As baseball’s World Series nears, we note that Massachusetts has had two swings at the plate without connecting in the 2015 global site selection contest for large biopharmaceutical manufacturing facilities.
I’ve noted in past columns that Massachusetts is strong in the manufacture of biologic drugs – drug products engineered from living cells versus the traditional chemical-based pharmaceutical drug product. The more sophisticated the biologic drug, the more likely Massachusetts has a competitive advantage over most other locations.
However, in June, Massachusetts-headquartered Biogen decided to build its newest manufacturing plant in Luterbach, Switzerland. The new $1 billion plant is scheduled to be completed by the end of 2018 and will employ 400 workers.
The second swing was at Novo Nordisk, the Danish headquartered company with close to 40,000 workers globally. In August, Novo Nordisk announced that the company would invest $1.85 billion in building a new, 200,000-square-foot plant in Clayton, North Carolina. The facility is scheduled for a 2020 opening and will employ 700 workers.
In some respects, it’s a tribute to the commonwealth’s team that Massachusetts was in the running for either of these facilities. Massachusetts state and local economic development officials made game efforts in each case (and, full disclosure, I was involved in an advisory capacity on the state team for both of these projects). With Biogen’s project, Massachusetts was handicapped by a federal tax code that ensures that global companies like Biogen will gain tax advantages with manufacturing locations outside the U.S. Novo Nordisk was even a tougher pitch to hit. Novo Nordisk’s plant in Clayton will make active pharmaceutical ingredients (APIs) that will, in turn, be packaged at the company’s existing “fill-and-finish” plant next door in Clayton. While the manufactured of APIs is a more sophisticated process than the fill-and-finish process, it’s not quite the advanced type of biologics manufacturing which is the hallmark of Massachusetts.
Still, Massachusetts was in the hunt for this significant facility and came up short. North Carolina is providing substantial incentives to Novo Nordisk. According to reports, Novo Nordisk will be eligible to receive up to $18.6 million in state incentives as it reaches hiring and investment goals. Johnston County purchased the 95-acre site in Clayton that will be home for the new plant for a modest $2.2 million, of which just under 20 percent was subsidized by the county’s economic development corporation. Novo Nordisk will lease the land for an undisclosed rate. The county will also provide $95 million in refunded taxes to Novo Nordisk. The company received a $2 million discount on permitting and inspection fee costs and Clayton agreed to seek additional public funds for a new regional wastewater treatment facility. For Novo Nordisk, Massachusetts had neither the perfect manufacturing specialization nor the competitive incentives could have tilted the balance in its favor.
The Biogen project, however, feels more like it should have a Massachusetts win. Federal tax code notwithstanding, Biogen’s manufacturing need was a perfect match to Massachusetts’ biologics manufacturing strengths. And, after all, while Biogen was founded in Switzerland, its headquarters are in Cambridge.
What is the takeaway for Massachusetts? Our region’s great advantage on this playing field is its people. In having the skilled people to design, construct and operate these facilities, Massachusetts is in an advantaged but not, apparently, dominant position.
The greatest triumph in winning a life sciences manufacturer was Bristol-Myers Squibb’s 2006 decision to locate a $750 million bulk biologics manufacturing plant at Devens. That was the right project at the right time with the right actions taken by
Massachusetts officials in supporting the project with substantial, even extraordinary, incentives. For such a biologics plant, extraordinary measures were warranted and, even, risk-free. BMS is producing drugs at Devens that have patent expirations that are still many years away. In the meantime, according to economists, for every job created at the facility, over six are created in other industries and over 500 direct employees are working and paying taxes in Massachusetts.
Not all types of government incentives to businesses provide a sure thing in return on investment, but investments in support of such biomanufacturing facilities are pretty close. With this in mind, we hope that for the next biomanufacturing pitch that comes down the plate, the commonwealth digs in, grits its teeth, and swings for the fences. Not to do so would be to potentially lose its position in this great global contest.
Peter Abair is a past director of economic development for Massachusetts and current executive director of the MassBioEd Foundation.
