Feb 17


Q&A: Nanotech guru Alain Kaloyeros

Alain Kaloyeros works in Albany but is emerging as a key player in Gov. Andrew Cuomo’s effort to revitalize the Western New York economy.

 Kaloyeros is the senior vice president and CEO of the College of Nanoscience and Engineering at the University of Albany. Since 1988 he has lead the effort to develop a nanotechnology sector in the capital region, and by extension, the state, which has resulted in the creation of some 18,000 jobs.

“He has spent the past two decades building the nano facility as the most advanced research complex of its kind at any university in the world,” according to the Albany Times Union

Over the past year, Kaloyeros has been working with local officials, including those at the Buffalo Niagara Medical Campus, to develop plans announced by Cuomo in December to invest $50 million in state funds to build and equip a pharmaceutical drug research and development center at the downtown medical campus.

Kaloyeros, 57, is a native of Beirut, Lebanon. He received his doctorate in Experimental Condensed Matter Physics from the University of Illinois, Urbana-Champaign in 1987.

Investigative Post Editor Jim Heaney interviewed Kaloyeros via satellite on Feb. 13.  A 3 minute, 41 second video clip featuring interview highlights is posted above. The full 24 minute, 45 second interview is posted deeper in the transcript, which has been edited lightly for clarity.

Readers might also be interested in the reported blog post and TV story that was published/aired on Friday.

Heaney: Briefly explain your role in the Buffalo project.

Kaloyeros: When Governor Cuomo announced the Buffalo Billion, part of it is the concept of taking a hybrid of the Albany innovation and education model of the College of Nanoscience and Engineering and adapting it to whatever makes sense for Buffalo.

Heaney: And you’re in charge of doing that transfer?

Kaloyeros: I’m part of the team the governor put in place to, basically, assist in the transfer of the concept and see how it applies working with the Western New York Regional Economic Development Council, with Howard Zemsky, with people on the ground in Buffalo. So, short answer is I’m part of the team.

Heaney: Because this is modeled after the nanotechnology effort in Albany, I want you to briefly explain what the heck nanotechnology is and what is the model that has been used that brings together SUNY, the state in industry there. So, what is nanotechnology?

Kaloyeros: Nanotechnology is basically the knowledge base on how to manage and control individual atoms and molecules – basically, the building blocks of matter. And once you establish that knowledge, you can literally predesign and fabricate anything you want with the properties you want, from faster computer chips, better and faster software and hardware, to very exciting applications in the medical field, from computer chips that help replace damaged optical nerves or spinal cord injury to computer chip-based patches you put on the body that can track anything in the blood you want or deliver drugs in a programmed way. So, there’s a lot of exciting innovation that is driven by nanotechnology.

Why is it called nanotechnology? Nano is the Greek word for dwarf. And nanometer is, basically, the unit, one billionth of a meter, which is the unit we use to describe and to measure individual atoms and molecules. And so, think of one nanometer in the following sense: If you take a human hair, cut it and look at the cross-section, it’s one hundred thousand nanometers. That’s how small it is.

What used to be called the “Kremlin Model,” where companies do things internally, on their own, and universities, on their own, is kind of a thing of the past.

Heaney: Explain, briefly, the model that has evolved in Albany  that has led to the development of the nanotechnology sector. You’ve got several components to it. Explain the pieces and how they fit together.

Kaloyeros: The latest iteration of the model is the one that Governor Andrew Cuomo announced in September of 2011. Because the model wasn’t static, if you will, it kept being adapted and changed to account for the realities of the innovation, the education, and the economic model as it evolves in the U.S. and globally. And, what I call the “Andrew Cuomo Innovation-Driven Economic Development Model” has the following pieces to it:

One, it’s a publicly owned and publicly run public-private partnership where you bring together an innovation hub. You locate the smartest people from a university and build a state-of-the-art infrastructure and bring in the top corporations in a specific field, in our case, nanotechnology, to co-locate in the facilities and invest in joint-innovation and education.

So, basically, we’re building, for lack of a better word, an animal where you bring in the major anchor tenants and the small tenants, put them together and we act as the acropolis, the open innovation where they all work together with us, invest in New York, create the jobs in New York and do innovation and economic development in New York.

That’s in a nutshell what I call the “Andrew Cuomo Economic Innovation Model.”

Heaney: So the idea is, is the state winds up hosting the facility and providing some of the key support staff.

Kaloyeros: And owning the facilities.

Heaney: So you own the facility. You own the equipment and you provide key support staff. And all that becomes the proving ground where companies come in and collaborate with the state and with each other. What’s the attraction for a company to do that, as opposed to just going off and doing its own thing? Is it cost? Is it complexity? What’s the hook?

Kaloyeros: It’s all of the above.

It starts with, as innovation evolves in the 21st century and the emerging field of nanotechnology and nanobio by molecular science, not a single company or a single university can innovate on its own anymore. What used to be called the “Kremlin Model,” where companies do things internally, on their own, and universities, on their own, is kind of a thing of the past.

Now it’s the open innovation, the acropolis where companies come in to innovate with university scientists and researchers, and together, basically, develop the know-how. So, basically, in this new era of innovation you need physicists, chemists, biologists, computer scientists, mathematicians, all working together. And no single company can afford it.

So, it’s driven by the complexity of innovation, as you pointed out, Jim. It’s driven by the cost, because with every new generation of products now, the cost for the research and development and the commercialization and the manufacturing is anywhere from tripling to ten-tupling.

To give you an example, the example we discussed last week, a manufacturing plant for computer chips at the current platform, which is 12 inches, costs anywhere from three to four billion dollars. When you migrate to the next wafer platform, which is code four-hundred fifty millimeters wafer, which is about seventeen inches and change, the cost per single manufacturing plan is going to go up to anywhere from twelve to fifteen billion dollars.

 There is not a single dollar going to any of the private corporations.

Heaney: Talk briefly about the outcome in Albany before I  get into specifics of Buffalo. In our phone interview the other day, you said there’s been, as a result of this effort in Albany and the capitol region, 18,000 jobs created over the last 10 years or so.

Kaloyeros: There are around 3,000 jobs located on-site at the College of Nanoscience and Engineering. Most of them are private jobs. But those are supported by another 15,000 jobs in nanotechnology across upstate, all the way from Buffalo down to New York City.

These 18,000 jobs average about $87,000 per job, according the Federal Bureau of Labor Statistics. So, just in wages alone, the investment that’s going into the state economy is amazing. And this is exactly why the governor is taking this model and blending it into a grassroots effort in Buffalo, to, basically, do a hybrid of it, as I’ve said.

Heaney: Let’s talk about the model here. It’s going to be drug research and located at the Buffalo Niagara Medical Campus. What can you add to those bare bones that I’ve just laid out in terms of what kind of drug research and who are partners going to be?

Kaloyeros: The model is being transferred or,  if you will, adapted, for Buffalo, that we worked on with regional council is to set up a hub for innovation. And what the governor announced the first $50 million is to go towards adapting an innovation hub at the Buffalo Niagara Medical Campus and, basically, adapt it. The $15 million will go to rehab the facilities and set them up as state-of-the-art facilities and $35 million will set up what we call a drug discovery and development line that researchers from all the universities, and from the companies, could work together on. And so, this is the fundamental infrastructure of the hub. This is the first announcement that the governor made.

Within two to three years, you’re looking at an excess of 500 high-tech jobs and then, take it from there. The sky’s the limit.

Heaney: Who are going to be the key partners on this project?

Kaloyeros: On the public sector side it would be the Jacobs Institute, the Buffalo Niagara Medical Campus and the College of Nanoscience and Engineering, with the University of Buffalo being the fourth partner. That’s on the public side.  And the facilities and the equipment, obviously, are owned by the public side. There is not a single dollar going, as we discussed, to any of the private corporations.

But in addition, to make sure of the viability of the model, the governor picked the first of what’s going be a number of private corporations coming in to be a part of this innovation hub. And the first company that was selected was Albany Molecular. Why Albany Molecular? Because, like the model in Albany, we needed the darlings of the industry, for lack of a better word, to come in, put the researchers there and work with the public sector to anchor all the big pharmaceutical companies in Buffalo.

Heaney: Let’s talk about Albany Molecular for a minute. As we’ve reported, they’ve lost, the last three years, more than $110 million and their stock is worth about one-tenth what it used to be. That’s raised some questions about their viability. So it begs to question, given their financial straits, is Albany Molecular the best choice for anchor tenant?

Kaloyeros: The short answer is yes. And it’s one of the anchor tenants. It’s the first anchor tenant and I’ll get, in a minute, to why the governor selected Albany Molecular. They’re announcing their end-of-year revenues today and you’ll be pleased with the results.

I want to address the $110 million. The lion’s share of that is a one-time charge they incurred to shut down their facilities in Europe and in the state of Washington to move their researchers to Buffalo. So, it wasn’t a structural deficit because of their revenue. It was more a one-time required charge to close their facilities.

In addition, if you remember, the last three years, we’re coming out of one of the worst downturns in the economy since the Great Depression, and all the companies had some form of revenue loss during those three years.

But if you look at the overall outlook of the company and its financial viability and its employment structure, they have over 700 jobs in New York and they haven’t laid one job off. And the Buffalo expansion is where they’re going to do all their innovation. 

There is no doubt in my mind that the deal is happening.

Heaney: Alright, let’s talk about the facility here in Buffalo. It’s going to  focus on drug research and development. Is there any model like this anywhere in the country, or is this unique to Buffalo?

Kaloyeros: This innovation hub is actually what Andrew Cuomo put together and it’s unique to New York and, in this case, in the drug area, unique to Buffalo.

I’m not aware of any other area, anywhere in the U.S. or worldwide, where you have an innovation hub that’s owned by the state, by the public entities and where you partner with the leading edge companies that do drug delivery and discovery, and attract all different pharmaceutical companies to the same area. So, the short answer is: Yes. It is unique. I don’t know of anything like it anywhere.

Heaney: I take it your expectation is that this is going to generate a lot of interest in that industry?

Kaloyeros: It’s already generating interest and I expect that over the next few weeks there’s gonna be some exciting announcements in terms of a couple of the key equipment companies in the business of drug delivery and discovery who are going to be joining the hub and joining AMRI. But my own projections are that within two to three years, you’re looking at an excess of 500 high-tech jobs and then, take it from there. The sky’s the limit.

Heaney: In terms of the initial job commitments – the governor said there would be in excess of 200 jobs initially. AMRI officials were quickly quoted in the press as saying, “We’re only bringing a fraction of those jobs.”  So, it kind of begs the question: Where are those initial two-to-three hundred jobs coming from if they’re not all coming from AMRI?

Kaloyeros: The intent was, as I said, to apply the same model in Albany where you have the private anchor tenant, in this case, AMRI, and some of its equipment companies coming with it.

Heaney: So, how many jobs does AMRI bring initially to all of this, if not 250?

Kaloyeros: Of the 250, AMRI’s bringing in 75 and there are 175  from the equipment suppliers. But, as I mentioned to you, the equipment suppliers have committed slightly more than the initial 175, so we are looking now at 275 jobs starting, not 250.

We avoided a lot of the mistakes that happened with the Bioinformatics Center.

Heaney: So we’re talking AMRI coming and doing R&D and at least two other companies coming and providing the equipment and some of the technical support?

Kaloyeros: Correct.

Heaney: How solid of a deal is this? Because I obtained, through the Freedom of Information Law, the MOU that the governor based his announcement on back in December. The MOU only commits the state and AMRI to quote “discuss” development of this project. It begs the question, seeing that there’s no written contract that actually commits the parties, of how solid of a deal is this?

Kaloyeros: It’s 100 percent solid.

This is, as we discussed, the process that’s used by signing a memorandum of understanding first to, basically lay out the key components of the agreement. And then, on the company’s side, they go socialize it with their board. They socialize it with their stock-holders. And, on our end, we work with getting the funding in place through our Empire State Development Corporation. And the contract is being finalized and is ready to be signed.

The process that has been done for the last 25 years, including in Albany, is, once the MOU is signed and the announcement is made, then the next piece of it is to have the contracts ready, have Empire State Development Corporation approve the grant, then issue what’s called a grant disbursement agreement that the contracts attach to.

So, there is no doubt in my mind that the deal is happening. And, hopefully, it’s happening sooner than we all think.

By next summer, you’re going to have the lion’s share of the jobs there.

Heaney: Let’s talk three dates. What’s the time frame for getting the deal signed? What’s the time frame for breaking ground on the facility? And what’s the target date for actually having this facility open for business with AMRI and these equipment manufacturers opening shop?

Kaloyeros: The first date, I presume, is going to be around April 1.

Heaney: And that’ll be the signing of the contract?

Kaloyeros: Correct. That’ll be once the state budget is finalized and ESDC approves the grant disbursement agreement. Then it’ll be signing the contract at the same time.

The second date is, and I don’t know if you talked to Matt (Enstice of the Buffalo Niagara Medical Campus) about this, but the second date is concurrently, Matt is looking at recruiting the architectural firm and the construction firm to rehab current space on the site.

One of the beauties of this is you are not building a new facility by taking an old facility and rehabbing it to become the new hub of innovation. And that, I presume, is going to be starting in the next month or two. And then, concurrently, I expect that by the end of this year and the beginning of 2014, at the latest, you’re going to start seeing jobs on the ground in Albany, and in Buffalo. By next summer, you’re going to have the lion’s share of the jobs there.

Heaney: From what you explained earlier, it’s not just a matter of having research and development work going on here. But you’re expectation, based on your experience in Albany, is that R&D is going to lead to manufacturing opportunities where the pharmaceutical drugs might actually be produced in the Western New York area as opposed to someplace else. Do you, in fact, expect to see a lot of spin-off from manufacturing?

Kaloyeros: There’s going to be two forms of spin-off, as you pointed out. One is, some of the innovation coming out from this hub from the universities and from the public’s side of the researchers, they’re going to be spun-off into companies from the, if you will, bottom-up approach.

But, concurrently, as part of the model that the governor implemented in Albany, and he wants to apply in Buffalo, is that given that pharmaceutical companies, like any high-tech companies, spend over 20 percent of their revenue on research and development, we hold a big stick over their head. So, any of those companies coming in wanting to do research and development, on the side, are going to be required, as part of the agreement, to locate a significant R&D and manufacturing presence in Buffalo. This is the same model we did in Albany.

I mentioned, for example, even the construction firm, M+W Group, that had its headquarters in Dallas, as part of them building the facilities in Albany and being part of the ecosystem, they moved their headquarters from Dallas to Arsenal Watervliet Arsenal Technology Park, which used to be an Army base and now it’s like a high-tech hub. So, absolutely right, it’s not only a hope, it’s part of the stick we’re gonna hold over their heads.

Heaney: One final question. Under George Pataki the state came in and bioinformatics was the big buzzword. And bioinformatics was going to be the economic savior of the region. And bioinformatics didn’t exactly happen. It became a promise that failed to live up to the hype and there’s going to be people in Buffalo who are skeptical that this is the next bioinformatics. What makes this initiative different from the last one?

Kaloyeros: We learned. The governor did not want to repeat what happened with the Bioinformatics Center. Actually, bioinformatics is still a big buzzword in our business and a field for a lot of innovations.

We avoided a lot of the mistakes that happened with the Bioinformatics Center including, this is a stand-alone innovation hub that’s owned by partnership that includes the universities, and not run only by the universities. And, it’s not just the public’s side of it.

What happened with bioinformatics was the investment went in with the hope that companies would follow. What Andrew Cuomo did is to make sure that the companies are on the ground floor and, basically, joining up-front so that the investments and the operating budget, and the ongoing expense and the attraction is done by the private companies, more than even us on the public side. So it has all the right elements to it.

Heaney: This is the centerpiece of the governor’s opening salvo in the Billion To Buffalo.  Does this have a potential, a realistic potential, of being a big deal, a medium deal or a small deal when it comes to helping to turn around this region’s fortunes?

Kaloyeros: Remember that this is part of a puzzle that’s actually a brilliant plan, in my mind, that the local regional council put together under the governor’s guidance, and it’s going to be a key. I view it as it’s going to catalyze a couple of the other pieces, and is part of this bigger puzzle.

I mean, look, everyone from the governor down are putting their name and face on this. And so, I would love to continue following this with you over the next years and come back and say, “You know what, guys? You were right, this has made the difference for the economy in Buffalo.”

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