Biotech Companies Encourage Economic Growth in Lansing
Thursday, March 19, 2015
From Greater Lansing Business Monthly
By Mickey Hirten
Biotech Companies Encourage Economic Growth in Lansing
In so many ways, Lansing’s future is linked to a burgeoning biotechnology economy. Michigan State University, a research juggernaut, is home to strong and successful life sciences and biomedical companies, and more are coming. Organizations like Prima Civitas, the Lansing Economic Area Partnership and Business Leaders for Michigan have identified biotech’s unique growth sectors and are marshaling resources and support.
The real question is how far can the region can advance. The answer seems to be, quite far.
The impact of MSU in accelerating mid Michigan’s biotech economy can’t be overstated. Last year, it was ranked 46th among the world’s universities for life sciences by Thomson Reuters, which considered in its analysis teaching, research, knowledge transfer and international outlook. The accolade reflects the university’s “World Grant” mission.
“MSU’s research operations alone exceed $500 million,” said Doug Gage, the university’s assistant vice president for research and graduates studies. “Our mission is new knowledge and new innovation.”
It aligns the university with the state’s other major research institutions: University of Michigan and Wayne State University. In 1999, all three established a “Life Sciences Corridor” to leverage their expertise in science, technology, math and engineering, skills that are the foundation of a biotech economy.
“We have dramatically improved our technology transfer organization over the last few years, actively mining things that come out of our faculty research labs,” Gage said. “We want to see our innovations benefit the region.”
Ties between the university and industry are evident throughout the region’s biotech firms. For example, the senior management team of Orchid Orthopedic Solutions, one of the region’s largest life-science companies, is stacked with MSU alumni. They include Mike Miller, chief executive officer; Mark Burba, executive vice president — machining; and Joe Zuzula, vice president of sales and marketing — corporate. The company, based in Holt and with a work force of 1,700, is a world-wide manufacturer of medical devices.
In short, connections matter. “There are lots of regions across the country and the world that compete for skilled workers. But it’s a competition we can compete in,” said Arnold Weinfeld, chairman and CEO of Prima Civitas, a Lansing-based nonprofit economic and community development organization that supports Michigan growth initiatives.
Some of the Lansing competitive benefits are prosaic, but important. “You might be surprised to know that we can actually bring in people from California and the East Coast. Part of it is lifestyle. You don’t have an hour commute. Housing is quite reasonable, the schools are good,” Gage said.
“Part of our success is a work ethic and culture. It’s the same reason General Motors decided to build two auto plants in Lansing,” said Weinfeld. And as Lansing’s reputation as a biotech center grows, so does interest in the region.
MSU and the University of Wisconsin are partners in the Great Lakes Bioenergy Research Center, one of three centers funded by the U.S. Department of Energy to perform the basic research that generates technology to convert cellulose biomass to ethanol and other biofuels. According to Gage, the venture has produced more than 100 patents and more than 700 research papers. It’s a project with national and international reach and broad business support. Collaborators included Arthur Daniels Midland Co., Cargill, Dupont, Exxon Mobil and General Motors, large businesses that recognize the commercial applications of university research. MSU’s involvement, its connections with businesses as well as its academic output all burnish the university’s brand.
“You never know what the next innovation will be that leads to a breakthrough,” Gage said, adding that the goal of the university is to pursue commercial opportunities where it finds them.
“There has to be a market pull. It doesn’t make sense to patent innovations that have no commercial potential. We shepherd our resources very carefully,” he said. With MSU and its dozens of biotech-related programs, its faculty, graduate students and grants, innovation happens along many lines.
Stephen Rapundalo is chairman and CEO of MichBio, an association that provides the biosciences industry information, advocacy and resources. His organization has categorized a broad mix of Lansing-region businesses and institutions engaged in biosciences: agriculture-food-nutrition, medical devices and equipment, pharmaceuticals and diagnostics-research and testing. These complement universities, smart zones, hospitals and clinics for the local share of a statewide industry that employed 42,000 in 2012. Altogether, MichBio identifies more than 100 businesses in a three-county region that in some way engage in or support biotechnology.
Among the firms that had international success from a base in Lansing is Emergent BioSolutions Inc. The company, which is headquartered in Rockville, MD, but retains an outsized presence locally, is a specialty pharmaceutical company that defines its mission as “protecting and enhancing lives.”
It’s not just a flowery phrase from a mission statement.
Emergent, through its United States government contracts, produces BioThrax, a vaccine that protects against deadly anthrax infections, at its Lansing laboratories. It is the foundation of the company’s biodefense line of business, which has expanded significantly since 2011, with new lines of post-exposure drugs. These products address infectious disease and CBRNE threats, that is, chemical, biological, radiological, nuclear and explosive.
Complementing the biodefense products is Emergent’s bioscience division with hospital and clinic products targeted at treatments in the hematology, oncology, infectious disease, autoimmunity, transplantation markets.
It’s the broader line of products — some developed by the company and other through corporate acquisitions — that have pushed annual revenues past $500 million. The company forecasts revenues between $510 million and $540 million in 2015, up 17 percent from 2014. It projects net income of between $50 and $60 million, a 49 percent increase. The performance follows significant year-over-year gains in 2014, with revenue up 43 percent and income higher by 19 percent, according to preliminary reports.
“In 2011 we had one product. Now we have nine,” said Adam Havey, Emergent’s executive vice president and president of its biodefense division. Since the company’s founding in 1998, it has expanded from a single facility in Lansing to 10 sites scattered across the United States and in Europe.
Employment has grown from 170 to about 1,300. In 1998 there were no new products in the company’s pipeline; now there are six clinical candidates and multiple pre- clinical candidates.
The company’s recent success derives in part from its mergers and acquisition strategy, said Havey, citing the purchase of Cangene Corp. and its successful integration into Emergent. The Cangene products that have broadened the company’s offerings and Emergent expect to continue purchasing compatible and complementary businesses.
But growth aside, Emergent is largely a company built on the success of its Lansing operation. It employs about 410 at its campus on north Martin Luther King Blvd., in laboratories that until 1998 were owned and operated by the state of Michigan as BioPort.
“It’s a huge asset,” said Havey of the Lansing campus. “We’ve invested $200 million into the facility over the last five to 10 years. 70 percent of our revenue comes from Lansing.”
Emergent is proceeding with a major enhancement to its Lansing manufacturing operation, building a new laboratory designed to boost vaccine production from 20 million to 25 million units a year compared with current capacity of 7 to 9 million units. The company announced in February that it had completed a nonclinical study demonstrating that BioThrax manufactured at large scale in the new facility it calls Building 55 was compatible with the BioThrax from its approved facility, Building 12. This is a key step in the approval process required by the U.S. Food and Drug Administration allowing for expanded production.
In 2010, the company signed a $107 million contract with the Office of the Biomedical Advanced Research and Development Authority of the Department of Health and Human Services to develop and obtain regulatory approval for large-scale manufacturing of BioThrax in Building 55.
“Unlike the Building 12 production facility, which is limited to a single product, the Building 55 laboratory can manufacture multiple products,” said Havey. “It can bring new products to the area.”
Emergent’s commitment to Lansing runs deeper than its founding roots.
“There are two things that set us apart: our people and our core values. We operate as a team,” Havey said. He cited the company’s relationship with MSU, the city of Lansing and the state and economic development agencies as contributors to the company growth and success.
As Emergent has grown, so has its need for skilled workers in many fields. “There are some years where finding talent and retaining talent has been easier, and other years where it’s been more difficult. Now we are really focused on talent development, taking kids from MSU and growing them,” Havey said. Emergent looks for graduates with biology, bio-chemistry or engineering degrees, also legal and finance degrees.
Another large company with a diverse portfolio is Neogen Corp., which specializes in worldwide food security. In 2014, the company, which is headquartered at Lesher Place in Lansing, has more than 1,000 employees and reported revenues for the fiscal year ended May 31 of $247.4 million, a $40 million increase from the previous year. Net income was $28.2 million compared with $27.2 million in 2013.
Neogen was founded in 1982 and operates globally, developing and manufacturing products to ensure food and animal safety.
In its 10-K filings with the U.S. Securities and Exchange Commission, the company described its Lansing-based food safety division which it said “develops and markets dehydrated culture media, and rapid diagnostic test kits to detect food borne bacteria, spoilage organisms, mycotoxins, food allergens, genetic modifications, drug residues, plant diseases and sanitation concerns.”
It has an animal safety division based in Lexington, Kentucky that focuses on “diagnostics, veterinary instruments, veterinary pharmaceuticals, nutritional supplements, disinfectants and rodenticides,” according to the company.
“Management’s vision is for Neogen to become a world leader in the development and marketing of products dedicated to food and animal safety,” the company said in its SEC filing. Attaining this goal requires increasing sales of existing products, new products and product lines, expanded international sales and business acquisitions and strategic alliances.
With its diverse array of life science business, the region is well positioned for future growth. And there is a project in the offing — the Facility for Rare Isotope Beams (the FRIB) now under construction at MSU — that will bring even more talent and opportunity to this economic sector.
“If you look at the FRIB, it’s not a biotech project, but there is an in excess of 450 new hires that it’s brought into the region. Those are salaried researchers working on the project. And with every grant that is funded, there are technicians, graduate students and post-docs,” Gage said.
“There is absolutely synergy. It’s attractive for companies when there is a talent base. We wish we were Boston or San Diego, where they have a high level of biotech status.” Gage said. “But that’s the direction we are moving in. There is quality here.”
The Economies of Biotech
While the success of biotech companies is largely attributed to their business model, there is a role for government. MichBio, which represents the interests of industry and academic enterprises, has a state competitiveness agenda to aid established companies, start-ups and business recruiting. The agenda, aimed at policy makers, elected officials and industry includes:
- Re-establish angel investor tax incentives
- Allow state funds as match for angel investment
- Ensure R&D tax incentive
- Expand exemption from Michigan sales and use Tax
Increase matching of small business innovation research/small business technology transfer funds
- Assistance for SBIR applications
- State-assisted bank financing or lending products
- Tax benefits for equipment purchase/facilities purchase or improvements
- Adopt domestic manufacturing incentive
- Tax incentive to offset portion of federal medical device excise tax
- Tax incentive to offset portion of federal FDA user fees
- Tax incentive for sponsored clinical trials
- Talent and workforce development incentive
Author: Mickey Hirten
Mickey Hirten is an award winning writer and editor. He has been executive editor of the Lansing State Journal, the Burlington Free Press in Vermont, and was the financial editor and a columnist for the Baltimore Evening Sun. He is the current president of the Michigan Press
Association. His wife, Maureen Hirten, is director of the Capital Area District Library.
[Read article online]