KALAMAZOO, Mich. — A private, nonprofit economic-development group here is searching for space in and around this city where it can open in the coming year a new facility designed to house Israeli life-sciences startups hoping to establish headquarters and other operations in the US.
Southwest Michigan First CEO Ronald Kitchens told BioRegion News on Nov. 20 his group is evaluating spaces capable of being converted into an accelerator of “probably in the neighborhood of 50,000 square feet to start.” He said the group plans to open it in the second quarter of 2009.
Kitchens said a decision would be made “after the first of the year” on a site for the accelerator, which will be designed to help speed the commercialization of products being developed by Israeli early-stage medical-device companies.
Southwest Michigan First already runs the Southwest Michigan Innovation Center, an incubator that houses 13 early-stage life-sciences businesses. However, much of SMIC’s space comprises laboratories that cost on average $200 per square foot to develop, far costlier than the $40-per-square-foot space sought by the Israeli companies at the planned accelerator, which would consist of office and assembly space.
“I can’t really justify putting them into wet lab space that they don’t need, so we’ll develop a new medical device accelerator this [coming] year, focused on Israeli companies and startup medical device companies,” Kitchens said during a wide-ranging Nov. 20 interview at the group’s offices in downtown Kalamazoo.
“We have set a goal of three Israeli companies a year to accelerate into market. Some of those [companies] will simply have products that are then sold to other companies, and some will be freestanding companies,” Kitchen said.
Those and other firms that move into the accelerator will likely need six to 12 months of advanced services before they enter the market with their new products, he added.
Southwest Michigan First took its most significant step in November toward identifying potential occupants for the second incubator when two executives of the group recently joined a delegation of state economic-development officials led by Michigan Gov. Jennifer Granholm in a week-long trade mission to the Middle East.
The two — Pat Morand, managing partner of the Southwest Michigan First Life Science Fund; and Paul Neeb, vice president of Southwest Michigan First —met with representatives of 44 Israeli companies in June. The trade mission marked Southwest Michigan First’s third visit to Israel in the past year, whose reps have sought to build relationships with three Israeli incubators focusing exclusively on life-science startups.
That trip yielded five Israeli startups now undergoing “due diligence” reviews because over the next year they wish to expand to the US and move into the accelerator. The group’s scientific advisory board is set to decide in January how many of the five can proceed to lease talks for space at the accelerator.
“For the Israeli companies to make it, they have got to come to the United States. They can’t sell enough product in Israel,” Kitchens said. “Other Middle Eastern nations won’t buy from them. And getting into Europe is just too cumbersome without a revenue stream for your product from the US.
“These companies want to come to the US, and we want to be the place,” he added.
“The Israeli companies … can’t sell enough product in Israel, other Middle Eastern nations won’t buy from them, [a]nd getting into Europe is just too cumbersome without a revenue stream for your product from the US.”
Kitchens projected the cost of the second incubator at $500,000 for renovations, plus the cost of the lease to be hammered out — expenses he said would be more than justified by the facility’s potential to draw new businesses and their jobs.
The accelerator will open several weeks after the planned January 2009 completion of a $3 million, 11,000-square-foot addition to SMIC. The 56,000-square-foot bioscience incubator — located south of Parkview Avenue and Drake Road, within Western Michigan University's Business Technology and Research Park — has nurtured 24 companies, graduating six of them, since opening in 2003.
SMIC is one vehicle through which Southwest Michigan First nurtures life-sci companies poised to grow within its region of the state. The organization maintains the $50 million life-science fund, which over the past two years has invested in 10 life-sci startups, and plans to award capital to five other life-sci companies in 2009. In return for the capital, companies agree to maintain operations in the Kalamazoo region.
Also in the coming year, Kitchens said, Southwest Michigan first expects to create its second $50 million bioscience fund, which will award its first capital in 2010.
Kitchens told BRN that life-sci businesses account for “the vast majority” of the 40 startups nurtured by the economic-development group over the past five years.
Southwest Michigan First has joined with area business and government leaders to welcome growing biotechnology, pharmaceutical, and medical-device companies to a region still recovering from the convulsive job losses wrought nearly a decade ago by auto and paper makers. One such spasm was triggered by drug giant Pfizer, which has sought to eliminate about 1,000 jobs in Kalamazoo since announcing the cuts in May 2003, two months before SMIC opened.
In 2005, Pfizer razed five downtown Kalamazoo buildings totaling 350,000 square feet and donated a sixth building of 200,000 square feet to Bronson Healthcare Group.
Kalamazoo is one of a few areas of the US that have sought to grow their life-science sectors by tapping into the expansion plans of Israeli-based companies, especially those specializing in development of medical devices. One such state, Maryland, has for nearly two decades worked to add Israeli startups to its life-sciences cluster, one of the world’s leading zones, in part through an annual conference presented by the nonprofit economic-development firm Maryland/Israel Development Center and other sponsors [BRN, Sept. 29].
The Kalamazoo region’s most dramatic step toward re-orienting its economy on the life sciences came on April 22 when MPI Research, the nation’s third-largest preclinical drug-testing company, announced a $330 million expansion that will bring a combined 3,300 new jobs over the next five to seven years to its headquarters in Mattawan, located just south of Kalamazoo, as well as two downtown Kalamazoo buildings previously occupied by Pfizer. The pharma giant has donated the buildings to the city of Kalamazoo, which is leasing them to MPI for $1 a year [BRN, April 28].
In return for the job-creation promise, the governments of Michigan, Kalamazoo, and Mattawan will shower MPI with tax breaks and other economic subsidies. The largest of these is an $86 million, 15-year state tax credit approved by the Michigan Economic Growth Authority board hours before the expansion was announced. The state has also approved a “Pharmaceutical Recovery Renaissance Zone” for the two Kalamazoo buildings MPI will occupy that will spare the company from paying property taxes there for 15 years.
MPI is one of two major job-attraction successes for Kalamazoo this year. On Oct. 16, Midlink Business Park, a multi-tenant industrial campus, joined its newest tenant Kaiser Aluminum in announcing a signed 464,519-square-foot lease for a production plant set to hire 300 people. Midlink is a 340-acre, 1.6-million-square-foot park previously occupied by a General Motors’ Fisher Body-stamping plant that shut down in 1999, idling about 4,000 workers.
Midlink tenants include the medical device maker Stryker. Some 200,000 square feet remains available, Kitchens said.