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Michigan Group’s New Year’s Resolution: Chart Life-Sci Assets, Set Growth Strategy

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NOVI, Mich. — Michigan’s life sciences industry-advocacy group will spend the early part of 2009 crafting a strategy for growing the state’s biotechnology, pharmaceutical, and medical-device sectors, with an eye to generating jobs and addressing longstanding issues raised anew by industry leaders during a recent summit here.  
 
MichBio President and CEO Stephen Rapundalo told BioRegion News on Nov. 18 his group would “probably” hire a consultant to help it study what companies, institutions, and facilities exist in Michigan, and how the state should grow its life-sci industry. He projected the study would cost “anywhere between $20,000 and $50,000, probably,” though it has yet to be decided whether additional sponsors would join MichBio in underwriting study costs.
 
“This would be a brand new effort. We would try to be in depth. The scientist in me wants to know very specifically what’s available so we can make as much information available up front to companies considering Michigan,” Rapundalo told BRN following the Biosciences Policy Summit at the 4th Annual MichBio Expo & Conference. The two-day conference, held Nov. 18-19, drew 500 life-sci leaders from across the state to the Rock Financial ShowPlace in this Detroit suburb.
 
“We have people who ask us, ‘Do you have folks who can do this, who can do that?’ I can sometimes rattle off a company or two, but I’m always curious about what else is out there like that. We get those questions almost daily, and a lot of times I don’t have the answers,” Rapundalo said.
 
He said Michigan’s new strategy would be evident to the rest of the life-sciences world, during the Biotechnology Industry Organization’s 2009 International Convention, set for Atlanta in May. There, Michigan will occupy a pavilion of 1,200 square feet — about 200 square feet more space than it had at this past year’s BIO convention in San Diego.
 
The new space, he said, will reflect a renewed commitment to the life-sci industry led by the state’s job attraction agency, the Michigan Economic Development Corp.
 
But the marketing effort will begin well before BIO opens its doors, he added: “Our space is already reserved. We’ve already pretty much settled on a brand and a message, and a marketing approach. Now it’s a question of going out to the stakeholders, telling them what we’re planning to do, get their input, and begin that implementation phase first thing in the new year.”
 
And by 2010, MichBio hopes to host a prominent national-level industry conference — it’s “already on the books; we’re targeting one in particular,” Rapundalo said, declining to identify the event. It’s unlikely to be a BIO convention, since that year’s global industry event has already been announced for Chicago.
 
“Certainly one thing that we’d like to do, that we need to do, is an asset-management analysis coupled with a needs-analysis from all different stakeholders, be they regions, enterprises, what have you, so that we can figure out what we have, much less what is it we’re missing. What we need is to sit down and figure out what’s the game plan we have to follow in order to fill those needs,” Rapundalo said during the summit. “We’re finding that there’s a lot of things goings on, but the left hand doesn’t know what the right hand is doing.”
 
Rapundalo was among 17 leaders who detailed Michigan’s strengths, and especially its shortcomings, in the life sciences during the nearly three-hour summit.
 
Among the state’s shortcomings:
  • A dearth of capital for companies in post-seed, pre-revenue stages, though most panelists said capital had been more readily available in earliest stages until the economic upheaval of recent weeks [See next week’s BRN for a report from the conference about Michigan’s prospects for attracting capital in the new year.];
  • A legacy of discouraging entrepreneurs, including anchoring the state’s life-sci industry around pharma giants; and
  • Fractiousness between regional leaders of life-science and economic-development groups.
“There’s so much potential we have. People need to get together. We’re not that far away. And we could almost do it virtually,” said Christine Turner, executive director of business development with the regional economic development group Ann Arbor SPARK, and an audience member at the summit.
 
“But each area is talking about life sciences, and this group is the most suitable to be doing that — not a bunch of business developers sitting around a table, marking out their geographical areas within Wayne County and Oakland County, let alone not even looking at Washtenaw County,” Turner said. “We need to know the assets of each community, of each area we’re looking at specifically, what strengths every group has.”
 
Michigan lacks the support for entrepreneurialism seen in top-tier biotech clusters such as the San Francisco Bay Area and Boston/Cambridge, Mass., said Michael Long, president and CEO of Velcura Therapeutics, an Ann Arbor developer of therapies designed to restore bone homeostasis and bone health.
 
“Michigan has, to my mind, a can’t-do attitude,” said Long, whose family has lived in the state for six generations. “I can’t tell you when I told people I was going to form a company how many people said, ‘You can’t do that,’ ‘You don’t have experience,’ ‘You don’t know what you’re doing,’ and so on, and so forth. There’s a sense that permeates the life sciences and everything else that risk isn’t accepted; it’s something you have to shun from and stay away from. It just seems to me there’s a lot of negative competition instead of a lot of cooperative competition.”
 
The solution, he said, includes life-sci leaders being “more interactive and more supportive of other companies. I’m not talking about events where you can get together and network. I’m talking about truly helping where there’s an opportunity in technology.”
 
Echoing Long in offering a downbeat assessment of Michigan’s life-sci entrepreneurial climate was Thomas Collett, president and CEO of Meditrina Pharmaceuticals, an Ann Arbor developer of therapies for disorders of the reproductive system in women.
 
“There aren’t all that many resources that Michigan offers that you can be all that positive about. It’s always difficult if you start believing your own PR,” Collett said. “I was shocked when I moved to Michigan how insular this community is,” especially after attending a business event where a CEO was introduced as being a longtime Ann Arbor resident: “I never before lived in a place where there was so little interchange with other communities.”
 
After Collett and Long met with counter-arguments that they needed to be more positive about Michigan, Long defended his sharp critique: “If you do a SWOT [strengths-weaknesses-opportunities-threats] analysis and you don’t look seriously at weaknesses, you’re not going to be able to assess threats and deal with opportunities.”
 

“We have people who ask us, ‘Do you have folks who can do this, who can do that?’ I can sometimes rattle off a company or two, but I’m always curious about what else is out there like that.”

Michigan’s chilly climate for life-sci startups — and its lack of tolerance for the rate of business failure seen in California’s tech mecca, has helped chase young bioentrepreneurs out of the Great Lakes State, one summit panelist said.
 
“If you had a panel like this in Silicon Valley, I don’t think more than one third of the panel would be over 30,” said Bill Worzel, president and CEO of Genetics Squared, an Ann Arbor provider of molecular diagnostic tests based on its proprietary Evolver non-statistical computational platform. “How do we make Michigan a place for young entrepreneurs so they don’t leave here in the first place?”
 
It’s a question not limited to the state’s life sciences sector, Long said, noting that of 400 law students who graduated from state law schools in 2007, only 17 stayed in Michigan.
 
Richard Sheridan, the summit’s moderator and the president and CEO of Ann Arbor software developer Menlo Innovations, said Michigan’s life-sci attraction effort has an ace in the hole — effective TV commercials by MEDC featuring actor Jeff Daniels.
 
Rapundalo said Michigan can find the direction it has long lacked in its life-sci effort by focusing on its ability to nurture contract research organizations and other businesses that service biotech and pharma companies. Many of these businesses occupy facilities built by pharma giants until the industry’s paradigm shifted in recent years toward outsourcing clinical testing and other functions.

“The service model is really taking over. The attitudes are starting to change, and there's a realization that we need to sell that brand,” Rapundalo said. “It’s important for the state as a whole to create a brand for itself.”

 
Speaking after the summit, Rapundalo told BRN the focus on CROs would be reflected in the new effort to market Michigan as a life sciences destination.
 
“I think we’ve certainly identified the fact that Michigan has great strength in contract research, both on the pharma and on the device side. We really do have everything from the very earliest of research all the way to market, essentially,” he said.
 
If Michigan focuses on CROs, it would emulate a strategy used with some success by several Midwestern states seeking to retain some industry presence at a time when big pharma is increasingly farming out clinical testing and other operations rather than performing them in house. Indiana’s BioCrossroads issued a report in February recommending the state nurture CROs and other “contract service providers,” [BRN, Feb. 25], while BioOhio has encouraged growth by several CROs, including an expansion disclosed a year ago by Charles River Laboratories [BRN, Dec. 10, 2007].
 
“I think our strength is better here, quite frankly. It’s better and it’s broader in its scope, and it has a longer history in terms of expertise and talent because of the legacy pharma business and the legacy device business,” Rapundalo said in the post-summit interview.
 
The idea of focusing on CROs met with resistance from Collett. He said Michigan should focus more on the greater value produced by the drugs of pharma and biotech companies, compared with the value of the services rendered by service providers.
 
“There’s value around the pharma industry, and that service jobs would not be as broadly sustaining as people believe,” Collett said.
 
But Dolly Niles, president and CEO of Quest Research Institute in Bingham Farms, Mich., said CROs like hers continue to expect growth as biotech and pharma giants continue to outsource many operations  — even while acknowledging that for the first time in memory, some CROs have been shedding jobs to retain their competitiveness.
 
“I still see that there’s a lot of opportunity for better efficiency,” said Niles, whose CRO conducts phase I-IV patient studies of existing compounds for clients that include Merck and Pfizer.
 
It was a CRO that carried out the state’s largest job attraction triumph this year. MPI Research, a CRO headquartered in Mattawan, Mich., announced plans in April for a $330 million expansion that will add 3,300 jobs over the next five to seven years in its headquarters town, and in nearby Kalamazoo, Mich. — in return for state and local incentives led by an $86 million, 15-year state tax credit and a “Pharmaceutical Recovery Renaissance Zone” for the two Kalamazoo buildings MPI will lease from the city for $1 a year, which will spare the company from paying property taxes there for 15 years. [BRN, April 28].
 
While panelists agreed that the fund has helped several life-sci companies come to or remain in Michigan, several also said the state should do more to link early-stage bio, pharma, and medical device companies with capital needed for growth.
 
“If we really want to create jobs in Michigan, we need to make a decision in this state to be a player in this industry” through “more direct investment right into companies,” John Stchur, chief financial officer of human tissue supplier Asterand, told the summit audience. To that end, he suggested, Michigan needs tax incentives at least as attractive as those it offered movie producers earlier this year, in hopes of luring many from across the US-Canada border in tax-friendly Toronto.
 
Access to capital for life sci companies is among services that could be addressed through a statewide business acceleration initiative akin to BioEnterprise in Cleveland, or the three life sciences “greenhouses” established in Pennsylvania, said Lisa Kurek, managing partner of Biotechnology Business Consultants, an Ann Arbor business services and tech commercialization consultancy. The consultancy receives funding through Michigan’s Technology Tri-Corridor Fund and the 21st Century Jobs Fund to assist emerging Michigan companies in the life sciences and other technologies.
 
“All have those kinds of infrastructure, facilities, funding, and resources. But we continue to cobble things together after all these years,” Kurek lamented. Michigan’s SmartZones program, designed to accelerate the growth of tech companies, consists of 12 regional districts, a number set to expand in 2009 to 15 following approval by Granholm of new sites in Blackman Township, Macomb County and Saul Ste. Marie.
 
“There is a lack of bringing all the infrastructure and facilities together in one place,” Kurek said.
 
“That would be a huge stimulus to the state of Michigan,” agreed Dale Johnson, president and CEO of the biopharmaceutical company Emiliem. “One of the problems is, there are so many different areas in the state of Michigan. I think you really could concentrate something like that.”
 
A single concentrated acceleration program could be created virtually through technology, Johnson said, an option he suggested should be pursued as a short-term answer. That is among topics he said should be addressed in both the short- and long-term strategies he hoped Michigan would adapt for growing the life sciences.
 
Johnson was among panelists who shared what they deemed several strengths of the state’s life-sci community:
  • Strong academic institutions such as the University of Michigan and Michigan State University;
  • Existing programs to assist life-sci and other tech entrepreneurs. While SmartZones was faulted by some panelists as insufficiently funded and too scattered, others sided with the state, which has defended the program by noting that at its last count last year, SmartZones attracted 845 businesses that created 16,359 new jobs, fostering $1.1 billion in new public and private investment; and
  • Communities with large concentrations of life-sci professionals and lower costs of living compared with top-tier bioclusters.
Johnson said the presence of both factors helped persuade him to open an office for his company in Kalamazoo, since the Michigan city offered a less costly quality of life than the Bay Area, where Emiliem has offices in San Francisco and Emeryville, Calif.
 
Also on the summit panel were Charles Bisgaier, president and CEO of Michigan Life Ventures; John McIntyre, president and CEO of Venomix; James Quebbeman, biopharma consultant with Integrated Compliance Solutions; Jim Medsker, principal in Keystone Product Development; Ron Williams, president of Medbio; Stephen Munk, president and CEO of Ash Stevens; Jill Ferrari, an aide to Wayne County Executive Robert Ficano; Fred Reinhart, vice president for technology commercialization at Wayne State University; and Daniel Heumann, president and CEO of HeumannlyCapable.
 
Heumann, who spent the past year joining with life-sci leaders in persuading a majority of voters to approve Proposal 2 — Michigan’s successful ballot question removing restrictions on human embryonic stem cell research [BRN, Nov. 10] — was the only summit panelist to emphasize the likelihood of additional hESC research, and tech commercialization, as another potential strength for the Wolverine State.
 
“At the end of the day, we have a great opportunity to be competitive against all these other states,” Heumann said.

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