Publications

- January 1, 2021: Vol. 8, Number 1

Puerto Rico playing key role in U.S. plans for reshoring vital supply lines

by Michael Gay

Let’s agree that the past 10 months, and the collective worldwide effort to understand and defeat COVID-19, has changed everything. Within that framework, it’s clear that Puerto Rico’s 60-year legacy in the business of biosciences makes the island well positioned for what’s needed now. The desirable features of Puerto Rico are acknowledged and embraced by a growing group of real estate investors and both large pharmaceutical companies and high-growth bioscience startups looking to ramp up operations quickly. In fact, the institutional knowledge on the island and sound foundational infrastructure is helping the United States better manage public health. Puerto Rico is already hard at work on this, as the U.S. territory has been for decades.

The combination of national reshoring efforts, favorable waivers from the U.S. Department of Transportation when it comes to cargo rules, billions in federally designated reconstruction funds and a local support ecosystem that is strong and ready to serve makes it a prime time for investors to consider Puerto Rico.

Investors getting involved now anticipate a strong upside to the Puerto Rico biosciences market. That’s proven by recent business development wins and key research findings. A new report developed in collaboration between JLL Puerto Rico and Invest Puerto Rico demonstrates how this island of innovation is primed to support reshoring efforts with its infrastructure, talent base, sociopolitical stability and strong quality of life. In addition, the island’s favorable tax environment and “move-in-ready” available inventory are additional strengths. Already, 30 percent of the island’s GDP is consistently generated by the life sciences sector. What’s more, life sciences represents 50 percent of the island’s manufacturing base. In short, life sciences is what we do.

Recently, Site Selection magazine’s annual Business Climate Rankings report identified Puerto Rico’s Mayagüez FTZ #12 on the list of Top U.S. Free Trade Zones for economic impact. The island is considered a growth opportunity market globally — values are accelerating and there is room for rental and property value growth based on projected supply and demand.

CASE STUDIES

Invest Puerto Rico and the business support ecosystem on the island has assisted with several recent deals bringing real estate investment and new jobs to the island. The newest deals allow, for example, recently developed and approved gene cell therapies to be produced on a mass scale, meeting ambitious go-to-market timelines. Or, for existing patented pharmaceuticals to be deployed in new ways. A few examples:

  • miR Scientific recently signed a cooperation agreement with Puerto Rico Health Insurance Administration in the fight against prostate cancer to deploy a new cancer test.
  • Fresenius Kabi announced a $30 million expansion and upgrade of its San Germán facility, which produces a range of blood testing products.
  • Romark, in Manatí, Puerto Rico, is developing new applications of its pharmaceuticals for the potential treatment or prevention of COVID-19.

STATE OF THE MARKET

One of Puerto Rico’s other differentiators is the diversity of commercial real estate product types, from move-in-ready manufacturing sites to cGMP-certified (FDA certification verifying manufacturing practices) of retrofitted buildings that can be adapted to market needs and made available to new tenants. One growing trend involves quickly preparing commercial buildings for bioscience endeavors through the use of cleanroom pods.

The ability for an existing building (such as a former big-box retail store) to be converted into a new use with cleanroom pods is a game changer because it allows businesses to quickly adapt the building to their specific needs. It creates a “city inside a warehouse” function. In addition, there are also greenfield options that could be fully built out for long-term and large-scale traditional pharmaceutical manufacturing, or renovated for other uses.

In fact, the recent report by JLL identifies 38 sites that are ready for rapid deployment for pharmaceutical and medical device manufacturing. In addition, Puerto Rico has the required workforce and supply chain on hand to see those plans through to fruition.

Puerto Rico has global differentiators in its favor when it comes to its role in bioscience. Among them:

  • Strategic location with direct access to routes between the Americas and Europe
  • Global air transshipment hub waiver awarded by the federal Department of Transportation in May allows for the ease of transfer for passenger and cargo service, the first area nationwide to achieve this designation
  • Part of the U.S. executive order for reshoring of the medical supply chain, including personal protective equipment
  • Property differentiation through a range of facility styles and types, from automated small molecule labs to large manufacturing, packaging, supply chain management operations
  • Local talent and support systems in place that are equal to anywhere else in the world

In addition to skilled workers and cost efficiency, Puerto Rico offers organizational and economic development support, such as Invest Puerto Rico as well as favorable tax incentives through opportunity zones and Act 60, commonly known as the Puerto Rico Incentives Code. This code consolidates various tax decrees, incentives, subsidies and benefits.

INFRASTRUCTURE

What’s more, Puerto Rico continues to build on strengthening its infrastructure in all forms, from a new power grid that’s improving the reliability and affordability of electricity, to more sophisticated Internet options, including platforms to facilitate Internet of Things applications.

While Puerto Rico has faced energy rate challenges due to scant diversity in energy providers, there has been remarkable resiliency and creativity by manufacturers on the island. Many of them have partnered or developed their own microgrids, combined heat and power partnerships, and have installed large solar arrays or wind power installations and redundant systems. By prioritizing business continuity planning, their operations are often rapidly back online after a disruption. The island also has a goal to achieve 100 percent renewables by 2050. This summer, FEMA announced $9.6 billion in grants for the renewal and resiliency of the island’s energy grid.

In addition, steady and significant investments in internet and communications technology in Puerto Rico are making it an even more attractive option for tech firms and entrepreneurs, with more than 30 internet providers and three 5G networks. A few months ago, Everynet introduced its LoraWAN network ultra-long coverage base stations to create a 0G network (a low-cost, low-power wireless network designed to send or receive small messages between IoT devices) that will provide full coverage for the island. This is especially important when it comes to advanced manufacturing and taking advantage of new developments in the IofT sector.

THE ROAD AHEAD

Puerto Rico has proven itself to be a next-generation global pharmaceutical hub, a powerhouse of talent, suppliers, incentives and available sites at the ready to accommodate quick-start operations. The island’s economic development strategy has at its core a deep commitment to strengthening the national supply chain and attracting new investments and ventures to Puerto Rico. The pandemic and other challenges underscore the urgent need to adapt the plan not only to respond to the crisis, but also to explore potential market opportunities.

Longtime, everyday healthcare products such as Tylenol and other over-the-counter medicines — as well as more specialized products such as Humira, Eliquis and pacemakers — are made in Puerto Rico. But today’s Puerto Rico is also making large-scale supplies of sophisticated treatments, tests and other diagnostic tools. Investors should review Puerto Rico’s 60-year track record in this space; it appears more innovations are just getting started.

Michael Gay is chief business development officer for Invest Puerto Rico.

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