Anatomy of a Pharmaceutical Plant - Part 1 in a 3-Part Series Examining the Financial Impact of New Plant Construction

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Cities across the nation vie for pharmaceutical and biotech companies’ consideration as the site for their next new plant. While economic developers recognize the value in landing one of these projects, there is often a lack of appreciation from the general population as to why these plants are so aggressively sought. This series seeks to illuminate just how the economy is impacted when big Pharma comes to town.

The financial effects start long prior to construction. New business is spurred in often-overlooked sectors when preliminary site studies are underway. Using the media industries to garner new business with splashy advertising campaigns outlining the positives and amenities of a particular location. Such mundane products as imprinted "gimme" caps, innovate electronic toys and laser pens translate into major dollars as those companies specializing in such items enjoy a surge of business in order to be handed out by the thousands at trade shows across the country in the all important quest of attracting new business. Real estate firms roll out the red carpets as they actively market suitable plots of land or shuttered plants closed by the downturn in other industries.

Caterers, hotels, airlines, restaurants-the list is virtually endless in the industry sectors impacted in the site selection process. The annual Bio Industry’s conference draws nearly 20,000 participants from across the globe. In addition to highlighting the latest in medical wonders, one of the main objectives of the conference is to match corporations with site locations for new plants or R&D facilities. The estimated financial impact of BIO 2005, which was held in Philadelphia, was $35 million delivered directly into the local economy.

Large new construction projects are often dealt with using code names, ones bearing absolutely no resemblance to who is considering construction of a plant. In this highly competitive stage of site selection, local and state officials often agree to a non-disclosure policy until a decision is made. This factor is one that causes frustration among the general populace, as tantalizing hints of snagging a $200-$300 million plant are leaked with no hint of what kind of plant it will be or the identity of the owner. Attorneys, staffing firms, accountants are all needed in the myriad dealings leading up to sealing the deal. No matter where in the country the plant is going to be built, a company needs expertise outside of their in-house staff to test the feasibility of locating in the area.

Investment firms benefit from news of new plant construction. Who is doing what and how frequently? Often giving a clue to a company’s confidence in their emerging drug pipeline, following new plant construction can be an early indicator to an upcoming blockbuster stock price. As reported in Industrialinfo.com’s Pharmaceutical Tracker - Online Database, it doesn’t have to be a major project, as several relatively small investments in the $2 to $3 million price range, scattered selectively across the country, can also portend impending growth. Such was the case of Ivax (AMEX:IVX) (Miami, Florida), whose stock price jumped from a low of $9 to over $27 when Israel’s Teva (NASDAQ:TEVA) made the offer to purchase the company in July 2005.

Having considered the enormous potential for profit from just the site selection process, in the weeks to come we will look at the financial potential of actual construction and eventual operation of a new pharmaceutical or biotech plant. As subscribers to the Pharmaceutical Tracker - Online Database and the 2005 North American Pharmaceutical-Biotech Forecast have discovered, knowing who in the industry is doing what, when, where and for how much has proven to be an essential asset towards maintaining, not to mention improving, their own financial health.

Industrial Information Resources (IIR) is a Marketing Information Service company that has been doing business for over 22 years. IIR is respected as a leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.