Athenex Looking Elsewhere as State Lags on Plans for Cancer Drug Plant
August 31, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Many big construction projects hit snags, and when those projects involve state and regional government spending, the odds of problems seem to go up. In February, it was announced that the state of New York would invest $225 million in a 300,000-square-foot manufacturing facility for Buffalo, NY-based Athenex, which would also kick in $1.62 billion over 10 years. The deal was expected to create 1,400 new direct and indirect jobs, 500 in Buffalo and 900 in Dunkirk.
But today it was reported that the work in both Buffalo and Dunkirk has stalled. Athenex apparently is not waiting around to see if things continue, but is considering its options. “I am actively talking to someone else, actually, and it’s in the U.K.,” Flint Besecker, Athenex’s chief operating officer, told The Buffalo News. “And it’s not a threat. It’s just we’re seeking other options that can accommodate our business challenge right now.”
Part of the original plan was that through a partnership with the SUNY Polytechnic Institute, Athenex’s North American headquarters at the Conventus Building would be expanded. The state of New York was to build the manufacturing facility in Dunkirk. Athenex agreed to invest a minimum of $1.62 billion in Western New York in labor, materials and supplies over the next 10 years. The facility in Dunkirk was to cost $200 million and would be a High Pharmacy Oncology Manufacturing Facility.
In Buffalo, the state would invest $25 million to expand and refurbish the sixth floor of the Conventus Building on the Buffalo Niagara Medical Campus. Athenex was to invest a minimum of $100 million, and also lease 51,000 square feet of space. Construction already started a year ago in August 2015.
Athenex was originally named Kinex Pharmaceuticals, and was founded in 2002. It was built on research conducted by David Hangauer at the University of Buffalo. It has offices in the U.S. and China. In October 2015, it announced it had inked a deal with the Banan District in Chongqinq, China, to build two separate drug manufacturing plants.
The construction projects in the Conventus medical office and research building, which were projected to be completed in April 2016, have not even started yet. Site preparation and detailed engineering plans were expected to start this spring for the Dunkirk facility, that that hasn’t started yet either.
Apparently things have stalled so much, or are so dysfunctional, that Athenex advanced money to a New York state agency to buy the land for the Dunkirk facility. As a result, Athenex has halted hiring and investing in the Buffalo area, including holding off on a planned expansion at a QuaDPharma production facility in Newstead. It is, instead, outsourcing laboratory testing work to companies in Illinois and California.
“We are formulating our drugs in the kitchen outside of New York State right now,” Besecker told The Buffalo News. “We’re looking at manufacturing options outside of New York right now. We don’t know whether those are going to be short-term, interim decisions, or whether we should create more dedicated investments in those areas. Yet to be determined. Our hope is that projects can get moving.”
Officials with the state of New York claim the delays are normal for project this size. Apparently contractors and subcontractors that were working on the Conventus building expansion are still owed $1.3 million, and the subcontracts are refusing on working on the formulation center until they are paid for that work. The Buffalo News reports that payment to the contractor and subcontractors for the Conventus site were approved last week and construction will start soon.
“While work never officially stopped,” Kevin Schuler, a spokesman for LPCimenelli, the construction manager on the project, told The Buffalo News, “equipment and other necessary items were not purchased because of the uncertainty of the payments.”
There are apparently many layers involved in getting the payments approved, and include Empire State Development, as well as Bart Schwartz, an independent investigator working for Guidepost Solutions. He was hired by Governor Cuomo’s administration to investigate the Buffalo Billion program, a state commitment to invest $1 billion in the Buffalo area’s economy.
Another factor in the delays is supposedly that the state was negotiating with Athenex regarding a second phase of the project, but Besecker says those talks are no longer active, saying that SUNY Polytechnic’s bringing up the second phase was a “red herring.”
Athenex was in talks with the state about a potential joint venture with an Asian company to locate operations near the Dunkirk facility. But Besecker says he ended those negotiations because it wanted to see progress on phase one of the project first.