Michigan BIO Boom

October 02, 2008 08:00AM
Mark Sanchez, Michigan Business Review

For any doubters to the notion of auto-dependent Michigan becoming a future biotechnology destination, perhaps two separate but related events of the past week may alter their perspective.

First, a California biotech company developing new genetic tests announced it's buying the Center for Molecular Medicine in Grand Rapids amid plans for a future new lab that may create up to 523 jobs by 2013.

The next day, the U.S. pharmaceutical industry's trade association unveiled a report in Michigan detailing the number of new drugs under development in America.

The Pharmaceutical Research and Manufacturers Association, or PhRMA, chose Michigan as the spot to release its report to highlight the state's growing role in the industry.

Although the biotech industry in Michigan remains small compared to some other states, "we see it as a fertile ground," with its research and support infrastructure, education base and talent pool, which continues to build, said Ken Johnson, senior vice president of public affairs with the Washington, D.C.-based PhRMA.

With the job losses in the state and the domestic auto industry's decline, there's also the obvious recognition of the need to develop new economic sectors, Johnson said.

"This is a state in the industry that's really starting to flex its muscles," he said. "Within 10 years, Michigan's going to be one of the leaders in this country in the field of biotechnology."

While those kinds of comments are usually heard these days from local economic developers and industry leaders promoting the state, the difference last week was that the talk came from people outside of Michigan.

In the case of Sequenom Inc., the growing research and clinical cluster along the Medical Mile was a lure that prompted the $4 million pending acquisition of the CMM, a joint venture formed two years ago by Spectrum Health and the Van Andel Institute.

"Grand Rapids is developing a really nice hub for science," said Paul Hawran, chief financial officer for the San Diego-based Sequenom [Nasdaq: SQNM].

Hawran calls the VAI a "hidden jewel.

"There's a lot of very powerful science there" that ultimately can lead to the formation of new businesses, he said. "As that snowball goes down the hill, it's just going to get bigger and bigger."

Sequenom, with 2007 revenues of $41.0 million, is developing a test to detect genetic disorders, such as Down syndrome, as early as the first trimester of pregnancy. The company plans to make the Grand Rapids CMM lab its primary clinical facility and will eventually invest $20.2 million investment to develop a new lab locally that will conduct millions of genetic tests annually, Hawran said.

The deal for CMM, 90 percent of which Sequenom will finance as a stock transaction with Spectrum and the VAI, is expected to close by the end of October, Hawran said.

Sequenom's investment in Michigan could create a ripple effect that would lead to other biotech companies looking here, CMM Executive Director Dan Farkas said.

"Clearly, others are going to notice," said Farkas, who will join Sequenom and oversee research and clinical labs in Grand Rapids and San Diego. "I certainly think it has the potential to create a cascading effect."

Sequenom represents the latest addition to a growing Michigan biotech and life sciences industry that PhRMA's Johnson highlighted in recent visits to Grand Rapids and Detroit.

Among the driving forces are the emergence of the Medical Mile research and clinical cluster and the formation and growth of more than 35 contract-research organizations in Kalamazoo and elsewhere.

Since 2000, Michigan has seen 122 new biotech companies started, Johnson said.

PhRMA recently commissioned a study by the University of Michigan to determine the industry's exact economic footprint in the state. The report is due by year's end.

The Ann Arbor-based trade association MichBio counted 550 bioscience companies in Michigan as of 2006 that generate 33,800 jobs with an annual average salary of $67,050.

In its report, PhRMA noted that 633 new medicines are now under development nationwide by 100 pharmaceutical companies.

About half of those companies are using research and support services offered by Michigan-based businesses, said Dave Zimmerman, CEO of Kalamazoo contract researcher Kalexsyn Inc.

CROs represent a fast-growing niche for Michigan, as large pharmaceutical makers increasingly farm out early research and development work into new medications, Zimmerman said.

"What you're seeing in the state is part of the revolution in the pharmaceutical sector," said Zimmerman, a former Pfizer Inc. scientist who co-founded Kalexsyn following a 2003 downsizing in Kalamazoo. "We are certainly in the right place at the right time."

Within the industry nationally, he said, "there is a growing recognition of the expertise Michigan provides" as a one-stop shopping destination of sorts for pharmaceutical research and development.

"At times, I think, we're a well-kept secret in the state of Michigan. However, we're not a well-kept secret if you look at the pharma industry," Zimmerman said. "The pharma industry recognizes what is going on in Michigan and the uniqueness we provide."