What Recession? Pharmaceutical-Bio Industry Invests $1.7 Billion in North American Capital and Maintenance Projects Starts During 1Q09

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Okay, so it has been a bewildering first quarter, and every industry sector is feeling the sturm und drang of the current economic meltdown. Nevertheless, the amazingly resilient pharmaceutical-biotech sector still managed to start 71 capital and maintenance projects in North America with a combined total investment value (TIV) of $1.7 billion in the first three months of 2009. One of the most encouraging facts is that these projects are not theoretical in any way, they are all actively under construction, or, in the case of some maintenance work, already started and completed.

Click on the image at right for a breakdown of 1Q09 Pharma-Bio capital and maintenance project starts in North America.

Of course the 2009 numbers are not what they were during the same time period in 2008, when 98 projects with a TIV of $3.1 billion began construction. The current numbers represent a 45% drop in spending and a 30% drop in the actual number of projects (source: Industrial Info's Pharmaceutical Tracker - Online Database). While the average project TIV for the first quarter of 2009 is still a healthy $24 million, this reflects a drop of 24% from the 2008 average of $31.6 million. The stats for 2008 were helped along by several very large project starts including the Dana-Farber Cancer Institute's $300 million Yawkey Center for Cancer Care, which will add both research and clinical space to the Boston facility.

The largest project to begin so far in 2009 is the $125 million Hearst Medical Research Tower in Oklahoma City, Oklahoma. Designed by Perkins + Will (Houston, Texas), the eight-story, 195,000-square-foot building will double the Oklahoma Medical Research Foundation's multi-disciplinary research capacity. The Flintco Companies (Oklahoma City, Oklahoma) is building the tower, which should be complete in 2011.

Although a fair number of the project starts for 2009 have been sourced from the public sector (i.e. universities), industry is represented as well. Healthcare product giant Covidien (NYSE:COV) (Hamilton, Bermuda) kicked off a $72 million expansion of the company's production hub in Maryland Heights, Missouri. The project will add a further 12,000 square feet of manufacturing space to the 364,000-square-foot campus. CH2M Hill (Denver, Colorado) provided the architecture, while McGrath and Associates Incorporated (St. Louis, Missouri) is acting as the general contractor. Completion of the project is anticipated in early 2011.

In terms of geographical locations for the projects, the top two regions for the first quarter mirrored last year. Once again, the Southwest came out on top with $454 million divided among 11 projects, followed by the West Coast with 10 projects totaling $316 million. The biggest change this year was how the Great Lakes region made the leap from 2008's sixth place to third place in 2009. The green light for funding of a number of big-ticket university projects helped the region start nine projects worth $199 million since January 2009.

With financing more difficult to obtain and subject to withdrawal following approval, everyone is becoming more creative. Larger projects are being divided into smaller phases so the job can start. Others are turning dirt as fast as the money comes in, all the while continuing to design the project as it is being built. These teams model the more common Construction Manager at Risk (CM@Risk) delivery method by including the architects, engineers and contractors who are all willing to take the risk to commit that it can be built for a designated amount. This can open up the field to more players throughout the life of the project, in the form of both equipment suppliers and contractors alike, which is not necessarily a bad thing at all. And of course, virtually every state in the country is looking for ways to attract and apply a piece of the "stimulus" pie, which in the case of the life sciences should prove beneficial to the private sector as well.

Industrial Info's 2009 Pharmaceutical & Biotech Industry Outlook packages useful, timely and essential information and statistics into one easy-to-use format. Features include upcoming trends, vital plant and project statistics, as well as a capital and maintenance spending analysis derived from our information databases. The Pharmaceutical Tracker - Online Database contains operational plant data, as well as sites under development in the Pharmaceutical and Biotech Industry. Individual active capital and maintenance spending reports spanning North America are also covered within the Pharmaceutical Tracker.

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Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.