Genentech Opens $400 Million Manufacturing Center
Genentech Opens In Hillsboro, Fueling Oregon's biotech aspirations [The Oregonian, Portland, Ore.]
From Oregonian (Portland, OR) (April 6, 2010)
Apr. 6--Genentech formally opens its $400 million manufacturing center this morning, a centerpiece of Oregon’s bioscience aspirations.
Genentech’s chief executive and other senior executives, lured to Oregon by a favorable corporate tax climate and additional incentives, will be greeted Tuesday by the state’s governor, a congressman and both its U.S. senators at the Hillsboro plant’s unveiling.
As the state welcomes one of the world’s leading drug manufacturers, it also harbors hopes that that the Bay Area company will help kick-start Oregon’s fledgling biotech industry the way Intel launched its chip trade.
The drug maker, acquired last year by Swiss-based Roche Holdings for $46.8 billion, comes with a global reach and loads of growth potential.
Genentech brings valuable experience, knowledge and industry cachet to Oregon, according to Arundeep Pradhan, vice president of technology transfer and business development at Oregon Health & Science University.
"The long-term potential for an expansion of that facility, into R&D or other areas, is relatively high," he said.
Genentech, which takes up just 15 acres of its 75-acre Hillsboro campus, has made no promises.
The company employs 250 at its Hillsboro warehouse and factory, where employees are putting the facility through its paces while they seek federal manufacturing certification.
Genentech plans to add another 25 workers in 2010, and perhaps 25 more over the next few years. Long-term plans remain uncertain.
"We purchased 75 acres here so that we had the ability to expand the operation," said Barry Starkman, the Hillsboro plant’s manager. "At this point we don’t have any specific plans to expand any further."
Genentech finished construction in Hillsboro in 2008 and opened a warehouse on the site in July of that year.
The company already has begun early production in Hillsboro to win federal approvals. It will eventually make all three of Genentech’s signature cancer drugs there.
Manufacturing biologic drugs is a complex process that begins by culturing cells and purifying the product to produce a specific, cancer-fighting antibody. That work is done at two California facilities.
Genentech will ship that product to Hillsboro in bulk, where it will be placed in individual vials for distribution to doctors. The Oregon factory will be Genentech’s only U.S. facility doing that kind of work.
About half of Genentech’s Hillsboro staff moved up from South San Francisco. The company is downsizing production there as it shifts production away from high-volume manufacturing to specialize in clinical trials.
Genentech won’t say how much it will pay its Oregon production workers, but the company has previously indicated the salaries will range from $35,000 to $65,000 annually.
Oregon landed Genentech four years ago, beating out rivals in Texas after aggressive recruitment by Gov. Ted Kulongoski and state economic development officials.
They persuaded Genentech to buy the 75 acres in Hillsboro to leave room for expansion, according to Bruce Laird, a state economic development officer who worked on the deal.
"They were really looking for a smaller site," he said. "They ended up getting a larger one."
Oregon’s corporate income tax structure was a key factor when Genentech chose Oregon, the company said, which singled out a feature known as "single sales."
That provision, approved by the Legislature in 2001 and phased in over several years, made sales within Oregon the primary factor in determining corporate income tax bills.
Oregon was one of the first states to use that approach, but it’s now been adopted by nearly half of the country. In aggregate, it reduced companies’ Oregon income tax burden by more than half since its approval.
For global corporations which sell nearly all their products outside Oregon, the change virtually eliminated their state income taxes.
Additionally, the governor promised $4.8 million in training assistance for the company’s workers. And Genentech won a property tax exemption valued at $23 million over the 15-year life of the deal under Oregon’s Strategic Investment Program.
"Every dollar we don’t spend on taxes go back to research," said Starkman, the Hillsboro facility’s manager.
State officials touted the incentives as a down payment on the state’s biotech industry, which has grown slowly over the past several years even as bioscience blossomed nationally.
Genentech’s sale to Roche last year broadens the Hillsboro factory’s scope, Starkman said, while complicating near-term planning.
"It just expanded our opportunities to be part of a global network," Starkman said.
But it will take time to coordinate the two companies’ activities in the wake of the huge deal, he added. That leaves future growth in Oregon an open question.
"I really don’t know at this point. I think with the merger and everything there are lots of possibilities out there," Starkman said. "None have been discussed with me yet."
-- Mike Rogoway; twitter: @rogoway
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Posted: April 2010