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Universities go corporate
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July 19, 1996: 9:16 p.m. ET
Faced with cutbacks, higher education institutions look elsewhere for money
From Correspondent Fred Katayama
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NEW YORK (CNNfn) - Faced with the threat of cutbacks in federal spending, the nation's colleges and universities are scrambling to find new sources of funding.
And while they're finding money in the form of corporate sponsorships -- some are even spinning off companies themselves.
Already, the spinoffs have had a dramatic impact across corporate America.
Pharmacopeia -- a Columbia University spinoff -- is using new, leading-edge technology to develop drugs faster and cheaper. The small biotech firm has licensed its chemical compounds to giants like Sandoz, Schering-Plough and Bayer.
Joseph Mollica, CEO of Pharmacopeia, said the educational tie-in was vital to his company's success.
"Without this core technology, probably the company wouldn't have come into existence," Mollica said.
The new drug innovations were partly developed by W. Clark Still, a chemistry professor at Columbia.
Pharmacopeia is one of approximately 1,100 companies that have been founded by American universities since 1980. A total of 240 companies were founded by U.S.-based higher-education institutions in fiscal year 1994 alone.
Many universities are boosting spinoffs at a time when they are being threatened by cutbacks in government research funds.
Among the recent high-technology successes that got their roots planted in education are computer workstation maker Silicon Graphics, spawned by Stanford University, and the search engine Lycos, started by Carnegie Mellon University.
In an effort to breed more biotech companies, Columbia opened a research park last year, offering cheap laboratory space to start-up firms.
"Technology transfer is becoming an increasingly important revenue stream," said Michael Crow, vice provost at Columbia.
Technology transfer has meant $50 million this fiscal year for Columbia, roughly 15 percent of the school's total research budget.
The technology transfer boom was sparked by the Bayh-Dole Act of 1980 which allowed universities to patent innovations from federally-funded research efforts and license them to private companies. Licensing activity has increased more than 60 percent in the last three years, yielding $360 million in 1994.
But critics such as Senate Budget Committee member Ron Wyden, D-Ore., charge such programs are a rip-off to taxpayers.
"Their tax dollars are used to promote the original research and then they get charged a premium for a product they've helped develop with their tax dollars," he said.
Others question whether academic institutions should be allowed to take equity stakes like the 4 percent Columbia holds in Pharmacopeia. (175K WAV) or (175K AIFF)
While the methods colleges and universities use to secure the funding they need aren't always well-received, experts say as government looks for ways to shrink, the schools will be forced to look for new earnings streams.
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