ALBANY – To see what state officials want for Buffalo, head 280 miles east, to the sprawling NanoTech Complex on the University at Albany campus.
In six buildings spread over 50 acres, 3,100 people go to work doing cutting-edge research for computer-chip production. Since 1993, New York State has put $1 billion into the complex, a down payment that spurred companies such as IBM and Intel to invest another $13 billion.
“I like to say about Albany, anybody who wants to do anything, anywhere in nano has to be here,” says Alain E. Kaloyeros, senior vice president and CEO of SUNY Albany’s College of Nanoscale Science and Engineering.
Now the state wants to replicate that with biotech in Buffalo.
Starting with the December announcement that New York State will spend $50 million to build a life-sciences innovation center on the Buffalo Niagara Medical Campus, the state aims to incubate a biotech cluster in Buffalo, fueled by University at Buffalo innovation, local medical expertise and private investment.
Albany Molecular Research Inc., the first tenant, has pledged to create 75 jobs over five years. The state says it has two so-far-unnamed companies lined up to bring in 178 more jobs, with the total private investment topping $200 million. The state will employ 25 people to manage the center.
The question is whether those seeds can grow into something as big as Albany’s nanotech industry – and become an economic engine for Western New York.
Observers say it will be tough. Nanotech was more of a pioneering field when Albany jumped in. Life sciences these days is already hot, with cities and universities battling for a piece of the action.
And the first step – bringing in AMRI – has critics. “In my mind, an investment in AMRI is a speculative investment. I’ll leave it to others to say whether a speculative investment is good public policy,” said George T. Conboy, president of Brighton Securities in Rochester, one of 20 academics, watchdogs, state officials, current and former AMRI employees and development experts interviewed for this article.
Advocates are confident. They say AMRI employees will start moving into temporary space in Buffalo’s former Trico complex within six months. During the next two years, the state will construct a new $15 million building and spend $35 million more on lab equipment, says Matthew K. Enstice, president of the Medical Campus.
Kaloyeros, who besides running the Albany nanotech effort is a driving force behind the life-sciences investment in Buffalo, says he will stake his reputation on the project producing 500 jobs within three years and 1,000 jobs within five years.
“I can tell you this,” Kaloyeros says. “What I predict, and what the governor wants, is anyone who wants to do anything, anywhere in medical innovation will have to be in Buffalo.”
The Albany story
The state’s first investment in the NanoTech facility dates to 1993, under the first Gov. Cuomo, and the first building was completed in 1997. The NanoTech Complex had just 70 employees in 2001. Today there is 800,000 square feet of space at the complex and 500,000 square feet more planned or under construction.
Employees from the world’s major computer-chip makers work side by side with SUNY Albany faculty, staff and students. Dozens of vendors have opened offices on site, providing engineering and architectural services or supplying “exact motion” cranes and vacuum pumps – the latter provided by Edwards Vacuum, a British company that has its U.S. headquarters in Sanborn.
“That billion is supporting companies, not just here in Albany or not just here at CNSE, but across the state, including out in Buffalo and companies like Edwards Vacuum,” said Stephen R. Janack, the nanocollege’s vice president for marketing and communications. (CNSE is SUNY Albany’s College of Nanoscale Science and Engineering.)
Across the country, biotech is one of the hot business development targets.
“It’s right up there with sports stadiums,” said Greg LeRoy, executive director of Good Jobs First and an expert on economic development subsidies. “The caution is there’s only a few communities that are true winners in landing big biotech clusters.”
Life sciences had been identified as a priority for the region for the governor’s “Buffalo Billion” proposal, partly because Buffalo already has several big medical institutions, notably the Gates Vascular Institute and Roswell Park Cancer Institute. Last summer, aides to Gov. Andrew M. Cuomo contacted Enstice of the Buffalo Niagara Medical Campus to say they had several companies interested in Buffalo if the campus had space.
One company, AMRI, wanted to expand and initially considered the Albany area, until the governor’s office, Empire State Development Corp. and the NanoTech team persuaded the company to look more closely at Buffalo.
“AMRI was picked as the first anchor tenant because of their reputation, the fact that they’re an innovation hub, the fact that they could act as a magnet with us to attract all the pharma,” Kaloyeros said.
State and NanoTech officials are trying to change the narrative that portrays the state investment as a grant to AMRI. Jennifer Diagostino, executive director of the Coalition for Economic Justice in Buffalo, noted the $50 million spent by the state to generate 250 jobs comes out to $200,000 per job.
“The first gut reaction was, $50 million is a lot of money,” Diagostino said.
What is AMRI?
December’s announcement likely was the first time many in Buffalo had heard of AMRI.
The company does drug research and manufacturing for customers around the world – 300 companies each year, including Buffalo’s Kinex Pharmaceuticals – that don’t have the lab equipment or staff expertise.
“We really built a global footprint in an industry that didn’t exist when we started,” said Thomas E. D’Ambra, chairman, CEO and president of AMRI.
Customers give AMRI a chemical molecule or compound – something that has potential as a new medical drug – and scientists and technicians at AMRI test, analyze and manipulate it, in some cases making thousands of changes to the original version. This drug discovery process lasts until scientists are convinced the molecule or compound is ready for testing in humans, when AMRI produces large batches for use in clinical trials.
After years of drug discovery, drug development and clinical testing – the only step AMRI doesn’t perform – AMRI can manufacture the drug’s active ingredient once it receives federal approval.
AMRI has 1,300 employees worldwide, with 700 in New York State, as well as large facilities in India and Singapore, where the costs of doing business are considerably lower.
“We don’t make our own drugs, we make them for our customers,” said Louis Garguilo, AMRI’s vice president for business development, showing off rows of patents mounted on a wall in the company’s headquarters in Albany.
AMRI’s recent financial performance has raised questions about whether the state is putting its money behind the right company. AMRI had a combined $112 million in losses between 2009 and 2011, and the company will lose the royalties it receives from the production of fexofenadine – the prime ingredient in Allegra – once the last of those patents run out in 2015. AMRI’s stock price has fallen from its peak of $63 a share in 2000 to $2.60 last summer. It closed at $7.79 on Friday.
“They haven’t turned a full-year profit since before 2008, and I think that’s a reasonable concern,” Conboy said.
D’Ambra said the losses reflect charges taken on the closing of a facility in Hungary and layoffs in Albany, among other cost-cutting moves. He says AMRI will report a profit for 2012. “We’re healthy,” he said.
Two former AMRI employees said they saw morale problems. “The turnover was really unbelievable,” said Jenny Frontera, who worked as a contracts analyst in AMRI’s legal department from 2008 to 2011.
Mark Darey was a senior research scientist for AMRI from 2001 to 2009, when he was laid off. “The way we made our money was by basically doing things cheaper than the competition. But there’s only so far you can go with that,” he said.
State officials remain bullish about AMRI, and they say the Albany NanoTech Complex is the right public-private model to follow.
Said Howard B. Glaser, director of state operations and the governor’s senior policy adviser: “If we wait around for a sure thing, Buffalo is going to be waiting for jobs.”