Recent Research: Will Operating Costs Drive Future Biotech Location Decisions?

There are several factors that go into location decisions for biomedical firms. Proximity to strong university research capacity, other biotech businesses, and technically competent workers are all important considerations. With the financial investments many states and localities are making toward the life sciences, however, the field of prospective locations for successfully launching a biotech firm has grown considerably larger than the "usual suspects."

That is a good thing, based on a recent study by the Boyd Company, a Princeton-based location consulting firm. As highly leveraged biotech start-ups increasingly are pressured by their venture capital backers to reduce operating costs, many smaller cities may present attractive alternatives for new biomedical industry investments, the study suggests.

The Boyd Company compared the costs of operating a biomedical research and product development facilities within 50 North American and European cities. Two U.S. locations included in the study, San Jose, Calif., and Sioux Falls, S.D., respectively, were the most expensive and least expensive, costing $11.3 million and $8.5 million annually. Overall, Dusseldorf, Germany, was the most expensive place to operate, costing $13 million per year.

In determining operating costs, the study included skilled labor, facility lease rates, utilities, corporate travel, and other occupancy factors. Cities chosen for comparison include those that currently house significant concentrations of biomedical industry operations and those projected by the Boyd Company to be emerging centers for biotech investment in the coming years. According to the study, facilities measured had at least 100 employees and occupied a minimum of 75,000 sq. ft.

The study cites recent examples of major biomedical companies relocating or building new facilities in smaller cities, which offer more attractive overall operating costs. Yamanouchi Pharma Technologies, for example, moved from San Francisco - the second most expensive city in the U.S. - to Norman, Okla., the third least expensive city in the study. Hematech, a privately-held company headquarter in Fairfield County, Conn., opened a new research lab in Sioux Falls, the lowest-cost U.S. location in the study.

Operating cost differentials between the U.S., Canada, and Europe also are detailed. For example, weighted average yearly earnings for employees of a biomedical facility in San Jose are $50,502, compared to Vancouver at $49,287 and Dusseldorf at $57,440. In addition, the study provides comparative annual operating costs by region.

With the Boyd Company's permission, SSTI has posted the executive summary at: http://www.ssti.org/Publications/Onlinepubs/Boyd_Biomedical_Facility_Study.pdf