Companies choose to deploy assets in a location for a variety reasons; decision drivers range from arbitrary personal preferences to calculated business needs. In the life sciences industry, making informed research decisions is critical, given the time and cost associated with the design, build-out and validation of a manufacturing site or the ecosystem needed for research and development (R&D) success.
Decisions on where to place life sciences assets should be approached with serious analytical rigor to minimize risk and avoid failure. There have been recent reports of plant closures and R&D footprint realignments as companies jockey to meet market demands, capacity constraints and cost pressures. With hundreds of millions in potential investment and years of design construction and validation, these investment decisions can affect an organization for decades. It is important for corporate executives to understand the factors that affect a location decision, as a deeper understanding talent, costs, infrastructure, government support and logistics help ensure the fitting approach to a location decision. This report provides a high-level executive overview to those issues and risk considerations. We use U.S. metro area data to illustrate differences among locations and regions, though these same risk factors can be applied globally.
The U.S. constitutes a major part of the $1.4 billion global life sciences industry, with 43% of all biotechnology operations and 38% of pharmaceutical production.1 Because of the potential customer base, the market continues to grow; 36% of companies identify proximity to markets and customers as their most important investment decision factor. Since 2003, there have been more than 2,000 life sciences capital investment projects in the U.S. with an estimated capital expenditure of nearly $56 billion. The projects range from new manufacturing facilities to expanding headquarters to relocating R&D operations. For these investments, 33% of companies identify talent availability as their most important decision factor and 23% cite the existence of an industry cluster as their top decision factor.2 This provides insight into the risks that life sciences companies prioritize with regard to investment decisions. Identifying these risks and mitigating them through strategic location selection helps position companies for long-term success.