A Beginning Action Plan to Strengthen Industry Assets, Talent, Resources and Opportunities

The future of Biosciences in Michigan

March 2011

Acknowledgments
MichBio facilitated the development of this Action Plan under the leadership of Stephen Rapundalo, Ph.D., who was also the author of the report. The ideas, writing and input of many stakeholders were compiled into the Action Plan. Largely, they were distilled from the testimony provided by numerous bioscience professionals before the State of Michigan House Subcommittee on Biosciences during 2009-10. MichBio would like to thank former Rep. Ed Clemente, Chair of the Subcommittee on Biosciences, and the members of that subcommittee for their leadership and interest in bringing attention to issues impacting the states bio-industry. Additionally, thanks go out to the many bioscience executives who participated in MichBio policy roundtables over the last several years and contributed their perspectives on growing our industry, and in a biosciences survey co-sponsored by Crains Detroit Business, Honigman and MichBio in advance of the 2010 Mackinac Policy Conference. Lastly, MichBio appreciates the interest of state legislators, many of whom past and present, have participated in the Michigan Biosciences Legislative Caucus and its discussions on policies relevant to the bio-industry. A special note of thanks is extended to Sen. Randy Richardville and then Sen. Rebekah Warren (formerly State Representative) for their service as Founding Co-Chairs of the Caucus and support for seeking new policy ideas towards growing the states bio-industry. Interested persons are encouraged to contact Stephen Rapundalo at srapundalo@michbio.org or (734) 5279144 with questions or comments regarding the Biosciences Action Plan.

EXECUTIVE SUMMARY
Today, the biosciences sector is at the forefront of creativity and innovation. It is the one industry thats poised to tackle every major human and environmental challenge. It is the one industry where the U.S. still leads globally and is a net exporter of manufactured products. Few sectors offer as much promise for long-term, sustained economic development and job creation as the biosciences sector. The sector already has an enormous impact throughout Michigan. No other industry affects our daily lives more. It is reflected in ongoing scientific research and innovation, manufacturing, investment and economic development, education and training, new healthcare treatments and delivery, sustainability in food and agriculture, renewable energy, and improving the environment. This life-changing technology sector will grow in importance for the economic and societal future of the state. It will require informed, sustained, and state-wide attention and leadership. This Plan begins to outline an action agenda designed to make the bio-industry an even more important driver of Michigans economy. Although weve had much success over the last ten years in building our bio-economy with approximately $325 million in direct state investment, the fact is that we have only scratched the surface of Michigans potential in the sector. To achieve that potential and insure a sound return on investment means having a clear roadmap to the states biosciences future that recognizes strengths in education, talent, assets and technologies, as well as defining unmet needs and opportunities for growth. Policies must be pragmatic, programs must be supported, resources and adequate funding must be committed, and long-term, statewide outcomes must prevail over short-term solutions. With these kinds of approaches, the biosciences industry and the future Michigan economy will reap great benefits from our investment, planning and proactive attitude. The Biosciences Action Plan is a living document and as such its priorities will change as circumstances deem necessary. Recommendations herein will be adjusted to reflect the most current viewpoints. The Plan is meant to bring together all relevant stakeholders bioscience professionals, service providers, educators, government leaders, policy- and decision-makers, and public. Bioindustry development is a statewide undertaking. We should all work towards the shared goal of growing the states bioscience industry into a vital economic driver for all citizens and communities across Michigan.

BACKGROUND
The biosciences is one of the most dynamic and growth-oriented sectors of the economy, and the one industry that enriches our lives by providing breakthrough products and technologies to combat disease, feed and fuel the world, and reduce our environmental footprint. The bio-industry represents a major slice of Michigans economy, and that found nationally, and covers an array of industry subsectors or clusters, from pharmaceuticals and therapeutics, medical devices and equipment, diagnostics, research products, clinical research, feedstock and chemicals, food and nutraceuticals, industrial and environmental, as well as biofuels and bio-based products.

Michigan is home to more than a 1100 bioscience companies and organizations based on NAICS code classifications according to the BIO/Battelle Report on State Bioscience Initiatives 2010 1 (MichBio counts approximately 550 as true bioscience R&D/OEM companies and research institutions 2). Collectively these companies employ 37,180 with a multiplier of 3.76 yielding >139,000 Michiganders employed directly or indirectly in support of the sector. The bio-industry generates $2.5 billion in private sector payroll and approximately $500 million in state tax revenues, while contributing about

Biotechnology Industry Organization (2010). BIO/Battelle State Bioscience Initiatives 2010. A report prepared by Battelle in cooperation with BIO. 2 MichBio Bioscience Resource Guide and Directory, 2010.
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$9.3 billion to Michigans GRP, this according to 2009 PhRMA report on the sectors contribution to the states economy. 3 Once considered in the upper tier of states for bioscience economic development, Michigan now finds itself ranked lower compared to other regions based on various indices. The Milken Institutes State Technology and Science Index 2010 ranks Michigan in the third tier overall (26 th ), and in the second tier for R&D inputs (18 th ) and human capital investment (20 th ), third tier for investment in technology and science workforce (27 th ) and risk capital/entrepreneurial infrastructure (30 th ), and in the bottom ten states for technology concentration and dynamism (46 th ) a measure of each states entrepreneurial, governmental and policy-formulating success. 4 Michigan now finds itself observing enormous investments by competitive regions seeking to create, attract and grow bio-manufacturing and bioscience companies. We must recognize the challenge and be bold to invest, especially in an era of rapid economic change and uncertainty. Building a strong biosciences industry requires some essential elements based on the experiences and outcomes in other states and regions 5, 6: Engaged universities with active leadership Building an entrepreneurial culture with intensive networking across sectors and with industry Available capital covering all stages of business life-cycle Discretionary federal or other R&D funding Workforce and talent pool Access to specialized facilities and equipment Supportive business, tax and regulatory policies Patience and a long-term perspective

Actually, Michigan has many of these key requirements to one degree or another. Whats needed is better strategic positioning, coordination between stakeholders, sustainability of resources and attention to unmet needs. Michigans economy is in transition with traditional industries succumbing to global market forces. Whats clear is that for Michigan to regain its competitiveness it must develop its knowledge-based economy. In short, this means Michigan must invest in biomedical and bio-based technology innovation given the states strong foundation and legacy in bioscience research, development and manufacturing. Because the opportunities in the biosciences are so compelling, Michigan needs to aggressively pursue the bioscience industry to drive its economic development and future prosperity.

Feinstein, A., Fulton, G., and Grimes, D. (2009). The Contribution of the Biosciences Industry to the Economy of Michigan. University of Michigan, Institute for Research on Labor, Employment and the Economy. A report prepared for the Pharmaceutical Research & Manufacturers Association (PhRMA). 4 DeVol, R.C., Klowden, K. and Yeo, B. (2011). State Technology and Science Index 2010 Enduring Lessons for the Intangible Economy. Milken Institute. 5 Biotechnology Industry Organization (2010). BIO/Battelle State Bioscience Initiatives 2010. A report prepared by Battelle in cooperation with BIO. 6 Biotechnology Industry Organization (2009). State Legislative Best Practices in Support of Bioscience Industry Development.
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IMPROVING THE BUSINESS AND COMMERCIALIZATION CLIMATE

Bioscience companies have many of the same requirements as other commercial enterprises in seeking a favorable business climate an affordable cost of doing business, a clear and competitive tax structure that permits growth, and a regulatory environment with consistent rules and regulations. However, the bio-industry also faces some unique conditions in that it often takes 15 years or more between the time of company formation and successful market launch of a drug, medical device or other type of bio-product. This means that the intervening years are fraught with setbacks and high costs. Thus, a favorable business climate, one that recognizes the high risk and expense involved in commercializing bioscience discoveries, and the need for policies that can sustain businesses rather than penalize them, is essential to the long-term success of industry growth. The most collective refrain in regards to improving the business and commercialization climate in Michigan is the need for additional capital. A common feature shared by leading bioscience states and regions is the presence of a robust capital community that is both focused towards emerging and local company investment. It is critical to have pre-seed, seed, and venture capital funds with experience investing in bioscience companies thereby addressing all stages of the business life cycle from prototype/proof-of-concept through seed to later-stage financing. Michigan has seen a steady growth in capital formation capacity over the last decade. Despite this, and the fact that Michigan ranks 18 th in the nation in bioscience venture capital investment (2004-09), 7 the state is still considered to be largely deficient in capital financing. Michigan has witnessed some notable commercial exits Esperion Therapeutics, HealthMedia, HandyLab, Lumigen, and Accuri Cytometers and these have brought more attention to our bio-industry and its many investment opportunities. However, the funds based or with a presence in Michigan are small and/or invest in a limited number of deals. The state must do more to entice venture capital to the region. The recent enactment of the Michigan Angel Investor Tax Credit is a strong step toward providing another incentive for potential investors in bioscience companies.

Lastly, an equally important element is to insure favorable regulatory policies. Specifically, state policies should recognize that bioscience companies must operate within a very strict federal regulatory environment unlike any other private industry sector. Thus, state regulatory policies should not unduly add to regulations in practices that are ultimately governed by the FDA. Bioscience companies are more inclined to stay in or move to states that provide wellstructured regulatory climates. Michigan should work with the bio-industry when contemplating
regulatory changes, and understand that any added regulatory burden increases the cost of doing business and ultimately to the expense of bringing new healthcare products to patients.

Biotechnology Industry Organization (2010). BIO/Battelle State Bioscience Initiatives 2010. A report prepared by Battelle in cooperation with BIO.
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Reform Michigans business tax structure

Restructure Michigan's corporate and business tax structure to insure simplicity and competitiveness with other states recognized as bioscience industry leaders Conduct an independent comparative study to identify the cost (tax structure) and benefits (incentives) of doing bioscience business (pharma, medical devices, diagnostics, bio-based technologies) in other successful regions, so that Michigan can adjust its business climate accordingly to become competitive

Effectively deploy state incentives for bioscience company growth

Retain Michigans Angel Investor Tax Credit with no legislative or regulatory impediments to its implementation and effectiveness, and undertake efforts to educate and introduce angel investors to opportunities within the biosciences using this incentive as a primary tool Independently review and analyze Michigans existing tax credit incentive programs with implications for the bioscience industry and develop legislative recommendations for improvement, including the development of new incentives based on best practices in leading bioscience states Establish a refundable tax credit for Michigan-based compensation equal to employee income taxes for emerging companies in the first five years Develop legislation and incentives that seek to enhance target areas of opportunity within the biosciences cluster Clearly describe incentives and resources available for bioscience companies and investors in a single, one-stop location and manner

Expand access to capital at all stages of business life-cycle

Increase funding for the state-based Micro-Loan Program and Pre-Seed Capital Fund and insure their long-term viability in supporting emerging bioscience company growth

 Expand the Emerging Technology Fund increase matching funds for both Phase 1 and Phase 2 federal awards (SBIR/STTR) of up to $100,000 and $500,000 respectively Establish a state-sponsored low-interest, revolving loan fund to help finance new-product bio-manufacturing and R&D support infrastructure, including the retrofitting/construction of new wet-labs and purchase of capital equipment Undertake activities to make out-of-state venture capital funds aware of investment opportunities in Michigan bioscience companies including direct communications and a database of companies seeking financing Direct greater funding by state pension funds to bioscience company investment

Insure a business-friendly regulatory environment

Develop regulatory policies and approval processes that are clear and efficient for bioscience companies seeking to start or grow in Michigan Conduct an independent review of the state's regulatory policies, related to environmental, agricultural, building, or procedures for determining the states preferred drug formulary and reimbursements for emerging medical technology products, to ensure that a balance is found in cost containment, market and patient access, and support for innovation

ENHANCING ECONOMIC DEVELOPMENT EFFORTS

Every economic development opportunity from niche industry clusters to value-added services and activities, to mechanisms for enhancing technology transfer and commercialization, all require the engagement and connectivity of people and institutions across the state. Similarly, each target area will have a myriad of regional impacts and outcomes including the presumption of job creation. As a consequence, new vendors, suppliers, service providers and related companies will emerge as will a variety of measurable economic impacts. In sum, such approaches and attitudes should fuel healthy growth of Michigans biosciences industry. Such economic development opportunities will have more successful outcomes if they begin with welldefined strategies and goals for where and how the bio-industry needs to develop. Michigan has not adopted, much less followed through with, a formal strategic plan for economic development of the states biosciences industry since 2002. Many other states, particularly those recognized as having specific strengths in the biosciences sector, 8 have developed strategic roadmaps for growing their bioindustries and witnessed strong economic impact because of a sustained commitment to and execution of their plans. Michigan needs a clear roadmap to the states biosciences future - a plan that fully taps Michigans many resources relevant to building a robust bio-industry. Although the state has had a strong legacy and much success in the sector, we have only scratched the surface of Michigans potential in the global biosciences economy. Strong cooperation among government, industry and educational institutions is required to strengthen Michigans bio-industry and propel us into being one of the nations top bioscience states. Economic development efforts can be greatly aided by knowing and promoting Michigans many bioscience assets, technologies and capacities. The state does not currently have a detailed understanding of these attributes and thus is not in a position to make such information available to its own bio-companies or those outside of the state to create business development opportunities. Its difficult to sell others on our products, resources, technologies and capabilities if we ourselves arent fully knowledgeable of them. Furthermore, Michigan has not fully taken advantage of its significant and successful Pure Michigan marketing campaign and applied the brand to promoting its bio-industry. Recognizing this, MichBio launched BioMatters, a bi-annual magazine designed to feature the successes and opportunities of the states bio-industry. Such efforts should be greatly expanded in partnership with the MEDC to grow awareness of our assets, especially by targeting key stakeholders like investors and bio-industry business development decision-makers. Additionally, Michigan must become more visible globally at industry trade shows that can spotlight our bio-companies and sell their services and products. All these kinds of economic development efforts will require abandoning institutional silos or attitudes of regionalism and coalescing around a single Michigan brand. The state should take advantage of industry expertise by strategically partnering with industry groups like MichBio to implement strategic initiatives on behalf of the state or play a supporting role to MEDC efforts in the sector. Collectively, a more seamless and integrated collaboration with transparency and better communication should allow for more meaningful economic development outcomes.

Rogers, J. (2010). State Rankings Report Biotechnology Strength. Business Facilities..

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Strategically grow MIs bioscience industry

Develop a formal strategy for growing the states biosciences economy with the collaboration of Michigans bioscience companies and research centers, local and regional economic development organizations, policy leaders and other relevant stakeholders, that recognizes cluster strengths and opportunities Implement an annual industry growth analysis and report with metrics Visibly promote the biosciences sector within existing State of Michigan programs (e.g., a distinct allocation and/or program within the 21 st Century Jobs Fund i.e., like the previous Life Sciences Corridor Fund)

Recognize MIs biosciences industry assets

Conduct a comprehensive asset mapping analysis of Michigans biosciences industry that details the research, technology and manufacturing capabilities and capacities of each bioscience company and research institution, as well as supporting service provider and supplier Identify cluster competencies, growth opportunities, and areas suitable for branding and promotion Support the expansion of the existing MichBio searchable database of Michigan bioscience businesses, service providers, manufacturing suppliers, research organizations and institutions, to enable a robust mechanism for business-tobusiness development and matchmaking Create a directory of Michigan bioscience companies engaged in international trade to support further research and marketing efforts

Identify new opportunities for sector growth

Engage industry to work with regional and state leaders to understand Michigans capacities to compete, innovate, and perform around current and emerging bio- and medical technology clusters

 Identify target areas of opportunity in the existing biosciences cluster for focused support and niche development: o Contract drug development o Clinical trials o Bio-based technologies and bio-products o Nutraceuticals and nutritional food products Determine tactics on cluster-specific needs (e.g., skills training, new enterprise development incentives) and cross-cluster issues (e.g., transportation, regulations, workforce development, immigration, marketing and branding) Establish formal international bioscience commercialization and trade gateways with targeted global regions like China, India, Israel and Germany that will allow expanded trade and commerce opportunities for the Michigan bioindustry

Enhance visibility of MIs biosciences industry

Develop a comprehensive state-based marketing and branding strategy and communications initiative linked with the Pure Michigan campaign to support the states biosciences industry (i.e., extend and modify previously successful digital media advertising) Provide dedicated funding for aggressively promoting the bio-industry and specifically, its cluster strengths, via multi-media activities Contract/partner with industry to support an active presence at leading domestic and international bioscience trade shows (e.g., BIO, MD&M, Medica, etc).

Better coordinate economic development initiatives

Insure funding for bioscience site selection and retention/recruitment activities and to create visibility for investors Establish and fund a strategic partnership between the MEDC and the bioindustry trade association, MichBio, to implement various Action Plan initiatives
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and better integrate economic development efforts for growing the states biosciences sector Develop a partnership of local/regional economic development groups that would seek to better position Michigan as a destination for bioscience businesses and develop better site selection strategies Create and maintain an accessible database that lists available real estate, facilities, local/regional infrastructure and amenities suitable for bioscience business development, and otherwise rates communities for their bio-business readiness Establish pre-permitted bioscience zones within communities or otherwise ease regulatory processes to streamline the renovation or new construction of bioscience laboratories and manufacturing facilities Educate local/regional governmental officials for the purpose of providing background about the biosciences industry and guidance on how to position a municipality as a destination for laboratory and manufacturing facilities.

AN EDUCATED AND SKILLED BIOSCIENCE WORKFORCE

A skilled workforce is the most important foundation for long-term competitiveness. The State of Michigan must have a key role in ensuring that education and training are aligned with the skills needed for business clusters. This is no less important for the biosciences industry given the sophisticated nature of its R&D and manufacturing processes. The bio-industry has a number of challenges to insure a sustainable supply of talent: i) a diversity of job positions requiring individuals with associate degrees to those with PhDs in very specialized areas, ii) a particular requirement for technicians with mid-level skillsets, iii) the need for continued education at all levels, iv) a broad geographic distribution of bio-companies across the state, and v) the uneven nature of job growth at different locations. Michigan is fortunate in that ranks 8 th nationally in the number of annual bioscience graduates. 9 However, the state suffers a brain drain of these graduates, along with experienced talent as a consequence of industry consolidations, largely due insufficient knowledge of available positions or of the types/locations of companies present in Michigan that could offer new job opportunities. More importantly, the state must recognize that the next generation of workforce seeks dynamic communities with high quality of life as job destinations. Thus Michigans local, regional and state leaders must do more to develop vibrant communities that can retain and attract the best bioscience talent, whether that is at the technical or management levels. Michigan must invest more in bioscience human capital given our poor national ranking in that regard. 10 However, a lack of a validated marketplace assessment of the states bioscience workforce prevents us from better understanding our bioscience talent pool. The availability of such data would be useful in identifying growth areas and unmet needs that would allow better alignment with bioscience education and training programs. Michigan fairs poorly too in its overall commitment and achievement in bioscience/STEM education based on a 2009 BIO/Battelle analysis across the U.S. 11 The quality of STEM education through K-16 is directly related to economic development of the bio-industry, not only for providing a future workforce and as a key factor in retaining/recruiting bio-businesses, but also for influencing career choices and attitudes towards entrepreneurship. Bio-industry jobs will be increasingly important to the future of Michigan. To insure a sustainable supply of skilled talent will require a coordinated statewide strategic plan that integrates and is supported by the bio-industry. Job growth in biosciences will occur through i) commercialization of new bio-technology ventures, ii) accelerating growth of existing Michigan bio-companies, iii) strategically recruiting innovative companies from outside the state, and iv) growing the academic and private research enterprise. The best key to success in growing the bio-industry will ultimately be dependent on retaining an educated biosciences workforce.
Biotechnology Industry Organization (2010). BIO/Battelle State Bioscience Initiatives 2010. A report prepared by Battelle in cooperation with BIO. 10 DeVol, R.C., Klowden, K. and Yeo, B. (2011). State Technology and Science Index 2010 Enduring Lessons for the Intangible Economy. Milken Institute. 11 Biotechnology Industry Organization (2009). Taking the Pulse of Bioscience Education in America: A State-byState Analysis. A Report prepared by Battelle in cooperation with BIO and the Biotechnology Institute.
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Assess bio-industry talent and training needs

Conduct an assessment of Michigan's biosciences workforce to benchmark current capacities, prospective employment trends, opportunities for growth and unmet bio-industry needs Analyze the capacity of higher education (community colleges and universities) to respond to industry workforce needs Establish a Bio-Industry Workforce Council to bring senior leaders of industry and education together to address workforce training and education issues Conduct an annual human capital needs assessment of Michigan's biosciences employers

Develop a strategic biosciences workforce development plan

Establish a comprehensive, statewide workforce development program with strong support from the bio-industry to insure the adequate supply and skill readiness of talent needed to fuel the states bio-industry growth Regularly gather stakeholders from the bio-industry, academia and government to strategize about talent supply and supporting resources Deliver an annual state biosciences labor market report with data about talent supply, emerging biosciences careers and unmet needs

Augment workforce development initiatives

Develop incentive programs or funding mechanism to recruit/retain top-level management talent, particularly targeting emerging bioscience companies Re-establish a state-supported, subsidized internship and co-operative program to place students and graduates in bioscience companies Re-establish and fund a Retention of Displaced Bioscience Assets Fund to support the redeployment of skilled bioscience workers within Michigan

 Increase programs to improve skills of incumbent bioscience workers Offer a college savings program for students selecting bioscience fields Provide financial incentives for students trained in biosciences to stay and/or companies to keep students in Michigan Implement targeted programs to increase supply of workers for specific highdemand, hard-to-fill positions

Enhance bioscience education and training

Develop a statewide, coordinated design and delivery of training programs for bioscience R&D and manufacturing, included industry-approved certifications Produce and retain more associate-degree and undergraduate bioscience students with interdisciplinary and experiential training Increase emphasis on independent and applied research in higher education programs Further develop and expand the K-12 STEM pipeline through improving preparation and motivation of students Provide adequate state-supported resources to teach bioscience technologies to K-12 students (e.g., teacher externship program, dedicated funding for specialized capital equipment) Fund a fully-equipped and -staffed "biolab-on-wheels" mobile laboratory through public and private support to train students and teachers in the latest bioscience technologies, particularly in more rural school districts Promote bioscience careers to middle and high school students, parents and guidance counselors

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3520 Green Court, Suite 450 P.O. Box 130199 Ann Arbor, MI 48113 (734) 527-9150 www.michbio.org