Our Post-Pfizer Economy

Ask any former Pfizer employee about his reaction to hearing the news in 2007 that the pharmaceuticals giant would be closing its Ann Arbor operations, and you'll hear roughly the same thing:

"Having been an employee of the company for 23 years, the site closure came as a big shock," says Bob Sliskovic, president of research and business development for AAPharmasyn. "Immediate thoughts turned to my family and how this could disrupt their lives."

Integrated Nonclinical Development Solutions (INDS) President James Herman says, "The announcement came as quite a shock. We all expected changes, including downsizing, but I don't think any of us expected a complete departure of research and development from Michigan because we felt we were one of the most efficient and productive sites in the organization."

"I wasn't happy with it," admits Dick Leopold, Molecular Imaging Research's (MIR) vice president of research and development. "I was proud of the record of my department, and I thought it was a poor decision."

What's that expression about doors closing and windows opening? One will note that though those reactions came from former Pfizer employees, each one now has a pretty nice looking title behind his name. These three are among dozens of ex-Pfizer employees who could have followed Pfizer on to a new facility out-of-state like many of their co-workers did, but declined. Nearly all of those who did depart with the company would lose those jobs just a few years later. Those who stayed built a new pharma community right here.

They became inverse pioneers of sort, boldly staying right where they were, forging ahead with work often identical to that they were doing for Pfizer, but with one main difference: now they were working for themselves. And Ann Arbor is better for it.

Five years after Pfizer's dramatic announcement, the local pharma economy is still alive and kicking in Ann Arbor. Yes, the employer of more than 2,000 is missed in many ways, but in others, it's almost hard to tell it's gone.

"I am constantly amazed that this contact is maintained and that offers of help are still forthcoming," says Sliskovic of Ann Arbor's AAPharmasyn. "We have worked with other post-Pfizer companies in the area, either in formal business relationships or just offering a friendly ear and some free advice."

This sentiment is so common, in fact, that many of the post-Pfizer startups seem to feel a little bit like their old departments, only replacing their inter-departmental relationships with inter-business ones.

"There is no overlap between the companies that sprang up after Pfizer left," says Velesco Pharma CEO and CSO Dave Barnes. "We stay in touch. If we have a client that calls and needs a service that we don't provide, we send them to another [post-Pfizer] business."

And there are plenty of business to supply those referrals to. According to estimates from SPARK, sixteen of these Pfizer spin-outs exist, employing about 100 in the Ann Arbor area -- and that's not even counting the numerous pre-existing pharma companies that beefed up their staff with former Pfizer employees.

It's not just the fact that these folks stuck around and maintained their own jobs that's so impressive: it's the fact that a lot of them are doing well. Early drug development company Velesco Pharmaceutical Services started out with three employees in 2007 and is now operating with a staff of 15.

"I like the job," says Barnes. "It gives me the opportunity to do something I enjoy. Secondly, there is a market for what we do. It's just not the big, frothy market it was years ago, but it's there, and I like the challenge."

A challenge, it is. For a group of scientists who never had to bother with the business end of their field, learning to be entrepreneurs is giving them new ways to expand their skills.

"I'm better off for it," MIR's Leopold says. "Financially, I'm probably neutral, but as far as enjoying what I do, it's more nimble and I enjoy the broader influence I can have with 100 clients or so, as opposed to just working for one company."

As it turns out, if a giant pharmaceutical company had to up and leave some of its most talented scientists behind, Ann Arbor was the place for it to happen.

"We were very fortunate as we had a lot of resources available to assist us with the transition from employees of a large corporation to small business owners," says Herman of INDS. "None of us had started or run our own business before, but thanks to the assistance of programs from Pfizer, SPARK, MEDC and others, we were able to get the guidance necessary to establish INDS without much difficulty."

The growing seemed to happen with just about the same ease. In 2010, INDS was recognized as one of the "Michigan 50 Companies to Watch" by Michigan Celebrates Small Business, and hired two full time employees to help with the increased demand for services.

Available talent was also a boon for the developing, post-Pfizer startups. So many talented individuals being laid off at once may have seemed like a tragedy, but it in fact created an ideal candidate pool for the new companies.

"Because of Pfizer's closing we were able to cherry-pick from fantastic talent," says Bruce Auerbach, president of Alphacore Pharma. "Only having five people on staff would be unheard of in pharma. But when you're able to pick the best of the best, you're already a well-oiled machine."

Humans aren't the only former Pfizer resource being repurposed and productive. The 174-acre property on Plymouth Road that formerly housed the pharma company's complex is now the North Campus Research Complex for the University of Michigan. The university purchased the property for $108 million in 2009 and set to work developing the property into a 30-building, two-million-square foot research compound.

U-M, another large recipient of ex-Pfizer employees upon the company's departure, now employs 1,000 workers at the still-developing site and expects to see that total hit 1,700 this year. The complex also includes a 16,000-square-foot business incubator called Venture Accelerator. And why stop there? Future plans for the site include the creation of the Institute for Healthcare Policy and Innovation, which will research ways to improve the nation's health care system.

Between 1,700 new university research jobs and 16 Pfizer spin-offs in the greater Ann Arbor area, suddenly the loss of those 2,000 Pfizer jobs looks a bit less depressing. In fact, after being so dependent on one enormous employer with the potential to impact the local economy as severely as Pfizer did in 2007, one might be tempted to wonder if things might not be better off than before.

"Let's face it, you work in the pharma company today, nothing is safe," says Barnes. "Since Velesco started three years ago, three of our competitors have folded."

He explains that part of the challenge of the pharmaceutical industry today is that it's not considered a hot sector for investors. Regardless of the importance of their work, the return on investment for a drug development company takes time.  "If you run a venture capital company and you're trying to maximize your return," Barnes says, "people are going out and looking for the next Facebook."

Fortunately, the cluster of new pharma companies throughout the Ann Arbor area seem to have the wind in their sails. If one of them doesn't end up making it or has to scale back, however, the impact will be far gentler than Pfizer's retreat.

"I don't think that [Pfizer leaving] was good news at that time," says Leopold, "but I think it has the potential to be [positive] in the long run. I think it hurt the Ann Arbor community when it happened, but it made the community much more open to entrepreneurial opportunities."

"There is still extensive and experienced pharmaceutical development talent in Michigan," says Herman."I believe that we can revolutionize how companies discover, develop, and manufacture the therapies of the future. Together, this talent can continue to drive the industry, create high paying jobs, and add to the rich pharmaceutical history of Michigan."

Natalie Burg is a freelance writer, the news editor for Capital Gains, and a regular contributor to Metromode and Concentrate.


All photos by Doug Coombe



Dave Barnes at the Velesco Pharmaceutical labs
The Velesco Pharmaceutical labs
The Velesco Pharmaceutical labs
Dave Barnes at the Velesco Pharmaceutical labs
Dick Leopold (photo courtesy Dick Leopold)
Bruce Auerbach at the AlphaCore Pharma labs
AlphaCore Pharma labs
AlphaCore Pharma labs
Bruce Auerbach, Brian Krause and Reyn Homan at the AlphaCore Pharma labs
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