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Citing Demand for Services, Kalamazoo CRO Startup Kalexsyn to Double Facility in 2010

A year after graduating from the Kalamazoo, Mich., region’s life sciences incubator, a contract research organization serving smaller pharmaceutical companies is planning a groundbreaking in 2010 on an addition that will double the size of its facility and expand its staff.
Kalexsyn — whose name stands for “Kalamazoo experts in synthesis” — said the planned expansion is possible because of its double-digit growth. The privately held CRO projects that in 2009 it will “probably do about $5.6 million to $5.7 million” in revenues — up 17 to 19 percent from the roughly $4.8 million in revenue it will generate this year, Kalexsyn CEO David Zimmerman told BioRegion News.
“We plan on breaking ground for our addition in 2010,” Zimmerman said in a Nov. 20 interview in his office. Kalexsyn is a graduate of Southwest Michigan First’s life-sci incubator, the Southwest Michigan Innovation Center. The company moved out of the incubator last year into its own $5.5 million, 22,000-square-foot building, at 4502 Campus Drive within the Western Michigan University Business Technology Research Park.
Zimmerman cautioned, however, that the health of the economy could affect Kalexsyn’s plans “as far as it will influence biotech and pharma’s ability to raise money and conduct research.
“They rely on the venture capital market. If the venture capital market is not available to them, that will certainly impact us downstream,” he added.
Kalexsyn remains optimistic about its future, he said, because: “We are obtaining a lot of unsolicited business from either companies that have heard about us, or companies recommended by other companies.”
And because Kalexsyn is much smaller than the pharma giants now largely cutting back on employees and operations, “to find business for 23 or 30 scientists shouldn’t be a problem. We turn more business away, which is nice.”
Kalexsyn’s current building has room for 32 scientists; 23 work there now. That capacity will grow to 56 scientists when the addition is finished — maxing out the company’s available headquarters space, absent a change in plans.
“Unless something unforeseen happens or some opportunity Bob [Robert Gadwood, Kalexsyn’s president and CSO] and I don’t envision, that’s probably as big as we’ll get. We want to stay focused on what we do, which is medicinal chemistry, and early process development, and maintain that level of expertise that we’ve become known for in the industry,” Zimmerman said.
Kalexsyn’s professionals are busy enough, he said, that the company is not accepting any further work that needs to be done in 2008: “We’re full through the end of the year.”
Kalexsyn’s customer base consists of small- to mid-sized pharmaceutical companies. At present, about 25 percent of the company’s revenue comes from customers in Europe and Japan.
“What we’d like to see is more of a 60:40, 70:30” percentage ratio of US-based to international customers, Zimmerman said, adding: “That’s certainly something we’ll continue to work toward.”

“We’re finally, I think, really getting to critical mass” in Kalamazoo.

Zimmerman and Gadwood founded the company in 2003 following the shutdown of discovery research operations in Kalamazoo by Pharmacia, shortly after the drug developer merged with Pfizer. Like many who were idled by Pfizer, they wished to continue working in or near Kalamazoo, given the concentration of life-sci professionals in the region.
While Zimmerman said he and Gadwood were able to self-finance their company, rather than rely on venture capital, he said Kalexsyn found additional help it needed both from a $200,000 economic development grant from Southwest Michigan First, as well as from equipment originally owned by Pfizer, but which the pharma giant donated to Western Michigan University for sale at reduced cost to Kalexsyn and other life-sci startups.
“Both Bob and I were interested in working with companies that are doing strong drug discovery research. That’s not big pharma any more. Those are the small companies that are doing that,” Zimmerman said. “You can imagine Cambridge[, Mass.], New Jersey, San Francisco, San Diego, Seattle, Research Triangle Park — those are our customer centers, really where there’s a strong nucleus of that entrepreneurial spirit.
That spirit, he said, is also evident in Kalamazoo.
“We’re finally, I think, really getting to critical mass” in Kalamazoo, Zimmerman said. “We’ve been a fairly nascent industry up to now, focused on establishment of our companies, and survival of our companies. But now, it’s about the growth of our companies, and the growth of the industry.”
A recent example of recognition for the Michigan city’s life-sci effort, he said, came when a prospective customer from Australia recently visited Kalexsyn’s headquarters, at the urging of its Boston-based venture capitalist.
“I think it’s reflective of the expertise in the area, and the support of economic development groups, and the support of the state government that’s starting to foster the growth of that life sciences industry here in Michigan.”
The state has aided Kalexsyn by awarding it a $192,000 loan the company paid back, with interest, two years ago. Michigan also awarded Kalexsyn a $350,000 low-interest loan from the state’s $8 million Pfizer Retention of Assets and Company Formation and Growth Fund — $50,000 for each ex-Pfizer employee retained by a Michigan life-sci company. That award allowed the company to complete the build-out of its smaller eight-person lab on the western end of its building. The facility also has a larger lab designed for 24 scientists.
Situated halfway between Chicago and Detroit, Kalamazoo and its suburbs are home to 85 life-sci businesses and institutions that employ a combined 24,100 people, according to Southwest Michigan First.
At SMIC, Kalexsyn moved into offices in July 2003, and into lab space in March 2004, a year that ended with Kalexsyn racking up $1 million in revenues. Growth has been steady since, rising to $2.4 million in 2005, $3.4 million in 2006, and $4 million in 2007.
In November 2007, Gov. Jennifer Granholm cut a ceremonial ribbon to celebrate the opening of the company’s current facility.

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