for«»stry - and of many of its 
developing industries - pharmaceuticals and health care - and 
^^ biotechnology also will be the basis for the development of new 
small businesses; and 

Whereas, a strong educational, research, financial, and 

1 9 

institutional base is necessary to attract the substantial funds 

20 

21 

46 



GENERAL A SSE MBLY OF NORTH CAROLINA SESSION 198 3 

1 DOW being invested in biotechnology and to nurture the 

2 development of existing industry and new saall businesses; and 

3 Whereas, North Carolina has the potential to realize 
h economic benefits froB advances in biotechnology, but the 

5 COB petition is severe among the states to attract the investments 

6 and to nurture the growth in biotechnology; and 

7 Whereas, earlier concerns with the safety of 

8 biotechnology research and development have decreased 
y substantially; 

10 Now, therefore, be it resolved by the House of Representatives, 

11 the Senate concurring: 

12 Section 1. The Legislative Research Commission shall 

13 review the basis of the pro-jections that biotechnology will have 
lli a pervasive inpact on industries such as pharnaceuticals, 
1$ agriculture, forestry, chenicaLs, pollution control, and other 
16 areas that the CoBoission sight identify. 

1? Sec. 2. The Coiiission shall review the devlopnent of 

18 the federal guidelines for the safe conduct of biotechnology 

19 research and development and the experiences of other states that 

20 have addressed this issue. 

21 Sec. 3- The Commission shall review the steps being 

22 taken by other states to strengthen their education, research, 

23 financial, and institutional resources in biotechnology. 

2li Sec. H. The Commission shall review the current status 

^S and future plans of the biotechnology programs in North 

j6 Carolina's universities, the Worth Carolina Biotechnology Center, 

t'/ North Carolina companies, the Department of Commerce, and any 
28 

2 House Joint Resolution 1282 

47 



GE NERAL ASSEMBLY OF NOR TH CAROLINA SESSI ON 19 83 

1 other orqaniza tions concerned with nurturinq the development of 

2 biotechnology in the State. 

3 Sec. 5. The CoBinisslon shall determine the short-teim 
la and long-term needs for North Carolina to be at the forefront of 

5 the technological and economic developments in the rapidly 

6 advancing field of biotechnology. 

7 Sec. 6. The Commission may call upon any Stat*' 

8 department or agency to provide it with information pertinent to 

9 its inquiry. In addition, the Commission may invitf* 

10 representatives of private industry and universities as well a-: 

11 experts from other states and the federal government to offer 

12 pertinent testimony. 

13 Sec. 7. The Commission shall appoint a Committee to 
lli conduct the study outlined above. The membership of the 

15 Committee shall consist of five members of the House and five 

16 members of the Senate, two representatives of North Carolina 

17 universities with programs in biotechnology, two officials from 

18 North Carolina companies engaged in research, development, and 
\^ production in biotechnology, and two representatives from the 

20 financial community knowledgeable concerning the investment 

21 climate in biotechnology. 

22 Sec. 8. The Commission shall file a report with the 

23 Governor and the General Assembly no later than Hay 1, 198i«. The 
2h report shall set forth the Study Commission's findings, 
25 conclusions, recommendations, and proposed legislation, if any. 
<.'( At this time, the Commission also may request that the study be 
■' '' continued. 

28 

House Joint Resolution 1282 3 

48 



GEN£RAL ASSEMBLY OF NORTH CAROLINA SESSION 1983 

1 Sec. 9. The Legislative Services Comaission shall 

2 provide professional and other staff assistance upon the reqaest 

3 of the CoDfl'issioD. The Coaaission may wish to seek additionial 
L staff assistance froa the Worth Carolina Biotechnology ceiiter and 

5 the universities. In addition, up to twenty-five thousand 

6 dollars ($2S, 000) of the appropriations in r983-Rt4 and 19RU-85 to 

7 the Biotechnology Center in "The New Technology Jobs Act" shall 
9 be used by the Center to support this study. 

9 Sec. 10, This resolution shall become effective July 1, 

10 1983. 
11 
12 
13 
lU 
15 
16 
17 
18 
19 
20 

21 

22 

23 

2U 

25 

.'6 

.'f 

c'8 

•♦ House Joint Resolution 1287 

49 



APPENDIX D 



GENERAL ASSEMBLY OF NORTH CAROLINA 
SESSION 1983 

RATIFIED BILL 



CHAPTER 899 
HOOSE BILL 1122 
&N ACT TO CREATE THE NEW TECBNOLOGY JOBS ACT. 

Whereas, unemploy aent rates vary considerably from one 
region of the State to the next; and 

Whereas, the creation of sore and better iob 
opportunities for North Carolinians at all age and skill levels 
in all regions of the State are a top priority in relation to 
balanced growth considerations; and 

Whereas, snail businesses of all kinds, including but 
not liaited to agriculture, aquaculture and forestry enterprises, 
are the primary sources of employaent throughout the State and 
they are likely to reaain the primary sources of eaploynent in 
the future; and 

Whereas, biotechnology is a new frontier of science that 
is already the basis for new products and businesses in the huaaui 
and aniaal health field and has even greater potential to lead to 
new, valuable agriculture and forestry products; and 

Whereas, in recognition of the iaportance of 
biotechnology to the industrial base of the State, the North 
Carolina Board of Science and Technology established the Horth 
Carolina Biotechnology Center to pursue opportunities in 
biotechnology research, education, and business developaent 
special benefit to the State; and 

Whereas, the Biotechnology Center has docuaented that it 
can leverage its State funds with at least an equal additional 
aaount froa non-State sources and that it can contribute to the 
developaent of new and existing businesses and research 
opportunities; and 

Whereas, scientific and technical advances in general 
flowing from research and acadeaic institutions can be applied to 
the developiBPnt of existing and new saall businesses throughout 
the State; and 

Whereas, principal growth iu employment has come froa 
the introduction of new technology; and 

Whereas, adequate capital and affordable space for the 
research activities of existing and new saall businesses are key 
ingredients to the developaent of new and existing saall 
businesses; and 

Whereas, partnerships between State and local 

government, financial institutions, business, labor, and research 
and academic institutions provide the most effective aeans for 
utilizing technological resources to create new jobs throughout 
the State; How, therefore. 
The General Assembly of North Carolina enacts: 

Section 1. G.s. 1438-433 is amended by inserting a new 
subsection to read: 

"(22) The North Carolina Technological Development 

Authority ,". 



Sec. 2- Article 10 of Chapter 143B of the General 
Statutes is amended by addinq a new Part to read: 

"Part 12. North Carolina Technoloqical 
Development Authority. 

"* 1 U3 B- 47 1 . Creation of Authoritj;. --There is hereby created 
the North Carolina Technoloqical Development Authority, to 
increase the rate at which new jobs are created in all reqions of 
the State, by stiauldtinq the development of existinq and new 
small businesses. The Authority shall be administratively 
located within the Department of Commerce, but shall exercise its 
powers independently of the head of that department, as if it had 
been transferred to the Department of Commerce by a Type II 
transfer as defined in G. S. 143&-6(b)- 

"§ 143B-47 1.1. CoB£Osition of Au thor ity. — (a) The Authority 
shall be governed by a board composed of 12 members, eiqht of 
whom shall be appointed by the Governor, two of whom shall be 
appointed by the General Assembly upon the recommendation of the 
President of the Senate under G.S. 120-121, and two of whom shall 
be appointed by the General Assembly upon the recommendation of 
the Speaker of the House of Representatives in accordance with 
G.S. 120-121. Consideration should be qiven to the appointment 
of persons, includinq minorities and females, with technical 
expertise as well as experience in entrepreneurial business 
development and capital formation. 

(b) Members shall serve four-year terms effective July 1, 
1983, and quadrennially thereafter, except that the two members 
appointed by the General Assembly upon the recommendation of the 
Speaker of the House of Representatives shall serve for two-year 
terms effective July 1, 1983, and biennially thereafter. No 
person appointed to a four-year term shall serve more than two 
consecutive terms. 

(c) Vacancies shall be filled by the Governor to serve the 
remainder of the unexpired term, except that vacancies in 
appointments made by the General Assembly shall be filled in 
accordance with G.S. 120-122. 

"§ 143B-471.2. O ffi cers; meetinqs .-- (a) The Governor shall 
appoint from the members of the Authority a chairman. The 
Authority shall elect from amonq its members a Vice-Chairman and 
shall elect a secretary. 

(b) The Authority shall meet at the call of the Chairman, upon 
the written call of the majority of its members or upon 
resolution of the Authority. 

(c) A quorum shall consist of seven members of the Authority. 
"§ 113B-47 1.3- C ompensati on. — Members of the Authority shall 

receive per diem and necessary travel and subsistence expense in 
accordance with G.S. 138-5. 

"^ 143B-47 1.3A. Posters. --I n order to enable it to carry out 

the purposes of this Part, the Authority may: 

(1) Exercise the powers qranted corporations under G.S. 55-17; 

(2) Employ an Executive Director, whose salary shall be set by 
the Governor and the- Authority, after consultation with the 
Advisory Budget Commission. The Authority may employ such other 
professional staff and clerical and secretarial staff as it deems 
necessary within the funds available to it. The salaries of such 
other personnel shall be set under the State Personnel Act; 



House Bill 1122 



51 



(3) 
Balei 

(<♦) 
North 
Dnite 
trust 
purpo 

(5) 

(6) 
and 

(7) 
Part. 

Autho 
the S 
provi 
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The 
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tablish an office for the transaction of its business at 

pply for and accept grants of money froB the State of 
olina, or any political subdivision thereof, fron the 
tates, or from any person, corporation, foundation, 
business or fro« any foreign government for any of the 
authorized by this Part; 

tablish and adainister the incubator facilities program; 
dminister the North Carolina Innovation Research Fund; 

kdopt reasonable rules to effectuate the purposes of this 



n 

rity 
tate 
des 

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ng a 
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(e) Th 

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business 

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faci 
dollar 
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; pr 
may no 
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vers it 
s or c 
progra 
grant 
rity, 
(1) m 
(2) 

m 

r 

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(3) a 

e incu 

Ate b 

conce 

al and 



he unemplo 
the n 
iversif ica 
the inter 
f an incub 
Y grants 
ooperation 
usiness, 
emon strati 
ncubator f 
thority ■ 
lit ies. 
s (1200,00 
in cash or 
ovided , 
t be inclu 
onprof it 
ios, colle 
ombina tion 
ms of thes 

from the 
the corpor 
anage and 

(lovelop 
anaqement 
evident s 
usiness co 
bide by ru 
bator faci 
ut may b 
rn reside 

other sup 



economic 



yment rate, 

eed for industrial and 

tion and development, 

est by the locality in the establishment 

ator facility in the area as manifested 

from public and private sources and 

agreements between local government, 

labor and educational institutions 

ng the probability of the success of the 

acility. 

ay make one-time grants to establish 
A grant may not exceed two hundred 
0) . Local government and interests must 
real estate value any grant made by the 
however, that contributions by State 
ded in the matching grant, 
corporations which are affiliated with 
ges, community colleges or technical 
s thereof to advance the educational and 
e institutions shall be eligible to 
Authority. Pursuant to rules adopted by 
ation shall: 

maintain the incubator facility, 
a mecrhanisB to provide technical, 
and entrepreneurial expertise to 
mall business concerns and to small 
ncerns throughout the area, and 
les adopted by the Authority, 
lity and any improvements shall be owned 
e leased to the corporation. Small 
nts of the facility may be provided 
port facilities and utilities for which 



House Bill 1122 



52 



the corporation may charge them a part or all of the cost. No 
snail business concern may reaain in the facility for more than 
two years. Notwithstanding any other provision of law, the State 
shall not be liable for any act or failure to act of any 
organization granted funds under this Part, or any saall business 
concern benefiting from the incubator facilities proqraa. 

"* 143B-471.5. N orth C arolina Innovation R esearch Fund . — (a) 
The North Carolina Innovation Research Fund is hereby created to 
provide equity financing for the research activities of new and 
existing small business concerns in various regions of the State, 
including agriculture, aguaculture and forestry enterprises. 
This financing is designed to enable small business concerns to 
acquire technical and management assistance and otherwise to 
conduct research leading to new. or improved product or service 
development. 

(b) The Fund will take an equity position in contracting 
concerns through the purchase of stock, the receipt of royalties, 
or other equity instruments. 

(c) The Fund will consist of appropriations from the State; 
monies derived from federal, local governments and private 
grants; receipt of royalties and sale of equities. 

(d) Awards per research project shall not exceed fifty 
thousand dollars ($50,000) per fiscal year. Awards will be 
limited to concerns physically located in North Carolina, but the 
awards shall not be limited to incubator-affiliated projects. 

(e) To protect its investments, the Authority shall make 
development agreements with contracting concerns, to ensure 
proper use of Fund awards and the receipt of royalties, where 
appropriate. Development agreements shall assign all rights to 
abandoned projects to the Authority. 

(f) Any funds received through the receipt of royalties, 
dividends, or the sale of equity instruments shall be deposited 
in the Fund and are available to the Authority for use under this 
Part. " 

Sec. 3. G.S. 120-123 is amended by adding a new 
subdivision to read: 

" (6a) The North Carolina Technological Development Authority 
as created by G.S. 1U3B-U71." 

Sec. 4. Of the funds appropriated from the General Funrl 
to the Department of Commerce in Section 2 of Chapter 761 of the 
1983 Session Laws, for fiscal year 1983-84 the sum of five 
hundred thousand dollars ($500,000) and for fiscal year 1984-85 
the sura of five hundred fifty thousand dollars ($550,000) is 
designated for the purposes of the North Carolina Technological 
Development Authority. Of the funds so appropriated for fiscal 
year 1983-84, the sum of two hundred twenty-five thousand dollars 
($225,000) is available only for the North Carolina Innovation 
Research Fund, the sum of two hundred thousand dollars ($200,000) 
is available only for grants to incubator faciliticj;, and the sum 
of seventy-five thousand dollars ($75,000) is available only for 
the operation of the Technological Development Authority. Of the 
funds appropriated for fiscal year 1984-85, the sum of two 
hundred fifty thousand dollars ($250,000) is available only for 
the North Carolina Innovation Research Fund, the sum of two 
hundred thousand dollars ($200,000) is available only for grants 



House Bill 1122 



53 



t .1 viicnbator idcilitios, ant thf r.ura of ore hundred thousand 
doilatrs ($100,000) is available tor the operation of the 
TPchnolvO] ica 1 Dovelopment Authority. 

.S<m;. S. of the funds appr i)pri .ii rd from the General Fund 
to the Depdrtaient of Comaerce in Section 2 of Chapter 761 of the 
1083 Session Laws, for fiscal year 1983-84 the sum of four 
hundred eiqhty-five thousand dollars ($(435,000) and for fiscal 
year 1081-85 the sum of four hundred ninety thousand dollars 
($'^90,009) is designated for the purposes of the Biotechnoloqy 
Center, provided that funds for fiscal year 1984-85 shall not be 
released unles.-^, tlie Biotechnoloqy Center has raised at least five 
hundred thousand dollars ($500,000) in non-State funds during the 
period beginning with the date of ratification of this act and 
ending on June 30, 1984; provided further that these 

appropriations shall not become part of the continuation budget 
for 1985-87 unless the Biotechnoloqy Center has raised a total of 
one million dollars ($1,000,000) in non-State funds by December 
31, 1984. 

Sec. 6. Of the funds appropriated from the General Fund 
to the Department of Commerce in Section 2 of Chapter 761 of the 
19(3} Session T.aws, the sum of fifteen thousand dollars ($15,000) 
in fiscal year 1983-84 and the sum of ten thousand dollars 
($10,300) in fiscal year 1984-85 is transferred to the 

Legislative Research Commission to conduct a study of the field 
of biotechnology- 
Sec. 7. This act is effective upon ratification. 
In the General Assembly read three times and ratified, 
this the 21st day of July, 1983. 



iAMES_C._GREEN_ 

James C. Green 
President of the Senate 



LISTON B RAMSEY 



Liston B. Ramsey 

Speaker of the House of Representatives 



House Bill 1122 

54 



APPENDIX E 

(Reprinted From the Biotechnology Study 
Corranittee's Report to tlie 1984 Session of 
the 1983 General Assembly.) 



BIOTECHNOLOGY: WHAT IS IT AND WHY IS IT SO IMPORTANT? 
The development of biotechnology, the ability to 
manipulate components of a cell and reproduce the results, 
is a revolution in scientific, agricultural, biomedical, and 
manufacturing processes and techniques. It is not a new or 
separate scientific discipline. One way of looking at 
biotechnology is that it is a collection of new techniques, 
centering on biology, which make possible novel extensions 
and combinations of existing scientific disciplines and new 
industrial applications. These new techniques came about 
with the understanding of the structure of deoxyribonucleic 
acid (DNA), composing the genes of all organisms, combined 
with the ability to manipulate genes and reproduce the 
results of that manipulation. 

These new techniques are revolutionizing many sciences 
and manufacturing processes and will have a pervasive effect 
on everyone's life in the very near future. It is important 
to understand that these techniques are already in use 
today. For example, on April 26, 1984, the New York Times 
Service newswire reported that a major biotechnology compa- 
ny, Genentech, Inc., announced that it had created in the 
laboratory a complex protein vital to the normal clotting of 
blood. It is the protein that is missing or deficient in 
hemophiliacs. Previously, the substance had to be extracted 
irom donated blood. By using gene splicing and cloning 
techniques, that substance can now be produced artificially 



-11- 
55 



and, as a by product of that research, scientists will be 
better able to study the molecular basis of hemophilia and 
possibly develop techniques for prenatal diagnosis of this 
hereditary disease. Insulin is another pharmaceutical 
product that can already be produced using biotechnology 
techniques. Such a product is presently undergoing clinical 
trials. Interferon, which is important to the body's immune 
functions and is thought to inhibit viral infections, can 
also already be produced using biotechnology techniques and 
is thought to hold great promise for such diverse results as 
a cure for the common cold and for certain kinds of cancer. 

The importance of biotechnology in the areas of agri- 
culture and forestry is enormous. Hybridization has always 
been at the forefront Of progress in these areas, with 
scientists developing various strains of plants and trees 
having desirable characteristics for particular applica- 
tions. These include faster growing varieties, disease, 
pest and drought resistance, and characteristics desirable 
for the ultimate use of the product, such as straight- 
growing knot-free trees. The problem has always been that 
the creation of these plants and trees through selective 
breeding has taken many, many years because of the need to 
go through the entire growing cycle for a number of plants 
(in trees this can be 20 years or more) and then attempting 
to select out the ones with the desirable traits and repro- 
duce them again, refining the end product each time. Using 



-12- 
56 



cloning techniques, this whole process can be shortened 
dramatically. 

In the area of pharmaceuticals and medicine, the most 
intriguing idea which the committee heard is the so called 
"magic bullet" technique of disease treatment. This in- 
volves the possibility of producing drugs which will seek 
out only those cells within the body responsible for an 
illness and deliver medication to those cells without 
affecting the rest of the body. For example, in the treat- 
ment ot cancer using chemotherapy, the present techniques 
involve the administration of drugs which are poisonous to 
the cancer cells. The problem is that once placed in the 
body the drugs also affect the other, noncancerous cells in 
the body. Hence, chemotherapy becomes a balancing act of 
administering enough of the treatment to kill the cancer 
causing cells without producing so much other damage in the 
patient's body that the patient is killed by the treatment. 
This is why success rates in chemotherapy treatment are 
erratic and why people experience such harsh side effects 
while undergoing treatment. Using biotechnology innova- 
tions, the desired treating agent could be attached to cells 
which would seek out only those cells in the body affected 
by the cancer, killing those cells but not the other healthy 
ones around them. This same technique would also lend 
itself to the production of all types of vaccines, some 
already produced by other means, others still in research 
stages . 



-13- 
57 



In the areas of pollution control and waste management, 
biotechnology should lead to creation of substances which 
can break down pollutants or waste products into harmless 
products more easily disposed of. A so-called oil eating 
bacteria which can be used to clean up oil spills has 
already been produced and patented . 

The production of chemicals will probably undergo one 
of the most important changes, although this is probably one 
of the longer range results from biotechnology research. At 
the present time, virtually all chemicals are petroleum 
based. In the future, however, it seems very likely that a 
biological, and therefore renewable, basis for chemical 
production will be developed, thus vastly reducing this 
country's, and the world's, dependence on oil. 

The committee has heard that even such things as mining 
may some day be done with biological substances produced by 
biotechnology research. These would seek out and remove 
ores from the earth, having been developed to seek out only 
a particular mineral and separate it from other substances 
which surround it. This technique will probably never 
change the way we mine iron ore or coal, but it may very 
well change the way we seek out rare elements and precious 
metals useful to industry and science. 

Research is presently going on to develop a biological 
basis of information storage for computers. Thus, the high 
technology field of computer development is already being 
viewed as capable of undergoing a further and more 



-14- 
58 



revolutionary change than that which was brought about by 
the development of microelectronics. 

The economic potential of all of this is so enormous as 
to be incalculable. Estimates of the value of biotechnology 
produced products by the year 2000 have ranged from 40 
billion dollars to 100 billion dollars yearly. The point to 
be remembered is that not only will we have new products and 
processes, but that the greatest economic impact will come 
because of the development of new ways of making and growing 
existing products and performing existing processes. This 
means that there will be economic development not only 
because new businesses will be developed to produce new 
products, but also because existing businesses will be 
producing or processing their products by other than their 
traditional techniques. This will mean that they, too, must 
invest in new production and processing facilities. 

The economic benefits to be realized come in the form 
of new investments by businesses and the related jobs and 
economic ripple effect from such investments, and in the 
form of direct benefits from the creation of products 
important to the economy of a given state. In the case of 
North Carolina, these direct benefits would be in the areas 
of agriculture, forestry, and pharmaceuticals, areas upon 
which the state is already greatly dependent for its econom- 
ic well being. 

Finally, if academically strong universities, public 
and private, are important to the well being of the people 



-15- 
59 



of the state, the ability of those universities to partici- 
pate in the biotechnology revolution is a necessity, because 
biotechnology related techniques will become part of basic 
research and teaching in many scientific disciplines. It is 
a necessity our universities have already recognized and 
begun to participate in to the extent that their resources 
allow. 



•16- 
60 



APPENDIX F 
(pages 56-90) 



(Includes the Summary of Findings and Recommendations, 
Appendix C and Appendix I) from the September, 1984 
report of the Biotechnology Study Committee's Economic Advisory 
Panel, entitled Economic E ffects of a North Carolina Biotechnology 
Initiative : A Preliminary Study. See the preceding text, pages 
27-32, in connection with the material which follows.) 



61 



Summary of Findings and Recommendations 

Finding #1: If a significant portion of the various 
state biotechnology programs are focused on the 
application of research to state-specific problems in 
agriculture and forestry, then significant returns in the 
foirm of farming profits are likely in the next 15 years at 
levels substantially in excess of the state investment. A 
breakthrough in agricultural biotechnology even in one 
major category (e.g. corn or hogs) would alone return up 
to $50 million dollars in incremental farming profits, in 
discounted 1985 dollars. 

Finding #2: With proper targeting, the state should 
be able to generate new firm growth and attract new plants 
and research facilities of existing firms to the point of 
being a major player in the world-wide biotechnology 
industry. The degree of success in this regard depends 
critically on creating centers of research (and supporting 
existing ones) in applied and basic science and 
engineering which are seen as sources of excellence in the 
field of biotechnology. In the bioprocess instrumentation 
sector alone, the state could realize an added payroll of 
$200 million in 1985 dollars over the next 15 years, 
provided a focus on this technology arena is adopted by 
state funded programs. 

Finding #3: The effects of biotechnology will be 
realized in a wide variety of economic sectors in North 
Carolina. The impact on new and existing jobs will extend 
to all geographic regions of the state, in part because 



62 



key promising segments of the biotechnology industry 
require the skills already in place in cities and towns 
across North Carolina. Major basic research facilities of 
firms will likely be based near the Triangle universities. 
******* ******** 

Recommendation #1: State funds should be used to 
support basic and applied research in biotechnology. To 
attract top-quality talent and to help focus the research 
on problems generic to industry and state-specific 
agricultural problems, a substantial portion of 
"people-related" support should be allocated to the North 
Carolina Biotechnology Center for the following purposes: 
direct support of interdisciplinary applied research 
staff; competitive grants to researchers at various 
institutes and universities; salary supplements for 
faculty; grants to public and private universities to aid 
in attracting world-class scientists. Up to 80% of the 
"people" support should go for these purposes. The other 
20% of "people" support should be allocated directly to 
support faculty positions in the state-university system. 
Estimated cost: $30 million over 5 years. 

Recommmendation #2: The state through the 
Biotechnology Center should engage appropriate expertise 
to examine the costs and merits of a partially 
state-funded biotechnology pilot plant. This effort 
should be part of specific targeting of bioprocess 
engineering and separation processes for industrial 
development in the state. Studies should be undertaken to 



63 



assess the types of industry infrastructure required to 
establish world leadership in this industry segment. No 
monies should be allocated to a technology- specific pilot 
plant until the study is completed. Estimated cost: 

$50,000. 

Recommendation #3: Significant investment in plant 
and equipment by the state in specific biotechnologies 
should for the most part be made jointly with industry and 
other non-state funds (e.g. NSF, foundations). 

Recommmendation #4: The NC Biotechnology Center 
should acquire and maintain computer software and 
databases which can be shared with the university and 
industry community (primarily in NC, but also worldwide) . 

Recommendation #5: The NC Biotechnology Center should 
lead a cooperativeef fort in consultation with appropriate 
groups to frame a NC biotech industry strategy - with 
specific industry segments targeted (eg bioprocess 
engineering, bioprocess waste management, marine 
biotechnology) . Collaboration between NCBC and 
universities should include a focus on opportunities 
and problems unique to NC and the southeast region. NCBC 
should report annually on the degree of effort which has 
gone toward NC specific problems and opportunities. 

Recommendation #6: The Department of Commerce should 
broaden its programs to include significant attention to 
industrial applications of biotechnology and on the 
problems faced by new start-up companies in the state. In 



64 



cooperation with the Agricultural Research Service and the 
Agricultural Extension Service, it should also develop 
programs for speeding the diffusion of new biotechnology 
products and services in the state economy. Specific 
funding for training state agriculture and industrial 
agents in biotechnology subjects should be allocated. 

Recommendation #7: Specific attention should be paid 
to training production workers and technicians in the 
state's schools and colleges. Appropriate state agencies 
should seek the advice of various biotechnology industry 
representatives about the nature and scope of such 
training. 



65 



APPENDIX 



AN ECONOMIC MODEL 
OF BIOTECHNOLOGY EFFECTS ON 
NORTH CAROLINA AGRICULTURE 
THE CORN EXAMPLE 



66 



EXHIBIT C-1 



A SUMMARY OF THE PROCESS UNDERTAKEN TO EVALUATE CORN 



In developing the corn model we -first studied the 
literature to determine what sort of impact biotechnology would 
have on corn yields. We -found that a growth regulator would be 
available to -farmers within the next five years which, it is 
expected, will enable farmers to increase their yields by 107.. 
Using this as a base, we compiled revenue data for each North 
Carolina county for 1981 (which we believe to be a 
representative year). 



This data was adjusted upwards beginning in 1990 (a 
reasonable time frame based on the literature) to reflect 
anticipated incremental revenue gains. Costs for the growth 
regulator (estimated at $3 an acre) were also taken into 
account. 



The assumption was made in the model that the yield 
increases were specific to the the North Carolina region (and 
climate), and the elasticity of demand for corn was incorporated 
into the model in such a way as to take this into account. If a 
yield gain is achieved nationwide, then all farmers will suffer 
because the demand for corn is inelastic. 



As adoption of the new (biotechnology) hybrid would be 
gradual and likely follow a pattern similar to that of other 
successful agricultural introductions, we incorporated a 
diffusion curve to simulate this real life phenomena. The 
incremental cash flows less costs were discounted back to 1985 
to determine the net present value of such a gain to farmers. 
We have also computed the net present value on a county by 
county basis. For ease of evaluation, the net present value 
figures were separated into two parts - those that accrue before 
the year 2000, and those that accrue during that year and 
after. 



To provide some sensitivity analysis, we have used three 
different discount rates (6%, 107., and 14%), three different 
levels of yield increase, and two different rates of diffusion. 
The model is set up so that further adjustments of the 
parameters may be made if so desired. 



67 



EXHIBIT C-2 



MODEL OF BIOTECHNOLOGY IMPACT ON 
NORTH CAROLINA CORN EARNINGS, 1990 - 1999 



N.C. Corn Revenue 
by County, 1981 



Production Costs (est.) 
and Profits, by County 



N.C. Corn Acreage 
Harvested, 1981 



Growth Regulator 

Cost, $3/acre (est. ) 



Prospective Yield 
(Increases (5% - 15%) 



Incremental Revenue 
Increases, 1990 - 1999 + 



Adjust for Diffusion Lag 
and Price Elasticity 



Discount Earnings Stream 
back to 1985 Dollars 



Estimate 


i of ] 


Earnings Gain 


dL 


le to 


Growth Regulator | 




for 


1990 


- 1999 + 


by 


County in 


1985 dollars 



68 



EXHIBIT C-3 



CORN MODEL BASED ON REGULATOR 



METHODOLOGY 



Revenue (production value) data for corn (for grain) 
was entered 

The percentage of production figures were then deter- 
mined for each county based on the percentage of 
aggregate N. C. revenue received 



N. C. corn production costs were then determined by 
county based on a U. S. cost per bushel figure and the 
percentage of production figures for each county 



Next profits (revenue 
county 



- costs) were estimated for each 



Total revenues for several different increased yield 
scenarios were then computed — these yield scenarios 
were based on literature that discussed prospective 
yield gains 

As increased costs are expected to accompany the pro- 
spective yield gains, these costs were incorporated at 
a rate of $3.00 per acre of 1961 acreage harvested (our 
best estimate) 

Incremental revenue gains were then computed for the 
prospective yield increases -- first without accounting 
for elasticities of demand, and then applying them 

An expected time frame over which the biotechnology 
advancement could be brought to fruition was arrived at 
(based on the literature) and Incorporated into the 
mode 1 

Based on this time frame, a diffusion curve was applied 

to provide us with expected revenue gains for each N. 

C. county over the first ten years following intro- 
duc tion 

The figures arrived at were totalled for each year and 
discounted back to 1S65 (the year the project would be 
initiated) at three different discount rates {6%, 1C?f, 
and ^4%) to provide an expected range of net present 
values for the project 



NOTEi 



We use the term "revenue(s)" to mean value of production 



69 



EXHIBIT C-4 



CORN 
(FOR GRAIN) 
ELASTICITY OF DEMAND EQUALS -0.63 



1979 



1980 



1981 



1982 



1983 



ACRES HARVESTED 

(IN THOUSANDS) 



1690 



1730 



1830 



1570 



1280 



BUSHELS HARVESTED 
(IN THOUSANDS) 



128A40 



103800 140910 158570 



76800 



YIELD PER ACRE 

(IN THOUSANDS) 



76 



60 



77 



101 



60 



COST PER ACRE 

(EXCLUDING LAND) 



178.62 



212.01 245.24 269.76 * 296.74 



COST PER BUSHEL 

(EXCLUDING LAND) 



1.63 



2.35 



2.24 



2.37 



2.52 



TOTAL COST N. C. PRODUCTION 
(EXCL. LAND, IN THOUS - ) 



209357 



243930 315638 375811 193536 



TOTAL VALUE N. C. PRODUCTION 
(IN THOUSANDS) 



377639 403344 



TOTAL PROFIT 

(EXCL. LAND, IN THOUS.) 



62001 27533 



NOTE: COSTS WERE BASED ON A PER BUSHEL BASIS RATHER THAN ON A PER ACRE 

BASIS, WHICH PROVIDES LOWER COST ESTIMATES FOR N. C. COST ESTIMATES 
ARE LOWER UNDER THIS APPROACH BECAUSE N. C. GETS LESS YIELD PER ACRE 
THAN THE NATIONAL AVERAGE, AS CLIMATE AND SOIL CONDITIONS ARE LESS 
THAN IDEAL FOR GROWING CORN. 

NOTE: THERE IS CONSIDERABLE VARIATION IN THE YIELD PER ACRE FROM ONE REGION 

TO ANOTHER ACROSS THE STATE. WE MAY WANT TO TAKE THIS INTO ACCOUNT AT A 
LATER DATE. 



* ASSUMES 6% INCREASE IN COST PER BUSHEL ANNUALLY — THIS WAS THE APPROXIMATE 
AVERAGE INCREASE IN COST BETWEEN 1975 AND 1981 BASED ON THE USDA's 
"ECONOMIC INDICATORS OF THE FARM SECTOR: FARM SECTOR REVIEW, 1982" p. 37 

ELASTICITY OF DEMAND TAKEN FROM: 

THE STRUCTURE OF INDUSTRY (1977), EDITED BY WALTER ADAMS, p. 6 



ACRES HARVESTED AND BUSHELS HARVESTED WERE TAKEN FROM: 
USDA's AGRICULTURAL STATISTICS, 1982 p. 32 
USDA's CROP PRODUCTION, 1983 SUMMARY p. B-16 



COST PER ACRE AND COST PER BUSHEL DATA WERE TAKEN FROM: 

ECONOMIC INDICATORS OF THE FARM SECTOR: FARM SECTOR REVIEW, 1982 p. 



37 



TOTAL VALUE OF N. C. PRODUCTION TAKEN FROM: 

NORTH CAROLINA AGRICULTURAL STATISTICS, 1983 p. 15 

70 



EXHIBIT C-5 



CORN: Production, 1982 



CORN FOR GRAIN 



LEADING 
COUNTIES 



CAChOOT • ISOOOOSuSHElS 



BUSHELS 



Robeson 


8 544 000 


Pitt 


7 623 000 


Baaufori 


6 787000 


Wtyne 


6.262000 


Duplin 


6.237 000 


S«nip»on 


6.100 000 


Johnston 


5.562000 


L«no<r 


5.319 000 


Gr»«n« 


4.762.000 


Wilson 


4.494 000 




71 



EXHIBIT C-6 



CORN YIELD INCREASE 



PRESENT VALUE IN 1985 OF INCREMENTAL REVENUES 
RECEIVED USING VARIOUS 
DISCOUNT RATES 



(IN THOUSANDS OF DOLLARS) 



YIELD INCREASE 

57. 107. 157. 

67. 105772.3 256528.7 406825.5 

DISCOUNT 

RATES /■107. 44681.9 108366.7 171857.3 

147. 23165.1 56182.1 89098.4 



NOTE: THESE FIGURES TAKE INTO ACCOUNT ELASTICITIES OF DEMAND 

NOTE: THESE FIGURES RESULT FROM THE USE OF AN 11 YEAR DIFFUSION CURVE 



72 



EXHIBIT C-7 



u 

r ■) 



LL 

I 

I" ■) 



U y 





< 




Li_ 




u 


,.-., .. 


It:- 


1 r 


P 


f" "■) 


ct 


1 


< 

LlJ 




>- 


1 


u 




U 


.-. 


_l 


IT 


UJ 



) 

Ll 




NulSrdJia JO 13/G1 

73 



EXHIBIT C-8 



CORN YIELD INCREASE 



PRESENT VALUE IN 1985 OF INCREMENTAL REVENUES 
RECEIVED PRIOR TO THE YEAR 2000 
USING VARIOUS DISCOUNT RATES 



(IN THOUSANDS OF DOLLARS) 



YIELD INCREASE 
57. 107. 157. 



67. 

DISCOUNT 

RATES 107. 



147. 



25873.7 


62795.2 


99586.0 


17178.4 


41677.7 


66096.2 


11668.3 


28305.3 


44S88.9 



NOTE: THESE FIGURES TAKE INTO ACCOUNT ELASTICITIES OF DEMAND 

NOTE: THESE FIGURES RESULT FROM THE USE OF AN 1 1 YEAR DIFFUSION CURVE 



74 



EXHIBIT C-9 



CORN YIELD INCREASE 



PRESENT VALUE IN 1985 OF INCREMENTAL REVENUES 
RECEIVED AFTER 1999 
USING VARIOUS DISCOUNT RATES 



(IN THOUSANDS OF DOLLARS) 



YIELD INCREASE 

57. 10-/. 157. 

67. 79898.6 193733.5 307239.5 

DISCOUNT 

RATES 107. 27503.5 66689.0 105761.1 

147. 11496.8 27876.8 44209.5 



NOTE: THESE FIGURES TAKE INTO ACCOUNT ELASTICITIES OF DEMAND 



75 



EXHIBIT C-10 



CORN YIELD INCREASE 



PRESENT VALUE IN 1985 OF INCREMENTAL REVENUES 
RECEIVED USING VARIOUS 
DISCOUNT RATES 



(IN THOUSANDS OF DOLLARS) 



YIELD INCREASE 

5"/. lOV- 157. 

6'/. 123982.5 300715.7 476866.5 

DISCOUNT 

RATES 107. 57533.8 139546.5 221288.9 

147. 32385.8 78550.8 124563.7 



NOTE: THESE FIGURES TAKE INTO ACCOUNT ELASTICITIES OF DEMAND 

NOTE: THESE FIGURES RESULT FROM THE USE OF A 6 YEAR DIFFUSION CURVE 



76 



EXHIBIT C-n 




NOISrdJia JO 13/G1 

77 



EXHIBIT C-12 \ 



CORN YIELD INCREASE 



PRESENT VALUE IN 1985 OF INCREMENTAL REVENUES 
RECEIVED PRIOR TO THE YEAR 2000 
USING VARIOUS DISCOUNT RATES 



(IN THOUSANDS OF DOLLARS) 



YIELD INCREASE 

57. lOy. 157. 

67. 44083.9 106982.2 169627.0 

DISCOUNT 

RATES 107. 30030.3 72857.5 115527.8 

147. 20889.0 50674.0 80354.2 



NOTE: THESE FIGURES TAKE INTO ACCOUNT ELASTICITIES OF DEMAND 

NOTE: THESE FIGURES RESULT FROM THE USE OF A 6 YEAR DIFFUSION CURVE 



78 



EXHIBIT C-13 



CORN YIELD INCREASE 



PRESENT VALUE IN 1985 OF INCREMENTAL REVENUES 
RECEIVED AFTER 1999 
USING VARIOUS DISCOUNT RATES 



(IN THOUSANDS OF DOLLARS) 



YIELD INCREASE 

5"/. 107. 15V. 

67. 79898.6 193733.5 307239.5 

DISCOUNT 

RATES 107. 27503.5 66689.0 105761.1 

147. 11496.8 27876.8 44209.5 



NOTE: THESE FIGURES TAKE INTO ACCOUNT ELASTICITIES OF DEMAND 



79 



EXHIBIT C-14 



INCREASE IN REVENUES DUE TO YIELD INCREASE OF 101 
(IN THOUSANDS OF DOLLARS) ttti 

DISCOUNTED 
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 

COUNTY 



90 


1991 


1992 


1993 


1994 


1995 


1996 


1997 


1998 


1999 


INCREHENTAL 
REVENUES 


1985 NPV 
BY COUNTY 


IFF. 


I DIFF. 


I DIFF. 


1 DIFF. 


I DIFF. 


I DIFF. 


1 DIFF. 


I DIFF. 


: DIFF. 


X DIFF. 


RECEIVED 


(DISCOUNTED 


8Z 


101 


121 


18X 


25: 


351 


501 


701 


80Z 


851 AFTER 1999 


AT 101) 


19.0 


23.8 


28.5 


42.8 


59.4 


83.2 


118.8 


166.4 


190.1 


202.0 


2139.1 


813.8 


^.2 


5.3 


6.4 


9.6 


13.3 


18.6 


26.5 


37.2 


42.5 


45.1 


477.7 


186.4 


0.2 


0.2 


0.3 


0.4 


0.6 


0.8 


1.2 


1.7 


1.9 


2.1 


21.7 


8.5 


15.3 


19.1 


22.9 


34.4 


47.8 


66.9 


95.6 


133.8 


153.0 


162.5 


1720,7 


681.8 


0.4 


0.5 


0.6 


0.9 


1.2 


1.7 


2.5 


3.5 


4.0 


4.2 


45.0 


17.5 


0.2 


0.2 


0.2 


0.4 


0.5 


0.7 


1.0 


1.4 


1.6 


1.7 


17.8 


7.2 


97.7 


122,1 


146.5 


219.7 


305.2 


427.3 


610.4 


854.6 


976.6 


1037.7 


10987.1 


4135.1 


65.1 


81.4 


97.7 


146.5 


203.5 


284.9 


406.9 


569.7 


651.1 


691.8 


7325.1 


2846.6 


55.3 


69.1 


82.9 


124.3 


172.7 


241.8 


345.4 


483.5 


552.6 


587.1 


6216.9 


2390.4 


14.4 


18.0 


21.6 


32.5 


45.1 


63.1 


90.1 


126.2 


144.2 


153.2 


1622.5 


641.4 


1.2 


1.5 


1.8 


2.7 


3.7 


5.2 


7.4 


10.4 


11.8 


12.6 


133,1 


51.6 


5.9 


7.4 


8.9 


13.3 


18.5 


25.9 


37.1 


51.9 


59.3 


63.0 


666,9 


262.3 


15.9 


19.9 


23.9 


35.9 


49.8 


69.8 


99.6 


139.5 


159.4 


169.4 


1793.7 


672.9 


3.0 


3.8 


4.5 


6.8 


9.4 


13.2 


18.8 


26.3 


30.1 


32,0 


338.5 


138.6 


48.8 


61.0 


73.2 


109.8 


152.5 


213.4 


304.9 


426.9 


487.9 


518,4 


5488.6 


2023.1 


14.^ 


17-9 


31.4 


32.2 


**.? 


42.3 


ev.3 


123. 1 


M2.T 


131,9 


160/. 9 


635.6 


5.8 


7.2 


8.7 


13.0 


18.1 


25.3 


36.1 


50.5 


57.8 


61.4 


649.9 


265.6 


9.1 


11.3 


13.6 


20.4 


28.3 


39.7 


56.7 


79.3 


90.6 


96.3 


1019,8 


385.1 


13.2 


16.5 


19.8 


29.7 


41.2 


57.7 


82.5 


115.5 


132.0 


140.2 


1484.6 


561.9 


2.6 


3.2 


3.9 


5.8 


8.1 


11.3 


16.2 


22.7 


25.9 


27.6 


291.7 


112.9 


22.0 


27.5 


33.0 


49.4 


6S.7 


96.1 


137.3 


192.3 


219.8 


233.5 


2472.2 


948.4 


1.6 


2.0 


2.4 


3.6 


5.0 


7.0 


10.0 


14.0 


15.9 


16.9 


179.4 


71.3 


4.5 


5.7 


6.8 


10.2 


14.2 


19.9 


28.4 


39.7 


45.4 


48.2 


510.8 


212.9 


69.3 


86.6 


103.9 


155.9 


216.5 


303.1 


432.9 


606.1 


692.7 


736.0 


7792.8 


2988.7 


36.7 


45.8 


55.0 


82.5 


114.6 


160.4 


229.2 


320.9 


366.7 


389.6 


4125.4 


1601.2 


28.2 


35.3 


42.3 


63.5 


88.2 


123.5 


176.4 


246.9 


282.2 


299.8 


3174.6 


1268.4 


45.9 


57.4 


68.9 


103.3 


143.5 


200.8 


286.9 


401.7 


459,1 


487.8 


5164.6 


1916.0 


1.4 


1.8 


2.1 


3.2 


4.4 


6.2 


8.8 


12.4 


14.1 


15.0 


158.9 


61.4 


18.6 


23.3 


27.9 


41.9 


58.1 


81.4 


116.3 


162.8 


186.1 


197.7 


2093.2 


789.7 


10.6 


13.2 


15.9 


23.8 


33.0 


46.3 


66.1 


92.5 


105.7 


112.3 


1189.4 


446.5 


99.6 


124.4 


149.3 


224.0 


311.1 


435.6 


622.2 


871.1 


995.6 


1057.8 


11200.3 


4432.1 


2.2 


2.8 


3.3 


5.0 


6.9 


9.7 


13.8 


19.4 


22.1 


23.5 


249.0 


98.3 


61.2 


76.5 


91.8 


137.7 


191.3 


267.8 


382.6 


535.7 


612.2 


650.5 


6887.1 


2810.8 


7.9 


9.9 


11.9 


17.9 


24.8 


34.7 


49.6 


69.5 


79.4 


84.3 


893.0 


342.3 


11.1 


13.8 


16.6 


24.9 


34.5 


48.3 


69.1 


96.7 


110.5 


117.4 


1243.3 


513.4 


3.3 


4.1 


4.9 


7.3 


10.2 


14.3 


20.4 


28.6 


32.6 


34.7 


367.1 


145.8 


34.1 


42.6 


51.1 


76.6 


106.4 


149.0 


212.9 


298.0 


340.6 


361.9 


3831.8 


1505.1 


0.2 


0.2 


0.3 


0.4 


0.5 


0.8 


1.1 


1.5 


1.7 


1.8 


19.3 


7.8 


9.1 


11.3 


13.6 


20.4 


28.3 


39.6 


56.6 


79.3 


90.6 


96.3 


1019.5 


403.8 


68.0 


85.0 


102.0 


153.0 


212.6 


297.6 


425.1 


595.2 


660.2 


722.7 


7652.4 


2955.7 


18.3 


22.8 


27.4 


41.1 


57.1 


79.9 


114.1 


159.8 


182.6 


194.0 


2054. 1 


776.8 


45.9 


57.4 


68.8 


103.2 


143.4 


200.7 


286.8 


401.5 


458.8 


487.5 


5161.8 


2089. 1 


11.8 


14.7 


17.7 


26.5 


36.8 


51.6 


73.7 


103.2 


117.9 


125.3 


1326.4 


625.6 


1.1 


1.4 


1.7 


2.5 


3.5 


5.0 


7.1 


9.9 


11.3 


12.0 


127.4 


48.3 


8.6 


10.7 


12.9 


19.3 


26.8 


37.6 


53.7 


75.1 


85.9 


91.3 


966.2 


364.7 


30.4 


38.0 


45.6 


68.4 


95.1 


133.1 


190.1 


266.2 


304.2 


323.2 


3422.1 


1343.0 



80 



5.4 


6.7 


8.0 


12.1 


16.7 


23.4 


33.5 


46.9 


53.6 


56.9 


602.6 


274.0 


46.2 


57.8 


69.4 


104.0 


144.5 


202.3 


289.0 


404.6 


462.4 


491.3 


5201.6 


1972.8 


14.5 


18.1 


21.7 


32.6 


45.3 


63.4 


90.5 


126.7 


144.8 


153.9 


1629.1 


623.0 


0.6 


0.8 


1.0 


1.5 


2.0 


2.8 


4.0 


5.6 


6.5 


6.9 


72.6 


28.4 


72.5 


90.6 


108.7 


163.0 


226.4 


317.0 


452.8 


633.9 


724.5 


769.8 


8150.7 


3188.1 


42.1 


52.7 


63.2 


94.8 


131.7 


184.4 


263.4 


368.8 


421.4 


447.8 


4741.2 


1820.8 


3.3 


4.1 


4.9 


7.4 


10.3 


14.4 


20.5 


28.7 


32.8 


34.9 


369.3 


148.8 


79.2 


99.0 


118.8 


178.2 


247.6 


346.6 


495.1 


693.2 


792.2 


841.7 


8912.3 


3440.6 


6.3 


7.9 


9.5 


14.3 


19.8 


27.7 


39.6 


55.4 


63.4 


67.3 


712.9 


271.2 


1.0 


1.3 


1.5 


2.3 


3.2 


4.5 


6.4 


8.9 


10.2 


10.9 


115.0 


44.2 


1.4 


1.7 


2.0 


3.1 


4.2 


5.9 


8.5 


11.9 


13.6 


14.4 


153.0 


59.9 


62.1 


77.7 


93.2 


139.8 


194.2 


271.9 


388.4 


543.7 


621.4 


660.3 


6990.9 


2644.3 


2.1 


2.6 


3.1 


4.6 


6.4 


9.0 


12.9 


18.0 


20.6 


21.9 


231.5 


91.7 


3.5 


4.4 


5.3 


7.9 


11.0 


15.3 


21.9 


30.7 


35.0 


37.2 


394.3 


161.5 


0.4 


0.4 


0.5 


0.8 


1.1 


1.6 


2.2 


3.1 


3.6 


3.8 


40.0 


15.2 


6.5 


8.1 


9.7 


14.6 


20.3 


28.4 


40.6 


56.8 


64.9 


69.0 


730.3 


291.3 


11.0 


13.8 


16.5 


24.8 


34.4 


48.2 


68.9 


96.4 


110.2 


117.1 


1239.6 


489.8 


28.6 


35.7 


42.9 


64.3 


89.3 


125.1 


178.7 


250.2 


285.9 


303.8 


3216.3 


1340.1 


2.3 


2.9 


3.5 


5.2 


7.2 


10.1 


14.4 


20.2 


23.1 


24.5 


259.7 


101.9 


39.0 


48.8 


58.5 


87.8 


121.9 


170.6 


243.8 


341.3 


390.0 


414.4 


4387.7 


1761.9 


30.9 


38.6 


46.3 


69.4 


96.4 


135.0 


192.8 


270.0 


308.6 


327.8 


3471.2 


1378.8 


11.6 


14.5 


17.4 


26.1 


36.2 


50.7 


72.5 


101.4 


115.9 


123.2 


1304.2 


491.6 


15.4 


19.2 


23.1 


34.6 


48.1 


67.4 


96.2 


134.7 


153.9 


163.6 


1731.9 


661.4 


45.2 


56.5 


67.8 


101.7 


141.3 


197.8 


282.5 


395.5 


452.0 


480.3 


5085.2 


1905.4 


40.1 


50.1 


60.1 


90.1 


125.2 


175.2 


250.3 


350.5 


400.5 


425.5 


4505.8 


1718.9 


44.3 


55.4 


66.5 


99.7 


138.5 


193.9 


277.1 


387.9 


443.3 


471.0 


4987.2 


1908.3 


14.9 


18.6 


22.3 


33.4 


46.4 


65.0 


92.9 


130.0 


148.6 


157.9 


1671.6 


637.0 


126.6 


158.3 


190.0 


284.9 


395.7 


554.0 


791.5 


1108.1 


1266.4 


1345.5 


14246.8 


5416.3 


1.4 


1.7 


2.1 


3.1 


4.3 


6.0 


8.6 


12.0 


13.7 


14.6 


154.4 


60.4 


33.5 


41.8 


50.2 


75.3 


104.6 


146.4 


209.2 


292.8 


334.7 


355.6 


3765.2 


1431.3 


3.8 


4.8 


5.8 


8.6 


12.0 


16.8 


24.0 


33.6 


38.4 


40.8 


431.6 


182.7 


109.3 


136.6 


163.9 


245.9 


341.5 


478.1 


683.0 


956.2 


1092.8 


1161.1 


12293.8 


4882.6 


9.6 


12.0 


14.4 


21.6 


30.0 


42.0 


60.0 


84.0 


96.0 


102.0 


1079.7 


412.9 


15.0 


18.7 


22.5 


33.7 


46.8 


65.6 


93.6 


131.1 


149.8 


159.2 


1685.6 


632.7 


4.0 


5.0 


6.1 


9.1 


12.6 


17.7 


25.2 


35.3 


40.4 


42.9 


454.2 


183.1 


93.5 


116.9 


140.3 


210.4 


292.2 


409.1 


584.4 


818.2 


935.1 


993.6 


10520.0 


4234.1 


8.4 


10.5 


12.5 


18.8 


26.1 


36.6 


52.3 


73.2 


83.7 


88.9 


941.1 


404.6 


34.6 


43.2 


51.9 


77.8 


108.0 


151.2 


216.1 


302.5 


345.7 


367.3 


3889. 1 


1508.0 


6.3 


7.9 


9.4 


14.1 


19.6 


27.5 


39.3 


55.0 


62.9 


66.8 


707.1 


273.8 


21.1 


26.3 


31.6 


47.4 


65.8 


92.2 


131.7 


184.3 


210.7 


223.8 


2369.8 


925.7 


0.2 


0.3 


0.4 


0.6 


0.8 


1.1 


1.5 


2.2 


2.5 


2.6 


27.7 


11.1 


3.0 


3.8 


4.5 


6.8 


9.4 


13.2 


18.9 


26.4 


30.2 


32.1 


339.8 


127.9 


34.2 


42.7 


51.2 


76.8 


106.7 


149.4 


213.5 


298.8 


341.5 


362.9 


3842.1 


1443.4 


24.7 


30.9 


37.1 


55.7 


77.3 


108.2 


154.6 


216.5 


247.4 


262.9 


2783.3 


1160.5 


1.4 


1.7 


2.0 


3.0 


4.2 


5.9 


8.4 


11.8 


13.5 


14.4 


151.9 


65.4 


10.6 


13.3 


15.9 


23.9 


33.1 


46.4 


66.3 


92.8 


106.0 


112.6 


1192.7 


482.4 


4.3 


5.4 


6.5 


9.7 


13.5 


18.9 


27.0 


37.8 


43.2 


46.0 


486.6 


200.0 


61.9 


77.4 


92.8 


139.2 


193.4 


270.8 


386.8 


541.5 


618.9 


657.6 


6962.5 


2624.2 


0.6 


0.8 


1.0 


1.5 


2.0 


2.8 


4.0 


5.6 


6.5 


6.9 


72.6 


27.5 


95.8 


119.7 


143.7 


215.5 


299.3 


419.1 


598.7 


838.1 


957.9 


1017.7 


10775.9 


4231.2 


9.6 


12.0 


14.5 


21.7 


30.1 


42.2 


60.2 


84.3 


96.4 


102.4 


1084.2 


420.7 


58.2 


72.8 


87.3 


131.0 


182.0 


254.7 


363.9 


509.5 


582.3 


618.7 


6550.7 


2604.1 


30.9 


38.6 


46.4 


69.5 


96.6 


135.2 


193.1 


270.4 


309.0 


328.3 


3476.5 


1322.6 


0.5 


0.6 


0.7 


1.1 


1.5 


2.1 


3.0 


4.1 


4.7 


5.0 


53.1 


21.1 



2476.2 3095.3 3714.4 5571.5 7738.2 10833.5 15476.5 21667.0 24762.3 26310.0 278576.3 

81 



THE NET PRESENT VALUE ARRIVED AT WHEN DISCOUNTING THE PROJECTED 
INCREMENTAL REVENUE FLONS IS INDICATED BELOW. IT IS DISCOUNTED BACK TO 
1995, THE YEAR WHEN THE PROJECT WOULD HOST LIKELY BEGIN. 



19B5 YIELD INCREASE 

EQUALS lOZ 
tttt 



NPV 2 

lOZ 10836&.7 



ASSUnPTIONSi 

Revenues per busJiel are the saee 4or all N. C. counties 

Costs are sieilar to U. S. average corn production costs per bushel 
excluding land 

Costs are allocated across counties in proportion to las a set 1 oi) the 
revenues of that county 

The cost of the regulator -that allow for increased yields is $3.00 per 
bushel as eipected 

The pace of diffusion foUotn a tit* fraie sitilar to nhat m have laid 
out 

There is a reduction in price accotpanying the increase in the quantity 
produced by N. C. 

t this is based on available inforeation on the elasticity of 
detand for corn (m used -0.&3 as the elasticity) 

t it is also assumed that the increase in yield exclusively 
takes place in N. C. 

t it is also asEuaed that there is no ujor change in planting 
in N. C. oc in other states 

I finally, this price and quantity relationship is based on the 
preeise that there are no aajor changes in cross-elasticities 
of deiand 



NOTE: The tere 'revenue<s)' is frequently used in the accoipanying charts. In 
the context of these charts Me have used it to refer to the value of 
production. 



82 



APPENDIX D 



POTENTIAL FOR NORTH CAROLINA 
INDUSTRY DEVELOPMENT IN 
BIOPROCESS ENGINEERING 



83 



BIOPROCESS ENGINEERING AND BIOLOGICAL 
SEPARATION TECHNIQUE PRODUCING FIRMS 

The generalized definition of bioprocessing is the 
following: The substrates and the nutrients are prepared 
in a sterile medium and are then put in to a fermenter 
with some form of a biocatalyst such as enzymes. Under 
controlled conditions the substrate is converted into the 
product and, when the desired degree of conversion has 
been achieved, byproducts such as new proteins, different 
enzymes and waste products are separated from one another. 

The importance of bioprocessing separation 
instrumentation and techniques is that they are all used 
presently or will be used in the future in an effort to 
make the production of biotechnological products 
cost-effective as well as profitable to the manufacturing 
companies that are involved with these compounds. Areas 
of business in which separation and purification 
instrumentation will be or are presently used are the 
following: 1) pharmaceutical industry; 2) food processing 
industry; 3) the specialty and commodity chemical 
industries; 4) waste management industry and pollution 
control efforts, and 5) farming (plants and animals). (See 
TABLE I) 

The design and manufacture of separation and 
purification instrumentation is one very important and 
very open industrial niche in which small companies have 
the chance to become leaders in this area of 



84 





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85 



biotechnology. As the principles and applications of 
biotechnology lead to a more mature industry in the 
future, this would allow for a major new industry to 
become well established in North Carolina over the next 
several years. Also, with more cost effective production 
processes available for biotechnological products, 
financial and commercial success for North Carolina 
companies making final products will be more likely, given 
a head start through working with area-based bioprocess 
research groups. 

Separation and Purification of Products. 

The aspects of bioprocess engineering most in need of 
development are separation and purification techniques. 
The need for development is quite apparent when the 
production of novel products such as proteins is 
considered. The current possibilities for improving 
techniques are the following: 

(1) Ultra-filtration — membranes and other filtration 
systems: According to the Congressional Office of 
Technology Assessment the U.S. companies making advances 
in this area include Millipore, Amicon and Nucleopore. 

(2) Continuous chromatography and high performance 
liquid chromatography: According to the OTA, if these 
laboratory-proven techniques could be scaled up to the 
level required by industry, it would be possible to 
collect a crude product from the medium and then 
selectively recover the product, reusable nutrients and 

-D-2- 

86 



inhibitory substances separately. A Millipore subsidiary. 
Waters, claims to have developed a pilot scale 
chromatographic unit of this type. 

(3) Electrophoresis: Electrophoretic methods, 
especially continous flow, can separate proteins, peptides 
and nucleic acids on the basis of their electrical charge. 
The major advantage of electrophoresis is that it can run 
continously and can effectively separate molecules in 
large sample volumes. 

(4) Monoclonal antibody affinity columns: 
Immobilized MAbs are being used as purification agents for 
protein products because this technique best suits large 
molecular weight and high value added products such as 
proteins . 

High performance liquid chromatography (HPLC) is used 
to identify particular compounds in a mix of compounds and 
is one of the fastest growing instrumentation fields 
according to the OTA. Another technique, flow cytometry, 
has potential use in measuring process variables such as 
cell size and cell viability. Growing sales of HPLC are 
due to its expanded use in both analytical and preparative 
areas. HPLC ' s are also considered standard analytic tools 
in the laboratory to accurately isolate an purify organic 
molecules, drugs and proteins. HPLC ' s have recently been 
scaled-up successfully to monitor bioprocesses and purify 
large quantities of leukocyte interferon (protein entity) . 



-D-3- 
87 



According to the Congressional Office of Technology 
Assessment, technical advances in separation and 
purification as well as monitoring will affect both 
laboratory research and commercial production, and, in the 
long run, the U.S. competitive position in biotechnology. 
The production of low-volume, high value-added products 
and high-volume products through the use of recombinant 
DNA technology has greatly increased the need to further 
support research and development programs centering on the 
development of more economic bioprocesses . One 
determinant of how quickly companies can reach 
international product markets is the ability to have large 
scale production of biotechnology derived products alona 
with the ability to isolate and purify large quantities of 
desired products. According to the well known report, 
"Commercial Biotechnology: An International 
Analysis, OTA, " a country that possesses the most advanced 
separation and purification technology in relation to 
commercially important compounds might gain some 
commercial advantages in the early stages of production, 
success in biotechnology may be difficult to achieve. 

In the United States, Europe, and Japan, there is 
intense competition in research and development to develop 
improved large-scaled separation and purification 
techniques for biological compounds as well as techniques 
for monitoring and controlling bioprocesses. To decrease 
the manufacturing costs of compounds such as proteins, 

-D-4- 



88 



there is a concerted effort to apply HPLC , continuous - 
flow electrophoresis, and flow cytometry to bioprocesses . 
There is also an increased research and development effort 
to solve problems involved with the scaling-up of 
analytical instruments, particularly HPLCs , from the 
laboratory level to the industrial level for use in larger 
volume production processes. According to the Office of 
Technology Assessment, the United States is a recognized 
leader in analytical instrumentation used in biological 
research as well as in hollow fiber and membrane 
technology (hardware support, i.e., advanced solid matrix, 
membrane, and hollow fiber design). With increasing 
research and development centering around the automation 
of bioprocesses and the use of sophisticated 
instrumentation to monitor and control the production 
process, there will be a gradual transformation of 
bioprocessing from an art to a science, thereby making 
production more economical. Also as this transformation 
occurs, a few United States companies, such as Varian, 
Beckman Instruments, Waters, Perkin Elmer, and Hewlett 
Packard, will be in a strong competitive position to 
remain leaders in this technically innovating field. 
However the growth in the market and continuing innovation 
would seem to leave plenty of room for new start-ups in 
this industry segment. 

Other examples of instrumentation will most likely be 
developed and used as bioprocess engineering is supported 

-D-5- 



89 



by research and development funding. An example of this 
could be computer - coupled bioprocesses . This process 
can greatly improve the monitoring and controlling of 
growth conditions during a bioprocess run, since computers 
can be used to analyze the data from sensors and other 
monitoring instrumentation and respond to these data by 
adjusting process variables. According to the OTA, 
purification and separation protocols have been developed 
for existing bioprocesses, but new and presently unknown 
bioprocesses will present new challenges to research and 
development teams in the future. 

According to the Congressional Office of Technology 
Assessment, the priorities for future research concerning 
bioprocesses are the following: 1) continued work on the 
practical use of and design of bioreactors for immobilized 
cell and enzyme systems; 2) development of a wider range 
of sterilizable sensors for process monitoring and 
control; 3) improved product recovery techniques, 
especially for the proteins; 4) general reactor design 
and practical approaches to better oxygen transfer; 5) 
inhibition of intracellular protein degrading enzymes; 6) 
improving the genetic stability of recombinant DNA 
organisms; 7) .protein secretion mechanisms; 8) improved 
methods for heat dissipation during bioprocessing; 9) 
biochemical and physiological mechanisms for temperature 
and pressure tolerance, and 10) the development of new 



-D-6- 
90 



bioreactor designs and instrumentation for the control of 
cell growth. 

According to Flannery and Steinschneider , the costs 
and profitability of an industrial fermentation process 
will depend upon a large number of variables such as the 
following: 1) the characteristics of the microorganisms 
chosen for the fermentation; 2) the cost of the media; 3) 
the equipment required; 4) the fermentation time, and 5) 
the cost of operations, together with the cost of 
isolation and purification. Also, Flannery and 
Steinschneider said the following about fermentation: 
"The advantages of fermentation processes and the 
potential impact of genetic engineering increase with the 
chemical complexity of the product. .. .Genetic engineering 
opens the way to the production of polypeptides and other 
complex molecules on a large scale and at a potentially 
great cost reduction. For instance, we estimate that 
interferon may be produced using the Genetech process at 
one hundred thousandfold lower cost than isolation from 
natural resources". With the increased potential use of 
fermentation processes in the future, there is a problem 
with the management of the scale-up from the laboratory to 
the industrial setting, according to Flannery and 
Steinschneider. This scale-up requires high capital 
investment in mixing, aeration, and refrigeration 
equipment as well as in monitoring and control devices. 



-D-7- 
91 



Potential Economic Effect 

What follows is an economic analysis of the 
employment levels and sales volume for the separations 
processes used with recombinant DNA manufacturing 
processes through 1999, with an estimate of the potential 
effect on the state of North Carolina if this segment is 
targeted for development. 

According to Emyanitoff and Weinert, the purification 
finishing steps for pharmaceutical industry goods must be 
kept to a maximum of 20 percent of the manufacturing costs 
of goods sold, which itself is kept at approximately 20 
percent of sales volume. Therefore, the separation 
process costs are constrained by the sales value of the 
end pharmaceutical or other important end-product produced 
by conventional manufacturing or recombinant DNA 
manufacturing . 

Emyanitoff and Weinert estimated the total worldwide 
market potential for separations processes by considering 
only the finishing steps for the following high value end 
products which require a high degree of purity and lack of 
toxicity in their production: 1) human pharmaceuticals, 
2) vitamins, 3) veterinary vaccines, 4) amino acids, and 
5) enzymes for industrial use. The projected total 
worldwide market will grow from $48.5 million in 1985 to 
$148.8 million in 1989. Also, the share for recombinant 
DNA products will increase from 28% in 1985 to over 70% in 

-D-8- 
92 



1989. These projected data were derived by estimating the 
markets for products from both recombinant DNA based 
manufacturing and conventional manufacturing and then 
calculating the manufactured cost of goods sold (20 
percent of sales: recombinant DNA manufacturing and 
conventional manufacturing) and then calculating the 
resulting cost of extraction, isolation, and purification 
(separation processes) as 20 percent of recombinant DNA 
manufactured cost of goods sold and 10 percent of 
conventional manufactured cost of good sold. 

The projected sales volume of separation processes, 
extrapolating from this study, is between $460 million and 
$1,400 million for the year 1999. The worldwide market 
potential is broken down into the potential but 
unavailable market and the potential available market. 
The projected growth in separations process sales is based 
on an average annual growth rate of sales of approximately 
60 percent, according to Emyanitoff and Weinert. An 
example of how to calculate the 1989 worldwide market 
potential in recombinant DNA manufacturing separations 
goes as follows: 1) Projected total sales of recombinant 
DNA products in 1989 = $2621 million sales/year. 2) 
Manufacturing cost of goods sold (20% of sales) = $2621 
million x 0.20 = $524.2 million/year. 3) Cost of 
extraction, isolation, and purification (20% of 
manufacturing costs): $524.2 million x 0.20 = $104.8 
million sales of separations processes/year. The 

-D-9- 
93 



projected total sales of recombinant DNA products include 
sales to end-users, the volume of products manufactured 
during scale-up and pilot studies, and products 
manufactured for internal use (clinical trials and other 
tests necessary for obtaining regulatory approval) . 

The total potential market for separation processes 
is unlikely to be available to outside vendors, according 
to Emyanitoff and Weinert. There are many manufacturers 
of recombinant DNA products that will prefer to design 
their own separations techniques and systems. These 
manufacturing companies have an interesting combination of 
a "do-it-yourself mentality" and an extremely competitive 
nature in regard to protecting their proprietary process 
information and technology. Also, the major manufacturers 
of recombinant DNA pharmaceuticals will be established 
corporations that have experienced process engineering 
groups with their own designs and systems for bioprocess 
separations techniques. According to Emyanitoff and 
Weinert, as much as 30 percent of the separations 
processes from recombinant DNA manufacturers will be 
unavailable to outside vendors by 1985, the percentage 
used in our estimates beyond 1985. This percentage of 
firms having self designed separation processes may 
increase as young firms develop their own process 
engineering capabilities and attempt to retain proprietary 
control over designs. 



-D-10- 



94 



If North Carolina targets this industry segment for 
development we have assumed that the state could 
eventually capture ten percent (10%) of the world market 
for separation and purification instrumentation, perhaps 
an ambitious but acheivable share. At 1985 wage levels 
averaging $18,000 per worker, the employment in North 
Carolina firms in 1999 is projected between 4200 and 
13,500, depending on whether one uses the pessimistic or 
optimistic industry growth rates. This translates into a 
1985 present value payroll of $200 million to $400 million 
for the period including 1986 to 1999. 

It should also be noted that the nature of the work 
in this industry segment is of the kind already done in 
many towns and cities of the state. Thus the labor force 
and skill base can be found readily in many locations, 
making it possible that the firms would locate in disperse 
localities and regions of the state. 



Key References: 

Flannery,R. and Steinschneider A., 

"Sensitivity Analysis: Fermentation, Economics In Relation 
to Genetic Engineering", Biotechnology , ,Nov. 1983 

Emyanitof f ,R. and Weinert, H., 

"Market-based Analysis of the Economics of Process Engineering" 
Genetic Engineering News , , July/August 1984 



-D-11- 
95 



APPENDIX G 



DUKE 



THE FUQUA 

SCHOOL 
OF BUSINESS 



Duke University 



The Fuqua School of Business 
Durham, North Carolina 27706 
(919) 684-4266 



November 19, 1984 

Senator William G. Hancock 
Representative Bobby R. Etheridge 
Biotechnology Study Committee 
North Carolina General Assembly 
Raleigh, North Carolina 27611 

Dear Senator Hancock and Representative Etheridge: 



In response to your request, I have completed some 

additional analyses of potential economic benefits to the 

State of North Carolina from a significant state 

biotechnology initiative. The summary results address 

examples from the biomedical and forestry sectors; I v/ill 

send you the detailed report under separate cover. The 

efforts of Dr. Phil Carl and Dr. Howard Reisner, UNC-CH 

School of Medicine, were most helpful in selecting and 

preparing the biomedical example. 

Biomedical Sector 

--Diagnostic Aids for Rocky Mountain Spotted Fever 

In the last two decades Rocky Mountain spotted fever 
(RMSF) has risen in incidence from about 200 cases per 
year to over 1100, and is now the most freauently reported 
insect-born disease in the U.S.. North Carolina reports 
more cases of RMSF than any other state, with over 250 
reported cases and 18 deaths in one year. The costs of the 
disease can be measured in direct costs of 
hospitalization, the loss of wages while ill and the loss 
of economic support for families of those who have died 



96 



from the illness. In addition, there is a growing fear of 
contracting the disease from contact with infected ticks, 
which most certainly has a negative effect on tourism and 
recreational enjoyment. 

Currently there is only one diagnostic test to 
confirm that a person indeed has RMSF during the acute 
phase. This test is expensive and not widely available. As 
a result there is likely to be an under-diagnosis of the 
disease, leading to higher rates of mortality. 

Modern biotechnology has made available the 
generation of highly specific monoclonal antibodies which 
can be used to detect traces of infectious organisms. 
There is good scientific reason to believe that through 
additional basic and applied research, a reliable, rapid 
and inexpensive diagnostic kit can be developed which 
could be easily used in a typical doctor's office. Such a 
testing device could provide early and accurate diagnosis 
of RMSF so that appropriate treatment could begin soon 
after symptoms appear. 

Some of the important research related to this 

problem is already underway in the state. Assuming that 

the manufacture and distribution of the RMSF diagnostic 

kits is done by a company in the state beginning in the 

next five years, the economic benefits from this 

development through 1999 are estimated as: 

Reduced mortality and hospitalization $32 million 

Reduced negative effects on tourism 5 million 

Added corporate wages paid 4 million 

(in 1985 dollars) Total $41 million 



97 



Forestry Sect or 

The report of the Economic Advisory Panel, 

Appendix-E, discusses the several potential effects of 

biotechnology on North Carolina forestry. The major areas 

of impact expected in the future are: 

-Improved resistance of trees to pollutants and disease 

-Improved forest yields through genetic breeding programs 

-Improved pest and herbicide resistence 

-Selective tree growing for specialty chemical output 

-Reduced growing time to maturity 

-Availability of more uniform quality in trees 

These benefits are expected from basic and applied 
research in the public and private sectors. In many cases 
the benefits to a particular forest-growing region are 
dependent on having a local or regional research effort 
which is focused on the forestry conditions and problems 
most prominent in the region. 

Assuming that regionally focused research generates a 

combination of productivity improvements of 5% net of 
costs, the value to North Carolina producers would be 
about $70 million in increased profits over the next 15 
years (in 1985 dollars) . 

I hope that this analysis will be useful in the final 
deliberations of the Biotechnology Study Committee. 



Sincerely, 

^A^ v^^[ Z^-VT 

Herbert L. Schuette 
Professor of Business 



98 



APPENDIX H 
SESSION ifl ^^ ^"^^ Biotechnology Development Program 



INTRODUCED BY: 



* 



Referred to: 



1 

2 
3 

4 

5 

G 

7 

8 

9 

10 

11 

12 

13 

14 

1.3 

16 

17 

18 

ly 

20 
21 
22 
23 
24 



A BILL TO BE ENTITLED 
AN ACT TO PROVIDE FOR BIOTECHNOLOGY DEVELOPMENT IN NORTH 
CAROLINA. 

Whereas, the field of biotechnology will have a 
strong economic impact on agriculture, forestry, marine biology 
and aquaculture, pharmaceuticals, medical care, chemicals, 
pollution control, and many other industrial and commercial 
areas important to North Carolina; and 

Whereas, biotechnology-related developments will also 
have positive effects on human health and the environment; and 

Whereas, research and teaching in biotechnology is 
necessary for the maintenance of academic excellence in the 
public and private universities and colleges, and the public 
schools in North Carolina; and 

Whereas, a carefully planned State effort in 
biotechnology development can bring substantial benefits to 
every area of the State through industrial expansion, increased 
employment, increased agricultural productivity, and better 
health care for the citizens of the State; Now, therefore. 
The General Assembly of North Carolina enacts: 

Section 1. Board of Governors Appropriation for 
Programs. - In addition to all other funds appropriated, there 
is appropriated from the General Fund to the Office of the 

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SESSION 19 L^ 



1 

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19 
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22 
23 
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Governor, Office of State Budget and Management, the sum of 
four million eight hundred thousand dollars ($4,800,000) for 
the fiscal year 1985-86 and the sum of four million eight 
hundred thousand dollars ($4,800,000) for the fiscal year 
1986-87, to be placed in a nonreverting Biotechnology Reserve 
for use by the Board of Governors of The University of North 
Carolina to establish new biotechnology research and teaching 
programs. Upon the application of the Board of Governors, 
funds in the Reserve shall be disbursed by the Governor as 
needed, with the advice of the Advisory Budget Commission and 
after notification to the Joint Legislative Commission on 
Governmental Operations. 

Sec. 2. Board of Governors Appropriation for Con- 
struction. - In addition to all other funds appropriated, there 
is appropriated from the General Fund to the Office of the 
Governor, Office of State Budget and Management, the sum of 
eight million five hundred seventy-seven thousand five hundred 
dollars ($8,577,500) for the fiscal year 1985-86 and the sura of 
eight million five hundred seventy-seven thousand five hundred 
dollars ($8,577,500) for the fiscal year 1986-87, to be placed 



r,-, in a nonreverting Biotechnology Reserve for use by the Board of 



Governors of The University of North Carolina to construct new 
space or renovate existing space for the purposes stated in 
Section 1 of this act. Upon the application of the Board of 
Governors, funds in the Reserve shall be disbursed by the 
Governor as needed, with the advice of the Advisory Budget 
Commission and after notification to the Joint Legislative 
Commission on Governmental Operations. 

Page 2. 

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SESSION 19. — 



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Sec. 3. Restrictions On Biotechnology Reserve. - No 
portion of the funds appropriated in Section 1 of this act 



- shall be used for maintenance of efforts or programs funded 
. prior to fiscal year 1985-86. No portion of the funds appro- 
_ priated in Section 2 of this act shall be used to provide space 

- for efforts or programs funded prior to fiscal year 1985-86 nor 
_ shall they be used for any purpose other than providing physi- 



cal space. Any efforts or programs funded with the appropria- 
tion described in Section 1 of this act that are funded during 
the fiscal year 1985-86 and that are in the nature of continua- 
tion items, must be funded in the succeeding fiscal year out of 
the appropriations described in Section 1 of this act. 

Sec. 4. Restrictions on Expending Reserve; Reports. - 
No funds appropriated in Section 1 or Section 2 of this act 
shall be released from the Biotechnology Reserve until the 
Board of Governors of The University of North Carolina submits 
to the President and President Pro Tempore of the Senate, and 
the Speaker and Speaker Pro Tempore of the House of Representa- 
tives, with copies being sent to the Governor and the North 
Carolina Biotechnology Center, a report specifically describing 



<,j the present status of the biotechnology efforts of The Univer- 



sity of North Carolina system, and a report describing its 
biotechnology development program for fiscal years 1985-86 
through 1989-90, based upon current perceptions of its needs 
and expected State and other funding, and provided further that 
in any event, the Board of Governors shall submit those reports 
not later than January 1, 1986. Not later than January 1, 
1987, the Board of Governors shall submit to the President and 

Page L 

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SESSION 19 1? 



J President Pro Tempore of the Senate, and the Speaker and 



2 

3 



5 

6 



10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 



Speaker Pro Tempore of the House of Representatives, with 
copies being sent to the Governor and the North Carolina 



. Biotechnology Center, an update of the biotechnology develop- 



ment program report to take into account changes in its 
biotechnology development program for the remaining years 
_ covered by that report. In preparing its biotechnology devel- 
Q opment program report and the update, the Board of Governors 
g shall consult with the North Carolina Biotechnology Center. No 
further funds may be allocated from the Reserve established in 
Section 1 and Section 2 of this act unless this update is 
submitted; however, the update must be submitted by the date 
specified regardless of whether additional funds are requested 
from the Reserve. 

Sec. 5. Board of Governors; Activity Reports. - By 
January 1, 1987, the Board of Governors of The University of 
North Carolina shall submit to the President and President Pro 
Tempore of the Senate, and the Speaker and Speaker Pro Tempore 
of the House of Representatives, with copies being sent to the 
Governor and the North Carolina Biotechnology Center, a report 
of the specific activities carried out during the fiscal year 
1985-86 with the funds provided in Section 1 and Section 2 of 
this act, as well as the specific activities related to 
biotechnology carried out with other funds, regardless of the 
25 source. This report shall include the economic impact of these 
2g activities and a description of the efforts that have been made 
Qijr to disseminate the results of these activities. A similar 

18 

Page 4. 



SESSION 19 __1? 



3 



10 
11 
12 
13 

14 



^ report shall be submitted to the same parties by January 1, 

2 1988, covering the activities in fiscal year 1986-87. 

Sec. 6. Department of Commerce; Appropriation for 
^ Biotechnology Center Programs. - In addition to all other funds 
g appropriated for this purpose, there is appropriated from the 
g General Fund to the Department of Commerce the sum of four 
^ million eight hundred thousand dollars ($4,800,000) for the 
g fiscal year 1985-86 and the sum of four million eight hundred 
g thousand dollars ($4,800,000) for the fiscal year 1986-87, said 
sums to be used for the purpose of entering into an agreement 
with the North Carolina Biotechnology Center to promote 
biotechnology research and development in North Carolina. The 
full amount of each appropriation shall be transferred to the 
North Carolina Biotechnology Center pursuant to such agreement. 
15 Sec. 7. Department of Commerce; Appropriation for 

jg Biotechnology Center Facilities. - There is appropriated from 
jY the General Fund to the Department of Commerce the sum of one 
jg hundred twelve thousand dollars ($112,000) for the fiscal year 
jg 1985-86 for the purpose of planning, site acquisition, and site 

20 preparation for facilities for the North Carolina Biotechnology 

21 Center, and the sum of one million eight thousand dollars 

22 ($1,008,000) for the fiscal year 1986-87 to be used to complete 

23 the construction of facilities for the North Carolina 

24 Biotechnology Center. No funds appropriated in this section 

25 may be expended until the North Carolina Biotechnology Center 

26 has obtained commitments from nonState sources for one million 

27 one hundred twenty thousand dollars ($1,120,000) in additional 

28 funds for the construction of these facilities. The 

Page 1 



SESSION 19 -L^ 



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commitments for nonState funds must be obtained not later than 
June 30, 1986, in order for these funds to be expended. If the 
commitments for nonState funds are not obtained by June 30, 
1986, the funds appropriated in this section shall revert to 
the General Fund. The facilities constructed with the funds 
appropriated in this section shall remain the property of the 
State. 

Sec. 8. Restrictions on Biotechnology Center Appro- 
priations; Report of Proposed Activities. - Prior to receiving 
the funds appropriated in Section 6 or Section 7 of this act, 
the North Carolina Biotechnology Center shall produce a report 
detailing its proposed activities for fiscal years 1985-86 and 
1986-87 and submit copies of this report to the President and 
President Pro Tempore of the Senate, the Speaker and Speaker 
Pro Tempore of the House of Representatives, the Governor, the 
Advisory Budget Commission, the Joint Legislative Commission on 
Governmental Operations, the Department of Commerce, the 
Commissioner of Agriculture, the Secretary of Natural Resources 
and Community Development, the Board of Science and Technology, 
the Board of Governors of the University of North Carolina, the 
President of the North Carolina State Board of Community 
Colleges, the Superintendent of Public Instruction, and the 
administrations of the private universities and colleges in the 
State. A similar plan, covering the proposed activities for 
fiscal years 1987-88 and 1988-89, shall be prepared and sent to 
the same parties not later than January 1, 1987. 

Sec. 9. Biotechnology Center; Reports From Funding 
Grantees. - The North Carolina Biotechnology Center shall 

Page 6_ 

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SESSION 19__. 1? 



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25 

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27 

28 



J require annual reports of the activities of its funding grant- 

2 ees and the economic impact or potential economic significance 

3 of their work. These reports shall include the grantees' 
^ efforts at disseminating the results of their work. 

5 Sec. 10. Biotechnology Center; Reports to General 

Assembly. - By January 1, 1987, the North Carolina 
rj Biotechnology Center shall submit to the President and Presi- 

8 dent Pro Tempore of the Senate, and the Speaker and Speaker Pro 
g Tempore of the House of Representatives, with a copy being sent 
to the Governor, a report that details all of the North Caroli- 
na Biotechnology Center's efforts during the fiscal year 
1985-86, assesses the overall economic impact of those efforts, 
and describes the dissemination of developments related to 
biotechnology. In addition, the report shall include all the 
information the North Carolina Biotechnology Center was re- 
quired to receive from its grantees under Section 9 of this 
act. A similar report shall be submitted to the same parties 
by January 1, 1988, covering the activities in fiscal year 



1986-87. 



Sec. 11. Department of Commerce Appropriation for 
Training and Biotechnology Promotion; Report to General Assem- 
bly. - There is appropriated from the General Fund to the 
Department of Commerce the sum of fifty thousand dollars 
($50,000) for the fiscal year 1986-87 to be used to train 
personnel in biotechnology subjects and for the promotion of 
biotechnology development and business recruitment in North 
Carolina. Not later than January 1, 1988, the Department of 
commerce shall submit a report to the President and President 



Page L 

105 



SESSION 19 1? 



1 



6 



Pro Tempore of the Senate, and the Speaker and Speaker Pro 
„ Tempore of the House of Representatives, with copies being sent 
_ to the Governor and the North Carolina Biotechnology Center, 
. outlining its activities in the field of biotechnology during 
f, the fiscal year 1986-87, which shall include the economic 

impact of its efforts and the efforts it has made at dissemina- 
_ tion of biotechnology-related information. 

_ Sec. 12. Agricultural Extension Service Appropria- 

- tion; Report to General Assembly.- There is appropriated from 
the General Fund to the Board of Governors of the University of 
North Carolina, for the Agricultural Extension Service, the sum 
of fifty thousand dollars ($50,000) for the fiscal year 
1986-87, to be used to educate farmers and other agricultural 
and forestry interests in the state about biotechnology and to 
speed the dissemination of biotechnology-related agricultural 
and forestry improvements as they become available. Not later 
than January 1, 1988, the Agricultural Extension Service shall 
submit to the President and President Pro Tempore of the 
Senate, and the Speaker and Speaker Pro Tempore of the House of 
Representatives, with copies being sent to the Governor and the 
North Carolina Biotechnology Center, a report outlining its 
activities related to biotechnology during the fiscal year 
1986-87 and the economic impact of its efforts. 

24 Sec. 13. Department of Commerce Appropriation for 

25 Bioprocess Engineering Facilities. - There is appropriated from 
the General Fund to the Department of Commerce, for the purpose 
of entering into a contract with the North Carolina 
Biotechnology Center for the construction and operation of 



10 
11 
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2G 
27 
28 



Page 8_ 

inf. 



SESSION 19 1? 



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^ bioprocess engineering facilities in the State, the sum of six 

2 hundred sixty thousand dollars ($660,000) for the fiscal year 

1985-86 for the purpose of planning, site acquisition, and 

4 commencement of construction of the facilities, and the sum of 

5 two million dollars ($2,000,000) for the fiscal year 1986-87 to 
g complete the construction of the facilities. No funds appro- 
rj priated in this section may be expended until the North Caroli- 

8 na Biotechnology Center has obtained commitments from nonState 

9 sources for five million three hundred twenty thousand dollars 
($5,320,000) in additional funds for the construction of these 
facilities. The commitments for nonState funds must be ob- 
tained not later than June 30, 1986, in order for these funds 
to be expended. If the commitments for nonState funds are not 
obtained by June 30, 1986, the funds appropriated in this 

15 section shall revert to the General Fund. The facilities 

16 constructed with the funds appropriated in this section shall 

17 remain the property of the State. 

18 S^^- 14. Effective Date. - This act shall become effec- 

19 tive July 1, 1985. 

20 



Page _ 

107 



APPENDIX I 



SESSION 19. 



85 Short Title: Biotechnology Study Continued 



INTRODUCED BY: ^ 



Referred to: 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

IG 

17 

18 

19 

20 



23 

24 



A BILL TO BE ENTITLED 
AN ACT AUTHORIZING THE LEGISLATIVE RESEARCH COMMISSION TO 
CONTINUE TO STUDY THE NEEDS FOR THE DEVELOPMENT OF 
BIOTECHNOLOGY IN NORTH CAROLINA. 
The General Assembly of North Carolina enacts: 

Section 1. The Legislative Research Commission shall 
continue its study of the development of biotechnology in North 
Carolina, with particular attention to the aspects of 
biotechnology referred to in Senate Joint Resolution 620 and 
House Joint Resolution 1282, 1983 Session, and the recommenda- 
tions of the Legislative Research Commission's Biotechnology 
Study Committee submitted to the 1985 Session of the General 
Assembly. 

Sec. 2. The Commission shall file a report with the 
Governor and the General Assembly prior to the 1987 Session of 
the General Assembly and may file an interim report prior to 
the 1986 Session of the General Assembly, if any. 

Sec. 3. The Legislative Services Commission shall 
provide professional and other staff assistance upon the 
request of the Commission. The Commission may seek additional 
staff assistance from the North Carolina Biotechnology Center 
and the universities. 



108 



SESSION 19 — 



Sec. 4. There is appropriated from the General Fund 
to the Legislative Research Conunission the sum of fifteen 
o thousand dollars ($15,000) for fiscal year 1985-86 and the sum 
of ten thousand dollars ($10,000) for fiscal year 1986-87 to be 
e used to support this study. 

Sec. 5. This act shall become effective July 1, 
1985. 



6 
7 
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Page _ 

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