Global Life Sciences Cluster Report 2011 - Jones Lang LaSalle

Figure 3
Asset efficiency impact on location footprint
Manufacturing
Improving utilization
and identifying
disposition targets
R&D
Co-located big and
small molecule
research teams
Offices
Improved utilization
of core space
and disposition of
satellite locations
Warehousing
Proximity to large
airports with overnight
shipping
resulted in a notable decline
in capacity requirements
and entire buildings becoming
idle. From a manufacturing
perspective, the drop in
throughput requirement, shift
of production capacity to
emerging markets and the
decline in the number of doses
patients require per day all
reduced capacity utilization
at many plants. This is
not easy to resolve, partly
because of the unique nature
of drug and pharmaceutical
manufacturing facilities and
technologies, and partly
because of the need to separate entities and manufacturing
technologies within a country to reduce legal risk. Many
companies have been forced to dispose of under-utilized
manufacturing operations at a fraction of replacement cost.
In contrast, in emerging markets with significant growth
potential, there is evidence that companies are rethinking the
use of third-party manufacturers to improve asset utilization and
bring more capacity under the direct control of the company.
Research and Development is the other area of focus for asset
efficiency. R&D portfolios have been consolidated, and in highcost
countries, more work has been reallocated to research
hubs. Investments have been made in existing world-class
locations, while satellite locations have been divested. At the
same time, more R&D facilities have been established in lowcost
countries such as India, China and Singapore, permitting
overall cost reductions, or larger research headcounts at an
equivalent cost. (Reference, figure 3)
6 The drug and pharmaceuticals global direct investment landscape | Jones Lang LaSalle
Direct investment landscape
Data compiled for this report demonstrates the extent of the
shift in foreign direct investment (FDI) to include not only the
United States and Western Europe, but also low-cost markets
such as India and China. For this report, foreign direct investment
data was analyzed for the period from 2003 to 2010, with a
view of activity before and after the global economic downturn.
The global view
Figures 4 and 5 provide an overview of the global investment
landscape, comparing pre-downturn (2003–2006) with (roughly)
post-downturn (2007–2010) investments. The United States,
with the world’s largest economy remains the number one
country for attracting investment. While many of the largest
drug and pharmaceutical companies have disposed of assets
in the United States to diversify into the world’s emerging markets,
the available assets have been acquired by other United States
companies, or European, Japanese and Taiwanese investors,
among others. The result was that the United States received
close to 20 percent of all global investment between 2003 and
2010. (Reference, figure 4 & 5)
Other countries representing a significant percentage of overall
global investment included Ireland, China and Singapore,
each individually attracting seven to nine percent of all global
direct investment. Project experience suggests that China’s
emergence as a leading destination for FDI is due to both the
revenue and operating margin opportunities there. Ireland
and Singapore are sought-after locations because of their
tax advantages. Ireland maintains a 12 percent flat corporate
income tax rate, and Singapore offers a very desirable income
tax-based incentive program that can reduce the rate to zero
for a period of 10 years or longer for select investments.
The next group of top performers, with FDI of less than five
percent of all global investment, includes India and Germany,
with other locations of relevance including France, Spain,
Puerto Rico (although declining) and Italy. The prominence of
Ireland, Singapore and Puerto Rico in the top 10 list for both
time periods is a clear indicator that tax-based incentives are
a highly effective way to attract investment.
Tof C