Biologistics industry prepared for takeoff

Memphis Business Journal
June 22, 2007
By Einat Paz-Frankel

With a strong biomedical presence and a well-established logistics industry, the next logical step for Memphis is to have a considerable slice of the biologistics pie.

That was the primary finding of a Memphis BioWorks study from late 2005. The study found that the emerging hybrid industry holds promise for Memphis, as the nation's $294 billion biomedical industry is supported by a biologistics industry valued at $13.8 billion a year.

Since the study results were released, both BioWorks and the Memphis Regional Chamber have started to work on the specifics of bringing biologistics companies -- namely companies that use cutting-edge logistics to ship their bio-products -- to Memphis, which can capitalize on its existing assets to capture a chunk of the lucrative biologistics market.

"We have a right to win," says Steve Bares, president and executive director of Memphis BioWorks Foundation. "Now the question is how we win at it and how biologistics fits with other economic development efforts."

The idea of growing the biologistics presence in Memphis is now receiving more attention as an economic development effort called Memphis Fast Forward progresses. The plan, a collaboration among several entities such as the Chamber and Memphis Tomorrow, has already won the approval of some city and county committees and is in the process of raising more than $60 million. One of the main goals defined by Fast Forward is pursuing the biologistics segment

"The original biologistics study laid out the opportunity but didn't tell you how to get it," says Dexter Muller, senior vice president for community development at the Chamber.

Fast Forward lays out the initial steps necessary to secure grants and marketing goals to achieve national visibility as a biologistics center in the next four years. The road is still long, though, especially when it comes to personalized medicine and customized genetic solutions that need to be handled with care and delivered to patients promptly.

"It's a vision; the market is still emerging and detailed studies are needed," Bares says.

As an example of that emerging market, Bares talks about tissues that are "precisely engineered for your medical needs." That may sound futuristic, but some companies that provide innovative "cellular technologies" -- not those that involve wireless transmission and reception -- are starting to notice Memphis' potential. Some even cross the Atlantic to come here.

Belgian biotech company TiGenix recently formed a joint venture with Baltimore-based Cognate BioServices to start producing and distributing a genetics-based treatment for injured cartilage from a 30,000-square-foot facility in Memphis. Scientists there will receive cell tissues from patients and donors and will multiply, reconfigure and ship them back to the surgeon for implant.

"They need to be implanted in the patient within 48-72 hours," says Luc Dochez, vice president of business development for TiGenix.

The procedure necessitates strict sterile conditions inside a temperature-controlled "clean room."

"If you take human cells and grow them outside of the body, you need to make sure nothing interferes and that no contamination occurs," Dochez explains.

With an extremely short shelf life, human cells require efficient and timely transportation in an isolated box. Dochez says that spells out FedEx, which was the primary incentive for TiGenix to locate here.

"The payment-in-lieu-of-taxes program isn't the best incentive," Dochez says. "It was a combination of the PILOT, FedEx, the existing facility and the cost of real estate."

TiGenix in May received a nine-year tax freeze from the Memphis and Shelby County Industrial Development Board, representing savings of about $270,000. The company is expected to create 100 jobs.

Labor is one of the biggest challenges to making Memphis a biologistics haven. Handling and shipping human cells is nothing like transporting still objects. Dochez says Cognate-TiGenix's geographical proximity to orthopedic and spinal leaders Smith & Nephew PLC and Medtronic, Inc., means the competition is challenging but there's an existing labor pool of expertise to draw from.

Medtronic, however, is not likely to give up any experienced biologistics personnel. The medical device company just spent $11.4 million on 35 acres of land to expand its distribution enterprise on Swinnea, for which construction and equipment will cost $20 million-$30 million. Aside from assembling and shipping time-critical surgery kits to orthopedic surgeons, the center also distributes Infuse Bone Graft, a human-derived product that promotes bone growth.

FedEx Corp., with its late-night cutoff time for packages originating in Memphis, is again one of the leading reasons Medtronic is in Memphis -- and growing.

"Let's say I'm in Indianapolis and need to ship a package through another UPS or FedEx hub, the additional hours can be a tremendous disadvantage," says Carl Stamp, Medtronic Spinal and Biologics' vice president of operations.

He says that hours sensitive tissues spend in a non-ambient temperature can be a setback. Like beer, they should be kept cooled.

"I'd much rather take the six-pack than let it stand in the sun," Stamp illustrates.

If Medtronic is emblematic of the growing biologistics industry in Memphis -- net sales of the Spinal and Biologics' parent division, Medtronic Spinal and Navigation, grew by 19% last year to $2.2 billion -- other companies, which rely heavily on logistics, are likely to follow.

"Transportation is a crucial component of our business," Stamp says. "It's wonderful to have a partnership with FedEx and be centrally located. We're three hours or less from either Coast."

Medtronic Spinal and Biologics

Parent: Medtronic, Inc.
Distribution campus: 4340, 4380 Swinnea
Web site: www.medtronic.com

Cognate-TiGenix

Biomedical joint venture
Address: 4600 E. Shelby
Web sites: www.cognate bioservices.com; www.tigenix.com

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