As the lines between pharmaceutical chemistry and the biotechnology industry blur, with the pharmaceutical industry adopting a number of biotechnology advances, one of the key site search factors is finding a location that will allow companies to recruit and retain qualified workers in a cost-competitive environment.

For biopharmaceutical companies (the convergence of the pharmaceutical and biotechnology industries) selecting a location should be based on long-term benefits. “Can the community sustain your company for a long period of time?,” asks Jonathan Sangster, senior managing director, global corporate services, CB Richard Ellis Consulting. He assists companies in making business location decisions.

Sangster says that when working with firms he finds that they believe financial incentives are a given in the site selection process. He says companies should evaluate those factors but also look at the long-term picture. By doing so, companies find economic incentives become secondary.

Sangster says the perfect marriage is when both the community and company win. For HollisterStier Laboratories LLC, there is no place like Spokane, Wash., to manufacture pharmaceuticals and grow the company. The company, which specializes in producing allergy treatment products, and conducts contract manufacturing for other pharmaceutical companies, has been operating in Spokane since 1921.

For HollisterStier, it is the employees that keep the company running. “We have the most hardworking and dedicated people in the Spokane area,” says Janell Jovick-Leonard, communications manager, HollisterStier. “Their work ethic is remarkable and I don't think you would find this in many other places.”

Jovick-Leonard notes that when clients come to visit the company from other parts of the country they continually comment that the staff is great to work with. “The staff is the key to what makes Spokane a great place for our company,” she says.

HollisterStier is conducting a $2 million warehouse expansion, which is 75 percent complete. After validation, the warehouse should be running this fall. In addition, the company will be conducting a $5 million project to add another freeze dryer, called a lyophilizer. The project will be about a two-year process, which includes the validation process.

Earlier this year, HollisterStier finished putting in its first freeze dryer, which was a $5.2 million project. The freeze dryer is used by companies developing anticancer and cardiovascular drugs.

Earlier this year, when American Pharmaceutical Partners, Inc. decided to conduct its $28 million expansion at its existing facility in Grand Island, N.Y., part of the Buffalo metro area, the decision was based in part on the workforce. Sangster assisted the company in its site search process.

One of the main factors the company evaluated in the process was to find a community with a qualified workforce, which had an industry cluster of skills sets and employees. It was also looking for a cost-competitive environment.

American Pharmaceutical Partners is expanding its manufacturing operations to produce generic and injectable drug products, as well as producing the drug Abraxane, for use in breast cancer patients. “Further expansion of our Grand Island facility is a key component of our growth momentum,” said Alan Heller, CEO, American Pharmaceutical Partners, at the time of the announcement.

Heller cited the Buffalo-Niagara area's low-cost workforce, incentives and the ability to fast-track construction on new buildings as the primary reasons for selecting Grand Island for the expansion. Says Dr. Ange Fatta, president and CEO, BuffLink, Inc.: “The decision clearly demonstrates APP's confidence in the Buffalo-Niagara workforce and quality of life.”

Sheer Brainpower

Beyond access to a pool of experienced biopharmaceutical workers, corporations seek locations where they can partner and collaborate with faculty at local universities and colleges. Purdue University's research park offers pharma companies, among other industries, the opportunity to access the research-oriented faculty and staff for consulting and research partnerships, as well as accessing students for internships, field experiences and part-time employment. Companies can also use expensive technical equipment under chargeback arrangements. The park's business incubator system provides attractive rental rates, shared-office services and professional business assistance.

The research park is home to several pharma companies, such as BASi, Endocyte and SSCI. Cinda Kelley, acting executive director, Lafayette-West Lafayette Economic Development Corp., notes that the city, the Purdue Research Foundation and Tippecanoe County are pro-active and resourceful when working with companies.  “We value our companies and work to help them in achieving their goals and successes,” she says.

These services include tax abatements, training funds, recruitment and relocation funding, and Life Science Council meetings, which are held monthly to address needs and concerns of the companies located in the park.

In South Carolina, Integrated Environmental Technologies was assisted by economic development organizations in establishing a long-term research and development agreement with the state university system. The company has two technologies it is ready to take into the development stage, one of which is developing an essential oil extraction process from botanicals.

“We will work with Coastal Carolina University in Myrtle Beach and Clemson University,” says Bill Prince, president and CEO, Integrated Environmental Technologies. The company relocated from North Carolina. Of the three states in the running for the new location — Georgia, South Carolina and Mississippi — Prince says South Carolina was more aggressive in wanting technology firms and stepped up by arranging the long-term research and development agreement. “Our decision had to do with the education and research, and the attitude of cooperative research,” Prince says.

Pharmaceutical manufacturers have found cooperation and partnership opportunities in Puerto Rico for years, and continue to invest in their facilities on the island. Amgen is investing $1.2 billion to build two bulk facilities, one for mammalian cell cultures and one for microbial fermentation; as well as a process development lab. What's more, Abbott Laboratories has invested $350 million for a manufacturing biotechnology plant, and Eli Lilly & Co. is investing $450 million in a facility to manufacture insulin.

Puerto Rico has traditionally been a leading manufacturing location in the industry, however, more companies are conducting some degree of R&D on the island, says Enrique Mirandes, deputy executive director, Puerto Rico Industrial Development Co. (PRIDCO), the economic development agency for the island. He says the island has the workforce to support all levels of the pharmaceutical industry.

Mirandes says Puerto Rico's history in the pharmaceutical industry has produced an experienced pool of talent, with 95 percent to 98 percent of the managerial staff consisting of native Puerto Ricans. The island also graduates more than 8,000 scientists and engineers each year.

Faculty and doctoral students for the University of Puerto Rico-Mayaguez, will staff the new Biotechnology Center for Research and Bioprocess Training, which was accepting bids for the building of the project at press time. The $15 million investment will provide a facility for training employees of biotech facilities. It will also offer process development capabilities for companies looking to bring new products to the market.

Puerto Rico is also home to 96 FDA-approved facilities, including the manufacturers of 16 of the top 20 blockbuster drugs. As part of its efforts to continually support the biopharmaceutical industry, Puerto Rican officials are building a $40 million Molecular Sciences Complex, which will house many of the research facilities found in the University of Puerto Rico system. The facility will be located between the university system's main campus and its medical school. The idea behind the facility is to attract more investment to the island, and to attract more National Institutes of Health funding for the researchers by putting them in a better position to compete for funding.

The University of Puerto Rico is also collaborating with the MD Anderson Cancer Center in Houston to develop the Puerto Rico Comprehensive Cancer Center.  The project has benefited from a grant from the National Cancer Institute.

Record Investment Fuels Growth

As biopharmaceutical companies continue in their quest to develop life saving products, they will need all of the training assistance and other resources they are able to tap into. According to the Pharmaceutical Research and Manufacturers of America, its member companies invested a record $38.8 billion in researching and developing new medicines, an increase of 12.6 percent from the previous year. The association says that when factoring in R&D spent by American biotechnology firms that are not members of the association, an estimated $49.3 billion was invested in biopharmaceutical R&D last year.

This type of investment will call for additional space and capacity requirements for the industry. Sangster says that the life sciences and biopharmaceutical industries require special use facilities. He says building criteria depends on where a company is in its product life cycle process.

“If you are emerging but ready to release your drugs commercially, you are looking for a place where you can receive significant assistance from state and local entities to produce as cheaply as possible,” Sangster says. “Because you don't have a lot of cash you are looking for free land or some other type of support.”

On the other end of the spectrum, established companies are looking for favorable business and tax environments, which may drive operations offshore, where it is favorable.

In Puerto Rico, PRIDCO is looking at the feasibility of establishing a biotech science park, which would feature biotech companies at all stages of operation. “Right now we are validating the concept in the industry to gauge the interest,” Mirandes says. Different sites on the island are being evaluated as possible locations for the project.

Mirandes adds that Puerto Rico is a low-cost alternative for pharmaceutical manufacturing produced for a U.S. market. “We offer the advantages of going offshore with the security of being home and operating in a U.S. jurisdiction,” he says. “Companies have the opportunity to operate without paying federal taxes, unless they repatriate the profits of their Puerto Rican operation to a U.S. headquarter company.”

In Chenango County, N.Y., which is home to Proctor & Gamble Pharmaceuticals, and OSG Norwich Pharmaceuticals, among others, the community is surrounded by larger municipalities such as Syracuse and Binghamton. However, because it is a smaller community, its tax base is less than the bigger areas. Proctor & Gamble Pharmaceuticals provides support functions for P&G's companies worldwide. It employs 200 people in Norwich.

OSG Norwich Pharmaceuticals conducted a $2.5 million facility upgrade in 2004, adding product lines and more efficient processes. The manufacturing and packaging outsourcer is expected to receive six new FDA approvals in 2005, as well as increasing its employment base of 320 people by 10 percent.

Due to Chenango County's proximity to larger communities, companies are able to draw from the larger cities for their workforces but pay lower wage rates, says Maureen Carpenter, specialist, Chenango County Economic Development.

Chenango County also offers the benefits of an Empire Zone, which is a New York state program offering significant tax benefits.

In Spokane, Jovick-Leonard says HollisterStier has benefited from the community's Empowerment Zone. She notes that the company also benefits from the relationships built with community officials.

HollisterStier's CEO, Tony Bonanzino, is currently the chair of the area's chamber of commerce, as well as a board member for Washington State University-Spokane. “In Spokane, our city officials are easily accessible,” Jovick-Leonard notes.

Carpenter says companies selecting Chenango County are aware that the community will assist them as issues arise, as it has a portfolio of tools and resources to support both small and large organizations.

Perhaps Prince says it best in regard to the relationships formed between corporations and the communities they conduct business in. “Every economic development organization in the country seems to have the same battle cry: generally pursuing biotechnology and technology,” he says. “However, there are those who actually show that, more than just say that. The Myrtle Beach area's business community, and in particular, the South Carolina university system, was very adamant about proving that to us.”

For biopharmaceutical companies involved in the site search, establishing relationships with higher education officials, and the ability to tap into skilled workforces, is just part of the equation. Make sure a community can back up its claims to support your business operations for the long term.

For more details about the organizations featured in this article, visit:

CB Richard Ellis Consulting, www.cbre.com

Chenango County (N.Y.) Economic Development, www.chenangony.org

HollisterStier Laboratories, LLC, www.hollisterstier.com

Integrated Environmental Technologies, www.ietusa.net

Puerto Rico Industrial Development Co., www.pridco.com

Pharmaceutical

Based on number of establishments first quarter 2003 to first quarter 2004.

New Branches

1.      New Jersey

2.      New York

3.      California

4.      Massachusetts

5.      Pennsylvania (tie)

5. Texas (tie)

7. Maryland (tie)

7. Ohio (tie)

7. Colorado (tie)

7. Wisconsin (tie)

7. Georgia (tie)

Startups

1.      California

2.      New Jersey

3.      New York

4.      Florida

5.      Texas

6.      Massachusetts

7.      Minnesota (tie)

7. Illinois (tie)

9.      Pennsylvania

10. Missouri

Data includes the following SICs:

2834 Pharmaceutical preparations

2835 Diagnostic substances

3559.9922 Pharmaceutical machinery

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