Departing Murdock chief: better days ahead

Published 12:00 am Wednesday, June 8, 2011

By Emily Ford
KANNAPOLIS — The leader of David Murdock’s nonprofit research institute — the centerpiece of the N.C. Research Campus in Kannapolis — has stepped down after two years.
Dr. Michael Luther, formerly with pharmaceutical giants Merck and GlaxoSmithKline, is out as president of the David H. Murdock Research Institute.
The institute created by Murdock in 2006 to outfit, own and operate the Core Laboratory Building has struggled financially.
Murdock is chairman of Dole Food and founder of the Research Campus, a startup life sciences hub in downtown Kannapolis.
The institute has had trouble paying its bills and relies on cash grants from Murdock to cover operating expenses. Companies and universities researching nutrition, agriculture and human health pay the institute to conduct cutting-edge tests and studies in the Core Lab, one of the world’s most complete life sciences laboratories.
According to the IRS, Murdock has made cash grants of $120 million to the institute, which generated revenue of $881,000 in 2009, the most recent Form 990 available.
Luther remains with the institute and has moved into business development.
He said brighter days are ahead for the nonprofit, which recently landed a significant research project on obesity and diabetes with renowned scientist Dr. Barbara Hansen of the University of South Florida.
Dr. Steven Leath, vice president for research for the University of North Carolina, has taken over day-to-day management of the Core Lab. Leath serves on the institute’s board of directors and was interim president before the board hired Luther in 2009.
Luther and Leath would not say if the board asked Luther to step down. Luther, who earned $305,947 in salary and benefits in 2009, would not comment about personality differences between him and Murdock, who serves as chairman of the board.
“Mike decided after a couple of years that he clearly had strengths and enthusiasm for business development, attracting new clients and more of the entrepreneurial activities associated with a startup,” Leath said.
Leath acknowledged the institute owed money to vendors and suppliers when he began taking over leadership several months ago. He said he couldn’t recall from memory how much was owed.
“We’re rapidly taking care of those issues,” Leath said.
A few outstanding balances remain, he said, and the institute has legitimate disputes with some vendors. But for the most part, “I’ve worked hard to raise the capital to get all that cleared up,” Leath said.
Money to pay the bills came from grants, increasing sales and help from Murdock, he said. Leath was meeting with accountants again Tuesday to go over the books.
“Financially, we’ve turned the corner,” he said. “Like any startup, there were difficult periods when we were trying to control costs and trying to develop our place in the scientific world.”
The addition of Hansen’s obesity and diabetes research will bolster the institute’s image and reputation around the world.
Hansen, a member of the Institute of Medicine of the National Academy of Sciences, has been funded by the U.S. National Institutes of Health for 39 years, Luther said.
Between seven and 10 of her employees will relocate to Kannapolis, he said.
“We are seeing big, fundamental strides,” Leath said.
While still relatively small, especially when compared to expenses, revenue generated by the institute through contractual agreements with industry and academia has increased. The institute made $881,000 in 2009, up from $61,000 in 2008, its first year of operation.
Luther said revenue likely will double this year. The 2010 Form 990 will be available after the close of the fiscal year June 30.
In April this year alone, the institute billed $400,000 for scientific services and research studies, Leath said.
The nonprofit should be self-sufficient by 2012, or able to pay its expenses without cash grants from Murdock, he said.
Expenses in fiscal year 2009-10 totaled $17.3 million, but that amount will fall substantially this year as the institute pays off equipment, Leath said.
“Most of those bills go away this year,” he said. “Much of our infrastructure is paid for.”
Murdock will continue to give to the institute, but Leath said his gifts will go toward an endowment, not operating expenses.
Total assets for the institute on the 2009 Form 990 were $98.1 million. Total liabilities were $4.1 million, leaving a fund balance of roughly $94 million.
Expenses to run the institute, such as lab operating costs and utilities, were about $4.6 million.
Over three years, the institute has paid $34.8 million to general contractor Turner Construction of Atlanta, which built the Core Lab Building.
The balance sheet on the 2009 Form 990 shows the institute started the fiscal year with accounts receivable, or money others owed to the nonprofit, of $1.4 million and ended the year at $566,000.
Accounts payable, or money owed by the institute, started the fiscal year at $13.7 million and ended at $3.5 million.
The institute hired six new employees in the past few months, Leath said, bringing the nonprofit up to 35 workers.
In 2009, the nonprofit had 34 employees, but several left. Leath said they were not laid off.
“We expect another big growth phase in the next few months,” he said.
Luther’s new position, likely vice president of business development, was originally held by Dr. Randy Allen, who left a year ago, Leath said. Dr. Steve Colman remains as chief operating officer.
Luther will work with Dr. Sheetal Ghelani, who already serves in business development for the institute, as well as Clyde Higgs, the top business recruiter for campus developer Castle & Cooke North Carolina.
Luther said while Higgs sells real estate at the 350-acre campus, “I have to sell them on the science.”
“I am fully committed to seeing this place succeed,” Luther said.
Luther’s new position is permanent, not temporary, Leath said.
Three finalists are vying to succeed him as president, including a candidate Leath said he interviewed in Salisbury Monday.
An announcement will come in 45 to 60 days, Leath said.
The finalists all have experience in the public sector, unlike Luther, who came from private industry.
“It was a much bigger change than he expected,” Leath said.

N.C. Research Campus
The 350-acre campus is home to branches of seven UNC System universities, Duke University and Rowan-Cabarrus Community College.
While billionaire Dole Food Chairman David Murdock supports the operations of Duke and the David H. Murdock Research Institute, other endeavors are state-sponsored.
The Kannapolis campus received $23.5 million from the state this fiscal year. That’s up $1 million from the previous year.
Contact reporter Emily Ford at 704-797-4264.