An effort to enhance the region’s economy through medical-related research and commercialization is getting a multimillion-dollar lifeline.
The John S. and James L. Knight Foundation has agreed to provide as much as $4 million in additional funding to the Austen BioInnovation Institute in Akron (ABIA).
The three-year commitment follows $20 million in support from the foundation that ended in May.
The state of Ohio also has awarded nearly $1 million to expand and equip the institute’s prototyping center, located in the downtown headquarters.
At the same time, the institute is reducing its workforce by about 30 percent and making other cuts to expenses as part of its sustainability plans after two of the five original founding organizations pulled out of the partnership this year.
The money from the Knight Foundation and state will be used to focus on expanding the institute’s product innovation and commercialization departments, which offer services that can generate revenues from clients, said Dr. Frank Douglas, the institute’s president and chief executive, on Wednesday.
The renewed Knight Foundation support “demonstrates their commitment to ABIA and Akron,” Douglas said.
“We have really been quite excited by the support from the Knight Foundation and their confidence in us,” he said.
The five founding partners — Akron Children’s Hospital, Akron General Health System, Northeast Ohio Medical University (NEOMED), Summa Health System and the University of Akron — launched the nonprofit venture in 2008 and divided a $20 million commitment in cash and in-kind contributions through 2013.
But Akron General and NEOMED have opted to no longer continue as full partners.
The Knight Foundation agreed to continue its financial support of the initiative because “it’s helping to create jobs, it’s helping to attract and maintain talent — all things that are important to the community,” said Juan Martinez, the foundation’s vice president and chief financial officer.
The Miami-based Knight Foundation invests in communities where the Knight brothers owned newspapers, including the Beacon Journal.
Martinez said the Knight Foundation is impressed with ABIA’s recent successes attracting new partners and clients, including specialty manufacturer Omnova Solutions and engineering design firm Nottingham-Spirk.
“By bringing new customers and new innovators into the community, it exposes Akron to a greater audience and it helps to attract new talent into the community as they see this as a community of innovators,” he said.
To get full funding from the Knight Foundation, ABIA must achieve targets for expenses and revenue generation.
“We believe in the plan,” Martinez said. “We believe in [their] management. We want to align our funding to achieve the plan and also provide incentives for the organization meeting its goals.”
The institute plans for its revenues to exceed its expenses within the next two or three years, Douglas 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.
Cost-cutting plans include eliminating about eight of the institute’s 28 full-time positions, Douglas said. Those impacted are being notified this week.
“We have to generate revenues and cut costs, so there will be some reductions that we will be making in order to further streamline the organization and get to sustainability,” Douglas said.
The University of Akron still is determining its funding level, Douglas said. Akron Children’s Hospital has agreed to support the institute with $800,000 annually, and Summa is providing $400,000 annually.
The BioInnovation Institute has been actively recruiting new partners and clients in recent months.
The institute’s new strategy has been to target its services to medical device companies, health-care systems, firms interested in entering medical markets, inventors, entrepreneurs, colleges and universities, Douglas said.
The goal moving forward is to reduce reliance on grants and support from its founders, he said.
“Our goal is to generate the funds and focus on that first and to tap into our grant as needed,” Douglas said.
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.
The partnership’s original goal was to create 2,400 new jobs and attract at least $50 million worth of investments annually in area health-care companies within its first decade.
Cheryl Powell can be reached at 330-996-3902 or firstname.lastname@example.org. Follow Powell on Twitter at twitter.com/.