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State Gambles on Alliance

News Journal- July 15, 2011

NEWARK — One of the world’s largest research firms, Fraunhofer Gesellschaft chose Delaware for its first U.S.-based laboratory.

With funding and other support from the beginning, the Delaware Economic Development Organization and the University of Delaware have backed Fraunhofer’s efforts to develop a new method for creating vaccines.

Those bonds became deeper Thursday with the ratifying of a new partnership between the state, UD and Fraunhofer.

The new agreement will result in a $32 million investment over the next six years to share between the state of Delaware, UD and Fraunhofer. The state will provide $6 million over the next six years through the Bond Bill and DEDO director Alan Levin plans to recommend another $3 million in Strategic Fund money for Fraunhofer at the September meeting of the Council on Development Finance. Previous Bond Bills already have routed $5 million to Fraunhofer in the past five years.

UD will provide Fraunhofer with $9 million worth of in-kind services, providing the company with access to its facilities and high-tech instruments to aid in its research.

“This is a long-standing relationship that we’re strengthening today,” UD president Patrick T. Harker said.

Fraunhofer will match the $18 million from the state and UD with its own investments toward expanding research at the lab and hiring additional staff.

In addition to encouraging Fraunhofer to create jobs, the state also is an investor, with about a 5 percent equity stake in the company’s U.S. operation. The state would share in royalties if Fraunhofer’s research takes off, Levin said.

Just how something will pay off is promising but unpredictable in the world of developmental research, Levin said.

“It’s either going to be nothing, or it’s going to be huge,” he said. “It could be a game changer.”

In the meantime, Fraunhofer employs about 100 people, most of them scientists, at its Newark laboratory. The facility plans to add a dozen more jobs over the next year and hopefully more in the future, said Vidadi Yusibov, executive director of Fraunhofer.

“Chemists, biologists, clinicians,” he said. “High-paying, high-impact jobs.”

The celebration of the partnership came several months after some members of the Bond Bill Committee questioned whether the state should continue giving the company $1 million per year in hopes of a future payday.

“It seems like once they get their hook into you, you never get out,” said state Rep. Michael P. Mulrooney, D-Pennwood, during a hearing this spring.

The committee ultimately decided to continue supporting Fraunhofer’s research with state funds, resulting in the $6 million commitment over the next six years.

“It’s been one of the best investments I think we’ve made,” said Bond Bill co-chairman and state Sen. Robert Venables, D-Laurel.

Fraunhofer’s main work at its Delaware site revolves around creating a new method to make vaccines. The process uses tobacco plants, instead of eggs, to rapidly develop vaccines, which could aid in the treatment of seasonal flu and other viruses.

The agreement also will pave the way for joint appointments to UD’s faculty and Fraunhofer’s research team, said Karl Steiner, senior associate provost for research and development. Fraunhofer scientists also will teach a biotechnology class on UD’s campus as adjunct professors.

UD will give Fraunhofer access to advanced research equipment on campus to aid in spectroscopy, as well as gene and protein sequencing. Both sides hope the relationship could lead to the future commercialization of basic research discoveries in UD’s labs.

“Many discoveries die in the infant stage,” Yusibov said. “Not because they are bad but because there’s no one to translate them from discovery to commercial use. This partnership tries to close that gap.”

Staff writer Chad Livengood contributed to this report.

Contact Wade Malcolm at 324-2386 or wmalcolm@delawareonline.com.