February 1, 2007 (Vol. 27, No. 3)

With the Benefits of Offshoring and U.S. Law, Commonwealth Island Is Manufacturing Hub

For more than 40 years, major pharmaceutical companies have built production plants in Puerto Rico and relied on the island’s workforce to manufacture prescription drugs, including Lipitor and Viagra.

About 25% of the global biologics manufacturing capacity is based in Puerto Rico, according to Enrique Mirandes, director of life sciences at PRIDCO (Puerto Rico Industrial Development Company; www.pridco.com). Up to 371,000 liters of bulk manufacturing capacity for biologics are available, and companies have invested $4 billion in bulk and fill/finish biotech facilities in the past five years. “Puerto Rico is the gateway to the most lucrative life science market in the world,” adds Mirandes.

Puerto Rico’s governor, Anibal Acevedo-Vila, has spearheaded the expansion of the pharmaceutical and biotechnology industry. His goal is to transform Puerto Rico into Bio Island. The Governor recently signed an executive order making the promotion and development of the biotechnology industry a public policy priority and instituted an interagency task force to fast-track permits for biotechnology companies.

Best of Both Worlds

Pharmaceutical and biotechnology companies are attracted to Puerto Rico for several reasons. As a U.S. Commonwealth, Puerto Rico operates under the security of U.S. laws for customs protection, federal currency and banking, and intellectual property, yet companies do not pay federal taxes until they repatriate profits. “Puerto Rico offers the advantage of going offshore with the security of home,” says Mirandes. Companies with operations in Puerto Rico are taxed locally at a rate of 7% or lower, depending on their investment in facilities and the number of jobs created. The initial tax rate is locked in for 10–20 years, and is renegotiated when it expires.

The growth of the biotechnology industry in Puerto Rico ranks second only to San Diego. Whereas the emphasis in San Diego is on research-and-development stage companies, companies in Puerto Rico manufacture pharmaceuticals, biologics, and medical devices. “We have a world-class infrastructure,” says Mirandes, including a 100% digital switching telecommunications network, the seventh busiest container port in the western hemisphere, airports with more than 4,300 cargo flights monthly, and a highway system that links people to airports or seaports within two hours.”

A supplier network of international and local companies has sprung up to assist companies with plant design, engineering, validation services, packaging, instrumentation, environmental protection, and other essential services. “You do not have to import resources to meet your needs,” Mirandes says. The manufacturing plants operate under FDA, EPA, and OSHA regulations to manufacture products for the U.S. market, and managers are familiar with European regulations. The FDA maintains a district office in San Juan, adding to the island’s appeal as a one-stop shop.

Puerto Rico attracts agricultural biotechnology companies, too. Long known for pineapples and coffee, now farmland is planted with genetically modified crops like corn and soybeans. The island’s tropical climate permits up to four harvests yearly. Dow, Syngenta Seeds, Pioneer HiBred, Mycogen Seeds, Rice Tech, AgReliant Genetics, Bayer Cropscience, and Monsanto are developing crops with herbicide and insect resistant traits or transgenic plants.

Residents of Bio Island

In Carolina, Eli Lilly (www.lilly.com) produces Humalog, a recombinant insulin. In August 2006, the FDA approved Lilly’s new 500,000-square-foot facility that houses 126,000 liters of fermentation capacity.

Late in 2006, the FDA approved Abbott’s (www.abbott.com) production plant in Barceloneta, with 20,000 liters of fermentation capacity dedicated to making Humira, a monoclonal antibody for rheumatoid arthritis. Becton Dickinson (www.bd.com) is constructing a bioscience unit in Las Piedras to manufacture monoclonal antibody reagents for diagnostic kits. Newcomer Abraxis Bioscience (www.abraxis.com), also in Barceloneta, will make the anticancer drug Abraxane, an injectable taxane bound to a nanoparticle albumin. These and other biopharmaceutical companies account for 40,000 direct jobs and 100,000 indirect jobs in the life science sector.

The ongoing expansion of Amgen (www.amgen.com) in Juncos illustrates Puerto Rico’s courtship of biotechnology companies. Amgen’s campus has 16 buildings, 1.2 million square feet of facilities, and 225,000 liters of fermentation capacity. Several biotherapeutics, including Epogen, Neulasta, Neupogen, Aranesp, and Enbrel, undergo some stage of the manufacturing process in Juncos. Between 2002 and 2006, Amgen’s work force grew from 450–2,500 full-time workers. When the current expansion is completed, 500 more jobs will be created.

“The government acts quickly to accommodate us,” says Henry McLeod Matos, associate director of environmental health and safety at Amgen’s Juncos facility. Amgen met with PRIDCO in December 2005, to outline plans for the current expansion and approval was granted in February 2006. “It took a few weeks of hard work to provide the infrastructure for expansion,” says Mirandes. Part of that infrastructure includes a private highway to the Amgen campus that bypasses local traffic in Juncos.

Educational Priorities

A strong collaboration between industry and academia insures a well-trained workforce, says Mirandes. In 1994, the University of Puerto Rico at Mayaguez (UPRM) started a five-year bachelor’s of science degree in industrial biotechnology. The curriculum includes classes in fermentation, thermodynamics, and bioremediation of hazardous substances.

The Industrial Biotechnology Learning Center at UPRM contains a 2,000-square-foot laboratory with bioreactors and chromatography columns. In addition to serving as a classroom for the students in the industrial biotechnology program, workers from the pharmaceutical industry are retrained in bioprocessing methods during intensive 40-hour sessions. Then the retrained workers are matched with the needs of biotechnology companies at a follow-up job fair.

Construction is under way on a 28,750-sq-ft Biotechnology Center for Research and Training in Bioprocessing, located at the Guanajibo Industrial Park near UPRM. The $125-million facility will house a pilot plant with suites for mammalian cell culture and microbial cell fermentation. The new Center will train workers from biotechnology companies and provide space for business incubation and contract production. The facility resulted from “the government and university asking biotechnology companies on the island what they needed to support their activities,” Mirandes says.

At the main campus of UPR in San Juan, ground was broken in June 2006 for a 152,000-square-foot molecular sciences complex, which will house faculty in interrelated disciplines, including molecular biology, proteomics, genomics, nanotechnology, and pharmacogenomics. The incubator space will hopefully encourage the spin-off of new biotechnology companies. “We hope to attract state-side scientists,” says Mirandes, some of whom may have left the island for better opportunities. The new complex links the medical campus of UPR with the new Puerto Rico Cancer Center, also under construction. The 20,000-square-foot facility is a joint venture of UPR and the University of Texas’ M.D. Anderson Cancer Center of Houston.

The biotechnology industry generally starts with small, research-and-development companies that grow to need manufacturing space. In contrast, manufacturing launched the industry in Puerto Rico, yet there are no biotechnology startups, even though top-notch researchers work at Puerto Rico’s universities.

PRIDCO is addressing this challenge by hosting venture capital forums to encourage researchers to commercialize their innovations. A $25-million venture capital program is available to fund initiatives.

“We’re creating the infrastructure for scientists to commercialize their research,” says Mirandes, who is certain that “we will have some success stories soon.”

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