If Minnesota is to build a vibrant biotechnology industry, as I wrote earlier today, it will need all of the homegrown talent and technology it can muster.
Unfortunately, what little we did have went out the door today when Landec Corp., based in Menlo Park, Calif., said it will pay $40 million to buy Lifecore Biomedical Inc. in Chaska, Minn., one of the state’s most experienced and fastest-growing biotech firms.
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Founded in 1965, Lifecore now makes hyaluronan-based biopolymers used in ophthalmic and cosmetic skin procedures and treating osteoarthritis. Hyaluronan is a fluid found naturally in the skin, cartilage and inside the eye. Manufactured hyaluronan compounds possess lubricative, connective and shock-absorbing qualities found in soft and bone tissues.
Lifecore expects to generate between $26 million to $28 million in sales this year, a 3 percent to 4 percent gain from 2009. The company estimates its earnings before interest, taxes, depreciation and amortization to hit $7 million to $8 million, giving it a profit margin of 27 percent.
The deal is good for private equity firm Warburg Pincus — it paid $239 million to acquire publicly traded Lifecore in 2008 and folded its larger dental business into one of the firm’s portfolio companies –and Landec Corp., a materials science firm specializing in food and agriculture. With Lifecore, Landec can finally break into medical technology, said CEO Gary Steele.
“We have shied away from medical applications,” Steele told analysts during a conference call. “Now we have venue for looking at high-value opportunities.”
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Yet Minnesota’s biotech industry should be bummed out. Over the years, the state has seen its best and brightest biotech firms bought out by outside companies.
Eiasi Co. in Tokyo acquired cancer drugmaker MGI Pharma Inc., based in Bloomington, Minn., for $3.9 billion in 2008. Also that year, WuXi PharmaTech in China paid $162.7 million to buy AppTec Laboratory Services Inc. in St. Paul, a fast-growing startup founded by prominent local entrepreneur Bonnie Baskin.
‘The rapid convergence of biotechnology and other sciences with medical devices has created a shortage of experienced managers, scientists and engineers who know how to lead in the development of biopharmaceuticals, pharmaceuticals, or combination products,” according to Destination 2025, a report prepared by Deloitte Consulting for the BioBusiness Alliance of Minnesota. “This lack of recognized private sector leadership in the biotechnology industry makes it difficult to attract funding and companies in a rapidly growing industry.”
In a brief phone interview, Lifecore CEO Dennis Allingham said the company, which will operate as a wholly owned subsidiary of Landec, will retain its senior management team. There will be no layoffs, Allingham said, noting Lifecore is one of the few Minnesota companies to add jobs during a tough economy. Lifecore today employs 125 people, about 25 percent higher than 2009.
Nothing will really change, he said.
“We really don’t care who owns us,” Allingham said. “We will continue to grow.”
Still, if Minnesota wants to build a biotech industry and attract money and talent, it needs homegrown companies. Getting someone to work for a fast-growing, local biotech firm sounds a lot better than working for a subsidiary of a food-packaging company in California.
