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After Mulling NC, Pennsylvania, OSI Opts to Abandon Long Island HQ, Consolidate in Suburban NY


This is an updated edition of a story originally published July 9.

By Alex Philippidis

OSI Pharmaceuticals has tapped the New York City suburban town of Greenburgh, NY, as the future site of a $95 million consolidation of its US operations.

OSI officials this week said that the availability of a long-vacant biocampus, the presence of a nearby budding biocluster, the promise of tax breaks and other economic incentives — and discontent with leaders in its current home base in New York's Long Island region — persuaded it to bypass North Carolina and Pennsylvania in favor of the Westchester County site near the town of Ardsley, NY.

Pierre Legault, OSI's executive vice president, chief financial officer and treasurer, told BioRegion News on Wednesday that the growing pharma company is weeks away from embarking on the consolidation. OSI will soon move the first of its 200 jobs within the Empire State from two Long Island sites to the 43-acre, 400,000-square-foot Ardsley Park Science & Technology Center, which has been mostly vacant since Purdue Pharma moved out the last of its employees in 2005.

Over the next year or so, OSI will consolidate in Greenburgh its headquarters at 41 Pinelawn Road in Melville, NY, and its other Long Island site within the Broad Hollow Bioscience Park on the campus of Farmingdale State College, part of the State University of New York system. OSI's oncology business in Boulder, Colo., and a facility in Cedar Knolls, NJ, will also be moved to the new site under the plan.

"We expect to start moving here probably in the beginning of the fourth quarter, and conclude the move probably by midyear next year," Legault said. Even before then, he said, "we expect that by early next year, that number [of employees] is going to exceed 350 people."

Most of those 350 jobs, if not the current employees who hold them, will be based in Greenburgh, as will 400 additional new jobs the pharma company plans to create there by 2014.

The promise of that job creation persuaded officials from Greenburgh, the Ardsley school district, Westchester County, and New York state to agree in principle to a 15-year payment-in-lieu-of-taxes, or PILOT, plan and other tax breaks — the value of which, and many other details, officials would not disclose pending future approvals.

"At the end, we really liked the relationship we had with the state of New York," Legault said. "When you look at Ardsley, it provides the full solution for us, not only from an infrastructure point of view, but from a facility point of view. The zoning for the research labs is more in line with what we needed. We didn’t have to change anything. We could just look at the facility. Plus, it's a good location to attract talent, and we can move in very quickly."

The Boulder site — which OSI bought in 2001 from Gilead, along with a pipeline of clinical candidates designed to fight cancer — employs about 145 OSI workers, while 20 additional staffers are now based in Cedar Knolls, OSI spokeswoman Kim Wittig said.

"All Long Island employees are being offered a position at the Ardsley facility," Wittig said. "We cannot comment on how many employees will move with OSI to Ardsley but we hope that a significant number of employees will make the move."

Sales, Mortgage Tax Breaks

Westchester's Industrial Development Agency will meet July 14 on the county portion of that economic incentive package. According to Greenburgh and the state's economic agency, Empire State Development, the county's incentives will include an exemption from the mortgage recording tax, and exemptions from state and county sales taxes on construction materials, furniture, equipment and fixtures, the county IDA's executive director Theresa Waivada told BRN.

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Greenburgh has agreed to retain its current $32 million assessment of the campus for five years, and reassess it at market rate for the remaining 10 years of the PILOT agreement.

Not affected is OSI's diabetes/obesity center in Oxford, UK, which will remain in operation. In a statement announcing the consolidation on Tuesday, OSI projected that it expects to save $15 million a year after the consolidation is completed, something the company said it anticipated happening by the fourth quarter of 2010.

Legault and two aides joined Greenburgh town Supervisor Paul Feiner and Waivada at Wednesday's meeting of the Town Council to officially welcome the company. In remarks to the sparse audience at the council meeting, Legault said OSI would be a good neighbor and better ambassador for the long-nascent cluster of life-sci businesses in Greenburgh and neighboring communities.

"We will become one of the key companies to create this cluster of biotech within the Westchester area," Legault predicted.

Speaking with BRN a few minutes later, Legault said OSI found the facility it wanted, at a lower cost than its other options, at the former Purdue Pharma campus on Route 9A (Saw Mill River Road), which the company will purchase for $27 million from the limited partnership MillSaw Realty, whose members include at least one Purdue Pharma executive; this week, a Purdue Pharma spokesman said MillSaw was a partnership associated with Purdue Pharma, but not an entity of the company.

Legault said the campus was also attractive to OSI because of its potential for additional development beyond the existing space, though how much more space, and how far into the future the company might need it, have yet to be decided.

OSI will immediately occupy 300,000 square feet, with the remainder available as the company expands, Legault said.

"We expect to grow significantly by 2012. We expect to be using, by then, the additional space, and then subsequently more. There is a lot of space to grow," he said.

The campus houses at least one existing tenant, Supresta, a maker of flame-retardant chemicals that signed its lease for 34,000 square feet soon after it was spun off by Dutch-owned Akzo Nobel in 2004. "We have to talk to them and we'll see what we do," Legault said.

Budding Cluster

Legault told BRN that OSI found Greenburgh attractive because of the presence within the town and neighboring communities of a nascent biotech cluster — more than a dozen companies that include MS drug maker Acorda Therapeutics, Regeneron Pharmaceuticals, cancer pharmaceutical developer EpiCept, and Siemens Healthcare Diagnostics, the world's largest clinical diagnostics company.

Greenburgh will generate $1 million in building permit fees from OSI, Feiner told BRN, as well as an expected influx of new buyers for its housing market, and more importantly, a catalyst in expanding the town's life sciences cluster. The town is organizing a welcoming event, as well as forming a panel of residents willing to escort OSI executives on tours of the town and the region.

"Hopefully, they'll choose Greenburgh as their home, rather than other parts of the county," Feiner said at the council meeting.

"We're going to be able to have some bragging rights of having a fantastic new biotech company in our community. There are going to be job opportunities for people in the local community. I believe this will slow down the certiorari [property tax refund] actions in the Ardsley school district, and it should also be very helpful to local businesses," Feiner added. "Greenburgh is well on the way as a go-to destination for world-class biotech companies."

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The Greenburgh-area cluster is not anchored by a major academic or research institution. It is, however, home to New York Medical College, an Archdiocese of New York institution which earlier this year was reported to be in talks to be acquired by Touro College. The cluster is also heavy with public life-sci companies rather than startups.

But over the past two years, a pair of life-sci companies have pulled out of Greenburgh's biocluster. Cara Therapeutics, a developer of therapeutics to treat pain and inflammation associated with various medical conditions, bolted for Shelton, Conn., after winning $4 million from the quasi-public Connecticut Innovations [BRN, Oct. 8, 2007]. And last year, a longtime Greenburgh-area biopharmaceutical company, Emisphere Technologies, completed its relocation to Cedar Knolls, NJ, in an effort to reduce its cash burn rate by more than $11 million annually, or more than 60 percent from current levels, moving its labs and administrative operations in phases starting in 2007 [BRN, Dec. 15, 2008].

Another asset for the Greenburgh-area biocluster is the presence of about half of the Landmark at Eastview, a 750,000-square-foot lab-office complex that straddles the town's border with the town of Mount Pleasant. Owner BioMed Realty Trust of San Diego is completing a $145 million, 360,000-square-foot addition to the complex — of which 194,000 square feet will be occupied by Regeneron — and has also sought to add space on the Mount Pleasant side [BRN, Feb. 9; Feb. 2].

And Greenburgh's village of Tarrytown is home to a facility of Bio-Reference Laboratories, which says it is the nation's third-largest full service laboratory.

"We're going to hopefully create a cluster in the biotech industry. By moving activities here, we expect that some other company will come also," Legault said. "This is a win-win for OSI, our employees, our shareholders, and hopefully for the town and the county."

OSI's effort to consolidate operations follows a decade in which the company introduced the drug Tarceva, used in treating pancreatic cancer and non-small cell lung cancer. Tarceva, which OSI markets with US partner Genentech, now a subsidiary of Roche, finished last year with $1.12 billion in sales, up 27 percent from 2007. During the first quarter, OSI revenues related to Tarceva rose 2 percent, to $84 million from $82 million in the year-ago quarter.

"We will only truly capture the full strategic value of our oncology franchise if we simplify our business by bringing together all the elements of our US operations onto a single site," Goddard said in OSI's press release announcing the consolidation.

Greenburgh emerged the winner in a multi-state search whose short list, Legault said, included sites in North Carolina and Pennsylvania. The search remained confidential until OSI decided to consolidate and expand in Greenburgh, said Waivada, who is also deputy director of Westchester County's Office of Economic Development.

"The project was a blind lead until a month ago when a decision was made to move forward with the Ardsley site," Waivada recalled. "KPMG was their site selection consultant and we never knew who the company was. It was known as Project Genesis. When we gave them a tour in December, they only told us their first names. They also toured sites in the metropolitan area and Hudson Valley."

Tom Giannone, a senior director at the commercial real estate brokerage Cushman & Wakefield, told BRN his firm had been marketing the property on Purdue Pharma's behalf for about five years.

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C&W, Giannone said, "answered a request for proposals that was issued by OSI's consultant. We found a user or the site, and did a deal."

Leaving Long Island

Two days after announcing the consolidation, OSI's top executive, CEO Colin Goddard, made public another key factor in the company's thinking that Greenburgh and Westchester offered better prospects for growth than Long Island.

In an op-ed column published Wednesday by Newsday, Goddard faulted in part "Long Island's insular business and political culture, which often fails to recognize the highly competitive global arena in which companies operate. And it's partly found in the unique opportunity we uncovered in Ardsley.

"But the main factor is our disappointing conclusion that a long-awaited biotech cluster — which is essential to creating a viable labor market for our company's growth — will not emerge on Long Island anytime soon," Goddard added.

Goddard's concern over the Long Island labor market sustaining OSI mirrors concerns expressed more broadly at a 2007 Long Island biotech convention by an economist who focuses on the region. Pearl Kamer, chief economist for the Long Island Association, said two population trends posed formidable challenges to the development of a biotech cluster on Long Island: The exodus out of the region by educated young adults priced out by sky-high housing costs and other expenses, and a migration to the area by poorer immigrants, both legal and illegal, with less of the education and skills sought by biotech companies and research institutions [BRN, July 2, 2007].

In the op-ed this week, Goddard said that when he joined OSI in 1989, he was drawn there by the promise that the company, then known as Oncogene Science, would anchor an emerging biotech cluster with the potential of "establishing the region as a national powerhouse in the sector."

"With academic centers of excellence like the Cold Spring Harbor and Brookhaven national laboratories in our community, the New York medical schools a stone's throw away, JFK and LaGuardia tying us to the world, and Wall Street on our doorstep, how could we miss?" Goddard recalled of his thinking. "Now, 20 years after that early enthusiasm, OSI remains the only prominent biotech company on the Island."

Goddard cited political opposition to a new shared animal facility at Broad Hollow, including pushback from an official he did not name but who he said was a key supporter in creating the bioscience park.

In addition to its 60,000 square feet of headquarters space in Melville, OSI occupies all 63,500 square feet within Broad Hollow's first building, which was completed in 1999 at 49,000 square feet when OSI was one of three tenants, then expanded in 2001-02 as OSI grew.

OSI is the building's sole occupant, in space that will be challenging to fill because it is now configured for a single user — though it's too soon to say if that will pose difficulty as the park seeks a new tenant, Greg Blyskal, Broad Hollow's executive director, told BRN.

As of Wednesday morning, he said. "I have had an additional inquiry from a company asking about the space." It consists of about 45,000 square feet of labs; the remainder is administrative offices.

"There were talks going on for quite a while, with the idea of them expanding here on the campus, in what would have been an expanded bioscience park, something designed for more of a one-company use," Blyskal said. "It's a setback, no question, because OSI is a company that we've been working with for the last seven years. It would have been nice to have them here, definitely."

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OSI's announcement was one of two blows suffered by Broad Hollow on Tuesday afternoon: At about the same time, Blyskal said, lightning from a storm knocked out the park's electric and phone systems.

The park is now planned for up to three development phases within 18 acres; to date two phases have been completed, the second consisting of a single 52,000-square-foot building designed for multiple early-stage life-sci companies.

OSI had considered expanding and consolidating within Broad Hollow, until opposition to the idea emerged from state Sen. Charles Fuschillo Jr (R-Merrick). Fuschillo told Newsday he opposed the project after seeing what he termed a draft of legislation that he contended would have awarded up to 40 acres to OSI "without any public bid, no taxes, and exempt" from local zoning laws.

At deadline, Fuschillo had not answered BRN questions furnished to his spokesman on the land deal and OSI's remaining at Broad Hollow.

Even if OSI had agreed to consolidate at Broad Hollow, the bioscience park at present does not have as much space or expansion potential as the campus OSI has agreed to purchase in Greenburgh.

"We tried to stay on Long Island. It was more expensive, [reviews would have been] more lengthy, and not preferable from a tenant improvement point of view. Overall, Ardsley was better. It was cheaper. And it gave us a chance to create a cluster in an area that would be easier to attract talent," Legault said.

The Greenburgh campus is known as the Ardsley Park Science & Technology Center because of its proximity to the village of Ardsley, and because it was so named in the 1990s by a former owner — a venture of several area developers led by Jon Halpern — that envisioned multiple tenants in the life sciences and other technologies on the campus originally built for the old Ciba-Geigy in 1956.

Ciba-Geigy vacated the campus in 1995 when it moved a few miles north within Greenburgh, to the Tarrytown Corporate Center, which he controlled at the time, and which was developed in the 1970s by Halpern's father. Ciba-Geigy — which later merged with Sandoz to form Novartis — sold the campus to the developer venture, called Ardsley Partners, which attracted to the site as anchor occupants Cultor Food Sciences and Purdue Pharma.

Purdue Pharma bought two buildings from Ardsley Partners — the 105,000-square-foot 444 Saw Mill River Road and the 30,000-square-foot 460 Saw Mill River Road — after moving there operations that were previously based a few miles south in Yonkers, NY.

Purdue later bought condominium ownership in a third building, the 52,000-square-foot 420 Saw Mill River Road. Purdue Pharma combined those holdings with three other buildings totaling 184,000 square feet — 410, 430, and 440 Saw Mill River Road — that Halpern sold in 2003 to Davis Cos., which joined with Purdue Pharma to create MillSaw. Davis, a commercial developer focused mostly on class A office space and based in Boston, has since sold its ownership stake in the partnership.

Purdue Pharma began pulling out in 2004, and moved the remaining 150 employees from that cutback the following year. The pullout was part of a company-wide retrenchment stemming from the loss of patent protection for controversial painkiller OxyContin.


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