KALAMAZOO - With the shift in the pharmaceutical industry from an in-house model to an outsourcing model, pharmaceutical companies of all sizes have been partnering with smaller contract research organizations like Kalexsyn Inc.

In a sense, Kalexsyn’s customers have at their disposal a state-of-the-art facility in the Western Michigan University Business Technology and Research Park (BTR), as well as a team of "world-renowned" highly skilled scientists. The company’s name is a shortened version of Kalamazoo Experts in Synthesis.

They get all that without the commitment and cost of bringing the functions in-house.

"(They can) really turn it on and turn it off as their budget and their scientific plans change," said co-founder David Zimmerman, noting the situation is akin to the outsourcing seen in the automotive industry 15 or 20 years ago. "It really allows the large companies to focus on things they do very well."

And it leaves room for the CROs to be the specialty suppliers to the pharmaceutical industry. Kalexsyn’s role in that supply chain is designing and creating molecules.

That’s been a good place for Kalexsyn to be. From 2006 to 2008, Kalexsyn almost doubled its revenue and expects a 20 percent increase this year. For its growth, the company was honored by the Edward Lowe Foundation as one of the top 50 Michigan Companies to Watch.

"I liken (our business) to the construction industry where, essentially, Kalexsyn plays the roles of architects and does the construction except rather than working with wood or metals, we work with molecules," Zimmerman said. "We’re the chefs in the kitchen. We look in your refrigerator to decide what ingredients need to be combined to come out with a palatable dish."

In scientific terms, clients come to Kalexsyn with an active molecule that they believe has potential, but that doesn’t currently have the right characteristics – like solubility, safety and activity – to move forward into clinical trials, for example.

"What we do is design the new molecules and then actually implement the construction of those new molecules," Zimmerman said. "It’s something our scientists have done for decades within large pharma. Essentially what we’re doing is harnessing that large pharma experience and providing it to small pharmaceutical and biotechnology customers. Chemistry is a very infrastructure (intensive), expensive undertaking. When small biotechs can find the right chemistry partners, they don’t have to undergo that task of building infrastructure. It’s also difficult to find, retain and recruit seasoned people."

Field of dreams

Zimmerman and Robert Gadwood, both ex-Pharmacia employees who started at The Upjohn Co., co-founded Kalexsyn in 2003. Gadwood was an associate director of chemistry, and Zimmerman came out of the administrative side in which one of his main responsibilities was outsourcing medical chemistry.

To help them get started, they tapped into the resources at the BTR, WMU’s Bioscience Research and Commercialization Center and the Michigan Economic Development Corp., which gave the company a $192,000 loan, a debt Kalexsyn quickly repaid as the company grew steadily out of the gates. Zimmerman credits the "proactive leadership" in Kalamazoo for having the vision to create easy pathways for companies like Kalexsyn to get up and running.

"Kalexsyn is a great example of what success looks like in start-up life science," Ron Kitchens, CEO of Southwest Michigan First, told LabWork. "They have achieved a global customer base, market credibility and sustainability. They have become a great example of what can be done with continued focus on the life science sector."

Six companies –Kalexsyn, AureoGen, Micromxy, Forensic Fluids, ADMETRx, and Venomix –on the Edward Lowe Foundation’s 50 Michigan Companies to Watch list are life science companies in Southwest Michigan.

"The selection of so many of our companies to the top companies list confirms our strategies are paying off," Kitchens said.

Zimmerman was a customer of the Kalexsyns of the world at that time. That customer experience –from the other side of the lab bench –helped guide the two men as they set up their own company.

What kept the company in West Michigan was the area’s uniqueness and opportunity, its culture and philosophy, he said.

"People who have experienced Kalamazoo don’t want to leave Kalamazoo," Zimmerman said.

And it’s not hard to get other people to buy into the region’s charm. After Pfizer closed its operation in Ann Arbor, for example, Zimmerman was able to attract five scientists to Kalexsyn. Many of the hires at the company have that big pharma experience, but Zimmerman said they’re also looking to top graduate schools across the country to help mentor the next generation of chemists, in particular.

Room to grow

Currently, Kalexsyn employs 31 people, 22 of which are scientists. In the existing facility, the company has room for another 10 scientists, plus it has the option of expanding the building on adjacent land.

Kalexsyn’s clients span the globe from Japan to Austria, Zimmerman said, noting about 25 percent of the company’s revenue comes from overseas sources. Nearly 60 percent of their revenue comes from companies on the West Coast. Some business comes from Michigan, but most is from other pharmaceutical centers across the country, like New Jersey and Massachusetts.

Most clients are outside of Michigan because other areas of the country have already been established in the biotech fields and drug research and development.

"We’re seeing a mini version of that here in Southwest Michigan where we have the start on a very strong nucleus of pharmaceutical companies," Zimmerman said. "And I think success breeds success. As we continue to move forward and continue to be successful, it will not only attract new companies to the area but new money to the area. And we’re starting to see that in the deal flow that’s been going on here in West Michigan."

Averaging about 175,000 frequent flier miles per year, Zimmerman spends about 75 percent of his time on the road getting in front of potential clients.

Still, he credits the work of groups like Southwest Michigan First for constantly promoting the region nationally and internationally and word of mouth from past clients for pushing business his way. Zimmerman said he receives, on average, two or three calls per week in unsolicited business.

"That’s significant and that trend will continue," he said. "I really anticipate 30 percent of our business in the future will be unsolicited business leads. And frankly, that’s the best kind."

Another contributing factor are the other local companies, especially CeeTox, PharmOptima and ADMETRx, with which Kalexsyn has partnered to offer clients a packaged solution for their needs.

"These are people that we’ve interacted with for 15 or 20 years, so I can pick up the phone and know who to call and I know what the work ethic is and what the product will be," he said.LW