Two of the five founders of a regional effort to grow the local economy with medical-related research, education and commercialization have pulled out of the partnership.
Akron General Health System and the Northeast Ohio Medical University (NEOMED) have notified the Austen BioInnovation Institute in Akron that they will no longer continue as partners.
Akron General and NEOMED joined with the University of Akron, Summa Health System and Akron Children’s Hospital in 2008 to launch the BioInnovation Institute, a nonprofit headquartered in downtown Akron.
The five founding partners divided a $20 million commitment in cash and in-kind contributions toward the venture through 2013.
The BioInnovation Institute (ABIA) is moving forward by actively recruiting new partners and clients, said Dr. Frank Douglas, president and chief executive.
ABIA’s new strategy is to target its services to medical device companies, health-care systems, firms interested in entering medical markets, inventors, entrepreneurs, colleges and universities, according to a statement issued Friday.
“We do need to bring in some major partners to replace the loss from the original funders,” Douglas said. “Sustainability is indeed our major focus.”
Another major source of funding — a $20 million commitment from the John S. and James L. Knight Foundation — ends this year unless it’s extended.
“We are now negotiating that and what that would look like,” Douglas said.
The Knight Foundation couldn’t be reached for comment.
FirstEnergy Corp. also has contributed $10 million.
The exact amount of the continuing partners’ financial commitment still is being finalized, BioInnovation spokesman Scott Rainone said.
The BioInnovation Institute’s expenses exceeded revenues by almost $7 million in 2012, the most recent year available from Internal Revenue Service filings. Expenses for the year totaled $10.5 million.
Nearly $3.2 million of the $3.5 million in revenues in 2012 came from contributions and grants.
“The new business plan being executed is externally focused on revenue growth through defined target and services in the industrial, health-care and higher education sectors,” Rainone said.
Partnerships re-evaluated
NEOMED decided to no longer continue as a founding partner after evaluating its partnerships and programs, spokeswoman Cristine Boyd said on Friday.
The university is focused on initiatives to attract youth to health-care careers, expand scholarships for students and potentially add new programs, including possibly a college of dentistry, she said.
“Over the past four years, we have actually contributed $4 million in cash and in-kind contributions to ABIA,” Boyd said. “ … While our membership with ABIA has been really valuable, it’s important for us to allow ABIA to become more self-sufficient.”
In a prepared statement, Akron General indicated it’s “no longer fiscally practical to participate as a founding member.
“The health-care landscape across America is changing, requiring leading health-care organizations to conduct a constant evaluation of resources and make prioritized expenditure decisions to ensure patients continue to receive the high quality care they deserve,” the health system stated.
Akron General is searching for a larger health system partner — another factor it indicated played into the decision.
NEOMED and Akron General said they continue to support the BioInnovation Institute and will remain “fee-for-service” partners, meaning they will participate in individual projects.
Moving forward, NEOMED has committed to investing as much as $100,000 annually in the BioInnovation Institute, Boyd said.
Committed to institute
Since launching six years ago, the BioInnovation Institute has contributed to the creation of almost 450 jobs and helped start or create eight companies, according to ABIA.
Officials with the remaining partners indicated they aren’t concerned about the viability of the BioInnovation Institute.
University of Akron President Luis Proenza said, “We envisioned in time that there would be the need for other partners and other opportunities to grow the linkages and synergies.”
He said the university is committed to continuing to work with the BioInnovation Institute, particularly with its expertise in polymers that can be used to develop new medical devices.
Likewise, Summa President and Chief Executive Thomas J. Strauss said the health system continues to believe in ABIA’s vision “and as a founding partner, we remain committed to supporting the organization’s efforts to accelerate biomedical innovation throughout our region.
“This is a time of change for the ABIA, but with change comes opportunity,” Strauss said in an email. “We already have seen significant success, particularly in the area of orthopaedics, and I remain optimistic that we can replicate that success in other areas as well.”
Akron Children’s Hospital President and Chief Executive William Considine said in a statement the hospital “is proud of our part in helping ABIA establish this organization as a cornerstone of the region’s and state’s culture of biomedical innovation.
“The support of our local leaders and of the Knight and FirstEnergy foundations is indicative of ABIA’s great value,” said Considine, who chairs ABIA. “Changes are a natural and expected part in the evolution of a unique organization that has grown quickly and in ways that were not imagined when ABIA launched.”
Cheryl Powell can be reached at 330-996-3902 or cpowell@thebeaconjournal.com. Follow Powell on Twitter at twitter.com/CherylPowellABJ.