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USC to Merge with Scripps?

Rumors are swirling that the University of Southern California may acquire The Scripps Research Institute.

By | June 18, 2014

Julian Voss-Andreae's "Angel of the West" adorns the campus of The Scripps Research Institute FloridaWIKIMEDIA, JULIANVAThe University of Southern California may acquire or merge with the Scripps Research Institute, according to unnamed Scripps researchers who spoke with the San Diego Union-Times, which broke the story. The private institutions themselves were less specific about a possible move. “The University of Southern California (USC) and The Scripps Research Institute (TSRI) are discussing the possibility of a relationship that would enhance the missions of both institutions,” Michael Marletta, president and CEO of TSRI, and Elizabeth Garrett, USC provost and senior vice president for academic affairs, said in a joint statement. “TSRI and USC have a shared commitment to academic excellence that will result in meaningful breakthroughs to improve health and well-being.”

Such a merger would be virtually unprecedented. “I’ve never heard of quite anything like this,” medicinal chemist Derek Lowe told the Union-Times. “It’s not like universities do this. You don’t hear that Penn is taking over Penn State in a corporate merger.”

The La Jolla, California-based TSRI, which specializes in chemistry, stem cell research, and molecular biology, announced an expansion into Florida in 2003, with a campus in Jupiter. The Sunshine State offered TSRI hundreds of millions of dollars in incentives to open shop in Palm Beach County. The news that USC and TSRI are negotiating some sort of joint relationship has angered at least one Florida politician. “I am outraged by this announcement and find it unacceptable based on several factors, including a recent large state appropriation without any of Scripps’ people even bothering to mention that negotiations have been ongoing for some time,” former GOP congressman Mark Foley told The Palm Beach Post. “I think this deserves an investigation and a freezing of the state monies before a check is written.”

Both USC and TSRI attract millions of dollars in funding from the National Institutes of Health (NIH) every year. But TSRI researchers rely almost wholly on NIH, which has grappling with flat budgets and a decrease in grants for a number of years. It employs nearly 2,900 scientists and other employees and had a $398 million budget in 2012, according to the Los Angeles Times.

However, the LA Times quoted “officials close to the situation” as saying that a potential deal is not imminent.

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Avatar of: RJR8222

RJR8222

Posts: 4

June 21, 2014

It is not unprecedented. In 2012, financial problems caused the Fox Chase Cancer Center to be acquired by Temple University.

With federal funding down and likely to stay down, an independent research organization with a low endowment to cash flow ratio and a high reliance on federal funding may need to look to a merger with a larger partner in order to maintain long-term viability.

This problem is exacerbated by the federal requirement that all research be burdened with the same indirect rate. Although this policy was originally intended to ensure that the government pay only its "fair share", the unexpected result has been to make it difficult for some independent research organizations to accept significant research support that does not come with the full federal indirect rate.

During periods of protracted growth, it was possible to overlook the dangers inherent in the unintended consequences of the federal accounting requirements for indirect costs. With flat or declining federal funds, however, some additional independent research institutions may also find themselves caught in a runaway negative fiscal feedback loop: a loss of federal support generates increased demands on a small pool of discretionary funds, which reduces the ability to fund uncovered indirect costs, which increases the dependence on federal funding, which worsens the effect of declining federal funds...

If this feedback system were to threaten the institution's ability to service its debt, contract terms with lenders could trigger substantial increases in debt-service expenses, rapidly tipping the situation from a difficult problem into a liquidity meltdown.

If the drop in federal funding for research persists, this "unprecedented" merger and acquisition will likely become a more commonly explored option as independent research institutions struggle to deal with new financial realities.

 

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