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STARTING OVER: Chemists, other scientists turn closure of Pfizer labs in Kalamazoo into business opportunity

Pfizer's decision earlier this year to close the Kalamazoo, Mich., drug discovery laboratories it acquired with Pharmacia was devastating both for the roughly 1,000 scientists and related personnel who worked in the labs and for the city itself. But out of the ashes of the former labs, close to a dozen new companies are arising that could employ more than 100 former Pharmacia staffers. They are being formed by scientists who chose not to accept offers of employment at faraway Pfizer locations and instead decided to set out on their own at home. Not all of the companies will succeed, but the creative energy generated from their formation is fostering a new buzz in a research community previously dominated by one firm. Most of the new companies will be based at the Southwest Michigan Innovation Center, a new-company incubator that opened in June, just two months after Pfizer announced the closure. The timing may seem fortuitous, but, according to Sandra Cochrane, the center's acting chief executive officer, it's actually the product of a planning process that began in 1998. That was when a nonprofit group called Southwest Michigan First (SWF) was formed by community leaders who saw the region being rocked by a series of corporate mergers and industrial plant closings. Cochrane says the group's CEO, Barry Broome, recognized Pharmacia as a cornerstone of the region but also as vulnerable to takeover in a time of rampant drug industry consolidation. SWF began developing plans to ensure Kalamazoo had the talent, funding, and facilities to support entrepreneurial life sciences companies of the sort that thrive in San Diego or Research Triangle Park. Thanks to Pharmacia, the region had talent “in spades,” Cochrane says. For funding, SWF began to cultivate ties with state agencies and venture-capital groups. And for facilities, it started raising money for the innovation center. Cochrane says local business leaders were confident the center would be needed in the wake of the “future event”—their euphemism for an acquisition of Pharmacia. But they also were aware of a severe lack of wet lab space in the Midwest. Indeed, as early as mid-2002, the center was attracting biotech firms such as Esperion Therapeutics and NephRX, both of which set up in temporary quarters at nearby Western Michigan University while they waited for the center to open. When Pfizer dropped its bomb in late April, just weeks after completing its purchase of Pharmacia, one person displaced scientists turned to was Tom Dammer. Dammer grew up in southwest Michigan and had returned to the area with his family in May 2001 after about 14 years on the East Coast. Dammer had just completed 18 months as the head of a local software company when Broome asked him to work with departing Pharmacia scientists who wanted to set up new companies. For two months, Dammer says, he and local lawyers and other experts worked pro bono to help former Pharmacia staffers develop business plans, identify potential financial backers, and navigate intellectual property issues. Like most other states, Michigan receives money as part of the landmark 1999 agreement between state attorneys general and the tobacco industry, and it has been spending some of its share to develop a life sciences corridor. A key moment in Kalamazoo business formation came at the end of May when Dammer, speaking on behalf of SWF, appealed to Michigan's life sciences steering committee for $2 million in emergency new-company funding. THE REQUEST was granted, and the steering committee started accepting business plan submissions from scientists eager to become entrepreneurs. Dammer says the committee received 29 proposals, conducted follow-up interviews on 21, and accepted 11, granting each of the new companies loans of about $200,000. Dammer is now CEO of one of them. The firm, Proteos, is the brainchild of protein chemist Robert L. Heinrikson, who worked at Pharmacia and its predecessor companies for 18 years. For 18 years before then, he taught in the biochemistry department at the University of Chicago. Heinrikson chose to retire from Pfizer after the closure was announced, but he wasn't ready to leave the world of science. He formed Proteos in June with fellow protein chemist Clark Smith and is now the firm's chief scientific officer. Proteos employs about eight of Heinrikson's former Pharmacia colleagues. Proteos' plan is to provide both consulting services and small-scale protein production to pharmaceutical industry customers. Equipment is on the way to the firm's space in the innovation center, Dammer says, and the company could have a working lab by the beginning of 2004. Heinrikson is well known in the protein chemistry field, and news of his firm is spreading fast. He went to Japan last week at the invitation of several Japanese companies interested in his firm's services. “People are looking us up and asking when we'll be up and running. That's encouraging,” he says. While companies like Proteos are getting by on the seed money from the steering committee and any other support they can scrape up, three new Kalamazoo companies have won official backing from Pfizer. The biggest recipient of Pfizer aid is Jasper Clinical Research & Development, which offers early-phase clinical studies. Jasper is receiving a facility and equipment from Pfizer plus a minimum amount of contract business for three years, support that Pfizer values at as much as $20 million. Ceetox, which provides in vitro toxicity screening of potential drug candidates, is to receive equipment and technology from Pfizer. And Kalexsyn, a provider of contract medicinal and synthetic chemistry services, has been promised help with obtaining laboratory equipment. Pfizer is also exploring the possibility of contracts with both firms. Robert C. Gadwood, Kalexsyn's CEO, was an associate director of medicinal chemistry at Pharmacia and one of the last chemists to leave the Kalamazoo labs. He kept a detailed tally of what became of the 138 chemists working in three Pharmacia medicinal chemistry units. By his count, 106 left Kalamazoo and 32 stayed. Of those who left, 66 went to other Pfizer facilities, 22 joined Eli Lilly, and 18 moved elsewhere. Of the 32 who stayed, four continue to work for Pfizer, eight found jobs outside Pfizer, and 20 are looking to start something new. Most are like Gadwood and his business partner, David C. Zimmermann, Kalexsyn's president: They loved their jobs in medicinal chemistry, but for family or other reasons they didn't want to leave Kalamazoo. “It seemed to me that these were all very highly experienced chemists—many of them had been with the company for more than 20 years,” Gadwood says, “and that this was a great opportunity to put together a contract medicinal chemistry company.” Kalexsyn, which was incorporated on July 18, has yet to learn what equipment Pfizer will help it obtain and what their business relationship might be. In the meantime, Gadwood says, Kalexsyn is negotiating to occupy space at the innovation center and preparing to equip it. As to the firm's business prospects, “There's a great deal of interest,” he says, “but everyone is waiting to see us demonstrate we can build a lab and equip it.” Gadwood says he's been impressed by the way Kalamazoo and the state of Michigan have rallied to support former Pharmacia employees who wanted to stay in the city. And he credits those who had the foresight to build the innovation center. “Everyone is trying to build labs and obtain equipment,” he says. “It's an exciting time to be in Kalamazoo.”