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Airport Site, Georgia Tax Credit Entices Dendreon to Base New Biomanufacturing Plant in State

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This is an updated version of a report first published Aug. 19.

By Alex Philippidis

Incentives from Georgia that could reach $9.6 million, as well as an available site in a reduced-tax zone and a role in training new workers, proved enticing enough for Dendreon to locate a new $70 million biomanufacturing plant in an Atlanta suburb, a state official said.

Heidi Green, Georgia's deputy commissioner for global commerce at Georgia's Department of Economic Development, told BioRegion News that the drug developer has promised to base 550 jobs, with an annual combined payroll of about $35 million, at the 160,000-square-foot plant to be built for Dendreon at the Majestic Airport Center in Union City, Ga. State officials are set to join Dendreon executives in a Sept. 30 ribbon-cutting ceremony formally welcoming the company to Georgia.

The plant is one of two to be developed by Dendreon at opposite ends of the nation — the other will rise in Seal Beach, Calif. — as the company gears up to bring its Provenge prostate cancer treatment to market. The company is pursuing final approval of the drug from the US Food and Drug Administration following successful clinical trials, though the application was tabled earlier this year to await additional results.

If Dendreon gains final FDA approvals, then creates the Georgia jobs within five years as promised, Green said, the company will qualify for incentives that include a $3,500 tax credit for each new job created for five years for a total of just over $9.6 million.

The cash grants Dendreon is receiving for jobs at the Union City plant stem from the company agreeing to locate in the Opportunity Zone created by the state earlier this year to attract new businesses and their jobs to an industrial section near Hartsfield-Jackson Atlanta International Airport.

"Really, the driving factor was that they wanted to be near the airport. There are numerous Opportunity Zones around the state, and other locations that could have met their needs. But they wanted that international, global access, and Hartsfield-Jackson airport was critical to them," Green said in an Aug. 14 interview.

"They were given a series of sites from which to choose from, but they said time and again, 'We want to be as close to the airport as we can be with our location,'" he added.

In addition to numerous direct international flights, the airport offers amenities — such as its 42,000-square-foot Perishables Complex, which allows for cold storage of cargo at four temperatures, ranging from 55 degrees Fahrenheit to -5 degrees Fahrenheit, "which will be critical to [Dendreon] getting their product out all over the world," she added.

Dendreon would be the first company to locate into the new Union City Opportunity Zone, which as with the other eight Opportunity Zones created statewide over the past year, allows employers to claim per-job tax credits of up to $3,500.

Green said Dendreon will be able to take the tax credit against payroll withholding, since its tax liability is minimal in the absence of a drug-production operation, allowing the company to essentially hold onto the amount of the tax credit as cash rather than remit it to the state Department of Revenue — an incentive she said was especially attractive to Dendreon since it has yet to generate the tax revenue the state expects to receive when the plant is in full operation.

According to Georgia's Department of Community Affairs, which oversees the Opportunity Zone program, the tax credit is available for new or existing businesses that create two or more jobs in designated areas that are within or adjacent to a census block group with 15-percent or greater poverty, in communities where an enterprise zone or urban redevelopment plan exists. The credits can be taken against the business’s income tax liability and, where applicable, state payroll withholding.

Another incentive that drew Dendreon to Georgia, Green told BRN, was the availability of customized workforce training that is free to businesses deemed to qualify for it through the state's Quick Start program, overseen by the Technical College System of Georgia. Among life-sci companies Quick Start has assisted is Quintiles Transnational, a contract research organization that has committed to creating 400 jobs as part of a corporate consolidation and expansion of operations in the state that includes the development of a new 201,000-square-foot facility in Marietta, Ga.

According to the Winter 2009 edition of the program's official newsletter, Quintiles conducted more than 64 classes covering 25 subjects in more than 5,000 training hours during the first half of 2008. “We expect our total training hours to exceed 20,000 in 2009,” Dan Brown, vice president and general manager of Quintiles Laboratories North America, the US/Canada laboratory arm of Quintiles Transnational, told the newsletter.

As of last year, Quick Start had trained more than 600,000 employees through 5,100 projects within the life sciences and all other industries since the program was established in 1967.

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For Dendreon, Quick Start plans to visit the company's facilities elsewhere, then replicate and, where it can, improve the company's processes and train people on those processes in Georgia, Green said. In addition, the state Department of Labor will recruit workers for the new jobs free.

"One of the things Dendreon was impressed with was really the level of assistance through the Quick Start training. They were blown away that we said, 'We're going to provide all of your new training free. They said, 'Our board of directors doesn't believe us when we tell them that.'" Green recalled. "And we were like, 'Look, we are going to do that. And not only that, but we're going to do that at the best level that you could find across the United States."

Green said Georgia knew that it was competing for the plant with several other states, but referred to Dendreon a question about which ones. A Dendreon spokeswoman was unavailable this week.

"We took some guesses” at which states, Green said, adding: "The state we thought we were in competition with, we knew did not have the kind of international access that we could provide."

Dendreon, acting through Ernst & Young as well as the real estate firm Jones Lang LaSalle, had been working with Georgia officials for about two months by the time the Biotechnology Industry Organization held its 2009 International Convention in Atlanta this past May. Biotech's largest annual industry event drew more than 14,000 people to the Georgia World Congress Center.

"BIO was another important step in being able to really show companies like Dendreon that we can provide them the workforce that they're looking for, the access that they're looking for … the global reach, the talent, the spirit of collaboration," Green said.

Dendreon's arrival in Georgia gives the state an opportunity to develop a biomanufacturing niche within its life sciences sector, which the Peach Tree State has traditionally positioned as a hotbed of research activity as carried out by institutions ranging from the US Centers for Disease Control and Prevention and American Cancer Society, to universities that include Georgia State University and Emory University.

Emory alone accounts for half, or 62, of the 119 federal research grant awards totaling more than $10 million that were awarded to Georgia institutions as of Aug. 17 through the $787 billion American Recovery and Reinvestment Act, the economic stimulus measure enacted by President Obama in February.

Pharmaceutical and medicine manufacturing accounts for 3,262 jobs, or 18 percent of the 17,941 jobs in life sciences companies recorded for Georgia in 2007 by Shaping Infinity: The Georgia Life Sciences Industry Analysis 2009, produced for Georgia Bio, the state's life-sci industry group, by the University of Georgia’s Selig Center for Economic Growth in the Terry College of Business. That year 49 establishments focused on pharmaceutical and medicine manufacturing, a 6 percent slice of the 793 establishments counted by the report.

The segment's job and establishment growth plateaued from the previous year. In 2006, pharmaceutical and medicine manufacturing accounted for 3,271 jobs in 48 establishments, according to the 2008 edition of Shaping Infinity. The total number of life-sci jobs cannot be compared since the earlier report did not include agricultural life-sciences jobs within the total industry employment figure of 15,283.

Georgia's pharmaceutical and medicine manufacturing sector commands the largest average annual salary of any segment within Georgia's life-sciences industry, at $89,672 per year. That's a 1.4-percent increase from the 2006 average annual salary of $88,408 — more than double the state's overall average annual salary, which rose 4.5 percent year-over-year, to $42,178 in 2007 from $40,371 in '06.

"We think we have a lot of opportunity on the biomanufacturing side, and it's an interesting crossroads of Georgia's strength," Green told BRN. "We have strength in advanced manufacturing, what we consider one of our strategic industries, and then we have this global healthcare industry that we also see growing here."

One selling point for Georgia to prospective biomanufacturers, according to Green: The state has fully adopted single-source sales factor, which cuts corporate income taxes for life-science companies and other employers by allowing them to determine the percentage of corporate income or “franchise” taxes they owe the state based solely on their sales within the state, rather than on factors required by some other states, ranging from out-of-state sales to the size of their payroll and the amount of property they own.

Dendreon's Union City plant is one of two new facilities that the publicly traded company disclosed it was developing in an Aug. 10 filing with the US Securities and Exchange Commission. The other is a 184,000-square-foot plant to be built in the Orange County city of Seal Beach, within an existing industrial building at the Pacific Gateway Business Park [BRN, Aug. 14].

The Georgia plant would be built for Dendreon by landlord Majestic Realty, which entered into a $6.7 million lease consisting of a 10.5-year term "anticipated to commence in the first half of 2010," according to the SEC filing, plus two five-year renewal options. Dendreon has said the lease includes a one-time purchase option exercisable prior to March 2011, and a 10-year expansion option for up to an additional 47,000 square feet.

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