Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Tuesday, September 07, 2021

How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a biotech sector there

Crain's Detroit Business has a very interesting article, "How Pfizer's closure planted a thousand seeds in Ann Arbor," about how the closure of the old "Parke-Davis Research Center" on Plymouth Road north of the University of Michigan's North Campus has seeded a biotech business cluster there.  (The article is locked but you can access it through printfriendly).

Postcard image of the Parke-Davis Research Laboratory in Ann Arbor.

Parke-Davis, a pharmaceutical company started in the 1850s in Detroit, was an example of how companies developed around the country, based on the expertise of the proprietors, before similar types of businesses tended to cluster into particular areas (Upjohn in Kalamazoo is another.  While the firm no longer really exists, Pfizer kept its production facilities there, and it is part of the coronavirus product manufacturing chain.)

Parke-Davis created the first drug-focused medical research laboratory in Detroit in the 1800s, and eventually moved its research to Ann Arbor in the late 1950s, buying land from the University of Michigan, and it became  one of the largest non-university, non-hospital employers in Washtenaw County.  The firm was acquired by Warner Lambert in 1970 and then Pfizer in 2002. 

Pfizer made the decision to shrink its research footprint and close the facility in 2007, and in 2009 it sold the facility "back" to the University of Michigan. 2,100 people were laid off with the closure.

Challenge to naive assumptions about business and technology development.  I have a series of articles about how DC could create a graduate medical education and biotechnology research initiative on the St. Elizabeths west campus, anchored by a new Southeast Hospital replacing the troubled United Medical Center.  

-- "Ordinary versus Extraordinary Planning around the rebuilding of the United Medical Center in Southeast Washington DC | Part One: Rearticulating the system of health and wellness care East of the River
-- "Part Two: Creating a graduate health and biotechnology research initiative on the St. Elizabeths campus"
-- "Part three: the potential for donations around an expanded program"
-- "Update on DC's plans to build a new United Medical Center"
-- "Community Health Improvement Planning"
-- "A glaring illustration of the need for comprehensive health and wellness planning in DC: Providence Hospital"

While the DC area does have a number of biotechnology firms, mostly centered in Montgomery County and anchored by activities of the National Institutes of Health and other federal laboratories and agencies ("University of Maryland could seed a complementary biotechnology and medical education initiative in Prince George's County"), charlie has pointed out that may not be enough, especially compared to Boston, San Diego, and San Francisco (although Greater DC and Baltimore is ranked #6 nationally in "Top Cities for Biotech 2021," Excedr).

Thinking about the implications of the Ann Arbor biotechnology cluster made me think about how creating viable products is not that easy, and while many universities and federal laboratories do have some success in fostering business development, there's a big difference between the creation of a few businesses, versus the creation of many to the point where it merits notice as a nationally significant cluster ("Life sciences is poised to be Boston’s dominant industry. Has the area become the Silicon Valley of biotech?," Boston Globe).

Reading about the successful development of a small biotechnology cluster in Ann Arbor, with seemingly great existing resources already in the University of Michigan generally, its medical and engineering programs, its hospital complex plus the VA and St. Joseph Hospital System, made me realize that not unlike college football, which has about six football programs that are at a quantum level beyond the other "Power 5 programs" ("How to break up Nick Saban's monopoly at Alabama to improve college football," USA Today), the reality is that there are six to seven universities that spin off successful start ups at a scale far beyond the rest:

  • MIT and Harvard in Boston
  • Stanford University in Palo Alto/Silicon Valley
  • University of California San Diego
  • University of California San Francisco
  • maybe the University of Washington in Seattle (Microsoft located there because that's where its founders lived before leaving for college, Amazon started up in Seattle because of the entrepreneurial culture created by Microsoft, and over time UW has gotten more involved in that ecosystem)
  • University of Texas Austin contributed to the development of an IT cluster in Texas, but key events like the creation of Texas Instruments had little to do with Austin ("The launch and evolution of a technology‐based economy: The case of Austin Texas," Growth and Change, 50:2, 2019).

Ann Arbor's development of a post-Pfizer biotechnology cluster.  As mentioned, Ann Arbor does have significant economic development advantages: a large university; with medical and engineering schools; major hospital systems and extensive medical research operations; an existing business development ecosystem; and high quality of life.

One of the problems with the hyper mergers in the pharmaceutical industry is that as the firms become bigger, companies seek to work on only those drug solutions that are likely to make many billions of dollars.  So they have slimmed down, focusing on areas where they believe they have extra-normal expertise, abandoning areas of research that may be successful, but lack the right level of economic impact ("Drug companies keep merging. Why that’s bad for consumers and innovation," Washington Post).

The research laboratory in Ann Arbor developed many successful drugs over the years, and had many potential successful drugs in the pipeline, they just no longer fit the direction at Pfizer.

Viable drug candidates needed new homes.  In closing the laboratory, Pfizer was not vindictive, and they were willing to support the transition of drug solution research programs to new firms. 

Because many of the staff had worked and lived in Ann Arbor for a long time, they had relationships with other actors in the industry, professors and others at the university, and a preference to stay, and they were motivated to create new firms to continue the research that they had been engaged in at Pfizer.

So a big difference between say DC trying to create a biotechnology hub is that the Ann Arbor lab closure wasn't just about space, like Walter Reed was or the St. Elizabeths campus, it also had viable drug products in the development pipeline.

Normally these products would be shifted off to other parts of the company as they became viable, approved, manufactured, marketed, and distributed.  So those parts of the product development chain weren't present in Ann Arbor heretofore.  

Ann Arbor's pre-nascent biotechnology cluster was presented with facilities, a research ecosystem, and potential products.  For example, Richard Florida's Rise of the Creative Class was based on the idea that Pittsburgh, despite the success of Carnegie Mellon University in sparking business development, didn't have a fully developed business ecosystem, and as the firms grew they left the area for cities with more talent and a more developed venture capital system.  Although maybe unexpectedly, at least to Professor Florida, eventually Pittsburgh's business development ecosystem became more developed, and better able to retain start ups as they grew, became larger, and/or moved from concept to production.

Viable, realizable, saleable products already in the pipeline made the difference.  When Pfizer made the decision to slim its research portfolio and research centers, the Ann Arbor facility had as many as 25 drugs beyond the discovery stage, potentially efficacious and therefore viable business candidates,  At the outset, fifteen firms were created immediately as a result of the lab's closure.  Today there are 250 biotechnology firms in the area, and about two-thirds of the lab's 2,100 workers still live in Ann Arbor-Washtenaw County.

The economic development lesson is that Ann Arbor  was "presented" with a more complete and functional biotechnology cluster from the outset, rather than needing to create products and each business subsystem from scratch, which ordinarily requires a long period of time, which sometimes is successful but often isn't, which is why such economic development initiatives often fail or take decades to be realized.

One big firm versus many small firms.  One of the points made in the Crain's article is that the Pfizer lab was a large employer, with 2,100 employees.  But while it was a big employer, it was less resilient as an element of the Ann Arbor economy, if circumstances were to change.  By comparison 70 companies each with 30 employees employs the same number of people, but if a few firms shutter, it has less negative impact than if the large firm shutters.

(By comparison see Rochester, New York, which has been devastated by the diminishment of Kodak and to some extent Xerox, as well as by IBM's closure of facilities etc. "Kodak's long shadow," Rochester Beacon, "Last days of Kodak town: the decline and fall of the city photography built," Guardian).

The other element that the article didn't mention was the entire product design, development, manufacturing, and distribution chain.  With a large company, the bulk of the profit generating activities are performed elsewhere.  With smaller firms, it's possible to capture locally more of the chain of revenue generating activities.

A key element: venture capital.  Unlike MIT, which has a venture capital arm as part of its endowment investment program, the University of Michigan isn't that active in that space of start up development, and unlike the early 1900s (capital surpluses from the Michigan forest and mining industries helped to fund the nascent auto industry), Michigan was a venture capital laggard.

This began changing in the late 1990s.  So when Pfizer made its announcement, and the imprimatur of firms having grown out of Pfizer and the institutional prominence of the University of Michigan, start ups were able to raise capital, including from local firms.  But had the research center closed earlier, capital to support this scale of new business development might not have been available, stunting the creation of a biotechnology cluster in Ann Arbor.

An interesting research question: what makes universities good or not good at spinoff business development?  Not being an economist, I'm not up with all of the research and literature on business development.  Certainly, Saxenian's book, Regional Advantage: Culture and Competition in Silicon Valley and Route 128, has influenced me greatly. (She has a newer book, The New Argonauts: Regional Advantage in a Global Economy, which I haven't read.)  

The article on Austin cited above ("The launch and evolution of a technology‐based economy: The case of Austin Texas," Growth and Change, 50:2, 2019) looks at "institutional factors" like presence of other companies, universities, etc., which has always been my focus. 

-- "The East-West Divide | DC area regional economic development: anchors and where they are placed matter + airports | But military spending matters the most,," 2021
-- "Aerotropoli and rethinking the scale of mobility networks in the context of a global economy," 2013
-- "DC area airport planning," 2021
-- "Better leveraging higher education institutions in cities and counties: Greensboro; Spokane; Mesa; Phoenix; Montgomery County, Maryland; Washington, DC," 2016
-- "Naturally occurring innovation districts | Technology districts and the tech sector," 2014   

But can the factors that separate the top seven universities (at least the ones that I think are the top) for business start up development, from the rest, with the aim of helping universities do a better job at this?

(On the other hand, maybe the type of people who work at universities and federal labs are different from the people who work in the private sector? and that's a key factor.) 

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At 9:08 PM, Blogger Richard Layman said...

"AI’s benefits are clustering in cities like Seattle. It’s tech inequality again"

This article by Seattle Times business columnist Jon Talton reports on clustering and agglomeration and the development of AI businesses.

It references a report from Brookings.


It lists SF as the leader, and Seattle, New York, Boston, Los Angeles, Washington, D.C., San Diego, Austin, Texas, and Raleigh, North Carolina as other key centers.

The article mentions 87 other places that have the potential, including Detroit, because of the auto industry, and Charlotte, NC and its place in finance and finance related AI.

But he is skeptical of those places, and I guess I am too. It's like the article Krugman wrote about referencing a supply chain study of the development of the vaccines, and how even big countries didn't have the scale to do all the pieces, that the supply chain has to be global.

At the end of the day, AI is bigger than cars or finance and likely that AI clusters will go beyond industry-specific sectors.

From the article:

But few of these have the world-class talent, top universities, tech transfer, entrepreneurship, financing and innovation clusters that would allow them to leap into AI’s headwaters. Expanding federal support for AI research might give some a boost. But it’s a long curve.

No wonder the report finds AI activity highly concentrated “in a short list of ‘superstar’ metro areas and ‘early adopter’ hubs, often arrayed along the coasts.” Another 261 metro areas aren’t in the game at all.

Like how the Pfizer article mentions that some universities are really good at sparking startups but most aren't, he mentions San Diego, UCSD as particularly good at this, which I mentioned too.

At 10:28 AM, Blogger Richard Layman said...

"‘The city that heals the world’: $100 million foundation grant to spur creation of biomanufacturing facility in Hazelwood"

The Mellon Foundation is giving the University of Pittsburgh a $100MM grant to build a drug manufacturing facility.

From the article:

It’s predicated on a “historic bet” that what Pitt plans to build will make Pittsburgh a global leader in life sciences and biomanufacturing, foundation director Sam Reiman said.

Both the university and the foundation billed BioForge as a true “game changer,” a facility unlike any other that has been built in Pittsburgh or anywhere else for that matter.

Beyond its promising medical potential, they see it as an engine for economic development — one that will draw companies and researchers from other parts of the country and the world to Pittsburgh.

Together, they can feed off one another and produce what Dr. Anantha Shekhar, dean of Pitt’s school of medicine and senior vice chancellor for the health sciences, called a “virtuous cycle.”

There are no other life sciences markets in the country that possess the combination of world-class health care and research, coupled with a strong business environment, that Pittsburgh has, Mr. Gallagher added.

WRT the last paragraph, that's puffery.

From the article:

While Pitt has long been involved in gene therapy and other biologics research, what it has lacked is a facility to manufacture such products on a large scale, he explained, resulting in the treatments being available to only a handful of patients at any one time.

Compounding the matter is that in order to get products or treatments manufactured, the work must be sent to facilities in cities like Boston, San Francisco and Houston, he said.

Given that such centers are few, “You have to stand in line for four or five years before you can actually get your product made for your treatments,” Dr. Shekhar said.

“So that has become a real sort of bottleneck for a lot of our discoveries,” he said. “And [BioForge] would actually make that problem go away and help us make our own products here on our timelines.”

The lack of such a facility is “really the limiting factor from Pittsburgh being a biotech powerhouse,” he said.

At 3:01 PM, Blogger Richard Layman said...

"Is this the golden age of health care discovery in Boston?"

At 3:14 PM, Blogger Richard Layman said...

University of Utah produces an "Innovation Report" annually, outlining the economic impact of various businesses developed out of the university, etc.

How the University of Utah has become a 'catalyst for innovation' in the Beehive State.


A precedent-setting $884 million in investments was raised by U. startups in 2021 and technologies developed by University of Utah faculty and students contributed to the launch of 14 startup companies last year, according to the report. ...

"We're doing over $650 million a year in research every year at the U. — some of that involves partnering with the private sector, partnering with entrepreneurs, partnering with venture capitalists, partnering with government," Marmer added. "That innovation economy, when I think of it, is basically the partnerships and the relationships across all of those stakeholders that's leveraging innovation to advance the economy, typically taking the form of startups or growing innovative companies to (a) larger scale."

A big part of the success detailed in the report is due to the U.'s Partners for Innovation, Ventures, Outreach and Technology Center, the university's organization that oversees innovation management. Marmer said he sees the center as a "catalyst for innovation."

The functions of the center fall into a few broad categories: technology, commercialization, corporate engagement and economic development, he said.

"We start between 10 and 15 new companies a year. We help those companies recruit management teams, raise capital, but we're also responsible for relationships with industry to help bring new research and innovation opportunities into the university," Marmer said. ...

While there are entities similar to the PIVOT Center at other universities, Marmer said that the novelty of it is how they work in a "fully integrated fashion."

"Oftentimes, you'll find an office that just does tech commercialization, or just does economic development. We created the center a couple of years ago to operate in a fully integrated fashion — I think that was the unique piece," he said.

At 9:55 PM, Blogger Richard Layman said...

wrt universities, clusters, and economic development, the Governor of NY proposes that SUNY Stony Brook and Buffalo be the SUNY system's premier research institutions, setting a new goal of $1 billion in annual research spending by 2030.

The SUNYs in Albany and Binghamton say they should be flagship universities as well, not second tier, as they will be at a competitive disadvantage otherwise.

"Capital Region lawmakers: Make University at Albany a SUNY flagship"


At 3:20 PM, Blogger Richard Layman said...

This article on Pittsburgh, Amazon HQ2, and the robotics cluster's success makes the point that to accommodate Amazon, there wouldn't have been enough employees for the robotics firms. Analogous to the point about one big firm, Pfizer, versus many smaller firms adding to the same number of employees and resilience.

At 7:02 PM, Blogger Richard Layman said...

Massive expansion of Boston biotech industry outside of Cambridge, because they just need so much space, for labs and manufacturing facilities.

"Greater Boston’s biotech industry has spilled out all over the region, leading some to ask: How much is too much?"

“The commercial office building developer is saying: I don’t have a full occupancy anymore. Can I convert my building to a lab/office environment?” said David Woolson, partner with AHA Consulting Engineers in Lexington. “They’re getting sometimes three times the rent for that type of space than they are for an office space,” which often makes lab the more profitable choice even if it’s more complex and expensive to build.

Yet challenges loom.

Some developers have begun whispering that lab demand, which has risen ever higher for years, can’t stay like this forever. They say the industry has inflated land prices, making other types of property — especially residential — increasingly expensive and difficult to develop. A number of life sciences companies have laid off workers in recent months. Biotech stock prices have been on a downward slope for months. And consulting firm Ernst & Young sees mergers and acquisitions — concentrating the sector into fewer, larger firms — on the horizon.

At 12:57 PM, Blogger Richard Layman said...

Penn, Longfellow to develop $365M life sciences complex in Philadelphia - Philadelphia Business Journal.

The University of Pennsylvania has teamed up with Longfellow Real Estate Partners on a $365 million, 455,000-square-foot life sciences and biomanufacturing building at Pennovation Works.

The proposed project at 34th Street and Grays Ferry Avenue is designed with 387,000 square feet of research and lab space that will be in two structures connected by 65,000 square feet of biomanufacturing space. ...

The building at 3401 Grays Ferry Ave. will add to a growing list of life sciences and biomanufacturing projects proposed for Philadelphia particularly in University City and the Philadelphia Navy Yard. For example, Gattuso Development Partners and Drexel University plan to build a $400 million, 500,000-square-foot life sciences research and lab building on the school’s campus at 3201 Cuthbert St. in University City. Around the corner, Spark Therapeutics is planning a $575 million, 500,000-square-foot gene therapy manufacturing facility that will be developed on Drexel’s campus at 30th and Chestnut streets.

Philadelphia region's growing life sciences industry ignites a $4 billion building boom"

Philadelphia is undergoing a life sciences building boom with $4 billion in projects in various stages of planning and development, setting the stage to grow the region’s economy with thousands of new jobs and life-saving discoveries.

Those real estate projects involve 11 million square feet of lab and manufacturing space, according to CBRE Inc. data. Projects range in size and scope and are scattered across the region in existing life sciences hubs such as University City and the Philadelphia Navy Yard to growing clusters in New Castle County, Delaware, and Philadelphia’s suburban counties. ...

Not to be overlooked are a series of high-profile projects in New Jersey, which is also experiencing an increase in life sciences development. For example:

Ground was broken in October on the New Jersey Innovation and Technology Hub, a $665 million, 550,000-square-foot development in New Brunswick that will be a center of innovation, research and development, and medical education;
On 13 acres in Jersey City, a project called the Cove is positioning itself as an East Coast hub for life sciences and innovation;
Liberty Science Center broke ground on a $300 million first phase of SciTech Scity, a 30-acre “city of tomorrow” innovation campus in Jersey City;
In Hopewell, BeiGene Ltd. plans to relocate its U.S. headquarters to a 42-acre site where it broke ground April 29 on an initial 400,000-square-foot manufacturing facility.

At 9:56 AM, Anonymous Anonymous said...

The Philadelphia Inquirer: Penn reaps nearly $1 billion in revenue from COVID vaccine technology.

At 10:24 AM, Blogger Richard Layman said... $57M flex-tech development breaks ground in Ann Arbor.

At 12:39 AM, Blogger Richard Layman said... Perrigo unveils new North American Corporate Headquarters on Grand Rapids’ Medical Mile.

At 11:22 AM, Blogger Richard Layman said...

Funding corporate r and d creations as independent firms.

CNBC: A new way iconic brands like Procter & Gamble, Nokia are cashing in on R&D moonshots.

At 2:04 PM, Blogger Richard Layman said...

I wonder if there is a halo effect from mRNA research at Penn, with the growth of the biotechnology sector in Philadelphia?

The Philadelphia Inquirer: While many Center City offices sit empty, a proposed lab space doubles down on Philly's life-sciences industry.

There is currently 4.6 million square feet of life sciences laboratory inventory in the Philadelphia region, according to Longfellow Real Estate Partners, the largest privately held life sciences developer in the country.

About a third of the inventory is based in Philadelphia itself, with six buildings — totaling 1.3 million square feet — in University City. Other prominent locations include King of Prussia;New Castle, Del.; and the exurban area around Exton, which boasts nine buildings with just under a million square feet of space total.

In Center City, the life sciences industry exists on a much smaller scale. The only existing space is in portions of the Curtis Center and the Terminal Office Building at 401 N. Broad St., but in neither case do laboratories comprise even half of the space. In addition to Breakthrough’s project on 23rd and Market, another research facility is being proposed by Miller Investment Management at 2323 Chestnut St.

At 9:59 AM, Blogger Richard Layman said...

Charlie included a link for an article from Stat News

Didn't see the Stat article. Thanks. Very interesting.

I've made a similar point before, that there is a difference between "doing" and "coordinating" and agencies that coordinate don't have the kind of spillover benefit that people think (eg FDA). Eg, with Obamacare, DC was saying that it would make the city a leading place for health research. But at that level, it's just contracts, not doing.

From the article:

Even if those projects prove transformational, experts say, it’s unlikely to change life in the agency’s host city.

“It’s the location of the performer, not the funder, that matters,” said Bhaven Sampat, a Columbia University professor who studies the politics and economics of government-funded research.

In other words: If the agency awards a contract to a company based in San Francisco, the economic impact will be felt there — not in the city where an ARPA-H employee handles the paperwork.

Even the agency’s workforce might not do much to bolster the local economy or create scientific prestige. DARPA, the Pentagon science agency that ARPA-H is modeled after, only employs about 200 people. ARPA-H, with a budget one-third the size of its sibling agency, will likely be even smaller.

This gets to the point I make about there being a difference between "building a local economy" and "economic development." The latter just focuses on top numbers, the gross grain number, not the specifics.

This is a big thing of course with big sports events. Big top numbers, but when you go super micro, the local impact is a lot less.

The article talks about "the Halo effect" in that it can help. That's the same thing with the sports events. I do think, in an existing science based area, it does help some. It's one more asset, in a string of them. But it's not the same as a big lab.

And even then, we learned with the Pfizer closure in Ann Arbor, and the resuscitation of the bioscience sector there, that big company labs do a lot, but as part of a big company, many key functions happen in other cities, and smaller companies may keep more of those functions on site, generating more employment.

Again, really great article.

At 10:21 AM, Blogger Richard Layman said...

"Biotech is sprouting into Dallas-Fort Worth’s next big thing, based on seeds planted decades ago"

D-FW now has more than 60 companies and 27,000 jobs in biotechnology and life sciences.

“In order for biotech to be successful, it has to have technology, investors and a network,” Dallas Baptist’s Fletcher said. “The technology obviously has been building, the investors have been coming, and now it’s a matter of developing the network.”

At 10:26 AM, Blogger Richard Layman said...

"Dallas-Fort Worth’s biotech boom pushes it into top 20 metros for life sciences"

Nice clickable map.

DC #5, Baltimore #14.

Detroit, which probably includes Ann Arbor, #13


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