BioMatters Special Edition: Michigan Bio-Industry Roadmap for Success

2016 Special Edition of BioMat ters

Michigan Bio-Industry ROADMAP FOR SUCCESS AGRIBIOSCIENCES MEDICAL DEVICE

PHARMA

LOGISTICS

R&D/TESTING

About MichBio:

MichBio is the statewide voice of Michigan’s biosciences industry, representing nearly 1800 establishments across the agri-biosciences, medical devices, biopharmaceutical, R&D and testing, and bioscience-related distribution sectors, that collectively employ nearly 42,000 Michiganders. Our mission is all about “Driving Bio-Industry Growth” in the state, and to be the foremost source of information, education, advocacy and resources for our members and others.

LEARN MORE AT: MICHBIO.ORG

About Business Leaders for Michigan:

Business Leaders for Michigan, the state’s business roundtable, is dedicated to making Michigan a “Top Ten” state for jobs, personal income and a healthy economy. The organization is composed of the chairpersons, chief executive officers, or most senior executives of Michigan’s largest companies and universities. Our members drive 32% of the state’s economy, provide nearly 375,000 direct jobs in Michigan, generate over $1 Trillion in annual revenue and serve nearly one-half of all Michigan public university students.

FIND OUT MORE AT: BUSINESSLEADERSFORMICHIGAN.COM

About University Research Corridor:

Michigan’s University Research Corridor (URC) is one of the nation’s top research clusters and an engine for innovation in Michigan and the Great Lakes region, increasing economic prosperity and connecting Michigan to the world.

FIND OUT MORE AT: URCMICH.ORG

Data Consulting Group (DCG):

DCG has over 20 years of experience providing high quality, resultsoriented professional services including management consulting, staff augmentation, and outsourcing. DCG’s seasoned practitioners have a depth of experience and a track record of successfully delivering solutions to the life sciences industry.

FIND OUT MORE AT: DCGROUPINC.COM

A MESSAGE FROM THE LEADERS It is with a great deal of enthusiasm and resolve that we present this Michigan Bio-Industry Strategic Roadmap for Success to guide the growth of Michigan’s biosciences economy into a global leader.

The plan grew out of the realization that Michigan, with its significant assets and a strong legacy in biosciences research, discovery and development, has an opportunity to become a global leader. Leading bioscience clusters all have followed defined strategies to success supported with coordinated action by committed stakeholders – private industry, government, education and research institutions, economic development groups and others. Michigan too can seize the opportunities presented by the biosciences and build an industry that will bring greater economic benefit. This Roadmap endeavors to lay out the key priorities and actions necessary to achieve that.

“Michigan’s success in building a more impactful bio-industry lies with our collective purpose, effort and execution. The future is ours to create. Join us!”

We urge you to read through this plan carefully. Discover areas in which you can contribute to moving the agenda forward for the benefit of your organization and the entire bio-industry in Michigan. Become engaged and plan to participate in activities that will focus on moving this industry forward. A full report will be released soon with all final thoughts, data and recommendations, including those gathered during the Michigan Bio-Industry Growth Summit.

Lastly, thanks to all of the stakeholders in the statewide biosciences community who generously gave their time, perspectives and energy to assist in the Roadmap initiative. A special appreciation goes out to the members of the Executive Steering Committee who labored long and hard in guiding the process to its successful conclusion.

Michigan’s success in building a more impactful bio-industry lies with our collective purpose, effort and execution. The future is ours to create. Join us!

Sincerely,

STEPHEN RAPUNDALO, PHD President and CEO, MichBio

DOUG ROTHWELL President and CEO, Business Leaders for Michigan

JEFFERY MASON Executive Director, University Research Corridor

Michigan Bio-Industry ROADMAP FOR SUCCESS PREMIUM MEMBERS

2016 Special Edition of BioMat ters

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TABLE OF CONTENTS

03 | Executive summary

Key Findings

to Strategy 04 | Path Development

06 |

Michigan’s Place in Bio-Industry Landscape

20 | Sector Areas

Agri-Biosciences...............21-22 Medical Devices................23-24 BioPharma..........................25-26 R&D/Testing........................27-28 BioLogistics........................29-30

Industry Growth ................10-11 Business Climate...............12-13 Innovation............................14-15 Education & Talent............16-17 Access to Capital..............18-19

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31 | Market Area

Clinical Trials............................32 Biobanking................................33 Contract Outsourcing.............34 Professional Services.............35 Manufacturing Suppliers........36

Michigan Biosciences by the Numbers: Competitive Benchmarking

09 | Functional Areas

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37 | Michigan’s Time

A Call to Action

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DEFINITION KEY Targeted Timeframe

Rationale

Years 1-2

Completion target to establish momentum with quick wins that will help set the stage for downstream actions and activities.

Years 3-5

Activities / Actions that require coordination, investigation and/ or definition of new programs and support services that could require additional state funding.

Years 5-10

Long-Lead activities / actions that will definitely require policy changes or new funding programs / sources to complete.

Stakeholder Abbreviation BL BLC BLM CP1 CRO/CMC DHHS FCP GLBRN HS LARA EDs MEDC MichBio MiDEVICE MIHIED MMA MMDC MMTC MSTA MVCA POLICY SZs TTOs URC

Stakeholder Definition Michigan's Bio-Industry Leaders Michigan Biosciences Legislative Caucus Business Leaders for Michigan Clinical Phase 1 Research Facilities Contract Research and Manufacturing Organizations Michigan Department of Health Human Services U-M IRLEE-First Customer Program Great Lakes Biorepository Research Network Michigan-based Hospitals and Health systems Michigan Department of Licensing and Regulatory Affairs Michigan Local Economic Development Organizations Michigan Economic Development Corporation Michigan Biosciences Industry Association MiDevice Michigan's Universities and Community Colleges Michigan Manufacturers Association Michigan Medical Device Consortium Michigan Manufacturing Technology Center Michigan Science Teachers Association Michigan Venture Capital Association Michigan Legislature Michigan's Smart Zones Technology Transfer Offices University Research Corridor

PATRON

EXECUTIVE SUMMARY

KEY FINDINGS The Michigan Bio-Industry Strategic Roadmap represents an opportunity for the State of Michigan, its bio-industry, and other stakeholders, to engage in a long-term effort to build the state as a global leader in the biosciences. Simply put, it’s a call to action.

Michigan must take seriously the opportunity to build its biosciences base, leveraging its already sizeable R&D, manufacturing and supply assets. The State, including policymakers, should join with the private sector, and take bold steps to maintain and enhance Michigan’s capacity for biosciences innovation, commercialization, product development and manufacturing to create high-quality jobs and sustainable economic growth.

The year-long strategic planning effort for growing Michigan’s bio-industry identified these key findings: Michigan’s biosciences cluster has strong assets in academic R&D and technology innovation, rapidly growing sectors like medical devices, as well as niche markets such as contract outsourcing, clinical trials and biobanking, all of which are a source of high-wage jobs; Connections between bio-industry stakeholders must be strengthened to fully leverage the state’s research, manufacturing and business strengths; Economic development actions are needed to aggressively promote Michigan’s existing bioscience assets, help grow existing businesses and recruit new enterprises; A comprehensive, multi-faceted approach is needed to align supply with demand, expand workforce education/development programs, and recruit experienced C-suite talent in the biosciences;

Michigan’s risk-capital market must be enlarged through innovative policies and better linkages with investment sources to benefit all phases of the business lifecycle; Michigan should better leverage its academic/clinical research enterprise by improving the industryresearch interface to foster more innovation and commercialization; Industry-specific business policies and resources are necessary for Michigan to incentivize bioscience company formation, development and sustainability; A long-term commitment and multi-stakeholder partnership is needed to successfully move a biosciences growth agenda.

The reality is that Michigan’s biosciences cluster, despite its strengths, is not currently competitive enough in the global bio-industry, either with peer states or with nations that in many ways are outperforming this state. For Michigan to succeed in achieving its bioscience vision, the state must take a comprehensive and integrated approach that addresses each of the key opportunities and actions detailed in this strategic plan.

The Roadmap is just the beginning. Implementation and execution will require regular tracking of delivered outcomes and assessments of impact. In other words, efforts towards realizing the opportunities outlined in the plan will be held accountable and made transparent.

THE TIME TO ACT IS NOW. The promise in making Michigan a bio-industry leader has never been greater. The opportunity to succeed cannot be ignored.

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

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PATH TO STRATEGY DEVELOPMENT This plan presents the results of a yearlong effort to set a strategic direction for economic growth of the biosciences industry in Michigan.

The Michigan Biosciences Industry Association (MichBio) developed a framework for the Michigan Bio-Industry Strategic Roadmap initiative in fall 2014.

Both the Business Leaders for Michigan (BLM) and the University Research Corridor (URC) joined in full partnership and provided key funding support recognizing that a regional strategy requires broad and collective leadership.

An industry-led, executive-level Steering Committee was established with broad representation from across the state, bio-industry sectors, and types of organizations. Beginning in January 2015, the Steering Committee conducted numerous meetings and dedicated considerable time reviewing documents and data offline. The group oversaw all aspects of process design and implementation, data acquisition, analysis and validation, as well as development of the findings, over the 10 month period.

The Roadmap initiative was designed to encourage collective buy-in and ownership, soliciting input from a variety of bio-industry stakeholders. Both high-level and grassroots activities were used in order to capture ideas regarding key opportunities and challenges, including:

4

•

an online survey of state innovation and industry growth mindset;

•

individual interviews with key bio-industry stakeholders within and outside Michigan;

•

focus group sessions for each of the 15 subject areas along with follow up as needed;

•

ongoing feedback from the Steering Committee with review, validation, consolidation and prioritization of collected information.

MICHBIO | michbio.org

The intent of this qualitative approach was to gain valuable insights, commentary and guidance from approximately two hundred bio-industry leaders and practitioners, as well as vendors-suppliersservice providers supporting the cluster. One-on-one conversations and face-to-face consultations generated rich and deep discourse. Focus group teleconferences yielded constructive discussions. To encourage candid exchange, identities were not attributed to any collected information.

All interviews and focus groups were recorded and/or transcribed. A hierarchy of themes was developed and consolidated to derive final priorities and actions. While a whole range of viewpoints was collected, it was clear from all sessions that a broad consensus exists for nearand long-term sustainable action.

In addition, data from a considerable number of regional, national and international sources were reviewed. Documents included analysis of publicly available information including strategic plans, economic impact and growth reports, business incentive program websites and monographs, industry sector and market assessments, policy white papers, news articles, and materials collected at trade shows.

Cluster comparisons were selected based on their similarity with Michigan’s demographics and industry representation, and/or their overall ranking. While the final list of peer states was confirmed by the Steering Committee, the priorities and actions reflect learnings from a much broader set of regions, particularly if there were noteworthy programs.

The Michigan Bio-Industry Strategic Roadmap followed a planning and stakeholder engagement process that was meant to be inclusive, comprehensive in scope, outcome driven, forthright in tone, and return on investment oriented. The document is the first step in what will hopefully become an annual review of progress against goals and bio-industry growth metrics. Also, it is intended to be a key tool for policy changes that can propel Michigan into a top ten biosciences state.

PATH TO STRATEGY DEVELOPMENT

RESEARCH AND DATA COLLECTION BY NUMBERS

77 6 23 143

INTERVIEW PARTICIPANTS

PEER STATES (35 OTHER REGIONS EXAMINED)

FOCUS GROUP SESSIONS

400

SURVEY RESPONSES

DATA SOURCES & DOCUMENTS REVIEWS

ONGOING RESEARCH & OVERSIGHT

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STEERING COMMITTEE MEETINGS

ROBERT DEWIT, PHD Southwest Michigan Innovation Center ANDREA DICKSON ENT Biotech MICHAEL HAGEN Ash Stevens

DEAN KNUTH Jasper Clinic/MPI Research

KEN MASSEY, PHD Wayne State University

MICHAEL KRUCZEK DCG

FREDRICK MOLNAR Michigan Economic Development Corporation

JEFFREY MASON University Research Corridor

STEPHEN RAPUNDALO, PHD MichBio

INTERIM WORK PRODUCTS & DELIVERABLES

WORK PRODUCT

DELIVERABLES

Environmental Scan Criteria Interview List Interview Guide Stakeholder Survey Actions Spreadsheets

Project Plan SWOT Analysis Interview Summary Recommendations Summary Roadmap Plan Roadmap Report

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

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Michigan’s Place in the Bio-Industry Landscape The numbers speak for themselves.

They should serve as a call to action.

As a biosciences hub, Michigan’s size (by employment or number of companies) places it in the top 15 of states nationally.

The same is true for the individual sectors.

The state appears to have attained a critical mass in Medical Devices, and continues to exhibit a robust Research, Testing & Medical Laboratories sector.

Many bio-industry leaders in the state agree that the cluster is showing positive signs of maturity with an increasing number of one-off successes. But they also believe that the bio-industry isn’t functioning with sufficient intensity and lacks a cohesive strategy for growth. The rankings highlight that talent, finance and investment, commercialization, and business programs are areas that require more broad stakeholder support.

Overall, Michigan’s economic performance has improved consistently since the downturn of the last decade. The state has succeeded in stabilizing its economy, lowering business costs and becoming more competitive. However, many metrics are still mired in the mid-range of states, while others have regressed further to moribund levels.

Michigan still has much to do. Its economic future is threatened by a lack of a common strategy for growing the state’s economy and prioritizing investments such as education and economic development activities.

The state’s bio-industry must take the initiative in driving the cluster’s future growth.

Leading by example – and persuading others to coalesce action around a common coordinated vision – coupled with a longterm commitment and greater resources are needed before Michigan can become a top ten state for the biosciences economy.

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MICHBIO | michbio.org

Michigan Biosciences by the Numbers

COMPETITIVE BENCHMARKING BIOSCIENCE RANKINGS

1

Trend* 





* Relative to prior year for Michigan

Employment

Establishment

Sector

Rank

Amount

Rank

Amount

Total Bio-Industry

13

41,892

13

1,760

Agri-Biosciences

21

963

21

29

Drugs & Pharmaceuticals

11

7,940

13

65

Medical Devices & Equipment

11

11,100

10

240

Research, Testing & Medical Laboratories

14

10,448

18

459

Bioscience-Related Distribution

12

11,441

10

967

Category

Rank

Amount

Academic Bioscience R&D Expenditures

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$1,236,820,000 

NIH Awards

11

$575,888,662 

(2009-2013)

18

2,157 

Bioscience Venture Capital (2009-2013)

17

$505,000,000 

Patents

























MICHIGAN BY THE NUMBERS

Does the state as a whole have the wherewithal to fuel bio-industry growth and its economy?

Trend* 

GENERAL RANKINGS Metric

Rank

Trend*

Metric

18 22 40

State Technology & Science3 State Entrepreneurial Sensitivity4



Innovation Capacity1



Entrepreneurial Activity1



University R&D Expenditures3 Patents/R&D $3

Business Environment

Business Tax Climate

5

Cost of Doing Business4 Economic Development Expenditures6

13 34 28

Business Incubators3

 

Education & Talent



Scientists and Engineering Graduates3 Science and Engineering Workers3

Access to Capital

2nd/3rd Stage Venture Capital3 Bank Commercial & Industrial Lending3

Rank

Trend*

Innovation & Research

State New Economy2

Seed/Early Stage3



* Relative to prior year for Michigan

Overall

Venture Capital Investment3



21 22 33 41

  

Human Capital Investment2 Technology & Science Workforce2

09 47 08 25 11 8 04 20 24

    

   

1 Battelle/BIO State Bioscience Jobs, Investments and Innovation 2014. Battelle Technology Practice, 2014.

2 The 2014 State New Economy Index. Information Technology and Innovation Foundation, 2014.

3 2014 State Tech and Science Index. Milken Institute, 2014.



4 Michigan Entrepreneurship Score Card – 11th Edition. MiQuest, 2015.

5 2016 State Business Tax Climate Index. Tax Foundation, 2015.

6 2015 Economic Competitiveness Benchmarking Report. Business Leaders for Michigan, 2015 7 Best of the Bunch - Life Science Clusters. http://siteselection.com/issues/2015/may/life-science-centers.cfm, JLL 2015

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

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MICHIGAN BY THE NUMBERS

BIOSCIENCES INDUSTRY DISTRIBUTION IN MICHIGAN

How is Michigan performing as a biosciences cluster when compared to other regions?

TOP BIOSCIENCE CLUSTERS*7 1. Greater Boston 2. San Francisco Bay

10

3. San Diego Metro

9

1

2

5

7

13 14

8

11

4

6

4. Raleigh-Durham Metro 5. New Jersey/New York City/Westchester 6. Los Angeles/Orange County Metro 7. Philadelphia Metro 8. Suburban Maryland/Metro DC 9. Minneapolis-St. Paul Metro

3

10. Seattle Metro 11. Denver Metro 12

12. Central & Southern Florida 13. Chicago Metro 14. Indianapolis Metro

8

MICHBIO | michbio.org

FUNCTIONAL AREAS Industry Growth Business Climate Innovation Education & Talent Access to Capital

“Other states are coming to Michigan and picking off our winners. Michigan is the loser.”

INDUSTRY GROWTH BUILDING A BIOSCIENCES CLUSTER Increasingly, it is technology-based economic development, driven by innovation, talent, and investment capital, that is shaping the future of successful U.S. state economies.

1-2 YEARS

Provide adequate staff to the Michigan Economic Development Corporation to enable it to pursue aggressive recruitment activities in the biosciences space.

KEY STAKEHOLDERS:

In many cases this is being achieved by developing industry clusters, as in the case of the biosciences, that help drive regional economic performance biosciences.

MEDC, BLM, BLC, POLICY

Michigan has core strengths in each of the five distinct biosciences sectors – agri-biosciences, medical devices, biopharma, R&D/testing and biologistics – and an immense opportunity to position the state as a global bio-industry leader.

Develop a comprehensive marketing and branding strategy linked with “Pure Michigan” or current state brand campaign to showcase Michigan’s bio-industry.

What, then, does it take to build a successful bioscience cluster? Is there something inherent to the already leading bioscience cluster hubs or can Michigan follow suit? If yes, will success be guaranteed?

OPPORTUNITY Develop and execute an aggressive economic development strategy to grow Michigan’s bio-industry.

ACTION

1-2 YEARS

Expand relationships with large, multinational bioscience companies for purposes of investment and business expansion.

KEY STAKEHOLDERS: MichBio, EDs, MEDC

ACTION

1-2 YEARS

Establish a visible Michigan Biosciences Industry Growth Initiative comprised of various incentives, investments, programs and resources dedicated specifically to building the cluster.

KEY STAKEHOLDERS: MEDC, MichBio, EDs, MiDevice

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ACTION

MICHBIO | michbio.org

ACTION

3-5 YEARS

KEY STAKEHOLDERS: MEDC, MichBio, EDs, BLM

First, such a growth opportunity begins with having a welldefined and executable state-driven economic development strategy. Currently, such an initiative is lacking according to bio-industry stakeholders and long overdue.

Reactions were mixed as to whether Michigan was fertile ground for future biosciences growth. Those who were positive pointed to strengths like the research universities, expert talent with bio-industry experience, access to contract services and a nascent entrepreneurial culture.

Others weren’t so sure, bemoaning the lack of visibility of promotion of Michigan’s bio-industry and its strengths/ assets; insufficient capital; underfunded, underutilized or otherwise misdirected state-supported programs; an uncompetitive business climate; lack of connectivity and cohesiveness within the bio-industry; little alignment between resources to foster synergies on a sustainable basis; and lack of commitment by the state to growing the bioindustry. The list goes on, but an undercurrent of malaise was hard to ignore.

Some stakeholders realize that Michigan should wait no longer for action and risk falling further behind other peer states when it comes to sustaining a statewide bio-industry.

They called for a public-private collaborative effort to move a bio-industry growth agenda forward.

INDUSTRY GROWTH

State-driven economic development

STRATEGY OPPORTUNITY Expand relationships with major bioscience companies for purposes of business development, research collaboration and investment.

ACTION

1-2 YEARS

Enhance existing bio-industry partnering and business development networking events.

KEY STAKEHOLDERS: MichBio

ACTION

3-5 YEARS

Partner with more established U.S. bioscience hubs and leverage their experience/resources to form creative alliances that are mutually beneficial.

KEY STAKEHOLDERS: MichBio Many in the state’s bio-industry believe that Michigan should develop a front-line, branded biosciences economic development initiative similar to that found in Massachusetts and Maryland, carved out within the context of the Michigan 21st Century Fund and/or Pure Michigan® campaign. Many still point to the Michigan Life Sciences Corridor Fund (19992002) that brought considerable visibility to Michigan and its bio-industry. Once diluted by name, outside awareness diminished – proving the old adage, out-of-sight, out-of-mind.

A so-called “Michigan Bio-Industry Growth Initiative” should be comprehensive and address business incentives, access to capital, talent and workforce development, cluster promotion and economic attraction/retention, and commercialization and business sustainability support. A program of such scale would quickly put Michigan back on the map as a serious player in the global bioscience market.

Other states (e.g., Minnesota, Maryland) actively pursuing bio-industry cluster development have taken steps to ensure the presence of personnel within the state’s economic development agency dedicated to the biosciences. The Michigan Economic Development Corporation’s (MEDC) current structure does not include a staff person whose sole focus is the biosciences. It is recommended that such a resource be instituted and work with singular focus on the bio-industry, acting to address specific issues and opportunities.

GROWTH

At the very least, Michigan should develop an aggressive economic development plan that focuses on recruiting bioscience companies directly to Michigan. The State should strategically expand its presence at trade shows in full partnership with bio-industry stakeholders. Additionally, the bio-industry should be an area of focus for statesponsored trade missions as is done in states like, but not limited to, California, Massachusetts, Missouri, Ohio, Washington, and Iowa.

Lastly, bio-industry executives emphasized the need to engage in policy discussions with the Executive Office, state legislators, Michigan Biosciences Legislative Caucus and key agencies like the MEDC. A Bio-Industry Leadership Council should be established and comprised of senior executives serving as advisors on matters related to bioscience cluster growth. Also, the bio-industry should advocate for the reestablishment of a standing Subcommittee on Biosciences in the House and/or Senate to specifically focus on the bioindustry. Without a broad active effort to help influence a supportive legislative agenda, the bio-industry will remain invisible to decision makers.

Bioscience clusters require a base of academic, private industry, and capital to grow. The degree to which regions looking to develop a cluster can be successful likely depends on the combination of its underlying assets, along with a dedicated and proactive recruitment mechanism, and a broad commitment to action. Michigan has the assets, now all it needs is determination, engagement and action.

OPPORTUNITY Expand advocacy efforts to better educate policy makers on the economic impact of Michigan’s bioindustry and long-term benefits of its growth.

ACTION

1-2 YEARS

Inform and engage the Executive Office, State Legislature and relevant agencies in issues critical to bio-industry development.

KEY STAKEHOLDERS: MichBio, BL, BLC

ACTION

1-2 YEARS

Increase the number of activities and interactions between legislators and the bio-industry.

KEY STAKEHOLDERS: MichBio MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

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BUSINESS CLIMATE COMPETING WITH THE WORLD

Bioscience technology companies, like any business, consider a variety of factors when deciding where to launch and grow their operations.

These include business costs, availability and quality of the workforce, logistics and infrastructure, real estate markets, regulatory environment, and quality of life. At the end of day, the bio-industry needs a business climate that recognizes the long development cycle required for bringing discoveries to market.

OPPORTUNITY Create a business- and regulatory-friendly environment for company growth.

ACTION

1-2 YEARS

Ensure that regulatory policies and approval processes are clear and efficient for bioscience companies seeking to start or grow in Michigan.

KEY STAKEHOLDERS: MichBio, LARA

ACTION

3-5 YEARS

Re-establish and make permanent an R&D tax incentive that is refundable and transferable; with a larger cap for research conducted within Michigan.

KEY STAKEHOLDERS: MichBio, MEDC, EDs, BLC, POLICY

ACTION

3-5 YEARS

Ensure competitive tax and relocation incentives to bring companies to Michigan

Michigan’s bio-industry stakeholders had mixed opinions on the importance that a supportive business climate plays in business decision making. A closer examination revealed that many of the differences were rooted in semantics or definition of terms. In the end, the vast majority of stakeholders supported the need for a host of tax incentives and business support solutions. In terms of programs already offered by the State, most respondents seemed uninformed and couldn’t identify any specific resources either their companies may have used or otherwise were accessible.

Primary interest by the state’s bioscience companies focused on the reestablishment of a state R&D tax credit to assist them in their qualified research activities. Michigan did away with its R&D incentive in 2012 when the state’s business tax was reformed. Now it is one of only six states without an R&D tax credit1. Many stakeholders referred to states such as Maryland, Massachusetts, and Virginia, along with international regions like Ontario and Ireland, which have been very aggressive in using R&D tax incentives successfully to spur bio-industry growth.

Proponents argue that an R&D tax credit would increase investment in basic research, job creation and business operations, and make the state more competitive against other regions. Others suggest that it is more prudent to systematically improve the business tax climate for the long term. Either way, it’s clear that Michigan must find ways to incentivize R&D activities, particularly for early-stage, nonrevenue companies, if it wishes to grow the bio-industry.

Stakeholders, whether from large established companies or small startups, uniformly called for tax incentives or state programs to address talent acquisition and workforce development. Everything from subsidies for recruitment and placement of talent (across all levels, occupations, technical and non-technical, research and manufacturing), experiential learning opportunities, enticements for entering STEM education and careers, and incumbent worker retraining and continuing education.

KEY STAKEHOLDERS: MichBio, MEDC, EDs, POLICY

1 2016 State Business Tax Climate Index. https://www.google.com/search?q=2016+state+business +tax+climate+index&ie=utf-8&oe=utf-8. Tax Foundation, 2015.

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MICHBIO | michbio.org

INDUSTRY GROWTH

OPPORTUNITY Effectively deploy a visible and branded biosciences growth initiative with supportive programs and resources.

ACTION

1-2 YEARS

Market State-supported bioscience services and capacity available at academic research institutions, contract research/manufacturing organizations, professional and business services.

KEY STAKEHOLDERS: MIHIED, MichBio, URC, MEDC, EDs

ACTION

3-5 YEARS

Create various bio-industry-specific incentives for existing sector growth and new “target areas of opportunity” as identified by industry.

KEY STAKEHOLDERS: MEDC, MichBio, EDs, BLC, POLICY Yet others, especially small company or startup leaders, wanted more state support to enable commercialization and technology transfer from universities – incentives or credits to assist with regulatory and intellectual property filings and professional services (e.g., market research), and investment in wet lab and medtech facilities/incubators. This was followed closely by abetting access to capital with specific measures to incentivize investment at all stages of the business life cycle, not the least being re-establishment of an Angel Investor Tax Credit. Increasing the state match for SBIR/STTR grants was also cited strongly as a highly valued benefit to early stage companies.

It is strongly recommended that State policymakers develop a portfolio of investment tools that include direct investments in bioscience companies, grants for R&D projects, financing tools for all phases of a business life cycle, and support for “shovel ready” capital projects that help influence the location decisions of bioscience companies. Similarly, state industry leaders and economic development groups should engage with a range of professional and corporate site selectors well versed in the global bio-industry on innovative public policies to spur bioscience company expansion and growth.

While fiscal incentives can’t create the essential elements of a successful bio-industry, they do play an important role in facilitating company formation and expansion in the

ecosystem. However, they are not the complete answer by themselves. And they certainly don’t help if the state fails to actively promote available assistance as part of a larger economic development strategy for growing the bio-industry specifically.

What’s far more important is the overall business climate including fiscal responsibility, good governance, collaboration between stakeholders and quality of life factors. In that regard, local, regional and state governmental units need to improve common perceptions over undue bureaucracy, inaccessibility to information, regionalism, and lack of partnership.

Additionally, they must tackle socio-economic issues like the need for livable communities, recreational opportunities, quality and funding of K-12 education, transportation and mobility options, and favorable labor and employment policies.

Other states, like Massachusetts, Washington, and California all have integrated such factors into their bio-industry growth strategies.

Lastly, leading bioscience clusters like Massachusetts and Maryland have conspicuously implemented and branded significant bio-industry growth initiatives. These have featured multiple components to address many of the aforementioned needs cited by Michigan bioscience stakeholders. Supportive solutions to enhance business climate are critical if the state hopes to be competitive as a bio-industry cluster.

OPPORTUNITY Actively educate the state’s bio-industry, policymakers and other stakeholders about Michigan’s business environment and level of competitiveness.

ACTION

1-2 YEARS

Regularly engage policymakers on issues relevant to Michigan’s bio-industry.

KEY STAKEHOLDERS: MichBio

ACTION

1-2 YEARS

Identify approaches and criteria to track bio-industry growth and inform stakeholders on the impact of state-supported programs.

KEY STAKEHOLDERS: MEDC, MichBio

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

13

INNOVATION AND COMMERCIALIZATION ENABLING DISCOVERY TO MARKET A vibrant and competitive biosciences industry must be supported by a strong and efficient innovation pipeline.

In most cases a biosciences innovation pipeline begins with academic research centers who’ve become adept at protecting intellectual property (IP), spinning out new companies, licensing technologies, and even developing venture funds to finance early stage commercial development. It is no surprise that the university-industry interface has strengthened and helped facilitate growth of the U.S. biosciences industry.

Fostering greater bio-industry and university interactions to accelerate innovation should be a top priority for any region wishing to develop a vibrant biosciences cluster.

Michigan’s bio-industry stakeholders were in complete support of this goal.

OPPORTUNITY Better integrate technology transfer and entrepreneurial activities between academic research centers and the bio-industry.

ACTION

3-5 YEARS

Establish incentive programs at research institutions to reward investigators to commercialize technologies and discoveries and commit part-time engagement in new entrepreneurial ventures.

KEY STAKEHOLDERS: MichBio, TTOs, MIHIED

ACTION

3-5 YEARS

Design an approach to increase the flow of academic product/technology opportunities to the bio-industry and that are vetted by a diverse set of industry experts for commercialization potential and development advice.

KEY STAKEHOLDERS: MichBio, TTOs, MIHIED

14

MICHBIO | michbio.org

The state ranks quite well in terms of its environment to foster innovation. A 2014 report ranked the Michigan 9th among other states in the nation for its high-tech Innovation Capacity1. The just released impact report from the University Research Corridor (URC, i.e., Michigan State University, University of Michigan, and Wayne State University) revealed that the cluster ranked #2 in the Innovation Power Ranking that indexes talent, R&D and technology commercialization among peer university innovation clusters2.

The Michigan experience has been one of consistent advancement in building an innovation ecosystem.

Academic bioscience R&D expenditures, the most comprehensive measure of university research that feeds the innovation pipeline, ranked Michigan 11th nationally with total R&D funding of $1.236 billion and NIH awards of $575.9 million3. Another measure, the number of patents filed between 2009-2013, placed the state 18th.

However, respondents were quick to note that additional progress needs to occur in getting ideas from the academic research labs to the marketplace more efficiently and with appropriate support. Indeed, the state lags considerably in translating discoveries into entrepreneurial ventures as evidenced by a dismal 47th ranking in Entrepreneurial Activity1. Stakeholders provided anecdotal validation that while an entrepreneurial culture has taken hold, it requires further nurturing and maturity.

Some bio-industry leaders were critical of university technology transfer policies and procedures. In their view, Michigan’s research universities still approach technology out-licensing with “parochial academic” attitudes, more interested in revenue generation than in facilitating commercialization and “doing right” by the entrepreneur.

Furthermore, many found tech transfer offices very unresponsive, causing startups to find IP workarounds and thereby avoid the need for a legal arrangement altogether. Critics pointed to other institutions like Georgia Tech, University of Minnesota and University of North Carolina, as demonstrating best practices for easing the burden and time requirements in tech transfer. Some stakeholders suggested that an university-industry group be charged with reviewing the challenges surrounding tech transfer processes and policies, and determine areas for improvement and streamlining.

INDUSTRY GROWTH

OPPORTUNITY Enhance innovation and commercialization activities, as well as services/programs that support such efforts.

ACTION

1-2 YEARS

Compile an online list of subject matter experts in various bio-industry areas for companies and Universities to use/ draw from.

KEY STAKEHOLDERS: MichBio, MIHIED, HS, URC

ACTION

1-2 YEARS

Provide an online portal to support bioscience commercialization with links to key resources.

KEY STAKEHOLDERS:

3-5 YEARS

Develop a market research support program for use by early-stage and small biosciences companies.

KEY STAKEHOLDERS: MichBio, MEDC

ACTION

Most innovation occurs as a result of private industry and investment. Is there a role for state government? How can Michigan help in promoting more innovation and technology transfer to commercialization? It can do so in several ways: Additional support for business startup and commercialization services like accounting and bookkeeping, legal and management advice, market research, IP and regulatory filings, product development; Facilitate commercialization of university research through more business support services and availability of seed capital; Gaps in available financing, improve terms and conditions for investment that align better with private venture capital;

MichBio

ACTION

One perceptive suggestion was to find ways to ensure closer alignment with the needs and demands of the health care system. It was noted that bioscience innovations require thinking in terms of their connection to health care delivery.

Thus, the opportunity to network and connect with clinicians and other health providers was viewed as a valuable unmet opportunity.

5-10 YEARS

Establish a state-supported fund to reimburse or subsidize the costs of patent filings for emerging companies.

KEY STAKEHOLDERS: MichBio, BLC, POLICY Another area needing more attention was how to foster greater bio-industry and university interactions. Many leaders observed that while there appears to be an increase in on-campus educational events related to entrepreneurship and commercialization, the private sector is largely excluded for lack of adequate communication or inclusion. To some this was yet another example of how universities are still “siloed”. Nonetheless, considerable interest exists on the part of the private sector to learn about new technology discoveries, meet with investigators and clinicians, and create a “talent bridge” through access to students for experiential learning opportunities.

Establish incentives to ensure a ready pool of entrepreneurs, experienced management and skilled workers; Improve the business climate with incentives for R&D and investors, reduce regulatory burden, simplify tax codes, permitting and licensing practices.

However, the Kauffman Foundation cautions states on how best to deploy resources and funding in support of entrepreneurship, particularly regarding the use of public venture funds and business incubators4.

In summary, innovation is the most important determinant of long-term economic competitiveness and accounts for the majority of productivity and per-capita income growth in the nation. It’s clear that for Michigan’s bio-industry to grow, greater emphasis must be placed on the university-industry interface to foster biosciences innovation.

1 The 2014 State New Economy Index. Information Technology and Innovation Foundation, 2014.

2 9th Annual Economic Impact Report of Michigan’s University Research Corridor. Anderson Economic Group, 2016.

3 Battelle/BIO State Bioscience Jobs, Investments and Innovation 2014. Battelle Technology Practice, 2014.

4 Guidelines for Local and State Governments to Promote Entrepreneurship. http://www. kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2015/03/ government_guideline_report.pdf. Kauffman Foundation, 2015.

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

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EDUCATION & TALENT KEY TO SUCCESS

In today’s global economy, talent is the most vital asset for success in innovation and long-term competitiveness.

The biosciences industry, like any knowledge-based cluster, is no exception. Michigan ranks 8th nationally in the number of science and engineering graduates it produces each year1. But it ranks relatively poor for its level of investment in human capital and prevalence of a technology and science workforce2.

Bioscience employers acknowledged that local talent and the industry’s ability to recruit outside the state are generally meeting current technical workforce needs.

However, it is not without its challenges, particularly in some specialized skill areas. Access to “C-level” talent is a huge problem. Michigan must create talent development programs and initiatives in full partnership with the bio-industry that ensures a future supply of talent for the cluster at all business stages.

OPPORTUNITY Assess the growing and changing talent needs of Michigan’s bio-industry.

ACTION

1-2 YEARS

Regularly gather stakeholders from the bio-industry, higher education, government and staffing/recruiting organizations to discuss talent supply, skill set standards and resource needs.

KEY STAKEHOLDERS: MichBio, BL, MEDC, MIHIED

ACTION

1-2 YEARS

Identify existing bioscience and education training programs offered by Michigan’s higher education institutions and their alignment with bio-industry needs.

KEY STAKEHOLDERS: MichBio, URC, MIHIED

16

MICHBIO | michbio.org

More fundamentally, stakeholders expressed concern that the state’s future talent will not be adequately prepared for work in the biosciences. Many employers pointed to the fact that K-12 STEM education is not rigorous enough, and shared their dismay over attempts by state policymakers and others to soften common core science standards. The worry is that students will be ill equipped for the rigors of university and college science programs with implications for workforce performance down the road.

Employers perceived a misalignment between their workforce skill set needs and what higher education institutions are teaching. For instance, graduates are not always adequately prepared to join the workforce, requiring companies to make significant investments to fill knowledge gaps. Today’s graduates acquire little knowledge of markets and business development, regulatory matters and FDA compliance, reimbursement, data and project management, as well as interdisciplinary aspects of product creation and development. Soft skills are equally, if not more, important.

Yet few institutions place any emphasis on developing them.

There is anecdotal evidence to suggest that schools are beginning to integrate such learning into classroom practice, particularly as senior year and graduate program group projects.

Most desirable is talent with experience in applied critical thinking and problem solving. Educational leaders expressed the desire for a greater emphasis on experiential learning experiences for students including internships, and to a lesser extent, co-op programs and vocational/ apprentice training, and bridge programs for post-doctoral fellows to transition into industry. However, many small to mid-size employers are challenged to offer such opportunities because of fiscal constraints. Stakeholders advocated for the state to develop and subsidize such talent development programs, coupled with incentives for students or employers, or both to encourage adoption.

#8 IN THE NUMBER OF SCIENCE AND ENGINEERING GRADUATES PER YEAR1

INDUSTRY GROWTH

OPPORTUNITY Further develop and expand the K-postgraduate STEM pipeline.

ACTION

1-2 YEARS

Enhance state appropriations for the Michigan Skilled Training Fund to ensure sufficient training opportunities to bioscience companies or those supplying the industry.

KEY STAKEHOLDERS: MichBio Additionally, employers believe that higher education institutions are not adjusting quickly enough to changing workforce demands. To address that, some schools have established industry advisory boards that counsel them on curricula and skill standards, as well as serving as partners for collaboration and learning. Such a resource should be encouraged at more institutions. However, stakeholders expressed an interest in a collective gathering like the BioTalent Summit hosted by MichBio in 2012, for exchange of ideas, best practices and partnership building.

There are worries about continued net population outmigration – due to the difficulty in retaining university and college students post-graduation along with incumbent workers – because of a lack of awareness and/ or an insufficient number of bioscience employment opportunities compared to major bio-industry hubs. Real concern was expressed that if Michigan does not act quickly, it will witness a continued drain of skilled biosciences talent. At a minimum, an educational campaign should be implemented to raise awareness of career and job opportunities coupled with enhancing existing bio-industry specific career centers.

Addressing the bio-industry’s workforce needs in Michigan in a systematic way will require a coordinated effort on the part of employers, higher education institutions, talent acquisition service providers and government.

A comprehensive market analysis of the biosciences workforce is needed to establish a baseline understanding of critical skill, competency and occupation gaps, as well as talent demand and supply, across the state, different sectors and positions.

The inability to secure the right talent at the right time can be a growth-limiting factor for bioscience organizations.

Left ignored and/or compounded, it becomes a far-reaching economic problem with ramifications for the bio-industry and the state.

Michigan must invest more in bioscience talent development as other benchmark states do, if it hopes to grow the bio-industry cluster into a national leader.

OPPORTUNITY Enhance bioscience education/training and workforce development programs to meet talent needs.

ACTION

3-5 YEARS

Expand the existing entrepreneurs-in-residence programs to better attract executive/management talent to Michigan.

KEY STAKEHOLDERS: MEDC, SZs, TTOs

ACTION

5-10 YEARS

Expand bioscience experiential learning opportunities by re-establishing a state-supported internship/co-op placement program.

KEY STAKEHOLDERS: MichBio, MIHIED

ACTION

5-10 YEARS

Re-establish a state-supported program to subsidize talent recruitment, especially management level, for qualified start-up, emerging and pre-market companies.

KEY STAKEHOLDERS: MichBio, MIHIED, MEDC

1 Michigan Entrepreneurship Score Card – 11th Edition. MiQuest, 2015.

2 2014 State Tech and Science Index. Milken Institute, 2014.

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

17

ACCESS TO CAPITAL FUELING BUSINESS GROWTH

Availability of capital investment and financing for businesses to launch, expand, and compete is critical for job creation and economic impact, both in the short-term and long run.

The bioscience industry is no exception, as it requires large amounts of funding to develop ideas into viable products.

Indeed, it consumes more capital than other high tech sectors, because of regulatory pathways and costly clinical development leading to longer timelines to market.

Venture capital funding in the U.S. biosciences industry largely tracks with the rankings of leading bioscience clusters. For the most part, investments are directed to coastal regions where the density of bioscience companies is large and opportunities abound.

Influx of investment capital in support of Michigan bioscience ventures has increased in the aggregate over the last decade. The state realized $416.1 million in total bioscience investment between 2010-2014 1. However, the swing in fundraising was considerable on a year-to-year basis. More importantly, it occurred against a backdrop where the nation and leading bioscience states continued to see increases in their levels of bioscience venture capital investment.

OPPORTUNITY Expand Access to Capital Investment and Funding Programs.

ACTION

1-2 YEARS

Re-establish an Angel Investor Tax Credit immediately.

KEY STAKEHOLDERS: MVCA, MichBio, BLC, POLICY

ACTION

1-2 YEARS

Expand the Emerging Technology Fund - Increase state matching funds for phase I and II SBIR/STTR awards of up to $100,000 and $500,000 respectively.

KEY STAKEHOLDERS: MichBio, EDs, SZs, BLC, POLICY

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MICHBIO | michbio.org

The state has noted a number of investment achievements in recent years. Impressive fundraising records in 2015 were set by both the state’s biopharma (i.e., $62M, Millendo Therapeutics) and medical device (i.e., $39M, Delphinus Medical) sectors. A couple of initial public offerings (IPOs) were transacted successfully in the last few years (e.g., Esperion Therapeutics, Diplomat Pharmacy). Such noted achievements are to be celebrated. But more is needed as Michigan still lags behind other Midwest states, most notably Ohio and Minnesota, in year over year investment totals, as well as in individual company raises1.

Michigan’s bio-industry stakeholders viewed access to capital to be one of the principal challenges that continue to constrain cluster growth. Many believe that more examples of the aforementioned successful exit transactions are needed “to captivate the (investor) audience”.

Risk capital available for early stage bioscience companies from regional investment sources was deemed to be inadequate. A 2015 Annual Report by the Michigan Venture Capital Association indicates an estimated $1.3 billion gap in the next few years between the funding startups need and what is available2. Furthermore, demise of the Michigan Small Business Investment Tax Credit, discontinued in 2012, was viewed as a major loss. For many, the absence of an incentive for early stage investors diminished the state’s competitiveness compared to other regions that continue to offer such an inducement.

The overall lack of enthusiasm for seed and early stage investing was most concerning to entrepreneurs and investors alike. A weak exit market combined with greater aversion to risk was viewed to have resulted in venture investors moving towards later stage investment. This has exposed seed and early stage companies, a critical component of the commercialization pipeline, to heightened insecurity over funding. As a consequence, startups are looking to alternative funding sources, including foundations and family offices, while they persevere in finding venture investment.

estimated $1.3 billion gap in funding the next few years

INDUSTRY GROWTH

ACTION

1-2 YEARS

Expand services/programs like BioConnections to increase opportunities for Michigan bioscience companies to partner with corporate, private, and institutional investment groups.

POLICY MAKERS

MICHIGAN VENTURE FINANCE COMMUNITY

KEY STAKEHOLDERS: MichBio, MVCA

ACTION

3-5 YEARS

Increase awareness by out-of-state venture firms on investment opportunities in Michigan bioscience companies including direct communication and a database of companies seeking financing.

KEY STAKEHOLDERS: MichBio, MVCA, MEDC

ACTION

5-10 YEARS

Increase the scope of lending products to include state-assisted bank financing and direct loan options (like a revolving loan fund) to help fund biomanufacturing and R&D infrastructure improvements.

KEY STAKEHOLDERS: MEDC, MichBio, BLC, POLICY

There is a real appetite by bioscience entrepreneurs to secure funding from venture firms outside of Michigan.

While 65% of all capital invested in 2014 came from such investors2, the perception persists that outside firms largely ignore the region and its investment opportunities.

Anecdotally, this is corroborated by the substantial interest and participation in partnering opportunities with visiting corporate and traditional venture capital firms offered by MichBio through its BioConnections® program, as well as in pitch competitions like Accelerate Michigan where investors and significant cash prizes abound.

Many state bio-industry leaders observed that Michigan’s commercial and investment banking community are riskaverse to financing late stage to mid-market companies unlike their brethren in Massachusetts and California.

Moreover, they are perceived to have little understanding of the biosciences field and markets.

Policy makers must collaborate with the Michigan venture finance community to identify the most appropriate types of incentives required to expand interest in bioindustry investment among the full spectrum of investor types.

Additionally, capital gaps should be identified and steps coordinated to leverage additional private investment.

Of equal importance is the need for Michigan venture capitalists, bio-industry leaders, trade groups, and the state alike to actively promote Michigan bioscience technology innovation and seek more national and international investment support. Michigan investors need to do a better job of advancing startups to “harvest time,” and convincing outside funding of the investment value of being in Michigan.

Without pro-active action in the short term, over time Michigan bioscience companies will migrate to more supportive markets that value the innovation and jobs created by the bio-industry. Indeed, there are several recent examples whereby successful Michigan-launched bioscience startups have moved their corporate headquarters to other regions following successful fundraising. This places their remaining state-based operations at great jeopardy for exodus too. To prevent this, Michigan must continue creating a business climate that rewards and incentivizes risk-capital investment in the state’s bioscience firms.

1 Midwest Healthcare Startups Raise $1.9 Billion in 2014 Financings. http://www.bioenterprise. com/resources/uploaded/documents/Midwest%20Healthcare%20Growth%20Capital%20 Report%20-%20press%20release%20YE2014%20%28FINAL%29.pdf. BioEnterprise, 2015.

2 2015 MVCA Annual Research Report. https://michiganvca.org/wp-content/uploads/2015/04/ MVCA-2015-Research-Report.pdf. Michigan Venture Capital Association, 2015.

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

19

FUNCTIONAL AREAS

SECTOR AREAS Agri-Biosciences Medical Devices BioPharma R&D/Testing BioLogistics

“Michigan’s legacy in biosciences, especially biopharma and medical devices, should be a foundation to leverage growth.”

AGRI-BIOSCIENCES GROWING THE BIO-ECONOMY

Agriculture and its related sectors (food and agricultural production, processing and manufacturing) are an area of economic strength for Michigan, accounting for almost 235,000 jobs and an annual economic impact of over $35 billion1.

The state is consistently in the top tier for agricultural production and export, and the industry is the second most diverse in the nation. However, Michigan is not viewed as an “ag” state despite the size of its food and agriculture industry.

Perhaps not surprisingly then, Michigan’s bio-economy sector, i.e., agricultural feedstock and chemicals or “agribiosciences,” an extension or outgrowth of the agricultural industry, is small. It ranks 21st nationally in employment size (963) and number of establishments (29)2, as well as location quotient3.

OPPORTUNITY Leverage Michigan’s agricultural base to attract new investments and grow the Biosciences Industry

ACTION

1-2 YEARS

Target food/ag/bio-based technologies for economic development and cluster expansion as a high growth area.

The absence of an interconnected industry network to foster sector development is a key impediment to future growth. The state’s bio-economy sector is fragmented into three broad agri-bioscience clusters – renewable industrial products (biobased chemicals and materials, bioenergy), food and animal safety (vaccines, diagnostics, animal and crop protection, biotechnology), and food and health products (health supplements and nutriceuticals, animal feed and nutrition, medical food, craft brewing). Michigan would benefit from establishing cluster networks around the different agri-bioscience technology or market areas to develop critical mass and foster partnering on strategic initiatives.

Paradoxically, Michigan is blessed with abundant biomass from forest and farm, long-standing industrial chemical infrastructure, superb academic research, as well as strong food production, processing and manufacturing expertise.

Global leaders like Dow Chemical, Wacker Chemie, PVC Chemicals, Bayer Crop Sciences, POET, Nestle/Gerber, Amway, Neogen, Kellogg, Monsanto DeKalb, Pioneer Seed, among others, have facilities or are headquartered here. In addition, academic R&D centers, most notably, Michigan State University (MSU), and premiere de-risking operations like MBI, are critical resources to the development of the state’s bio-economy.

Michigan must take fresh stock of its agri-bioscience assets, including emerging technologies as well as manufacturing infrastructure capacities and capabilities. An inventory of the state’s assets - size and location of biomass resources, estimates on extraction, processing and transport costs, data on workforce and industrial infrastructure - should be assembled and validated against promising market opportunities to reveal areas where Michigan could become a world-class leader.

KEY STAKEHOLDERS: MEDC, EDs, MichBio

ACTION

1-2 YEARS

Establish a statewide peer network of food/ag/industrial biotech and bio-based technology stakeholders.

KEY STAKEHOLDERS:

ALMOST

235,000 JOBS

annual economic impact of over $35 BILLION

MichBio, MEDC, EDs

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

21

SECTOR AREA

AGRI-BIOSCIENCES OPPORTUNITY Incentivize growth of Michigan’s ag/industrial biotech cluster to compete with other key Midwest and U.S. agri-tech regions.

ACTION

1-2 YEARS

Implement a “BioPreferred”-like, “market pull” program for preferential procurement of Michigan’s bio-based products.

KEY STAKEHOLDERS: MichBio, BLC, POLICY

ACTION

3-5 YEARS

Institute bio-economy R&D and production tax incentives for qualified bio-energy, renewable chemicals and related bio-based technology research and development costs sourced in Michigan.

KEY STAKEHOLDERS:

The potential for building a statewide agri-biosciences sector is ample and ripe for attracting manufacturers, entrepreneurs, investors and researchers.

However, Michigan will continue to lag behind many other agri-bioscience clusters and lose out on significant economic impact if it doesn’t quickly take steps to leverage its sizeable agricultural enterprise and research expertise. While core competencies and resources exist in Michigan, they have not been integrated in a cohesive manner around a single vision for growth supported by advantageous regulatory and business policies.

A 2008 analysis validated Michigan’s prospects for becoming a major player in the global bioeconomy if only appropriate economic development initiatives were in place to support biomanufacturing operations4. That opportunity remains valid today, but may fade quickly, as others take proactive steps to build out their agri-bioscience ecosystems.

MichBio, BLC, POLICY Michigan should embark on increasing its investment in research, innovation and skills. Resources and programs like those offered by Michigan State University’s Product Center should be expanded. Value-added private sector-academic collaborations on applied research ought to be pursued more aggressively and any resulting commercial opportunities incentivized to remain in the state. Otherwise, Michigan will stand to lose out on economically impactful opportunities.

Indeed, there have been at least two instances whereby commercial ventures based on Michigan-derived biobased technologies established their production facilities in other regions (most notably Ontario).

Most critically, business- and regulatory-friendly policies and programs are essential to enable biobased company growth. Sector-specific R&D, commercialization and production incentives should be implemented along with support that creates a regional marketplace for agricultural commodities. An excellent starting point would be to emulate “bio-preferred” policies enacted federally (i.e., USDA BioPreferred purchasing program) and by several states (e.g., Minnesota, Iowa, and Ohio) to help drive Michigan’s regional bioeconomy. In addition, other regions like Louisiana, Kentucky, Tennessee and Missouri, as well as Ontario, all are using government incentives to ramp up agri-biosciences investment and create jobs.

OPPORTUNITY Build upon the region’s strong and diverse agricultural production, agri-processing and chemical industry base.

ACTION

1-2 YEARS

Develop a strategy for active recruitment of bio-based technology companies, especially targeting potential production facilities.

KEY STAKEHOLDERS: MEDC, EDs, MichBio

ACTION

1-2 YEARS

Create an inventory of existing assets and/or potential sites/facilities for ag/bio-based production infrastructure.

KEY STAKEHOLDERS: MichBio, MEDC, EDs

1The Economic Impact of Michigan’s Food and Agriculture System. Working Paper No. 01-0312.

Michigan State University Product Center, March 2012.

2 Battelle/BIO State Biosciences Jobs, Investments and Innovation 2014: Michigan. www.bio.org/ sites/default/files/SP_Michigan.pdf, Battelle, June 2014.

3 Golden, JS, Handfield, RB and McConnell, TE. An Economic Analysis of the U.S. Biobased Products Industry: A Report to the Congress of the United States. U.S. Department of Agriculture, June 2015.

4 The Lansing Tri-County Bio-Manufacturing Feasibility Study. http://ced.msu.edu/upload/reports/ biofeasibilitystudy%2020g-PQ%201.pdf, Center for Community and Economic Development, Michigan State University, Fall 2008.

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MICHBIO | michbio.org

MEDICAL DEVICES SUCCEEDING AS A TOP TIER STATE

The Medical Devices & Equipment sector, more broadly referred to as the “advanced medical technology” (medtech) industry1 is an R&D-driven, manufacturing sector that contributes greatly to the national economy.

The U.S. continues to be the global leader in advanced medical technology innovation and manufacturing. It is the largest medical device market in the world with a projected market size of around $148 billion in 20162. The sector is one of the few major industries that both boasts a net trade surplus and is a job creator.

Over the last decade Michigan’s medical device sector has grown almost 20% and achieved a top ten ranking nationally based on number of companies3. This significant growth has been driven primarily by export-oriented strategies of the large multinational corporations (MNC) present in the state (e.g..Stryker, Terumo Cardiovascular, RTI Surgical, Skytron), along with a healthy increase in early stage company growth (e.g., MC3, Delphinus Medical, Xoran Technologies), and expansion by finished product contract manufacturers (Orchid Orthopedic, Tecomet (formerly Symmetry Medical).

OPPORTUNITY Develop and implement a coordinated economic development strategy to promote and grow the medical devices sector.

ACTION

1-2 YEARS

Develop an accessible and centralized directory for medical devices companies, expertise and capabilities.

The medtech sector is largely concentrated in SE Michigan, most notably the Oakland-Genessee-Macomb County area and the Detroit Metro-Ann Arbor corridor. A second regional hub is found in West Michigan, primarily in the greater Grand Rapids region as well as in the KalamazooPortage area. Lesser clusters are located in the LansingSaginaw-Bay City region, Traverse City-lower NW Michigan area, as well as a scattering in the Upper Peninsula (Sault Ste. Marie, Marquette, Houghton, Manistique). Greater than 85% of companies statewide have <100 employees.

Michigan has considerable competency in academic medtech R&D, primarily in the bioengineering space.

Intellectual property is increasingly being spun out into medtech startups at not only major institutions like University of Michigan, Wayne State University and Michigan State University, but also at Michigan Technological University, Kettering University, Lawrence Technological University, and University of MichiganDearborn. All maintain interactions with medtech industry partners to some measure for training and experiential learning opportunities.

Despite the fact that Michigan’s medtech sector has now reached a respectable critical mass, it remains largely unnoticed and lacks much of a national identity. At home, state medtech stakeholders expressed the view that little support has been provided over the years to overcome barriers to success, in spite of pledges from government and economic development leaders. The main challenges identified included 1) a considerable problem with finding qualified talent in a number of high tech disciplines, 2) poor resources for identifying and connecting with available technology, manufacturing and clinical assets, 3) nonexistent efforts to market and promote the sector’s capabilities, and 4) a dearth of incentives and/or capital programs to spur more innovation at large and small organizations. As a result, many do not view Michigan as being fertile ground for expanding the medtech sector.

KEY STAKEHOLDERS: MichBio

ACTION

1-2 YEARS

Develop a coordinated branding and promotional campaign that markets the region specifically as a hub for medical technologies.

KEY STAKEHOLDERS: MEDC, MichBio, EDs

20% growth in medical device sector MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

23

SECTOR AREA

MEDICAL DEVICE OPPORTUNITY Institute medical device-specific business incentives to spur new technology commercialization and ensure established company growth.

ACTION

3-5 YEARS

Institute a “Michigan Preferred” program that incentivizes the use of Michigan-based contract manufacturing suppliers by medical device companies.

KEY STAKEHOLDERS: MichBio, BLM, POLICY

ACTION

3-5 YEARS

Examine feasibility for an early adoption/validation program with Michigan-based health systems for medical technologies developed and manufactured in the state.

KEY STAKEHOLDERS:

Additionally, the medtech sector simply must have a greater and visible presence at trade events deemed strategic to showcase the state’s assets and capabilities.

Lastly, Michigan must do more to ensure a fair and balanced business tax environment. Incentives should be considered to spur innovation, de-risking of technology, R&D activities and product development. Also, more access to capital and financing for all business stages should be sought out.

The most critical issue for Michigan’s medtech sector is actionable movement towards creating a global center of medical device innovation, manufacturing and adoption. For many, the time to act is now, as much remains to be done, or risk losing the recent gains in sector growth, much less its future economic value and return.

OPPORTUNITY Expand relationships between academic research/ healthcare institutions and Michigan medical device manufacturers.

MichBio, HS, POLICY

ACTION To that end, Michigan must concentrate on increasing coordination and collaboration within the medtech community, and enabling linkages and partnerships with the extended ecosystem (i.e., supply chain, service providers, etc.), as well as with health system and academic research stakeholders. Capacities and capabilities in all facets of product development life cycle (e.g., design, engineering, validation) need to be expanded and integrated to better facilitate technology de-risking and commercialization activities.

Despite generating high numbers of science and engineering graduates, skilled talent in Michigan, particularly in certain specialty areas, is difficult to find. The medtech sector, being an application-oriented field, could benefit greatly from enhanced education, training and certificate programs that would result in greater retention and attraction of talent to the region. Michigan should reestablish and fund a talent development program focused on experiential learning.

Additionally, resources and financial support would be beneficial to offset talent recruitment costs, especially for C-suite level positions, for early stage startups and mid-sized companies.

Awareness of Michigan’s medtech sector by the outside world is modest at best; attraction of new MNC or mid-cap business is minimal. The State should work with industry stakeholders to develop and fund a strong marketing campaign and economic development strategy that could better brand the cluster and entice companies to relocate or expand.

24

MICHBIO | michbio.org

3-5 YEARS

Enhance linkages between innovation centers at academic research/health institutions and industry through increased networking events.

KEY STAKEHOLDERS: MichBio, HS, MIHIED, MiDevice, MMDC

OPPORTUNITY Develop a visible and active medical technology sector with supportive resources and programs.

ACTION

1-2 YEARS

Establish an active group of medical technology stakeholders to advise on sector resource needs, development of education/training programs and activity planning.

KEY STAKEHOLDERS: MichBio, MMDC, MiDevice, MIHIED

1 The advanced medical technology industry is defined as being comprised of eight subsectors based on federal NAICS codes, which include: In-vitro diagnostic substance, electro-medical and electrotherapeutic apparatus, irradiation apparatus, surgical and medical instrument, surgical appliance and supplies, dental equipment and supplies, ophthalmic goods, and dental goods manufacturing.

2 United States Medical Devices Report. Epsicom Business Intelligence, 2016.

3 Battelle/BIO State Bioscience Jobs, Investments and Innovation 2014.

Battelle Technology Practice, 2014.

BIOPHARMA

RECLAIMING A LEGACY OF LEADERSHIP The pharmaceutical industry is one of the most enduring, largest and most critical knowledge-intensive sectors in the U.S. economy. Michigan has a very strong legacy in biopharma, being home to the first two pharmaceutical companies in the nation – Parke-Davis & Company (1875) and Upjohn Company (1886) – and credited with building the first modern R&D laboratory and developing the first systematic methods of performing clinical trials. Numerous major drug development discoveries have stemmed from Michigan’s private and academic R&D enterprises including Lipitor®, Motrin®, and cisplatin, among others.

The state was a biopharma powerhouse through the early part of this century. At its peak in 2002, biopharma employed 11,922 Michiganders and was the state’s largest bio-industry sector1. However, the sector witnessed a severe consolidation between 2003-2008 with a 33% loss in jobs due the shutdown of Pfizer’s human R&D operations in Kalamazoo and Ann Arbor. In 2014, Sun Pharma (formerly Caraco Pharmaceuticals) closed its production facility in downtown Detroit, resulting in a loss of 178 jobs (from a peak of over 500 employees).

OPPORTUNITY Rebuild biopharma and therapeutics sector as a key regional concentration.

ACTION

1-2 YEARS

Establish a statewide consortium for drug discovery comprising of academic and industry stakeholders.

Currently, Michigan’s biopharma sector includes 7,940 in direct statewide employment2. It ranks 11th (employment) and 13th (establishments) nationally in terms of the biopharma sector’s size. It is still home to major biopharma operations: Pfizer manufacturing (Portage), Zoetis R&D (Kalamazoo/Richland), Perrigo (Allegan), and Endo/Par Pharmaceuticals (Rochester Hills). Smaller biotechs have taken root too such as Esperion Therapeutics, ProNAi Therapeutics, Lycera, NanoBio and Millendo in Ann Arbor, Metabolic Solutions Development Company and Tetra Discovery in Kalamazoo, and Housey Pharmaceuticals in Oakland County. In 2011 the biopharma sector directly generated $9 billion in economic output in Michigan, and supported another $8.8 billion through its vendors, suppliers and economic activity of its workforce3.

Biopharma stakeholders indicated that the prominence of the state’s biopharma sector has diminished. Moreover there appears to be a more disheartened attitude or at least inattentiveness to the sector since consolidation. The state’s apparent lack of proactive effort to support the biopharma companies a decade or more ago, and avoid or minimize job losses is still etched in many minds. Most agree that the state has done little since to rebuild the biopharma sector to its former stature. For example, little effort was made to repurpose the former Caraco Pharmaceuticals facility in Detroit, retain skilled production workers, and maintain a biopharma presence in the city. Concerns about potential layoffs (and even shutdown) as Pfizer spun out its animal health division to create Zoetis in 2013, or as Perrigo contemplated a possible acquisition by Mylan in 2015, were mentioned too.

MICHIGAN’S BIOPHARMA SECTOR

Nationally Ranked

KEY STAKEHOLDERS: MichBio, MIHIED, URC

ACTION

1-2 YEARS

Inventory the pharmaceutical assets that exist within the state’s bio-industry and research institutions on which to build a stronger sector.

KEY STAKEHOLDERS: MichBio

7,940

11th

in direct statewide employment2.

13th

employment establishments

MICHIGAN BIO -INDUSTRY | ROADMAP TO SUCCESS

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SECTOR AREA

BIOPHARMA ACTION

3-5 YEARS

Leverage strategic partnerships between research institutions, industry and government to gain access to global decision makers to attract expansion of biopharmaceutical R&D and manufacturing in Michigan.

KEY STAKEHOLDERS: MichBio, MEDC, EDs

ACTION

5-10 YEARS

Enhance the creation and attraction of therapeutics start-up companies to foster a new generation of pharmaceutical R&D in Michigan

KEY STAKEHOLDERS: MEDC, EDs, MichBio

ACTION

5-10 YEARS

Develop novel financing mechanisms for companies building or expanding biomanufacturing plants in the state.

KEY STAKEHOLDERS: MEDC, EDs, MichBio,

It was noted that one positive outcome of the consolidation in Michigan’s biopharma sector was the evolution of a biotechnology entrepreneurial community. However, despite tangible commercial successes, the state’s biotech cluster can never replace the economic impact realized with major company pharmaceutical R&D operations. Indeed the biotech community will continue to be nascent, and potentially wither without a large biopharma company presence, along with well-integrated, public-private partnerships that link companies, researchers and clinicians.

The lack of an aggressive economic development strategy to recruit mid-size and major pharmaceutical production facilities is the most significant threat to the long-term viability of Michigan’s biopharma sector. Also, the absence of state business incentives specific to the bio-industry that can spur private investment diminishes the state’s competitiveness with others like New York, Massachusetts, North Carolina and Maryland. Michigan should support capital investment in infrastructure and research equipment

if it wants to grow the sector and increase the number of biopharma jobs. Similarly, a coordinated recruitment and site selection strategy should be developed for repurposing facilities and/or constructing new technology parks.

A second area of opportunity is to expand and integrate Michigan’s academic drug discovery ecosystem into an unrivalled R&D catalyst for product development. The first ever Michigan Drug Discovery & Development Symposium in 2015 demonstrated clearly that the state’s research centers have considerable biomedical R&D assets and expertise, including an experienced cohort of former pharmaceutical industry scientists.

All the top ten U.S. biopharma clusters have tended to flourish in close proximity to strong biomedical R&D bases4. Not only are such research communities essential for scientific breakthroughs as substrate for drug development, but also they help create a local/regional environment in which biopharma companies can access talent. The latter takes on immediate urgency in Michigan as the existing pharmaceutical industry workforce ages, and future talent with seasoned experience is limited. Moreover, it has an enduring effect on the need for specialized scientific and clinical research support services, something the state is rich in.

Michigan will only be a thriving biopharma location again if it enhances biosciences research capacity and infrastructure, facilitates investment at all stages, develops human capital, and enacts policies that attract and grow the sector.

EXPAND Academic drug discovery ecosystem

INTO R&D catalyst for product development

1 Feinstein, A, Fulton, GA, and Grimes, DR. The Contribution of the Bioscience Industry to the Economy of Michigan. Institute for Research on Labor, Employment and the Economy, University of Michigan, February 2009.

2 Battelle/BIO State Biosciences Jobs, Investments and Innovation 2014: Michigan. www.bio.org/ sites/default/files/SP_Michigan.pdf, Battelle, June 2014.

3 The Economic Impact of the U.S. Biopharmaceutical Industry Report. Battelle Technology Partnership Practice, 2013.

4 2015 Profile: Biopharmaceutical Research Industry. http://www.phrma.org/sites/default/files/ pdf/2015_phrma_profile.pdf, Pharmaceutical Research & Manufacturers Association, 2015.

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R&D/TESTING

BUILDING THE FUTURE OF HEALTHCARE The Research, Testing & Medical Laboratories sector is the largest and fastest growing of any that make up the bio-industry1.

This amorphous cluster includes highly R&D-oriented (i.e., pre-market) companies, service-oriented firms involved in pre-clinical and clinical R&D contract services (i.e., contract research and manufacturing outsourcing), as well as medical laboratories and non-medical (i.e., analytical, environmental) testing firms.

OPPORTUNITY Expand Michigan’s bioscience research capacity.

ACTION

1-2 YEARS

Enhance the visibility of Michigan’s bioscience research activities, discoveries, expertise and capacities.

KEY STAKEHOLDERS: MEDC, MichBio, MIHIED, URC

ACTION

3-5 YEARS

Establish regional research networks to raise awareness and exchange of scientific discoveries, technologies and expertise available within Michigan’s research community.

KEY STAKEHOLDERS:

In Michigan, Research, Testing & Medical Laboratories is the second largest bio-industry sector by number of companies (459), having witnessed over 35% growth during 2007-2013, well above the national average1. It runs a close third in size based on employment (10,448)1. Market projections point to continued strong sector growth in Michigan over the next five years. The drivers for this notable expansion – enhanced federal R&D funding to academic research centers, increased bioscience start-up activity, demand by biopharma and medtech outsourcing, and a heightened demand for predictive and diagnostic testing services – are anticipated to continue. As a result, the potential is great and future growth of the sector in Michigan seems assured, though competition will be fierce for attaining a market leadership position.

OPPORTUNITY Enhance state-supported resources and programs available to private R&D enterprises that can accelerate their growth and time to market.

MIHIED, MichBio, URC, BL

ACTION

The Research, Testing & Medical Laboratories sector, while traditionally encompassing commercial markets like therapeutics and medical technology development, is positioned well for next-generation disciplines like genetic and genomic screening. These fields open up new possibilities for targeted and personalized treatments, predictive diagnostics for disease susceptibility and developing preventative medical interventions. In nonmedical areas, food supply chain security and animal safety, along with crop diagnostics and ecogenomics are burgeoning fields as a consequence of anthropogenic impacts on the environment and the need to feed an increasing global population.

5-10 YEARS

ACTION

3-5 YEARS

Better integrate academic research and private sector R&D enterprises through novel approaches such as immersive experience by research fellows, access to instrumentation/equipment and laboratory facilities, and technology development/validation support resources.

Create state R&D tax incentives, escalated depreciation schedule for lab equipment and subsidizations on wet lab lease costs.

KEY STAKEHOLDERS:

MichBio, BLC, POLICY

KEY STAKEHOLDERS:

MIHIED, MichBio

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SECTOR AREA

R&D/TESTING OPPORTUNITY Ensure a pipeline of skilled talent to meet the workforce needs of laboratory testing and R&Dbased companies.

ACTION

3-5 YEARS

Expand the number of undergraduate clinical laboratory programs to develop ASCP-eligible talent with training in molecular diagnostics and next-gen sequencing, as well as require clinical lab experiential learning.

KEY STAKEHOLDERS: MIHIED, URC

ACTION

3-5 YEARS

Identify a statewide funding mechanism that incentivizes clinical sites by reimbursing for practicum experience through clinical rotations.

KEY STAKEHOLDERS: MichBio, BLC, HS, CP1, POLICY, MEDC

ACTION

3-5 YEARS

Require clinical laboratory personnel to be licensed by the state of Michigan with standards more stringent than CLIA’s mininum requirements.

KEY STAKEHOLDERS: MichBio, POLICY, LARA, DHHS There is broad diversity in the size, focus and capabilities of the bioscience R&D companies, CROs/CMOs, and testing firms distributed around the state. Not surprisingly, many congregate in proximity to academic research and health care centers, as well as field operations and facilities, where they have access to technology, talent, and commerce.

Generally, the Research, Testing & Medical Laboratories sector is fairly hidden within Michigan, and certainly beyond.

Companies appear to be so focused on their own enterprises that they don’t sufficiently network or partner with others in the ecosystem, either for business development purposes or cross-fertilization of knowledge and technology. This is especially true of early stage, R&D-based companies.

One would anticipate a higher degree of visibility demonstrated by the more service-oriented CRO/CMC/ CMO and testing segments. However, companies tend to be small in size (i.e., <50 employees) with few exceptions (e.g., MPI Research) and largely specialized. They often lack sufficient resources for active promotion and so most business development comes by word-of-mouth.

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MICHBIO | michbio.org

Additionally, their markets are outside of Michigan and thus there is little motivation to assemble with those they already are familiar with or otherwise are not prospective clients.

Notwithstanding, many firms have expressed the desire to partner in a branded marketing campaign aggregated for the benefit of the larger contract outsourcing community. This has been tried in the past on a local level with mixed outcomes, but a more concerted, statewide effort is warranted with the private sector taking the lead and facilitated through a convening organization like MichBio.

Given continued growth of the Research, Testing & Medical Laboratories sector (particularly in the contract outsourcing and testing segments) the sector is facing a severe shortage of qualified laboratory personnel.

Policymakers in concert with education leaders and the bio-industry stakeholders must develop policy initiatives to encourage careers in clinical laboratories and the development and enhancement of laboratory training programs. These programs can come in the form of public outreach, grant/loan incentive programs and funding to academic institutions and professional/trade associations. Michigan in the past deployed such resources, but fiscal considerations during the economic downturn precluded their renewal despite positive metrics.

If significant economic opportunities are to be captured within Michigan, however, the Research, Testing & Medical Laboratories sector needs to be able to operate in a business environment that encourages continued state investment in commercialization and incentivizes profitable operations.

It’s important to note that markets outside the state drive business in the case of medical-related testing and contract R&D outsourcing. This poses some risk for company flight from Michigan and economic sustainability of the state’s bio-industry.

To that end, Michigan should consider implementing tax incentives to stimulate R&D in existing companies and attract private-sector R&D activity to the state. While Michigan’s low corporate taxes serve as a general incentive for business activity, the state stands to improve its competitive position by implementing tax incentives that specifically target research and development. In addition, access to incentives should be made available to contract outsourcing and testing companies, as currently they are completely shut out.

From an economic standpoint, Michigan’s Research, Testing & Medical Laboratories sector has been an economic bright spot.

It deserves close attention and meaningful commitment to insure a robust future of its own, and for the broader biosciences economy that it underpins.

1 Battelle/BIO State Bioscience Jobs, Investments and Innovation 2014.

Battelle Technology Practice, 2014.

BIOLOGISTICS

DEVELOPING LEADERSHIP IN MOVING PRODUCTS Bioscience-related distribution or “biologistics” coordinates the delivery of bioscience-related products spanning pharmaceuticals, medical devices, and agri-biosciences. It was long viewed simply as a basic support function for the biosciences industry.

However, its importance has grown immensely over the last decade as the bio-industry competes in a global marketplace. Only recently has it gained recognition as a distinct and significant sector within the broader bioindustry. The complexity of new bioscience products, business growth in emerging markets, globalization of supply chains and more demanding regulatory requirements are just a few of the factors contributing to the growth in capacities and capabilities of the biologistics sector. In particular, technology innovation in specialty areas of cold chain management, product monitoring, and automated distribution systems is changing the way bioscience-related products and materials are being moved around.

Bioscience-related distribution is the largest of the bio-industry sectors in the state, employing over 11,440 Michiganders directly (10th in the U.S.) in almost 1000 establishments (12th nationally)1.

OPPORTUNITY Identify the current state and future needs of the bioscience-related distribution and logistics sector in Michigan.

ACTION

1-2 YEARS

Conduct an asset-maping exercise that identifies all facilities in Michigan and their capacity and capabilities to support distribution and logistics of bioscience-related products.

KEY STAKEHOLDERS:

COLD CHAIN MANAGEMENT PRODUCT MONITORING

Technology Innovation

AUTOMATED DISTRIBUTION SYSTEMS

A number of the major global biologistics firms have a presence or are headquartered in the state, including Cardinal Health, AmerisourceBergen, Owens & Minor, McKesson, and Syncreon. Moreover, the state features the #1 (Michigan State University) and #6 (University of Michigan) ranked supply chain management programs in the country with bioscience-related logistics expertise. Yet a 2015 national report ranks Michigan a ‘C’ for the health of its overall logistics industry, a drop from previous years2, despite of the fact that the state is one of the country’s major trade locations3.

Notwithstanding such prominent assets, the biologistics sector in Michigan is hardly recognized even within the state as a strength and notable feature of the region’s logistics activities. This is due partly to the diversity in sub-sectors – procurement, production, distribution, and disposal (i.e., reverse) logistics including specialized services, storage, and transport – companies that comprise them (many of which are small to mid-size, as well as being local and regional in focus) and markets they serve (healthcare, food, agriculture, etc.). As a result, connectivity is lacking, making the development of a vibrant biologistics ecosystem difficult.

Generally, there was little apparent consistency in stakeholder perspectives, except for a common belief that Michigan was not doing enough to leverage its logistics strengths and assets nor to adequately fund infrastructure improvements long term. Also, it was observed that a strong biologistics sector was only as robust as the presence of a sizable biosciences manufacturing base, something Michigan was viewed as lacking compared to other regional bioscience hubs.

MichBio, MEDC, EDs, BL

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SECTOR AREA

BIOLOGISTICS OPPORTUNITY Establish Michigan as a leading healthcare and biosciences distribution and logistics hub.

ACTION

1-2 YEARS

Develop a strategy to actively recruit healthcare and bioscience-related distribution, logistics and supply chain companies to expand in Michigan.

KEY STAKEHOLDERS: MEDC, EDs, MichBio

ACTION

1-2 YEARS

Engage with key bioscience logistics and supply chain sector stakeholders to identify resources necessary for growth and strategy.

KEY STAKEHOLDERS: MichBio, BL, MEDC, EDs

The lack of a comprehensive asset map identifying the many players and details of their strengths and capabilities was identified as a major shortcoming and stymied broad data collection. An initial priority then should be to advance a collaborative sector network to improve communication, connection between industry with technology leaders and academic R&D centers, and develop a collective industry voice.

The state of Michigan has focused on improving the region’s position in the global logistics and supply chain industry in recent years. A Michigan’s Logistics and Supply Chain Strategic Plan 2013-20204 was released in 2013 to direct the development of this vital sector under a single, unified plan of action. Subsequently, a Commission for Logistics and Supply Chain Collaboration was established in early 2014 to identify the types of action needed to address industry shortfalls.

Michigan’s logistics assets are regarded as valuable by bioscience companies, but not viewed as a critical regional location advantage. One recommendation from the state’s Logistics Plan was to identify niche market opportunities – the biologistics sector should be one such focus and integrated into the commission’s proceedings.

Given that the biologistics world has become so competitive, stakeholders suggested that Michigan must identify a “game-changer” to distinguish it from other regions, e.g., creation of a centrally located biologistics and integrated supply chain district supported by targeted incentives to support the regional medical device, pharmaceutical, clinical testing, and biobanking markets. Also noted was the need to advance a public-private biologistics marketing partnership for outreach to identified bio-industry targets, as well as an economic development attraction tool.

If the state aspires to become a leading destination for biosciences-related logistics businesses and jobs, it must focus on its strengths, invest in infrastructure (i.e., specialized for the bio-industry) and transport systems, develop a sector-specific network and lines of communication, and continue to identify niche markets or technology expertise that can set Michigan’s biologistics sector apart from others.

OPPORTUNITY Ensure a well-maintained statewide distribution, logistics and multi-modal transport infrastructure and capacity.

ACTION

3-5 YEARS

Petition the Michigan State Legislature to fund key transportation improvements that enable efficient movement of employees, parts and finished products to/ from bioscience manufacturing sites

KEY STAKEHOLDERS: MichBio, BLM

Advance a collaborative sector network to improve communication

1 Battelle/BIO State Biosciences Jobs, Investments and Innovation 2014: Michigan. www.bio.org/ sites/default/files/SP_Michigan.pdf, Battelle, June 2014.

2 2015 Manufacturing & Logistics Report Card. Connexus Indiana and Center for Business and Economic Research, Ball State University. http://conexus.cberdata.org/files/National2015.pdf, June 2015.

3 http://www.trade.gov/mas/ian/statereports/. International Trade Administration, U.S. Department of Commerce, 2015.

4 Michigan’s Logistics and Supply Chain Strategic Plan 2013-2020. http://www.michiganbusiness. org/cm/files/reports/logistics_strategic_plan-12.pdf. Michigan Economic Development Corporation, June 2013.

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MICHBIO | michbio.org

MARKET AREAS Clinical Trials Biobanking Contract Outsourcing Bioscience Professional Services Manufacturing Suppliers

“Michigan has undervalued niche strengths that must be leveraged into market leaders.

In turn, that can bolster the state’s overall bio-industry.”

MARKET AREAS

CLINICAL TRIALS

HELPING PATIENTS & SCIENCE

Clinical trials are a significant economic driver in Michigan.

The state is consistently ranked in the top twelve nationally in terms of number of industry-sponsored trials conducted across its health systems, community physician practices, and private clinical research facilities1. A 2015 Battelle study reported that sponsored clinical trial activities statewide accounted for $192 million in site-based investment and a total economic impact of $488 million2.

Clinical trials are integral in the development of new therapeutic drugs, devices, diagnostics and medical practices essential for approved, evidence-based medicine and healthcare delivery. They bring together scientific discovery and clinical practice that allows a better understanding of diseases while advancing treatments for patients. A healthy clinical trials environment attracts product R&D and commercialization activities, creates employment and economic opportunities, and enhances the state’s capacity for bioscience innovation.

KEY STAKEHOLDERS:

MEDC, MichBio, CP1, HS

ACTION

5-10 YEARS

Establish a statewide Clinical Trial Registry for HIPAAcompliant patient registration, link to active trials and recruiting investigators/providers.

KEY STAKEHOLDERS: DHHS, HS, CP1, MichBio

1-2 YEARS

KEY STAKEHOLDERS:

MEDC, MichBio, CP1, HS

Improve communication and coordination among statewide clinical trial sites to support clinical trials initiation and ongoing oversight.

KEY STAKEHOLDERS: CP1, HS, MichBio

3-5 YEARS

Form strategic alliances with major clinical research organizations to bring new multi-site studies to Michigan.

KEY STAKEHOLDERS: CP1, MichBio, HS

ACTION

3-5 YEARS

Implement a public outreach campaign in partnership with patient/disease advocacy groups and clinical research organizations to raise awareness of the benefit of clinical trials on healthcare and economy.

Michigan should develop improved clinical trials infrastructure, leading and unified best practices, as well as a nimble business model based on a financially sustainable operations plan. Such an effort must be predicated on establishing collaborative and innovative partnerships in the absence of parochial interests and bureaucracy.

Actively brand and promote Michigan as a clinical research destination.

ACTION

ACTION

1-2 YEARS

Position Michigan as a more visible and attractive center for conducting sponsored clinical trials research.

ACTION

Position Michigan as a more visible and attractive center for conducting sponsored clinical trials research.

The state’s considerable heft in clinical trials research, assets, facilities and talent should be leveraged to a greater level, if it is to become a stronger leader in the global, industry-driven clinical trials market. A number of other states (e.g., Ohio, Arizona, Georgia, Texas, Wisconsin) and international regions (e.g., Ontario, British Columbia, Australia, Spain) have moved to develop coordinated clinical research enterprises. In part, this is in response to increased competition from emerging countries that has resulted in a reduction of investment by the bioindustry in U.S.-sited clinical trials, including here in Michigan.

This trend must be abated if the state is to compete globally.

OPPORTUNITY

ACTION

OPPORTUNITY

3-5 YEARS

Determine feasibility of a regional trials consortium with single point of access, adoption of harmonized and streamlined review processes, coordinated patient recruitment and SOP efforts, and reduced costs structures.

Also, the state’s clinical trials enterprise should be promoted widely, operate in a more harmonized and collaborative manner, and feature efficient processes with a single point of entry to better attract industry sponsors. A network of community clinical trials centers and participating physician practices should be developed statewide that can leverage the already extensive presence of clinical Phase 1 research facilities as a prominent strength of Michigan’s clinical trials cluster.

Michigan can become a global leader in industry-sponsored clinical research if it acts quickly and with determination. Such a well-managed and integrated cluster will enhance economic growth through increased market share, job creation and investment. In addition, the state is likely to attract world-class researchers and federal research funds, strengthen health systems, while improving access to innovative treatments and an improved quality of life for Michiganders.

KEY STAKEHOLDERS: CP1, HS, MichBio, DHHS 32

MICHBIO | michbio.org

1 https://clinicaltrials.gov/ct2/results/map/click?map.x=158&map.y=165&fund=2 (Search: all industry trials, United States by state), www.clinicaltrials.gov, December 13, 2015.

2 Biopharmaceutical Industry-Sponsored Clinical Trials: Impact on State Economies. www.phrma.org/sites/default/files/pdf/biopharmaceutical-industry-sponsored-clinical-trialsimpact-on-state-economies.pdf. Battelle-PhRMA Report, March 2015.

ACTION

FOUNDATION FOR MEDICINE Demand for biological specimens, particularly in the fast-evolving age of personalized medicine, is fueling explosive growth of the biobanking market - activities related to the procurement, preservation, processing, storage, and distribution of biospecimens and associated data1.

That global market is projected to generate $22.7 billion in 20182 – a staggering 100% increase since just five years ago.

Such biosamples are meant for use in drug discovery, clinical research, diagnostics testing, biomarker profiling and gene sequencing, among others.

Michigan is well positioned to be a global leader in biobanking.

Already it is home to the Michigan Neonatal Biobank, the largest and oldest repository of human neonatal bloodspots in the U.S., and the Great Lakes Biorepository Network, a statewide, collaborative effort for biospecimen administration.

Both initiatives have defined and robust end-to-end processes for biosample procurement, distribution and management.

Notwithstanding its existing strengths, the state must invest more in infrastructure, talent development, education and resources if it is to develop a vibrant biobanking enterprise.

Establishment of a “front-door” business model with easy access by clinical partners, industry sponsors and customers, coupled with state-of-the-art data management systems and regulatory procedures, will be essential for success. Moreover, growth of a biobanking cluster should be built through publicprivate partnerships and collaboration with clear benefits to patients, while advancing scientific discovery and innovation.

OPPORTUNITY Establish Michigan as a national leader in biobanking.

ACTION

1-2 YEARS

Evolve the Great Lakes Biorepository Network into a central statewide center for biobanking with state-supported infrastructure, resources, and more functionalities.

KEY STAKEHOLDERS: GLBRN, DHHS, HS

MARKET AREAS

BIOBANKING

3-5 YEARS

Consider a state budget appropriation for the creation of a public-private biorepository as a central storage facility for fail-safe specimen banking.

KEY STAKEHOLDERS: MichBio, GLBRN, HS, DHHS, BLC, POLICY

ACTION

5-10 YEARS

Develop State incentives to enhance hospital systems that better link patient electronic medical records to samples stored in biobanks

KEY STAKEHOLDERS: MichBio, HS, BLC, POLICY,

ACTION

5-10 YEARS

Examine opportunities to enhance the public health of Michigan citizens by leveraging biobank specimens for application in precision medicine practice and approaches to healthcare payment.

KEY STAKEHOLDERS: DHHS, HS, POLICY, MichBio

ACTION

5-10 YEARS

Implement a public-private outreach campaign in partnership with patient/disease advocacy groups and clinical research organizations to raise awareness of the benefit of biobanking on healthcare.

KEY STAKEHOLDERS: GLBRN, HS, DHHS, MichBio, The State of Michigan through its Department of Health and Human Services should provide key support and engagement, with a focus on developing a so-called “population bank” or central repository consisting of biomaterial samples and associated data from the state’s general population, while offering redundant storage capacity for private clients to offset operating costs.

A concerted effort to expand the regional biobanking enterprise would be aided greatly with the implementation of state incentives. These should target the integration of biospecimen data with electronic medical records to address the growing emphasis on connectedness and transparency of clinical information. The result would not only boost the growth of the biobanking economy, but also more importantly, be of critical public benefit by involving patients more in their own healthcare and broadly in medical research. So biobanking is a scientific, economic and social endeavor, and one that Michigan has a singular opportunity to become a niche market leader.

1 Hewitt, R. and Watson, P.H. Defining biobank. Biopreserv. Biobanking, 11(5):309-315, 2013.

2 Biobanking For Medicine: Technology And Market 2014-2024. Visiongain, September 2014.

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MARKET AREA

LIFELINE TO THE BIO-INDUSTRY Contract outsourcing – contract research organizations (CROs), chemistry, manufacturing and control organizations (CMCs) and contract manufacturing organizations (CMOs) – is a subset of not only the largest, but also fastest growing sector (i.e., Research, Testing & Medical Laboratories) in the global bio-industry1.

The vertical includes research, development, market access and post-market activities. Its global market is expected to reach $59.4 billion in 20202 as innovator companies streamline R&D processes, contain costs and change business models to contend with pipeline productivity challenges.

OPPORTUNITY Improve visibility of Michigan-based contract research organization (CRO) and contract chemistry, manufacturing and controls (CMC) companies, along with their capabilities.

ACTION

1-2 YEARS

Develop and implement a branding and marketing campaign to showcase CRO/CMC network and capabilities along the medtech/drug development pathways.

KEY STAKEHOLDERS: MEDC, MichBio, EDs, CRO/CMC

ACTION

3-5 YEARS

Establish a statewide CRO/CMC network to coordinate activities and develop brand awareness strategies for mutual benefit along the medtech/drug development pathways.

KEY STAKEHOLDERS: MichBio, BL, MEDC, EDs

In order to fully realize the growth potential of Michigan’s biosciences economy, state and bio-industry leaders must work to sustain and build CRO/CMC/CMO capacity. A more cohesive regional cluster must be created that can better connect the community and leverage common strengths and opportunities. Top priorities for near-term action include building a defined brand for the CRO/CMC/CMO sector and raising awareness about and aggressively promoting its breadth of capabilities to the region and beyond. Such efforts must be bio-industry led and supported.

The sector faces a looming shortage of experienced contract outsourcing personnel over the next 5-10 years as the current industry-hardened workforce phases out. Education and bioindustry leaders must take steps to ensure that appropriate academic and training programs, including experiential learning opportunities, are in place and aligned to deliver the contract research and manufacturing workforce of the future.

Other states including Indiana, Colorado, Florida and North Carolina have mature talent development programs dedicated to such a mandate. The growth of Michigan’s CRO/CMC/CMOs risks being suppressed without a reliable and sustainable source of experienced talent.

Lastly, the state’s tax policies and business programs must be reformed to broaden access for contract outsourcing companies. Currently, most CRO/CMC/CMOs are not eligible for state incentives enjoyed by innovator companies engaged in R&D and manufacturing. Other states, most notably Massachusetts, are actively pursuing business-friendly policies directed to expanding their CRO/CMC/CMO sectors, recognizing the potential for positive collateral impact on broader bio-industry growth.

The CRO/CMC/CMO cluster is vital to the overall health of Michigan’s bio-industry.

This symbiotic relationship must be given particular attention and action if the state hopes to become a global biosciences leader.

1 Battelle/BIO State Bioscience Jobs, Investments and Innovation 2014. Battelle Technology Practice, 2014.

2 Contract Research Organization (CRO) Market for Early-Stage Development Services and LastStage Development Services: Global Industry Perspective, Comprehensive Analysis and Forecast 2014 – 2020. http://www.marketresearchstore.com/report/contract-research-organizationmarket-for-early-stage-development-services-36074.

Zion Research - Market Research Store, 2015.

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MARKET AREAS

CONTRACT OUTSOURCING

Michigan’s biosciences-related contract outsourcing cluster is highly regarded, though considered to be 2nd tier based on size2.

Built on the state’s legacy in biopharma and medical devices, it is widely known globally for its range, competency, quality and performance. This is due largely to the cluster’s expert talent, many of which are bio-industry veterans with unrivaled experience. The sector includes global brands like MPI Research, NSF international and Cayman Chemical, as well as smaller companies like Ash Stevens, Velesco, TransPharm and Kalexsyn.

AN INTEGRAL SUPPORT SECTOR The professional and business services (PBS) sector plays a key ‘enabler’ role in most regional economies. Beyond creating jobs, PBS firms serve to augment private sector innovation and productivity in an increasingly complex global marketplace.

OPPORTUNITY Develop a more active and visible biosciences professional services community.

ACTION

1-2 YEARS

Enhance existing referral activities that connect bioscience companies to providers of professional services.

KEY STAKEHOLDERS: FCP, MichBio, MEDC

ACTION

MARKET AREAS

MARKET AREA

BIOSCIENCE PROFESSIONAL SERVICES

securities regulations, insurance for R&D and clinical trials, communications and marketing, and engineering and facilities services are just some of essential PBS areas utilized by the bio-industry.

1-2 YEARS

Develop an accessible and comprehensive directory of bioscience professional services providers located within Michigan (and outside of the state if expertise cannot be found here).

Michigan possesses a small-to modest-sized biosciences-related PBS sector. In part this is because few PBS firms locate bioscience group practices in what is considered a 2nd tier region. Such firms are ‘client-driven’ and concentrate accordingly. This is corroborated by the disparity in the strength and size of various service areas. For example, there is an excellent cohort of law firms offering general, M&A and IP protection legal services. In contrast, the state has a dearth of regulatory, compliance and medical product reimbursement consultants to support product development and manufacturing operations.

Bolstering the biosciences-related PBS sector begins by ensuring a fully sourced and interconnected ecosystem that can win more business at home. Understanding the dynamics, opportunities and constraints for increasing the value of PBS is imperative, as are perceived gaps in service functions. A comprehensive assessment to identify all biosciences-related PBS providers and their range of expertise is needed. Such information could be made readily accessible through the Michigan Biosciences Directory1 and integrated into BioConnections®, MichBio’s partnering and referral service, that serves as a custom resource2.

Lastly, higher education and vocational institutions should institute programs to ensure that the PBS sector has the skilled talent necessary to meet bio-industry needs, especially in underserved areas like regulatory affairs, compliance and reimbursement.

More broadly, Michigan must cultivate a business and regulatory environment that will foster bio-industry growth, which in turn can sustain a more vibrant and competitive PBS sector. Without thoughtful and concerted efforts there is every risk that the state’s biosciences-related PBS sector will remain static. Worse, it may ‘hollow out’, and watch business opportunities, and even bioscience companies too, move to more concentrated bio-industry hubs.

KEY STAKEHOLDERS: MichBio

ACTION

OPPORTUNITY 3-5 YEARS

Enhance access by bioscience startups to affordable professional services through special programs and/or partnering agreements.

KEY STAKEHOLDERS: MichBio The bio-industry is particularly reliant on a robust regional PBS cluster – due to a highly regulated business environment and growing trend for outsourcing corporate, R&D and manufacturing functions - as scientific talent and technology alone will not grow a sustainable company.

Support for company formation and governance, intellectual property protection, regulatory review and compliance, investment and fundraising, business operations and

Expand the supply of bioscience professional services to support bio-industry growth.

ACTION

5-10 YEARS

Institute educational/training curricula in specific bioscience service areas like reimbursement/health economics and regulatory compliance at universities/colleges to develop expert talent.

KEY STAKEHOLDERS: MIHIED, URC

1 http://www.michbio.org/directory 2 http://www.michbio.org/bioconnections

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MARKET AREAS

STRENGTHENING THE BIOSCIENCE SUPPLY CHAIN

OPPORTUNITY

Almost every bioscience original equipment manufacturer (OEM) or service-oriented company is dependent on manufacturing suppliers.

Their support impacts many aspects of company operations including innovation, development, and competitiveness.

Bioscience companies are becoming increasingly reliant on a robust manufacturing supply chain due in part to industry consolidation, a stricter regulatory environment, and a shortage of skilled talent at OEMs. A good supply chain An opportunity exists to extend growth of Michigan’s bioindustry into the advanced manufacturing support space. The state enjoys a rich manufacturing history and considerable supplier assets across several discrete segments. However, the numbers of Michigan suppliers that have penetrated the bioindustry space successfully are small to modest. The supplier base is largely unseen and dispersed, though regional hubs exist in West Michigan and Oakland County. This has created challenges for OEMs seeking to commercialize and produce products with local Michigan-based firms, and caused them to outsource business elsewhere.

OPPORTUNITY Raise the profile of Michigan’s manufacturing suppliers supporting the biosciences industry.

ACTION

1-2 YEARS

Enhance the existing directory/lists of manufacturing suppliers to centralize and reflect their capabilities and capacity.

KEY STAKEHOLDERS: MichBio, MEDC, MiDevice, MMTC, MMDC, FCP, MMA, EDs,

ACTION

3-5 YEARS

Proactively develop and promote a “Michigan BioManufactures” brand to help market the sector to OEM companies within and outside of Michigan.

Expand the capacity of Michigan’s manufacturing supplier base to support the biosciences industry.

ACTION

3-5 YEARS

Connect OEMs with needed Michigan-based manufacturing suppliers.

KEY STAKEHOLDERS: MichBio, MMTC, MiDevice, MMDC, FCP, EDs, MEDC

ACTION

5-10 YEARS

Develop ways to incentivize use of Michigan manufacturing suppliers by Michigan-based OEMs.

KEY STAKEHOLDERS: MichBio, MMA, BLC, POLICY West Michigan medical device consortium, MiDevice that promotes supplier expertise – from concept design through manufacturing and distribution1. A 2014 asset mapping study extended that database by identifying many medical device OEMs and manufacturing suppliers statewide along with their capabilities and capacities2. The same needs to be done now for suppliers to the R&D and testing, agri-biosciences, and biopharma sectors, and integrated into a one-stop, central and comprehensive business referral tool like MichBio’s Michigan Biosciences Directory3.

The value of any statewide accessible supplier network should be maximized through a vigorous marketing campaign. Robust linkages between regional suppliers are needed as a resource to support existing and emerging biomanufacturing companies in Michigan. In addition, active promotion of such an ecosystem under a single Michigan brand could help access new markets.

A substantive gap analysis of the manufacturing supply chain should be conducted and a plan developed to grow or attract more bioscience capabilities. A greater focus must be placed on helping small-and medium-sized manufacturing supply firms to 1) adopt new technologies and expertise, 2) create partnerships involving OEMs, universities, and professional service providers, 3) make training programs available that ensure a skilled manufacturing workforce, and 4) provide incentives to recruit and retain suppliers, especially those that support Michigan-based OEMs.

KEY STAKEHOLDERS: MEDC, MichBio, MMA, MiDevice 1 http://www.midevice.org/members-capabilities/ 2 Market Needs Analysis and Identification, Cataloging, and Mapping of Assets and Resources of the Medical Device Sector in Michigan. Institute for Research on Labor, Employment and the Economy, University of Michigan, September 2014.

3 http://www.michbio.org/directory

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MICHBIO | michbio.org

MARKET AREAS

MANUFACTURING SUPPLIERS

Michigan should commit to growing a more integrated biosciences-related manufacturing supplier ecosystem. To begin, a deeper inventory of the region’s existing strengths in advanced manufacturing support is needed. An excellent example is the easy-to-read matrix developed by the

MICHIGAN’S TIME: A CALL TO ACTION IS MICHIGAN READY TO BUILD A POTENT AND DYNAMIC BIO-INDUSTRY? Many states aspire to be a leading biosciences hub. For many, the goal is but a dream in an increasingly competitive environment where many regions and countries fiercely vie for larger shares of the global biosciences economy.

Michigan has many of the key ingredients and tremendous underdeveloped capacity to develop a highly functioning and innovative bio-industry – strong academic R&D funding, growing accessibility to capital, skilled workforce and talent pool, maturing entrepreneurial culture with noted successes, and strong base for innovation. The time has come to leverage our assets to the economic benefit of the region and its citizens.

In short, Michigan has great potential to build a biosciences cluster the envy of others. This strategic roadmap issues a call to action for bio-industry stakeholders—private sector, academia, healthcare systems, support services providers, economic development organizations and government—to commit to and act on a cohesive, long-term vision necessary to realize the region’s promise in biosciences and innovation.

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MichBio P.O. Box 131099 Ann Arbor, MI 48113-0199

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