University of Michigan to lease piece of ex-Pfizer property to Lycera for biotech expansion
Biotech startup Lycera Corp., which has attracted millions in pharmaceutical research dollars and venture capital to develop its drug technology, plans to launch an operation at Ann Arbor's ex-Pfizer campus.
Lycera founder Gary Glick (right), a University of Michigan professor, is leading development of the company's drug therapies.
Angela Cesere | AnnArbor.com
The University of Michigan, which purchased the property in 2009, plans to lease to Lycera 14,134 square feet of offices and lab space at an ex-Pfizer building located on the west side of Huron Parkway, according to documents expected to be approved Thursday by the U-M Board of Regents.
It's unclear whether that means that Lycera is exiting its space at the Michigan Life Science Innovation Center, a Plymouth Township biotech incubator managed by economic development group Ann Arbor SPARK.
Lycera, which was founded by U-M professor Gary Glick, is developing therapies to treat various autoimmune diseases, including rheumatoid arthritis, psoriasis and multiple sclerosis.
The decision to open an operation at U-M's ex-Pfizer property comes less than two months after Lycera struck a research agreement with pharmaceutical giant Merck that could be worth more than $300 million.
Lycera, which is backed by deep-pocketed venture capital investors, will pay a starting rate of $42,083 a month for a "full service gross lease with all costs covered by monthly rent," according to the regents documents. That rate will rise 3 percent at yearly intervals during the three-year lease.
U-M is also agreeing to provide and manage rodents for use in Lycera's clinical work. That amount could equal up to $500,000 annually.
U-M also revealed that North Campus Research Complex executive director David Canter, a former leader of the Pfizer site, owns an equity stake in Lycera.
Since Canter is leading U-M's repositioning of the Pfizer property, his ownership stake in the company had to be disclosed as part of the deal. In the meeting documents, U-M said Canter, Glick and two other U-M professors with ownership in Lycera "have met state law requirements with the disclosure" of their interests.
Lycera is moving into space housed within Building 26 on the Pfizer property. (See a map of the property here.)
The Board of Regents must officially approve the deal before it's finalized.
Glick and Canter were not immediately available for comment Monday afternoon.
Skip Simms, SPARK's vice president for entrepreneurial business development, said the group is in discussions with Lycera about continuing to lease space to the company at the Plymouth Township incubator.
Lycera's arrival in Ann Arbor comes after a series of changes for the company, which is considered one of the most promising drug development startups in Michigan.
The company had shifted its headquarters to Massachusetts more than a year ago to accommodate then-CEO Bill Sibold, who lived there.
But Sibold left the company less than a year after joining, and the company eliminated its Massachusetts office and moved its headquarters back to Michigan.
The decision marks another sign that U-M plans to use the ex-Pfizer property to welcome startup business tenants. The university earlier this year officially opened the Venture Accelerator, a 16,000-square-foot incubator that houses about half a dozen private startups that are developing U-M intellectual property.
The university also rents specialized lab space to Michigan State University startup BoroPharm, which is reportedly interested in expanding its presence here.
Lycera's deal with U-M gives the company a local platform to accelerate technology that may have global potential.
As part of the startup's research agreement with Merck, the pharmaceutical giant paid $12 million upfront to Lycera. But the deal could be worth up to $295 million in milestone payments depending on the key technology's progress. In addition, Lycera would receive royalty payments based on sales performance if the companies' collaboration leads to commercialized therapies.
Merck will handle clinical development of Lycera's technology and will receive marketing rights for the technology that comes out of the partnership.
That deal added to Lycera's stockpile of cash. In 2009, the company announced that it had secured access to $36 million in venture capital from several firms, including Ann Arbor-based EDF Ventures.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
Lets Get Real
Thu, Apr 21, 2011 : 5:39 p.m.
PS. And of course we won't discuss the insider wheeling and dealing going on here (i.e. all of the disclosures necessary to make this happen). The inmates are running the assylum.
Lets Get Real
Thu, Apr 21, 2011 : 5:33 p.m.
I'm thrilled the space is being used, jobs are being created and the headquarters is being moved back to MI. (I can't believe the company would move the HQ there for a CEO who stayed less than a year, but that speaks to the self-importance of some people and the desperation of those who they've duped into believing they are the only salvation) However, treetowncartel's concern is genuine. 14,000+ sq ft of space is being RENTED and more to other entities (i.e. MSU spin off). Yes it is specialized space, but the OWNER - UM - is a non tax paying entity. They collect rent - generating a revenue stream that pays no tax; they own the property being rented - on which they pay no property tax, there are assets in the building - on which they pay no personal property tax, and of course they don't pay MI business tax because they are a tax supported, state educational institution. AND this is fair? Other property owners pay property tax and income tax on their revenues not to mention personal property taxes and MI business tax and get no taxpayer dollars for operational support. Sounds like an unfair advantage to me. But then I'm just one of those small business owners being called a "millionaire and billionaire" who needs to pay their fair share cause the government entities say I'm not. Ironic, huh?
Tom Joad
Tue, Apr 19, 2011 : 1:41 a.m.
These are all pipe dream figures. Biotech drugs are fraught with extreme development costs and suspect profits based on sales of unproven drugs. With the UM as principle animal research purveyor how much scientific accountability will the university involve itself in the final measure?
Watcher
Mon, Apr 18, 2011 : 11:39 p.m.
211.181. Taxation of lessees or users of tax-exempt property; exceptions Sec. 1. (1) Except as provided in this section, if real property exempt for any reason from ad valorem property taxation is leased, loaned, or otherwise made available to and used by a private individual, association, or corporation in connection with a business conducted for profit, the lessee or user of the real property is subject to taxation in the same amount and to the same extent as though the lessee or user owned the real property.
Lady Audrey
Tue, Apr 19, 2011 : 4:12 p.m.
Yeah, but who is going to enforce this?
DennisP
Tue, Apr 19, 2011 : 12:30 a.m.
Well, there you have it. State law imposes the property tax upon the tenant as if the tenant owned the property. Thanks for the info. That should put this speculation on all our parts to rest.
Kafkaland
Mon, Apr 18, 2011 : 10:25 p.m.
Let's be realistic here, for a moment. Of course we all wish that a company like this would be paying property taxes, but it just isn't going to happen. First, this is highly specialized space with services like the rodent supply that no commercial landlord in the Ann Arbor area is going to supply. Second, don't you think a company with this kind of high-paying jobs and tremendous potential for growth wouldn't ask fo a tax abatement, that pretty much any municipality would be happy to grant? So I'm for one glad that this portion of the Pfizer space is put to good use that will, with a bit of luck, benefit Ann Arbor in the long run by providing a home to a company with hihg-paying jobs and growth potential.
DennisP
Mon, Apr 18, 2011 : 8:07 p.m.
That question about property taxes is a good one and I don't think it is addressed specifically in state law except that it probably remains as untaxed real property because of UM ownership. The businesses occupying the facility will be subject to a personal property tax though (all equipment such as computers, etc are valued and taxed). In Iowa, they passed legislation that removes that tax-free status when public property is leased to a private entity. <a href="http://itrl.idr.iowa.gov/mx/hm.asp?id=427.1" rel='nofollow'>http://itrl.idr.iowa.gov/mx/hm.asp?id=427.1</a> See also: <a href="http://itrl.idr.iowa.gov/mx/hm.asp?id=1B8E" rel='nofollow'>http://itrl.idr.iowa.gov/mx/hm.asp?id=1B8E</a> Perhaps the State Legislature should consider similar legislation to cover these unique circumstances. While I applaud UM and Lycera for their local, mutual endeavor, it seems to be an uncompetitive advantage to those companies that can get a lease at Pfizer from those who are unable to for whatever reason and, certainly, makes it difficult for other owners of leasable property who need to build in the costs of taxation in their lease rates. Tax laws shouldn't favor public entities over private ones when the public entities engage in commercial enterprise--regardless of how well-meaning the intentions may be.
Lady Audrey
Tue, Apr 19, 2011 : 4:01 p.m.
Congratulations to Dennis for this thoughtful reply. I can imagine that the rental rate for Lycera is competitive with market. If it is a sweet deal, though, it is troubling that the manager of the site (Cantor) is also an owner of the company and therefore may personally benefit from keeping costs down for his investment. Also has the company nearby so he can keep an eye on his investment. Companies who don't have access to the animal facilities of the University are definitely at a competitive disadvantage if they have to build their program from scratch.
DaLast word
Mon, Apr 18, 2011 : 7:44 p.m.
Funny,because that's the very first thing that crossed my mind as well, taxes. At the very least they must pay the personal property tax and they really should pay both.
Randy M
Mon, Apr 18, 2011 : 7:36 p.m.
@brucae: Which other tenant in town can offer 14,134 square feet of offices and lab space -- not to mention being able to "provide and manage rodents" for use in Lycera's clinical work? And how do you know that $42,083 is an under-market monthly rental? It's pretty hard even to gauge the market for such a unique space, but maybe you have some inside knowledge. I would think that keeping in town a start-up dedicated to developing therapies to treat various autoimmune diseases, including rheumatoid arthritis, psoriasis and multiple sclerosis, would be a good thing.
Veracity
Mon, Apr 18, 2011 : 7:15 p.m.
Addendum: ...... and pay housing real estate taxes.
Veracity
Mon, Apr 18, 2011 : 7:13 p.m.
treetowncartel and buceae: Well, as lessee, Lycera Corp should not pay property taxes. Also, the University of Michigan property is exempt from taxation. Thus, the city gains no taxes unless those working in the facility live in Ann Arbor and pay millage.
bruceae
Mon, Apr 18, 2011 : 7:05 p.m.
Right, what taxes. U of M pays nothing. Can now lease property to another U of M "good ole boy" at a lower rate than anyone else in town can since they operate tax free and then they get to make a little profit off the whole deal.
alan
Mon, Apr 18, 2011 : 7:44 p.m.
Are you suggesting anything wrong with tax exempt status for educational institutions?
treetowncartel
Mon, Apr 18, 2011 : 6:42 p.m.
Anybody care to explain how property taxes work in this scenario?