Mississippi Might Miss the Boat on Baxter's $60 Million Pharma Expansion Project Over Funding Delays

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Pharmaceutical manufacturing isn't typically the first thing that comes to mind when Mississippi is mentioned. Yet, the small delta town of Cleveland is home to a sprawling plant owned by pharmaceutical giant Baxter International Incorporated(NYSE:BAX) (Chicago, Illinois). Opened in 1949 and operated by the Baxter Healthcare Division, the site employs nearly 1,000 people. The entire state rejoiced when the company announced its intent to expand the plant, to the tune of $60 million. Today, those plans may be in jeopardy as the state drags its feet on funding incentives promised to Baxter.

The Cleveland site performs production through packaging operations of a variety of products, most notably, parenterals, or sterile injectable drugs. The planned expansion or upgrade would see the addition of new process and packaging equipment, along with some building modifications. The decision to expand in Cleveland was helped by the promise of a strong incentive package, totaling $10 million, under the Momentum Mississippi plan. The plan was devised to provide loans and grants to attract companies and expand existing facilities that are currently ineligible for state incentives - such as high-tech or distribution facilities.

By the end of the most recent state legislative session, lawmakers had failed to pass this year's bill. A variety of reasons abound for the lack of approval, ranging from partisan politics to an abundance of "pork" being added to the legislative menu. Mississippi Governor Haley Barbour and other state officials are stunningly aware that they are in real danger of losing the Baxter expansion and, as a result, will convene a special legislative session on June 28 to once again consider the package.

Baxter is unhappy with the delay in funding, as its initial capital estimates are quickly becoming outdated. The company has indicated it is making a final evaluation of the situation and will make a firm decision soon as to the fate of the project. It could be located to another state, downsized, or completely scrapped.

As discussed in Industrialinfo.com's 2005 Pharmaceutical Industry Forecast, incentives have become a vital factor in site decisions. Capital projects with locations chosen based on incentives range from Baxter's expansion to a $300 million grassroot plant in North Carolina that Merck (NYSE:MRK) (Whitehouse Station, New Jersey) is building. North Carolina coughed up approximately $36 million to seal that deal. See North Carolina Remains Pharma Heavyweight as 2005 Begins with $400 Million in New Plant Construction Investment Underway.

The impact of Baxter's presence in Cleveland cannot be underestimated. The company employs nearly five times as many as the town's next largest commercial employer, Duo-Fast, which employs approximately 200 people locally. A steady economic force like Baxter has been invaluable to the growth of the community, which has been listed as one of the "100 Best Small Towns in America". Home to a respected state university and an impressive medical center, Cleveland has broken the mold of a sleepy delta town. City officials and those of home county, Bolivar, are hoping state officials assure it stays that way.

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