Scripps Florida Funding Corporation

Scripps Florida Funding Corporation 1

Annual Report 2006

Scripps Florida Funding Corporation

Third Annual Report

For Year Ended September 30, 2006

INTRODUCTION

Florida Statute 288.955 (the “Enabling Statute”) created Scripps Florida Funding

Corporation (“SFFC”) to facilitate the establishment and operation of a biomedical

research institution for the purposes of enhancing education and research and promoting

economic development and diversity. In addition, the Enabling Statute charged SFFC

with the obligation to assure the compliance by The Scripps Research Institute (“TSRI”)

with the Enabling Statute and the agreement between SFFC and TSRI (the “Operating

and Funding Agreement”). The Enabling Statute provides that SFFC shall prepare or

obtain certain reports, audits, and evaluations of TSRI’s compliance with the

performance expectations and disbursement conditions contained in the Enabling Statute.

As such, SFFC is submitting this SFFC Annual Report to the Governor, the President of

the Senate, and the Speaker of the House, as required by the Enabling Statute to be

submitted by December 1 of each year. This SFFC Annual Report addresses the

activities and outcomes of SFFC and Scripps Florida (“Scripps”) for the fiscal year ended

September 30, 2006 (“Fiscal 2006”). The Scripps Florida Annual Report addressed the

activities and outcomes of Scripps Florida for the year ended June 30, 2006, and SFFC

received the Scripps Florida Annual Report on August 31, 2006. The information in the

Scripps Florida Annual Report was informally updated for this SFFC Annual Report.

This SFFC Third Annual Report is presented in two parts: first, a summary that

highlights the substantial events that have occurred during the year ended September 30,

2006; and second, an itemized report that corresponds with the applicable sections of the

Enabling Statute.


Annual Report 2006

About the Scripps Florida Funding Corporation

In November 2003, Governor Bush signed into law an historic piece of legislation that

laid the framework for The Scripps Research Institute to expand its world-renowned

scientific research and endeavors into Florida. The bill, passed by the Florida Legislature

during special session, provided a one-time investment of $310 million from federal

economic stimulus monies to create Scripps Florida and pay certain of its expenses for

the first seven years, specifically salaries and equipment purchases.

To oversee the investment and spending of the State’s investment in Scripps Florida, the

Florida Legislature created the Scripps Florida Funding Corporation, hereto referred to as

SFFC, a nonprofit entity comprised of a nine-member Board. The role of SFFC was

enunciated by Governor Bush:

“My vision for this board is that it manages the financial portion of our

partnership, but lets Scripps do what it does best – conduct biomedical research.”

This report serves to inform of both the requirements and the aspirations as set forth by

the State in the Operating and Funding Agreement with Scripps.

About the Scripps Research Institute

The Scripps Research Institute, headquartered in La Jolla, California, in 15 buildings on

22 acres overlooking the Pacific Ocean, is one of the world's largest independent, non-

profit biomedical research organizations. It stands at the forefront of basic biomedical

science that seeks to comprehend the most fundamental processes of life. Scripps

Research is internationally recognized for its research into immunology, molecular and

cellular biology, chemistry, neurosciences, autoimmune, cardiovascular, and infectious

diseases, and synthetic vaccine development. Established in its current configuration in

1961, it employs approximately 3,000 scientists, postdoctoral fellows, scientific and other

technicians, doctoral degree graduate students, and administrative and technical support

personnel.

About Scripps Florida Scripps Florida, a 364,000 square-foot, state-of-the-art biomedical research facility, is

under construction in the Town of Jupiter in Palm Beach County, Florida. Scripps

Florida now operates with approximately 190 scientists, technicians, and administrative

staff at two temporary laboratory facilities, together comprising 74,000 square feet, on

the Florida Atlantic University campus in Jupiter. Scripps Florida focuses on basic

biomedical science, drug discovery, and technology development.


Annual Report 2006


Third Annual Report

Changes in Board Membership

Of the nine-member Board of Directors, three Directors are appointed by each of the

Governor, House Speaker, and the Senate President. Several Board members were

reappointed in Fiscal 2006.

Governor Bush appointed Mr. Andy Crawford, of Jacksonville, on January 20, 2006 for a

term ending on November 13, 2009. Mr. David Gury, also a gubernatorial appointment,

was reappointed through November 13, 2008.

Senate President Tom Lee appointed Dr. Edward Gonzalez, of Valrico, FL, on December

27, 2005 for a term ending on November 13, 2009.

Speaker of the House Allan Bense reappointed Mr. Chris Sullivan through November 13,

2008 and Dr. Joseph J. Thomas through November 17, 2009.

SFFC Board of Directors and Committee Meetings

From October 1, 2005 through September 30, 2006, the SFFC Board of Directors

(“BOD”) held five meetings, one of which was an in-person meeting. At the beginning

of 2006, Chairman Marshall Criser, Jr. was unanimously reelected by the Board to

continue his chairmanship and Mr. Chris Sullivan was unanimously reelected by the

Board to continue as Vice Chair. Chairman Criser submitted a letter of resignation on

November 2, 2006, stating that he would serve until the Governor appointed a successor.

At the November 28, 2006 Board of Director’s meeting, the Board elected Mr. Chris

Sullivan as Chairman and Mr. David Gury as Vice Chair, and their terms will begin in

2007.

In-Person Board of Directors Meeting

On March 2, 2006, the members of the Scripps Florida Funding Corporation met

at the Jupiter campus of Florida Atlantic University, adjacent to the Scripps

Florida campus. This meeting involved the annual grant request and the SFFC

Board was joined by representatives from Scripps and Scripps Florida as well as

representatives from Palm Beach County. After an Investment Committee

meeting and an Audit Committee meeting, the Board took a tour of the Scripps

Florida temporary facilities and Dr. Peter Hodder gave a presentation on the high-

throughput screening technology. The Board reconvened at the FAU facility to

hold its meeting and the agenda included updates from the Audit and Investment

Committees and an update on the status of the permanent site. The last agenda

item at this meeting was the 2006 annual grant request which was approved

unanimously.


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Committee Meetings

The three Committees of the SFFC are the Investment Committee, the Audit

Committee and the Reports Committee. From October 1, 2005 through

September 30, 2006, the Investment Committee held four teleconference

meetings. The majority of the Investment Committee’s time dealt with the review

of the quarterly reports from the State Board of Administration (“SBA”), where

the balance of the State’s $310 million investment in Scripps Florida is held. Mr.

Michael Lombardi, the SBA’s Representative, participates in the Investment

Committee meetings and informs the Committee of the actions undertaken by the

SBA. In this fiscal year, the Investment Committee approved the revised

disbursement schedule for Scripps Florida’s quarterly disbursements. During this

fiscal year, the Audit Committee participated in four teleconference meetings to

review, accept, discuss and approve the financial reports provided by TSRI and

Scripps Florida, which include: the quarterly unaudited financials for TSRI and

Scripps Florida; the yearly Audit reports for TSRI, Scripps Florida, and SFFC;

and the yearly budget for Scripps Florida and the SFFC. The Reports Committee

held three meetings from October 1, 2004 through September 30, 2005 and all of

those meetings concerned the 2005 SFFC Annual Report.

Scripps Florida Facilities

Scripps Florida currently operates out of two temporary facilities adjacent to Florida

Atlantic University’s Honors campus in Jupiter, FL. The first temporary building, a

41,000 square foot facility, is almost entirely comprised of laboratory space and was

completed in January 2005. Scientists moved into this temporary laboratory facility after

equipment validation in March 2005. The second temporary facility, slightly smaller

than the first facility at 33,000 square feet, was available for occupancy in October 2006.

Scripps Florida’s external affairs and development personnel remain in Scripps Florida’s

downtown West Palm Beach office. The Palm Beach County Commission, on November

22, 2005, voted to suspend construction at the Mecca site, the original site for Scripps

Florida’s permanent building, and on February 14, 2006, the Commission selected the

Jupiter / Briger site as the new permanent site for Scripps Florida.

The New Permanent Site

The 100 acres for Scripps Florida is comprised of the following: 30 acres for

Scripps Florida’s three permanent buildings, totaling 340,000 square feet, on

FAU’s Jupiter campus, and 70 acres for Phase II (Scripps Florida expansion)

across the street from FAU on the Briger property. Additionally, the Briger

owners agreed to restrict 100 acres for research and development spin-off use.

The revised grant agreement between TSRI and the County was signed on May 2

before the FAU sublease went before the Cabinet on May 16. TSRI will sublease

the 30 acre parcel from FAU for a term of 99 years. TSRI will lease the 70 acre

parcel from Palm Beach County for a term of 15 years. At the end of the 15-year

term, title in fee simple will pass to TSRI. Site clearing has begun and the

permanent site is slated to be completed in March / April 2009.


Annual Report 2006

Interlocal Agreement

In order to protect the 8 million square feet of land surrounding Scripps for the

growth of the biotech cluster, Palm Beach County entered into an Interlocal

Agreement with five northern Palm Beach County municipalities - Palm Beach

Gardens, Jupiter, Mangonia Park, Lake Park and Riviera Beach on March 14,

2006. The Interlocal Agreement provides for the formation of an Advisory Board

consisting of seven members including: one appointment each from the

participating municipalities, one representative from the Governor’s Office, and

one representative from Palm Beach County. The purpose of the Advisory Board

is to make recommendations regarding amendments to comprehensive plan use

maps and rezoning and land development regulations that directly effect

bioscience research uses on properties within the municipal overlays. The

municipalities are required to initiate comprehensive plan amendments creating

Bioscience Research Protection Overlays in their comprehensive plans to identify

lands within the Overlay and protect such lands from commercial or residential

development. These amendments provide for a super majority vote of the

governing body to approve conversion of land uses within the municipal

overlays. Additionally, the Board has the authority to:

Review all applications for rezoning within overlay

Make recommendations for land development regulations

Plan undeveloped land for bioscience use

Encourage policy initiative to encourage bioscience use

Assist in streamlining regulatory procedures for bioscience use

Scripps Florida Business Plan

Because of siting and legal delays for the permanent site, Scripps Florida requested an

extension of the funding schedule under the Funding Agreement by three years and

additional time to reach its 545 job target and minimum equipment investment, and

accordingly asked for a reduced grant disbursement schedule. Scripps Florida and the

Scripps Florida Funding Corporation agreed to a revised business plan in the fall of 2006

and in conjunction with this, amended the Operating and Funding Agreement. The total

hires and equipment purchases remain the same as the original seven-year business plan

but the revised business plan covers a ten-year period - through 2013.

Scripps Florida Employees

As of September 30, 2006, Scripps Florida employed 180, and by the end of 2006,

Scripps Florida plans to have 207 employees on board.

Two Scripps Florida business administration hires occurred in Fiscal 2006.

Dr. Peter Policastro, Senior Director of Business Development, Scripps Florida

Dr. Policastro is an entrepreneurial senior executive with extensive experience in

launching and building successful businesses focused on early stage drug development

and drug discovery platforms. He has specific experience in-licensing small molecule


Annual Report 2006

drug development programs from major pharmaceutical companies with subsequent

advancement through IND filing and Phase I Clinical Trials and a proven ability to create

attractive business plans from early stage assets and raise substantial venture capital. Dr.

Policastro has demonstrated ability to bring together and lead exceptional management

teams focused on developing and commercializing first in class drugs and discovery

platforms that can successfully compete for major market opportunities. From December

2004 until his hire as Scripps Florida’s Senior Director of Business Development in

September 2006, Dr. Policastro was the Entrepreneur In Residence of BCM Technologies

Inc, Houston, TX, a corporate seed stage venture capital firm funded by the Baylor

College of Medicine to commercially advance emerging healthcare-related technologies

and other assets under development by the faculty and other affiliated parties. From June

2003 until November 2004, he was the President/CEO of Rejuvenon, one of BCM

Technologies successful portfolio companies. At Rejuvenon, Dr. Policastro raised $37

million Series B round from top tier venture capital firms to fund two potential first in

class drugs through Phase II Clinical trials. Dr. Policastro has also served as President

and CEO of Enchira Biotechonology, Inc., Senior Vice President of Plastics

Manufacturing Company, a division of Borden Chemical, Senior Vice President and

Chief Technology Officer of Plastics Manufacturing Company, a division of Sun Coast

Industries, Inc. In 1992, he founded and served as CEO of Medgenesis, Inc., of Coral

Springs, FL, which developed and manufactured disposable medical devices used in laser

surgical procedures. Dr. Policastro started his career as a staff scientist at General

Electric’s Corporate Research Division in Niskayuna, NY and he was promoted to the

Program Manager, Specialty Polymers. Dr. Policastro received his Ph.D. in Organic

Chemistry from The Massachusetts Institute of Technology and his Bachelors, Magna

Cum Laude, in Chemistry from Duke University.

Barbara Suflas Noble, Director, Scripps Florida External Affairs

Barbara Suflas Noble was promoted to Director, External Affairs, Scripps Florida in

September 2006. In this role, Ms. Noble is responsible for directing Scripps Florida’s

overall fund raising efforts through a team comprised of professional staff, fund raising

counsel, and volunteer philanthropic leadership to ensure sustainable, world-class science

and discovery in Florida. She most recently served as Scripps Florida’s External Affairs

Manager for Florida and California since July 2004, after joining Scripps Florida in

February 2004 as External Affairs Administrator, in which role she and the Director

established the first official headquarters of Scripps Florida. Prior to joining Scripps

Florida, Ms. Noble founded BSN Enterprises, Inc. in 1993, which provided consulting

services to nonprofit organizations, private sector and public service providers. Ms.

Noble is actively engaged with many public service roles in Palm Beach County. She is

the President of the Board, Western Academy Charter School, the first charter school to

service students from K - 8th

grade in the western communities of Palm Beach County.

Since 1996, Ms. Noble has been appointed and re-appointed by the Palm Beach County

Board of County Commissioners, currently serving as the Chairman of Citizen’s

Advisory Council for the Solid Waste Authority of Palm Beach County and as member of

the Land Development Regulation Advisory Board to the Palm Beach County Planning,

Zoning and Building Department, Zoning Division. Ms. Noble has served eight years as a

board member and in 2001 as the President, of SunFest, Florida’s largest music, art and


Annual Report 2006

waterfront festival of international prominence with over 300,000 attendees. With this

role, she presided over a 23 member board of directors, $3.9 million budget, organization

staff, and volunteer committee structure comprised of 3,000 people. In September 2000,

she was elected to public office as Palm Beach County Republican Executive

Committeewoman, for a four year term. Ms. Noble is the Recipient of the 2001 Woman

of Distinction Award for volunteer service to woman and children, presented by

Soroptimist International of Boca Raton and Deerfield Beach and a Finalist for the 2002

Junior League/Wachovia Bank Woman Volunteer of the Year Award. Ms. Noble

graduated with a Bachelor of Science in Biology from Millersville University, and

completed post-graduate studies in Urban and Regional Planning at the University of

Pennsylvania, Philadelphia, Pennsylvania

Joining the Scripps Florida research team in November 2006 was Dr. John L. Cleveland.

Dr. John L. Cleveland, Chairman, Department of Cancer Biology, Scripps Florida

Dr. John L. Cleveland was appointed as Professor and Chairman of the Department of

Cancer Biology of Scripps Florida on November 1, 2006. Most recently Dr. Cleveland

was a Professor and Member of the Department of Biochemistry at St. Jude Children's

Research Hospital (SJCRH) in Memphis, Tennessee. Dr. Cleveland’s profession

experience includes the following: Graduate Teaching Assistant, Department of

Immunology, Microbiology and Virology, Wayne State University School of Medicine,

Detroit, Michigan; Staff Fellow and Senior Staff Fellow, Viral Pathology Section,

Laboratory of Viral Carcinogenesis, National Cancer Institute, National Institutes of

Health, Frederick, Maryland; Assistant Member, Department of Biochemistry, SJCRH,

Memphis, Tennessee; Adjunct Assistant Professor, Department of Biochemistry,

University of Tennessee, Memphis, Tennessee; Associate Member, Department of

Biochemistry, SJCRH, Memphis, Tennessee; Adjunct Associate Professor, Department

of Biochemistry, University of Tennessee, Memphis, Tennessee; Full Member,

Department of Biochemistry, SJCRH, Memphis, Tennessee; Adjunct Professor,

Department of Molecular Sciences, University of Tennessee, Memphis, Tennessee.

Dr. Cleveland is a member of the American Society for Microbiology, the American

Association for the Advancement of Science, The American Association for Cancer

Research and the Phi Kappa Phi Honors Society. He has participated in numerous grant

review committees, and is currently a member of the National Cancer Institute-C

Program Project Review Committee. Dr. Cleveland currently serves on five scientific

advisory boards – the Extramural Scientific Advisory Board for SPORE and PPG grants

for The University of Arizona Cancer Center, Tucson, AZ; The Extramural Scientific

Advisory Board, Roswell Park Cancer Institute, Buffalo, NY; The Extramural Scientific

Advisory Board, The Blood Research Institute, Milwaukee, WI; The Extramural

Scientific Advisory Board, CellGate, Inc., Redwood City, CA; and The Scientific

Advisory Council for the Florida Center for Brain Tumor Research, University of

Florida, Gainesville, FL. Dr. Cleveland also serves as Editor for two journals (Molecular

and Cellular Biology and Molecular Cancer Research) and as Associate Editor for two

others; he also serves as an ad-hoc reviewer for many other top-tier journals. Throughout

his career, Dr. Cleveland has served on several institutional committees, most recently as


Annual Report 2006

a Member of the Scripps Florida Steering Committee, as Co-Leader for The Signal

Transduction Program of the SJCRH Cancer Center, and as Chair of the SJCRH GMP

Advisory Committee. Dr. Cleveland received his B.S. degree in Biology from the

University of Maine in 1979 and his Ph.D. in Immunology and Microbiology from

Wayne State University School of Medicine (Detroit, Michigan) in 1985. Finally, Dr.

Cleveland is currently the Principal Investigator of three large R01 grants from The

National Institutes of Health.

Scripps Florida Scientific Achievements

To date, 29 patent applications have been filed by Scripps Florida. Since its inception,

Scripps Florida has been awarded 22 grants totaling $13 million from federal agencies,

including the National Institutes of Health (“NIH”), and through September 30, 2006,

15.7% of total research dollars received by Scripps Florida were from sources other than

the state funds.

Scripps Florida has successfully out-licensed 14 technologies to Novartis and has entered

into a number of in-license agreements, two of which relate to the establishment of

Scripps Florida’s high-throughput screening program. NeoRx, now Poniard

Pharmaceuticals, has committed $2.5 million to Scripps Florida’s kinase program

research, as reported in last year’s annual report.

The following are some excerpts from the scientific achievements of Scripps Florida

scientists over the past year. A full description of the achievements may be found in

Appendix A, “Scripps Florida Scientific Achievements.”

Mammalian Transcriptome Mapped

In September 2005, the FANTOM Consortium for Genome Exploration Research

Group, a large international collection of scientists that includes researchers at the

Scripps Florida campus, reported the results of a massive multi-year project to

map the mammalian "transcriptome" in the September 13, 2005 issue of the

journal Science.

Scripps Research Establishes Biochemistry Department

that Bridges California and Florida Campuses and Faculty

In November 2005, TSRI formed the Department of Biochemistry to span its

California and Florida campuses. The focus of the new department reflects the

need to understand physiological processes from the molecular level to the whole

organism. By taking integrative approaches to substantial problems in modern

biology, the department’s research will impact the understanding of a wide variety

of diseases such as diabetes, cancer, and autism. The department’s faculty

members are multidisciplinary biologists with broad interests that seek to answer

contemporary questions in neurobiology, metabolic control, immunology, and

cancer biology.


Annual Report 2006

Dr. Steve A. Kay, Professor of Cell Biology and Director of the Institute for

Childhood and Neglected Diseases at Scripps in La Jolla, California, has been

appointed as the founding chairman of the new department. Faculty on the La

Jolla and Florida campuses will staff the department. Kay noted that his

department’s faculty takes a broader view of biochemistry than the traditional

definition. "Our faculty members are interested in understanding the workings of

the human body from the most minute processes to system-level organization,"

said Kay.

IBM and Scripps Florida to Collaborate on Pandemic Research

In February 2006, IBM and TSRI announced a collaborative initiative to conduct

advanced research on pandemic viruses leveraging the industry-leading talent and

technology from both organizations. The objective of “Project Checkmate” is to

develop means to anticipate, manage and contain infectious diseases.

The Checkmate Initiative will capitalize on Scripps’ world class research in the

areas of biochemical modeling and drug discovery and IBM’s expertise in

computational biology bio-patterning and supercomputing. The joint research

team will exploit the use of IBM’s Blue Gene supercomputer, the world’s fastest

supercomputer technology, and have access to Scripps’ new state-of-the-art

biomedical research facility at Scripps Florida.

“This is a very exciting and timely collaboration between two of the finest

institutions in our state,” said Governor Jeb Bush. “It is exactly the type of

advanced research and talent we want to attract to the State of Florida.”

New Research from the National High Magnetic Field Laboratory

Gives Scripps Florida Scientists Powerful Tool for Drug Discovery

The magnet lab is a national and state partnership between Florida State

University, the University of Florida and Las Alamos National Laboratories.

Researchers at the Magnet Lab, located in Tallahassee, Florida, and Scripps

Florida developed and evaluated a robust new system for analyzing how drugs

bind to proteins. This groundbreaking work could speed the delivery of potential

new drugs and improve existing ones. The work, which appeared in the journal

Analytical Chemistry the week of February 13, 2006, is the first published paper

to result from partnerships between Scripps Florida and Florida universities.

Scripps Florida Collaborations

“Collaborations among researchers are the lifeblood of contemporary biomedical

science.” - Dr. Lerner, President of TSRI

Scripps Florida has established collaborative relationships with three Florida based

institutions – the Jupiter Medical Center, Dyadic and IBM. Jupiter Medical Center is

analyzing select specimens for Dr. Layton Harris Smith, Director of Pharmacology at

Scripps Florida’s Department of Drug Discovery, to further his biomedical research.


Annual Report 2006

Dyadic International, Inc, a biotech company in Jupiter, FL, engaged Scripps Florida to

provide a complete annotation of the genome of Dyadic's proprietary fungal

organism. Project Checkmate, a collaborative initiative between TSRI and IBM, aims to

conduct advanced research on pandemic viruses leveraging the industry-leading talent

and technology from both organizations.

Five Florida universities - University of Florida, Florida Atlantic University, University

of Central Florida, University of Miami and Florida State University - have executed

Joint Cooperation Agreements (“JCAs”) with Scripps. JCAs streamline the scientific

collaboration process by including such provisions to make it easier to collaborate on

filing patents and to share revenues from commercialized innovations.

Scripps Florida scientists have established collaborative relationships with scientific

colleagues both inside and outside of Florida. Currently, 33 such relationships are

underway.

Scripps Florida’s “Access to Technologies” Program

In January 2006, Scripps Florida launched the "Access to Technologies" program, which

invites scientists from Florida universities and other academic research institutions to use

state-of-the-art screening technologies at Scripps Florida's facilities in Jupiter for

qualifying projects. Access to Scripps Florida's new High Throughput Screening

(“HTS”) operation, similar to that used widely by the pharmaceutical industry, should

speed up the process of discovering new drugs to treat a variety of human illnesses. This

allows scientists from all over Florida, scientists from all over the globe, to have access to

Scripps' high-throughput machine which is one of five in the world. Currently, over 25

scientists have utilized this technology, and have applied for use of the machine from

institutions as far away as the Mayo Clinic in Rochester, Minnesota, Cornell University

in New York, New York, and the Burnham Institute in San Diego, California, and as

near as the University of Florida in Gainesville and Florida Atlantic University in Boca

Raton.

"Inviting our state's outstanding scientists to share in the extraordinary technologies

available at Scripps Florida is another example of how our investment in biomedical

research is contributing to the biomedical knowledge base here," said Florida Governor

Jeb Bush. "This program will pay off academically, economically, and ultimately lead to

better health for Floridians and people everywhere."

Key components of the HTS process include the institute's cutting-edge screening

system, purchased for Scripps Florida from Kalypsys of La Jolla, California, the first

technology to be made available to academic scientists outside Scripps Florida or Scripps

Research in California. These automated robots quickly determine and analyze the

biological or biochemical activity of a large number of drug-like compounds, useful in

discovering pharmacological targets or pharmacologically profiling a cellular or

biochemical pathway of promise. For the complete description of Scripps Florida’s HTS

operation, please see Appendix A, “Scripps Florida’s Scientific Achievements."


Annual Report 2006

Scripps Florida Grants and Awards

Kenan Charitable Trust Gives Additional $50,000 to Scripps Florida Education

Outreach Programs, Bringing Its Total Contribution to $250,000 in 2005

In December 2005, the William R. Kenan, Jr. Charitable Trust added $50,000 to its

support for education outreach programs at Scripps Florida. The new grant supplements

an initial $200,000 two-year contribution announced in May 2005 for the Florida

biomedical institute's K-12 science education outreach projects throughout Palm Beach

County, including its High School Student Summer Internship Program and the Summer

Research Internship Program for Teachers.

"There are few places in the world where highly motivated high school students and

dedicated high school teachers can sit side-by-side with world-class scientists and

contribute to conquering disease," said Dr. Krasno, executive director of the Trust and

president of the William R. Kenan, Jr. Fund, based in Chapel Hill, North Carolina. "Our

grant to The Scripps Research Institute has afforded this opportunity to Palm Beach

County students and teachers. We are grateful to the scientists of Scripps Florida for

helping to develop and inspire the great scientists of tomorrow and to the students and

teachers of Palm Beach County for their enthusiastic participation in the program. We

have been so gratified by the early success of this program that the William R. Kenan, Jr.

Charitable Trust is making an additional grant of $50,000 to expand the program."

"Scripps Florida has made a commitment to the science education community to use its

intellectual and material resources to introduce high school students and middle/high

school science teachers to contemporary issues in biomedical research," said Dr. Harry

W. Orf, Vice President of Scientific Operations at Scripps Florida and Director of the

education outreach program. "The further generosity of the Kenan Charitable Trust

provides us with the means to offer more intensive, hands-on laboratory experiences on

our campus, in classroom lectures, and through summer internships. The Trust's support

will help to encourage students to pursue scholarship and careers in the biological and

chemical sciences that will benefit the health of all people in the future."

Update on Scripps Florida’s First Scientific Collaboration

As reported in last year’s annual report, on August 4, 2005, Scripps and NeoRx

Corporation (NASDAQ: NERX), a cancer therapeutics development company,

announced the first collaboration at Scripps Florida, focusing on discovering novel,

small-molecule, multi-targeted, protein kinase inhibitors as therapeutic agents, including

cancer treatments. NeoRx has provided $2.5 million over 26 months to support the

research. NeoRx will have the option to negotiate a worldwide exclusive license to any

compounds developed through the collaboration.


Annual Report 2006

Update on Scripps’ Receipt of $10.4 Million Grant from National Institutes of

Health

A group of researchers at both the La Jolla, California, and Palm Beach County, Florida,

campuses of The Scripps Research Institute was awarded a $10.4 million dollar grant

from the National Institutes of Health (“NIH”) in June 2005 to establish The Scripps

Research Institute Molecular Screening Center. This is a pilot program to discover small

molecule tools for translating basic biomedical discoveries more quickly into medically

relevant applications. Governor Bush remarked, “This kind of cross-pollination is an

example of the synergies we envisioned when we first approached Scripps and is only the

precursor of what lies ahead.”

The screening centers at TSRI and Scripps Florida together with nine screening centers

from the public and private sectors will comprise the Molecular Libraries Screening

Centers Network (“MLSCN”), a part of the NIH’s strategic funding plan, the Roadmap

Initiative. The funds are administered jointly by the National Institute of Mental Health

(“NIMH”) and the National Human Genome Research Institute (“NHGRI”) on behalf of

NIH, and the work, which is scheduled to last three years, began in August 2005.

Scripps Florida Educational Outreach

Scripps Florida has continued, and further developed, its many educational outreach

programs in Fiscal 2006.

Scripps Florida High School Summer Internship Program

Scripps Florida’s High School Summer Internship Program began in summer 2005. The

internship exposes students to a variety of contemporary issues in basic biomedical

research, providing hands-on laboratory experience, thus motivating and preparing

students for continuing education in the sciences. For the summer 2006 program,

internships were awarded on a competitive basis to students beginning their junior or

senior years in a Palm Beach County high school in the fall 2006. Students applied

through an online form and applicants with a minimum grade point average of 3.0 who

were at least 16 years of age submitted letters of recommendations, transcripts, resumes

and other ancillary material. Special emphasis was placed on identifying and recruiting

students who are underrepresented in the sciences. Students were given a gross

compensation of $8.00 per hour for the six-week summer program. Seven Palm Beach

County students participated in this program in the summer of 2006.

Scripps Florida Summer Research Program for Middle and High School Teachers

The Summer Research Program for Middle and High School Teachers at Scripps Florida

commenced in the summer of 2005. The research program exposes teachers to current

laboratory techniques and procedures, provides information on a variety of contemporary

issues in basic biomedical research, creates ties and linkages to working scientists who

can assist them in curriculum development and creates opportunities for teachers to share


Annual Report 2006

information and knowledge with their peers. The program emphasizes the scientific

process, research planning, bench experience, experimental design, data analysis and

interaction with laboratory personnel. As an adjunct to their day-to-day responsibilities,

participants are required to attend specially-designed seminars throughout the course of

the summer. For the summer 2006 program, the application procedure was similar to the

high school summer internship program and teachers were given a gross compensation of

$20.00 per hour for the six-week summer program. Three Palm Beach County teachers

participated in this program in the summer of 2006.

During Fiscal 2006, in addition to the student and teacher summer internship programs,

education activities have included:

The "Introduction to Science" lecture by Scripps Florida researchers includes

interactive exercises designed to teach a middle school class about our world,

what it's made of, and how it works. It is a chemistry-based lesson, but

demonstrates the fundamental ties among the four basic sciences (math,

chemistry, physics, and biology). This lecture is typically 45 – 60 minutes long

and is performed at the requesting school by one or two Scripps Florida scientists.

The "Science Saturday" course shows sophomore and junior level high school

students (30 maximum) about the everyday tools of biotechnology science

through a hands-on DNA forensics exercise of 3-4 hours on the Scripps Florida

campus. High school students process DNA and utilize standard laboratory

techniques to solve a "crime."

The one-hour "Scripps Florida Biotechnology Tour" provides an up-close view of

the most advanced biomedical technologies used in the battle against human

diseases at Scripps Florida. The tour lasts for approximately one hour on

Saturdays and can accommodate up to 40 middle or high school students.

The "What is DNA?" lecture, appropriate for 5th

– 7th

grade students,

demonstrates what DNA looks like and where it comes from. This lecture is

typically one hour long and is performed at the requesting school by two Scripps

Florida scientists.

The "Careers in Biotechnology" lecture informs high school and college students

about careers in the biotechnology and pharmaceutical fields. A Scripps Florida

scientist travels to the requesting site and gives a 30 – 60 minute presentation

covering many aspects of this topic.

Opportunities exist for undergraduate students from academic institutions in

Florida or elsewhere to perform research in the Scripps Florida laboratories,

conditional on the availability of lab space.

In September 2006, the first Ph.D. Candidate began studies at Scripps Florida as part of

the Kellogg School of Science and Technology.


Annual Report 2006

Scripps Florida Business and Community Outreach

Scripps Florida connected with many business and community organizations during

Fiscal 2006 by communicating information on Scripps Florida’s research and health-

related topics. These efforts involved providing tours of the Scripps Florida laboratories

and presentations by Scripps Florida scientists. Many local residential groups, cultural

organizations and specialty groups, such as the local Chambers, women’s’ networks,

leadership groups and youth organizations such as the Boy Scouts, took advantage of

these outreach opportunities provided by Scripps Florida.

Scripps Florida executives participated in several trade missions, organized by Enterprise

Florida in conjunction with the Governor’s Office of Tourism, Trade and Economic

Development, two of which were lead by Governor Bush – one to the UK and one to

Germany and Switzerland. Scripps Florida participated and spearheaded over 140

business and community outreach activities. Please see the listing of outreach activities

found on page 37.

The Scripps Florida Science Seminars

The Scripps Florida Science Seminars – the Institute Speaker Series and the Frontiers in

Scripps Science - focus on topics within the broad fields of biomedical science, advanced

technologies applied to biomedical research, and drug discovery. The sessions are open

to interested professionals within the Scripps Florida and Florida scientific communities.

They began in March 2005 and are typically held every month.

The Scripps Research Institute and Oxford University Host International

Biotechnology Conference

From November 13 – 15, 2005 in Palm Beach, Florida, TSRI, in collaboration with the

University of Oxford held the inaugural Scripps/Oxford International Biotechnology

Conference, entitled, “Building a New Model for Bioscience, Biotechnology and Bio-

Medicine.” The conference was designed to provide scientists, physicians, investors,

pharmaceutical and biotechnology executives, and professionals with insights from 40

experts into breakthroughs of biomedical research applicable to commercialization and to

clinical practice.

David J. Gury, a Scripps Florida Funding Corporation Board member, participated in the

Conference’s “Building the Community: Economic and Non-Economic Indicators” panel

and expressed that, “The Conference was really impressive – not only were there

excellent participants and presentations but also a high level of energy was felt in the

hallways of The Breakers.”


Annual Report 2006

Developing the Biotech Cluster

Florida’s Innovation Economy Legislation

Governor Bush has made diversifying Florida’s economy a top priority, placing particular

emphasis on fostering the development of emerging technologies. To further diversify

Florida’s economy through the growth of science- and technology-based industries, the

Florida legislature committed $337 million to the Innovation Economy. This legislation

enacted during the spring 2006 legislative session provides the basis for further

developing the biotech cluster and capitalizing on the success of Scripps Florida.

To accelerate the growth of Florida’s Innovation Economy, Governor Bush signed the

following legislation:

$20 million for the World Class Scholars Program to provide universities with the

financial resources to attract leading researchers from around the globe to Florida.

Funds may be used for incentives, including building labs, providing high-tech

equipment, or funding salaries and stipends for a staff of graduate and post-

doctoral students to support the endeavor of principal researchers. The state will

match the investment of universities dollar-for-dollar.

$45 million for the “State University System Research and Economic

Development Investment program” to allow universities to build high-tech,

cutting edge facilities with advanced equipment to attract flagship research

projects.

$30 million for the Centers of Excellence Program to recreate and enhance the

Centers of Excellence program, allowing state universities and their research

partners to leverage public and private dollars to establish research and

commercialization centers that support emerging technologies. The collaboration

between industry and academia will help drive inventions and innovations from

the lab to the marketplace.

$45 million for the Quick Action Closing Fund, enabling the state to offer a cash

incentive to companies considering Florida as the location for their business. This

fund helps Florida compete with other states and nations to bring high-wage,

professional jobs to Florida. Since this fund was established in 1999, Florida has

provided nearly $20 million in incentives to 18 companies, generating an

investment of $806 million and creating 5600 jobs.

$42 million to secure Florida’s leadership position in the Space and Aeronautics

industry.

$200 million for the Florida Innovation Incentive Fund to enable Florida to attract

world-class research and development opportunities and/or innovative business

projects that support the growth of high-technology innovation clusters and high-

wage jobs in Florida. Funding will match the investment of the local community.

The Governor also signed legislation providing full sales tax exemption for machinery

and equipment purchased for use in research and development.


Annual Report 2006

The fruits of this legislation were quick to ripen and two companies were awarded

Innovation Incentive Funds in 2006 to expand their operations to Florida.

The Burnham Institute

On August 23, 2006, Governor Bush announced the Burnham Institute for

Medical Research of La Jolla, California had selected Florida as the site for its

East Coast expansion. Burnham specializes in pure scientific research, translating

discoveries into innovative treatments and therapies. Founded in La Jolla,

California, as a non-profit medical research institute focused on cancer research,

Burnham has grown to a staff of 750 people, with an annual operating budget of

$87 million. Burnham has a strong commitment to pure scientific research and is

renowned for its work in unraveling the fundamental molecular mechanisms of

disease and the creation of devise proto-type therapies. The Burnham Institute

researches cancer, Alzheimer’s, arthritis and other diseases. Burnham scientists

are responsible for five FDA-approved therapies and another nine innovative

therapies.

In its startup phase, the Burnham Institute will operate a campus-style research

park in the City of Orlando and plans to create 300 jobs. In recognition of

Florida’s acclaimed biomedical industry and to further boost the state’s booming

life-sciences sector, Florida has approved a $155 million incentive package for

Burnham. The amount from the state must be matched with an equal amount of

local money, infrastructure or services. Dr. John Reed, President & CEO of

Burnham Institute for Medical Research remarked, “By providing the financial

means for our expansion into Florida, together with increased investments in its

public universities, the State’s leadership is laying a superb foundation for growth

of biotechnology in Florida. This exceptional partnership will allow us to drive

our scientific discoveries more rapidly toward clinical proof of concept,

narrowing the gap between discovery and the development of new ways of

detecting, treating, curing, and ultimately preventing diseases.”

The Torrey Pines Institute

On September 26, 2006, Governor Bush joined Dr. Richard Houghten, President

and CEO of the Torrey Pines Institute of Molecular Studies, to announce the

Institute’s plans to establish a Florida headquarters in the master-planned

community of Tradition, in Port St. Lucie, Florida. Governor Bush said, “This

move will have a significant impact on the local economy while continuing to

build upon a growing life sciences sector in Florida. I congratulate St. Lucie and

the entire Treasure Coast region for their aggressive and successful recruitment of

Torrey Pines. I wish Torrey Pines great success in Florida.”

Dr. Richard Houghten founded the Torrey Pines Institute for Molecular Studies in

La Jolla in 1988 with eight employees. Now in its 17th year, it has become

internationally recognized for its scientific contributions in a wide range of fields,

including chemistry, immunology and pain management, and for its contributions

in fighting diseases, including multiple sclerosis, AIDS, Alzheimer’s disease,


Annual Report 2006

diabetes, infectious diseases, heart disease and cancer. The Institute has grown to

include more than 75 scientists, technicians and administrative staff. In addition to

Torrey Pines, Houghten has founded three commercial businesses, including a

publicly traded biotechnology company. Maintaining an entrepreneurial focus as

part of its Florida expansion, the Institute is expected to soon spin off two new

companies here.

The Torrey Pines Institute for Molecular Studies has a history of community

involvement and its scientists will be assets to area schools and community

organizations. In San Diego, the Institute has a number of outreach programs that

encourage children and minorities to pursue careers in science. Additionally, area

students will have access to internships with leading scientists. Plans are in place

for Torrey Pines to partner with Florida Atlantic University for research efforts

and with Indian River Community College to make science training programs

available to residents.

BIO 2006

In March 2006, Enterprise Florida, in partnership with several county economic

development corporations and Florida universities, participated in BIO 2006 in Chicago,

the world’s largest biotechnology conference. Governor Bush attended and met with

leading biotechnology executives, venture capitalists, journalists, policy makers and

scientists to promote Florida’s unique biotechnology business climate.

Florida: A “Top 10” Biotechnology State

In April 2006, under the leadership of Governor Bush, Florida moved into the top 10 of

the state-by-state ranking of biotechnology business centers provided by the Ernst &

Young Global Biotechnology Report and as further confirmation of the State’s

advancements in biotechnology, Governor Bush was awarded the “BIO Governor of the

Year” award at the BioFlorida conference in February 2006.

Conclusion

Scripps Florida Funding Corporation is pleased to report another successful year of

operations for Scripps Florida. Despite the delays, Scripps Florida continues to advance

its scientific discoveries, collaborate with Florida universities and colleges, and interact

with businesses and the community through its outreach activities – all well ahead of its

contractual requirements.


Annual Report 2006


Third Annual Report

Itemized Report for the Year Ended September 30, 2006

INTRODUCTION

Florida Statute 288.955, referred to as the Enabling Statute, sets forth certain information

that is required to be included in the SFFC Annual Report. The information that follows

has been organized to correspond to the sections of the Enabling Statute that address

information to be included in the SFFC Annual Report. As not every section of the

Enabling Statute relates to the SFFC Annual Report, only the sections of the Enabling

Statute that apply are referenced herein. For convenience, the text of the Enabling Statue

that describes the information to be set forth in the SFFC Annual Report is set forth next

to each Enabling Statute section reference.


Annual Report 2006


Third Annual Report

Itemized Report for the Year Ended September 30, 2006

Florida Statute 288.955

Subsection (14) ANNUAL REPORT

By December 1 of each year, the corporation shall prepare a

report of the activities and outcomes under this section for the

preceding fiscal year. The report, at a minimum, must

include:

Subsection (14) (a) A description of the activities of the corporation in managing

and enforcing the contract with the grantee.

Scripps Florida Funding Corporation Board of Directors Meetings

Please note the Scripps Florida Funding Corporation web site:

http://www.flgov.com/scripps

Purpose: To oversee the disbursement of the State’s funds invested in Scripps Florida,

the Florida Legislature created the Scripps Florida Funding Corporation, hereto referred

to as SFFC, a nonprofit entity governed by a nine-member Board of Directors, and one

ex-officio member.

Membership: Of the nine-member Board of Directors, three Directors were appointed by

each of the Governor, the House Speaker, and the Senate President. Governor Bush’s

appointees are: Mr. Marshall Criser, immediate past Chairman of the University of

Florida’s Board of Trustees, of Gainesville; Mr. David Gury, former President and CEO

of Nabi Pharmaceuticals, of Boca Raton who was reappointed through November 13,

2008; and Mr. Andy Crawford, Chairman of Advanced Disposal Systems, of Jacksonville

who was appointed on January 20, 2006 from a term ending on November 13, 2009.

Speaker Byrd’s appointees are: Ruben Jose King-Shaw Jr., Chairman & CEO, Mansa

Equity Partners, Inc., of Carlisle, Massachusetts; Dr. Joseph Thomas, dentist, of Vero

Beach; and Mr. Chris Sullivan, Chairman of Outback Steakhouse, of Tampa. Speaker

Bense reappointed Dr. Thomas for a term ending on November 17, 2009 and Mr.

Sullivan through November 13, 2008. President King’s appointees are: Mr. Jim

McCollum, former Regional Director for Bell South, now retired, of Jacksonville; and

Mr. Bill Foley, CEO of Fidelity National Financial, of Jacksonville. President Lee

appointed Dr. Edward Gonzalez, dentist, of Valrico on December 27, 2005 for a term

ending on November 13, 2009. Dr. Pamella Dana, Director of the Governor’s Office of

Tourism, Trade, and Economic Development (“OTTED”), is an ex-officio member.

Meetings and activities: From October 1, 2005 through September 30, 2006, the SFFC

Board of Directors (“BOD”) held four teleconference meetings, and one in-person

meeting. On November 28, 2005, the Board approved the SFFC Audit and the SFFC


Annual Report 2006

Second Annual Report, authorizing the transmission of the report to the Governor,

Speaker of the House and the President of the Senate on December 1, 2005.

Representatives from the organizations which submitted information for the Annual

Report were on the call and Chairman Criser gave the status of the permanent site. On

January 31, 2006, Chairman Criser gave an update on appointments to the SFFC BOD

and the BOD agreed to the insurance for the Board and to the 2006 SFFC Budget. On

March 2, 2006, the BOD held its annual grant request meeting at the Jupiter campus of

Florida Atlantic University, adjacent to the Scripps Florida campus. This meeting

involved the annual grant request and the SFFC Board was joined by representatives

from TSRI – Mr. Tom Northrup, Ms. Donna Weston, Ms. Carol Licko, Ms. Wanda

Whigham - and Scripps Florida – Mr. Harry Orf - as well as representatives from Palm

Beach County – Ms. Shannon LaRocque and Ms. Sherry Howard. After an Investment

Committee meeting and an Audit Committee meeting, the Board took a tour of the

Scripps Florida temporary facilities and Dr. Peter Hodder gave a presentation on the

high-throughput screening technology. The Board reconvened at the FAU facility to hold

its BOD meeting. The agenda included: the election of officers, updates from the Audit

and Investment Committees and an update on the status of the permanent site, given by

Ms. LaRocque. In order to prepare the Board for the annual grant request, Ms. Deutsch,

SFFC counsel, reviewed the six requirements that Scripps has to meet for the grant

request. Those requirements are: the grant request form, receipt of TSRI and Scripps

Florida annual financial statements, the scientific report, the update to the annual Report,

the legal opinion and the satisfaction of disbursement conditions. She stated that the

monitoring instrument which is the independent auditor’s assessment of compliance with

the disbursement conditions was thoroughly discussed at the Audit Committee meeting

and that the disbursement conditions were satisfied with a couple of minor exceptions,

which she explained. After discussion, the 2006 annual grant request was approved

unanimously. On May 25, 2006, Chairman Criser gave a report on the status of the

permanent site, the proposed amended Scripps Florida Business Plan was discussed and

the SFFC accepted the County’s cluster plan. On June 12, 2006, the BOD, after a review

by Audit Committee Chairman Crawford, received and filed the TSRI and Scripps

Florida March 31, 2006 unaudited financials and Investment Committee Chairman Foley

reported on the March 31, 2006 SBA reports. Chairman Criser led a discussion of the

Scripps Florida revised business plan and the BOD accepted this plan, in principle,

subject to SFFC’s acceptance of the final Business Plan and appropriate amendments to

the Operating and Funding Agreement. On September 12, 2006, the BOD reviewed the

revised Business Plan and Ms. Weston, Chief Operating Officer, TSRI, explained some

of the changes. The Board approved the amended Business Plan and agreed to amend the

Operating and Funding Agreement, subject to the resolution of the remaining open issues

by Chairman Criser and staff who agreed to work with Scripps to resolve these issues,

with a goal of completing them by the next Board meeting.


Annual Report 2006

SFFC Committee Meetings

Investment Committee

Purpose: The Investment Committee receives and reviews quarterly investment reports

from the State Board of Administration (SBA) to ensure that SFFC’s investments are

consistent with the objectives established in the Trust Agreement and that SFFC is able to

make the disbursements anticipated in the Operating and Funding Agreement between

SFFC and TSRI.

Membership: Mr. Bill Foley is the Chairman of the Investment Committee, and Dr.

Joseph Thomas and Mr. Jim McCollum are Committee Members. Mr. Michael

Lombardi from the SBA participates in the Committee meetings.

Meetings and activities: The Investment Committee held four meetings at which they

primarily reviewed the quarterly reports from the SBA. On November 16, 2005, the

Investment Committee reviewed the September 30, 2005 reports from the SBA. On

March 2, 2006, the Committee reviewed the December 31, 2005 SBA reports and

Investment Committee Chair Foley remarked that the investment program was “working

as it should.” On June 7, 2006, Mr. Lombardi reviewed the March 31, 2006 SBA reports

for the Investment Committee and discussed the cash position of the funds. The

Committee also discussed the change in the disbursement schedule due to the revisions in

the Scripps Florida Business Plan. On October 4, 2006, the Investment Committee

reviewed the SBA reports for the period ending June 30, 2006 with Mr. Lombardi and

Ms. Misselhorn presented the new schedule for the quarterly disbursements. Ms.

Misselhorn explained that Scripps had reviewed and agreed to this new schedule and the

Committee agreed to adopt the new disbursement schedule, pending final approval of the

revised Business Plan.

Audit Committee

Purpose: The Audit Committee reviews financial information and monitors the financial

condition of TSRI and Scripps Florida. The Audit Committee also provides oversight for

the annual audit of SFFC and compliance monitoring of TSRI and Scripps Florida with

the terms of the Operating and Funding Agreement. The Audit Committee provides

direction on the scope of the audit engagements and reviews any finding or

recommendations related to the audits. The Audit Committee, in turn, reports its

recommendations on the reports to the full Board.

The Scripps Florida Funding Corporation receives and the Audit Committee reviews the

following reports from TSRI and Scripps Florida:

TSRI and Scripps Florida unaudited quarterly financial statements

TSRI and Scripps Florida audited annual financial statements

TSRI and Scripps Florida annual budgets

Scripps Florida Annual Report

Scripps Florida Annual Scientific Report


Annual Report 2006

There are three types of annual audit reports that are received and reviewed by the Audit

Committee as follows:

1. Scripps Florida and TSRI provide three annual audit reports to SFFC:

a) Audited financial statements of TSRI, including the operations of Scripps

Florida.

b) Audited financial statements of Scripps Florida as a separate division,

including a report on internal control and compliance in accordance with

Government Auditing Standards.

c) A Federal Single Audit of TSRI in accordance with OMB Circular A-133.

The audits are prepared by Deloitte and Touche (“D&T”), the independent

auditors for TSRI. The Funding Corporation’s independent auditor has been

granted access to the D&T workpapers in order to assess the application of

generally accepted accounting principles and the significant assumptions

made by TSRI management in the preparation of its financial statements.

2. SFFC receives two annual audit reports completed by an independent auditor

contracted by the SFFC:

a) Audited financial statements of SFFC, including a report on internal

controls and compliance in accordance with Government Auditing

Standards.

b) A Federal Single Audit of SFFC in accordance with OMB Circular A-133.

3. A contractual monitoring and compliance audit of the Operating and Funding

Agreement between TSRI and SFFC (“contractual monitoring and compliance

audit”) to address the Monitoring Checklist (Exhibit A-1 to the Funding and

Program Agreement between OTTED and SFFC). The contractual monitoring

and compliance audit is completed by an independent auditor contracted by the

SFFC who verifies many of the items covered in the SFFC Annual Report,

including, but not limited to:

a) the number of jobs created

b) the average salaries and their consistency with the approved Business Plan

c) designation of a person to assist in collaborative efforts with OTTED and

compliance with OTTED’s requests for cooperation

d) purchase of equipment is consistent with the approved budget

e) achievement of collaborative efforts with Florida universities

Membership: Mr. Andy Crawford is the Chairman of the Audit Committee, and Mr.

Chris Sullivan and Dr. Joseph Thomas are Committee Members. Other participants in

the Audit Committee meetings include representatives from TSRI’s auditors, Deloitte and

Touche, SFFC’s auditor, Mr. Scott Porter from Caler, Donten, Levine, Druker, Porter &

Veil, PA, and TSRI’s Chief Financial Officer, Ms. Donna Weston.

Meetings and activities: From October 1, 2005 through September 30, 2006, the Audit

Committee participated in four meetings to review, amend, discuss and approve the


Annual Report 2006

several financial reports provided by TSRI and the auditing and compliance matters of

SFFC. On October 19, 2005, the Audit Committee reviewed the Scripps Florida 2006

Budget. On November 28, 2005, the Audit Committee approved the SFFC audit for

inclusion in the SFFC Second Annual Report. On March 2, 2006, Ms. Weston provided

an overview of the TSRI and Scripps Florida Deloitte audit reports for the year ended

September 20, 3005 and the December 31, 2005 unaudited financials. At this meeting,

the annual compliance report of how Scripps Florida is meeting the performance

expectations was reviewed and accepted for presentation to the full BOD. Also, Mr.

Porter presented the SFFC complete single audit draft and the SFFC tax returns draft. On

June 8, 2006, Ms. Weston presented information to the Committee on the March 31, 2006

unaudited financials from TSRI and Scripps Florida. Also at this meeting, the Audit

Committee approved the 2006 engagement letters for Funding’s annual audit and the

Monitoring Instrument Compliance.

Reports Committee

Purpose: The predominant purpose of the Reports Committee is to review and approve

the Annual Report before it is reviewed and approved by the SFFC Board of Directors.

Membership: Chairman Criser is the acting Chair of the Reports Committee. Mr. King-

Shaw and Mr. Gury are Committee Members.

Meetings and Activities: The Reports Committee held three meetings from October 1,

2005 through September 30, 2006 and all of those meetings concerned the 2005 SFFC

Annual Report.

Subsection (14) (b) An accounting of the amount of funds disbursed during the

preceding fiscal year to the grantee.

Disbursement Date Principal Interest Total

December 15, 2005 $13,827,250.00 $734,928.25 $14,562,178.25

March 15, 2006 $17,590,000.00 $683,244.97 $18,273,244.97

June 15, 2006 $17,590,000.00 $1,427,955.95 $19,017,955.95

TOTAL $49,007,250.00 $2,846,129.17 $51,853,379.17

In accordance with the revised Business Plan for Scripps Florida, no disbursement was

made on September 15, 2006.


Annual Report 2006

Subsection (14) (c) An accounting of the expenditures by the grantee during the

fiscal year of funds disbursed under this section.

Report of SFFC Grant Disbursements from October 1, 2005 to September 30, 2006:

Category Amount

Salaries $8,886,109.00

Supplies $6,454,597.00

Science Equipment $7,252,500.00

External Affairs & Other $769,233.00

Project Commencement

Administration, Facilities, etc.

$10,034,994.00

Total $33,297,433.00

The expense categories set forth above reflect those used by TSRI to report grant activity

to grantors. This schedule excludes: unpaid commitments, unspent grant funds of

$34,851,779, funds provided by other sources, and expenditures charged against other

funding sources.

Subsection (14)(d) Information on the number and salary level of jobs created by

the grantee, including the number and salary level of jobs

created for residents of this state.

Position

Hired

between

10/01/05

and

9/30/06

Average

Annualized

Salary

Professor 0

Associate Professor 0

Assistant Professor 0

Research Faculty 0

Staff Scientist 0

Research Associates/

Post Doctorate Students

11 $39,589

Administration* 3 $41,212

Total 14

* 2 of the 3 individuals listed under the Administration

category provide direct science support (i.e., laboratory

technicians).

Of the 14 new hires in the past fiscal year, 11 were residents of Florida and 3 were

residents of Palm Beach County. As of September 30, 2006, Scripps Florida employed

180 persons.


Annual Report 2006

Subsection (14) (e) Information on the amount and nature of economic activity

generated through the activities of the grantee.

See Appendix B, “The Economic Impact of Scripps Florida on Florida’s Economy”

prepared by Enterprise Florida for SFFC in November 2006.

Subsection (14) (f) An assessment of factors affecting the progress toward

achieving the projected biotech industry cluster associated

with the grantee’s operations, as projected by economists on

behalf of the Executive Office of the Governor.

See Appendix C, “An Assessment of Factors Affecting the Progress Toward Achieving

the Projected Biotech Industry Cluster” prepared through information provided by Palm

Beach Community College, Palm Beach County’s Business Development Board,

BioFlorida, Enterprise Florida, and Workforce Florida.

Subsection (14) (g) A compliance and financial audit of the accounts and records

of the corporation at the end of the preceding fiscal year

conducted by an independent certified public accountant in

accordance with the rules of the Auditor General.

See Appendix D, The “Audited Financial Statements and Supplementary Information”

for SFFC for the period ended September 30, 2006.

Subsection (14) (h) A description of the status of performance expectations under

subsection (9) and the disbursement conditions under

subsection (10).

Subsection (9) PERFORMANCE EXPECTATIONS

Subsection (9) (a) The number and dollar value of research grants obtained from

the Federal Government or sources other than this state.

Scripps Florida continues to draw down on grants previously obtained from non-state

sources. In Fiscal 2006, Scripps Florida scientists have expended $3,007,000 in grants

provided by grantors other than SFFC. Of this amount, $2,219,000 was funded by the

NIH and other federal agencies.

Subsection (9) (b) The percentage of total research dollars received by TSRI

from sources other than this state which is used to conduct

research activities by the grantee in this state.

The $3,007,000 expended by Scripps Florida scientists through represents 15.7% of total

research dollars received from sources other than the state.


Annual Report 2006

Subsection (9) (c) The number or value of patents obtained by the grantee.

In Fiscal 2006, 11 patents were filed by Scripps Florida and since its inception, Scripps

Florida has filed 29 patent applications. No value has been assigned to these patent

applications.

Subsection (9) (d) The number or value of licensing agreements executed by the

grantee.

Scripps Florida has successfully out-licensed 8 more technologies to Novartis in Fiscal

2006, bringing the total to 14 technologies out-licensed to Novartis on an exclusive (5) or

non-exclusive (9) basis.

Subsection (9) (e) The extent to which research conducted by the grantee results

in commercial applications.

In Fiscal 2005, Scripps Florida announced that the biotech company NeoRx (now

Poniard Pharmaceuticals) committed $2.5 million in research funding to the Scripps

Florida kinase program. As a result of this funding, NeoRx (now Poniard

Pharmaceuticals) has obtained an option to license any discovery made during the course

of the project.

Subsection (9)(f) The number of collaborative agreements reached and

maintained with colleges and universities in this state and with

research institutions in this state, including agreements that

foster participation in research opportunities by public and

private colleges and universities and research institutions in

this state with significant minority populations, including

historically black colleges and universities.

Five Florida universities - University of Florida, Florida Atlantic University, University

of Central Florida, University of Miami and Florida State University - have executed

Joint Cooperation Agreements (“JCA”) with TSRI. JCAs streamline the scientific

collaboration process by including such provisions to make it easier to collaborate on

filing patents and to share revenues from commercialized innovations.

Scripps Florida scientists have established collaborative relationships with scientific

colleagues both inside and outside of Florida. Currently, 33 such relationships are

underway, as demonstrated on the following two pages.


Annual Report 2006

Collaborations with Florida Colleges & Universities

Institution Institutional

Collaborator(s)

Description of Collaboration

FAU / U Miami

(Cardiology)

Lina Shehadeh

& Nanette

Bishopric

Networks in cardiac hypertrophy.

U Florida Su-Shing

Suchen

Computational methods for genetic network analysis.

U Miami

School of

Medicine

Norma Kenyon

& Camillo

Ricordi

Gene expression pattern and biomarkers in diabetes.

U Miami Keith Webster Stem cell aging.

U Miami

School of

Medicine

Joshua Miller Genetics of renal allograft rejection.

U Florida David

Silverman

HD-exchange to study differences in the dynamics of the

dimer and tetramer interfaces of MnSOD protein.

U Miami Josh Miller Genetics acceptance of rejection in HLA-matched sibling

renal transplant.

U Florida William Cance HD-exchange to study the interactions of Focal Adhesion

Kinase with a number

of peptide ligands to determine their effectiveness in

activating the protein.

Florida State

University

Choogon Lee Circadian clock function.

FAU Larry

Liebovitch

Algorithms for genetic networks.

U Miami Robert Hoffman Genetics of lupus.

U Miami Patrick Haslett Dentritic cells profiling after infection with leprosy.

U Florida,

Ophthalmology

Shalesh

Kaushal

Identification of binding partners to rhodopsin.

U Florida Leonid Moroz Aplysia sequence annotation.

U Florida, Cell

Biology

Eric Triplett Quantitation of proteins from Medicago plants using iTRAQ.

U Miami Glenn Barber Cell based screening of Interferon signaling.

U Miami Richard

Bookman

P30 - Neuronal signaling

U Miami

School of

Medicine

Kermit

Carraway

Differential phospho site mapping on ErbB2 in conjunction

with Muc4 and neuregulin treatment.

U Florida Peter Sayeski Identification of transcription factors in angiotension II

signaling.


Annual Report 2006

Subsection (9) (g) The number of collaborative partnerships established and

maintained with businesses in this state.

Scripps Florida has established collaborative relationships with three Florida based

businesses.

The Jupiter Medical Center

The Jupiter Medical Center agreed to analyze select specimens for Dr. Layton Harris

Smith, Director of Pharmacology at Scripps Florida’s Department of Drug Discovery to

further his biomedical research.

Dyadic International, Inc.

In March 2006, a collaborative effort between scientists at Scripps Florida and Dyadic

International, Inc. (AMEX: DIL), a Jupiter-based biotechnology company, was

established to provide a complete annotation of the genome of Dyadic's proprietary

fungal organism, Chrysosporium lucknowense ("C1"). Dr. Nick Tsinoremas, Senior

Braman Family

Breast Cancer

Institute, UM

Sylvester

Comprehensive

Cancer Center

Joyce

Slingerland

Phosphopeptide ID of cdk2.

Mayo,

Jacksonville

Steven Younkin Beta-amyloid mechanisms.

U Florida Pete Turner &

Dick Moyer

Cell-based screening of vaccinia virus infection.

U Miami Hendrik Luesch Cell-based screening of neuroprotection.

U Florida Mark Lewis Slc6a4 polymorphisms and repetitive behavior.

U Florida Chen Liu Cell-based screening of alpha-1-antitrypsin in PiZZ patient

cells.

FAU Zongwei Li &

RuiTao

Gene expression profiling in yeast.

U Florida Carrie Haskell-

Luev

NPY ligand development.

U Florida Art Edison Small animal MRS/MRI imaging for drug discovery.

U Miami George Inana Genetics/genomics

U Florida Robert

Yezierski

Animal models for pain.

Bascom Palmer Elizabeth Fini Polymorphism detection in steroid receptors.

U Miami Glen Barber Identification of transcription factors in interferon signaling.

Ixion Biotech &

U Miami

School of

Medicine

Steve

Bartelmez,

Norma Kenyon

& Camillo

Ricordi

Stem cells for pancreatic islet transplantation in diabetes.


Annual Report 2006

Director of Informatics at Scripps Florida, will direct the work at Scripps Florida. The

knowledge gained from this effort is expected to facilitate further development of the C1

Host Technology as a robust platform for the discovery, development and production of

various materials for medical and industrial applications.

Dr. Richard Lerner, President of TSRI, said, "In addition to its potential contributions to

Dyadic's success, this partnership for our new Palm Beach County-based research group

also will benefit Scripps Florida and the broader scientific community."

Project Checkmate: TSRI and IBM

In February 2006, TSRI and IBM announced a collaborative initiative, Project

Checkmate, to conduct advanced research on pandemic viruses leveraging the industry-

leading talent and technology from both organizations. This initiative will capitalize on

TSRI’s world class research in the areas of biochemical modeling and drug discovery and

IBM's expertise in computational biology bio-patterning and supercomputing. The joint

research team will exploit the use of IBM's Blue Gene supercomputer, the world's fastest

supercomputer technology, and have access to a state-of-the-art biomedical research

facility, Scripps Florida. For a complete description of Project Checkmate, please see

Appendix A, “Scripps Florida Scientific Advancements.”

Subsection (9) (h) The total amount of funding received by the grantee from

sources other than the State of Florida.

Since inception through September 30, 2006, Scripps Florida has been awarded 22 grants

totaling approximately $13 million from federal agencies including the NIH, the Arthritis

Foundation, and from other grantors.

Other Revenue sources $162,000

Grant Awards ($3,677,000 expended) $13,126,911

Contributions at net present value $2,406,000*

Palm Beach County $7,690,561**

Palm Beach County $24,910,719**

*The amount reported above was determined in accordance with generally accepted

accounting principles. Therefore, certain non-cash items, such as promises to give, are

reflected at their estimated net realizable value.

**The value of construction paid directly by the County of Palm Beach to contractors and

other vendors for either the permanent facility or the temporary facility at FAU in Jupiter

has not been included.

Subsection (9) (i) The number or value of spin off businesses created in this state

as a result of commercialization of the research of the grantee.

To date, no spin-off businesses have been created.


Annual Report 2006

Subsection (9) (j) The number or value of businesses recruited to this state by the

grantee.

Scripps and the State of Florida have engaged in discussions with several companies who

desire to establish a presence in Florida. As a result of the successful Innovation

Economy Legislation in the spring of 2006, two companies were awarded incentive funds

to establish branches of their companies in Florida – the Burnham Institute, of La Jolla,

CA, and the Torrey Pines Institute for Molecular Studies, of La Jolla, CA. These

companies have or are in the process of negotiating contracts with the State and local

governments and will establish their facilities in Orlando and Port St. Lucie, respectively.

Subsection (9)(k) The establishment and implementation of policies to promote

supplier diversity using the guidelines developed by the Office

of Supplier Diversity under s. 287.09451 and to comply with

the ordinances, enacted by the County and which are

applicable to this biomedical research institution and campus

located in this state.

It is the policy of Scripps Florida to offer diverse businesses an opportunity to compete

on an equal basis with all other vendors. The Scripps Florida policy defines a diverse

business as a Minority Business Enterprise, Woman Business Enterprise, Small Business

Enterprise, or Veteran Business Enterprise. Scripps Florida searches for qualified

vendors, beginning in Palm Beach County and expanding out to the State of Florida and

beyond.

Scripps Florida currently accepts certifications from the following organizations:

National Minority Supplier Development Council (NMSDC) or

affiliate(s)

Women's Business Enterprise National Council (WBENC)

U.S. Small Business Administration 8(a) Program

State of Florida Office of Supplier Diversity

Palm Beach County Office of Small Business Assistance

All vendors interested in providing products and/or services to Scripps Florida complete

and submit a vendor application to the Diversity Coordinator. Vendor appointments are

scheduled with those companies that can meet the needs of the institute. If there are no

current opportunities to do businesses with the institute or if the company provides a

product or service the institute does not procure, the company's information is added to

the Scripps Florida database for future reference and potential referral opportunities.

Subsection (9) (l) The designation by the grantee of a representative to

coordinate with the Office of Supplier Diversity.

Mr. Audric Dodds is the designated Scripps Florida representative who coordinates with

the Office of Supplier Diversity.


Annual Report 2006

Subsection (9) (m) The establishment and implementation of a program to

conduct workforce recruitment activities at public and private

colleges and universities and community colleges in this state

which request the participation of the grantee.

Ms. Hollie Alkema, Scripps Florida’s Human Resource Analyst and Recruiter, has

participated in the following workforce recruitment activities:

3/15/2006 Hollie Alkema Barry University Career Expo Miami Shores, FL

3/23/2006 Hollie Alkema FMU Career Fair Miami, FL

4/19/2006 Hollie Alkema Northwood College Career Fair Palm Beach Gardens, FL

4/20/2006 Hollie Alkema Indian River CC Career Fair Ft. Pierce, FL

Subsection (10) DISBURSEMENT CONDITIONS

Subsection (10)(a) Demonstrate creation of jobs and report on the average

salaries paid.

As reported in Subsection (14) (d), Scripps created 14 new jobs through September 30,

2006 – 11 research associates with an average salary of $39,589 and 3 administrative

assistants, two of which provide direct science support, with an average salary of

$41,212. As of September 30, 2006, Scripps employed a total of 180 people. By the end

of 2006, Scripps is projected to have 207 total employees.

Subsection (10)(b) Beginning 18 months after the grantee’s occupancy of its

permanent facility, the grantee shall annually obtain $100,000

of non-state funding for each full-time equivalent tenured-

track faculty member employed at the Florida facility.

Not applicable until occupancy of the permanent facility.

Subsection (10) (c) No later than 3 years after the grantee’s occupancy of its

permanent facility, the grantee shall apply to the relevant

accrediting agency for accreditation of its Florida graduate

program.

No report is due until 2012, 3 years after occupancy of the Scripps Florida Permanent

Facility.

Subsection (10) (d) The grantee shall purchase equipment for its Florida facility as

scheduled in its contract with the corporation.

Approximately $7,252,500 of equipment was purchased from October 1, 2005 through

September 30, 2006. The revised Schedule 4.4 (c) indicates that an estimated $3 million

was scheduled for Year 3 equipment purchases.


Annual Report 2006

Subsection (10)(e) No later than 18 months after occupying its permanent facility,

the grantee shall establish a program for qualified graduate

students from Florida universities permitting them access to

the facility for doctoral, thesis-related research.

Although Scripps is not scheduled to commence operations in its permanent facility until

March/April of 2009, Scripps Florida has nine graduate students enrolled in its Kellogg

School of Science and Technology. In September 2006, the first Ph.D. Candidate began

studies at Scripps Florida.

In March 2006, Florida Atlantic University and Scripps Florida signed a “joint education

agreement” that provided a framework for planning and implementing a variety of

programs to promote education and research in areas involving biomedical science and

related fields. The programs envisioned include collaborations in the areas of graduate

and professional education, including post-doctoral training; undergraduate education and

training, including laboratory and administrative internships and, community outreach

activities, including continuing education for credit and service activities. This

agreement also provides a blueprint for partnerships with other educational institutions

throughout the region and state to facilitate similar cooperative activities.

Subsection (10) (f) No later than 18 months after occupancy of the permanent

facility, the grantee shall establish a summer internship for

high school students.

Scripps Florida’s High School Summer Internship Program began in summer 2005. The

internship exposes students to a variety of contemporary issues in basic biomedical

research, providing hands-on laboratory experience, thus motivating and preparing

students for continuing education in the sciences. For the summer 2006 program,

internships were awarded on a competitive basis to students beginning their junior or

senior years in a Palm Beach County high school in the fall 2006. Students applied

through an online form and applicants with a minimum grade point average of 3.0 who

were at least 16 years of age submitted letters of recommendations, transcripts, resumes

and other ancillary material. Special emphasis was placed on identifying and recruiting

students who are underrepresented in the sciences. Students were given a gross

compensation of $8.00 per hour for the six-week summer program. Seven Palm Beach

County students participated in this program in the summer of 2006.

Name Ethnicity School

Dhruv Bellapu Asian Suncoast

Jason Wagner Caucasian Suncoast

Ashley Wells Caucasian Palm Beach Gardens

Margia Ferrer African American Wellington

Aruna Khan West Indian John I. Leonard

Albert Fernandez Hispanic Dreyfoos School of the Arts

Tegan MacDonald Asian Park Vista

.


Annual Report 2006

Subsection (10) (g) No later than 3 years after occupancy of the permanent

facility, the grantee shall establish a research program for

middle and high school teachers.

The Summer Research Program for Middle and High School Teachers at Scripps Florida

commenced in the summer of 2005. The research program exposes teachers to current

laboratory techniques and procedures, provides information on a variety of contemporary

issues in basic biomedical research, creates ties and linkages to working scientists who

can assist them in curriculum development and creates opportunities for teachers to share

information and knowledge with their peers. The program emphasizes the scientific

process, research planning, bench experience, experimental design, data analysis and

interaction with laboratory personnel. As an adjunct to their day-to-day responsibilities,

participants are required to attend specially-designed seminars throughout the course of

the summer. For the summer 2006 program, the application procedure was similar to the

high school summer internship program and teachers were given a gross compensation of

$20.00 per hour for the six-week summer program. Three Palm Beach County teachers

participated in this program in the summer of 2006.

Name Ethnicity School

Sharuron Bradley African American Palm Beach Lakes

Carolyn Slygh Caucasian Seminole Ridge

Laura Comas Caucasian West Boca High

During Fiscal 2006, in addition to the student and teacher summer internship programs,

education activities have included:

The "Introduction to Science" lecture by Scripps Florida researchers includes

interactive exercises designed to teach a middle school class about our world,

what it's made of, and how it works. It is a chemistry-based lesson, but

demonstrates the fundamental ties among the four basic sciences (math,

chemistry, physics, and biology). This lecture is typically 45 – 60 minutes long

and is performed at the requesting school by one or two Scripps Florida scientists.

The "Science Saturday" course shows sophomore and junior level high school

students (30 maximum) about the everyday tools of biotechnology science

through a hands-on DNA forensics exercise of 3-4 hours on the Scripps Florida

campus. High school students process DNA and utilize standard laboratory

techniques to solve a "crime."

The one-hour "Scripps Florida Biotechnology Tour" provides an up-close view of

the most advanced biomedical technologies used in the battle against human

diseases at Scripps Florida. The tour lasts for approximately one hour on

Saturdays and can accommodate up to 40 middle or high school students.

The "What is DNA?" lecture, appropriate for 5th

– 7th

grade students,

demonstrates what DNA looks like and where it comes from. This lecture is

typically one hour long and is performed at the requesting school by two Scripps

Florida scientists.


Annual Report 2006

The "Careers in Biotechnology" lecture informs high school and college students

about careers in the biotechnology and pharmaceutical fields. A Scripps Florida

scientist travels to the requesting site and gives a 30 – 60 minute presentation

covering many aspects of this topic.

Opportunities exist for undergraduate students from academic institutions in

Florida or elsewhere to perform research in the Scripps Florida laboratories,

conditional on the availability of lab space.

Representatives of Scripps and Scripps Florida have participated in a large number of

educational outreach programs, as documented at the end of this report.

Subsection (10) (h) No later than 18 months after occupancy of the permanent

facility, the grantee shall establish a program for adjunct

professors.

No report due until September of 2010, 18 months after occupancy of the permanent

facility.

Subsection (10) (i) No later than 6 months after commissioning it high throughput

technology, the grantee shall establish a program to allow open

access for qualified science projects.



Scripps Florida’s state-of-the-art screening technologies for qualifying projects.

Access to Scripps Florida's new High Throughput Screening (“HTS”) operation, similar

to that used widely by the pharmaceutical industry, should speed up the process of

discovering new drugs to treat a variety of human illnesses. Florida scientists who may

not have these technologies available at their respective institutions are encouraged to

review the Scripps Florida “Access to Technologies” web site to learn more about the

Core Technologies and opportunities to access them.

Key components of the HTS process include the institute's cutting-edge screening

system, purchased for Scripps Florida from Kalypsys of La Jolla, California, the first





biochemical pathway of promise.

For a complete description of the “Access to Technologies” program at Scripps Florida,

please see Appendix A, “Scripps Florida Scientific Advancements.”


Annual Report 2006

Subsection (10) (j) Beginning June 2004, the grantee shall commence collaborative

efforts with Florida public and private colleges and

universities, and shall continue cooperative collaboration

through the term of the agreement.

See the reply to Subsection (9) (f).

Subsection (10) (k) Beginning 18 months after the grantee occupies the permanent

facility, the grantee shall establish an annual seminar series

featuring a review of the science work done by the grantee and

its collaborators at the Florida facility.

Scripps Florida holds several types of seminar series that were established in 2005.

The Scripps Florida Collaborative Seminar Series is a monthly series of lectures featuring

a Florida-based speaker from the academic, biotechnology or pharmaceutical community.

The series serves as a major foundation for creating knowledge and technology-sharing

opportunities, team building and collaborations among biomedical researchers at Scripps

Florida and other Florida research and academic institutions and companies. The

Collaborative Seminar presentations focus on topics within the broad fields of biomedical

science, advanced technologies applied to biomedical research and drug discovery. The

sessions are open to interested professionals within the Scripps Florida and Florida

scientific communities.

The Scripps Florida Collaborative Seminar Series, held in Fiscal 2006.

Also in Fiscal 2006, Scripps Florida began a series of lectures, “The Institute Speaker

Series.” On November 7, 2005, Dr. J. Donald Capra, President, Oklahoma Medical

Research Foundation, spoke to a crowd at the FAU Lifelong Learning Center at FAU’s

Jupiter campus on “Human Lymphocyte Subsets: The germinal center from birth to

death.” On December 9, 2005, Dr. Garret A. FitzGerald, Chair, Department of

October 13, 2005 Leonid Moroz, Ph.D.

Dr. Moroz is an Associate Professor of Neuroscience at the University of Florida

Lecture – “Genomic dissection of memory-forming networks: Models and

approaches for real-time single cells genomics”

November 17, 2005 Glen Barber, Ph.D.

Dr. Barber is a Professor at the University of Miami School of Medicine

Lecture – “Innate Immunity to Virus Infection; translational concepts”

January 19, 2006 Speaker: Wayne K. Goodman, M.D.

Dr. Goodman is a Professor at the University of Florida and the Chairman of the

Department of Psychiatry.

Lecture – “Antidepressants and Suicidality: FDA Issues”

February 9, 2006 Speaker: Steven Younkin, M.D., Ph.D.

Dr. Younkin is a Professor of Pharmacology and Neuroscience at the Mayo Clinic.

Lecture – “The Complex Genetics of Alzheimer’s Disease”

June 15, 2006 Speaker: Todd E. Golde, M.D., Ph.D.

Dr. Golde is a Professor of Neuroscience at the Mayo Clinic.

Lecture – “Modeling and Preventing A B Deposition in Alzheimer’s Disease

Mouse Models”


Annual Report 2006

Pharmacology, University of Pennsylvania School of Medicine, discussed, “Hope,

Humility and Hubris: Aspirin, Vioxx and Beyond.”

Scripps Florida also continues to hold the “Frontiers in Science” series, Scripps Florida's

public lecture series. On March 22 and 23, 2006, this lecture series featured Drs. Charles

Weissmann and Donny Strosberg and their discussions on the "Frontiers in Infectology."

Other lecturers for the Frontiers in Science series are listed in the outreach section,

starting on page 37.

Subsection (10) (l) Beginning June 2004, the grantee shall commence

collaboration efforts with the Office of Tourism, Trade, and

Economic Development by complying with reasonable requests

for cooperation in economic development efforts in the

biomed/biotech industry. No later than July 2004, the grantee

shall designate a person who shall be charged with assisting in

these collaborative efforts.

Scripps has worked, directly and indirectly, with OTTED to foster biotechnology

economic development growth in Florida.

Scripps Florida hosted the Scripps/Oxford International Biotechnology Conference at the

Breakers in Palm Beach, Florida in November 2005. The theme of the conference,

"Building a New Model for Bioscience, Biotechnology, and Bio-medicine," included

presentations and panel discussions by leading scientists and business executives from

around the world about the state of the art in essential areas of biomedical research, while

addressing biotechnology development from a scientific point of view. Some 300

attendees and presenters gathered for the three days of presentations, lectures, and panel

discussions. Among the distinguished presenters at the main conference were:

Frederick Frank, Vice Chairman, Lehman Brothers: The Episodic

Transformation of the Pharmaceutical Industry and the Present

Convergence with the Biotechnology Industry.

Raymond Dwek, D.Phil, Director of the Glycobiology Institute,

Department of Biochemistry, Oxford University:Gylcosylation and

Disease and John Bell, D.Phil., Regius Professor of Clinical Medicine,

Oxford University: Genetic susceptibility to Disease.

Richard Hargreaves, Ph.D., Executive Director, Merck Research

Laboratories: Innovative Imaging Technologies.

Paul R. Schimmel, Ph.D., Professor of Molecular Biology, The

Scripps Research Institute: Novel Antiangiogenic Strategies.

Inder M. Verma, Ph.D., Professor, The Salk Institute; Alain Fischer,

Ph.D., Professor, Hospital Necker, Paris; and Shimon Efrat, Ph.D.,

Professor, Tel Aviv University: Stem Cell and Gene Therapy.

Presenters from the Whitehead Institute at the Massachusetts Institute

of Technology, the Max Planck Institute of Biochemistry, the

University of Amsterdam, and the Institute for Systems Biology on the

latest cancer research.


Annual Report 2006

Governor Jeb Bush led a Team Florida delegation, including Dr. Richard A. Lerner and

Dr. Deborah Mosca of TSRI, on a full-scale business development and trade mission to

Munich and Düsseldorf, Germany, and Basel, Switzerland, November 13 - 18, 2005.

Organized by Enterprise Florida, Inc., the mission targeted the world’s third largest

economy by promoting Florida’s life sciences, information technology, and other high-

tech sectors in one of Europe’s most critical markets.

"As a leading European economy and Florida’s third-largest trade partner, Germany is a

prime market for many of the Sunshine State’s high-tech products and services," said

Governor Bush. "Trade missions such as this are a critical part of our efforts to enhance

trade and investment opportunities for Florida businesses and further diversify Florida’s

economy."

Team Florida Germany coincided with "Medica," Europe’s largest medical device trade

show, in Düsseldorf and "Productronica 2005," an electronic components trade event

held in Munich. These events are part of four option packages that provide a variety of

choices for mission participants.

Basic Trade and Delegate Team Florida packages featured one-on-one business

appointments for Florida companies and networking events with German business

organizations. Participants choose either the Medica or Productronica packages. A Life

Sciences package offered a side trip to Basel, Switzerland for meetings with prominent

pharmaceutical companies, universities and potential trade partners.

From July 16 – 21, 2006, Governor Bush led a Team Florida trade mission to the United

Kingdom and Ireland, with more than 100 leaders from Florida’s international business

community. While in the U.K., the Governor promoted trade, investment and business

opportunities for a host of industries, including life sciences, aviation/aerospace and

tourism. At the University of Oxford and Imperial College London, the Governor

encouraged Florida-U.K. cooperation in the life sciences industry.

Outreach Activities

Scripps faculty and staff have participated in the following outreach events to foster

business, educational, and community relations between various organizations and

Scripps Florida.

Date

Speaker/Lead

Representative

Business Outreach

Organization

Location

10/06/05 Candy Walker EFI, BDB, FAU Tour & Briefing Jupiter, FL

10/26/05 Claes Wahlestedt Meeting with Brian Hutchison

of Regeneration Tech

Jupiter, FL

11/16/05 Deborah Mosca Team Florida – Switzerland Basel, Switzerland

11/17/05 Richard Lerner Team Florida – Germany Munich, Germany

12/03/05 Harry Orf Meeting with EFI: Darrell Kelley & John

Ray

Jupiter, FL


Annual Report 2006

01/12/06 Donny Strosberg Cambridge Health Institute San Diego, CA

01/17/06 Donny Strosberg Nabi Pharmaceuticals Boca Raton, FL

01/20/06 Deborah Mosca, Ray

Carpenter, Harry Orf

Press Conference on

Access to Technologies Program

West Palm Beach, FL

01/25/06 Deborah Mosca Technology Entrepreneurship & Capital

(TEC) Committee

Tallahassee, FL

01/26/06 Candy Walker Jupiter Medical Center Jupiter, FL

02/01/06 Donny Strosberg Venture Forum Florida Jacksonville, FL

02/21/06 Ray Carpenter BioFlorida West Palm Beach, FL

02/22/06 Donny Strosberg BioFlorida West Palm Beach, FL

02/23/06 Donny Strosberg BDB Stakeholders Meeting West Palm Beach, FL

02/23/06 Ray Carpenter InterSouth Partners Venture Capital

meeting

Jupiter, FL

03/20/06 Ray Carpenter FAU Commercialization Workshop

“Turning Ideas into Revenue”

Jupiter, FL

04/01/06 Ray Carpenter Corporate Club luncheon West Palm Beach, FL

04/05/06 Ray Carpenter Leadership Florida Jupiter, FL

05/03/06 Donny Strosberg TSRI / Hospital for Special Surgery New York, NY

05/19/06 Ray Carpenter Business Development Board meeting West Palm Beach, FL

06/08/06 Ray Carpenter 2006 Florida SBIR/STTR Life Sciences

and Advanced Technology Conference

Series

Jupiter, FL

06/09/06 Ray Carpenter Licensing Executive Society

Scripps Florida capabilities/collaboration

opportunities

Jupiter, FL

06/28/06 Ray Carpenter Regional Forum - Economic Development

West Palm Beach, FL

07/15/06 Claes Wahlestedt,

Polly Murphy,

Richard Lerner

Enterprise Florida Trade Mission to the

UK

London, England,

Oxford, England,

Edinburgh, Scotland

10/15/05 Harry Orf South Florida Science Museum West Palm Beach, FL

11/16/05 Harry Orf Jupiter-Tequesta-Juno Beach

Chamber of Commerce

Jupiter, FL

01/25/06 Ray Carpenter Florida Research Consortium

Annual Meeting

Tallahassee, FL

02/03/06 Harry Orf Enterprise Florida’s Life Science

Roadmap

Advisory Committee

Boca Raton, FL

05/22/06 Ray Carpenter FL Research Consortium

Scripps Florida capabilities/collaboration

opportunities

Sarasota, FL

06/21/06 Harry Orf BioFlorida Board Meeting West Palm Beach, FL

09/14/05 Harry Orf South Florida Science Museum

Board meeting

West Palm Beach, FL


Annual Report 2006

Educational Outreach

09/19/05 Kevin Hayes Jupiter High School Jupiter, FL

10/07/05 Science Saturday Jupiter High School Jupiter, FL

10/12/05 Harry Orf Palm Beach Atlantic University West Palm Beach, FL

10/27/05 Harry Orf Seminole Ridge High School Loxahatchee Groves, FL

10/27/05 Candy Walker FMU Students/teachers Jupiter, FL

10/29/05 Candy Walker Florida Memorial University Jupiter, FL

11/02/05 Science Saturday Seminole Ridge High School Jupiter, FL

11/03/05 Harry Orf Teacher's Conference in Orlando Orlando, FL

12/12/05 Harry Orf Teacher's Conference in Orlando Orlando, FL

01/13/06 Harry Orf Coalition for Improvement

in Math & Science

Orlando, FL

01/17/06 Charlie Cochrane Frontiers in Science Jupiter, FL

01/19/06 Charles Weissmann Frontiers in Science Jupiter, FL

01/24/06 Mike Cameron FL State Dept. of Education - FCAT

Review

Orlando, FL

01/24/06 Candy Walker FAU/VA Hospital Jupiter, FL

01/25/06 John Hogenesch Frontiers in Science Jupiter, FL

01/27/06 Robert Bates South Fork High School Martin County, FL

01/28/06 Hollie Alkema

Audric Dodds

Florida Georgia Louis Stokes Alliance for

Minority Participation in Science,

Engineering and Mathematics

Albany, GA

01/30/06 Gina Zastrow Palm Beach Gardens High School

Science Saturday

Jupiter, FL

02/07/06 Claes Wahlestedt Frontiers in Science Jupiter, FL

02/11/06 Layton Smith Frontiers in Science Jupiter, FL

02/16/06 Brandon Young Girl Scouts of America

Science Saturday

Jupiter, FL

02/17/06 Harry Orf Palm Beach Education Commission

Meeting

Delray Beach, FL

02/23/06 Candy Walker FAU Science Majors - Career Day Jupiter, FL

03/08/06 Robert Bates Palm Beach Country Day School

Chemistry Workshop

Jupiter, FL

03/10/06 Keith Whitaker Atlantic High School Delray Beach, FL

03/11/06 Harry Orf West Riviera Magnet Elementary Riviera Beach, FL

03/15/06 Teresa Reyes Wellington High School

Science Saturday

Jupiter, FL

03/15/06 Harry Orf Intro to science lesson at West Riviera

Magnet Elementary School

Riviera Beach, FL

03/17/06 Harry Orf Presentation to the Palm Beach County

School Board on Expo

West Palm Beach, FL

03/24/06 Audric Dodds,

Jennifer Busby

Youth Entrepreneur Workshop Ft. Lauderdale, FL


Annual Report 2006

03/30/06 Harry Orf Intro to Science Lesson at Ideal 27 kids Royal Palm Beach, FL

03/28/06 Candy Walker,

Josephine Harada

Science, Technology, Engineering and

Mathematics (“STEM”) meeting

Jupiter, FL

04/08/06 Gina Zastrow,

Brandon Young

Jupiter Elementary Science Fair Jupiter, FL

04/24/06 Gina Zastrow, et al. Palm Beach Central High School

Science Saturday

Jupiter, FL

04/25/06 Ray Carpenter,

Jennifer Busby

Jupiter High School Jupiter, FL

04/25/06 Harry Orf,

FAU’s Nancy

Romance

Blanche Ely High School Pompano Beach, FL

04/25/06 Kristen Clarke,

Colin Easson

Suncoast High School Riviera Beach, FL


Barbara Noble

Dreyfoos School of the Arts West Palm Beach, FL

04/29/06 Teresa Reyes,

Julie Baggs

Palm Beach Gardens High School Palm Beach Gardens, FL

05/05/06 Julie Baggs South Florida Science Museum West Palm Beach, FL

05/08/06 Evelyn Griffin,

Becky Mercer

Dwyer High School Palm Beach Gardens, FL

05/10/06 Bill Roush The Benjamin School Palm Beach Gardens, FL

06/28/06 Candy Walker, Bill

Roush, Pat Griffin,

Phil LoGrasso, Derek

Duckett, Chris Baker,

Charles Weissmann,

Nick Tsinoremas

U Miami Miller School of Medicine,

18 graduate students brought by Richard

Bookman

Jupiter, FL

06/28/06 Harry Orf BioFlorida Educational Committee

meeting

West Palm Beach, FL

10/11/05

Harry Orf Community Outreach

South Palm Beach County Bar

Association

Boca Raton, FL

10/20/05 Harry Orf Indian River Chamber of Commerce Sebastian, FL

12/08/05 Deborah Mosca, Ray

Carpenter, Will Ray

Cystic Fibrosis Gala in honor of Gov

Bush

Ft. Lauderdale, FL

12/11/05 Harry Orf Israel Cancer Association West Palm Beach, FL

01/12/06 Candy Walker BIG Business & Industry Group Jupiter, FL

01/21/06 Candy Walker Habitat for Humanity Riviera Beach, FL

01/24/06 Donny Strosberg Business Development Board meeting Jupiter, FL

01/26/06 Will Ray FoundCare Foundation groundbreaking Lake Worth, FL

01/30/06 Harry Orf Commissioner Aaronson and Mayors tour Jupiter, FL


Harry Orf

Roger Dean Stadium Jupiter, FL


Annual Report 2006

02/02/06 Harry Orf Jupiter Rotary Club Jupiter, FL

02/03/06 Harry Orf Commissioner Greene and Mayors tour Jupiter, FL

02/07/06 Candy Walker Junior Achievement of PBC Jupiter, FL

02/08/06 Harry Orf Commissioner Koons and Mayors tour Jupiter, FL

02/10/06 Candy Walker Women's Physician's Group Jupiter, FL

02/11/06 Layton Smith FAU LifeLong Learning Jupiter, FL

02/13/06 Harry Orf Commissioner McCarty and Mayors tour Jupiter, FL

02/21/06 Josephine Harada Executive Women of the Palm Beaches Delray Beach, FL

02/21/06 Harry Orf,

Polly Murphy

BioFlorida Panel Discussion - Hiring

Trends

West Palm Beach, FL

03/02/06 Claes Wahlestedt Martin County Chamber of Commerce Indiantown, FL

03/07/06 Harry Orf Boca Chamber of Commerce Boca Raton, FL

03/08/06 Harry Orf Jupiter Ocean & Racquet Club Jupiter, FL

03/10/06 Audric Dodds,

Al Kinsey,

Francisco Carpio,

Hollie Alkema

Florida Regional Minority Business

Council

Ft. Lauderdale, FL

03/11/06 Will Ray,

Claes Wahlestedt

NARSAD Public Symposium West Palm Beach, FL

03/22/06 Charles Weissmann,

Donny Strosberg

FAU Frontiers in Science Boca Raton, FL

03/23/06 Charles Weissmann,

Donny Strosberg

FAU Frontiers in Science Jupiter, FL

03/28/06 Hollie Alkema,

Bruce Heider

South Florida BioScience Consortium

Meeting

West Palm Beach, FL

03/30/06 Candy Walker BIG Tour of Facility Jupiter, FL

04/04/06 Donny Strosberg Jewish Federation West Palm Beach, FL

04/05/06 Donny Strosberg Leadership Florida Address at FAU Jupiter, FL

04/06/06 Donny Strosberg PBC Channel 20 Interview West Palm Beach, FL

04/13/06 Josephine Harada Youth Leadership Palm Beach County

Business & Development Day

West Palm Beach, FL

04/19/06 Harry Orf Boy Scout Lunch Wellington, FL

04/20/06 Candy Walker Palm Beach Community College Palm Beach Gardens, FL

04/21/06 Will Ray,

Barbara Noble

Palm Beach Business Group, L'Opera West Palm Beach, FL

04/22/06 Candy Walker 10th Anniversary of Abacoa

Groundbreaking

Jupiter, FL

04/24/06 Candy Walker PGA Corridor Association Palm Beach Gardens, FL

04/29/06 Ray Carpenter Factor Foundation of America Fundraiser Jupiter, FL

05/05/06 Peter Hodder Dade County Science Teachers'

Association

Miami, FL

06/13/06 Harry Orf Palm Beach Rotary West Palm Beach, FL

02/09/06 Harry Orf Kiwanis Club Tequesta, FL


Annual Report 2006

Appendix A, “Scripps Florida Scientific Achievements”

Appendix A

Scripps Florida Scientific Achievements


Scripps Research Establishes Biochemistry Department that Will Bridge

California and Florida Campuses and Faculty

Scripps Florida Opens Its Cutting-Edge Screening Technology to Florida

Scientists

o "Access to Technologies" Program Designed to Speed Biomedical

Research

IBM and Scripps to Collaborate on Pandemic Research

New Research from Florida State University’s Magnet lab

o Scripps Florida Gives Scientists Powerful Tool for Drug Discovery


Annual Report 2006



Scripps Florida Professor Claes Wahlestedt Describes Startling Results of Massive

Project by Consortium of International Scientists

In September 2005, the FANTOM Consortium for Genome Exploration Research Group,

a large international collection of scientists that includes researchers at The Scripps

Research Institute's Florida campus, is reporting the results of a massive multi-year

project to map the mammalian "transcriptome" in the September 13, 2005 issue of the

journal Science.

The transcriptome, or transcriptional landscape as it is sometimes called, is the totality of

RNA transcripts produced from DNA, by the cell in any tissue at any given time. It is a

measure of how human genes are expressed in living cells, and its complete mapping

gives scientists major insights into how our genome works.

"This is arguably the next major step after the human genome project," says Professor

Claes Wahlestedt, M.D., Ph.D., who is the director of Pharmacogenomics at Scripps

Florida. Wahlestedt is also a professor at the Karolinska Institute in Sweden, and is

adjunct chief scientist at RIKEN Institutes, Japan. "Our Japanese collaborators, headed

by Professor Yoshihide Hayashizaki, should be credited for their long-standing focus on

generating novel data on the transcriptome," Wahlestedt continues.

The mammalian transcriptome has already revealed a number of new and startling things

about the nature of mammalian biology. One of the most significant of these findings,

about "antisense transcription," appears in a separate article by Wahlestedt and his

colleagues in the same issue of Science.

Antisense transcription (see section below) was once thought to be rare, but the

transcriptome reveals that it takes place to an extent that few could have imagined.

"Instead of it being a rare phenomenon, we are showing that it is a massively abundant

phenomenon," says Wahlestedt. "It is the rule rather than the exception."

This discovery has significant implications for the future of biological research,

medicine, and biotechnology because antisense genes are likely to participate in the

control of many, perhaps all, cell and body functions. If correct, these findings will

radically alter our understanding of genetics and how information is stored in our

genome, and how this information is transacted to control the incredibly complex process

of mammalian development.


Annual Report 2006


How They Mapped the Transcriptome

The results that appear in a special section in the journal Science are part of an

international effort that represents an enormous body of work —one that has been going

on for about a decade, but really took off in the last four years following the completion

of the Human Genome Project in early 2001.

Like the genome project, the transcriptome project constituted another massive

sequencing effort. Instead of DNA, though, it was concerned with RNA, the genetic

material that is transcribed from DNA. Basically, the project amounted to fishing all the

RNA out of a variety of tissues and cells and sequencing the pieces that were found.

While genomic DNA is comprised of some 3 billion "nucleotide" bases in humans and

other mammals, RNA transcripts may be anywhere from a few dozen to several thousand

nucleotides. Or, to describe the difference in terms of an analogy, if a cell were a music

library, then the genome would be the complete collection of recordings, the genes would

be like the master tapes of individual songs, and the RNA transcripts would be like

dubbed copies, ready to play.

One big surprise about the recent transcriptome results is the amount of noncoding RNA

expressed in cells. (Noncoding RNA does not encode for proteins and therefore does not

fit into the classical definition of a gene.) While Wahlestedt and his consortium

colleagues found 20,714 protein-encoding RNA transcripts—which was what the

scientists expected, since there are about 22,000 genes in the human genome—they found

an even larger number of noncoding RNAs in mammalian cells, 22,839 in all.

No doubt, many of the noncoding RNA play a number of different regulatory roles, and

now that the sequences of these noncoding RNA molecules are known, scientists can

begin to look for their cellular functions.

In fact, a third article in the September 13 issue of the journal Science by a team of

researchers at The Scripps Research Institute and the Genomics Institute of the Novartis

Research Foundation have discovered a way to screen through hundreds of RNA

molecules for their functions within cells. For details on these results, see the Scripps

Research news release at http://www.scripps.edu/news/press/090105a.html

Antisense Transcription—What Is It?

Another major finding of the transcriptome project is that there are far more antisense

genes than anyone ever knew. Some genes have been known for a long time to have

antisense counterparts, but the extent to which antisense expression exists has never been

guessed at before. The stunning thing is that the majority of genes are seen to have an

antisense counterpart.

http://www.scripps.edu/news/press/090105a.html


Annual Report 2006


To get an idea of what antisense RNA is, it's necessary to understand something about

how and why RNA is made in the cell. The why is simple—or at least it used to be. The

"central dogma" of molecular biology states that DNA genes are transcribed into RNA

transcripts that are then translated into proteins. The RNA, from this point of view, is

there to take a gene from DNA to protein, the building blocks of our cells that in turn

make up our bodies.

RNA, which is a single strand of nucleotides, is made by enzymes as an exact base-to-

base copy of DNA. Since DNA is double-stranded, only one of these strands, the so-

called sense strand, encodes for proteins. In normal DNA transcription, the two strands

are split apart, and only the sense strand is copied. The other DNA strand, the "antisense"

strand, can also be transcribed into RNA. Antisense transcription is the "reverse"

expression of genomic DNA. If the same molecule of DNA is transcribed into antisense

RNA, then the transcript has the reverse sequence as the original DNA sequence.

Antisense RNA transcripts can exert function because they can bind to the RNA

transcripts for which they are complementary messengers and modulate their expression

into proteins. In fact, synthetic antisense molecules have been widely used to inhibit

conventional genes, including applications as anti-viral and anti-cancer drugs, which are

currently on the market or in clinical trials.

With such a widespread occurrence of antisense sequences, says Wahlestedt, the

transcriptional landscape of mammals shows this same principle may be used by nature

on a massive scale to extensively modulate the gene expression within in our cells.

It's still unclear whether the majority of antisense sequences are involved in regulation or

in some other biology, he adds, but this result is likely to fuel research for years to come.

The article, "Antisense Transcription in the Mammalian Genome" is authored by S.

Katayama, Y. Tomaru, T. Kasukawa, K. Waki, M. Nakanishi, M. Nakamura, H. Nishida,

C.C. Yap, M. Suzuki, P. Carninci, Y. Hayashizaki, C. Wells, M. Frith, T. Ravasi, K.C.

Pang, J. Hallinan, J. Mattick, D.A. Hume, L. Lipovich, P.G. Engstrom, Y. Mizuno, M.A.

Faghihi, A. Sandelin, A.M. Chalk, S. Mottagui-Tabar, Z. Liang, B. Lenhard and C.

Wahlestedt and appeared in the September 2, 2005 issue of the journal Science. See:

www.sciencemag.org.

This work was primarily supported by a Research Grant for the Genome Network Project

from the Ministry of Education, Culture, Sports, Science and Technology of Japan

(MEXT), the RIKEN Genome Exploration Research Project from MEXT, Advanced and

Innovational Research Program in Life Science, National Project on Protein Structural

and Functional Analysis from MEXT, Presidential Research Grant for Intersystem

Collaboration of RIKEN, Scripps Florida and grants from the Swedish Research Council

and from the Wallenberg Foundation of Sweden on natural antisense transcripts.

http://www.sciencemag.org/


Annual Report 2006


Scripps Establishes Biochemistry Department that Will Bridge California and

Florida Campuses and Faculty

In November 2005, The Scripps Research Institute formed the Department of

Biochemistry to span its California and Florida campuses. The focus of the new

department reflects the need to understand physiological processes from the molecular

level to the whole organism. By taking integrative approaches to substantial problems in

modern biology, the department’s research will impact the understanding of a wide

variety of diseases such as diabetes, cancer, and autism.

The department’s faculty members are multidisciplinary biologists with broad interests

that seek to answer contemporary questions in neurobiology, metabolic control,

immunology, and cancer biology.

"I’ve wanted to create a biochemistry department at Scripps Research for some time,"

said President Richard A. Lerner, M.D. "The new approaches that combine the latest

tools from chemical and biological disciplines provide the basis for our new department".

Dr. Steve A. Kay, Professor of Cell Biology and Director of the Institute for Childhood

and Neglected Diseases at Scripps Research in La Jolla, California, has been appointed as

the founding chairman of the new department. Faculty on the La Jolla and Florida

campuses will staff the department. Kay noted that his department’s faculty takes a

broader view of biochemistry than the traditional definition. "Our faculty members are

interested in understanding the workings of the human body from the most minute

processes to system-level organization," said Kay. "They’re comfortable wielding tools

as diverse as protein dynamics in solution to large scale genetic and chemical screens."

Kay said the new department would span several areas of contemporary biomedical

research. "Integrative approaches will better position us to develop novel therapeutic

strategies for diseases as diverse as diabetes and autism," said Kay.

In addition to Kay, the new department will initially comprise faculty members from

Florida. Kay said he expects to add five or six new appointments in California over the

next several years.


Annual Report 2006


SCRIPPS FLORIDA OPENS ITS CUTTING-EDGE SCREENING

TECHNOLOGY TO FLORIDA SCIENTISTS

"Access to Technologies" Program Designed to Speed Biomedical Research



state-of-the-art screening technologies at Scripps Florida’s facilities in Jupiter for

qualifying projects.

Access to Scripps Florida’s new High Throughput Screening (HTS) operation, similar to

that used widely by the pharmaceutical industry, should speed up the process of

discovering new drugs to treat a variety of human illnesses.

"Inviting our state’s outstanding scientists to share in the extraordinary technologies

available at Scripps Florida is another example of how our investment in biomedical

research is contributing to the biomedical knowledge base here," said Florida Governor

Jeb Bush. "This program will pay off academically, economically, and ultimately lead to

better health for Floridians and people everywhere."

"Science is always advanced through sharing," said Richard A. Lerner, M.D., president of

the Scripps Florida’s parent institution, The Scripps Research Institute in La Jolla,

California. "I’m convinced that sharing our technologies with researchers throughout

Florida will quicken the pace of progress, further challenging both them and us to find

answers to difficult health questions."

Key components of the HTS process include the institute’s cutting-edge screening

system, manufactured for Scripps Florida by Kalypsys of La Jolla, California, the first





biochemical pathway of promise.

Typically, HTS assays are performed in sets of either 96 or 384 samples on each

automation-friendly plate. The Scripps Florida technology can use plates that can hold up

to 1,536 samples at a time, quickening the pace of analysis and discovery. The robots are

two of only a handful of such machines in nonprofit research institutions. The facility

also has several other robots that help scientists develop experiments suitable for the

Kalypsys system.


Annual Report 2006


Gaining Access to Scripps Florida Technologies

Florida researchers can begin the process by visiting the Scripps Florida Access to

Technologies website, http://www.scripps.edu/florida/technologies/hts, which provides a

description of the services available and instructions for completing a project submission

form.

Scripps Florida scientists will evaluate each project for applicability to the HTS process,

then notify the applicant of the project’s status (approved, not approved, or further

information required). Approved projects will then be scheduled, within the limits of time

available for use of the technology and other resources. Once an institution’s project is

approved, the organization will be asked to complete appropriate agreements, submit

materials, and begin the project.

At project completion, an electronic file containing the HTS data and compound

structures will be sent to the originating institution.

Capabilities

The Lead Identification Department at Scripps Florida has set-up a state-of-the art HTS

operation to support Scripps’ intramural HTS efforts. This department has both HTS and

compound management automation, and expertise in adapting biological and biochemical

bench-top assays into high-throughput screens. Florida researchers can apply for access

to Scripps expertise through the Scripps’ “Access to Technologies” program.

Listed below are the available services provided by the Lead Identification Department,

which was in operation January 2006:

Assay Implementation: If an assay is accepted into the Access to Technologies

Program, Scripps will use its expertise to execute an HTS assay to 384-well or

1536-well plate format as necessary.

Access to Technologies Compound Library: Scripps has designated a subset of

its HTS compound collection (~2400 pharmacological entities) to be used for

Access to Technologies screening efforts. This collection contains known

inhibitors/activators of the most common HTS target classes (GPCRs, ion

channels, etc.).

HTS Screening & Follow-up: Once the submitted assay has been optimized for

HTS, the "Access to Technologies" Compound Library will be screened (n=3 per

compound) at a single concentration. [Compounds will be assayed in triplicate to

confirm activity.] Upon completion of the follow-up assay, a table of data listing

the compound id#, screening concentration, and %activity (or %inhibition) for

each hit compound will be provided to the researcher.

https://email.eog.fl.gov/exchweb/bin/redir.asp?URL=http://www.scripps.edu/florida/technologies/hts,


Annual Report 2006


Although there are a variety of biochemical and biological assays, only a subset is

amenable to HTS. Only a limited number of HTS campaigns/year are available through

the Access to Technologies program. The Scripps selection process includes a review of

various criteria, such as assays that are amenable to automation and research programs

that may have significant impact on the scientific community.

IBM and Scripps to Collaborate on Pandemic Research

In February 2006, IBM and The Scripps Research Institute announced a collaborative

initiative to conduct advanced research on pandemic viruses leveraging the industry-

leading talent and technology from both organizations. The objective of “Project Check-

mate” is to develop means to anticipate, manage and contain infectious diseases.

The Check-mate Initiative will capitalize on Scripps Research’s world class research in

the areas of biochemical modeling and drug discovery and IBM’s expertise in

computational biology bio-patterning and supercomputing. The joint research team will

exploit the use of IBM’s Blue Gene supercomputer, the world’s fastest supercomputer

technology, and have access to Scripps Research’s new state-of-the-art biomedical

research facility, Scripps Florida, in Palm Beach County.

“This is a very exciting and timely collaboration between two of the finest institutions in

our state” said Governor Jeb Bush. “It is exactly the type of advanced research and talent

we want to attract to the State of Florida.”

“The U.S. Government and the international community have realized the magnitude and

potential severity of pandemics,” said Dr. Richard A. Lerner, M.D., Scripps Research

president. “This will be an enormous arena for advanced research. Having the

opportunity to work with IBM’s talent and technology makes possible the concept of

modeling and simulating a virus with the ultimate goal of containment.”

This combined team will have access to unparalleled resources from Scripps Research’s

network of scientists and to IBM Research’s depth of expertise in bioinformatics,

structural biology, life sciences research, functional genomics, systems biology, and

medical informatics. Check-mate will create a “collaboratory” in South Florida, to focus

and accelerate the pace of discovery for advanced research of infectious diseases, such as

Avian Influenza.

Dr. Ajay Royyuru, Senior Manager, IBM Computational Biology Center leads the IBM

Research team. Dr. Nicholas Tsinoremas, Director of Informatics for Scripps Florida

leads the Scripps Research team. Dr. Richard Lerner will personally provide direction to

the combined team. The combination of the talent and the technology will be used to

study the genetic variations of the virus and responses from the host immune system, and

develop methodologies to anticipate and contain the disease (“Check mate”).


Annual Report 2006


On April 28, 2006, leading scientists from TSRI, IBM and Mt. Sinai met in Boca Raton

and finalized a revolutionary strategy to prepare for the next pandemic. Project

Checkmate is composed of five scientific approaches, coordinated to understand events

that may lead to a pandemic flu:

Rapid In Vitro Evolution: Use of phase display to identify mutations

most likely to result in a pandemic influenza and antibodies that will

neutralize

Computational Modeling and Structural Prediction of Influenza

Virus Evolution: Apply IBM’s BlueGene supercomputer to predict,

in silico, viral changes that affect specificity and susceptibility to host

defenses for subsequent biological validation

Antibodies and Vaccines: Identify broadly neutralizing antibodies to

the conserved regions and apply to the development of vaccines

Small Molecule Inhibitors: Screen for small molecules that mimic

the effect of neutralizing antibodies identified by other teams

Computational Prediction and Biological Validation: Employ

computational technologies to understand antigenic variation of

viruses and validate the assumptions in a laboratory setting

The United States government has taken a series of unprecedented steps to address the

pandemic threat, allocating more than $7 billion to accomplish its Implementation Plan

for the National Strategy for Pandemic Influenza. Of the 300 critical actions described in

this comprehensive document, Project Checkmate addresses the goals emphasized in

Section 6.1.17: Use novel investment strategies to advance the development of next-

generation influenza diagnostics and countermeasures, including new antiviral

medications, vaccines, adjuvant technologies, and countermeasures that provide

protection across multiple strains and seasons of the influenza virus. The Project

Checkmate Team has already met with key government officials and several federal

agenices to aggressively pursue the appropriate path to obtain federal funding.


Annual Report 2006


New Research from Florida State University’s Magnet Lab

Scripps Florida Gives Scientists Powerful Tool for Drug Discovery

Also in February 2006, Researchers at Florida State University's National High Magnetic

Field Laboratory and Scripps Florida developed and evaluated a robust new system for

analyzing how drugs bind to proteins. This groundbreaking work could speed the

delivery of potential new drugs and improve existing ones. The work, which appeared in

the journal Analytical Chemistry the week of February 13, 2006, is the first published

paper to result from a partnership between Scripps and a Florida university.

The collaborative research is focused on getting a more accurate picture of human

proteins, which are the target of most drugs. Understanding the nature of the interaction

between a drug and a protein—where the drug attaches and where it doesn't—is one of

the keys to drug research, because the exact placement of a drug can determine whether it

enhances a natural biological function or counteracts it.

"By pairing the magnet lab's expertise in high-field research with Scripps' expertise in

protein dynamics and drug development, we can create a kind of map that shows where

drugs bind to the surface of proteins," said Alan G. Marshall, director of the lab's Ion

Cyclotron Resonance (ICR) program and the Kasha Professor of Chemistry and

Biochemistry at FSU. "We can do that because our technology is the best way to generate

highly accurate pictures of tiny amounts of protein molecules."

The technology referenced by Marshall is a Fourier transform ICR mass spectrometer

built around a 14.5-tesla superconducting magnet. A tesla is a unit of measurement of a

magnetic field's strength. To illustrate the magnet’s relative strength, an MRI machine is

1.5 tesla, and a refrigerator magnet is 0.0025 tesla. Marshall is the co-inventor of Fourier

transform ICR, and his group is widely acknowledged as the world leader in the

development of Fourier transform ICR techniques and applications.

Marshall said the experiment detailed in Analytical Chemistry can best be described as

"molecular spray painting." Here's how it works:

The receptor protein with a drug stuck to it is dipped into a solvent called "heavy water"

(deuterium oxide, or D2O). In the portions of the receptor that can exchange with heavy

water (regions not involved in hydrogen bonding), the natural hydrogen atoms are

gradually replaced by deuterium atoms, which increase the mass from 1 to 2 mass units.

Scientists then dissect the receptor and use the magnet to weigh pieces of it to see which

segments of the receptor remain covered up by the drug.

The team saw the potential of probing human protein molecules with this spray-painting

technique, but also recognized that the experiment was limited by several factors. Each

test that would have to be performed would take anywhere from one minute to several


Annual Report 2006


hours, and each measurement would be slow. To ensure the reliability of the experiment,

the process would need to be replicated twice more to validate the results, adding

additional days to the process.

The paper published in Analytical Chemistry lays out the results of research to improve

the technical aspects of the experiment. By utilizing the high-field ICR magnet and its

powerful spectrometer, coupled with a sample preparation robot, the scientists were able

to extract data that show how the drug alters the dynamics of the receptor upon binding.

This application of the experiment can measure changes in a fraction of the time—and

show those changes over time. And the results are highly reproducible.

"This research is important because it gives us a new and very powerful way to probe the

interaction between drugs and proteins," said Patrick Griffin, professor of biochemistry

and head of drug discovery at Scripps Florida. "Because we've now solved many of the

technical problems, this technique is sure to play an even larger role in understanding the

mechanism of action of many classes of drugs."

Now that the data acquisition has been automated, the next step is automating the data

analysis. The amount of data generated by the magnet's high-test mass spectrometer is

staggering: 1 million data points every second. To analyze the data by hand would take a

month. With automated software being developed at the magnet lab, the analysis will

take just a few minutes.

The National High Magnetic Field Laboratory develops and operates state-of-the-art,

high-magnetic-field facilities that faculty and visiting scientists and engineers use for

research in physics, biology, bioengineering, chemistry, geochemistry, biochemistry and

materials science. The laboratory is sponsored by the National Science Foundation and

the State of Florida and is the only facility of its kind in the United States. To learn more,

please visit www.magnet.fsu.edu.

http://www.magnet.fsu.edu/

The Economic Impact of Scripps Florida on Florida’s Economy

October 1, 2005 - September 30, 2006

Prepared by Enterprise Florida

for the Scripps Florida Funding Corporation

November 2006

November 2006 2

The Economic Impact of Scripps Florida On Florida’s Economy

October 1, 2005 - September 30, 2006

Introduction This analysis is designed to address Section E of the 2006 Scripps Florida Funding Corporation Annual Report to the Florida Legislature: Objective: Estimate the economic impact of activities of Scripps Florida (TSRI) during its second fiscal year of operation, covering the period from October 1, 2005, to September 30, 2006. Just like the analyses carried out the previous two fiscal years, this year’s analysis was conducted by Enterprise Florida at the request of the Scripps Florida Funding Corporation (SFFC). It is based on data provided to Enterprise Florida by the Scripps Florida Funding Corporation, using the industry standard IMPLAN economic impact model. The objective of this economic impact analysis of Scripps’ presence in Florida has been to quantify those economic benefits that have actually accrued during the third full fiscal year of Scripps’ operation in the state based upon expenditures by Scripps Florida or its partners on Scripps’ behalf (Florida Atlantic University, Palm Beach County, and the State of Florida). The analysis does not attempt to project future streams of benefits that might be expected as the Scripps facility in Palm Beach County draws closer to full build out, nor can it measure any non-quantifiable benefits that might accrue as a result of Florida’s enhanced global name recognition as an emerging hub for the life sciences. This report closely follows the template developed for the previous two years’ economic impact analyses of Scripps Florida, and is organized into the following sections:

• About Economic Impact Analysis: IMPLAN is an industry-standard economic impact estimator. The specific application of this model is described.

• Methodological Note: The model inputs include a variety of direct expenditures

by Scripps and its partner organizations (FAU, Palm Beach County, and the State).

• Results of the Economic Impact Analysis: Presentation of the key findings of

the analysis.

• Extra-Model Economic Benefits: A brief mention of additional impacts this analysis does not attempt to capture.

November 2006 3

About Economic Impact Analysis Economic impact analysis measures the changes in employment, personal income, economic output (Gross State Product), and tax revenues resulting from an event or the presence of a facility in a given study area. Impacts can be measured at the county, regional (i.e. groups of counties), statewide, or national level. Given the statewide importance of Scripps Florida and its role in putting Florida on the map as an emerging hub for the life sciences, this analysis measures the economic impact of Scripps on the entire State of Florida. In practice, however, the bulk of these quantifiable impacts will be geographically concentrated in Palm Beach County, as well as other neighboring areas in the South Florida region. Assessing the impact of Scripps Florida’s presence in our state has been carried out utilizing an industry-standard IMPLAN economic impact model, one of the top models used in the United States for economic impact analysis. This economic impact analysis for the most part uses the standard features of the IMPLAN model, without altering any of the model’s default settings. In accordance with the particular circumstances of Scripps Florida, this analysis looks at economic impacts categorized in three different ways: 1. Based on the type of impact measured, the IMPLAN model quantifies four main

categories of impacts:

• Employment: The number of additional full-time equivalent jobs attributable to the presence and operation of Scripps Florida in Palm Beach County.

• Personal Income: The additional earnings pumped into Florida’s economy as

a result of Scripps;

• Economic Output (Gross State Product): The increase in Florida’s total economic output attributable to all these additional people working and creating value added; and

• Tax Revenues: Additional fiscal revenues for the state and local governments

generated by all the added economic activity (through taxable sales, property taxes, licenses, fees, etc.).

2. Based on the round of effects analyzed, there are three categories of impacts:

• Direct Effects: These include the economic impact of the setup and operations of Scripps Florida itself, such as jobs at the facility or at companies

November 2006 4

responsible for designing and constructing the future Scripps facilities, employee income, the total increase in economic activity associated with this, and resulting tax revenues.

• Indirect Effects: These include operating inputs (both goods and services)

provided by local area businesses as a result of the operation of the Scripps Florida facilities and companies responsible for designing and constructing the future Scripps facilities, and all the employment, income, and tax revenues associated with this increase in economic activity.

• Induced Effects: The increase in local and state economic activity stemming

from expenditures by Scripps Florida’ employees and employees of other area businesses either directly or indirectly affected by Scripps Florida’ local purchase of goods and services. Like Direct and Indirect impacts, Induced impacts also result in jobs, increases in the area’s total Income, and augmented fiscal revenues stemming from this increase in economic activity

Every purchase in any sector of the economy creates additional spending as direct, indirect, and induced effects. This happens over and over numerous times. The repeated spending that occurs as a result of any single purchase is called the multiplier effect. In other words, money spent once by an individual or a company enables a chain reaction of new spending by other individuals and companies.

3. Finally, a unique feature of this analysis is the inclusion of, and distinction between,

the following:

• Scripps’ Operational Impacts: These impacts pertain to the operations of Scripps Florida itself in its third full fiscal year. In addition to Scripps’ own payroll expenditure (on research, professional, and support staff), there is also the procurement of laboratory and other scientific equipment, information technology, office furniture and supplies, and various business services.

• Facility-Related Impacts: These encompass all the economic activity

resulting from expenditures on establishing the temporary Scripps facilities, as well as on designing and constructing the future (permanent) home of Scripps Florida. These expenditures are borne by Florida Atlantic University, Palm Beach County, and the State of Florida, in addition to Scripps Florida itself. Specific activities include carrying out land surveys, environmental impact studies, architectural designs, detailed engineering designs, site preparation and related civil works, any construction activity that may take place, as well as the real estate transactions and professional/business services necessary to implement the project. Facility-related impacts are included in this analysis because they are directly attributable to setting up Scripps’ facilities in Florida.

November 2006 5

Thus, to properly measure the total impact that the presence of Scripps is having on Florida’s economy, this analysis has taken into account the operation of the temporary Scripps facilities at Florida Atlantic University (FAU), plus all activities related to the establishment of Scripps permanent site in Palm Beach County.

Methodological Note Any economic impact analysis is only as good as the primary data and assumptions on which it is based. In carrying out this analysis, Enterprise Florida has relied on data provided by the Scripps Florida Funding Corporation. The data provided include all known expenditures by Scripps Florida, Palm Beach County, and Florida Atlantic University, during the fiscal year October 1, 2005, to September 30, 2006. All expenditure data thus obtained were fed into the IMPLAN model, assigning the appropriate NAICS-based IMPLAN industry sector designation to each expenditure item. These items were then aggregated according to their characteristics to obtain the different kinds of quantifiable impacts presented in the previous section. No data on actual Scripps-related job creation were input into the IMPLAN model. Instead, the model estimated direct employment levels (averaged out for the entire fiscal year in question) based on total expenditure levels, but in accordance with corresponding income levels determined by industry and geography. Therefore, the estimated employment impacts generated by IMPLAN should be interpreted as average annual full-time equivalent (FTE) positions, and not a snapshot of actual employment by Scripps or any other entity at any individual point in time during the fiscal year analyzed. Given its focus on quantifying impacts on Florida’s economy during a single fiscal year, the model also does not attempt to distinguish between recurring and one-time economic impacts. In practice, many jobs associated with setting up Scripps’ facilities may be of a specific duration, while those at Scripps Florida itself may be sustained over many years into the future. Either way, the study only looks at impacts on Florida’s economy in Scripps’ FY 2005-06. This analysis did not alter the default assumptions built into the IMPLAN model, such as the level of “leakage” between economic areas, population, workforce, and personal income totals (all of which come from standard U.S. Federal government data sources), or any inter-industry linkages. Relying on IMPLAN’s Social Accounting Matrices, the analysis computed the various kinds of economic impacts associated with Scripps’ presence in our state.

November 2006 6

Scripps Florida-Related Expenditures Categories, Scripps' FY 2005-2006Expenditure Item Amount

Facilities-Related:Final cost of Mecca Farms (real estate acquisition) $23,435,147FAU construction $271,529FAU soft costs (engineering reports & fees, architects' fees, permit fees) $2,246,328County salaries & benefits $350,000Scripps chemical library $897,755Scripps on engineering services $476,367Subtotal Facilities-Related $27,677,126Operational:FPL $2,076,634Scientist Salaries & Benefits $8,886,109Supplies (laboratory & office supplies: glassware, chemicals) $6,454,597Scientific equipment $7,252,500External services (HVAC maintenance, hazmat pickup, FAU services) $769,233Compensation (Florida only) $2,357,809Other Florida adminstrative expenses, except compensation $1,904,220Utilities, maintenance, etc. $2,961,641Subscriptions $117,864Supplies $184,624Allocations from La Jolla minus Recoveries $1,134,713Subtotal Operational $34,099,944Total Scripps-related expenditures in Florida in FY 2005-06 $61,777,070

Source: All expenditure data provided to Enterprise Florida by the Scripps Florida Funding Corporation

Tax impacts were also computed by the IMPLAN model, with the breakdown between local and statewide fiscal revenues being estimated by Enterprise Florida based on revenue type. For instance, this analysis assumed that all tax revenues obtained through vehicle licensing fees go to the State of Florida, while all property taxes are assumed to go to local governments. Sales tax receipts are split between the state’s standard 6% rate and any additional local penny options, as applicable. Likewise, all other revenues were allocated to the appropriate category. Primary expenditure data fed into the IMPLAN model are provided in the table below:

November 2006 7

The Economic Impact of Scripps Florida on the State of Florida, Scripps’ FY 2005-06Type of Impact Direct Indirect Induced Total

Employment Impact , of which: 400 210 677 1,288Operational 195 124 347 667

Facility-Related 205 86 330 621

Personal Income Impact , of which: 18,982,877$ 7,923,971$ 25,802,504$ 52,709,351$ Operational 13,144,615$ 4,874,732$ 13,045,570$ 31,064,917$

Facility-Related 5,838,261$ 3,049,239$ 12,756,933$ 21,644,434$

Output (Gross State Product) Impact , of which: 61,777,071$ 21,917,340$ 65,653,159$ 149,347,570$ Operational 34,099,944$ 13,269,443$ 34,157,903$ 81,527,290$

Facility-Related 27,677,127$ 8,647,897$ 31,495,256$ 67,820,281$

Tax Revenues , of which: 3,340,128$ 1,201,808$ 3,519,857$ 8,061,792$ Operational 2,062,707$ 802,669$ 2,066,213$ 4,931,590$

Facility-Related 1,277,421$ 399,138$ 1,453,644$ 3,130,203$

Breakdown of Tax Revenues Between State & Local Gov't:

State of Florida 1,885,806$ 678,530$ 1,987,280$ 4,551,616$

Local Governments (County & Municipal) 1,454,321$ 523,278$ 1,532,577$ 3,510,176$

Note: Estimated totals may not add up exactly in each case, due to rounding off to the nearest whole dollar or employee.

Results of the Economic Impact Analysis

Based on all the data and assumptions incorporated into the analysis, the total statewide economic impact of Scripps Florida in its third full fiscal year of operation is summarized in the table below:

Summarized by type of impact, the key benefits to Florida’s economy during the third fiscal year of Scripps Florida’s presence include: 1. Employment impact: Scripps Florida’s presence helped to sustain an estimated

1,288 full-time equivalent jobs1 statewide, of which:

• Direct: This analysis provides two different kinds of direct employment impacts: 195 full-time equivalent positions sustained by the operations Scripps Florida

1 The total number of jobs sustained by Scripps Florida’s presence in the state does not mean that all those jobs were created in FY 2005-06 alone; some of the jobs were created in previous fiscal years and “carried over” into this one, while others in fact represent jobs newly-created during FY 2005-06. Therefore, it would be incorrect to add the job impacts from the previous two fiscal years’ economic impact reports to those in this year’s – this would result in a double-counting of jobs created in FY 2004-05 and continuing to be sustained in FY 2005-06. “Jobs sustained” means all Scripps-related employment existing in Florida during FY 2005-06 irrespective of when the jobs in questions were first created.

November 2006 8

itself, plus another 205 jobs sustained by the design and construction of Scripps’ physical facilities, for an estimated total of 400 direct jobs resulting from the presence of Scripps in Florida during its third full fiscal year; and

• Indirect and Induced: An additional 887 jobs throughout Florida were

supported as a result of the multiplier effect. 2. The total income impact of Scripps Florida in its third full fiscal year of operation

amounted to $52,709,351. This total includes:

• Direct: The earnings at Scripps Florida itself and entities engaged in designing or constructing the Scripps facilities boosted Florida’s total personal income by $18,982,877; and

• Indirect and Induced: An additional $33,726,474 in personal income was

produced by the ripple effect that the direct spending had through Florida’s economy.

3. The contribution of Scripps Florida’s presence to Florida’s total economic output

(Gross State Product) was $149,347,570 in fiscal year 2005-06. Of this:

• Direct: Scripps Florida and entities engaged in designing or constructing the Scripps facilities contributed $61,777,071 to Florida’s Gross State Product; and

• Indirect and Induced: The ripple effect of Scripps’ presence accounted for a

further contribution of $87,570,499 to Florida’s total economic output. 4. The total fiscal impact of Scripps Florida’s presence in Florida amounted to

$8,061,792 in fiscal year 2005-06. Of this total:

• Direct: Scripps Florida and entities engaged in designing or constructing the Scripps facilities accounted for economic activity yielding an estimated $3,340,128 in tax revenues for Florida’s state and local governments; and

• Indirect and Induced: The ripple effect of Scripps Florida’s presence

accounted for economic activity generating a further $4,721,665 in tax revenues for the state and local governments.

The approximate breakdown between fiscal revenues accruing to the State of Florida and those paid to county and municipal governments was as follows:

November 2006 9

• State Taxes: The tax revenues going to the State of Florida amounted to an estimated $4,551,616; and

• State Taxes: An additional $3,510,176 in taxes was paid to county and

municipal governments as a result of Scripps Florida’s presence in the state.

Extra-Model Economic Benefits While the focus of this analysis is on measuring the economic benefits of the presence of Scripps Florida in the state during its third full fiscal year, it is important to note that economic impact models such as IMPLAN by their very nature capture only the economic benefits that can be quantified – jobs, income, output, and tax revenues. These models cannot express other important yet unquantifiable benefits such as enhanced business visibility and marketing value (branding) that stems from having a high-profile facility such as Scripps in Florida. While not immediately quantifiable, such benefits will nevertheless become evident through future streams of quantifiable economic impacts, and so should be kept in mind when attempting to gauge the total impact of Scripps Florida on Florida’s economy.


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Appendix C, “Assessment of Factors Affecting the Progress Toward Achieving the Projected

Biotech Industry Cluster”

Appendix C

Subsection (14) (f)

An assessment of factors affecting the progress toward achieving the projected biotech

industry cluster associated with the grantee’s operations, as projected by economists on

behalf of the Executive Office of the Governor

This subsection was completed with information provided by:

Enterprise Florida, Inc. (“EFI”) is the public-private partnership responsible for leading

Florida's statewide economic development efforts. The organization's mission is to diversify

Florida's economy and create better paying jobs for its citizens by supporting, attracting and

helping to create businesses in innovative, high-growth industries. EFI focuses on high-value

sectors such as: life sciences, information technology, aviation/aerospace, homeland

security/defense and financial/professional services. EFI works with a statewide network of

regional and local economic development organizations ("Partners") to continually improve

Florida's business climate and ensure its global competitiveness.

BioFlorida is Florida’s independent statewide bioscience organization that serves its members

by providing the infrastructure to exchange information and ideas through industry specific

programming, education, networking and legislative initiatives. BioFlorida focuses on creating

and maintaining a favorable business and legislative environment, advancing the

commercialization of research and working with investors, private enterprise, government,

academia and the financial and service sectors to further develop existing companies, launch

start-up companies and attract new business to Florida.

Workforce Florida, Inc. (“WFI”) was created by Governor Jeb Bush and the Florida

Legislature with the passage of the Workforce Innovation Act of 2000, Chapter 445, Florida

Statutes. A 45-member board appointed by the Governor oversees and monitors the

administration of the state’s workforce policy, programs and services carried out by the 24

business-led Regional Workforce Boards and the Agency for Workforce Innovation. Direct

services are provided at nearly 100 One-Stop Centers with locations in every county in the state.

The Business Development Board of Palm Beach County, Inc. (“BDB”) is a public-private

partnership established in 1982 to be the official economic development organization for Palm

Beach County. It is a not for profit organization that is funded in part by Palm Beach County

Board of County Commissioners and in part by private corporate members. BDB is the official

partner of Enterprise Florida, Inc. in Palm Beach County.

Palm Beach Community College (“PBCC”), Florida's first public community college

established in 1933, has been recognized as a premier two-year institution, lauded for

achievement at the local, state and national level. PBCC has over 48,000 students enrolled in

over 100 programs of study including associate in arts and associate in science degrees and

short-term certificates. PBCC has four campuses in Palm Beach County: Belle Glade, Boca

Raton, Lake Worth and Palm Beach Gardens.

http://www.workforceflorida.com/wages/wfi/bcs/board.htm

http://www.workforceflorida.com/wages/wfi/boards/index.htm

http://www.floridajobs.org/

http://www.employflorida.net/


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I. Capital and Infrastructure o Enterprise Florida

Ran banner ads on the National Venture Capital Association’s website.

Additionally, EFI is placing print ads in the Association’s Quarterly

Newsletter, which is distributed to approximately 4,000 people in the

venture capital community, which is highly concentrated in Northern

California, Massachusetts and in other key concentration areas.

Sponsored the Dow Jones VentureWire Alert and Professional

eNewsletters, which are targeted to the general venture capital community.

Sponsored the 2005 Southeastern BIO Investor Forum, the Southeast’s

premier life sciences venture capital conference.

o The Business Development Board

Continued participation at the Bioscience Land Protection Advisory Board

established in northern Palm Beach County.

Conducted a comprehensive review of all available real estate throughout

Palm Beach County that could be used for life science uses.

Worked with its partners (Scripps, EDC, PBCC, FAU and others) to

identify ways to attract outside capital to Palm Beach County. VC and

Angel funding has been recognized as a vital component of a life science

cluster and has been lacking.

Formed a Life Science Strategic Steering Group to perfect BDB’s

recruitment strategy, identify gaps in the cluster and advise on strategies to

recruit those organizations. The Group will also identify infrastructure

needed in order to make the environment more enticing, including

incentives.

II. Collaborations and Outreach

o Enterprise Florida

The Technology Entrepreneurship and Capital (“TEC”) Committee of the

EFI Board is charged with implementing the innovation economy priority

of the statewide strategic plan for economic development. The Council’s

action agenda included a proposal for early stage seed capital fund, the

Centers of Excellence Program as well as a World Class Scholars

program. The Governor’s Innovation Agenda also included an R & D

Innovation Incentive Fund to be used for major R & D recruitment

opportunities.

The Life Sciences Roadmap project was initiated and funded by EFI, the

Florida High Tech Corridor Council and Workforce Florida. A request for

proposal was issued and the Milken Institute was selected to conduct this

year-long study, which began in July 2005. Numerous economic

development partners are sponsors of this study. An advisory committee

of key stakeholders includes representatives of BioFlorida, Florida

Medical Manufacturing Consortium, universities and research institutes,

and industry representatives. A life sciences advisory committee meeting


Annual Report 2006



was held on August 25, 2006. The study is anticipated to be completed

this year.

o Business Development Board

Partnered with Scripps to promote Palm Beach County at BIO 2006 in

Chicago which helped both entities in projecting a positive image for

recruitment and business development activities.

Worked with Scripps Florida to promote the life sciences cluster to

visiting delegations from Portugal, United Kingdom, Germany and South

Africa.

Hosted and participated in the Bioscience Stakeholders’ Meetings and the

Florida Life Science Summit on July 24, 2006 at FAU’s Jupiter campus.

Maintained and strengthened its relationship and collaboration with

Florida Atlantic University. FAU’s President assisted BDB with several

prospects throughout the year and the Vice President for Research has also

collaborated on many projects.

Led a delegation from Palm Beach County to BIO 2006 in Chicago to

represent the life science cluster and to encourage others to join it.

Members of the delegation included Scripps, FAU, PBCC, Palm Beach

Gardens, BioTools, TransDermal Technologies, Ruden McClosky,

Regions Bank, the Town of Jupiter, City of Lake Park and the Greater

Boca Raton Chamber of Commerce.

Facilitated the beginning of a relationship between Florida Atlantic

University and the University of Westminster in the United Kingdom, as a

result of the Team Florida mission to the UK in July 2006.

III. Spin-offs and Economic Development o Enterprise Florida

From January 2004 to the present, marketing programs generated 392 life

science company leads.

Marketing programs have also resulted in a substantial improvement in

Florida's image as a life science state. In 2006, 68% of life science

executives nationally had a favorable impression of Florida as a place to

do business.

Since July 1, 2003 to the present, EFI has facilitated the recruitment and/or

expansion of 35 life science companies, involving nearly 3,700 new, high

wage jobs in this key sector, and encompassing over $600 million in new

capital investment.

In recent years, Florida has witnessed a steady growth in biotech

companies, startups and spinouts. By EFI’s data collection, the number of

biotech firms in Florida has increased from 48 in 2004 to 85 in 2006.

Florida is among the nation’s top 10 biotechnology states according to

Ernst & Young’s latest report. The report is based on the number of

companies in the state, ranking Florida 3rd among the Southeastern states.

(Ernst & Young, April 2006)

http://www.ey.com/global/content.nsf/International/Biotechnology_Report_2006_Beyond_Borders


Annual Report 2006




Met with an entrepreneurial company from Gainesville, FL that needs to

be located very close to Scripps. The introduction was made by Scripps.

Continued participation as a Board member of the Enterprise

Development Corporation that fosters small start ups and provides

mentoring services to them.

Relocated three (3) companies in the life sciences to Palm Beach County:

BioTools, Disc Motion Technology and Biocatalyst International.

IV. Workforce Development/ Education o Employ Florida Banner Center for Biotechnology

The Employ Florida Banner Center for Biotechnology, based at the University of

Florida, is funded by a $500,000 grant from Workforce Florida, Inc., and housed in

the Center of Excellence for Regenerative Health Biotechnology. Just getting under

way, the new Employ Florida Banner Center will build on curricula developed by the

Florida Consortium for Biotechnology Workforce Development. The program will

develop a set of courses that can be taught at partner institutions and elsewhere

throughout the state to train entry-level workers and currently employed

biotechnicians needing to upgrade their skills. With its industry-driven approach, it

will become the state’s leading resource for biotechnology industry worker training.

The Employ Florida Banner Center academic partners are UF, Florida Community

College at Jacksonville, Santa Fe Community College, Indian River Community

College and Embry-Riddle Aeronautical University. The program is one of four new

Employ Florida Banner Centers funded by Workforce Florida, Inc. aimed at creating

and providing up-to-date training for workers in industries that are critical to

sustaining and growing Florida’s diverse economy. Other industries targeted by

Banner Centers are: aviation and aerospace (at Florida Community College at

Jacksonville); financial services (at Miami Dade College); and manufacturing (at

Hillsborough Community College).


Supported Workforce Alliance’s bid for the B.E.S.T. grant, which was

successful.

Actively supports Scripps’ educational initiatives, and facilitates that

relationship through the Education Commission and the PACE luncheon

held annually.

Works with PBCC as it prepares for its new bioscience building to open.

The Life Science Cluster of the BDB actively supports the Teacher to

Lunch program as well as other educational initiatives.

o Bioscience Career & Education Exposition

BioFlorida’s Education Committee held its first annual Bioscience Career &

Education Exposition, which was held in schools across the state of Florida during the


Annual Report 2006



week of April 24-28, 2006. This unique program was designed to: motivate students

to consider careers in bioscience and related fields, promote fundamental science and

math proficiencies, expand awareness and understanding of the impact of biosciences

in the coming century, and increase appreciation of the broad range of bioscience

career opportunities. Key components of the Expo included: school visitation by

scientists and professionals in bioscience related fields, bioscience portfolio of careers

and information, and science lesson plans designed to generate meaningful

discussions in the classroom. A promotional DVD outlining the expo was sent to

classrooms across the state.

o Biotechnology Program at Palm Beach Community College

Now in its second year, this program is specifically designed to impart practical

laboratory skills with a solid theoretical foundation. The curriculum is based on skill

sets that are needed in the immediate community. A major focus of PBCC’s

Biotechnology Program is to create collaborations with industry partners and research

laboratories to provide actual workplace experience and to address the changing

employment needs of the industry. PBCC’s faculty is comprised of leaders of local

bioscience companies and scientists involved in academic research. To provide

further enrichment, PBCC students perform laboratory exercises in research and

industrial laboratories. A.S. degree is designed specifically for immediate entry into

to bioscience workplace and an A.A. degree program provides a solid foundation for

those who wish to pursue a four year degree.

PBCC has created a paid internship program where students complete a

research project in a research or industrial laboratory. Students are

required to complete 320 hours of training in a workplace setting and

present their findings in a formal research seminar format to faculty and

students. Taken together, PBCC’s biotechnology program provides a

solid theoretical foundation and basic laboratory skill training specific to

our community’s workforce needs.

Milestone: On April 20, 2006, PBCC broke ground for the BioScience

Technology Complex in Palm Beach Gardens. The 92,000-square-foot,

$15 million science complex will feature two buildings connected by a

multi-media lecture hall and courtyard. Phase I will house state-of-the-art

classrooms and laboratories for the core sciences (biology, microbiology,

anatomy and physiology, physics and chemistry). Phase II of the complex

is reserved for biotechnology classrooms and laboratories.

o Biotechnology Curricula Development

Backed by a $1.2 million grant from Workforce Florida, Inc., a consortium of Florida

universities, community colleges and industry associations, including BioFlorida, has

developed up to 42 hours of new, web-based training for biotechnology workers. The

training, created with input from Florida biotechnology companies, focuses on

general and specialized technical skills in three primary areas: laboratory technology,

biomanufacturing and regulatory affairs. Among the subjects explored are technical

math, sterilization, inspection procedures and testing methods, federal regulations,


Annual Report 2006



work practices, applied biotech microbiology, genetic engineering for technicians,

and an introduction to working with proteins. Created by the Florida Consortium for

Biotechnology Workforce Development in 2005, the curricula are designed for short-

term, customizable delivery. In addition to BioFlorida, consortium partners included

Florida Community College at Jacksonville, Santa Fe Community College,

Hillsborough Community College, the University of Florida, Florida Atlantic

University and the University of South Florida. Earlier this year, South Florida

biotechnology firms were introduced to the new curricula through iCoast, an

economic development initiative in Broward, Miami Dade and Palm Beach counties.

o Workforce Alliance’s Biotechnology Training

Workforce Alliance’s Biotechnology Training grant from the Department of Labor

retrains dislocated professionals with appropriate academic background at Florida

Atlantic University with the one-year Biotechnology Certificate curriculum.

Graduates of this grant-funded certificate program are obtaining jobs with Scripps

and other area employers in the biotech industry. An Advanced Biotechnology

Training Program was also developed through this grant at FAU, and students who

are part of this graduate-level training have paid internships with area biotechnology

companies, including the Scripps Research Institute. The internship positions, paid

through the grant, provide startup companies with top quality students from the

program at no initial cost. These students are non-traditional, mostly dislocated

professionals from declining industries, who have a spectrum of transferable skills

that are valuable to the biotech industry.

Specific companies benefiting from these funded internships include

Scripps Florida and the startup companies of Stromacyte, Tequesta

BioVentures, and Ocean Ridge Biosciences.

Workforce Alliance also received a state grant from Workforce Florida,

Inc. for Business Employment Solutions and Training (B.E.S.T. grant).

This grant provides training for any career in the biotechnology industry

sector, including its supporting occupations.

Workforce Alliance will be involved in BioFlorida’s Bioscience Career

and Education Exposition, and will be working with the Palm Beach

School District to motivate students to consider careers in bioscience and

related fields.

V. Leadership and Development o Enterprise Florida

Team Florida Germany / Switzerland, November 12 – 17, 2005. Led by

Governor Bush, EFI organized and executed a highly successful life-

science focused delegation and mission to Munich, Germany and Basel,

Switzerland with more than 160 leaders from Florida’s business and

research communities. The mission promoted trade, investment and

business opportunities in information technology, biotechnology, health

care and pharmaceuticals; and fostered life science research partnerships


Annual Report 2006



and collaborations with Europe’s premier hubs for cutting edge biotech

research and development.

A UK Life Sciences Mission was held in London, Oxford and Edinburgh

on July 15 – 21, 2006. The event brought together scientists and

researchers from the UK and Florida to develop strategic partnerships.

Meetings were held with Oxford University, Imperial College in London.

London Technology Network, Edinburgh University and venture

capitalists. Florida’s universities and research institutes participated in

this mission.

The Florida Pavilion made a stance at BIO 2006, held from March 9 – 12

in Chicago. Governor Bush led the Florida delegation and held a

reception. The Life Sciences Market Brief was handed out at the Pavilion,

in addition to a promotional piece of all the Florida Pavilion sponsoring

partners. Governor Bush said, “BIO 2006 is an important opportunity to

meet with the world’s brightest life scientists and researchers, as well as

visionary entrepreneurs and investors, as we continue to promote Florida’s

life sciences cluster.”

The Florida Pavilion had a presence at the Medica 2005 show in Germany,

which is the world’s foremost medical trade fair that attracts more than

130,000 visitors from around the world.

EFI coordinated the Florida booth at the Medical Design & Manufacturing

East trade show in New York City. This trade show is considered to be

one of the largest and best established medical products, design,

manufacturing and packaging events in the East Coast. EFI created a web

page promoting the event, and developed a brochure to distribute at the

booth.

o BioFlorida

BioFlorida’s 9th annual conference, entitled, "Intersections: Converging

Fields, Emerging Opportunities,” was held from November 13 – 15 in

Gainesville. More than 400 Florida life science researchers, venture

capitalists, students and industry leaders participated in the conference.

Governor Bush was the conference’s closing luncheon keynote speaker

and he highlighted Scripps Florida, the Burnham Institute, the Torrey

Pines Institute for Molecular Studies, and the state’s rapidly expanding

biotech infrastructure as foundations for growing Florida’s economy

through the converging fields of biomedical research, advanced medical

technologies and drug discovery and diagnostics.


Hosted and participated in three Bioscience Stakeholders’ Events and the

Florida Life Science Summit in July 2006. These events brought biotech

leaders together to discuss topical issues and face the challenges of the

industry.


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Sponsored the 8th

Annual BioFlorida Conference in West Palm Beach in

February 2006. Business Development Board was a premier sponsor of

the 9th

Annual BioFlorida Conference in Gainesville, FL.

Led the Palm Beach County delegation on the Team Florida mission led

by Governor Bush to the UK in July 2006. Other biotech participants

included: FAU, Scripps, TransDermal Technologies, and PBCC.

The Life Science Cluster meets every 6-8 weeks to further the aims of the

industry in Palm Beach County and to aid collaborations. Attendance is

usually 40+.

o Workforce Alliance

Through the B.E.S.T. grant, Workforce Alliance is cosponsoring professional

conferences and consortiums to bring together leaders in research and industry to

promote workforce and economic development.

VI. Marketing o Enterprise Florida

EFI’s marketing message centers around the tagline:

The goal is to brand Florida as a state where innovative businesses thrive, as

well as generate leads. Florida life Science innovation stories are an integral

part of the state’s branding message. Innovations include:

Discovery of a protein linked to Alzheimer’s disease by the Mayo

Clinic in Jacksonville.

Development of a way to regenerate damaged heart tissue for

patients too weak to endure open-heart surgery by BioHeart in

Weston.

Development of fiber optic biosensors capable of rapidly detecting

contaminated food and water by USF researcher Dr. Daniel Lim.

Development of lasers that are so precise that it can target one

cancer cell at a time, leaving nearby healthy cells unharmed by

Raydiance, Inc. in Orlando.

The branding message is promoted in EFI’s Life Sciences marketing

efforts using various multi-media tactics, such as special advertorial

sections, interactive/online marketing, direct mail, Customer relationship

management (“CRM”) emarketing, advertising, radio, public relations and

by having a physical presence at life science industry-related events.

Some examples of such international and national marketing include:

A four-page special German-language supplement placed in the

October and November issues of “Transkript” magazine, the

leading biotech magazine in German-speaking Europe.


Annual Report 2006



Sponsored Nature’s Bioentrepreneur Website and eNewsletters,

both target scientists interested in commercializing their research.

Mailed a promotional piece to 7,000 pre-registrants of BIO 2006 to

drive traffic to the Florida pavilion and promote the Life Sciences

Market Brief, which is included in this appendix.

Sent the life science-related flash flashed which have provided

news on Scripps Florida, various venture capital closings, research

collaborations and events to approximately 2,200 My eFlorida

members specifically interested in Florida’ Life sciences cluster.

Placed life-science-focused print ads in the following publications:

“Area Development”, “Bioscience in Florida”, “Business

Facilities”, “Expansion Management”, and “Site Selection”.

Placed 10-second radio sponsorship tags promoting Florida’s life

sciences cluster. These tags are placed nationwide on NPR

programming and the credit reads, “Brought to you by Enterprise

Florida. Helping life science businesses locate, expand and start

up in Florida. Innovation Hub of the Americas. Online at e-

Florida dot u-s.”


Advertised in the following magazines to promote the industry:

“Expansion Solution”, “Area Development”, “American-British

Business”, “European Biopharmaceutical Review”, “Site Selection” and

“Florida Trend”. Business Development Board’s prime marketing tool is

“Profile” magazine, and its quarterly publication “The Prospector”, both

of which highlight the life sciences. In addition, the BDB produced two

new life science pieces and a DVD dedicated to promoting the industry in

the county.

Jennifer Hartzler, a 2006/2007 Gubernatorial Fellow in the Office of Tourism, Trade and

Economic Development, assisted with the completion of Appendix C.

Audited Financial Statementsand Supplementary Information


A Component Unit of theState of Florida

September 30, 2006

SCRIPPS FLORIDA FUNDING CORPORATION –A COMPONENT UNIT OF THE STATE OF FLORIDA

AUDITED FINANCIAL STATEMENTSAND SUPPLEMENTARY FINANCIAL INFORMATION

SEPTEMBER 30, 2006

Page

INDEPENDENT AUDITOR'S REPORT ............................................................................................................................... 1

MANAGEMENT DISCUSSION AND ANALYSIS............................................................................................................ 3

BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Governmental Fund Balance Sheet/ Statement of Net Assets ................................................................................................................................................. 8 Statement of Governmental Fund Revenues, Expenditures and Changes in Fund Balance/Statement of Activities ............................................................................................... 9 Notes to Financial Statements ...........................................................................................................................................10

SUPPLEMENTARY INFORMATION Required Supplementary Information General Fund Budgetary Comparison Schedule.............................................................................................................................17 Notes to Budgetary Comparison Schedule............................................................................................................18

COMPLIANCE REPORT AND MANAGEMENT LETTERIndependent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial

Statements Performed in Accordance With Government Auditing Standards....................................................19Management Letter Required by the Rules of the Auditor General for the State of Florida ......................................................................................................................................................21

CALER,DONTEN,LEVINE,DRUKER,PORTER&VEIL,P.A.

CERTIFIED PUBLIC ACCOUNTANTS

WILLIAM K. CALER, JR., CPA 505 SOUTH FLAGLER DRIVE, SUITE 900 MEMBERSLOUIS M. COHEN, CPA JOHN C. COURTNEY, CPA, JD WEST PALM BEACH, FL 33401-5948 AMERICAN INSTITUTE OFDAVID S. DONTEN, CPA CERTIFIED PUBLIC ACCOUNTANTSSCOTT D. DRUKER, CPA, JD TELEPHONE (561) 832-9292JAMES B. HUTCHISON, CPA FAX (561) 832-9455 FLORIDA INSTITUTE OFJOEL H. LEVINE, CPA CERTIFIED PUBLIC ACCOUNTANTSJAMES F. MULLEN, IV, CPA [email protected] A. PENCE, JR., CPASCOTT L. PORTER, CPA MARK D. VEIL, CPA

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Independent Auditor's Report

The Board of DirectorsScripps Florida Funding CorporationWest Palm Beach, Florida

We have audited the accompanying financial statements of the governmental activities and major fund of Scripps Florida Funding Corporation, a component unit of the State of Florida, as of September 30, 2006 and for the year then ended, which collectively comprise the basic financial statements of Scripps Florida Funding Corporation as listed in the table of contents. These financial statements are the responsibility of the management of Scripps Florida Funding Corporation. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control over financial reporting of Scripps Florida Funding Corporation.Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and major fund of Scripps Florida Funding Corporation as of September 30, 2006, and the respective changes in financial position for the year then ended in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2006 on our consideration of the internal control over financial reporting of Scripps Florida Funding Corporation and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

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The management discussion and analysis on pages 3 through 7 and the budgetary comparison information on pages 17 and 18 are not a required part of the basic financial statements but are supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

December 15, 2006

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Management Discussion and Analysis

Acting in our capacity as the management of Scripps Florida Funding Corporation (“SFFC”), we offer readers of SFFC’s financial statements this narrative overview and analysis of the financial activities of SFFC as of and for the year ended September 30, 2006. SFFC is governed by a nine member Board of Directors, three of whom are appointed by the Governor of the State of Florida, three of whom are appointed by the President of the Senate of the State of Florida, and three of whom are appointed by the Speaker of the House of Representatives of the State of Florida. For financial reporting purposes, management determined that SFFC should be reported as a governmental organization and a component unit of the State of Florida based on the appointment of the Board of Directors by officials of State government.

Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments requires the presentation of certain comparative information for the current and prior year in the Management Discussion and Analysis.

Financial Highlights

The assets of SFFC exceeded its liabilities at September 30, 2006 by $207,609,419 (net assets).

SFFC’s total assets were $372,720,037, of which $161,503,655 were related to securities lendingcollateral. Net assets of $207,551,911 are attributable to the unexpended portion of a federal grant of $310 million and investment earnings thereon and are restricted for future grants to The Scripps Research Institute for development of a biomedical research center in Palm Beach County, Florida.

As of September 30, 2006, SFFC’s General Fund reported ending fund balance of $207,609,419. Of this total amount, $207,551,911 is committed to funding The Scripps Research Institute project (reservedfund balance), $13,267 is reserved for prepaid expenses and $44,241 is designated for spending in the subsequent year’s budget (designated fund balance).

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to SFFC’s basic financial statements.The basic financial statements of SFFC include three components: (1) government-wide financialstatements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of SFFC’s finances, in a manner similar to a private-sector business.

The statement of net assets presents information on all of SFFC’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of SFFC is improving or deteriorating.

The statement of activities presents information showing how SFFC’s net assets changed during the most recent fiscal year. All changes in net asset are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flow. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods.

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The government-wide financial statements present functions of SFFC that are principally supported by federal funds passed through from the State of Florida to finance SFFC’s mission of promoting, developing and advancing the economic welfare of Florida through the establishment and operation of a biomedical research institution and campus by The Scripps Research Institute (governmental activities).The governmental activities of SFFC include all General Fund functions.

SFFC has no business-type activities that are intended to recover all or a significant portion of their costs through user fees and charges.

The government-wide financial statements can be found on pages 8 and 9 of this report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. SFFC, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. SFFC utilizes only one fund, the General Fund , which is classified as a governmental fund and accounts for all financial resources of SFFC.

Governmental funds. Govern mental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the governmental fund financial statements focus on near-terminflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financialstatements, it is useful to compare the information presented for governmental funds with similarinformation presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of SFFC’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenue, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between the governmentalfund and governmental activities.

SFFC adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided on page 17 for the General Fund to demonstrate compliance with this budget.

The basic governmental fund financial statements can be found on pages 8 and 9 of this report.Explanations of the reconciling items between the governmental fund and the governmental activities can be found in Note D on page 16.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 10-16 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning SFFC’s budget to actual results for the General Fund for the current year. Required supplementary information can be found on pages 17-18 of this report.

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Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position.In the case of SFFC, assets exceeded liabilities by $207,609,419 at September 30, 2006.

By far, the largest portion of SFFC’s total assets (99.9 percent) are investments with the State Board of Administration held for future disbursement to The Scripps Research Institute for the development of a biomedical research institution and campus in Palm Beach County, Florida.

Net Assets

2006 2005AssetsCash and other current assetsInvestments and other restricted assets

$ 128,595372,591,442

$ 39,798483,039,125

Total assets $ 372,720,037 $ 483,078,923

LiabilitiesCurrent liabilitiesLiabilities payable from restricted assets

Total liabilities

$ 28,987165,081,631

$ 165,110,618

$ 2,281243,457,877

$ 243,460,158

Net assets

RestrictedUnrestricted

$ 207,551,91157,508

$ 239,581,24837,517

Total net assets $ 207,609,419 $ 239,618,765

The largest portion of SFFC’s net assets (restricted net assets) represents resources that are subject to external restrictions on how they may be used. These restrictions relate to the use of the funds for the development of a biomedical research institution and campus by The Scripps Research Institute. At the end of the current fiscal year, SFFC reported positive balances in both categories of net assets.

SFFC’s unrestricted net assets of $57,508 relate to the unspent portion of funds appropriated by the Florida Legislature for the administrative expense of SFFC.

Governmental activities. Governmental activities decreased SFFC’s net assets by $32,009,346 in 2006 and by $57,301,569 in 2005. Key elements of this change are as follows.

Changes in Net Assets

2006 2005Revenues Investment income Contributed services

$ 18,417,30824,769

$ 11,930,72918,741

Total revenues 18,442,077 11,949,470

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2006 2005Expenses General government Economic development Grant to The Scripps Research Institute Securities lending expense

$ 167,261

40,936,1299,348,033

$ 196,993

61,960,3197,093,727

Total expenses 50,451,423 69,251,039

Change in net assets (32,009,346) (57,301,569)

Net assets – beginning of period

Net assets – end of period

239,618,765

$ 207,609,419

296,920,334

$ 239,618,765

Investment income includes the earnings from the investment of the federal grant in Federal National Mortgage Association (FNMA) securities, money market funds and securities lending income through the State Board of Administration.

For the most part, general government expenses were primarily professional fees associated with the grant monitoring responsibilities of SFFC and administrative expenses, such as rent. The economic development expense includes the grant funding SFFC provided to The Scripps Research Institute in connection with the development of the biomedical research institution and campus in Palm Beach County, Florida.

Due to delays in finalizing a site for The Scripps Research Institute’s permanent facilities in Palm Beach County, SFFC and The Scripps Research Institute agreed to amend the Operating and FundingAgreement in 2006 to modify the future annual amounts of the grant payments and extend the time period for disbursement of the grant funds from a term ending December 31, 2010 to a term endingDecember 31, 2013. As a result, the scheduled grant disbursements to The Scripps Research Institute for the fiscal year ended September 30, 2006 were decreased by $32,270,000 from the amounts in the original Operating and Funding Agreement. The total disbursements to The Scripps Research Institute over the term of the Operating and Funding Agreement did not change.

Financial Analysis of the Government’s Funds

As noted earlier, SFFC uses fund accounting to ensure and demonstrate compliance with finance-relatedlegal requirements.

Governmental funds. The focus of the governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing SFFC’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As noted previously, SFFC has only one governmental fund, the General Fund.

As of the end of the current period, SFFC’s governmental fund reported ending fund balance of $207,609,419. Approximately 99.9 percent of the ending fund balance ($207,565,178) constitutes reservedfund balance, which is not available for new spending because it has already been committed to pay for development of the biomedical research institution and campus in Palm Beach County, Florida, and for prepaid expenses. The remainder of fund balance ($44,241) is unreserved to indicate that it is available for spending at the discretion of SFFC, although all of the unreserved fund balance is designated for 2006-2007 budgeted expenditures.

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Key factors to consider in analyzing the fund balance for the General Fund are as follows:

The federal funds received by SFFC and the investment earnings thereon are required to be disbursed to The Scripps Research Institute through December 31, 2013.

In future years, SFFC is limited to expenditures of $200,000 annually for administrative expenses.All other funds are committed to The Scripps Research Institute project.

General Fund Budgetary Highlights

There were no differences between the original budget and the final amended budget for the year ended September 30, 2006.

During the year, revenues met budgetary estimates. Expenditures were less than budgetary estimates by approximately $20,856, of which approximately $17,000 was attributable to lower professional fees incurred for the grant monitoring activities of SFFC and approximately $4,000 was attributable to various administrative items, primarily lower travel expenditures.

Capital Asset and Debt Administration

Capital assets. SFFC has not purchased any capital assets but is renting equipment for the SFFC office.

Long-term debt. SFFC is not permitted to incur long-term debt.

Economic Factors and Next Year’s Budget

SFFC has a stable financial position and economic outlook, as indicated by:

The investments with the State Board of Administration earned $11,165,836 for 2006, excluding non-cash market losses and discount amortization of approximately $2,280,000. Investments consist of U.S. Government Agency securities with fixed maturities corresponding with the annual payments to The Scripps Research Institute. SFFC anticipates holding these securities to maturity which will avoid realization of any market losses.

Administrative expenditures are limited to $200,000 annually in future years.

These factors were considered in preparing SFFC’s budget for the 2006-2007 fiscal year.

Requests for Information

This financial report is designed to provide a general overview of SFFC’s finances for all those with an interest in the organization’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Scripps Project Director at 505 South Flagler Drive, Suite 1003, West Palm Beach, Florida, 33401.

SCRIPPS FLORIDA FUNDING CORPORATION

GOVERNMENTAL FUND BALANCE SHEET/STATEMENT OF NET ASSETS

September 30, 2006

ASSETSCash $ 115,328 $ $ 115,328Restricted assets

Cash equivalents 51,673,911 51,673,911Investments held under securities loans 156,407,086 156,407,086Securities lending short-term collateral

investment pool 161,503,655 161,503,655Accrued investment income 3,006,790 3,006,790

Prepaid items 13,267 13,267

TOTAL ASSETS $ 372,720,037 0 372,720,037

LIABILITIESAccounts payable $ 28,987 28,987Liabilities payable from restricted assets

Obligations under securities lending agreement 161,459,648 161,459,648Accrued investment expenses 711,983 711,983Economic development grant 2,910,000 2,910,000

TOTAL LIABILITIES 165,110,618 0 165,110,618

FUND BALANCE/NET ASSETSFund balance

Reserved for Scripps project 207,551,911 (207,551,911) 0Reserved for prepaid items 13,267 (13,267) 0Unreserved

Designated for subsequent years'expenditures 44,241 (44,241) 0

TOTAL FUND BALANCE 207,609,419 (207,609,419) 0

TOTAL LIABILITIESAND FUND BALANCE $ 372,720,037

Net assets Restricted 207,551,911 207,551,911 Unrestricted 57,508 57,508

TOTAL NET ASSETS $ 0 $ 207,609,419

GovernmentalActivities

FundStatement ofGovernmentalNet Assets

GeneralFund

Adjustments(Note D)

See notes to financial statements.8


STATEMENT OF GOVERNMENTAL FUND REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE/STATEMENT OF ACTIVITIES

Year Ended September 30, 2006

Revenues Securities lending income $ 9,572,350 $ $ 9,572,350 Investment income 8,844,958 8,844,958 Contributions 24,769 24,769

18,442,077 0 18,442,077

Expenditures/Expenses Current General government 167,261 167,261 Economic development grant 40,936,129 40,936,129 Securities lending Interest 9,291,953 9,291,953 Agent fees 56,080 56,080

50,451,423 0 50,451,423Revenues over (under) expenditures/

Change in net assets (32,009,346) 0 (32,009,346)

Fund balance/Net assets at October 1, 2005 239,618,765 239,618,765

Fund balance/Net assets at September 30, 2006 $ 207,609,419 $ 0 $ 207,609,419

Fund (Note D) ActivitiesGeneral Adjustments Governmental

Statement ofGovernmentalFund Activities

See notes to financial statements.9


NOTES TO FINANCIAL STATEMENTS

September 30, 2006

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NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Scripps Florida Funding Corporation (“SFFC”) is a Florida not-for-profit public benefit corporation created byFlorida Statutes, Section 288.955 and was incorporated on December 8, 2003 for the purpose of enhancingeducation and research and promoting, developing and advancing the business prosperity and economicwelfare of the State of Florida and its residents by facilitating and overseeing the establishment and operationof a state-of-the-art biomedical research institution and campus in the State by The Scripps Research Institute (“TSRI”).

SFFC is governed by a nine member Board of Directors, three of whom are appointed by the Governor of the State of Florida, three of whom are appointed by the President of the Senate of the State of Florida, and three of whom are appointed by the Speaker of the House of Representatives of the State of Florida.

Financial Reporting Entity: For financial reporting purposes, management determined that SFFC should be reported as a governmental organization and a component unit of the State of Florida based on theappointment of the Board of Directors by officials of State government. In considering potential component units to include in the SFFC financial reporting entity, management applied the criteria set forth in U.S.generally accepted accounting principles (GAAP). As defined by GAAP, the financial reporting entityconsists of (a) the primary government, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for whichthe nature and significance of their relationship with the primary government are such that exclusion would cause the financial reporting entity's financial statements to be misleading or incomplete. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the financial reporting entity's financial statements to be misleading or incomplete. Based upon the application of these criteria, SFFC found that there were no entities to consider as potential component units.

Government-wide/Governmental Fund Financial Statements: SFFC is a special-purpose government engaged in one primary governmental activity, to facilitate and oversee the establishment and operation of a state-of-the-art biomedical research institution and campus in the State by The Scripps Research Institute. SFFCaccounts for all financial resources in one fund, the General Fund, which includes all governmental activities of SFFC, which are supported primarily by appropriations from the State of Florida. Accordingly, theGovernment-wide and Governmental Fund financial statements of SFFC are combined using a columnarformat that reconciles individual line items of General Fund financial data to Government-wide data inseparate columns on the face of the financial statements. The Governmental Fund financial statementsinclude a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balance for the General Fund. The Government-wide financial statements consist of the Statement of Net Assets and the Statement of Activities. Note D explains the reconciling items presented in the adjustments column of the combined Government-wide and Governmental Fund financial statements.

Measurement Focus and Basis of Accounting: Financial reporting is based upon all pronouncements of the Governmental Accounting Standards Board (GASB), as well as the pronouncements of the FinancialAccounting Standards Board (FASB) and its predecessors, including FASB Statements and Interpretations, APB Opinions, and Accounting Research Bulletins that were issued on or before November 30, 1989 that do not conflict with or contradict GASB pronouncements. FASB pronouncements issued after November 30, 1989are not followed by SFFC in the preparation of its financial statements.



September 30, 2006

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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recognized when earned and expenses are recognized when incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues as soon asall eligibility requirements imposed by the provider have been met. SFFC does not allocate indirect expenses.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues arerecognized in the period in which they become both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. SFFC considers revenues to be available if collected within 90 days of the end of the current fiscal year. Expenditures are generally recognized in the accounting period in which the fund liability is incurred.Investment earnings are considered susceptible to accrual and have been recognized as revenue in the currentfiscal year. All other revenue items are considered to be measurable and available only when received in cashby SFFC.

Cash and Cash Equivalents: Cash consists of amounts on deposit in money market and non-interest bearingchecking accounts. Cash equivalents include amounts held in a “2a7” like money market fund administered by the State Board of Administration of the State of Florida.

Investments: Investments are stated at fair value, and consist of deposits in an investment pool administered by the State Board of Administration of the State of Florida (the “SBA”) pursuant to a trust agreement entered into January 30, 2004. All SFFC funds legally restricted to the TSRI project are required to be deposited in the SBA investment pool.

Prepaid Items: Certain payments to vendors reflect costs applicable to future accounting periods and arerecorded as prepaid items.

Net Assets/Fund Balance: The government-wide financial statements utilize a net asset presentation. Net assets are categorized as follows:

Restricted – This component of net assets consists of constraints placed on the use of net assets by external restrictions imposed by vendors, contributors, or laws or regulations of other governmentsor constraints imposed by law, constitutional provisions or enabling legislation.

Unrestricted – This component of net assets consists of net assets that do not meet the definition of Invested in Capital Assets, Net of Related Debt or Restricted.

The governmental fund financial statements utilize a fund balance presentation. Fund balance is categorized as follows:

Fund balance reserves indicate the portion of fund balance that is not available for subsequentexpenditure, other than for the specific purpose for which the reserve was established.

Fund balance designations indicate management’s intended future use of available resources.



September 30, 2006

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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Economic Development Grant: SFFC has entered into an Operating and Funding Agreement (the“Agreement”) with TSRI dated January 30, 2004. Pursuant to the terms of the Agreement, SFFC will provide an economic development grant to TSRI in the amount of $310 million plus the net investment incomethereon. Subject to compliance by TSRI with the terms of the Agreement and annual approval of a grant request by SFFC, the economic development grant is payable to TSRI in quarterly installments on March 15th,June 15th, September 15th and December 15th of each year, unless there is a material default of the Agreement by TSRI. At September 30, 2006, TSRI was in compliance with the Agreement and the quarterly payment due on December 15, 2006 is accrued in the accompanying financial statements.

In-Kind Contributions: SFFC records in-kind contributions for contributed professional services. Contributed professional services are recognized if the services received (a) create or enhance long-lived assets or (b)require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. The project director for SFFC is an employee of the State of Florida, Office of Tourism, Trade and Economic Development, which contributes to SFFC the portion of theprofessional time of the project director related to administering the operations of SFFC. For 2006 these in-kind professional services were valued at $24,769 and recorded in the accompanying financial statements as contributions and offset by a like amount included in general government expenditures/expenses.

Property Taxes: SFFC receives no property taxes.

Risk Management: SFFC is exposed to various risks of loss related to torts; theft of, damage to, anddestruction of assets; errors and omissions; injuries to employees; and natural disasters. SFFC purchasescommercial insurance for the risks of losses to which it is exposed. Policy limits and deductibles are reviewed annually by management and established at amounts to provide reasonable protection from significantfinancial loss. Settlements have not exceeded insurance coverage since inception.

Estimates: Management uses estimates and assumptions in preparing financial statements in accordance withU.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues andexpenditures. Actual results could vary from the estimates that were used.

NOTE B – CASH, CASH EQUIVALENTS, INVESTMENTS AND SECURITIES LENDING

Cash: At September 30, 2006 SFFC had deposits with financial institutions with a carrying value and bank balance of $115,328. The deposits with financial institutions were entirely covered by federal depositoryinsurance and a collateral pool pledged to the State Treasurer of Florida by financial institutions that complywith the requirements of Florida Statutes and have been designated as a qualified publicdepository by the State Treasurer. Qualified public depositories are required to pledge collateral to the State Treasurer with a fair value equal to a percentage of the average daily balance of all government deposits in excess of any federal deposit insurance. In the event of a default by a qualified public depository, the amountof public funds would be covered by the proceeds of federal deposit insurance, pledged collateral of the public depository in default and, if necessary, a pro rata assessment to the other qualified public depositories in the collateral pool. Accordingly, all deposits with financial institutions are considered fully insured orcollateralized in accordance with the provisions of GASB Statement No. 3.



September 30, 2006

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NOTE B - CASH, CASH EQUIVALENTS, INVESTMENTS AND SECURITIES LENDING (Continued)

Cash Equivalents: Cash equivalents include amounts on deposit in the SBA’s Commingled AssetManagement Program (CAMP) money market fund. The CAMP money market fund is operated by the SBAin a manner consistent with Securities and Exchange Commission (SEC) Rule 2a7 of the Investment CompanyAct of 1940. All cash equivalents are legally restricted to the TSRI project.

Investments: Pursuant to a trust agreement with the SBA entered into on January 30, 2004, SFFC is required to invest all funds legally restricted to the TSRI project in an investment pool administered by the SBA. The objective of the SBA investment pool is to provide liquidity to fund the anticipated disbursements for the TSRIproject through 2013. All investment policies are established by the SBA, except for those specifically set forthin the trust agreement. The trust agreement requires investments to be made in marketable securities rated investment grade (BBB for Standard and Poor’s or Baa for Moody’s Investor Services) by at least oneNationally Recognized Statistical Rating Organization (NRSRO), or if not rated, deemed by the SBA to be the equivalent of investment grade. Short-term investments must be rated in the highest two categories by at least one NRSRO. All investments are required to mature within six months of the anticipated date ofdisbursement to TSRI.

As of and for the year ended September 30, 2006 the SBA investment pool for SFFC included Federal NationalMortgage Association (FNMA) securities, the SBA’s CAMP money market fund and securities lending short-term collateral investment pool.

Securities Lending: Pursuant to Florida Statutes Section 215.47(16) and SBA policies, the SBA investment poolfor SFFC participates in a securities lending program for investments. In the securities lending program, a lender (the SBA) loans securities to a borrower for cash collateral, with a simultaneous agreement to return the collateral for the same securities in the future. The SBA’s custodial bank (KeyBank) manages the securities lending program and receives cash held as collateral. Generally, the cash collateral is required to be at least 102 percent of the fair value of the securities lent. The cash collateral received by the custodial bank is pooledwith cash collateral received for securities on loan in other funds at the SBA and invested in a short-termcollateral pool consisting of eligible securities meeting the SBA investment guidelines for credit quality,maturity and liquidity. Eligible securities of the short-term collateral pool generally include obligationsissued or guaranteed by the U.S. Government, its agencies and instrumentalities; commercial paper; bankersacceptances; domestic and Eurodollar time deposits and certificates of deposit; certain repurchase agreementsand money market mutual funds; bank and deposit notes; corporate and medium term notes; loanparticipations; guaranteed investment contracts; beneficial interests in trusts; and, other approved debtobligations.

All securities loans can be terminated on demand by either the SBA or the borrower. Maturities ofinvestments made with cash collateral generally are not matched to maturities of securities loans, due to some securities loans being open-ended with no fixed expiration date. There are no restrictions on the amount of investments in the investment pool for SFFC that may be loaned by the SBA at one time. The SBA securities lending contract with the custodial bank requires the bank to indemnify the SBA if borrowers fail to return the securities, fail to pay the SBA for income distributions by the securities’ issuers while the securities are on loan, or if the collateral is inadequate to replace the securities loaned. No violations of legal or contractualprovisions occurred and no losses were incurred due to borrower or lending agent defaults for the year ended September 30, 2006.



September 30, 2006

14


At September 30, 2006 the SBA investment pool held for SFFC consisted of the following;

Credit Quality RatingsFair Value

WeightedAverage

Maturity S&P Moody’s

CAMP money market fund

Investments held under securities loans with cash collateral FNMA securities (cost $166,739,747)

Securities lending short-term collateral investment pool

$ 51,673,911

156,407,086208,080,997

161,503,655

$ 369,584,652

30 days

2.12 years

18 days

Not Rated

AAA

Not Rated

Not Rated

Aaa

Not Rated

Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Investments of the SBA pool are structured to mature within six months of the scheduled SFFC annual grant disbursement dates. The weighted average maturity of the CAMP money market fund islimited to ninety days. For purposes of calculating a weighted average maturity, the maturity date isassumed to be the next reset date rather than the stated maturity for floating rate investments of the CAMP money market fund and for all investments of the securities lending short-term collateral investment pool atSeptember 30, 2006. The table above provides the weighted average maturity for the SBA investment pool at September 30, 2006.

Credit Risk: Credit risk is the risk that an issuer will not fulfill its obligations. All investments other than the CAMP money market fund must be rated investment grade by at least one Nationally Recognized StatisticalRating Organization (NRSRO), or if not rated, deemed by the SBA to be the equivalent of investment grade.An investment grade rating is at least BBB for Standard and Poor’s (S&P) or Baa for Moody’s Investor Services(Moody’s). Within the CAMP money market fund, all eligible investments must be first tier investment grade at time of purchase. Neither the CAMP money market fund or the securities lending short-term collateral investment pool carry a credit rating. Cash collateral invested in the securities lending short-term collateral investment pool at September 30, 2006 had no credit risk exposure to borrowers at September 30, 2006 since the cash collateral held exceeded the fair value (including accrued interest) of the securities on loan for all borrowers. The table provides the credit quality ratings by S&P and Moody’s for the FNMA investments held at September 30, 2006.

Custodial Credit Risk: Custodial credit risk is defined as the risk that the investment pool may not recover the securities held by another party in the event of a financial failure. The SBA investment pool does not have a formal policy for custodial credit risk. At September 30, 2006 the investments of the SBA investment pool are considered unclassified pursuant to the custodial credit risk categories of GASB Statement No. 3. The FNMAsecurities held under securities loans are unclassified because all FNMA securities were on loan at September 30, 2006 for cash collateral. The CAMP money market fund and securities lending short-term collateralinvestment pool are both commingled pool investments that cannot be classified.



September 30, 2006

15


Concentration of Credit Risk: Concentration of credit risk is defined as the risk of loss attributed to themagnitude of an investment in a single issuer. For investments other than the CAMP money market fund, there is no specific policy for concentration of credit risk. In the CAMP money market fund, securities of a single issuer are limited to no more than 5% of the portfolio amortized cost (excluding U.S. Treasury andFederal Agency securities). Repurchase agreements must be fully collateralized by U.S. Government orAgency securities.

Foreign Currency Risk: Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. There was no exposure to foreign currency risk in the SBA investment pool atSeptember 30, 2006.

Administrative Expense: The SBA receives an administrative investment fee in the amount of two basispoints annualized, calculated and charged monthly based on the end-of-month fair value of the investments,with an annual minimum fee of $2,500. The SBA administrative fee expense for the year ended September 30,2006 was approximately $43,000 and is netted with investment income received from the SBA.

NOTE C - COMMITMENTS AND CONTINGENCY

Contract Commitment: Pursuant to the terms of the Operating and Funding Agreement, SFFC will provide an economic development grant to TSRI of $310 million plus the investment income thereon and less anannual allocation to SFFC for administrative expenses of $200,000 for 2006 and each subsequent contract year.The grant funds are to be used by TSRI to establish and operate a state-of-the-art biomedical researchinstitution and campus in Florida. Subject to a material default by TSRI under the agreement, SFFC willdisburse the grant funds to TSRI in quarterly installments over the term of the Agreement. During 2006 SFFC and TSRI agreed to amend the Agreement to modify the future annual amounts of the grant payments andextend the time period for disbursement of the grant funds from a term ending December 31, 2010 to a term ending December 31, 2013. The future anticipated annual disbursements under the revised Agreement,exclusive of investment earnings on invested funds, are as follows:

Year Ending September 30, Amount

20072008200920102011201220132014

$ 26,819,25048,273,50037,620,50024,943,50030,180,75019,271,000

7,441,5001,250,000

Total $ 195,800,000



September 30, 2006

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NOTE C - COMMITMENTS AND CONTINGENCY (Continued)

Lease Commitment: SFFC leases office space under a long-term lease expiring January 31, 2007 with anoption to renew for three additional years. Annual rent increases are based on changes in the consumer price index. Rent expense under this lease was $10,892 for the year ended September 30, 2006. The minimumfuture lease payments at September 30, 2006, were $7,356 due in the fiscal year ending September 30, 2007.

Grants: Amounts received or receivable from grantor agencies are subject to audit and adjustment by those agencies. Any disallowed claims, including amounts already received, might constitute a liability of SFFC for the return of those funds.

NOTE D - EXPLANATION OF DIFFERENCES BETWEEN GOVERNMENTAL FUND AND GOVERNMENT-WIDE FINANCIAL STATEMENT AMOUNTS

The only difference between the Governmental Fund financial statements and the Government-wide financialstatements is the reclassification of the Fund Balance reported for SFFC’s General Fund into the Net Assetscategories reported for Governmental Activities in the Statement of Net Assets. There were no differences between the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities.

REQUIRED SUPPLEMENTARY INFORMATION


BUDGETARY COMPARISON SCHEDULE -GENERAL FUND - NON-GAAP BUDGETARY BASIS

Year Ended September 30, 2006

RevenuesInvestment income allocation

for administrative expenses $ 200,000 $ 200,000 $ 200,000 $ 0

TOTAL REVENUES 200,000 200,000 200,000 0

General Government Insurance 39,800 39,800 38,086 1,714 Office supplies and expense 1,100 1,100 1,264 (164) Postage 350 350 208 142 Professional fees Legal 50,000 50,000 34,701 15,299 Accounting and auditing 50,000 50,000 48,931 1,069 Bookkeeping 1,440 1,440 960 480 Other 200 200 160 40 Public meetings and notices 650 650 1,387 (737) Rent 10,608 10,608 10,892 (284) Telephone 4,200 4,200 5,830 (1,630) Travel Board members 5,000 5,000 73 4,927

TOTAL EXPENDITURES 163,348 163,348 142,492 20,856

REVENUES OVER EXPENDITURES -BUDGETARY BASIS $ 36,652 $ 36,652 $ 57,508 $ 20,856

Variance with

Budgeted Amounts ActualOriginal

Final BudgetPositive

Final Amounts (Negative)

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NOTES TO BUDGETARY COMPARISON SCHEDULE

September 30, 2006

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NOTE A - BUDGETARY ACCOUNTING

An appropriated budget is legally required and has been legally adopted for the General Fund on the same modified-accrual basis used to reflect actual revenues and expenditures, except that for budgetary purposes, investment income from the SBA, excluding the annual administrative allocation, securities lending income, and in-kind, contributed professional services are not budgeted in revenues and SBA investment expenses, in-kind, contributed professional services and economic development grant are not budgeted in expenditures. The Board of Directors must approve all changes or amendments to the budgeted expenditures of Scripps Florida Funding Corporation (SFFC). Total expenditures may not legally exceed total budgeted appropriations at the fund level. During 2006, SFFC made no supplemental appropriations.

The General Fund budget amounts presented in the accompanying budgetary comparison schedulereflect the original budget and the amended budget based on legally authorized revisions to the original budget during the year. Appropriations lapse at fiscal year end.

NOTE B - BUDGET TO ACTUAL COMPARISONS

Generally accepted accounting principles (GAAP) requires that the General Fund budgetary comparison schedule be prepared under the basis of accounting used in preparing the budget. As a result, General Fund revenues reported in the budgetary comparison schedule differ from the revenues reported on the GAAP basis. The difference can be reconciled as follows:

Revenues Expenditures

Budgetary basis GAAP basis adjustments:

SBA investment income Securities lending income and expenses

Economic development grantIn-kind contribution of professional services

GAAP Basis

$ 200,000

8,644,9589,572,350

24,769

$ 18,442,077

$ 142,492

9,348,03340,936,129

24,769

$ 50,451,423

Expenditures for general government purposes are legally limited by Florida Statutes to $300,000 for the first contract year of operations, ending on December 15, 2004 and $200,000 for each contract year thereafter. For purposes of this limitation, the budgetary basis expenditures for general government purposes of $142,492 through September 30, 2006 were within the $200,000 limitation for the contract period ending December 15, 2006. The limitation of $200,000 for the contract period ended December 15, 2005 was met.

COMPLIANCE REPORT ANDMANAGEMENT LETTER




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Independent Auditor's Report on Internal Control Over Financial Reportingand on Compliance and Other Matters Based on an Audit of Financial

Statements Performed in Accordance With Government Auditing Standards


We have audited the financial statements of the governmental activities and major fund of Scripps Florida Funding Corporation, a component unit of the State of Florida, as of and for the year endedSeptember 30, 2006, which collectively comprise the basic financial statements of Scripps Florida Funding Corporation and have issued our report thereon dated December 15, 2006. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the internal control over financial reporting of Scripps Florida Funding Corporation in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the financial statements of Scripps Florida Funding Corporation are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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This report is intended solely for the information and use of the Board of Directors, Audit Committee and management of Scripps Florida Funding Corporation, and the Auditor General and pass-through agency of the State of Florida and is not intended to be and should not be used by anyone other than these specified parties.

December 15, 2006




21

Management Letter


We have audited the financial statements of Scripps Florida Funding Corporation, a component unit of the State of Florida, as of September 30, 2006 and for the year then ended, and have issued our report thereon dated December 15, 2006.

We conducted our audit in accordance with U.S. generally accepted auditing standards and GovernmentAuditing Standards, issued by the Comptroller General of the United States. We have issued ourIndependent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovernmentAuditing Standards. Disclosures in that report, which is dated December 15, 2006, should be considered in assessing the results of our audit.

Additionally, our audit was conducted in accordance with Chapter 10.700, Rules of the Auditor General, which require that we address certain compliance and other matters in the management letter, if not already addressed in the auditor’s report on internal control over financial reporting and on compliance and other matters. In planning and performing our audit of the financial statements of Scripps Florida Funding Corporation as of September 30, 2006 and for the year then ended, we considered Scripps Florida Funding Corporation’s internal controls in order to determine the scope of our audit procedures for the purpose of expressing an opinion on the financial statements and not to provide an opinion on internal control. While our purpose was not to provide an opinion on internal control, certain matters are required to be reported to you as follows.

CURRENT YEAR FINDINGS AND RECOMMENDATIONS

The Rules of the Auditor General require disclosure in the management letter of the following matters if not already addressed in the Independent Auditor’s Report on Internal Control Over Financial Reportingand on Compliance and Other Matters: (1) violations of laws, rules, regulations, and contractualprovisions that have occurred, or are likely to have occurred; (2) improper or illegal expenditures; (3) improper or inadequate accounting procedures; (4) failures to properly record financial transactions; and (5) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. Our audit for the year ended September 30, 2006 disclosed no such matters that are required to be disclosed.

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PRIOR YEAR FINDINGS AND RECOMMENDATIONS

The Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor’s report on internal control over financial reporting and on compliance and other matters, whether or not inaccuracies, shortages, defalcations, fraud, and/or violations of laws, rules, regulations and contractual provisions reported in the preceding annual financial audit report have been corrected. Additionally, the Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor’s report on internal control over financial reporting and on compliance and other matters, whether or not recommendations made in the preceding management letter have been followed or otherwise no longer apply. We noted that comment 2004-1 inthe prior year management letter relating to Securities Lending Transactions was addressed by SFFC and no longer applies.

This report is intended solely for the information and use of the Board of Directors, Audit Committee and management of Scripps Florida Funding Corporation, and the Auditor General and pass-through agency of the State of Florida and is not intended to be and should not be used by anyone other than thesespecified parties.

December 15, 2006

Documents

Scripps Florida Funding Corporation