Week of May 19, 2003
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Pfizer's Post-Merger Shuffle: NYC Adding 2,000 Jobsby JACK LYNE, Site Selection Executive Editor of Interactive Publishing
in $1B Investment
NEW YORK "We at Pfizer are here today with some good medicine: a shot in the arm for one of the greatest cities in the world," Pfizer President and Chief Executive Officer Henry McKinnell said in announcing the drug-maker's major New York City expansion.
The announcement came less than a month after Pfizer finalized its $57-billion takeover of rival Pharmacia.
Pfizer's first post-merger month has been so inordinately active that it's seemed fueled by a potent cocktail of Viagra and Lipitor - two of the company's most popular products: In some places, Pfizer's appreciably enlarging its presence; in others, it's substantially reducing headcount.
The growth/contraction combo, though, is certainly no surprise. The Pharmacia acquisition created a corporate giant - the world's third-largest in terms of market capitalization - fusing Pfizer's 98,000 employees with Pharmacia's 43,000.
That post-merger leviathan, though, is riddled with redundancies in its facilities, employees and equipment. McKinnell wants to squeeze out a whopping $2.5 billion in savings by 2005. Winners and losers in jobs and operations have begun to emerge from the savings shakeout. In addition to New York, the major winners thus far look to be Connecticut, Michigan and New Jersey. And the economic stakes here are high: Pfizer workers reportedly make an average of $87,000 a year.
Firm numbers for how many net jobs the company is creating, though, are almost impossible to pin down at this point. Pfizer isn't venturing any solid figures. Many new jobs in places like New York actually will be transfers, officials say.
Here, though, is a thumbnail look at some of the major projects that are beginning to surface.
NYC: $400-Million Acquisition of 685
"Today's announcement marks another important milestone in our 154 years of operations in New York City," said McKinnell, flanked at the announcement by Mayor Michael Bloomberg (R) and Gov. George Pataki (R). "During a time of economic uncertainty, as New York City continues to recover from the aftermath of Sept. 11, we are pleased to add good jobs in New York and launch a capital investment program that will bring substantial returns to both the city and state."
Some $400 million of Pfizer's $1-billion investment will go into purchasing the 31-story midtown office tower at 685 Third Ave. at East 43rd St., McKinnell said. Pfizer already leases space in the 635,000-sq.-ft. (57,150-sq.-m.) building. Following renovation, the company will occupy more than half of 685 Third Ave., Pfizer officials said. The buy should close in June, they noted.
Owning 685 Third Ave. will allow Pfizer to bulk up its headquarters cluster. The company's operations base sits nearby, at 235 East 42nd St., where Pfizer has roughly 4,500 workers. Transfers will fill most of the 1,000 New York jobs added over the next year, McKinnell indicated. Those positions will add some $150 million to Pfizer's payroll, said Bloomberg, who called the announcement "a real step forward in the city's economic recovery."
The other $600 million in capital investment will go into renovating its owned facilities in Manhattan, company officials said.
1,000 More Jobs During 2004-09Pfizer's announcement also ensures the future of the company's 1,000-employee Brooklyn plant, McKinnell noted. And the company, he said, is planning to add at least 1,000 additional New York jobs during 2004-09.
Long-term job-creation numbers could be even higher - at least if Pfizer wants to qualify for the $46.1 million in incentives that the New York Economic Development Corp. (www.newyorkbiz.com) is offering. The company, though, would have to create 4,300 new jobs over the next 15 years to collect that package. Pfizer is receiving another $1.4 million in grants from the Empire State Development Corp. (www.empire.state.ny.us).
McKinnell praised city and state officials for their project support.
"The future success of Pfizer and our industry depends on public policies that support high-risk and long-term pharmaceutical research and development and provide fair reimbursement for innovative medical products," he said. "I salute the efforts of New York's leaders to work in partnership with Pfizer. We believe that our company and New York can continue to be global leaders in the exciting quest for future cures."
Pfizer's 2,000-employee expansion comes as a welcome curative sign for New York's economy. The city has been hemorrhaging jobs of late, with unemployment rising to 8.8 percent in February, according to government reports. New York lost 226,100 jobs from December 2000 through the end of February 2003, the city controller's office reported.
N.J.: 1,300 Jobs Headed to Morris PlainsThe early stages of Pfizer's post-merger era have also been kind to New Jersey - Pharmacia's home state.
Pfizer has announced that it will add 1,300 jobs during 2004-08 at the headquarters of its Consumer Healthcare business in Morris Plains, N.J. The drug-maker says it's planning to add up to 900,000 sq. ft. (81,000 sq. m.) of new space at the 175-acre (70-hectare) Consumer Healthcare campus.
Some 3,700 employees now work at the Morris Plains complex, which includes 1.3 million sq. ft. (117,000 sq. m.) of office and R&D space. Housing up to 5,000 workers there will almost equal Morris Plains' entire population (roughly 5,300 people).
"Expansion of our operations here in Morris Plains will enable us to meet our future growth needs with minimal disruption to our business and colleagues," Consumer Healthcare President Marc Robinson said in explaining Pfizer's decision. "The site allows our R&D and business teams to operate seamlessly from one location."
Another New Jersey location that Pfizer will continue to occupy is Pharmacia's one-time world headquarters in Peapack.
Pfizer's other New Jersey decisions are a mixed bag for the Garden State. The company, for example, is expanding its regional sales operation in Parsippany, but it's closing the regional sales office that Pharmacia had in Princeton.
Former AT&T HQ Hitting the MarketPfizer, however, definitely won't occupy one of Pharmacia's biggest buildings in New Jersey: AT&T's 1.3-million-sq.-ft. (117,000-sq.-m.) former headquarters in Basking Ridge.
The seven-building Basking Ridge complex has an odd recent history. Pharmacia bought AT&T's former headquarters only a few weeks before Pfizer's buyout. Pharmacia said at the time that it intended to use the Basking Ridge buildings as its new headquarters. Many analysts, though, think the buy was largely an effort to up the acquisition price, which was 2002's largest in the U.S.
Whatever the strategy, Pharmacia never moved any employees in. And AT&T moved out, relocating its employees late last year to another company-owned building in Bedminster, N.J. Since then, the Basking Ridge complex has stood empty.
Now, Pfizer has announced that it's putting the onetime AT&T buildings on the market. The only part of the Basking Ridge operation that it's keeping open - at least temporarily - is the North Maple Inn, a 171-unit hotel and conference center.
Pfizer may be sensing trouble in unloading the sizable operation, which includes another 1.3 million sq. ft. in an underground parking garage. The drug-maker is currently in discussions with the state on cooperative strategies for using AT&T's one-time headquarters.
Also headed for market is Pharmacia's 250,000-sq.-ft. (22,500-sq.-m.) facility in Bedminster, which employs 750 workers. Pfizer has announced that it will sublease the building - the same strategy that Pharmacia announced before its buyout. In addition, the company will also sublease the 350-employee former Pfizer operation in Bedminster.
R&D HQ Staying in ConnecticutIn contrast to New York and New Jersey, retention spells relief for Connecticut and Michigan in Pfizer's post-merger epoch.
Connecticut's Pfizer story is simpler. That tale largely hangs on the company's 6,000-employee Global Research and Development Headquarters in New London, Conn. - considered the crown jewel of Pfizer's real estate portfolio. The big story for Connecticut is Pfizer's announcement that the New London headquarters will continue, remaining the centerpiece of the world's largest privately funded biomedical research organization.
Pfizer only last year opened a new $294-million R&D medical research headquarters in New London. The three six-story office buildings totaling 750,000 sq. ft. (67,500 sq. m.) were built with $100 million in state assistance.
The Constitution State, however, is feeling some of Pfizer's belt-tightening pinch. Company officials have disclosed that Pfizer is closing its veterinary and inflammatory disease research programs in Groton, Conn., which together employ some 500 workers.
Michigan Likely to Maintain Biggest Pfizer ClusterThose Connecticut positions are headed to Michigan, where Pfizer's most complex post-merger scenario is playing out. The bottom-line result for Michigan, though, seems largely positive at this point. The Wolverine State seems likely to maintain its current total of 10,000 Pfizer jobs, all former Pharmacia employees.
Michigan's cluster is Pfizer's largest employee concentration in a single state. Four campuses in Kalamazoo County account for 6,500 Michigan workers, while Ann Arbor is home to another 3,200, and Holland hosts 400. But the job mix at some sites will now shift.
Pfizer anticipates "maintaining a similar or higher employee base" in Ann Arbor by the end of 2003, a company spokesperson said. Pfizer has announced that it will boost drug R&D in Ann Arbor, where the cholesterol-busting drug Lipitor was first defined and produced. Some of Ann Arbor's cancer drug programs, though, will be transferred, Pfizer announced.
An undisclosed number of R&D jobs will also be transferred from Kalamazoo County. On the other hand, Kalamazoo will become one of Pfizer's two principal sites for veterinary medicine R&D. In addition, the company will consolidate enough manufacturing in the county that the county will rank as Pfizer's largest production site in the world. Kalamazoo County operations will also perform safety testing on virtually every drug that Pfizer takes to market.
Holland, on the other hand, will keep its 300 manufacturing jobs. But Pfizer will close down the city's R&D operations.
Pfizer's hyperactive global reshuffle is designed "to rapidly integrate the operations of Pharmacia," McKinnell said. "The goal is to enhance our ability to discover new medicines." Simultaneously, that goal is prodding many communities to discover new economic realities.
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