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Indiana Gov. Enlists Economic-Development Leaders to Help Grow State’s Lif-Sci Muscle

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INDIANAPOLIS — Indiana Gov. Mitch Daniels is leading a platoon of economic-development officials and academic leaders in setting an ambitious goal for their state’s life-sciences industry following five years of progress in attracting jobs, capital, and research talent.
 
Addressing attendees at a conference held here last week, Daniels vowed “to continue Indiana’s movement not merely into the first tier, but to the very front rank of life-sciences centers of concentration and emerging technological excellence.”
 
Answering a BioRegion News question at a Q&A session following his remarks, Daniels, a former Eli Lilly executive, said pharmaceutical giants like his former employer would remain an anchor for Indiana’s growing life sciences sector, despite their struggles nationwide and in his state.
 
One example: Pfizer is set to shut down an insulin-producing plant in Terre Haute, Ind., in 2009, an event that will idle some 700 workers. Terre Haute has begun to replace those jobs.
 
And earlier this month Swiss drug and diagnostics giant Roche announced it would shift 300 jobs from Indianapolis to Mannheim and Pennzberg, Germany, over the next three years starting in October, to consolidate the company’s research and development of reagents used in diagnostics for diseases such as HIV and West Nile virus. Roche said 85 percent of its reagents R&D work is already taking place in Germany.
 
But a few days later Lilly — which is headquartered in Indianapolis — dedicated a 475,000-square-foot bioproduct R&D laboratory where 500 scientists and research-support staff in molecular and cell biology, analytical science, and engineering will be based. The project marked the final phase of a $560 million, three-facility expansion of Lilly's biotech campus, announced in 2002 (see Around the Regions, this issue).
 
“Pharmaceuticals is a critically important part,” Daniels said at the conference, titled “Life Sciences is a Capital Idea,” and held May 16 at University Place Conference Center, within the campus of Indiana University-Purdue University Indianapolis.
 
“Anecdotally, all the cluster theory that I’ve read [supports creating] a large place for Lilly and Roche and the others that we’re blessed to have. And one reason is, in addition to their own discoveries, which we hope will be ongoing and successful, at some point they begin to spin off people and ideas, either technologies or maybe through outsourcing,” Daniels said.
 
“I think we’re seeing more of that happening,” he added. “We need to get much better at this; we need to find ways to foster it and nurture it when it happens. But I think we’re seeing the acorns starting to fall from the tree, and grow.”
 
Daniels also said Indiana needs to get better at training high school and college students, and will work to fulfill that goal through a program now in the works to offer an undisclosed amount of funds to each of the state’s high school graduates for “at least” two years of postsecondary education.
 
“Much of that, I hope, will be in the support of the lab tech[nician], pharma tech[nician] sorts of disciplines that a truly large sector would require in large numbers,” said Daniels.
 
“We have a good ways to go. It’s got to go a long way beyond my running around, hectoring students about biology,” Daniels added. “Simply to be an informed and complete citizen in the world that we have now entered, one would need to have at least the rudimentary grasp of the technology [that] is transforming the world today, just as Silicon [Valley] did in the three or four decades behind us.”
 
Daniels joined two officials of the state’s economic agency, the Indiana Economic Development Corp., and the presidents of two universities to trumpet Indiana’s progress in building life-science businesses and jobs in recent years:
  • Raising venture capital investment in emerging companies — the Indianapolis metro region more than tripled its VC funding last year, to $54.8 million in 2007 from $17.6 million in 2006, according to Dow Jones VentureSource. During the first quarter, however, Dow Jones VentureSource recorded a 74-percent plunge in year-to-year VC spending in biopharma for this metro region compared with Q1 ’07, from $24.5 million to $6.3 million; and
  • Escalating spending by the state’s two top research universities, Indiana University and Purdue University, on research projects and new research facilities.
During the fist nine months of the fiscal year ended June 30, IU President Michael McRobbie said his university had received $406.3 million in federal and other external research grants, up about 27 percent from $296.9 million during the previous fiscal year.
 
“We’re on track for a half-billion dollars in externally funded research,” which would raise IU to among the top 20 US schools receiving that type of funding, McRobbie said.
 
“No matter who looks at it, Indiana is steadily ascending the ranks of places in this country where life sciences are strong,” Daniels said. “Remarkable progress has occurred in the life sciences in this state.”
 
Daniels’ secretary of commerce and IEDC Chairman, Nate Feldman, said life-science jobs accounted for 2,990, or 13 percent, of the total 22,627 jobs attracted to or retained by his agency last year.
 

“We didn’t reflexively, unthinkingly turn to life sciences. We looked very hard at the data, and came away convinced that what our instincts and maybe our hearts told us was really true: Indiana has everything it takes.”

Those overall job numbers are among accomplishments being cited by Daniels, a Republican favored to win a second four-year term. He is being challenged by a Democrat, former US Rep. Jill Long Thompson, in a campaign that has centered on his administration’s leasing $3.8 billion of the state’s highways to a private venture.
 
At the conference, Daniels’ tenure as governor was the reference point for several figures provided by state officials. Feldman noted that life-science jobs accounted for 7,402, or 12 percent, of the 60,029 jobs attracted to or retained by Indiana by IEDC between 2005, when Daniels took office, unseating Democratic incumbent Joe Kernan, and 2007.
 
Some of the largest job gains for Indiana took place last year in the life sciences and related businesses. In September 2007, Beckman Coulter shifted 120 jobs to Indianapolis when it relocated its centrifuge-manufacturing operations from Palo Alto, Calif.; that facility is set to be shut down later this year.
 
In return, the IEDC offered Beckman Coulter about $2.7 million in tax credits that hinge on meeting commitments for job creation and capital investment, as well as $670,000 in job training grants. In addition, the Indianapolis city government’s Metropolitan Development Commission approved a $644,000, 10-year tax abatement, reflecting about half its real and property taxes [BRN, Sept. 24, 2007].
 
And in November 2007, Medco Health Solutions, a prescription management and health information provider based in Franklin Lakes, NJ, promised to create 1,300 jobs by 2012 by building a $165 million, 318,000-square-foot mail-order pharmacy set to open next year in Anson, Ind., in return for $18.25 million in tax credits and up to $450,000 in training grants from IEDC.
 
Additional life-science jobs have been drawn this year, with Indiana announcing several new medical device and other life science-company attractions and expansions:
  • Cook Pharmica, a biopharmaceutical manufacturer, will create more than 200 jobs through an $80 million, 80,000-square-foot expansion to its production facility at its development and manufacturing center in Bloomington [BRN, Feb. 11]. IEDC offered the company up to $2.2 million in performance-based tax credits and up to $100,000 in training grants, with Bloomington expected to offer a subsidy through its Community Revitalization Enhancement Fund;
  • MED Institute, the product-development subsidiary of a Cook Pharmica sister company, Cook Medical, plans to base 250 new jobs by 2011 at a renovated 92,000-square-foot development center dedicated Feb. 29 within Purdue Research Park in West Lafayette. IEDC offered Med Institute up to almost $1.9 million in performance-based tax credits;
  • DCL Medical Laboratories, a provider of clinical laboratory-testing services, on May 7 announced a $4.7 million expansion of its headquarters and clinical laboratories that will add 125 jobs, plus 20,000 square feet of commercial lab space, to the company’s 150-person local workforce. In return, IEDC offered the company up to $750,000 in performance-based tax credits and up to $116,000 in training grants based on the company's job creation plans. The company is also expected to win a property-tax abatement from the city of Indianapolis;
  • OrthoPediatrics, a developer of children’s orthopedics, on April 8 revealed plans for a $4.5 million expansion to its development, manufacturing, and distribution center in Warsaw creating 100 new jobs in return for up to $1.7 million in performance-based tax credits and up to $75,000 in training grants from IEDC, plus the promise of a property tax abatement from the city, which calls itself the “orthopedics capital of the world;” and
  • Symmetry Medical, another orthopedics manufacturer focused on implants and surgical devices, will undertake a $6.2 million expansion set to create 60 jobs, and expand training for its 400 current employees in and around Warsaw, in return for a $127,000 grant from the state's Skills Enhancement Fund.
“There are fantastic things happening here,” Feldman said. “I think we’re at a tipping point.”
 
In 2004, Indiana’s economic-development agency drew only 8,519 total jobs to the state — none of them in the life sciences, Feldman pointedly added.
 
In a report issued in March, the state’s life-science industry group BioCrossroads recommended that Indiana accelerate its life-sciences growth by adding to its pharma, med device, and orthopedics anchors yet another bulwark: companies that have grown in recent years by carrying out the operations farmed out to them by shrinking pharmas and fledgling biotechs [BRN, Feb. 25].
 
BioCrossroads calls these companies contract service providers or CSPs, which include contract research organizations. The state has some 50 CSPs at present, according to the report, available by registering here.
 
Feldman and Bruce Kidd, IEDC’s director of entrepreneurship, echoed Daniels in attributing the growth in life-sciences jobs to a series of changes by his administration.
 
One change was restructuring the state’s economic-development effort into the current public-private IEDC, which they said allowed it to make decisions faster, pursue job attraction prospects more aggressively, and serve businesses better than its predecessor state agency. Another was its decision to pursue higher-wage jobs in the life sciences and other technology sectors.
 
“We didn’t reflexively, unthinkingly turn to life sciences,” Daniels recalled during the conference. “We looked very hard at the data, and came away convinced that what our instincts and maybe our hearts told us was really true: Indiana has everything it takes” — namely three research universities, including Indiana University’s Medical School, an established pharmaceutical job base, and a growing medical device sector.
 
The third was a restructuring of a key state economic subsidy used by many of the state’s growing life-science companies. Under Daniels, Indiana shifted the target of its 21st Century Research and Technology Fund from universities spinning out new companies and corporate giants to emerging smaller tech businesses. The state reasoned that the universities and corporations could recoup state funds by drawing on their larger budgets, the governor told conference attendees.
 
Kidd told BRN the 21 Fund has $35 million remaining to be awarded on the existing $113 million set aside for the program under the state’s biennial budget, which ends June 30, 2009. According to the state, unspent money is rolled over to the following two-year period.
 
Since the current biennial budget took effect last year, the fund has awarded $78 million in grants ranging from $100,000 to $2 million to emerging companies in the life sciences and other tech sectors. The average award ranges between $750,000 and $1 million.
 
21 Fund grant recipients “are literally all across the board,” Kidd said. “We have several pharmaceutical companies treating different forms of cancer. We have a lot of device companies, companies that are doing diagnostics on kidney disease, cells for drug interactions for pharmaceutical companies, diagnostics for the orthopedic industry. We have a couple of really interesting service companies.”
 
To qualify for 21 Fund grants, companies must propose a technology project “that can be commercialized into an innovative product or service with high market potential,” according to IEDC’s description of the program.
 
Since 2005, the 21Fund has assisted 30 life-science companies among 59 total businesses receiving 21 Fund grants. While the cumulative value of life sciences grants was not immediately available, Kidd said the life-science companies accounted for 400 jobs with average annual salaries of $76,000.
 
Another IEDC program that has helped emerging life-science companies is the Venture Capital Investment Tax Credit, which gives individuals and businesses investing in Indiana-based startups a 20 percent credit against their Indiana income taxes.
 
Last year, Kidd said, 62 companies were approved for a combined almost $6.4 million in VC tax credits. IEDC is limited to certifying up to $12.5 million in credits in any calendar year.
 
[BRN’s May 27 issue will cover panels from this conference and additional information focused on investment and university research and facility trends for life sciences in Indiana — Ed.]

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