Shire’s Cabrey on the Company's Expansion In Pennsylvania and (Possibly) Massachusetts

The past few weeks have been anything but quiet for Shire Pharmaceuticals. In July, the British-based company ceremonially broke ground on a $30 million expansion of its US headquarters campus in Wayne, Pa., designed to add 390 new jobs to the company’s existing work force there of 595 jobs. Shire will lease 1200 Morris Drive, a 115,000-square-foot building vacant for more than five years in the Chesterbrook Corporate Center.  

 

A few weeks before the Pennsylvania groundbreaking, Shire representatives submitted plans to Lexington, Mass., town officials for a $394 million project that the company projected would draw by the year 2015 a total 680 new employees, with average annual salary of $100,000, filling more than a half-million square feet of refurbished office and lab space in the Lexington Technology Park. The R&D campus had once been filled by Raytheon, until it moved its headquarters in 2004 from Lexington, Mass., to Waltham, Mass., about five miles south.

 

Shire is considering renovating the 125,000-square-foot 300 Patriot Way, once occupied by Raytheon, and building two additional structures on development pads — the 200,000-square-foot 400 Patriot Way, and the 170,000-square-foot 200 Patriot Way. Shire already has a presence at the technology park; earlier this year it agreed to lease 55,000 square feet at 125 Spring St., a lease it says is unaffected by the expansion proposal.

 

The company wants to create its research, development, administrative and manufacturing operations in Lexington between the first quarter of 2008 — when office support, IT and warehousing employees would move into 300 Patriot Way — and the third quarter of 2011, when manufacturing, warehouse, and utilities would be up and running at 400 Patriot Way.

 

But instead of pursuing state and town approvals quietly, Shire has generated headlines in Massachusetts after it took the unusual step this summer of complaining publicly that the state had been slow to show support for the life sciences industry. Specifically, the company urged state lawmakers to enact the $1 billion, 10-year biotech bill submitted by Gov. Deval Patrick last July, two months after introducing the bill to an electrified crowd at the BIO 2007 conference in Boston. If the bill is not passed, Shire has threatened to carry out its Lexington expansion somewhere outside of Massachusetts.

 

BioRegion News spoke this week with Matt Cabrey, senior manager for corporate communications at Shire, to learn more about the company’s timetable for deciding what to do with its Lexington plans, as well as details of expansions the company has planned for Massachusetts and Pennsylvania.

 

 

Shire acquired a company in Cambridge in July 2005, called TKT, which stands for Transkaryotic Therapies. At the time, they employed about 325 people. When Shire acquired the operation, we essentially wanted to keep the operation as a separate, independent operation, and it remains that today. And it’s now known as Shire Human Genetic Therapies, or Shire HGT. The goal was to not come in and change things around, not to fire everybody and fold the operation into Shire’s existing operation. We wanted to do the exact opposite. The reason Shire was so attracted to TKT was because of the team of experts and professionals and scientists that were working on really unique projects, and we wanted to retain those folks, frankly.

 

Shire today operates in two businesses. One is called Specialty Pharmaceuticals; that’s the division that’s based out of Pennsylvania. In a nutshell, it includes [attention deficit and hyperactivity disorder], [gastrointestinal], and renal. There’s a president of Shire Specialty Pharma; his name is Mike Cola.

 

The other business is Shire HGT; [the president] is David Pendergast. Shire HGT is based in Cambridge, Mass. The Shire HGT team focuses on lysosomal storage disorders, LSDs. In more layman’s terms, it’s genetic disorders. We have two medicines on the market for the Shire HGT — Elaprase for Hunter syndrome [and] Replagal for Fabry disease.

 

When Shire acquired the former TKT, now Shire HGT, one of the very early observations was that with the anticipated approval of Elaprase, there was going to be a need for increased resources, meaning manufacturing, commercial operations, with what we anticipated was a robust pipeline, and which projects would be moved forward. There was a need for regulatory and clinical folks. And all of the back-office operation structures as well like finance, legal, human resources, corporate communications, and things like that. Right from the very beginning, there was an investment by Shire in the operation in Cambridge. And today, we actually employ about 550 people in the space in Cambridge, Mass. Worldwide, the Shire HGT operation is about 700 — we have folks out in the field and in Europe and South America now.

 

 

Back in July of 2005, the recognition of strategic planning and growth was understood. It was at that time that a team was put together to say, ‘So where are we going to be in 2010? 2011? 2012? And what are our facilities needs?’ That prompted us to begin exploring different options: ‘Do we stay in Cambridge? Do we explore other options?’ Shire has signed a long-term lease for about 55,000 square feet of space at 125 Spring St. in Lexington, within the Lexington Technology Park. [Last month] we had 75 people relocate from facilities in Cambridge to that 125 Spring St. location.

 

 

Primarily clinical and R&D and some regulatory folks. There are some labs there, and some office facilities. But it’s primarily a clinical and R&D operation. That’s all that has been officially relocated. We continue to explore space that is immediately adjacent to 125 Spring St., which was a former NitroMed facility. The address is Patriot Way, the old Raytheon facility.

 

 

That’s right. We’ve already signed [the 125 Spring St.] lease. We’ve already refurbished that space. And folks are actually going to be working out of that space. That space was retained with the anticipation and hope that we will continue to expand at that Lexington Technology Park campus. And that’s why we continue to look closely at 300 Patriot Way, although we do not have a signed lease for 300 Patriot Way. And if everything moves according to plan, and we’re hopeful that it will, we’ll sign a lease there. We’ll refurbish the existing building. And we’ll relocate staff that is currently based in Cambridge to that Lexington Technology Park as well, sometime in the next 12 to 18 months.

 

 

This situation in Cambridge is really in two phases. Our research and development and clinical operation and some administrative operations, like commercial and legal, those kinds of things. The other component is manufacturing, or what folks call our technical operations. We today have a facility in the Alewife section of Cambridge. That is our primary manufacturing facility for Shire HGT. It’s where we make Replagal and Elaprase.

 

 

The anticipation is, the Alewife facility will remain long-term with Shire, regardless of what happens next. Our goal is to establish an additional manufacturing facility. And that may be in Lexington, or may be somewhere else in Massachusetts. Or frankly, it could also be outside of Massachusetts. When I say it could be in Lexington, there are pad sites that we are interested in, and that we have been talking with their owners about at Lexington Technology Park. The pad sites are 200 Patriot Way and 400 Patriot Way, on either side of the existing 300 [Patriot Way] building. It’s 200 and 400 that Shire would invest in constructing from the ground up to meet our specifications for a manufacturing

 

That’s right. We’d potentially have four separate buildings in the Lexington Technology Park campus.

 

 

Our discussions with the commonwealth of Massachusetts and the town of Lexington have been very positive. We value and appreciate everything they’ve shared with us and the work that we’ve done with them, as we hope to secure some tax incentive financing, both at the state and local level.

 

We’ve been having and continue to have very good dialogue with the Massachusetts Office of Business Development. They have not been able to put together a package of incentives that they would offer to Shire, or frankly other life sciences companies, because they’re waiting for [Gov. Deval Patrick’s proposed Life Sciences Initiative] to be considered, and ultimately approved by the legislature.

 

Until that happens, the tool kit that the Massachusetts Office of Business Development has to put together packages is limited. And they’re waiting on this legislation in order to put together something that they can offer us. We can’t sign any long-term agreements to construct new buildings until we have a better understanding as to what the financial impact may be on the company.

 

It’s difficult to say. We can make some adjustments internally to our timelines based on what our production needs are. So there are a couple of different options that we can consider that would allow us to continue to hold off making any long-term decisions for a few more months.

 

We anticipate being able to make a decision, based on feedback we’ve heard from the commonwealth, within the next four to six weeks. We want to move sooner than later, based on when we have product coming off the manufacturing line, to meet what we anticipate is our demand for medicines. That’s really what’s driving this.

 

 

Our commitment has not changed. What frankly has prompted us to share publicly our thoughts is the desire to help folks understand we don’t have signed leases at 200, 300, or 400 Patriot Way. We really would be hard pressed to sign those long-term leases until we have a better understanding as to what potential tax incentives may be offered by the commonwealth and by the town of Lexington. The process, as positive as it has been, is just moving a little slower than we initially anticipated. And we hope to basically let folks know that this is not a done deal, and we need to continue to explore our options. It’s in Shire’s best interests to keep all of our options open, from a due-diligence perspective, to ensure we don’t close the deal and put all of our eggs in one basket. We have a plan B and a plan C and others as necessary.

 

 

Things have been going very well for Shire. We’re growing so rapidly that we needed to expand. So we recently signed a lease for 10 years for an additional building that’s 115,000 square feet. It’s about 800 yards away from where we are in Chester County. It’s the Chesterbrook Corporate Center in Wayne, Pa. And we’re currently refurbishing that space.

 

As part of that commitment and lease signing, we agreed to create 390 new jobs over the next three years. Again the commonwealth provided some tax incentives and some job-training grant dollars in order to help Shire grow here. [According to a press release by Pennsylvania’s Department of Community and Economic Development, Shire secured a $2.07 million funding offer from Pennsylvania’s Department of Community and Economic Development, including a $600,000 Opportunity Grant, $300,000 in customized jo- training assistance, and $1.17 million in job creation tax credits. Shire is also eligible to apply for Pennsylvania R&D tax credits since its new operation will include significant research functions.]

 

Shire established our US headquarters in 2004. In essence, what took place was a consolidation from about 14 North American sites to four. At [first], we were working out of temporary space while 220,000 square feet of space was being refurbished and connected.

 

 

At the time we committed to Pennsylvania in 2004, we had committed to create 400 new jobs in a three-year period. We exceeded that within the first 18 months, and ultimately created about 180 jobs above our commitment of 400. We have 595 jobs there now. That does not include contractors. Total on our campus now in Pennsylvania, we have 770 people, about 170 of those are contractors — not full-time employees of Shire but based on site on long-term assignments. In exchange for that, the commonwealth provided us some tax incentives and some grant funding and some job creation and job-training dollars.

 

[DECD has disclosed that Shire received $5.2 million in incentives from Pennsylvania linked to its initial expansion into Wayne.]

 

They’re not intertwined or connected in any way.