Life Science Leader magazine Danville, Virginia highlighted in article about bioscience economic development!
Survey Identifies Widely Varying Pharma/Bio Site-Selection Drivers
Regional and local economies provide financial incentives to attract life sciences companies, but financial incentives don’t always trump business opportunities and quality-of-life issues.
Life Science Leader, July 2009
Written by: Ann Roberts Brice
At one time or another, most life sciences companies add facilities, spawn new units, or simply seek greener pastures. Site-selection managers and executive leadership teams need to stay on top of their games to find optimal environments. Companies often begin with a review of key regions around the country for life sciences, but the overall relocation experience is also an important consideration. Financial incentives, business opportunities, and quality-of-life issues all become persuaders in relocation decisions.
To provide an edge, Life Science Leader (LSL) informally surveyed several U.S. areas known for growth and innovation in the life sciences industry. The survey was completed by state economic development officials and, in some cases, private sector partner groups at state and regional levels.
Tax breaks, grants and loans, and workforce training topped the list in response to our question: Identify the five key incentives used to entice biotechnology and pharmaceutical companies to locate in your state or region. The states polled said that incentive programs typically revolve around tax credits for R&D, job creation, and investment capital, as well as a variety of conditional grants, assistance loans, loan guarantees, and state-assisted workforce training programs (often held at local two-year community colleges).
Many officials said the basic structure of most states’ incentive programs is similar, while the magnitude of the funds may differ along with conditions for eligibility and the lifespan of specific incentives.
Among the several states that have funded recent initiatives for technology and life sciences-based development are: Ohio, which allocated $1.6 billion; Maryland, $1.3 billion; and Massachusetts, $1 billion. All of these programs extend for 10 years.
Massachusetts’ new program is designed to create jobs, drive innovation, and support good science, commented Susan Windham-Bannister, president & CEO of the Massachusetts Life Sciences Center (MLSC). The MLSC is a quasi-public entity authorized to be the “stewards” of the state’s investment. Windham-Bannister disagrees with “the broad brush generalization” that incentive programs are basically the same. “The way Massachusetts’ specific initiatives are structured is quite different,” she claims, citing one that encourages fund matching from private investors. Also, the MLSC is “broadly welcoming” a range of life sciences companies, including pharmaceuticals, diagnostics, bioinformatics, biotechnology, and devices, which is “the strength of our cluster,” she says. The MLSC has a scientific advisory board and reports to a board of directors.
A FOCUS ON BIO
In contrast, Maryland is more focused on biomedical R&D, with nearly $15 billion of research conducted by federal agencies, academia, and some 400 private companies. “Opportunities abound for biotechnology and pharmaceutical companies to in-license, codevelop or outsource within the state,” notes Dr. Larry Mahan, head of the new Maryland Biotechnology Center.
In June 2009, the Maryland Biotechnology Center will officially open as a “one-stop” resource for the bioscience community, grouping together existing programs. It was designed by the state’s Life Sciences Advisory Board to focus on entrepreneurial development and foster relationships between industry, academic research centers, and federal institutes.
Mahan says Maryland receives more National Institutes of Health (NIH) R&D contract awards than any other state and has nearly the highest number of doctoral scientists and engineers as a percentage of total employment. Like Boston and North Carolina, it has grown to become a “classic biotech” cluster over the past 20 years.
Other states such as New Jersey and Pennsylvania are associated with “classic pharma.” Continuing its growth, New Jersey has 238 biotechnology firms in addition to 15 of the world’s 25 largest pharmaceutical companies. Its critical mass in biopharmaceuticals, which attracts others in the industry for partnering, has led it to be called the “Medicine Cabinet of the World.”
Ohio’s $1.6 billion “Third Frontier” program includes a competitive grants initiative under which 45% of funding has been awarded to biomedical and bioscience firms, noted Ohio’s Lieutenant Governor Lee Fisher, a former director of development. Ohio’s tax reform measures, giving it the lowest business taxes in the Midwest, have also been extremely helpful in attracting companies, he added.
Fisher, who was involved with San Diego-based Amylin Pharmaceuticals opening a new facility near Cincinnati, worked closely with county, city, and regional agencies so the company didn’t have to “knock on multiple doors.” However, the real “game changer,” he added, was the customized workforce development package that his group put together.
A VERY COMPETITIVE ENVIRONMENT
While every state possesses unique strengths and distinctive characteristics, competition has heated up among states to attract life sciences companies. This was evident when one of our survey participants expressed reservations about providing details about areawide programs for fear of having them imitated.
Studies show that life sciences bring to an area skilled workers, high-paying jobs, and lots of profits that boost state economies over the long term. In 2006, the average annual wage for a bioscience worker was $71,000 compared with $42,000 for all private sector workers, according to Battelle Research.
The biotechnology sector outpaced the private sector in job growth, increasing 5.7% as compared with 3.1% overall between 2001 and 2006, says Battelle. Indirect and induced employment generated millions of other jobs in the economy besides the 1.3 million in the biosciences. Even in the current recession, one regional official observed that the number of relocation leads has not declined, although companies are taking longer to make decisions.
Nonfinancial incentives also play a role, according to survey responses, including a willingness to tailor packages to individual company needs. The personal touch never hurts, with some officials using a proactive approach in reaching out to potential residents. Shire Pharmaceuticals USA is a case in point, having consolidated its operations in Wayne, PA in 2004 from two other states and expanding its workforce by 400 employees in 2007.
Shire’s relocation experience was included in Greater Philadelphia officials’ response to another LSL survey question: Identify a few companies that have moved to your state or region, and describe which specific incentives convinced them to do so. David Reese, VP of Shire’s Global Facilities, recalls how Governor Edward Rendell made a personal phone call to Shire’s Matt Emmens, who was CEO at the time. The Governor made it “crystal clear” that he wanted our company in his state, says Reese. “Other states didn’t reach out with the same type of passionate involvement.” The state also put together a nice package of incentives that made it difficult for Shire to decline, he continued.
Raindance Technologies also valued nonfinancial decision drivers. Its President & CEO, Chris McNary, pointed out that Massachusetts’ $1 billion initiative demonstrated the state’s “position of support” for the industry long term.
Raindance moved from Connecticut to Lexington, MA in mid-2008 after its directors became confident it would grow to become a “sizeable” company. Its technology, when applied in biopharmaceuticals and molecular diagnostics, could find a new way to discover drugs to break the existing paradigm, claims McNary. “We wanted to make sure the area was recognized as being a biotech and also an innovation center,” he said. Emerging companies tend to thrive near hubs of innovation (i.e. research institutes, medical centers, universities). While a West Coast biotech cluster was also considered, McNary noted that, “The distance from Connecticut to Massachusetts made it easier to move for us,” thus illustrating the practical aspect of decision making. In addition, the company is involved in a joint project with Harvard.
FINANCIAL+NONFINANCIAL INCENTIVES MAKE THE DIFFERENCE
For Octapharma USA, a unit of a growing Swiss-based company, financial and nonfinancial incentives played a role in its decision making, according to Louis DiCriscio, VP, finance & operations. The unit moved to the Hoboken, NJ new Waterfront Corporate Center in February, 2008 from Virginia, with the help of a $517,500 Business Employment Incentive Program (BEIP) grant from the state. Octapharma was attracted by a number of things, including New Jersey’s strong pharmaceutical talent pool. From its new location, it has easy access to three international airports with direct overseas flights, DiCriscio noted. It is currently partnering on a project with Hackensack Hospital in Hackensack, NJ.
Octapharma develops and markets products from human blood plasma for people with bleeding or immune deficiency disorders. Hoboken’s accessibility to New York City was important, as it has stakeholders there including a large patient organization partner and group purchasing organizations with which it contracts. As to quality of life, Hoboken and Jersey City, both on New Jersey’s waterfront, have tremendous views of New York City, good transportation, and are in a state of “tremendous revitalization” with beautiful parks for employees on piers jutting out into the Hudson River, commented DiCriscio.
Incentives are sometimes built on the strategic advantages provided by the resources of a geographic area. Danville, VA, at the heart of the old tobacco industry where agricultural farmlands are plentiful, is developing a new economic base around this asset.
It has created, with the state and county, the Institute for Advance Learning and Research (IALR) in Cyber Park, a partnership that provides academic support on-site from Virginia Tech. Since its 2004 founding, the Institute has attracted three high-tech firms and some 6,000 jobs in Pittsylvania County and the city of Danville.
Danville had just the environment that Michael Duncan, general manager of Donnachaidh LLC, sought for his biofuel start-up, he said. Duncan was attracted not only by the land needed for research on the hybrid poplar tree, the resource for his biofuel, but also the available workforce with experience around agriculture, Duncan said. The real “kicker” in the deal was the IALR and its sustainable and renewable resources arm, which will facilitate the research underway, noted Duncan. In addition, his firm received a $105,000 cash grant from the Tobacco Commission for the building project, which will help create 25 jobs and have a capital investment of $7 million.
To sum up, companies are often looking for proximity to innovation, a qualified workforce, a favorable tax environment, and availability of working capital. The decision is usually based on a combination of these factors, with financial incentives being important but not primary, believes Tom Morr, president & CEO of Select Greater Philadelphia, which covers parts of three states (Pennsylvania, Delaware, and New Jersey) and several counties. “When we talk to companies, the first question is: What’s my business opportunity? The second is: Can I find the people I need to do what I want to do? Third can be a variety of things that relate to environmental factors such as quality of life, good schools, cost of living, housing, and state taxes,” stated Morr. “Companies ask for the financial breaks because they have a fiduciary responsibility to shareholders. Few companies decide to go someplace because someone offers them money. If they did, they’re probably making their decisions for the wrong reason.”
Thursday, July 02, 2009
Life Science Leader magazine Danville, Virginia highlighted in article about bioscience economic development!
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