By Chris Anderson
OKLAHOMA CITY—A unique Tax Increment Financing (TIF) package that would provide more than $7 million to construct a $12 million dollar office and production facility here was enough to get biotech start-up Cytovance Biologics to locate its company in the Presbyterian Health Foundation Research Park starting in 2005.
The 26,000-square-foot building will initially house 40 to 60 employees. Cytovance intends to provide contract manufacturing services of protein-based drugs, also called “biologics.”
Local business leaders, the Oklahoma City Redevelopment Authority and the Presbyterian Health Foundation provided Cytovance with a TIF package dissimilar to most TIF deals. Typically, a TIF uses property tax dollars paid by a company for its new facility to provide infrastructure, such as improved roads or wastewater facilities. In Oklahoma City, however, civic leaders were able to provide a package that financed the bulk of the actual construction of the office/production facility.
“I'm not aware of any other TIF deal that is like this one,” says Michael Anderson, president of the Presbyterian Health Foundation. “We had the benefit of some very creative minds to come up with a plan that would make this work.”
The multi-layered deal required cooperation from a number of different public and private entities. Initial funds to start building construction were provided by a local bank in the form of a “bridge” loan. The loan will, in turn, be paid back by a bond from the city (which has also been guaranteed by an insurance company). Finally, once the building is up and the city collects taxes on the improved property, the TIF money will be used over the course of 15 years to repay the bond.
While the $7 million in TIF money was incentive for Cytovance to locate their facility here, strong local ties led the Princeton, N.J.-based company into the heartland. Cytovance chairman, John Crowley, is the former CEO of locally-grown Novazyme Pharmaceuticals, which was sold in 2001 to Genzyme. In fact, the entire management team are former Novazyme employees.
“We considered other areas for this facility, but because of our past experience, Oklahoma City was always on the fast track,” says Spencer Reynolds, vice president of marketing for Cytovance. “But what was really impressive is that the city was able to step up each time and be with us on that fast track.”
The financing package was key, Reynolds notes, as it helps the start-up company preserve the capital it needs to get up to speed. “That is really important since the area of biotech that we are in—contract manufacturing—doesn't attract a lot of venture capital.” Cytovance expects it will still need to kick in from $5 to $6 million to get up and running.
One investor in the company is the Presbyterian Health Foundation. The 18-year-old foundation boasts an endowment of nearly $110 million dollars, and over the years has provided more than $90 million in funding to a variety of entities, including the neighboring Oklahoma Health Center and University of Oklahoma Health Sciences Center.
“By funding these activities and attracting companies like Cytovance, we want to prove that proximity to a large population base is not necessary in biogenic manufacturing, and will help us continue to develop the research park,” says Anderson.
Reynolds agrees and points to the success of Novazyme, which had more than 100 employees when it was sold in 2001. “We've shown it can be done and we are intent on doing it again with Cytovance,” he says. “The combination of low costs of doing business, a trainable workforce and the ability to easily expand in the research park were all in Oklahoma City's favor.”