Quantitative vs. Qualitative Factors
Comparative locations featured in the study include long-standing centers of bioscience industry such as Boston, San Francisco, San Diego, and Montgomery County, MD, as well as emerging hubs of investment like Las Vegas, Palm Beach County, FL, St. Louis, MO, and Sacramento, CA. The study also looks at New York City, which is striving to capture a greater share of commercial life sciences activity.
Today, operating costs are the white hot issue in the boardrooms of bioscience companies. Owing to the competitive forces of global free trade, rising energy and drug production costs, soaring civil litigation and regulatory expenses, and a lean and mean message being sent by the post dot-com crash venture capital community, quantitative factors focusing on the cost of doing business are trumping qualitative lifestyle factors when it comes to siting new bioscience facilities. For many firms, start-ups especially, the only way to improve the bottom line is by reducing expenditure, and there is little help on the revenue side of the ledger.
Operating cost differentials between an acceptable city and an optimum bioscience site can be very substantial, running into the millions of dollars per year.
In the Boyd study, annual operating expenses under a new construction assumption in the U.S. range from a high of $11.4 million in New York to a low of $9.7 million in Las Vegas. In Canada under the same assumption, annual operating costs range from a high of $8.1 million in Vancouver to a low of $7.3 million in Saskatoon, home of the University of Saskatchewan and a flourishing agribio sector.
Under a lease assumption in the U.S., annual operating costs range from a high of $10.9 million in New York to a low of $9.6 million in Las Vegas. In Canada under this assumption, annual operating costs range from a high of $8 million in Vancouver to a low of $7.1 million in Saskatoon. All amounts are scaled to a hypothetical 22,000-sq-ft bioscience laboratory employing 110 workers.
States like Texas, Florida, and Nevada that have no state personal income tax provide additional relocation benefits to biotech transferees and start-ups by enabling them to keep more of what they earn. Lowest cost Las Vegas has neither a personal nor a state corporate income tax.
Canada continues to offer a low-cost environment for the bioscience industry, even with the double digit rise in the Canadian dollar versus the U.S. greenback during the past year. Biotech companies enjoy lower labor expenses in the area of fringe benefits due to Canada’s nationalized healthcare system.
Boyd biotech clients in the U.S. typically shell out about 35–40% of their payroll toward benefits, mostly healthcare-related. In Canada, however, companies spend between 15% and 20%. This cost disparity facing U.S. multinational firms, both in and out of the life sciences industry, will likely be a key talking point as the U.S. once again revisits the topic of national healthcare during the upcoming election cycle.