KALAMAZOO -- This West Michigan city saw the writing on the wall even before Pfizer cut 1,200 jobs here in 2003.
After Sweden's Pharmacia Corp. merged with Kalamazoo's own Upjohn Corp. in 1995, the new company moved its headquarters out of state, cutting hundreds of jobs and setting the stage for Pfizer Inc. to gobble up Pharmacia in 2003.
The loss of 109-year-old Upjohn stunned a community steeped in more than a century of pharmaceutical research, forcing community leaders to plan for the previously unimaginable: a Kalamazoo without Big Pharma.
Today, 100 miles across the state, Ann Arbor can relate to the pain felt by its sister college town. By the end of next year, Pfizer will close its massive Ann Arbor research and development campus and take 2,100 high-paying jobs out of town.
But Ann Arbor also is looking to learn from Kalamazoo's experience and replicate many of the efforts that helped keep scores of Pfizer scientists in Western Michigan and make the region an integral part of Michigan's life sciences and biotechnology industries.
Southwest Michigan reacted swiftly to Pfizer's announcement of the massive job cuts in 2003, just after it completed its purchase of Pharmacia. The region's economic development organization launched a marketing campaign to encourage laid-off workers to stay, leveraging a newly constructed business incubator to encourage scientists to start their own companies. Businesses, elected officials and community leaders united and turned to the state, other businesses and even Pfizer for help. The region eventually raised $50 million for the life sciences.
"If we wanted to retain relevancy in the life sciences industry, which we've had for 100 years, then we needed to do something pretty aggressively," said Ron Kitchens, CEO of Southwest Michigan First, the region's economic development organization.
Ann Arbor leaders are following a similar playbook to keep the scientists now working at Pfizer, which wants to relocate up to 70 percent of the jobs cut in Ann Arbor. The region's economic development agency is posting jobs, talking to would-be entrepreneurs and developing a plan for Pfizer's 177-acre Ann Arbor campus. The multifaceted effort involves all segments of the community, including Pfizer, and has engaged the University of Michigan, a research powerhouse whose involvement observers say is Ann Arbor's ace card and a key to its success.
"They are doing the right things and they will succeed," said Peter Pellerito, a senior policy analyst for the Biotechnology Industry Organization in Washington, D.C. But, the Detroit native cautions, "it's not going to be an easy transition and it's not going to be happening in the short term."
Startups are successful
Success didn't come overnight for the startups in Kalamazoo, either. It's taken a few years, but the first of the companies spawned in the business incubator, called the Southwest Michigan Innovation Center, are starting to move out.
Sixteen life sciences startups, 11 of which are now housed in the incubator, have been formed since 2003. None has failed, according to Kitchens. The new companies employ a couple hundred people, mostly former Pfizer scientists.
PharmOptima is one of the success stories.
In the fall of 2003, with their severance packages from Pfizer in hand, nine scientists formed the company, which helps drug makers analyze compounds. The company also is developing its own antibiotic.
Like many of his colleagues, 58-year old Jim Vrbanac and his family didn't want to leave Kalamazoo, where his wife has an established law practice and his grown daughter lives. "This is a very nice place to live," he said.
PharmOptima found its leader in Chris Schauer, the retired CEO of a Portage plastics firm. And they found a home in the Southwest Michigan Innovation Center, which opened in July 2003. "It was an absolute blessing," said Schauer of the sleek, red-brick-and-glass building in Western Michigan University's Business Technology and Research Park.
Since it was founded, PharmOptima has added 16 employees, for a total of 26, and has acquired more equipment than can comfortably fit in its 3,000-square-foot home in the incubator. The company is moving to a new home in Portage that will triple its physical space and allow for more growth.
The private company won't share financials, but "we've grown in an exponential manner," scientist Mike Wynalda said.
Center is rallying point
For most of the startups, their birthing place was the Southwest Michigan Innovation Center, the core of the campaign to encourage local workers to stay.
"It became a symbol. It became a rallying point. It became a central location" and a clearinghouse for ideas and inquiries in the wake of the Pfizer cuts, said Chief Operating Officer Sandra Cochrane, who was part of the incubator in its infancy in 2000.
But Kalamazoo's response to the Pfizer cuts went beyond the incubator:
The private sector, not government handouts, will continue to be the long-term solution to growing the region's life sciences industry, Kitchen asserts. "This is about the business community coming together and creating a solution that has a capitalist base to it," he said.
He notes that the region has created about 2,000 life sciences jobs since the Pfizer cuts in 2003, including from expansions at Mattawan-based MPI Research, a nonclinical research company, and Stryker Corp., a medical device and equipment manufacturer based in Kalamazoo.
The Kalamazoo region has fared better than most parts of the state, and the state as a whole, with an average preliminary annual unemployment rate of 5.5 percent in 2006 that stayed steady from the year before. The state's average was 6.8 percent, while Ann Arbor's was the best of all regions, at 4.4 percent.
'We were golden'
For years, Kalamazoo's pharmaceutical backbone had largely shielded it from the economic woes afflicting other parts of Michigan. "We were golden and we were special," Kalamazoo Mayor Hannah McKinney said.
Ann Arbor, too, has been an economic oasis in Michigan, protected by U-M's work force of 36,000, as well as Pfizer and other high-tech employers. Although Ann Arbor's pharmaceutical history isn't as long as Kalamazoo's, the industry has been a major employer and corporate citizen since Parke-Davis moved its headquarters to the city in 1959.
As generic drug competition and other factors shook up the pharmaceutical industry, Ann Arbor leaders knew some cuts at Pfizer were coming. But they never expected the jolt they got in January, when the drug maker said it was pulling out of the city all together.
"An announced closure was certainly beyond anyone's expectations here," said Mike Finney, president and CEO of Ann Arbor Spark, a regional economic development organization.
In Kalamazoo County, meanwhile, officials expecting the worst were spared the brunt of Pfizer's cuts this time. The drug maker will eliminate 250 more Kalamazoo jobs in human health research and development, but will keep the Portage manufacturing plant, where it employs 3,400.
Ann Arbor regrouping
Ann Arbor, on the other hand, was hit far worse than expected. And knew it had to move quickly.
Spark mobilized more than 100 volunteers in teams that are exploring ways to keep talented ex-Pfizer workers, reuse the Pfizer site and address the impact of the loss on community agencies and organizations. Teams also are developing a plan to attract new business to the region and are working with state leaders to get legislative support and funding.
In addition, Spark has become the clearinghouse for Pfizer news and startup information, and it has been connecting job-seekers with employers.
A successful outcome in Ann Arbor will be one that maximizes the number of people who stay and one that reuses the Pfizer space to promote the growth of life sciences businesses, said Pellerito of the Biotechnology Industry Organization.
A former U-M government relations officer, Pellerito sees an advantage for Ann Arbor in the research strength of U-M. That strength is being leveraged, with the involvement of U-M President Mary Sue Coleman in creating a post-Pfizer plan.
In Ann Arbor, cooperation between policymakers, business leaders and the university hasn't always been the case. But Finney said that it's happening now, in an unprecedented way. "Everybody is on the same page," he said.
You can reach Sofia Kosmetatos at (313) 222-2401 or skosmetatos@detnews.com">skosmetatos@detnews.com.
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