MARC S. REISCH, C&EN NORTHEAST NEWS BUREAU

Michigan was at the epicenter of a high-tech shake-up once before.

	HOT AIR Michigan State research associate Ed Timm works in a mobile air- testing lab funded through Michigan's Life Science Corridor Initiative.

At the turn of the 20th century, a small group of entrepreneurs began to assemble horseless carriages in and around Detroit. The auto industry they developed changed the way people lived and worked. Even when the economic depression of the late 1920s and early 1930s slowed other industries, Detroit's auto industry kept churning out cars and trucks.

Now, Michigan wants to be a high-technology manufacturing center once again, and the state's economic development authorities hope that investments in high technology, led by the life sciences, will propel state economic growth.

Michigan is not the only state looking to technology for an economic boom (see page 45). Many others want to tap the same vein by targeting funds for research at state universities. A recent survey of state R&D spending by Battelle and the State Science & Technology Institute found that states collectively targeted $3 billion in 1995 for R&D--much of it spent in the hopes of also boosting economic activity (C&EN, Sept. 17, page 38).

SOME STATES have developed policies specifically focused on high-technology and life sciences business development--among them California, New Jersey, Connecticut, New York, and Pennsylvania. They each have policies to promote information technology infrastructures and university cooperation with business to foster growth.

But Michigan is trying something just a bit different. As a state with significant life sciences research centers, such as the University of Michigan and the Van Andel Institute, it is devoting $1 billion over the next 20 years to boost bioscience research and manufacturing. And as a center of auto production and research, it is promoting the cause of advanced technology for a new generation of low- or no-pollution cars.

Long thought of as a blue-collar, heavy-industry manufacturing state, Michigan aims to become a lab coat manufacturing state. It's made progress by nurturing more than 300 life sciences companies with annual sales of more than $1.6 billion, according to the Michigan Economic Development Corp. (MEDC). And it has moved away from heavy manufacturing through an emphasis on high-technology companies that develop everything from new batteries to new plastic coatings.

"In the 1980s, Michigan was known as a Rust Belt state with good reason," says economist Patrick Anderson. Surveys consistently ranked Michigan last in having an environment conducive to business. "Michigan was a state with high wages, high unionization, high taxes, and not a very high productivity rate," says Anderson, former director of the Michigan Department of Management & Budget and now head of his own consulting firm, the Anderson Economic Group.

ROTHWELL

All that changed in the 1990s, Anderson says. And that, says MEDC President and Chief Executive Officer Doug Rothwell, is because Michigan has been doing things a bit differently.Sure, Rothwell admits, Michigan offers tax incentives for business expansion or relocation like most other states. It also offers worker training and recruitment support to employers. It has reduced taxes by 20% over the past 10 years--to the point that the state tax burden on businesses and individuals is at the national average, Rothwell says.

These programs have been successful in helping to diversify the state's economy. Michigan isn't nearly so dependent as it once was on the auto sector. Today, the state's economy is almost as diverse as the national economy, Rothwell says. The description of Michigan as a Rust Belt state is not apropos any longer, he maintains.

But beyond the tax breaks and business incentives, what is different about Michigan is the way it is trying to develop life sciences businesses. When tobacco companies agreed to reimburse states for health spending on indigent smokers, Michigan promised to devote 12% of the $8.25 billion settlement--$50 million a year or $1 billion over 20 years--to commercialize life sciences through the development of a Life Sciences Corridor Initiative. The balance of the money will fund college student education and smoking cessation programs.

Michigan universities, led by the University of Michigan, now spend more than $400 million annually on life sciences research. Private-sector R&D spending in the state, at companies such as Pharmacia and Pfizer, exceeds $1.2 billion annually.

An extra $50 million a year may not seem like much, but MEDC officials say it's seed money that will pay dividends in new businesses and jobs down the road. "Current spending levels already place Michigan among the top 10 states in life sciences research spending," Rothwell says. And as a further measure of its resolve to grow life sciences, MEDC devoted its entire $5 million advertising budget in 2000 to attract life sciences workers to do the work that has to be done, he says.

The Life Sciences Corridor Initiative was set up two years ago. It all started when the presidents of the University of Michigan, Michigan State, and Wayne State developed the concept and approached government leaders with the proposal. Raili Kerppola, managing director, spearheads the initiative for MEDC. Kerppola, a biochemist, headed technical acquisitions and life sciences at the Parke-Davis unit of Warner-Lambert before Pfizer acquired it.

Late last year, the initiative handed out $100 million in awards covering 2000 and 2001. For each year, the initiative awards $20 million, or 40% of funding, for basic research; $25 million, or 50%, for applied research; and $5 million, or 10%, to help transfer technology to commercial applications, Kerppola says.

THE INITIATIVE directs the basic research grants at Michigan universities as well as nonprofit research institutions. The applied portion encourages collaborative efforts among university, nonprofit, and private company researchers. The initiative does not require collaboration, Kerppola says, but this is where the entrepreneurial element enters, because these funds will be used to develop a prototype product.

The aim of the remaining commercialization projects, she says, is to aid the transfer of a prototype to the private sector. "The universities can benefit here because these funds can be used to support their spin-offs," she says.

The $100 million in awards handed out so far have gone to 63 different projects, Kerppola says. While the lion's share of funding went to the state's major research institutions, about 12 private companies received funding as principal applicants. Other private companies also received awards as participants with university researchers.

Among the recipients of funds so far is the so-called Core Technology Alliance, which includes the University of Michigan, Michigan State, Wayne State, and the Van Andel Institute. These enterprises will develop five centers for technical research to be available to researchers from both academia and private enterprise. The actual award for this effort is $67 million, but it will be paid out over five years, she says.

	ROYGBIV Researchers at Wayne State, part of the Core Technology Alliance, employ a 24-color chromosome painting technique to examine genetic abnormalities.

The five centers--in genomics, proteomics, structural biology, animal models, and bioinformatics--will have a "hub" at one of the four institutions and a "node" at the other three, Kerppola explains. The award should boost both business and academic research, she says, because it will enhance research tools available for developing these science disciplines.

The bioinformatics center, for instance, will make available new equipment for research. And the animal models center will develop transgenic mice and rats to aid breakthrough research, Kerppola adds.

THE INITIATIVE also helps companies. For example, Ann Arbor, Mich.-based Rubicon Genomics got $1.9 million to help commercialize new sequencing amplification reagents. Another development-stage company, Nanobiologics, spun out of the University of Michigan last year, received $900,000 to develop nanostructures that prevent food-borne diseases.

The 2002 round for funding begins in November when early proposals are due, Kerppola says. Full proposals are due in March 2002, and recipients will receive awards in May or June. "We're seeing a similar high level of interest in the next round compared with the first, when we received more than 500 requests for funding exceeding $600 million," she notes.

One unusual recipient of initiative funding is an investment fund set up to provide seed capital for developing businesses. Sloan Ventures received $843,000 from the state to set up a venture-capital fund to help stake start-up life sciences businesses. Managing Director Richard S. Sloan, who with his brother, Jeffrey M., invented the Battery Buddy, a device to prevent a car battery from going completely dead, learned the hard way--through selling his own invention--about the difficulties facing a start-up company.

Sloan says he has used some of what he has learned to make it easier for new companies to get off the ground. He has helped raise funds from investors to launch a number of Michigan companies, including Rubicon Genomics, where he serves on the company's board. Having learned how to start up his own company, he and his brother now help other new Michigan firms by raising funds from mostly local "angel" investors.

Sloan Ventures will manage the Michigan Life Sciences Corridor Catalyst Fund with the grant from the initiative. Sloan says the fund will provide up to $150,000 to a life sciences start-up. This is "a two- to three-month lifeline at most," during which Sloan Ventures will help the company to find additional funding to keep it going.

Investments in new companies will be made in the form of a loan at 6% annual interest, but the loan may be converted into equity when a company begins raising funds from private-venture capitalists. Late in June, the fund made its first investment of $150,000 in Streamline Proteomic, a company with novel rapid clinical gene analysis technology that has applications in genomics and proteomics, as well as combinatorial chemistry.

THE LEVEL of activity revolving around new companies with patentable technology to protect has begun to attract other professionals to the state, too. The intellectual property law firm of Brinks Hofer Gilson & Lione, based in Chicago, just opened an office in Ann Arbor. The new office recognizes "the importance of Ann Arbor's emerging high-tech and life sciences sectors, so we're extremely pleased to be on the ground there," says firm President Jerold A. Jacover.

Long thought of as a blue-collar, heavy-industry manufacturing state, Michigan aims to become a lab coat manufacturing state.

Even well-established companies have a stake in the Life Sciences Corridor. Ash Stevens, based in Detroit, started out in 1962 as a supplier of active pharmaceutical ingredients and supplies to the National Institutes of Health, says President and CEO Stephen A. Munk. Today the privately held contract manufacturer does a $10 million-a-year business supplying pharmaceutical customers, such as Schering AG and Allergan, as well as the government. It has 50 employees, a research facility in Detroit, and a manufacturing site in Riverview.To build the life sciences corridor, "Michigan wants to attract our clients in California and on the East Coast," Munk explains. The company is now expanding its Riverview plant in part to supply the chemical agents needed by biopharmaceutical clients that may start up or relocate in Michigan.

Ash Stevens is expanding the 20,000 sq-ft work space it already has in Riverview by 50% at a cost of $10 million. The company will add new lab space and will have three manufacturing bays--it has one now--to make metric-ton quantities of active ingredients. The site, which currently employs 35 people, should employ 100 when it is up and running within the next 18 months, Munk says.

To aid Ash Stevens in its expansion, MEDC not only put the company in touch with the small-business development center at Wayne State, but also hooked the company up with bankers and investors, and helped the company obtain tax abatements. "We're poised for more rapid growth now because of the Life Sciences Corridor," Munk says.

The state isn't putting all its hopes in life sciences. It still has strong traditional businesses in furniture and automobiles. Automotive scientists and engineers, for instance, are doing their share of high-technology work with fuel-cell technologies, microprocessors for antilock brakes and navigation systems, and automated assembly processes. With so many major automakers headquartered in Detroit, MEDC claims that 98% of total U.S. automotive R&D activity is centered in the state.

Is Michigan "a great state to do business in," as economist Anderson insists? MEDC's Rothwell says it is working hard to overcome the popular notion of Michigan as a high-cost, old-economy manufacturing state. Not only does it offer the same tax incentives to new and growing businesses that other states do, it is also supporting research at universities and businesses that it hopes will ultimately add jobs and expand its economy.

FUNDING THAT goes into the Life Sciences Corridor Initiative for drug discovery should ultimately result in products new to the market. "We're trying to be a place where we make a discovery and it becomes a new product manufactured in Michigan," Rothwell says.

Companies set up to commercialize the new products will need help to succeed in Michigan; that's where venture capitalists like Sloan come in. "We want to help form angel investor networks," Rothwell says, to raise more capital for new companies. "We'll subsidize management fees to get these networks up and running for the first three years. They can decide themselves where they want to put their money."

Looking to lab coat workers for inspiration and opportunities, Michigan has a most ambitious goal. It once again hopes for an economy not subject to the swings of the business cycle. It wants a modern equivalent of what it had in its glory days when the auto industry shook up the world.

[Previous Story] [Next Story]

Top