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November 27, 2006

Group works to find lab space for Ann Arbor startup

Investors may pressure Lycera to move to California

By Sherri Begin-Crain's Detroit Business

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ANN ARBOR, MI -- (November 27, 2006) -- A startup company seeking at least $20 million in venture-capital funding to develop drugs to treat autoimmune diseases and cancer wants to keep its company in Ann Arbor — provided it can get laboratory space.

Lycera Corp., which this fall licensed about 70 domestic and foreign patents and patent applications from the University of Michigan with seed money from Ann Arbor-based EDF Ventures and others, could face pressure from potential West Coast investors to move the company there.

Lycera plans to use the money to develop a topical drug for psoriasis, and conduct further research into treatments for autoimmune diseases and cancer, according to an executive summary of the company’s research and plans.

The company’s goal is to produce “first-in-class” drugs that offer a new approach to treatment, said CEO Gary Glick, who is the Werner Bachmann Professor of Chemistry at UM. Lycera’s first product could be ready for market in three to five years.

Glick said he thinks the company, which now contracts out its research work, will be in a position early next year to hire 12 people.

“The ideal location (for Lycera) would be in Ann Arbor,” said Glick, 45. “Having close proximity to one of the world’s best research universities is an enormous benefit and almost irreplaceable.”

“I hope we wind up in Ann Arbor, but ultimately, we have to do what’s best for the company.”

Ann Arbor Spark, Pfizer Inc., UM and the Michigan Economic Development Corp. are working to get additional wet lab space in the city to meet the immediate needs of Lycera and about a dozen other startups, said Michael Finney, executive director of Ann Arbor Spark. The group hopes to find space within three to four weeks.

“(Glick) has been working very hard to keep his business in Ann Arbor,” Finney said. “But we have to do some things also that help him.

“If we’re going to overcome the pull (West Coast investors) have, we’re going to have to make sure we’re addressing his needs.”

The new wet lab space, which will need to include running water, direct ventilation and other features such as fume hoods that enable the synthesis and testing of drug molecules, would serve as a business incubator, Finney said, and be operated by Ann Arbor Spark, a regional economic-development group. He declined to say how the new lab will be funded.

“There is existing space out there that is desirable and, with reasonable modifications, would work perfectly for companies needing wet lab space,” Finney said.

Ann Arbor Spark is working with Warren-based F.H. Martin Construction Co. on the project, he said.

Finney said Ann Arbor Spark has looked at four sites in the area: one at UM, one owned by a private, unnamed business, and two owned by Pfizer that are not on its Ann Arbor campus.

“The one we think is most suitable for this project is a Pfizer-occupied space,” that’s about 12,000 square feet but could be expanded to 30,000 square feet, Finney said.

A recent study commissioned by the Washtenaw Development Council identified a need for roughly 50,000 square feet of wet lab space in the Ann Arbor area during the next two to three years, Finney said. The 12 startups Ann Arbor Spark is talking with collectively would need about 30,000 square feet of that.

While negotiations continue, UM has offered short-term lab space to Lycera, Finney said, and some specialized equipment on a limited basis.

If the group is unable to secure wet lab space in Ann Arbor for Lycera, Finney said he expects the company to move out of state.

“That would be unfortunate because Lycera is exactly the kind of company that we want here to help Michigan transition to a 21st-century economy,” he said.

Mary Campbell, EDF Ventures’ general partner, said her firm also expects to participate in the first-round of funding.

“There is a group of venture-capital investors who like to keep an eye on what’s happening at UM, and they appreciate someone being on the ground here, helping with some of the early company formation, company-strategy issues,” she said.

“This is one of the most exciting opportunities to come out of UM in a long time.”

The state and Ann Arbor Spark are putting together an incentive package to keep Lycera in the state, MEDC CEO Jim Epolito said.

The MEDC plans to offer Lycera a single-business tax abatement, Epolito said, declining to give the exact amount. By law, the abatement would require that the city of Ann Arbor offer a similar tax abatement or provide equivalent dollars, he said.

“This is another test for us, and we’re going to do everything we possibly can” working with groups such as UM and Ann Arbor Spark, he said.

Lycera Corp.
  • What it is: Ann Arbor-based Lycera Corp. is a startup developing drugs to treat immune diseases and cancer.

  • What it does: It is currently working on a drug for the treatment of psoriasis and treatments for other diseases and cancer. It hopes to have its first drug on the market in three to five years.

  • Connection to Ann Arbor: CEO Gary Glick is a professor of chemistry at the University of Michigan. Lycera also has licensed patent applications from UM and has received seed money from Ann Arbor-based EDF Ventures.

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