Operating cost differentials between a high-cost city and a more cost-efficient biopharma site can be substantial, running
into millions of dollars per year. Annual operating costs in the US range from a high of $11.2 million in San Jose, CA to
a low of $8.4 million in Sioux Falls, SD. In Canada, annual operating costs ranged from $9.2 million in Vancouver to $8.5
million in Montreal. Among the European cities, annual operating costs ranged from $13.0 million in Düsseldorf to $10.1 million
Table 1. Total Annual Operating Costs (in Millions)
Table 1, which ranks the total annual operating cost for each city, is a distillation of our eight-factor analysis. In Table
2 we present a spreadsheet depicting the extreme differences in operating costs. Aside from a constant amortization charge,
notice the wide variation in local charges. Space does not permit publishing data for all 50 cities, so they will be available
on BioPharm International's website with this issue (
Table 2. What It Costs to Operate a Biotech Facility: The Highs and Lows*
RELOCATION IS REALITY
In Europe, we see increasing corporate mobility as a result of historic business climate reforms and price transparencies
brought about by the common (euro) currency. Now, operating cost penalties and conversely, cost savings, associated with the
various European Union nations can be clearly perceived and easily quantified without the exchange rate and currency conversion
vagaries of the past. Many of the tax initiatives, business attraction incentives, deregulation programs, and free market
reforms that were fashioned in North America during the past 25 years are now being rolled out in Europe. Biopharma-related
projects in Germany, France, and the UK are one of the fastest growing corporate relocation segments in Europe.
In the US, there is a growing shift of biopharma investment from many of the larger and expensive centers of life sciences
industry concentration in New England and California to smaller, more manageable, and less costly metropolitan areas in other
regions. A good example of this trend is HemaTech, a pioneer in the development of polyclonal antibodies. Originally operating
in Connecticut and Massachusetts, HemaTech has relocated research and headquarters operations to Sioux Falls, SD, (pop. 200,000).
Sioux Falls, home of the University of South Dakota Life Science Center, is the lowest cost biopharma site cited in the Boyd
study. Other examples include Yamanouchi Pharma's move from San Francisco to Norman, OK; Dupont's relocation of its nutrition
division from Wilmington, DE to Des Moines, IA; and San Diego-based Scripp's selection of Palm Beach County, FL, for its newest
biomedical research lab.
Photo of Sioux Falls, SD, the lowest cost US city in the Boyd study and new home to Connecticut-based biotech transplant Hematech,
Canada continues to offer a low cost environment for the biopharma industry, even though the Canadian dollar rose substantially
versus the US greenback during the past year. Biopharma companies can save additional labor costs in the area of fringe benefits
due to Canada's nationalized healthcare system. Our biopharmaceutical clients in the US typically pay about 35 to 40 percent
of their payroll for benefits (mostly healthcare-related). The same figure in Canada is 15 to 20 percent.