Breakthrough Dividend
Chapter 9: U.S. Government Support

Israel is unique in that a significant amount of its scientific, agricultural and industrial research is conducted jointly, supported or catalyzed by binational foundations, mostly with the United States (Germany is second). The very special relationship between the U.S. and Israel has been expressed both in a variety of specific U.S.-Israel cooperative programs, and a tendency for Israelis to offer, and the U.S. to freely select, Israeli proposals in the open international competitions of American agencies, such as the National Institutes of Health (NIH) and Department of Defense (DOD). These arrangements have worked well for both sides, and have further increased trust and mutual respect between the U.S. and Israeli scientists involved.

U.S.-Israel Binational Science Foundation (BSF)

BSF was established by the U.S. and Israeli governments in 1972. It primarily supports joint U.S.-Israel basic and applied research projects in the natural sciences, medicine and biomedical engineering. BSF's Board of Governors has five representatives from the U.S. and five from Israel. An Executive Director, Deputy Director and an Israeli staff in Jerusalem manage the Foundation's ongoing activities. BSF's major source of income is the interest on a $100 million permanent endowment contributed equally, in two phases, by both governments. It is thus financially independent and isolated from direct national political influences. BSF's 1993 research budget was $11.5 million.

Over the past decade, applications to BSF increased while interest on the endowment declined, reducing the number of available grants and acceptance ratio. In response to the financial constraints, the grants competition was split into two parts. Applications in alternate years are limited to either the life sciences (plus medicine and biomedical engineering) or to all other fields. BSF currently receives approximately 370 proposals (split competition) and awards about 100 grants annually. Altogether, BSF has awarded more than 2,100 grants, involving scientists from 298 institutions in 43 states. Projects typically last three years and have an average annual budget of about $35,000. Unlike its sister funds, BARD and BIRD, BSF funds mostly the Israeli team's research. The U.S. partner receives travel money to facilitate participation in the project.

BSF-sponsored studies benefit the United States by extending research resources to achieve milestones that might not otherwise be attainable; introducing novel approaches and techniques that can lead American researchers to move in new directions; confirming, clarifying and intensifying research projects; providing access to Israeli equipment and facilities and early access to Israeli research results that speed American scientific advances. BSF documented no less than 75 new discoveries that probably would not have been possible without foundation-supported collaboration.

During even-numbered years, BSF is an excellent source of funds for putting Israeli scientists to work on basic biotechnology-related research projects in which U.S. investigators have a matching interest. Although BSF has no separate category for biotechnology, many of the 97 basic research projects in "health sciences" and "life sciences" it funded in 1992 have important implications for biotechnology. Projects ranged from "Megakaryocyte Maturation and Platelet Production in Bone Marrow Transplantation" (see Chapter 13), to the "Cloning of Genes that Govern Tumorigenicity," to the "Regulation of Fish Growth Hormone Expression."

Institutions in North Carolina have shared with counterparts in Israel more than $500,000 in BSF grants in the last five years. Two of BSF's 1993 projects involved collaborations between Tel Aviv University and the University of North Carolina at Chapel Hill: "Cloning and Characterization of DNA Repair Genes connected with Xeroderma Pigmentosum Syndrome" and "Ty [Genetic] Recombination in Yeast." For example, Tom Petes, a geneticist at UNC, is doing basic research to discern the rules of recombination. "By looking at the way a cell breaks down in a primitive organism like yeast," he explained, "we hope to gain an understanding of what goes haywire in higher organisms and is thought to cause tumors." Petes is working with a colleague who knows a lot about damage to DNA and DNA repair and finds the collaboration gives him ideas and new ways of thinking. "Without this type of collaboration," says Petes, "you get inbred ideas. The BSF grant allows me to meet and work with other scientists." This is especially important, he added, because money has become tight and it is difficult to go to as many conferences as he used to for such exchanges.

U.S.-Israel Binational Agricultural R&D Fund (BARD)

BARD was established in 1977 by the U.S. and Israeli governments to promote joint agricultural R&D. BARD is funded by the income (about $9 million annually) on a $110 million endowment fund, established by equal contributions from the U.S. and Israel. Grants are typically $250,000-300,000 for three years. Unlike BSF funds, BARD grants are split roughly equally between recipient institutions in the U.S. and Israel. BARD's Board of Directors has three members from the U.S. and three from Israel, who nominate a Technical Advisory Committee (TAC) comprised of five senior scientists from each country. After external peer reviews and panel evaluations in both countries, the TAC recommends funding priorities to the Board. BARD receives about 200 proposals and funds about 35 new grants a year. Since its inception, BARD projects have led to new technologies in drip irrigation, pesticides, fish farming, livestock, poultry, disease control and farm equipment. A summary of benefits derived from BARD research appear in the foundation's publication, Partnership for Tomorrow.

BARD research is directly targeted at (eventual) practical benefits for the U.S. and Israeli farmer, food producer and consumer. On its 10th anniversary in 1987, BARD commissioned an extensive series of external evaluations of its research performance and impact. A team of agricultural economists from the University of Maryland and University of California reported the economic benefits of just five projects--related to cotton, pecans and solarization--exceeded all U.S. investment in BARD. Overall, BARD-sponsored research has generated sales of more than $500 million, tax revenues of more than $100 million and created more than 5,000 American jobs.

During 1979-92, BARD received 2,157 proposals and awarded nearly $113 million to fund 611 (28 percent) research projects. Of these, 68 (11 percent) were in "Cell and Molecular Biology"; however, advanced agricultural biotechnology is also an important component of many other BARD programs, such as plant protection, animal protection and field crops. Examples of typical projects include: "Molecular Approaches to the Control of Cucurbit Potyviruses," "Molecular Genetic Dissection of Juvenile Hormone Synthesis in Drosophila" and "Mitochondiral Molecular Genetics and Milk Production." In fact, a sizable fraction of Israel's top agricultural scientists (about a quarter) have been supported by BARD grants at some point in their career, and much of the information in Chapters 17-19 derives from BARD-sponsored research.

North Carolina State (NCS) and the University of North Carolina (UNC) have received BARD grants worth nearly $2 million since 1987, with NCS receiving the lion's share. For example, Ed Noga, an immunologist at NCS, has been studying the immune response of fish. Most species of fish in warm, brackish seawater found in the Mediterranean, Red Sea, Gulf of Mexico and areas of North Carolina are susceptible to a deadly parasite. Noga and his Israeli collaborators are interested in understanding this response so they can develop ways to immunize against them. Noga finds the project provides "a very productive, positive interaction."

Ben McDaniel, a geneticist at NCS, has found that bulls pass certain useful traits to their daughters more readily than to their sons, supporting similar observations by Israeli animal scientists. His BARD project combined the unique expertise of scientists in Israel, Iowa and North Carolina. In addition, Israel had a molecular genetics lab that NCS did not have. The collaboration has established strong links between McDaniel and his Israeli counterparts.

U.S.-Israel Binational Industrial R&D Foundation (BIRD)

BIRD was established in 1977 to fund joint U.S.-Israeli teams in the development and subsequent commercialization of innovative, nondefense technological products. BIRD shares up to 50 percent of the R&D costs for new joint ventures between U.S. and Israeli companies. The latter can even be R&D subsidiaries of their U.S. partners, a policy which clearly promotes the formation of such subsidiaries. Israel's academic spinoff companies occasionally participate as an Israeli partner and academic faculty often provide specific R&D services for BIRD-funded high-tech companies in such areas as pharmaceuticals and computer software. Most grant recipients, however, are small businesses involved with software, instrumentation, communications, medical devices and semiconductors.

BIRD projects vary from $200,000 to $2.5 million in size, and successful projects eventually repay up to 150 percent of the grant. By 1992 these profit-sharing repayments amounted to $4 million of BIRD's $12 million annual budget. Mini-projects ($200,000 or less) need only the Executive Director's approval, whereas full-scale projects (average budget $1 million) require board approval.

The program has been successful beyond all expectations. Since its inception, BIRD has funded nearly 400 joint high-tech R&D projects (none in North Carolina). Products developed from these ventures have generated sales of more than $3 billion (a 3,300 percent "return" in terms of industrial promotion), tax revenues of more than $200 million in the United States alone and created an estimated 20,000 American jobs.

BIRD's role in promoting biotechnology is unclear. In theory, it could be "just what the doctor ordered," since it sits near the critical juncture between research and the market. On the other hand, it favors existing companies with demonstrable potential products, something still scarce in a new field like biotechnology. Accordingly, most of its existing projects (71 percent) are in the "mature" Israeli fields of electronics, software and communications. This also gives it a definite, if inadvertent, "Silicon State" bias (over half of its projects are in California). In contrast, only one of its 1993 projects was, perhaps, in biotechnology (a "soft-steroid" ophthalmic drug), although three projects were in related fields (medical software and laser surgery). I do not know the source of the contention in a recent Department of Commerce consultant's report that "approximately 10-11 percent of BIRD's funds (i.e., over $1 million a year) are awarded to medical biotechnology," unless they are referring to earlier data or are confusing biotechnology with biomedical engineering, software and electronics. None of BIRD's 1993 mini-projects were in biotechnology, although Savyon Diagnostics did get a mini-grant in 1994.

In all fairness, few Israeli biotechnology groups apply to BIRD, perhaps because they are still unable to find established U.S. industrial partners. In any case, BIRD, like any good venture capitalist, makes decisions based on likely short-to- mid-term profit and payback, which gives established industries, fields and markets a definite advantage.

Biotechnology opportunities are usually long-term affairs with less guaranteed payback. They also tend to be further back on the R&D chain, so they often can't yet make a strong case to BIRD and potential U.S. partners. On the contrary, they need funding precisely to test and put together just such a case. In short, despite its unquestionable success in other areas, BIRD has not been a major player in U.S.-Israel biotechnology to date, and it is far from clear if it is the most appropriate channel for such aid in the future.

The U.S.-Israel Cooperative Development Research Program (CDR)

CDR was established in 1985 as a U.S. Agency for International Development (AID) program to increase the access of less-developed countries (LDCs) in Africa, Asia and Latin America to Israeli scientific, technical and development expertise. It provides funding for Israeli and developing country scientists to cooperate in joint research on significant development problems, while strengthening the future ability of LDC scientists to do such research themselves.

CDR seeks such eventual benefits as improvement of food production, reduction of the burden of disease, provision of employment, or protection of the environment and national resources. Emphasis is given to problems common to several target countries that are not the predominant focus of domestic research funding in the United States. The CDR program emphasizes areas in which Israeli technology and expertise could be particularly valuable to target countries. These areas include arid lands agriculture, irrigation and hydrology and biological pest control. CDR is heavily focused on biotechnology and four of its first seven areas (biotechnology/plants, biotechnology/animals, biological pest control and human health) were explicitly biotechnology based.

Typical CDR projects have included the development of easy-to-use ELISA-based diagnostic tests for pertussis, filariasis and leishmaniasis, the development of sterile-male potatoes for hybrid potato breeding and cloning Newcastle disease virus genes for a new vaccine. Three related areas in which the CDR took an early lead were: tilapia genetics and aquaculture, algae production and use, and biological pest control. Although designed to help LDC's, many successful CDR projects have had major potential benefits for the U.S. as well.

Consider, for example, the well-known Israeli biocontrol agent, the bacterium Bacillus thuringiensis var. israelensis (BTI). Discovered by Ben-Gurion University Prof. Joel Margalit in a Negev pool in 1977, BTI produces spores that contain a potent, highly-selective mosquito and blackfly toxin. Endorsed by WHO and EPA as environmentally-safe, BTI can kill most culex mosquito larvae within minutes. CDR has funded Israeli-LDC teams throughout the world — in Thailand, Sri Lanka, the Philippines, Kenya and Guinea — to adapt and extend BTI technology. CDR-sponsored biotechnologists have successfully cloned the BTI toxin gene, expressed it in more persistent bacterial strains, adapted it to local conditions and introduced a variety of other improvements.

During a recent sabbatical at Harvard, Prof. Margalit helped design an environmentally-safe BTI mosquito control program for Massachusetts. The Governor was sufficiently impressed to personally request $2 million for the successful program from the State Legislature, which was concerned about previous cases of mosquito-borne encephalitis. The Israeli team also offered to help Mississippi Basin States affected by the 1993 flood. U.S. firms are major producers and users of BTI bacteria, all of which derive from the original Israeli culture.

The Middle-East Regional Cooperation Program (MERC)

MERC was created in 1979 to sponsor joint research projects by scientists from Egypt, Israel and the United States. The program focuses on infectious diseases, marine science and arid land agriculture. Of the ten large research projects (total budget $75 million) funded to date, eight (five in agriculture and animal science, two in human health, one in marine resources) have been biotechnology-related.

In 1991, AID contracted for an outside review of MERC. The subsequent report praised the program and recommended that it continue to receive strong government support. It also said the program has "contributed in a modest way to the Middle East peace process." The report outlined several areas for expansion, including the involvement of other Arab countries. With the signing of the Israel-Jordan peace treaty, this is now possible and trilateral projects are being developed, including one involving teams of scientists seeking to establish environmentally safe arthropod biocontrol programs (based on BTI) in the Jordan Rift Valley and the Gaza Strip.

The U.S.-Israel Cooperative Development Program (CDP).

CDP is an AID program that funds training and technical assistance projects run by Israel in developing countries. Administered by MASHAV, the International Cooperation Department of the Israeli Ministry for Foreign Affairs, CDP seeks to solve LDC development problems through practical training (a MASHAV specialty) and problem-oriented, practical research. Past areas of emphasis included: arid lands agriculture, livestock, exotic crops and irrigation. CDP is not a major participant in biotechnology R&D.

Direct U.S. Government Contracts and Grants

U.S. Government agencies often take direct advantage of Israeli technical expertise to meet their own program-specific needs. Since they have the whole world to choose from, the fact that U.S. agencies award so many grants and contracts to Israeli investigators demonstrates the confidence these agencies have in Israel's ability to meet U.S. research needs. The two main "purchasers" of Israeli R&D through this channel are the U.S. National Institutes of Health (NIH) and Department of Defense (DOD). Both have considerable interest in Israeli R&D in biotechnology, and both have invested accordingly. Israel has been the beneficiary, for example, of $2-3 million of direct research grants, and another $6-7 million of other support (on-site advanced training in the U.S., postdoctoral fellowships and contracts) from NIH each year. Israel also receives several million dollars in contracts each year from DOD's Advanced Research Projects Agency and Armed Forces Science Offices. The U.S. Air Force Office of Scientific Research, Office of Naval Research and the U.S. Medical Command also fund research in Israel.

U.S. Government agencies are not the only American organizations with Israeli grantees and partners. Many U.S. public foundations, usually devoted to specific R&D problems in the health sciences, also offer such opportunities, many of them in biotechnology. Organizations such as the American Foundation for AIDS Research, U.S. Juvenile Diabetes Foundation, Diagnostic Technology for Community Health and Dysautonomia Foundation give Israeli researchers a hearing and fund many of them on an open competitive basis.