Ex-Searle Employees Feed Growing Chicago Life Sciences Community

MidwestBusiness.com - August 13, 2007

Michael S. Rosen

CHICAGO – These days, I continuously run into friends and former colleagues throughout Chicagoland from G.D. Searle (that once-iconic pharmaceutical company).

Searle represented a pharma company that lasted more than 100 years before disappearing into the M&A jaws of larger pharma companies as part of the voracious consolidation of Big Pharma.

I am often reminded of the late 1950s and early 1960s protest song “Where Have All the Flowers Gone?” by Peter, Paul & Mary. In this case, where have all the Searlies gone?

The good news is that not only the spirit but physical embodiment of G.D. Searle is still alive and well in Chicagoland. Amazingly, many of the more than 3,000 former Searle employees – who had been located at Searle’s various sites in Chicagoland (Old Orchard, Skokie, Mount Prospect, etc.) – are still in Chicago.

It’s even more amazing that this cadre of pharmaceutical talent remains vital. It provides ongoing managerial expertise to not only all of the area’s major pharma companies (Abbott, Baxter, Takeda, Astellas, Hospira, etc.) but also some of the newer biotech and specialty pharma companies along with the growing contract research organization (CRO) business.

Even the region’s science parks (the University Technology Park at IIT, the Chicago Technology Park, the Evanston Research Park at Northwestern University, the Illinois Science + Technology Park, etc.) and universities have benefited from having some of the former Searlies in their midst.

The Searle family is actually still part of this movement.

The family name is still active in Chicagoland via the Searle Foundation, which funds important scientific research endeavors such as the Chicago Biomedical Consortium (CBC), the University of Chicago and Northwestern University to the tune of $25 to $50 million.

So where have all the Searlies gone? They are clearly playing an important part in the growth of Chicagoland’s thriving bioscience cluster. G.D. Searle’s former headquarters off the Edens Expressway in Skokie, Ill. (known as the Old Orchard facility) has in part been transformed into the headquarters of National-Louis University.

The original headquarters and later the R&D campus of Searle is being transformed by Forest City Enterprises into the 23-acre Illinois Science + Technology Park, which currently houses eight companies and more than 700 people on a campus that once held 2,000.

Forest City plans to eventually attract 6,000 people to this expanded life sciences campus and perhaps 40 to 50 companies.

Many of these companies just may be made up of Searlies. This can be seen in the current trend of companies already in the park including the U.S. R&D component of the second-largest Japanese pharma company – Astellas Pharmaceuticals – via its Astellas Research Institute of America.

These Searlies don’t forget their roots.

Just last week, a group of about 100 got together in Northbrook, Ill. for an evening’s reunion. It was part of the annual gatherings that have been happening since 2003 when Pfizer acquired Pharmacia/Searle and decided to eliminate the Chicagoland-based activities. This put many of these employees out on the street.

Just in case you think this is limited to the U.S., former Searlies in Europe have been getting together twice a year in different countries for the last several years. So what was it about this family owned, once Big Pharma that has gestated such loyalty and residual feelings?

Like many of the major U.S. pharmas, Searle originated in the late 1800s.

It really began to grow and internationalize during and after World War II. When I started in the pharmaceutical industry in 1974 with Pfizer, Searle was very close in size and sales to Pfizer. It established international operations in several countries. It was a clear rival to both Baxter and Abbott over the years.

During the mid-1980s, the Searle family (and former CEO Don Rumsfield) exited the business when it was sold to chemical company Monsanto.

This lasted until the late 1990s when Monsanto itself merged with Pharmacia. During that period, Searle management (an interesting amalgamation of both senior Monsanto and Pfizer executives) became entrepreneurial and bold. They launched several new products and acquired more operations and companies in key strategic countries.

There was an entrepreneurial and upbeat feel to Searle during the late 1980’s and 1990’s, in spite of the frequent reorganizations (it seemed as if every quarter a new organizational structure was rolled out). Still, there was a sense of team, comradery, and rebuilding; excellent managerial talent was drafted from top pharma companies.

A new sense of pride emerged in the organization. Searle had a new goal of making it back into the ranks of the world’s top 20 Big Pharma companies. It had already achieved this in the U.S. and key European markets.

Coupled with excellent pharmaceutical development expertise and managerial talent, this entrepreneurial spirit is among the key factor to enabling a number of the former Searlies to band together and start new companies after the downfall of G.D. Searle in 2003. I have profiled one such enterprise (a CRO called CorDynamics) in a past column.

Still another CRO (also composed of a group of former Searle executives) called Midwest BioResearch (MBR) not only has taken off with initially six employees in 2003 but has grown to about 45 employees in less than four years.

CRO Industry Growth

A key phenomenon that has occurred as a result of the M&A consolidation of Big Pharma and spinning off of assets and talent has been the growth of the CRO industry.

If the pharma industry currently produces revenue in excess of $600 billion a year and invests about 10 percent of that into R&D, that translates into more than $60 billion a year of product development. It is estimated that at least a third of this activity and money (or $20 billion) is outsourced to the CRO industry, which has grown and specialized.

Though there are a few large CROs that try to manage a “soup-to-nuts approach” to product development from pre-clinical (meaning test tube and animal studies) to clinical (human) studies, there are hundreds of companies that have been developed with specific expertise in key aspects of pharmaceutical product development. Some of the key stages are the following:

1. Discovery, which is usually done at a university or government lab (such as the NIH or a biotech company).

2. Pre-clinical efficacy, which is early indication that a drug works against a disease target. These studies are first done in test-tube models. They progress to rodents and perhaps some other animal models.

3. Pre-clinical toxicology (safety), which means once a drug has been shown to work against a specific disease, it needs to be studied further to understand the right doses; safety profile; how the drug works; where it works; the potential impact on key body organs, systems and functions; and how the drug is finally excreted from the body (called drug metabolism and distribution).

Additionally, it is critical to understand how a drug interacts with other drugs a person might be taking for a related disease disorder (called drug pharmacokinetics). Such extensive evaluation is first done in a series of test-tube and lab-based studies (in vitro). Only then is it explored in at least two different animal models before a decision is made to go into human trials.

Of course, all of this data is heavily scrutinized by the FDA. The impact of the drug is analyzed not only over the short term but also the long term via extensive studies. While clinical trials are the most expensive part of drug development, pre-clinical toxicology analysis and studies in animals is the second-most expensive piece.

It can take many months. To the degree that good predictive work can be done first in the lab and test tube (a lot of progress has been made in this latter field), it allows for better targeting of animal studies. This saves time, money and animals.

It is precisely in this last field of pre-clinical toxicology that two ex-Searle spin-off companies have positioned themselves, built their businesses and thrived.

CorDynamics focuses specifically on the cardiovascular impacts of new drugs. Midwest BioResearch focuses on the analytical techniques to help determine what happens to a new drug when it enters the body and on an in vitro approach to understand the potential negative effects of a drug before putting it into animal or human studies.

So why this rampant growth of the CRO business? Many Big Pharma companies are constrained to hire new employees and often have to cut back on existing personnel. This results in a need to outsource key product development activities.

Likewise, biotech and specialty pharma companies often operate in a virtual mode that focuses on a select group of core competencies (e.g. drug discovery in a specific field or product marketing in a specific disease area). They often need to rely on specific external product development expertise they could not afford to build up internally.

The three areas of drug development most sought after by biotech and pharma companies include pre-clinical development services encompassing toxicology, drug absorption, distribution, metabolism and excretion; formulation development and early stage scale-up manufacturing; and regulatory services (knowledge of the FDA) and clinical design services.

Midwest BioResearch: A Chicago CRO

Enter Midwest BioResearch, which was founded in Oct. 2003. It focuses solely on drug toxicology (safety) and has built up a core expertise and group of scientists and researchers in this arcane but vital field.

Mike Schlosser (president of Midwest BioResearch and a former Searle head of toxicology and then head of Pharmacia/Searle toxicology in Chicago) along with his initial Searle research partner (Sabrina Morton) took their Pfizer severance packages and savings to create this fast-growing and specialized CRO.

It leverages their industry experience, knowledge and contacts to build a business with more than 100 pharma and biotech clients in less than four years. Interestingly enough, 60 percent of their business is repeat business from existing clients. There appears to be a high level of customer satisfaction.

The two initial partners expanded to six (most of which also held stints as Searle/Pharmacia scientists). As there were few places in Chicago that offered wet labs to emerging life sciences companies (Pfizer put up the former Searle campus for sale but had no takers for a while), the young Midwest BioResearch went to the Northwestern University incubator (the Evanston Research Park) where it set up initial operations.

While these labs were fine for the first couple years, the company’s rapid growth and need for larger quarters brought it back to consider a move back to their old stomping grounds at the former Searle campus (now the Illinois Science + Technology Park). It is a place they knew well.

In a pivotal growth decision moment that took a large financial and personal risk, Midwest BioResearch decided to significantly expand business and personnel due to industry and client needs, move back to the former Searle site where the management team once worked and take on substantially more space commitment and cost to handle the additional personnel and scientific equipment needed to meet the pharma industry clientele needs.

Its rapid growth has happened due to a number of key factors:

1. High pharma industry need for these precision studies.

2. Availability of qualified scientific talent in the Chicago area (not just the ex-Searle personnel who didn’t want to move out of Chicago but others cut loose by companies such as Abbott and Baxter in their continuous downsizing activities).

3. Beginning of a life sciences network created by the growth of the Illinois Biotechnology Industry Association (iBIO), which iBIO itself has now formalized into its PROPEL program (which is designed to assist young companies and entrepreneurs with their growth strategies).

4. New availability of lab space in a market that was previously heavily space constrained via the recent development and expansion of bioscience parks in Chicagoland.

5. Pfizer’s decision to initially support Midwest BioResearch and provide it with existing (and expensive) scientific equipment from its former labs at heavily discounted prices. This helped to enable the company in its formative stage. A small business loan also helped in this early stage.

Still, key ingredients to the company’s formation and growth are that entrepreneurial spirit, camaraderie and risk-taking attitude embedded in the former Searle environment of the 1990s and late 1980s. So where does Midwest BioResearch go next?

Currently only 5 percent to 10 percent of its business is from outside the U.S. However, Schlosser realizes that this represents a key potential growth area. The company is evaluating whether or not to put an office in Europe (the second-largest pharma market). They are currently doing some business with Israeli, Scandinavian and U.K. companies.

About 90 percent of the company’s business comes from outside Illinois (probably because companies like Abbott and Baxter still tend to do this type of work internally). At least 50 percent of the business relates to biotech drugs (i.e. protein-based drugs).

Perhaps the next challenge is the growth from less than a 50-person organization to the next stage of 100 people or more and the need for more corporate structure, employee benefits and programs, training and investment in scientific software to enhance research productivity.

In 2007, the company has already made an important investment into laboratory information management systems (LIMS) software based on a Oracle-type platform. This software will allow them to more easily track and manage data that needs to be reported to clients from their laboratories.

Schlosser says it is more difficult to run a CRO these days than his former activity within Pharmacia/Searle. The quality standards for clients are higher to meet more and more scrutiny from the FDA. This requires a tightening of standard operating procedures (SOPs) and less time to accomplish tasks.

Schlosser and his partners seem invigorated by the challenge and glad to not only be back in their old scientific stomping grounds but amid a growing and thriving environment at the Illinois Science + Technology Park and greater Chicagoland. It is clear that the Searle spirit is still alive and kicking yet transformed in a new way in the Chicago community

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