Pharmaceutical Commerce - May/June 2011 - (Page 11)

Business Finance 2011 Site Selection Report: For a Lucky Few, Biopharma Expansion a Reality Again By Lena Anthony Last April, Diplomat Specialty Pharmacy announced plans to centralize its operations in 340,000 square feet of space at the Great Lakes Technology Centre, the former innovation center for General Motors, in Flint, Mich. One rapid $7 million renovation later, the space has been transformed into a stateof-the-art headquarters and compounding and distribution facility for the growing specialty pharmacy, which experienced a 917% growth in sales from 2006 to 2009. Purchased at auction for “pennies on the dollar,” according to Diplomat President and CEO Phil Hagerman, and supplemented by state and local economic incentives, the project has been a game-changer for the company. With the purchase of the 340,000-square-foot technology center, as well as the purchase a few months later of an adjacent 210,000-square-foot warehouse, the company acquired a 10-year growth footprint. “At first, we were concerned that we would bite off too much,” Hagerman says. “But slowly we started to adopt that ‘go big or go home’ attitude. Normal business rules don’t allow companies to acquire a 10-year growth footprint, so we’re very lucky. It gives us a tremendous long-term competitive advantage.” In many ways, Diplomat’s story is also a model for site selection in a post-recession world. Yes, many companies are still reeling from its effects: Sixty-six percent of life sciences executives who responded to a Deloitte survey said their companies experienced either a moderate negative effect or significant negative effect as a result of the recession. But other companies like Diplomat emerge unscathed and ready to expand. Their pick of properties, combined with attractive deals from state and local economic development agencies vying for their jobs, are helping to make biopharma expansion a reality again. What companies want As companies start to expand again, site selection observers will notice a shift, says Matthew McDevitt, executive vice president of real estate for BioMed Realty Trust (San Diego), a life sciences real estate investment trust with properties in seven core markets across the United States. Coming off a stretch of doing no deals in 2008, 2010 saw an increase in activity (the company posted $700 million in acquisitions last year) and some noticeable changes in what biopharma companies were looking for in a site. “The biggest was speed to market,” Figure 1: Metropolitan Statistical Areas with the largest employment levels in drugs and pharmaceuticals, 2008 1. New York-Northern New Jersey-Long Island, NY-NJ-PA ......................................................49,752 2. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD ....................................................................17,584 3. Chicago-Napierville-Joliet, IL-IN-WI .................................................................................................17,029 4. Indianapolis, IN ..........................................................................................................................................12,396 5. San Francisco-Oakland-Fremont, CA.............................................................................................. 12,009 6. Los Angeles-Long Beach-Santa Ana, CA ........................................................................................ 11,318 7. Boston-Cambridge-Quincy, MA-NH ...................................................................................................8,682 8. Durham, NC ..................................................................................................................................................6,755 9. Oxnard-Thousand Oaks-Ventura, CA ................................................................................................6,537 10. San Diego-Carlsbad-San Marcos, CA ...............................................................................................4,673 11. Dallas-Fort Worth-Arlington, TX ........................................................................................................4,208 12. Bridgeport-Stamford-Norwalk, CT ...................................................................................................3,774 13. St. Louis, MO-IL .........................................................................................................................................3,578 14. Washington-Arlington-Alexandria, DC-VA-MD-WV..................................................................3,478 15. Kalamazoo-Portage, MI .........................................................................................................................3,455 Source: Battelle/BIO State Bioscience Initiatives 2010 Diplomat Pharmacy’s newly expanded Almac Group’s new North American headquarters in Souderton, PA headquarters in Flint, MI McDevitt says. “No one is really willing to take a space from shell or scratch and spend the time to actually design and build it. They really want to take as much risk out of the equation and find existing space.” Diplomat Pharmacy’s Flint, Mich., retrofit is one example of this trend. Another is Daiichi Sankyo, which announced in February that it is investing $15 million to open its first U.S. manufacturing and packaging facility in Bethlehem Township, Pa. The company was originally looking at Southeastern Pennsylvania, near the Greater Philadelphia life sciences cluster, when a former Amcor Pharmaceutical packaging facility was identified as a potential site in Bethlehem Township. Almac Group’s new North American headquarters in Souderton, PA. Figure 2: “After turning up nothing in Southeastern Pennsylvania, they indicated that the project had gone on the back burner,” says Michael Rossman, director of Pennsylvania Gov. Tom Corbett’s economic development action team. “Then, they identified this existing packaging facility that provided an opportunity for them. They expect to be operational there at the end of the year.” BioMed Realty Trust’s McDevitt says he also has noticed a shift in the types of amenities companies look for during the site selection process, which he says speaks to their commitment to attracting top talent. “They want to provide a really nice environment for their employees,” he says. “Proximity to transportation, running paths, health clubs—all of those things are becoming very important. Now I hear a lot of ‘Where do my employees park their bikes?’ Or if we’re in a more suburban area, they want to see the cafeteria and the gym right away.” The cluster effect Another trend concerns where companies will expand. McDevitt says he’s noticed a return to clustering, which is good news for the major biopharma hubs like Boston, Philadelphia, the Research Triangle Park, San Diego and San Francisco (see Figs. 1 and 2). Pete Mooney, principal of the Deloitte Global Life Sciences and Healthcare Consulting Practice, says a new set of clusters, driven by demand for product, is forming in emerging markets like Brazil, China, India, Mexico, Russia and Turkey. continued on page 12 > May | June 2011 11 www.PharmaceuticalCommerce.com Top 5 States: Venture Capital Investments by Segment (Pharmaceutical), 2004–2009 CALIFORNIA MASSACHUSETTS MARYLAND NEW JERSEY PENNSYLVANIA Source: Battelle/BIO State Bioscience Initiatives 2010 http://www.PharmaceuticalCommerce.com

Table of Contents for the Digital Edition of Pharmaceutical Commerce - May/June 2011

Pharmaceutical Commerce - May/June 2011
Table of Contents
Editorial
Op-Ed
Top News
Business / Finance
Brand Communications
Supply Chain / Logistics
Information Technology
Legal/ Regulatory
Executive Development
Meetings and Editorial Index

Pharmaceutical Commerce - May/June 2011

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