Public-Private Partnership with AMRI to Create 250 Jobs

Today, the Governor announced that New York will invest $50 million in state of the art biomedical research equipment and facilities, and has secured an agreement from a private company, Albany Molecular Research Inc. (AMRI), to locate in Western New York at Buffalo Niagara Medical Campus (BMNC) a new drug discovery research and development center. This investment, $35 million of which will go towards new equipment and $15 million of which will go towards improving existing lab space, will leverage $200 million in private investments and create 250 jobs. At least initially, the facility is expected to be located in the Innovation Center on Ellicott Street.

Albany Molecular Research, Inc. is a global contract research and manufacturing organization offering customers fully integrated drug discovery, development, and manufacturing services.

The advanced manufacturing and health sciences approaches to job growth, two key tenets of Governor Cuomo’s overall Buffalo Billion investment, will be based on recreating what nano-electronic research and development did for the Capital Region in Western New York, instead using nano-biomedical R&D. Rather than give money directly to private companies, the State, through SUNY, invested in core infrastructure and equipment and used that equipment as the incentive to attract companies to establish themselves in these new high-tech facilities located in the Capital Region. This provided a state owned foundation for private sector job growth. This approach made the Capital Region the international center for nanoscale research, and now commercial, development in the field of electronics.

The Governor, through his Buffalo Billion initiative and under the leadership of the Western New York Regional Economic Development Council, is making a down payment on replicating this approach in Western New York, however using a different field of research and development than what was used in the Capital Region. These strategic investments by the state, leveraged significantly with private investment, will build upon Western New York’s leadership in life science research and increase the commercialization of innovations developing from that research as well as more advanced manufacturing jobs in the pharmaceutical industry.
 
AMRI Chairman, CEO & President Thomas E. D’Ambra, Ph.D. said, “Albany Molecular Research, Inc. is pleased to be working with the State of New York to locate a new state-of-the-art pharmaceutical research, development and testing operation in Buffalo. We salute Governor Andrew Cuomo’s vision and leadership in building a new New York as a global hub for pioneering innovation and economic opportunity in the leading scientific fields of the 21st century. This new initiative with recognized institutions like the Jacobs Neurological Institute of the University at Buffalo and the College of Nanoscale Science and Engineering is projected to generate over $250 million in investments and attract 250 high-paying positions to Buffalo.”

amriglobal_logoweb.jpg“Since our founding in the Capital District in 1991, AMRI continues to be a long-time corporate citizen in Upstate New York. AMRI currently has nearly 700 employees in New York, with just under 1,300 employees companywide and has invested almost $200 million in the Albany and Syracuse regions over the years,” said D’Ambra.  “AMRI is excited to be working with the Governor and our other partners in making this vision a reality.”

“Our signature initiatives build upon our council’s 2011 five-year plan, ‘A Strategy for Prosperity in Western New York,’ by exploring the opportunity to leverage our region’s key assets,” said Howard A. Zemsky, Managing Partner at Larkin Development Group and Regional Council Co-chair. “I thank Governor Cuomo for giving our region this incredible opportunity to support the expansion of local companies, and to target and attract new businesses from across the country and around the globe.”

In other Medical Campus news, The Jacobs Institute was awarded $4 million for the construction of a medical device prototyping and research facility. The project will result in the creation of 20 new jobs, and will help leverage an estimated $12 million in private sector investment. The construction of the Jacobs Institute facility is on schedule as the non-profit continues to build partners with businesses like Toshiba.

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46 comments
Non Believer
Non Believer

I'm not sure what bumbling fool did the due diligence on this deal? Certainly AMRI came nowhere near discovering a drug at their Washington state site.

Donating $50 million in tax dollars appears a ridiculous investment given this track record. The reality of this deal will be a hard pill to swallow as these tax dollars could have been used to spur the growth of more productive opportunities in biotech or elsewhere.

whatever
whatever

It will be interesting to see what manufacturing vendors of Apple and other electronics firms end up doing in the U.S., and where, why, etc.

I wonder how many $ would given by NY state to any company per each job it created here making components for trendy products. It could be a very large amount in the recent trend of multimillion gifts for 17 new jobs at Rich's and for AMRI's "small fraction" of supposedly/eventually 250 jobs at BNMC.

Then again, if NYS subsidizes industrial engineers it could backfire in the impact on job count totals - since one of the purposes of an IE is to find ways of minimizing the total #'s of workers needed to manufacture things.

Maybe NYS would offer to subsidize only IE's who promise to not be very effective!

benfranklin
benfranklin

What I've read says they're considering moving just one of the Mac lines back to the U.S.

In the U.S., we employ about 200,000 industrial engineers (total, all industries). In China, Apple (through other companies) employs 30,000 industrial engineers supporting 700,000 line workers.

In the Job's biography, he points out that there aren't enough engineers in the U.S. to cover what Apple would need.

whatever
whatever

elmdog, if it was as simple as you say and as good an idea as you say, don't you suppose they'd just go ahead and do it?

NYS just agreed to give $50M from taxpayers for what very possibly will end up being less than even the 250 jobs Cuomo is claiming (and most of the lapdog media is naively making sound like a sure thing, despite AMRI saying they'd hire only a small fraction of 250 jobs).

Where should the $ for all these "incentive" handouts that you're advocating come from?

How much public $ would you be willing to hand to a company like your suggestion of Foxconn in return for them creating say 2,000 jobs here?

elmdog
elmdog

A billion for Buffalo for this-

he rumor on Foxconn planning to open manufacturing plants in the U.S. is true. According to Bloomberg, Foxconn spokesman Louis Woo said, “We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there.” Woo wouldn’t name clients, but in light of Tim Cook’s confirmation that Apple is investing over $100 million in manufacturing some Macs in the U.S. next year, it’s not difficult to deduce that the world’s most valuable company is a primary reason for Foxconn’s upcoming plans.

Woo also noted that ”Supply chain is one of the big challenges for U.S. expansion” and that “any manufacturing we take back to the U.S. needs to leverage high-value engineering talent there in comparison to the low-cost labor of China.”

In addition to creating thousands of new jobs, Foxconn’s expansion into the U.S. also has another benefit: reduced delivery times for new products. Whereas most iPhones and iPads are assembled in China, having plants on U.S. soil would allow quicker transport times. And for super-secretive companies like Apple, it could also mean fewer product leaks from the factory line.

elmdog
elmdog

A billion for Buffalo for this-

he rumor on Foxconn planning to open manufacturing plants in the U.S. is true. According to Bloomberg, Foxconn spokesman Louis Woo said, “We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there.” Woo wouldn’t name clients, but in light of Tim Cook’s confirmation that Apple is investing over $100 million in manufacturing some Macs in the U.S. next year, it’s not difficult to deduce that the world’s most valuable company is a primary reason for Foxconn’s upcoming plans.

Woo also noted that ”Supply chain is one of the big challenges for U.S. expansion” and that “any manufacturing we take back to the U.S. needs to leverage high-value engineering talent there in comparison to the low-cost labor of China.”

In addition to creating thousands of new jobs, Foxconn’s expansion into the U.S. also has another benefit: reduced delivery times for new products. Whereas most iPhones and iPads are assembled in China, having plants on U.S. soil would allow quicker transport times. And for super-secretive companies like Apple, it could also mean fewer product leaks from the factory line.

elmdog
elmdog

I think this is positive but I also heard the numbers on the company..I hope this is only a first step for Cuomo and his Billion fo buffalo campaign...Although this is good...AMRI is a 400 million dollar company with 40 million in net revenue...That is a nice size company ....But since Buffalo is a city without a Fortune 500 company calling it home or even a second home....This is the opportunity to steal someone like what Buffalo has been done to for years......Put together a package that is irrestible for a company to locate 2k plus jobs....I am only a person with an opinion and no real facts to base this off of....but it can be done...should be easy....

synthesis
synthesis

I hope to see the private investment made. I like that we are not paying some company directly to make a home in Buffalo like we would have for Bass Pro (for minimum wage jobs no less) and like we do for the Bills. This is 50 million in scientific infrastructure that is state owned and can be marketed to many suitors if AMRI pulls out. I am a scientist myself, so maybe I can float a resume their way!

grad94
grad94

i'd like to create a babysitter early childhood development specialist position. the successful applicant will work on a contract basis, including evening and weekend hours. duties will include nutritional guidance and literacy preparation for 2.5 at-risk children.

the economic development potential of this growth field is surely worth a $10k investment from the state of new york.

marge
marge

I fear this will involve animal research and testing. Sad.

whatever
whatever

Reggie - (& adding to what Rand said...)

according to Biz Journals, the $50M of NYS govt spending sounds for sure, but the 250 number of jobs to be created isn't at all for sure.

Although some local media are reporting the 250 as fact, the company AMRI is making it clear they aren't saying that at all.

"unspecified time period", "only account for a fraction", "hope"

"250 jobs Cuomo projected"

"gain these numbers … arrived at by the governor's office"

From

http://www.bizjournals.com/albany/news/2012/12/04/50m-biomedical-facility-planned-for.html?page=all

"...Cuomo stated that the state's $50 million investment tied to the new AMRI lab would spark $200 million of unspecified private investment and lead to 250 jobs overall, over an unspecified time period.

Garguilo [V.P. of business development at AMRI], in a follow-up email, said AMRI itself would only account for a fraction of the 250 jobs Cuomo projected.

"We hope our presence there will help this NYS initiative, in total, gain these numbers ... arrived at by the governor's office," Garguilo wrote.

So if it ends up creating only 50 jobs instead of 250, then Rand's example of "That means that each job cost a cool one million dollars apiece." would be prophetic.

Or if it ends up topping off at 100 jobs, then amount of NYS taxpayer spending would be $500,000 per job.

Then again, maybe it's also possible it could be more than 250 jobs.

We'll see.

Regarding the whole thing - no matter if it succeeds or not - it seems I'm in a small minority who doesn't think NYS govt should be trying to choose winners & losers among corporations and among very narrow industry niches in this way of handing out millions in public taxpayer $.

Rand503
Rand503

zltd@earthlink.net. Address it to Randy.

paulsobo
paulsobo

Id say this is an excellent reason to save most of the TRICO building and choose the option that only selectively demolished for an ATRIUM.

They can always build new...and we have seen from the Larkin Warehouse...companies start small and grow. They could very easily stay in TRICO for a few years and be replaced by smaller companies while they move into a new build.

Thats being smart and using an investment to prepare the way for follow on investment behind you.

And while I must say this investment by Albany is good news Buffalo must learn from its past! Demand and build more Centers for Excellence. Create more engines of economic growth in other sections of the city.

UB is poised to strongly grow its nanotechnology next and that would be perfect for South Buffalo Research Center with all its material science history there or a Niagara Falls/Tonawanda Research Center with all its material science history there.

Others:

Telecommunications & Data

Power Generation, Distribution

there are others...and Buffalo must diversify

Jaxson
Jaxson

What's everyone think of the Maid of the Mist shenanigans ? I know that the newspaper honeydew won't be too happy

Postermaster
Postermaster

At some point in the future he will look back and say, "Man, I guess I was just under some kind of spell."

Rand503
Rand503

Of course it's simplistic. But unless you have something better, it's as good as any to analyze what's going on. You can't just throw a ton of money at something and then cross your fingers and hope that lots of dividends will follow.

Infrastructure like roads, bridges and tunnels facilitate commerce. Having a modern airport is crucial to increased passenger and cargo flow. I agree -- these are basic projects for government precisely because no one else will do it, and it provides a great benefit to the public. Parks are also infrustructure and don't contribute much revenue, but nonetheless are seen as a public good.

But this isnit infrastructure. I know that because they are specifically saying this is an investment, and they hope to leverage private money. If it's an investment, then there must be a calculation of the worth of the investment.

If we actually see this properly as an investment, then we would demand proper follow through. Is there a plan to actually raise that $200 million in private investment? Has it been already identified? Who is qualified to go out and raise it? What happens if it isn't raised?

Then, once all that money is in place, is there the talent to turn that investment in to several billion dollars worth of companies? You do realize that with an investment of $200 milion, whether it comes from public or private, should be reasonable expected to generate at least 5X on it's return, but that's pretty low. Few investors will touch any investment nowadays unless there is a promise of 10X. That means there has to be a reasonable expectation that the $200 M in pirvate investment will generate at companies collectively worth $2 billion at a minimum.

So -- what's the plan to turn $250 M in total investment into $2 billion? Unless I see that, I am highly doubtful anyone has really thought this through. If I were to ask you to contribute your own personal funds to this, you would certainly ask the same questions. Only the most foolish investor would put any money into an investment without asking such basic questions.

Rand503
Rand503

Excellent. Then what you need is an investor who knows how to do that. There are some who are qualified both with money and with expertise to do exactly that.

When you have a clear idea of your needs -- and it's really a person who can turn your growth into revenue -- then you have a better shot at getting money. You may be able to find someone who will take a reduced salary in exchange for part ownership of the company, probably about a third or so. That's a great deal, because then you aren't out much in the way of cash. You need someone who has a track record of doing this at least three times previously. If so, you bring him on and you do exactly what he tells you to do. He wouldn't invest his time and expertise unless he really thinks you've got a shot at turning this into a huge valuation.

When you figure out what you want to do, put together a slide deck, no more than 15 max, and one third of them should be financials with five year projections. Then send to me and I might be able to find a guy for you.

benfranklin
benfranklin

Thank you for the response.

The company has grown organically through Google. We have customers in 220 countries. We recently passed 100,000,000 visitors to the site (this is cumulative, over a number of years).

A certain percentage of visitors become members. We have been mentioned in certain financial news columns, where someone will say they view us as a competitor (this makes us laugh).

Again, our thought is a more marketing savvy group could probably turn the traffic into more profit than we are capable of.

Buffalogni
Buffalogni

Tax cuts for rich dbags?

Oh, they don't need tax cuts when they are getting $50 million in subsidies. This money is necessary because it helps support:

-CEO Dr. Thomas E. D'Ambra; Salary $3.97 million a year

-Senior VP Dr. Bruce J. Sargent; Salary $298 thousand a year

-Senior VP Dr. Steven R. Hagen; Salary $374 thousand a year

Remember, these are the stated salaries and don't include perks, company equity, bonuses etc.

Can't the government just keep taxes low so we don't have to play this game of crony capitalism? How about a separation of government and economy?

benfranklin
benfranklin

A significant part of the value of the company is the volume of web traffic it receives, from around the world. We convert a certain percentage into paid subscriptions.

A more profit driven enterprise could convert the traffic into more dollars. Rather than scale up to do that...maybe it's best we get out.

EAHS 1972
EAHS 1972

I suspect a big part of this $50 million in state funds will be capital costs, ie "state of the art biomedical research equipment and facilities."

Dividing the cost of a project by the number of jobs created, and saying "this project cost x number of dollars per job" is really simplistic. It ignores the fact that the initial investment money also paid for something tangible and lasting - medical research equipment and facilities - as well as the the jobs, which will result in hundreds of thousands of dollars annually in state and federal income and SSI taxes paid by the workers, and property taxes paid to the city for as long as the building stands, to say nothing of the money the employees will spend at local businesses on food, housing, clothing and other necessities.

I'm sure the Peace Bridge had a large per-worker pricetag when it was constructed in 1925-27. But we also had something tangible and lasting when it was completed.

Rand503
Rand503

No debt is a good thing. Keep it that way.

To answer your question, I would need a bit more information. What do you need the money for? If it's for expansion so that you can increase revenues, that's good, and that's what you should be using it for.

If you were to apply to our angel group for funding, we look at whether your product is scalable -- can it grow quickly within two years to national and international sales? How quickly can you scale up? Who are your backers?

We typically look for companies that will exit ( be acquired or go IPO) within two years or three years. Investors today are not looking for companies that will exit much later, because they want their ROI much faster. Additionally, they are looking for an 10X on their investment.

So if they put $100,000 into your company, will they get $1 million back within two or three years? That doesn't necessarily mean the revenues have to go, but it does mean the valuation of your company has to increase dramatically to achieve that sort of return.

If you do get that investment, you will need to agree to some changes, and that usually means that the investors will insist that you have a CFO or other C-level person who will grow the company quickly to achieve a 10X increase in valuation. How many people in Buffalo are experienced in your field in doing that? I really don't know, but I would guess it's not many. So that means an investor will want you to relocate the company to where there is someone who can work with you to achieve that goal, or try to get someone to relocate to Buffalo to work with you. Usually, it's the former case, and that's why so many startups leave their place of incubation. It has nothing to do with taxes or the business climate, and has everything to do with what the investors insist upon.

If you can't show a reasonable expectation of 10X within 2 to 3 years, it is going to be very difficult to find investment money of any kind, no matter what anyone tells you. If you can't show that in a credible way, then you simply won't get anywhere.

Glad that your management is thinking along these lines, however. Whatever you do, talk to many people, not just banks or investment bankers, but whatever you do, do NOT pay a huge fee to a consultant for advice. It's a waste of money.

Good luck.

Travelrrr
Travelrrr

Depends on what kind of business you are--technology, service? If the former, buyers might be more interested in the actual tech (but, revs/profitability do help, for sure). If the latter, it's a harder sell (but can happen with some strong revenue/profits, customers, etc).

The question is almost impossible to answer as there are so many variables involved. I say don't fix it if it ain't broken.

benfranklin
benfranklin

Question for you.... I'm involved with a small company that did not need an angel or other investment (so we don't have that guidance). We don't have the stomach for going public, but we'd consider some form of 'selling out'. How many millions in profit, per year, would we need to show to attract some kind of private equity interest? (I realize this is a gross oversimplification of the actual situation, and I'm not underestimating the amount of work that would be involved in finalizing such a transaction.) The company has no debt.

Rand503
Rand503

Yes, but that is supposed to leverage another $200 million from private investment. Still, the state investment is $50,000,000 and that's a hefty investment. You have to generate a heck of a lot of revenue to produce that much tax revenue to pay it all back.

Will it in fact leverage $200 million? My experience with these things is that the gov't hopes are widely off the mark. There simply isn't $200 million in Buffalo for investment, so they must be looking outside of Buffalo to achieve that figure.

In the past five years, there has been a drop of 80% in the total amount of money available for investment, which include all angel and VC investment. Most companies go begging for money -- and they often don't raise their rounds. If they don't raise money, they either go out of business, or just limp along not doing much.

Also, note that any company that results from this and becomes successful will likely be acquired by a larger company. Often, that means relocation. So there is no guarantee that even if we get those 10 companies that they will actually stay in Buffalo.

Throwing this money into Buffalo is probably a good step. But if it isn't followed up with attracting the right people and also the private investment, it won't go anywhere.

Nonetheless, even if they don't, it's still good for Buffalo. But getting to that point is damn difficult, and few places achieve even after spending ten times that amount. I wish them well, and hope it succeeds.

(Sorry about the double post)

Rand503
Rand503

Yes, but that is supposed to leverage another $200 million from private investment. Still, the state investment is $50,000,000 and that's a hefty investment. You have to generate a heck of a lot of revenue to produce that much tax revenue to pay it all back.

ReginaldQMerriweatherIV
ReginaldQMerriweatherIV

"This investment, $35 million of which will go towards new equipment and $15 million of which will go towards improving existing lab space, will leverage $200 million in private investments and create 250 jobs."

It's $50 million from the state for a cost of $200,000 per job.

SadLlama
SadLlama

Good news, now what about the expansion of the historic tax credits???

Rand503
Rand503

Let's see: $250 million to create 250 jobs. That means that each job cost a cool one million dollars apiece.

Will these people and R&D spin off companies that will produce at least $250 million in revenues? That's the real question. How many times has that actually occurred? Actually, the spinoffs have to generate at least $50 million in tax revenue for the state to say that the investment was an even wash, but since that tax revenue comes in tomorrow dollars, not today's, the figure would have to be higher.

How many companies in Buffalo have paid $50 million in tax revenue over a short period of time, like five years? How many businesses would have to be created to aggregate enough to pay the tax revenue?

Then there's the matter of repaying investors. This is a highly speculative sector of the market, and there are many failures. The general rule of thumb in angel and venture capital investing is that out of ten investments, you will get only two that will really give you a good return.

So -- we would need to create 50 companies from this in order to have 10 that would become big enough to pay back the investors. Those ten could only achieve that sort of return if they become large global companies.

It's a tall order. Many other regions have sunk similar figures, even more, in the hopes of creating an innovation ecosystem, and few have succeeded. Not saying it can't happen, but it requires far more than just money -- it requires attracting the right talent to grow companies from startup to acquisition, and there are few people of those people in Buffalo.

it will take a fairly long time and a lot of failures before we see a real return on that investment.

Rand503
Rand503

Let's see: $250 million to create 250 jobs. That means that each job cost a cool one million dollars apiece.

Will these people and R&D spin off companies that will produce at least $250 million in revenues? That's the real question. How many times has that actually occurred? Actually, the spinoffs have to generate at least $50 million in tax revenue for the state to say that the investment was an even wash, but since that tax revenue comes in tomorrow dollars, not today's, the figure would have to be higher.

How many companies in Buffalo have paid $50 million in tax revenue over a short period of time, like five years? How many businesses would have to be created to aggregate enough to pay the tax revenue?

Then there's the matter of repaying investors. This is a highly speculative sector of the market, and there are many failures. The general rule of thumb in angel and venture capital investing is that out of ten investments, you will get only two that will really give you a good return.

So -- we would need to create 50 companies from this in order to have 10 that would become big enough to pay back the investors. Those ten could only achieve that sort of return if they become large global companies.

It's a tall order. Many other regions have sunk similar figures, even more, in the hopes of creating an innovation ecosystem, and few have succeeded. Not saying it can't happen, but it requires far more than just money -- it requires attracting the right talent to grow companies from startup to acquisition, and there are few people of those people in Buffalo.

it will take a fairly long time and a lot of failures before we see a real return on that investment.

Pubmoney1
Pubmoney1

Ful steam ahead on the Trico conversion, get it done now. Companies will be taking note after this announcement today.

grad94
grad94

indeed. it is time that the private sector stopped flattering themselves that they are the 'job creators.'

Jaxson
Jaxson

Did Cuomo say antything about the Bills lease, I think thats would be kind of important.

Wolffman
Wolffman

This is the best news. Huge for the city. Keep it coming!

hamp
hamp

No one is forcing anyone.

We elect people to represent us. That includes the Governor and Legislature. We may not like the decisions they make, but these folks were voted into office.

Don't like what they do? Then you have to vote them out.

elmdog
elmdog

This is one cog in the equation, or at least that is my hope......With a billion define by public, private investment tax incentives, tax breaks etc......There has to be more potential to come....This is a great win but.....

Yo Yeah
Yo Yeah

Better than investing in wars. Or tax cuts for rich dbags.

Tim
Tim

Good news on the job front, but people need to remember that when ''new York," or "the government" is investing $50 million, its really the citizens forcibly investing through tax dollars. Had to say it.

hamp
hamp

Don't forget the staples.

elmdog
elmdog

Great first step...250 new jobs....spin off, new building on the campus....From the sounds of it, the next 6 years at the BNMC will be extremely busy with 5 new builds at least....Construction jobs, restaurants feeding these people, new student population, 250 good paying jobs....

This is great news....

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