20141201-NEWS--5-NAT-CCI-CL_--
11/26/2014
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DECEMBER 1 - 7, 2014
CRAIN’S CLEVELAND BUSINESS
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ChanTest’s technology channels interest from big buyer By CHUCK SODER csoder@crain.com
For years, other companies have been asking Dr. Arthur “Buzz” Brown if he’d be willing to sell ChanTest. He gave in on Oct. 29. On that day, a much larger drug development services company, Charles River Laboratories of Wilmington, Mass., bought ChanTest for an amount that could reach $54 million. The deal marked the end of what Brown described as “a pretty keen competition” to buy the Garfield Heights company, which has made money every single year and continues to grow. That growth should accelerate, based on predictions made by Charles River, a publicly traded firm with about 8,000 employees.
Arthur “Buzz” Brown
ChanTest, which has roughly 60 employees, helps drug developers figure out how their compounds affect a cell’s ion channels. Those channels act like doors: They decide which electrically charged particles enter a cell and which ones
leave. Charles River expects demand for those services to increase. That’s partly because regulators from several countries are coming up with new guidelines that could push drug developers to run more ion channel tests. It just so happens that ChanTest can conduct 120 different ion channel tests. It’s probably “the most comprehensive” lineup of ion channel tests in the world, according to a press release from Charles River. Market forces also could help ChanTest grow: Pharmaceutical companies are starting to spend more money on early-stage drug development — the kind that involves testing compounds on cells in a laboratory, according to Brown. And they’re often hiring outside companies to do the work.
MORE INSIDE Arthur “Buzz” Brown gives business tips. Page 20
During the recession, they cut back on laboratory research. Instead, they focused on later-stage drugs being tested in humans. But they couldn’t do that forever, Brown said. “They have to find new drugs,” he said.
Staying put Charles River has spent a lot of money to capitalize on growing demand for early-stage drug development. In March, the research services organization struck a deal to buy two European drug research companies, Argenta and BioFocus, for
an amount that could reach 134 million euro (about $167 million). Now all three companies are part of Charles River’s Early Discovery division. For years, Brown rejected ChanTest’s many suitors because he “wanted see how far we could go without selling.” But a few factors pushed him to do the deal. For one, ChanTest raised an undisclosed amount of money from Ampersand Ventures in 2007. The Boston-area venture capital firm was looking to sell its stake. Brown could have bought it himself, but he decided ChanTest might be more successful as part of a bigger company. Charles River has a few assets that could be valuable to ChanTest, including overseas offices and See CHANTEST, page 20
State regulations won’t break their spirit Craft distilling businesses are growing rapidly, but feel their production is somewhat stymied by laws that aren’t very ‘sensible’ By KATHY AMES CARR clbfreelancer@crain.com
Tom Herbruck produces four samples of rye whiskey and sets them atop wooden steps that flank a copper pot whiskey still. He takes a sip of each, contemplating the taste, which is at various stages of the grain-to-bottle production process. He motions to the two hulking pot stills, reclaimed from a descendent of the Jim Beam family, within his 1,500 square-foot property barn in Chagrin Falls. “We make authentic, handcrafted spirits using traditional methods,” Herbruck said. The equipment won’t be there for long. He and his wife, Lianne, owners of Tom’s Foolery, are relocating their operation in the spring about five miles east, to an 8,000-squarefoot production facility on a 110acre farm, where they will harvest more corn and rye for their distilled spirits. Tom’s Foolery is among a spate of fledgling craft distillers throughout the Buckeye State whose business is growing as demand for artisan spirits with Ohio origins increases. The venture, famous for its applejack, just released its first batch of Ohio Straight Bourbon Whiskey. Its inaugural rye whiskey release follows in spring. Despite the planned physical expansion and new product foray, Herbruck and his brethren still feel constrained by regulation they argue stymies business growth. “The laws make it tough to have a sensible business model,” said Herbruck, who is a member of the Ohio Distiller’s Guild, which formed in 2012 to serve as an advocate for legislative issues and as a resource forum. “Most laws governing alcohol rarely have changed since the repeal of prohibition, especially in Ohio,” said Ryan Lang, guild president and co-founder of Columbus-based Middle West Spirits. There has been incremental
THEY’RE WORKING AS FAST AS THEY CAN Craft distilling represents a mere 1% of the $40 billion spent annually on spirits in the United States, according to Bill Owens, founder of the American Distilling Institute. There are 850 distilled spirits plants in the country, nearly triple the 300 or so operating in 2011. Another 150 are under construction. “What’s preventing us from growing even faster is that there are only a half-dozen companies manufacturing distilling equipment, so it can take months to get a still,” Owens said. “Brewers and wineries have dozens of companies to choose from. There’s a barrel shortage, too.” There’s very little in terms of education for distillers, he added, so most distillers are self-taught. “It takes a person with a certain DNA who wakes up and has that burning sensation in their belly and a thirst of knowledge to do this,” Owens said. “Many of them are balancing this with other full-time jobs.” — Kathy Ames Carr
progress over the last couple years. Local distillers have become more educated and surgical in their efforts to impel the state to further ease laws and eliminate redundancies so they have parity with breweries and wineries. “The guild over the last two years has been working with the Division of Liquor Control to recognize some of deficiencies in the laws because we’re getting left behind,”
Lang said.
It’s the law Ohio is one of 17 states where the government controls liquor sales, which reached a record $898 million in sales in 2013. Liquor profits are directed toward JobsOhio, the state’s private, nonprofit economic development group. JobsOhio received about $157 million in net
KATHY AMES CARR PHOTOS
Tom Herbruck and his wife, Lianne, will relocate their Tom’s Foolery craft distilling operation to an 8,000-square-foot production facility on a 110-acre farm this spring. The business makes “authentic, handcrafted spirits using traditional methods,” Herbruck said. liquor profits in 2013. Prior to 2012, only two A-3a liquor permits — which allowed consumers to purchase a distiller’s products on premise — were issued in the state. Only one permit could be allocated to counties with populations of greater than 800,000, which were Cuyahoga, Franklin and Hamilton. The Division of Liquor Control lifted those restrictions. Now, 27 microdistillers hold
permits. “I think if you look at what’s been done over the last three years, we’ve worked closely with them from an operational standpoint,” said Bruce Stevenson, superintendent of the liquor control division. The payment structure, for one, was amended to allow distillers to pay the state once a month based upon what they sold in their own See SPIRIT, page 20