R&D Tax Credit Aspects of Sleep Innovation
It affects the way we
work, our daily function, how quickly we recover from illness,
our mood, even our survival rate from cancer. Innovation in
the sleep industry is growing rapidly due to the growing
number of people that are being diagnosed as sleep disorder
sufferers and the constant need to make sleep aid technology
more comfortable to wear, and effective. Wearables and smart
sleep monitoring equipment are generating large streams of
sleep "Big Data" that can be used to generate new effective
sleep products. R&D tax credits are available to support
sleep technology innovation.
The R&D Tax Credit
Enacted in 1981, the Federal Research and Development
(R&D) Tax Credit allows a credit of up to 13 percent of
eligible spending for new and improved products and processes.
Qualified research must meet the following four criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 18, 2015, President Obama signed the
bill making the R&D Tax Credit permanent. Beginning
in 2016, the R&D credit can be used to offset Alternative
Minimum tax and startup businesses can utilize the credit
against payroll taxes.
Sleep Disorders
Sleep disorders including sleep apnea,
snoring, night terrors, insomnia, affect millions of Americans
every time their heads hit the pillow. Sleep apnea and snoring
can result in serious medical and health issues. While
insomnia usually only last for a couple days while your body
is adjusting, medications may be prescribed to help the sleep
process return to normal. Medications such as Lunesta or
AmBien can be taken in order to induce sleep as well as
sustain sleep. However, the Washington Post recently stated
that Lunesta should start to be taken in smaller doses in
order to make sure that the next day people who took the drug
aren't too drowsy from taking too large of a starting dose the
day before. A reported 168 million adult drivers have said
that they drove while drowsy, and a reported 103 million
people (unrelated to the drowsy figure) have said that they
have actually fallen asleep at the wheel in the past year. Out
of the 13% (roughly 10 million people) say that they have
fallen asleep at the wheel at least once a month. 4% of the
population has admitted that they have either been in an
accident due to drowsiness or have almost been in an accident.
Health Concerns
Lack of sleep can result in a multitude of
problems not only to yourself but also impact your work and
the people around you. Loss of sleep has been proven to
increase risk for Heart disease, heart attack, heart failure,
irregular heartbeat, high blood pressure, stroke, and
diabetes. Insufficient sleep has been also linked to
depression and anxiety. Studies of growing children have
increasingly shown that lack of sleep can lead to childhood
diabetes, obesity and higher risk of early heart disease. In
2007, a poll by Sleep in America surveyed 10,000 people. The
surveys showed that people who suffered from insomnia were
five times as likely to develop depression as those without
insomnia. In today's 24 hour society, lack of sleep is very
common. With new 24/7 mobile technology people stay up later
than normal and disrupt their internal clocks, causing
increased risk of chronic disease. Lack of sleep can also age
your skin as result of the release of a chemical called
Cortisol which breaks up skin collagen, which keeps your skin
tight and smooth. When you sleep your body releases growth
hormone, which is crucial in children so they can grow
properly and strengthen their bones and muscle mass. Lack of
sleep, makes you forgetful. In 2009 American and French
researchers determined “sharp wave ripples” are
responsible for consolidating memory. Getting less than 6
hours of sleep has demonstrated a 30% higher probability of
becoming obese. It has been shown that lack of sleep causes
the release of what is called Ghrelin, which stimulates
hunger. But not only that, but your body will also have
cravings for high-fat, high-carb foods.
In 2007, British
researchers who conducted the "Whitehall 2 Study" surveyed
10,000 people who reduce their sleep from 7 hours to 5 hours.
The results demonstrated that reducing sleep doubled your risk
of death by all causes. But in particular it doubled the risk
for cardiovascular disease. Lastly, the lack of sleep impairs
judgment.
Many leading U.S. universities are engaged in research
related to sleep as follows:
University of
Pennsylvania Medicine Center for Sleep and Circadian
Neurobiology
Recent Penn medicine
studies that were reported in March of this 2014 have shown
that chronic loss of sleep is linked to the loss of neurons.
Neurons are the building blocks of our brains and by losing
these essential building blocks, we lose alertness and optimal
cognition. During studies where researchers used mice at
different levels of sleep patterns, such as normal rest, short
wakefulness, or extended wakefulness, the results showed that
in extended wakefulness, the SirT3 protein which is essential
for maintaining metabolic homeostasis stopped and resulted in
a 25% loss of neurons. The research also states that extended
periods of SirT3 loss can lead to nerve damage. The research
team plans to examine several specimens post-mortem in order
to see if extended SirT3 loss can accelerate the onset of
Alzheimer's and Parkinson's. Although it is not yet proven all
indications are pointing in that direction. Before these
studies no one believed that sleep loss can cause irreversible
brain damage. But now it is clear that it can.
Johns Hopkins University
Johns Hopkins
University School of Medicine in the Baltimore Marshland has
been doing to research on how sleep apnea might have even more
serious risks than previously believed. A study was conducted
using 18 people that just started using a Continuous Positive
Airway Pressure (CPAP) machine to treat sleep apnea and 18
people who were not currently being treated. All of whom had
to perform a simulated driving test. The results
overwhelmingly showed that the participants, who were being
treated, even just after three days of use, had much faster
reaction times to simulated accidents. The control group who
was not being treated had no results improvement, which rules
out the argument of becoming familiar with the simulation. A
study was also done to see if the use of a CPAP machine would
reduce Left Ventricular Hypertrophy of the heart, which means
the left ventricle's muscular wall was thickening due to the
heart trying to pump more blood during sleep to compensate for
the sleep apnea. After 6 months of complying with the CPAP
therapy, all patients had significant reduction in the size of
the left ventricle. Left Ventricle Hypertrophy is a direct
link to cardiac-related death.
American Academy of Sleep Medicine
A new study, which
was conducted at Stanford University in California, has shown
that women with advanced stages of breast cancer, who get
better sleep, have a much higher survival rate then women who
don't. Although it is not completely clear why, we do know
that increased levels of sleep increase immunity function.
Mean survival was 68.9 months of women who were classified as
efficient sleepers as compared to 33.2 months of women who
were not so efficient. Analysis has shown that just a 10
percent increase in sleep efficiency increases survival rate
by 32 percent. The study consisted of 97 women all of whom had
advanced stage breast cancer. Each spent about 8 hours in bed
and slept for approximately 6.5 hours. Although the exact
mechanism of the relationship between sleep quality and
advanced breast cancer is not yet clear, it is clear that
better quality of sleep leads to improved immunity and a
better survival rate.
University of California: San Francisco
Drs. Ying-Hui Fu and
her Husband Louis Ptacek are researching how genes can play an
important role in the quality of our sleep. They have
discovered that only 1% of Americans can actually wake up
feeling refreshed after just 6 hours of sleep. They have also
found that those people are more energetic, optimistic and
have a go getter mentality. Dr. Ptacek is hoping to begin
research on how certain drugs can alter our circadian rhythms,
which controls our entire biological cycle. Disruptions in
this circadian rhythm have been shown to lead to chronic
illnesses such as cancer, obesity, and metabolic syndrome.
Conclusive results could eliminate jet lag and a more curative
process to cancer treatments. Dr. Ptacek says that a drug of
this nature is going to require at least 10 years of
development. Dr. Fu also is hoping to, in the future, to begin
research on drugs that can reduce the amount of time that we
need to sleep in order to feel refreshed and energetic.
Together, they gather data from 100s of families in order to
find the "needle in a haystack" so to speak to try and find
that one family that has the short sleeper genome. It is
extremely time consuming work that rarely comes up with a
helpful result. But researching each family is very "important
and helpful in order to further understand the implications of
sleep deprivation" (Sumathi Reddy).
Big Data Opportunities
The opportunities presented for data
analysis, thanks to new sleep software, will lead the way in
not only how we think about sleep but also how we see sleep.
The large increase in wearables and sleep monitoring devices
presents a tremendous amount of new sleep "Big Data." As a
result of this new data, sleep device and mattress industries
will respond with new products.
Continuous
Improvements in Mattress Technology
Not having the right mattress can also lead
to problems in one's sleep cycle, such as back pain, fatigue
and muscle soreness. Mattresses should be evaluated every
seven years in order to make sure that you are using the right
mattress for your lifestyle and your body.
The following table
presents the research budgets of some of the largest publicly
traded manufacturers including; Tempur-Pedic headquartered in
Lexington, Kentucky, and Select Comfort headquartered in
Minneapolis, Minnesota. Along with ResMed Inc. from Australia
but headquartered in San Diego, California and Leggett &
Platt from Carthage, Missouri.
*Note: The listed Tempur-Sealy expenses and employees for
years 2011 and 2012 are before the Tempur-Pedic and Sealy
merger.
Tempur-Sealy and
Leggett and Platt made a large transaction on July 1, 2014 in
which Leggett and Platt bought all of Tempur-Sealy's U.S.
inner spring production facilities and equipment. Leggett and
Platt is now the exclusive long term supplier of inner spring
Tempur-Sealy mattresses and box springs for sealy in the U.S.
and Canada. The transaction creates significant benefits as it
leverages the strengths of two key players of the global
bedding industry. Importantly, the agreement paves the way for
multi-year strategic product development initiatives between
the two companies. Now that Tempur-Sealy no longer has control
over the inner spring mattress production, they can
concentrate their efforts on innovation and improve their
working capital position.
The mattress
industry provides 9 different kinds of mattresses as well as
varying sizes. The mattress industry is constantly working on
finding new materials and foam compounds in order to maximize
comfort for the sleeper and to reduce pain.
Sleep Innovation, a
mattress producer, announced that they have created a mattress
that now adjusts to your optimal comfort level, but that air
that is inside the mattress also monitors how you sleep and
every morning gives you a report card on a tablet that is
provided when you purchase the mattress. The tablet also has a
lifestyle and nutrition application that coincides with your
sleep patterns every night to see what kind of daily choices
affect your sleep the most. This product is not offered in all
of Sleep Innovations Sleep Number beds, but is in the process
of becoming available in other model sizes. The bed only
records when you want it to record with a privacy button for
those private moments. The stand alone technology will be
available independent of the mattress for $999 as compared to
the $7,999 for the starting queen.
In 2012 Advent
International, purchased Serta International as well the
sister company Simmons Bedding Company. Together they compose
a 34% mattress market share and both have large R&D
departments to improve their mattresses.
|
Company
|
Year
|
R&D Expenses
|
Number of
Employees
|
R&D
Expenses Per Employee
|
|
Leggett &
Platt
|
2013
|
$ 24,000,000
|
18,800
|
$1,277
|
|
2012
|
22,000,000
|
18,300
|
1,202
|
|
2011
|
20,000,000
|
1,924
|
10,395
|
|
ResMed, Inc.
|
2013
|
$ 120,100,000
|
3,900
|
$30,795
|
|
2012
|
109,700,000
|
3,700
|
29,649
|
|
2011
|
92,000,000
|
3,450
|
26,667
|
|
Tempur-Sealy
Internatial Inc.
|
2013
|
$ 21,000,000
|
6,700
|
$3,134
|
|
2012
|
15,000,000
|
1,950
|
7,692
|
|
2011
|
9,900,000
|
1,800
|
5,500
|
|
Select Comfort
Corporation
|
2013
|
$ 9,478,000
|
2,858
|
$3,316
|
|
2012
|
6,194,000
|
2,791
|
2,219
|
|
2011
|
4,175,000
|
2,328
|
1,793
|
Mattress Recycling
In September of 2013 the state of
California enacted the Used Mattress Recovery and Recycling
Act, which requires mattress manufacturers to create statewide
recycling program for discarded mattresses. The program is
paid for by a new fee that is attached to buying a new
mattress. The fee pays for the pick-up and recycling of the
old mattress. Connecticut and Rhode Island followed suit in
also passing recover and recycle acts. However, changes were
made in early June of 2014 in order to help clarify what
defines a mattress, as well as to help retailers make the
necessary changes. This presents a good opportunity for
mattress producers, to begin creating mattresses from
sustainable materials and established recycling programs.
Sleep Monitoring
Wearables
Wearable sleep technology such as mouth
guards for snorers and ram air masks for people with sleep
apnea are also constantly improving technology and comfort of
the wearables in order to give the consumer the best possible
sleep. 28 million Americans suffer from sleep apnea which can
be lethal if not treated properly. Nullifying the treatment,
investors data indicates that about half of people who are
diagnosed with sleep apnea, and advised to wear a mask during
sleep, shed or rip their masks off within the first one to
three weeks. A new patch called Provent is placed below the
nostril and two small plugs create enough air pressure to keep
the airway open all night. However, Provent isn't for everyone
since it is only effective on 1/3 of users. Provent is also
more expensive than a traditional CPAP machine due to monthly
replacements of the patch. These developing technologies give
users a better healthier sleep.
One of the fastest
growing new product categories is health and wellness
monitoring wearables with sleep related applications. Fortune
Magazine reports that an increasing number of companies are
purchasing wrist bracelets such as the Fitbit made by the
Fitbit Inc. of San Franciso and the Jawbone made by Jawbone
also of San Francisco, in an effort to improve the health of
their employees. BP the global oil company in particular has
lead the way, partnering with StayWell Health Management, and
offers employees Fitbit wrist bands to measure how many steps
that each user takes as well as monitoring other physical
activities. The more an employee exercises the more "wellness
points" they will receive. Not only does BP want to make sure
that their employees are healthy, but want to manage
escalating health care premiums. The use of the products
motivates the employees to try and make a difference with his
or her health while trying to make it fun and easy at the same
time. Users of the Jawbone or Fitbit are encouraged to share
their progress online to motivate users. After only a short
period of time, since the implantation of these new wearables,
results are conclusive that employees are sleeping better due
to healthier habit changes.
The Jawbone and the
Fitbit wearable wrist sensors monitor your daily activities as
well as your sleep habits. Jawbone's UP retails for $129.99
and only requires that you download the accompanying UP app
that presents you your data for the day. The Jawbone also
includes a vibration feature that alerts the user when they
should wake up based on his or her natural sleep pattern or if
they have been sedentary for too long. The Fitbit requires a
$49 a year subscription in order to download the users data.
The advancements in sleep aid technology are just another
branch of this new wave of technology.
Kickstarter company, Hello, raised almost $13 million in angel
investor contributions for the sleep monitoring wearable,
Sense. The Sense device, which will retail for $129, sits at
your bedside and measures pollen, humidity, light, and sound
disturbances throughout the night. The Sense also has a
small pillow attachment that tracks sleep movements.
Conclusion
While research from leading universities
demonstrates that a better night sleep will lead to a
healthier life, it is important to develop the tools that will
allow people to obtain that good quality sleep. The R&D
tax credit supports the advancement of these technologies
which result in a healthier society.
