Operating costs are the white-hot issue in the boardrooms of our life sciences clients and they tend to rule the site selection
process. A soft economy, worldwide trade competition, drug cost containment pressures from the US government, and a lean and
mean message sent by the venture capital community mean that quantitative factors that focus on the cost of doing business
are trumping qualitative lifestyle factors, especially when evaluating sites for a new biopharmaceutical facility.
Many of our site-seeking clients tell us that the only way they can improve the bottom line is by reducing costs because it
is extremely hard to improve the revenue side of the ledger. High-profile corporate accounting cases like Bristol-Myers Squibb
and product liability cases like Merck's Vioxx withdrawal have caused corporate boardrooms to focus heavily on balance sheet
issues and the true cost of conducting business. For example, Pfizer is implementing a $4 billion cost-containment program
that will re-shape its network of operations in California, Michigan, Connecticut, Massachusetts, England, and Japan.
MAKING A LIST
Our company conducted a corporate location study comparing the cost of doing business for the biopharma industry in 50 cities
in the US, Canada, and Europe. The study analyzed all the major cost drivers of the corporate site selection process. These
included salaries for employees with advanced degrees in the life sciences, wages for workers in other laboratory and administrative
support positions, fringe benefits, utilities, lease rates, and other geographically variable operating costs. All costs were
expressed in US dollars and are scaled to a representative 100-worker biopharma facility occupying 75,000 ft2 of office and laboratory space.
Locations featured in the study include long-standing centers of the biopharma industry such as San Francisco, Boston, Central
New Jersey, North Carolina Research Triangle, and San Diego. We evaluated emerging new hubs of the industry such as Des Moines,
IA, Norman, OK and Sioux Falls, SD. European biotech centers studied include London, Brussels, Düsseldorf, Amsterdam, and
Madrid. The Canadian centers are Vancouver, Montreal, and Toronto.
John H. Boyd
The costs included in our biopharma reports are termed geographically variable, that is to say, those operating costs vary
significantly by geography. Labor cost differentials were shaped by Boyd field interviews with major employers in candidate
locations and were scaled to a representative 100-worker biopharma research and support staff. Fringe benefit costs, including
all statutory benefits, pay for time not worked, and company-sponsored benefits were estimated by Boyd and reflect prevailing
averages in all US, Canadian, and European locations in the analysis. Utility costs reflect local rate schedules for monthly
electric requirements of 150,000 kWh. Boyd professionals honed in on real estate costs through field investigation and contact
with local real estate professionals. Costs were scaled to a model 75,000-ft2 biopharma facility.
Equipment costs were based upon Boyd case study estimates and reflect a seven-year amortization rate with payment factor of
5.0 percent. Heating and cooling costs were a function of power cost differentials and comparative heating and cooling degree-days
data (30-year National Oceanic & Atmospheric Admin-istration [NOAA] averages). Boyd travel cost figures (reflecting cooperate
lodging, three meals, rental car and local transit, and other incidental costs) were obtained from Boyd's client BTN (New
York) and investigative field research. Annual travel costs were based upon 22 billable corporate travel days per week (for
multiple traveling employees) at each of the surveyed biopharma locations.