Bio Buzz Day 3 - BIO 2011: My Lab is Bigger Than Yours...

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--It is all about infrastructure, if the legions of economic developers at the BIO 2011 conference (June 27-30, 2011, Washington Convention Center) are to be believed. As BIO entered its third day, the ED teams showcased bragging rights that rivaled proud parents crowing over their kid's report cards.

When most think about the bio business, the focus tends to settle on sophisticated drug development, big finance and complex laws engendered by the industry. Beyond the impact in treatment of disease or some other malady, it can be difficult to understand its business appeal to anyone other than attorneys, scientists and stockholders. But none of the "magic" can happen without the brick and mortar end of the bio business.

Perhaps the best way to underscore the intrinsic value that comes with capital construction in the life science industry is the numbers themselves. A current analysis of active projects reveals plans ranging from humble $1 million equipment upgrades to federal laboratories topping $1 billion, with some nearing the end of construction, others nascent and several years away from any shovels hitting the ground. The bottom line is more than 1,200 projects totaling $52 billion in North America alone.

Click on image at right for a breakdown by market region of active North American life science industry projects.

A new-build life science facility can hit $1,000 per square foot and beyond, often employing thousands during construction and adding hundreds of jobs after validation is complete. The ancillary benefits to the host community of a large-scale manufacturing or research campus are not be overlooked, with ripples extending out to boost education, housing and local businesses.

In hopes of landing a "big one" (read this to mean a Novartis (NYSE:NVS) or a Pfizer (NYSE:PFE) putting down roots), economic development teams from around the world offer slick brochures listing their existing bio business facilities, ranging from small incubator space to help launch fledgling companies to plans for elaborate buildings ready to go once the deal is done. Vast plots of acreage are displayed, with the promise of a streamlined construction process. But it takes more than buildings and land, not to mention a healthy chunk of cash incentives, to reel them in.

A location has to offer "intellectual property" along with the real estate. While some employees inevitably follow from other locations to new sites, a large number of new staffers will be drawn from the local area. New jobs range from maintenance workers to top-level scientists, and all have to offer a measurable degree of skill to work in the sophisticated laboratories and manufacturing plants of today's life science market.

So much the better if there is a strong university infrastructure and academics already in place. Often neglected in the past as "just a public job," university capital projects are now garnering a sizeable chunk of the construction end of the business. Their importance cannot be denied, and as such, it is not surprising that the BIO 2011 Exhibition floor features universities displaying their wares in flashy booths alongside the more expected, traditional offerings.

If biological drugs appear complex, so are the partnering deals to build a facility. Public, private and any other entity with the cash and credibility to make it happen are invited.

Much like the old perception of university projects, the real estate investment trust (REIT) sector has changed the way many projects make it to construction. Once thought of as mere purveyors of shopping centers and office complexes, REITs have become an important factor in many of Big Pharma's planning playbooks. The business model that has grown in popularity throughout the life science market: turn all the specs and headaches of construction over to a REIT or developer.

And no one does it better than Alexandria Real Estate Equities Incorporated (NYSE:ARE) (Pasadena, California)--although rival BioMed Realty Trust Incorporation (NYSE:BMR) (San Diego, California) might have something to say about that. Alexandria's simple yet stunningly effective lighthouse display rises on the exhibition floor, with each backlight panel outlining just how successful they have been in landing the big ones. What evolved out of experimenting with speculative lab space are complete developments devoted to major life science operations.

The $500 million Alexandria Center for Life Science in New York, New York, is a textbook example of how the projects of today can evolve. Tapped by the city to develop a 3.5-acre site on Manhattan's East Side with an eventual build-out calling for more than 1 million square feet of space, the development brings together public and private factions under a very classy roof.

In the dream scenario that unfolded after a number of initial delays, the cancer drug company Imclone Systems, a division of Eli Lilly & Company (NYSE:LLY), snapped up 90,000 square feet of space in the center to house its new headquarters and research space. Not be outdone, in January 2011 Pfizer signed up for its own 15,000-square-foot piece of the very high-tech pie.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.