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Inward Investment Guides

Biotech and Pharmaceuticals Rent Labs To Cut Costs

Biotech and pharmaceutical companies are saving money by renting laboratory facilities instead of constructing expensive, new research sites.

John K. Borchardt (June/July 10)
(page 2 of 3)
The University of Michigan purchased a Pfizer lab and established its North Campus Research Center there. The University of Michigan purchased a Pfizer lab and established its North Campus Research Center there.
Restructuring and Renting
Other companies with declining laboratory needs stayed open but rented parts of their spaces to other firms. Eastman Kodak did just that at its Eastman Business Park (EBP), the former Kodak Park. The 1,200-acre site contains three million square feet of laboratories, warehouses, and manufacturing buildings in Rochester, New York. From 2003 to 2007, Kodak spent $230 million redeveloping the site. In addition to laboratories, manufacturing facilities, and offices, the site also houses a 2,000-seat auditorium, cafeteria, fitness center, and gymnasium. Emergency medical services, a credit union, and a shop selling lab safety glasses and shoes are available on-site.

EBP currently hosts 20 external businesses in addition to Kodak's remaining research unit. Besides large firms such as Johnson & Johnson's Ortho Clinical Diagnostics division and International Paper, mid-sized firms such as Arnprior Rapid Manufacturing Solutions, with 160 employees, conduct research at EBP. Arnprior occupies 170,000 square feet and offers services to other EBP tenants and outside firms. Small start-up firms - such as Transparent Materials, LLC, which was established in 2008 and has five employees - also occupy labs at EBP.


Tenants also have access to Kodak services including project, construction, and management services. Rather than building its own production plant, start-up firm Novomer, which has 23 employees, will use an idle facility at EBP to produce sustainable materials for computer casings made partly from carbon dioxide, a greenhouse gas.

"We'll be able to use their reactors to make larger quantities of material," than at Novomer's Ithaca, New York research and development facility, says Mike Slowik, the company's manager of strategic planning and analysis. "They also have great equipment for testing the material's properties." That will help Novomer quickly get their products to prospective large-scale customers for testing quickly.

From 1990 to 2002, Shell Oil sold some of its chemical businesses. Most of the buyers rented space the chemical companies had used in Shell's Westhollow Technology Center in Houston. Tenants included large firms such as Dow Chemical and mid-sized firms such as Resolution Performance Polymers (now part of Hexion Specialty Chemicals) with 900 employees, Kraton Polymers with 800 employees, and Tomah Products with 94 employees. Since 2008 these tenants have moved to their own facilities as their leases expired. Shell is moving employees from other research locations into the site.

Rebirth of Closed Labs
In 2003 Pharmacia closed its Kalamazoo, Michigan laboratory after it was acquired by Pfizer. By gaining local financial backing, readily available facilities, a deep pool of scientific talent, and affordable housing and education, Kalamazoo is attempting to reinvent itself as a biotech hub. Life sciences service companies first leased space in the lab. Now a growing number of drug and medical device firms are relocating or starting up in the Kalamazoo laboratory. Five years after the Pfizer closure, 21 companies had opened facilities, according to Ron Kitchens, CEO of Southwest Michigan First, a life science-focused economic development organization. These firms have created more than 400 new jobs.

In 2008 Pfizer sold two of its empty downtown Kalamazoo laboratory buildings to MPI Research, which employs 441 people. MPI is a privately-owned Midwest company that provides research services to biotech, pharmaceutical, medical device, animal health, and agrichemical companies. Pfizer sold the two buildings, totaling 510,000 square feet, to MPI for $1 each to house customized, state-of-the-art laboratories. MPI had planned to move into the buildings in 2009 and hire approximately 400 people over the next few years. But due to the recession, the move has been delayed until later this year.

Kalamazoo's growth as a research services and biotechnology hub has persuaded Pfizer to return to its laboratory. In 2009 Pfizer Animal Health completed $75 million in renovations to Building 300 for its global veterinary medicine research and development center. This consolidated most laboratory and office functions from other locations as far away as Louisiana and England.
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