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Archive for Saturday, January 7, 2006

Company drops plans for Lawrence

$33M Serologicals building and site to go on the market

January 7, 2006

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A life-sciences company's $33 million plant that had been looked upon to feed Lawrence's hunger for bioscience development is being put up for sale before ever entering production.

Serologicals Corp. announced Friday that it was abandoning plans to open its plant in the East Hills Business Park, a project that was completed in 2004 but never cleared final testing by some of the company's biggest customers.

Less than a month after reaffirming plans to open the plant by the end of March, company officials reversed course and opted to rely on an existing plant in Illinois to handle production of Ex-Cyte, the company's cornerstone cell-growth product.

Instead of meeting expectations to pump out an estimated $60 million worth of the bottled liquid each year, the Lawrence plant now will have its specialized equipment dismantled, its value written down and its eight remaining employees either laid off or transferred.

The promise of meeting needs of pharmaceutical and research industries from the East Hills Business Park - and spawning growth of more life-sciences projects in town - will be left to someone else.

"It's a huge disappointment to us, and it's a huge disappointment to the community," said Bud Ingalls, Serologicals chief financial officer. "We expected to be a significant participant in the community, and we're very disappointed. We wish things would have worked out differently for us. We wish demand for our product would have been stronger and, unfortunately, we'll bear the bulk of the write-off and impact.

"We would certainly hope that the community would be fine and have another player involved."

The building and site will be on the market by the end of the first quarter, Ingalls said, with hopes for closing a sale by the end of the year. Serologicals also announced Friday it was closing another plant, in Toronto, Canada, and putting it up for sale.

'First-class' building

The company's decision to locate in Lawrence, announced in December 2002, had been hailed by local leaders as a cornerstone in the city's efforts to become a player in the biosciences industry. Lawrence city commissioners quickly approved the company's request for an 80 percent tax abatement for 10 years on an estimated $28 million in investments in property and equipment. The tax break would have been among the largest in the city's history.

The 44,000-square-foot plant managed to produce 1,650 liters of Ex-Cyte for testing purposes, and had 26 employees until the company laid off 19 in March, citing delays in customer certification processes.

Commissioner Sue Hack, who helped approve the abatement as mayor in January 2003 and represented the city during ground-breaking ceremonies soon thereafter, found herself thankful Friday that the company's vision - for the building, at least - had become reality.

"We did get a first-class bioscience building out of it," said Hack, who noted that the tax abatement has not been put into effect, and would have to be renewed for any company that buys the property. "Did we lose anything? Did we lose any dollars? No, we really didn't.

"We would not have entered into a tax abatement agreement with this company if we thought it wasn't going to work out for the community. We had every faith that it would, but it's important to remember that the facility stays here. And they have built an absolutely magnificent facility, so we'll find an occupant for that."

Ingalls said the plant would be appropriate for major pharmaceuticals companies or the contract manufacturers they increasingly rely upon to make their products.

As a state-of-the-art fermentation plant, he said, the Lawrence plant should prove especially attractive to a buyer, given a relative lack of such space in the United States. Serologicals plans to place a value on the asset within 30 days.

"We spent a total of $33 million, and that's not an insignificant number for us - or for anybody," Ingalls said. "We're going to take a significant hit, no question. But we're not going to put a number on it at this point."

Sales fall short

Ingalls said the company's Ex-Cyte sales had been growing, but not as fast as officials had hoped. Ex-Cyte sales are expected to account for $30 million to $35 million in 2005, well short of the $60 million a year that had been anticipated for the Lawrence plant alone.

That's why the company opted to expand operations in Illinois, at a plant that's now running 24 hours a day, seven days a week.

"It just came down to the fact that for the company, economically, it made more sense to have one facility," Ingalls said.

Lavern Squier, president and chief executive officer of the Lawrence Chamber of Commerce, said economic-development officials would be working with Serologicals to produce a marketing plan for the property.

Chamber officials have been fielding an increasing number of inquiries from life-sciences companies, he said, as momentum builds through partnerships with Kansas University and other area officials.

"I think it's a momentary loss, but our bioscience future is very bright," he said.

Comments

black_watch 8 years, 6 months ago

They mis-estimated their growth that badly? Think about this. They were expecting to meet $60 million in demand from the lawrence plant, on top of their Illinois plant, and only ended up with $30 million that their IL plant can meet? Why are they wildly exaggerating their sales projections that badly?

Also, how does one increase the capacity of one's central plant by 50%, while simultaneously building an entirely new plant, and not consider coordinating the efforts? How does one overnight increase production by that much? Is this company so uncoordinated that the left hand doesn't know what the right is doing? Either we have a case of a company with serious, serious competency issues in higher management, or... Let's hear it... It was planned that way all along. Conspiracy may be too strong of a word, but planned? People wielding this kind of money are typically not this seemingly foolish without a reason. What's the payoff? What do they get out of it? Perhaps they got some great perks from the state for expansion, and for promoting growth in bioscience, federally as well. Consider also the stock jump that must've occured. I recommend checking the executives' stock portfolios for relatively recent sales. A major faux expansion campaign that can't really be supported long-term, to boost share prices to sell; a sell-off by execs, then comes the bad news. A killing is made.

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black_watch 8 years, 6 months ago

The previous post was a possible reasoning behind the actions of any actual company, companies, or persons. It is not meant to reflect any actual situations that may or may have happened, past, present, or future, and may be considered an opinion only, and not necessarily factual in any way, nor as a reflection of the actual workings of the company mentioned.

... just so you know.

...But I think they did it on purpose.

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just_another_bozo_on_this_bus 8 years, 6 months ago

Agree, as well. It's either major incompetence, or some sort of scam along the lines that black watch outlined. But such scams are business as usual these days, and the proceeds are the main source of funding for Republicans in particular, with DLC Democrats running a close second.

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