Michigan Moves from Motors to Molecules

Michigan can call to mind images of the Great Lakes or of canoe trips through freshwater marshes. The city of Detroit may evoke the clanging of a car-part conveyor belt or the odor from smokestacks. But now Michigan officials and entrepreneurs also want investors around the world to envision hubs of high-tech collaborations that will transform the state into a biotechnology hotspot within the decade. Surprising to many, Michigan already has built a vigorous life science community. The state boasts more than 300 biotech companies, a handful of pharmaceutical giants, and a triad of world-class research universities. This lineup helped create 16,800 life science jobs in 2000, making the state the 11th largest supplier of such positions in the United States, according to the Michigan Economic Development Corp. (MEDC). The workers generate $1.6 billion (US) in sales, placing the state 10th among those that produce life-science revenues. Michigan also compares favorably to the new biotechnology clusters in Britain, Sweden, and Germany. Courtesy of Michigan Economic Development CorporationA Bio Hotbed: More than 300 life science firms and institutes span this Midwestern state The total number of biotechnology companies nearly matches those found in the region surrounding the National Institutes of Health in Maryland, but Michigan officials concede the state cannot boast of a large concentration of these companies, as can Boston, San Francisco, Metropolitan Washington D.C., or Research Triangle Park, N.C. The state also lacks sufficient numbers of people experienced in managing entrepreneurial startups and in obtaining finance. Compounding matters, Michigan's manufacturing history—involving the oft-struggling US automotive industry—creates an image problem. "It's difficult to attract CEOs and CFOs for our startup companies because we don't have yet the critical mass of biotech, so that somebody coming here knows that he will find something else if it doesn't work out," says Michelle van de Walle, life sciences business development manager for the MEDC. Investing in Biotechnology To promote the region, Michigan legislators earmarked $1 billion for life sciences business development from the $8.25 billion the state collected in settlement of lawsuits claiming public health damages from the tobacco industry. The two-year-old biotech initiative is called the Michigan Life Sciences Corridor (MLSC). The proceeds allow MEDC to grant $50 million a year for 20 years to state universities and research institutions. By law, $20 million is designated for basic research at universities and nonprofit institutions; $25 million is appropriated for applied research, often involving collaboration between private companies and universities; and $5 million is earmarked for technology transfer commercialization and company spin-off efforts. To date, the MLSC initiative has awarded 63 grants for a total investment of $100 million. In 2002, the grant awards will be reduced to $45 million to help balance the state's budget, with the difference to be made up later. "We want to use the funding to increase the profile of Michigan's life science research and enterprise and enhance Michigan's R&D and commercialization environment," says Raili Kerppola, MLSC managing director. The state government hopes to boost the creation of new companies and jobs and spur venture capital investment to complement the $1.2 billion private investment in research led by Pfizer Inc. and Pharmacia Corp., and the more than $500 million in university life science research. Michigan companies are also seeking foreign investment as evidenced by officials visiting firms in Sweden, Japan, and Korea to persuade executives to relocate some of their operations to the state. Life Science Span State The Michigan life sciences corridor stretches roughly 125 miles along Interstate 94, incorporating Wayne State University in Detroit; Pfizer Inc. and the University of Michigan in Ann Arbor; and Western Michigan University, Pharmacia Corp., and Stryker Corp. (a large medical equipment manufacturer), in Kalamazoo. Along the way, the corridor doglegs north to Michigan State University in East Lansing and the Van Andel Research Institute in Grand Rapids, a relatively new billion-dollar cancer research center. Courtesy of Michigan Economic Development CorporationLegacy for Medicine: The Van Andel Research Institute in Grand Rapids, Mich. The MLSC initiative supports basic research at the University of Michigan, Michigan State University, Wayne State University, and at the Van Andel Research Institute through what's called the Core Technology Alliance. This five-year, $67 million initiative will create a linked network of five advanced laboratories—for genomics, proteomics, structural biology, animal models, and biological information—with each managed by an institution and the others serving as satellite facilities. The labs are to be outfitted with state-of-the-art equipment that also will be made available to private companies at minimal cost. Though biotech may be new to Michigan, the life sciences and pharmaceuticals are not. The state has long housed Parke Pharmaceuticals, which later merged into Parke-Davis and finally into Pfizer Inc. The Upjohn Co., which opened in Kalamazoo in 1886, has been absorbed into drug giant Pharmacia Corp. "We already have significant research and manufacturing operations," Kerppola says. The pharmaceutical companies produce a rich talent pool. But the state lacks entrepreneurial experience. Jan Gensheimer, executive director of the Michigan Biosciences Industry Association, predicts that once the needed experienced business generators are in place the venture capital will flow. "The money people tell me [that] with the right people here, we won't have a money problem," she says. To help attract these entrepreneurs, the life sciences initiative provided Sloan Ventures LLC $843,000 to establish a seed fund called the MLSC Catalyst Fund, to finance fledgling companies until they can get other capital. Streamline Proteomics LLC in Ann Arbor, and GeneGo Inc. in New Buffalo, have received some of these funds, according to Richard S. Sloan, managing director of the venture capital fund. The firm also manages $10 million in biotech venture capital funds. Rubicon Genomics, Inc., a spin-off from the University of Michigan, won a $1.9 million grant from the state to develop sequencing reagents. Thomas A. Collet, Rubicon's president and CEO, says recruiting people from outside the state has been a challenge. "There is a view of the world that genomics is only on the East Coast or the West Coast," he says. "But once you bring people out to Michigan, they are quite favorably impressed. The quality of life in Ann Arbor is very, very good. For people who like the seasons and the outdoors, in a university setting with affordable housing and a lot of diversity, it's a great place." Ann Arbor has been ranked in surveys as one the best places to live in the United States. It enjoys relatively low crime and high quality public education. But Ann Arbor's median sales price for existing homes, at $187,000, outpaces that of Detroit ($148,000), Kalamazoo ($114,000) Grand Rapids ($125,000), and Lansing ($114,000).1 Clearly the cities along the Michigan Life Sciences Corridor differ. Detroit, for instance, still suffers the crime, troubled public education, and other problems typical of older, industrial US cities. Initially, CEO Randal Charlton, of Asterand Inc., was apprehensive about locating in Detroit. "It seemed a bit like a Third-World city," he says. "But I think Detroit's coming back. I've lived all over the world and I enjoy it here." He has recruited more than 20 people, nearly all of them from out of state. Michigan hospitality has also attracted other biotech brethren from outside the state. "The folks have been very helpful and welcomed us with open arms," says Alan Walton, senior partner of Oxford Biosciences Partners, a Boston-based venture capital firm that funds Asterand. Charlton's company rents space at Wayne State University's Karmanos Cancer Institute. "I'm sitting in absolutely state of the art facilities, with brand-new lab space in a large building with lots of backup facilities, and we're only paying $20 a square foot," boasts Charlton. "I couldn't have gotten this for five times the price on the East Coast." For some, the potential value of Michigan's role in biotech stretches beyond the state boundary. "The real question is whether the Midwest can build a biotech corridor that is as attractive to companies and investors as are Boston and California," says Barry Broome, president of Southwest Michigan First, a trade association in Kalamazoo seeking to promote economic development. "I'd like to see Ann Arbor, Chicago, Indianapolis, Kalamazoo, [and] Grand Rapids in a seamless partnership," he says. "That would be an appropriate way to benefit all the communities." Ted Agres (tagres@usa.net) is a freelance writer in Washington, D.C. 1. "Housing Opportunity Index: Second Quarter 2001," National Association of Home Builders, Washington, D.C. Pharmaceutical Foundation Michigan boasts its share of major life science companies: Pfizer Inc. Parke Pharmaceutical, then the largest drug company in the country, was headquartered in the state in the 1950s and later merged to form Parke-Davis. That company combined with Warner-Lambert into Pfizer Inc. Pfizer's research center in Ann Arbor employs 2,600 people. Pharmacia Corp. A biotech anchor in Kalamazoo, Pharmacia employs 6,000. It absorbed the former Upjohn Co., which opened in the state in 1886. Stryker Corp. A world leader in manufacturing medical products, including orthopedic implants and surgical instruments. Stryker employs 900 workers in Kalamazoo. Perrigo Co. This contract drug and pharmaceutical manufacturing company in Allegan (north of Kalamazoo) employs 2,800 workers. Dow Chemical Co. The chemical giant's agricultural science division in Midland focuses on plant genetics and biotech. University of Michigan This top-ranked academic powerhouse in Ann Arbor consistently ranks in the top five for life science research. The university's medical school attracts more than $200 million in research funding annually. Michigan State University The nation's first land-grant university spends more than $100 million a year on life sciences research, including genetic mapping, bioinformatics, and intercellular communication. The campus in East Lansing houses three medical schools: the College of Human Medicine, College of Osteopathic Medicine, and the College of Veterinary Medicine. Wayne State University With the fourth largest medical school in the nation, the Detroit-based institution attracts $80 million for research annually. Research developments include AZT and dCyd for treatment of AIDS, and t-PA, a clot buster. Courtesy of Michigan Economic Development CorporationInside VARI: The cancer genetics research lab at The Van Andel Research Institute The Van Andel Research Institute (VARI) This 400,000-square-foot cancer research facility opened in May 2000 with a $1 billion endowment. Designed to rival centers such as the Howard Hughes Medical Institute in Maryland and the Salk Institute in California, VARI will focus on the functions of genes and proteins in cancer and on developing diagnostics and treatments. —Ted Agres

Michigan Moves from Motors to Molecules

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