By Emily Ford
eford@salisburypost.com
KANNAPOLIS ó As an industry, biotechnology might not only survive but thrive in a recession.
And with its singular focus on health and nutrition, the N.C. Research Campus could succeed financially, even though it opens today in the worst economic climate since the Great Depression.
“Biotech is not recession-resistant, but it is quite resilient,” said Dr. John Connaughton, director of the UNC Charlotte Economic Forecast, a leading source of economic information for North Carolina.
While developers would have preferred to open the $1.5 billion life sciences complex in downtown Kannapolis while the economy was booming, “I’m not exactly sure this is the worst of times,” Connaughton said.
Regardless of the economy, people will spend money on health care, making it less subject to an economic downturn if not immune to it, he said.
“Ultimately, they will produce health care in Kannapolis,” he said.
Connaughton did sound a warning for the campus. While healthcare is not as adversely affected by recession as other industries, companies in Kannapolis could have a harder time finding investors to fund their ideas for new pharmaceuticals, medical devices and other health-care products.
“It’s obviously more difficult to raise capital,” Connaughton said.
While biotech may be resilient, some projects tied to the campus have been put on hold, including the sale of $168.4 million in self-financing bonds to pay for infrastructure improvements and a large townhome project called South Village.
Special niche
Campus founder and billionaire David Murdock’s decision to focus on health and nutrition in Kannapolis was wise, said Mac Holladay, head of the Atlanta-based economic development consulting firm Market Street Services hired by the campus.
Murdock is expected to spend $1 billion of his personal fortune developing the campus. In addition, the state has committed millions of taxpayer dollars, and Cabarrus County and Kannapolis are underwriting the self-financing bonds that are on hold.
“What Murdock has done that so many other places haven’t done is to create a very special niche, to go after one thing,” Holladay said.
Researchers in Kannapolis hope to revolutionize nutrition and medicine by tailoring them to the individual. They want to discover why one person gets sick and another doesn’t and exactly how much of a nutrient an individual needs, as well as create new superfoods with higher nutritional profiles.
New blood tests, drugs, crops and nutritional products can take years to get on the market, and each costs millions of dollars in research and development.
Connaughton sees it as an experiment. If biotechnology provides new ways to fight disease, the Research Campus will bring important growth to the Charlotte region and beyond.
“It’s kind of like alternative energy,” he said. “It’s a new technology that shows a lot of promise, but 10 years from now, is this the way that we’re going to be solving disease?”
Regardless, in the short term the Research Campus will have a big impact on Kannapolis, a former mill village that depended on textiles for 100 years, Connaughton said.
But long-term growth depends on the ability of the Research Campus to act as a catalyst, he said.
“If biotech becomes a growth industry, then I think having the research park in Kannapolis could lead to significant growth,” he said.
Full steam ahead
It helps that life sciences typically don’t receive funding from “normal sources,” Kannapolis city manager Mike Legg said.
“Bank of America is not the first place that someone who needs venture capital is going to go,” Legg said.
Universities in Kannapolis are seeking grant money from the National Institutes of Health and private foundations. The Research Campus has a Venture Fund that invests in emerging life sciences companies, and the state’s Biotechnology Center offers grants and loans for young companies and education training programs.
“Those are sources that aren’t all market driven,” Legg said.
The Research Campus has seen “job creation occurring right out of the gate” and hasn’t lost any commitments from future tenants, he said.
“All things considered, there are probably few projects in our region that are still full steam ahead,” Legg said. “And this is one of them.”
Major player
The 25-year-old biotech industry in North Carolina became a “major player” in the past 15 years, Connaughton said.
The state currently ranks third in the nation for number of biotech companies. More than 450 bioscience companies are headquartered or have operations in North Carolina, employing 55,000 people.
“Health care and life sciences are premiere job generators and have been for 10 to 15 years,” Holladay said.
The Research Campus now includes more than a dozen companies, including Murdock’s Dole Food. Holladay’s firm estimates that eventually, the campus will create 5,500 biotech jobs locally and 37,000 related jobs across the region.
The state has bought into Murdock’s idea.
The N.C. General Assembly has increased funding every year since Murdock broke ground in 2006, giving the University of North Carolina System nearly $20 million and the N.C. Community College System more than $3 million this year alone to pay for salaries, rent and programs at the Research Campus.
Seven UNC schools have research programs in Kannapolis, as well as Duke University.
Regional importance
The Research Campus proves that the region’s economy isn’t dependent on banking alone, Connaughton said.
“Certainly, in the local economy it’s good news,” he said. “And it points to the regional economy as fairly well-diversified.”
Because Charlotte is the second largest financial center in the country, the current economic crisis makes biotech even more important to the region, Holladay said.
“But the credit crunch is so severe that you just hope that all capital expenditures for projects don’t stop,” he said.
Problems at Dole Food or one of Murdock’s many other companies due to the economic downturn could have an impact in Kannapolis, Holladay said.
“I don’t want to see the Research Campus slowed or put on the back burner,” he said.
The campus is Murdock’s top priority and he does not rely on money he makes at Dole to fund the project, Lynne Scott Safrit has told the Post. Safrit serves as president of campus developer Castle & Cooke North Carolina.
Safrit has said that reported financial problems at Dole will not affect the Research Campus.
Dole recently announced a large asset sale to help reduce its debt. The company will sell its fresh flowers division, two subsidiaries in Europe and land in California, Mexico and Hawaii.
Dole has been raising cash to avoid default on $350 million in bonds that mature next year.
These are strange economic times, Holladay said.
“Nobody really knows where this is going to go,” he said. “There is a great deal of uncertainty.”
But the completeness of Murdock’s strategy and the holistic way that the campus approaches health and nutrition will transform the region, Holladay said.
“It is very logical,” he said. “Everyone is interested in health and living longer and feeling better. That’s why this makes so much sense.”