State and community leaders from two Michigan towns are calling a $330 million plan by the nation’s third-largest preclinical drug-testing company to add 3,300 jobs over five years a dawn of a new era for a regional life-sciences industry struggling to rebound from years of layoffs and cutbacks by local powerhouse Pfizer.
State and local officials were heartened last week when the contract research organization, MPI Research, announced plans to add 3,300 jobs over the next five to seven years at its Mattawan headquarters and the nearby city of Kalamazoo.
In an April 22 announcement, MPI Chairman and CEO William Parfet and Michigan Gov. Jennifer Granholm said the CRO plans to nearly double its approximately 1 million square feet that it currently occupies at its 130-acre headquarters, within the Mattawan Business Park.
That expansion will add 2,900 jobs while the remaining 400 positions will be based about 10 miles east of Mattawan within two renovated buildings MPI will lease for $1 a year from the city of Kalamazoo, which will accept them as a donation from Pfizer.
The pharmaceutical giant has vacated one of the buildings and will vacate the other by year’s end to create 500,000 square feet of available lab and office space for MPI.
In return for its selection of Michigan over sites in China, the state as well as the governments of Kalamazoo and Mattawan will shower MPI with tax breaks and other economic subsidies.
The largest of the incentives 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 will also approve 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.
A bill to that effect will be introduced by state Rep. Robert Jones (D-Kalamazoo), a former city mayor; and state Sen. Tom George (R-Texas Township). Both incentives were recommended by the state’s economic-development agency, the public-private Michigan Economic Development Corp.
“The tax incentives offered by the MEGA board with the State of Michigan, and the willingness of the city of Kalamazoo to lease the vacated Pfizer buildings to us” sold MPI on both sold MPI on both expanding within Mattawan, and expanding to Kalamazoo, MPI spokeswoman Joan Manners told BRN via e-mail.
Michigan has also agreed to award MPI $2 million through its 21st Century Jobs Fund, while its Department of Transportation agreed to improve the intersection of Interstate 94 and Mattawan’s Main Street to better accommodate traffic from MPI employees; the cost of that work was not available last week.
Also, the city of Kalamazoo has agreed to the $1-a-year lease, during which Pfizer will furnish power and chilled water, plus the $150,000 cost of an environmental “due diligence” review and hooking up the site to water and sewer systems.
The review has not found a need for a brownfield cleanup, Jerome Kisscorni, executive director of Kalamazoo’s Economic Development Corp., told BioRegion News last week. “There’s nothing there that’s anything significant; that would be a deal-blower.”
MPI’s economic package includes another plum: After five years, MPI can buy the downtown Kalamazoo buildings for $1 if it meets job-creation targets.
Officials from the state and local communities say that the cost of the package is more than outweighed by the MPI expansion’s projected financial and other benefits. The state has projected that after the MPI expansion is in place, it will gain nearly $251 million in net revenues over five years, after subtracting the $86 million in subsidies from a projected $337 million revenue gain, as well as 3,300 jobs indirectly tied to the CRO’s expansion.
Mattawan Village President Terri McLean told BRN that the business park eyed by MPI has room for expansion, since the only other occupants are a trucking company and the village’s public works department. She said despite a property tax abatement tied to a previous expansion, the village expects the company’s expansion will contain local taxes.
“One thing that we pride ourselves on as a village is we have one of the lowest tax bases in the state of Michigan already” with roughly $4.45 taxed for every $1,000 of taxable property value, McLean said in an interview. “It can only go down from there. It’s going to increase our revenue quite a bit.”
She said MPI has not yet filed site plans for its additional space at deadline. Those plans would require approval by the village planning commission before MPI could begin construction. Manners said MPI will submit those plans “when all agreements are finalized,” which the company said in a press release it hoped to achieve by the end of this year.
McLean said Mattawan did not offer its own incentives in the economic package, though MPI enjoys a village property tax abatement obtained for a previous expansion.
CROs That Grow
MPI is among CROs that have grown rapidly in recent years by carrying out operations outsourced over the past decade by pharmaceutical and biotech giants. MPI offers safety evaluation and toxicology services for the biotechnology, pharmaceutical, medical device, chemical, agricultural, and related industries.
The preclinical contract research organization is very healthy, growing at a rate of 15 percent,” Manners said — enough for the company to double its Mattawan space from 500,000 square feet over the past three years.
“Because our clients, largely from the pharmaceutical and biotechnology industries, are asking us to do more work for them than ever before, we are expanding to meet their needs. Virtually every research service we offer is growing,” Manners added.
Since it was established in 1995, MPI has grown on average 30 percent annually, while its workforce has also grown during that time from 200 employees to its current 1,600. MPI is one of several CROs to find success in and around Kalamazoo by capitalizing on the region’s historic base of managers and workers with pharmaceutical industry backgrounds.
“[CROs] saw a niche that they could fill, and they had the expertise,” said Stephen Rapundalo, executive director of Michigan’s life sciences trade association MichBio, in an interview. “MPI is one end of the spectrum, a very large corporation that’s a CRO. At the other end of the scale, we’ve seen others that have one to five people, and everything in between, with a fair number of them in the Kalamazoo area.”
One successful local CRO cited by Rapundalo, Jasper Clinical, uses 50 beds at Bronson Methodist Hospital in downtown Kalamazoo for conducting its first-stage clinical trials, particularly human cardiac safety, PK/PD, drug interaction, and methodology studies. Last month, Jasper announced it would expand to another 20 beds at the nearby 50-bed Bronson Vicksburg Hospital as part of a growing partnership.
“So we’re scouring, really focusing our efforts on the US, Canada, and Israel, and looking for startup life sciences companies.”
Another CRO, Kalexsyn, last November cut a ceremonial ribbon to mark the completion of a 20,000-square-foot research headquarters allowing it to more than double its staff of scientists from 15 to 32 within Western Michigan University's Business Technology and Research Park in Kalamazoo. The research park is among 11 “SmartZone” sites designated by the Michigan Economic Development Corp. with the goal of nurturing a cluster of new businesses in the life sciences and other tech specialties.
Rapundalo said the city, like the state, has promoted the life sciences as part of a long-term tech-based business strategy. “They recognize that life sciences is really where they have a major strength, so clearly they are putting a lot of effort into expanding that base and creating an even larger hub.”
The Midwest, with its concentration of manufacturing facilities and employees, has proven to be very fertile ground for CROs. Indiana and Ohio are among states that are looking to cultivate that segment of the life-sciences industry, following numerous expansions by such companies [BRN, Dec. 10, 2007; Feb. 25].
Michigan’s life-science sector has long been anchored on the manufacturing operations of such pharma giants as Pharmacia and Upjohn, where Parfet served as president from 1991-93, two years before launching MPI. In remarks made during the announcement, Parfet recalled his place in that history: More than a century ago his grandfather, W.E. Upjohn, purchased the land occupied by the two ex-Pfizer buildings MPI will occupy.
Upjohn and Pharmacia merged in 1995. Seven years later, Pfizer acquired the combined company, by then renamed Pharmacia. Soon after, Pfizer cut costs by consolidating operations and their facilities. Since 2003, Pfizer has moved to eliminate about 1,000 jobs in Kalamazoo, followed over the past year by the phased shutdown of a campus in Ann Arbor, located about 100 miles east of Kalamazoo, where 2,100 employees once worked [BRN, Jan. 14]. Today 300 Pfizer employees still work at Ann Arbor, spokesman Rick Chambers said.
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.
The layoffs created a pool of life-science professionals, most of whom were willing to remain in the region. To help them stay, the private regional economic-development group Southwest Michigan First established the Southwest Innovation Center, an incubator intended to nurture life sciences and other tech businesses, and located within the WMU Business Technology and Research Park.
“What we had was a lot of scientists that wanted to stay in Kalamazoo. We nurtured them in this incubation center, and had a lot of graduates come out of it,” Kisscorni said.
Sixteen companies have been nurtured at that incubator, and another eight at a second incubator run by Southwest Michigan First at the Michigan Technical Education Center within Kalamazoo Valley Community College. Of those companies, nine have graduated and spun out into their own space, generating 150 jobs — about as many as are now based at the incubators, Ronald Kitchens, CEO of Southwest Michigan First, told BRN.
Kitchens expanded an incubator effort begun by his predecessor Barry Broome, now president and CEO of the Greater Phoenix Economic Council.
“The vast majority, 90-plus percent, were started up by former Pfizer people,” Kitchens said.
Southwest Michigan First has also worked to grow the region’s life sciences cluster by establishing a for-profit entity. Southwest Michigan Life Science Ventures is a $50 million fund that recently completed its eighth investment in an early-stage business — Monteris Medical, a Winnipeg, Canada-based medical device startup that announced earlier this month it will open an office in Kalamazoo.
The fund awards startups that agree to move their businesses to southwest Michigan. Kitchens said none of the companies that have received capital through the venture fund were started by ex-Pfizer executives. Going forward, the fund is setting its sights beyond Kalamazoo.
“We had an early surge of ex-Pfizer; we know we’re not going to continue to have that,” said Kitchens, the venture fund’s general partner. “We also know that while Michigan has good university research, that really isn’t going to be the prime source for our life science efforts.
“So we’re scouring, really focusing our efforts on the US, Canada, and Israel, and looking for startup life sciences companies,” he said. “We’re willing to invest in those young drug, contract research, and device companies.”
The fund typically awards between $1.5 million and $3 million in pre-seed capital. In return, recipients must either have a presence, or commit to establish one, in or near Kalamazoo.
Kitchens said the MPI deal will benefit Mattawan and Kalamazoo by ensconcing the CRO as the new anchor of a growing regional life sciences industry. But the industry’s longtime regional anchor, Pfizer, will remain a major industry presence and among the largest employers in the region, with 3,600 staffers throughout Kalamazoo County — anchored by the company’s largest global manufacturing facility in Portage, just south of Kalamazoo. The plant, which employs 3,000, specializes in producing active ingredients, sterile injectables, and liquids and semi-solids.
Pfizer is also completing a consolidation of its Veterinary Medicine Research & Development operations that will shift its headquarters from Richland Township to the 800,000-square-foot “Pfizer Building 300” in downtown Kalamazoo. Pfizer has said it will spend $50 million to renovate Building 300, a project set for completion next year.
Some 600 Pfizer staffers will work in Building 300, compared with about 1,250 downtown staffers when the company began cutting operations in Kalamazoo in 2003. Today the facility employs about 250 people.
“We’re starting to get those jobs back” when MPI’s 400 staffers and the employees of early-stage companies are totaled, Kisscorni said.
Pfizer has sought to soften the blow of its shutdowns through several community-building donations. The pharma giant has donated:
- $6.5 million in lab equipment and supplies to the Michigan Innovation Equipment Depot for distribution to life science startups across the state, to four Michigan research universities, and to 55 middle and high schools;
- A $50 million vacant research facility in Holland to Michigan State University for use as an R&D center;
- $1 million through its Pfizer Foundation to the Ann Arbor Area Community Foundation to help local nonprofits scrambling for alternate funding sources;
- Minimum matches by the foundation of $620,000 in 2007 and $310,000 this year, on top of employee contributions for the Washtenaw County United Way; and
- More than $3 million in employee contributions, plus a foundation match, for the Greater Kalamazoo United Way this year.
Pfizer has also promised to continue supporting Pfizer Helpful Answers, which last year provided 22,500 uninsured Michigan patients with $21.4 million worth of free or reduced-price medicines.
Pfizer is among the life science giants that contributed to MPI’s growth. “We have worked with MPI before for outside research support, and we expect to continue to do so in the future,” spokesman Chambers told BRN.
Customers like Pfizer have allowed MPI to grow into the largest employer in Mattawan, with a village workforce of 1,500. “The highest percentage (40 percent) of workers live in Kalamazoo, with the second-highest percentage (15 percent) in Portage. Mattawan and Paw Paw are each home to 7 percent of MPI’s workers,” according to the Mattawan Comprehensive Plan, which can be read here.
Drawing more of those workers as village residents is among ideas for capitalizing better on MPI’s presence contained within a “comprehensive plan” completed earlier this month by a consultant to the village, the Lakota Group of Chicago. The plan was designed to shape future land-use policies that advance the village’s goals of growing its population, accommodating a greater variety of housing, and building its commercial base.
That base, McLean said, includes an historical downtown district heavy with antique shops, and exactly four restaurants, two of them pizza parlors; plus a credit union office, a bank, a video rental shop, a doctor’s office, and a fairly new Family Dollar discount store. Much of Mattawan remains undeveloped, giving it a rural feel, though the village has a total 170 units in its residential development pipeline, in announced and as-yet-unannounced projects.
“One of our biggest requests that we get from our residents are for restaurants and other types of small businesses. We’ve made several attempts to draw them in. For some reason, because we’re so small, we don’t seem to be too attractive right now,” McLean said. “It is our hope that that starts to change. We sure hope so.”
The plan also concluded MPI’s growing workforce would augment a customer base to support several types of enterprise not carried out at present in Mattawan. “MPI brings numerous visitors to its site who could possibly help support hotels, a conference center, banquet facilities, and other businesses.”
Because the comprehensive plan incorporates MPI’s expansion plans, no rewriting of the document or its findings will be needed, McLean said. “We planned for some growth.”
The comprehensive plan was published in December 2007, four months before McLean, Kitchens, Kisscorni, and other officials joined Granholm and MPI executives in celebrating the company’s expansion plans. The announcement capped 18 months of talks that heated up earlier this year, once Kitchens persuaded Graham’s office to contact Pfizer to discuss reuse of the Kalamazoo buildings by MPI.
MPI says it has yet to decide what operations will be based in Kalamazoo.
“Although the Kalamazoo buildings lend themselves well to our discovery research services, speculation about which operations will be based at the two sites is premature,” Maners said.
Pfizer had sought to sell the buildings for several years, without success. “They had the two buildings they are going to vacate on the market, and had not been able to liquidate that asset. There were moving forward getting specifications to take those buildings down,” Kiscorni recalled. “We are fortunate to have the company in our backyard.”
Meantime in Mattawan, the company had begun adding employees this year, about 90 by McLean’s estimate. “It kind of took us by surprise how quickly it all came about.”
Just how MPI will fill its planned 3,300 jobs has yet to be decided, with Manners saying the company considers such discussion premature at present.
She said MPI especially welcomed Michigan’s decision to reward the company for future headquarters growth as well as the expansion into Kalamazoo. “The incentive package offered by the state of Michigan was especially attractive because it also took into consideration expansion at our corporate headquarters site, something that other states could not do. Thus, the Michigan package best met our needs.”
MPI chose Mattawan and Kalamazoo over sites in Pennsylvania and China, according to local news reports. Spokeswoman Manners would not confirm those specific sites, but did say: “We have been carefully evaluating locations worldwide for the past few years, including both the East and West Coasts since most of our clients are located there.”
A spokesman for Pennsylvania’s Department of Community and Economic Development could not comment at deadline about the company’s search in his state.
“We worked hard to win MPI's investment," Granholm said in a press release announcing the expansion. “And we will continue to go anywhere and do anything to get more companies like this to locate in Michigan.”