Entrepreneurship. Spinoffs from Former Employers

Entrepreneurs are increasingly licensing technology and receiving aid from their former employers and using it as the basis to build new companies.

Divergence, Inc.

Divergence, Inc. chief executive officer (CEO) Derek Rapp described the history of his St. Louis start-up firm in a paper presented at the Revitalizing the Heartland’s Chemical Economy Symposium (part of the 2011 ACS Combined Midwest/Great Lakes Regional Meeting). Divergence began operations in 1999 as a genomics-based company looking to identify pathways to control and prevent parasitic infections of plants. Its goal was to develop a biogenetics means of controlling certain pests (nematodes) that eat crop plant roots thereby reducing productivity. After giving up on this approach, Divergence licensed technology from the CEO’s former employer, Monsanto, and developed it to the point of commercialization. In October 2011, Monsanto bought the company giving investors and Divergence employees a handsome profit and jobs with Monsanto.

Michigan life sciences start-ups

Michigan life sciences start-up firms provide interesting examples of start-ups that received support from the large firm that gave rise to them. In 2003, Pfizer closed its Kalamazoo, Michigan laboratory, the former site of UpJohn’s research center. About 1,000 employees lost their jobs. To prevent the departure of all of these professionals, the state and city provided seed money for aspiring entrepreneurs to start businesses. The more than two dozen start-ups that arose were primarily pharmaceutical service companies rather than companies relying directly on Pfizer technology. Most were born at the Southwest Michigan Innovation Center, which opened in July 2003 at the Western Michigan University Business Technology Research Park in Kalamazoo.

As of 2011 most of these service companies have graduated from business incubators to become fully operational. At least some have become profitable. Together they offer a broad range of services from drug discovery through early stage clinical trials with associated manufacture of the drugs needed for these trials. They employ a number of former Pfizer and Upjohn scientists. In at least some cases, Pfizer has provided these firms with contract research business.

An example is Jasper Clinical Research & Development, which offers early-phase clinical studies. Jasper has received a facility and equipment from Pfizer plus three-year contracts for contract research business Pifzer estimates total as much as $20 million.

Another start-up, CeeTox, Inc., provides in vitro toxicity screening of drug candidates, received equipment and technology from Pfizer and a recent $25 million dollar contract from the U.S. Environmental Protection Agency.

The founders of contract research organization Kalexsyn, Inc., Robert Gadwood and David Zimmerman, based their 2003 start-up company on what they had learned about CROs while working for Pfizer and its predecessor companies in Kalamazoo. Former Kalamazoo employees initially formed the core of Kalexsyn’s workforce. As the firm grew to 23 employees, Kalexsyn outgrew its original 7,000 square foot site in the Southwest Michigan Innovation Center. Kalexsyn built its own $4.5 million, 20,000 square foot facility in the Business Technology and Research Park on the Western Michigan University Parkview campus. The building includes both laboratory and office space.

A mixed record of success

Most but not all the post-Pfizer start-up firms have succeeded. For example, contract research organization firm ADMETRx, Inc. also was founded in 2003 in the wake of Pfizer’s laboratory closure. In May 2010, ADMETRx shut down with CeeTox acquiring some of its assets.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.

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