From Beaches to Biotech: Puerto Rico Attracts Millions in Capital Investment

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Puerto Rico was once best known for its fabulous beaches and exotic nightlife. Today, the lush island paradise reads like a who's who of some of the world's biggest names in pharmaceutical manufacturing. Companies are going beyond routine plant upgrades and constructing massive manufacturing complexes costing hundreds of millions of dollars.

"The momentum of pharma spending in Puerto Rico has not slowed down. Billions of dollars have been spent over the years on building plants, adding equipment, and training personnel. Virtually every major pharmaceutical manufacturer at any given time, has a project of some size either in planning or under construction", according to Annette Kreuger, Pharmaceutical and Biotech Group Manager with Industrialinfo.com. "The ripple effect of all this investment has been a study in itself. Contractors like Turner, Fluor and Turcon are having a field day criss-crossing the island as they expand or build new pharmaceutical plants! I'm seeing a lot of ancillary companies now considering establishing local offices. And I'm not hearing anyone complaining about drawing these particular job assignments!"

Eli Lilly & Company (NYSE: LLY) (Indianapolis, Indiana) announced that they were going to build a $250 million biopharmaceutical plant at its Carolina complex and then shortly thereafter increased the scope of the project to $450 million.

Amgen (NASDAQ: AMGN) (Thousand Oaks, California) chose Barceloneta as the location for their new commercial-scale biologics plants.

Wyeth has multiple projects going on, including $100 million expansion on its Guayama plant and another $150 million investment at their site in Carolina.

Abbott Laboratories (NYSE: ABT) (Abbott Park, Illinois) is spending over $300 million at their Barceloneta site.

Despite losses in virtually all other industrial sectors, the pharmaceutical industry remains strong in Puerto Rico, with an estimated work force of 27,000 in 2002, or 20% of the total manufacturing jobs. According to the Puerto Rico Industrial Development Corporation (PRIDCO), 25 % of all pharmaceutical products manufactured in the United States are shipped from Puerto Rico, and 16 of the 20 top-selling prescription drugs in the United States are manufactured there. The value of pharmaceutical exports increased to $25.1 billion in fiscal year 2001, a 35.7% increase over the previous year.

Long established as a desirable site for the pharmaceutical industry, Puerto Rico operates under the U.S. flag, thus offering benefits including a shared monetary and postal system as well as simplified clinical trials and drug approvals. There is an established infrastructure coupled with a solid supply of trained technicians and managers.

Puerto Rico also offers both local and foreign tax benefits. The 10- year phase-out of Section 936 (which will be completed in 2005) has lead companies to review their options and decide whether to apply for IRS Section 901's foreign tax credits. By converting all or part of their local operations to controlled foreign corporation (CFC) status, a company that operates outside the U.S. mainland can reduce its federal tax by the amount of taxes it has paid to the foreign country where it operates. If a company decides to repatriate its earnings to the U.S., earnings will be taxed 35%. However, U.S. tax code dispositions allow companies to defer tax payment indefinitely until their earnings are repatriated. There are still many remaining variables and amendments to tax codes under active pursuit and consideration.

For a unique, half hour discussion focusing on spending trends in the pharmaceutical and biotech industry, with Annette Kreuger, Manager Pharmaceutical/Biotech with Industrialinfo.com, tune in to Crazy Al's Radio Party IndustryToday segment, by clicking on to the following link: Oldies & Industrial News