Point a finger at a map of the United States and try to find a state that's not competing to attract pharma and biotech business. It's nearly impossible. The story is the same in Europe and Asia. Around the world, countries, regions, and cities are trying to build their economies, and the life sciences are a key element in their plans.

The world's hunger for economic development creates plenty of opportunity for both Big Pharma and emerging companies. But with billions of dollars in corporate investment at stake, the question is how to identify the opportunities that will pay off best. Evaluating potential new business sites is no easy task. The variables are many, and their relative value depends on who's looking and why.

Environmental Considerations

"You have to think about it differently across the value chain," says Mark Kozin, managing partner, US, LEK Consulting. "If you're talking about research, companies are looking for world-class scientific talent. When Novartis, Merck, and Amgen move to Boston, it's because there's a critical mass of scientists there. Research is a high-cost activity, so things that are farther down the ladder such as housing and transportation don't really matter that much."

But for manufacturing, Kozin explains, costs become more important. And if the point of a new facility is to expand sales and marketing, there's a premium on locations with high unmet patient need and the ability to influence the regulatory path.

Anyone who has bought an engagement ring knows the "four C's" of diamond buying: cut, color, clarity, and carat. Except for the wealthiest buyers, the ideal diamond is always a compromise-smaller but more brilliant, better in cut but less perfect in color. Similarly, there are four C's in pharma site selection: capital, clusters, capacity, and commercialization. (See "Environmental Considerations" below and "Site Selection Criteria," page 60.) This article will help pharma executives categorize site location variables according to their companies' definition of value and pick the trade-offs that best meet their needs. It also offers expert insight from all sides of the industry to help put the decision making process into perspective.

Capital Local, regional, and national economic development agencies continue to offer tax breaks, grants, and low-interest loans to attract companies. But savvy companies look beyond simple financial incentives. Instead of cash, they look for capital.

Follow the Money

Capital comes in many forms, and for many pharma companies, the most important are human and intellectual: access to quality employees and to the research and new ideas associated with universities and research centers.

A new study by Pennsylvania's Lehigh Valley Economic Development Corporation finds that 90 percent of pharma and biotech site consultants surveyed rank a skilled and educated work force as the number-one concern of companies choosing a new facility location. And that's true for companies of all sizes-start-up, emerging, or established.

Nothing better exemplifies the point than Pfizer's recent multi-year, 1,000-job, $400+ million commitment to expand the company's global headquarters in midtown Manhattan. "New York may not be the cheapest place to do business," says New York City Economic Development Corporation president Andrew Alper, "but it provides the best value, with a more productive work force and proximity to the financial, legal, and advertising communities. This is a business [pharma] in which intellectual capital is so valuable that the cost of real estate and labor is overwhelmed by the quality of ideas."

Site-Selection Criteria

For regions that lack New York's unique assets, training programs are useful. In its 2001 report for the Biotechnology Industry Organization, the Battelle Memorial Institute (BMI), offers details of states' initiatives. "In the past six months, we've talked to several pharma companies that are having difficulty with certain kinds of production and technician-level workers and are looking for additional support programs," says Walter Plosila, vice-president and director of BMI's technology partnership practice. He points out that several community colleges have shown interest in revamping their curricula to serve that work force, particularly one in St. Louis, Missouri and several in California. And pharma is equally interested in having such curricula to meet their work force needs.

Clearly, what sets regions apart in their ability to attract pharma business of any kind-research, operations, manufacturing, or marketing-are their life sciences educational and professional development programs. North Carolina serves as a model for other states to follow, as companies such as GlaxoSmithKline, Biogen, Eisai, and Novo Nordisk have proven by their presence and recent expansion in Research Triangle Park.

North Carolina's move to strengthen its academic programs for work force development was an idea that caught on-or was already exemplified-in other areas that wanted pharma and biotech manufacturing but lacked an employee base that would allow them to compete on the research level. That's true for many locales outside the United States, such as Ireland, which has become a manufacturing powerhouse; Singapore, which is working to gain that status; and Puerto Rico, which has done so well during the past 30 years that some experts speculate the island may soon reach its saturation point.

The focus on people and education doesn't mean that cash doesn't count. Companies, especially young ones, need access to investment capital. And investment capital often has surprisingly close ties to specific geographic locations. (See "Follow the Money.")