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Life Sciences Outlook 2013:  Biologic Biosimilar Demand Transforms Real Estate Needs

Life sciences companies are responding to three seismic industry shifts by increasing operational excellence

CHICAGO, Dec. 13, 2012 – Demand for biologic biosimilar pharmaceuticals is expected to soar in 2013 as a significant number of patents expire for brand-name biologic drugs, and a multi-billion dollar marketplace opens for biosimilar products. In turn, real estate portfolios must transform to support increased biologic drug production, marketing and sales. This fundamental shift comes at a time when companies are making adjustments throughout their businesses to become more cost-conscious, and to pursue operational excellence. The most urgent need for innovation may come in the manufacturing process and its facilities: biologics are produced—grown, actually— in laboratory environments that vary significantly from traditional pharmaceutical manufacturing facilities. 

Jones Lang LaSalle has identified three major industry trends expected to shape the industry in 2013 and the role of facilities, real estate and laboratory services in the corporate response:

  1. Optimizing the Real Estate Platform and its Data
  2. Increased Outsourcing, Expansion into Highly Technical Areas
  3. Seismic R&D Shift to the Middle Market

Trend One:  Optimizing the Real Estate Platform and its Data
“Ongoing M&A activity in the life sciences sectors has led to real estate portfolios that are not fully optimized for current operations and goals,” explains Richard McBlaine, International Director, Jones Lang LaSalle. “Achieving a portfolio that offers the right facilities, in the right sizes, in the right places, will be a major focus for continuous improvement in 2013.”

Companies, especially those recently involved in a merger or acquisition, are critically assessing research, sales and manufacturing operations to see if there’s too much space, too little, and if it’s in the right place. The lag time between an acquisition and a full realignment of the real estate as a business can take years. But the potential is great; while some facilities may be divested, others can be repurposed to take advantage of a local skilled labor force, to increase productivity or to improve line management, quality assurance and operations.

Location strategy is key. New sources of revenue in the Asia Pacific region show significant potential, but market demand has outpaced many life sciences companies’ abilities to fully build out their presence in new markets. Companies need to move quickly to establish the in-country facilities footprints that will enable the expansion of sales, from manufacturing facilities to mobile-friendly workplaces for 21st century sales teams.

But before a company can move toward an optimized portfolio, it must be able to fully understand the value, size and shape of its real estate. It’s never been more important to standardize and oversee facilities management data, to respond in real-time to market demand and other business drivers. New technology platforms are bringing data and best practices from around the globe together onto real-time dashboards, supporting increasingly sophisticated analysis of both present and future facilities. For example, it is much easier to calculate return on investment in the real estate portfolio when all data has been centralized into a single system. This newly centralized data is being leveraged to standardize drug production oversight, increase transparency, reduce energy usage and cost, achieve standardization and leverage volume purchasing power. Significant investment in technology platforms to access and analyze local, regional and global data trends has already occurred, and is expected to increase significantly in 2013.

Trend Two: Increased Outsourcing, Expansion into Highly Technical Areas
Outsourcing is increasing in life sciences industries, with many companies entering into outsourced facility management contracts for the first time. This focus is being driven by the role that outsourcing can play in optimizing the facilities portfolio, many times moving the needle to streamline a corporation’s FTE count and boost operational efficiency. By outsourcing non-core functions, employees are given the luxury of focusing on their core task-at-hand—whether that is science, strategy, sales or otherwise—and not on functions where a service provider can offer industry-leading expertise and technology platforms.

Outsourced providers have become more sophisticated in their technology platforms and service offerings, and are frequently moving into areas beyond traditional services like facilities management, move management and construction to activities once handled almost exclusively in-house, including equipment cleaning, facilities-related compliance documentation, laboratory operations and maintenance of equipment. As more medicines production moves from traditional factories and into more lab-like facilities, highly regulated practices are becoming a bigger part of facilities management.

“We are now managing an increasing number of sites inside the ‘yellow line areas,’ where the operations must comply with GMP and other highly technical operational regulations,” explains Bill Barrett, JLL executive managing director and the leader of the firm’s life sciences business.

Trend Three: Seismic R&D Shift to the Middle Market
M&A designed to fuel future sales will undoubtedly continue as larger companies purchase middle market companies to access promising development pipelines approaching later-phase clinical trials. Larger companies are almost exclusively focusing in-house R&D resources on drugs with significant market potential, creating the opportunity for a rising number of middle market companies to research and develop products in the $100 to $200 million range.

Beyond R&D, it is widely anticipated that there will be an expansion in the biologic biosimilars production marketplace. It is expected to grow to a multi-billion dollar market in 2013 from its 2012 market size of less than half a billion US dollars. As larger companies expand into this sector, demand will call for fewer traditional factories and more production laboratories. This shift will also require more sophisticated lab services, higher security, regulatory oversight and technically trained personnel. Meanwhile, traditional multinational pharmaceutical companies will continue to right-size their total real estate assets—particularly in North America.

Looking Ahead
These trends collectively suggest that facilities may become more specialized, smaller and geographically dispersed. With the impact of blockbuster drugs expected to represent significantly less market impact in the coming years, the biopharmaceutical industry has the opportunity to achieve excellence in its operations through real estate strategies. Looking closely at workplace and facility needs will continue to gain importance and the industry becomes increasingly focused on efficient operations and overall productivity.

Jones Lang LaSalle offers a team of real estate and facility management experts dedicated to helping life sciences companies optimize and manage their real estate portfolios. The firm provides a comprehensive range of facilities management services to the life sciences community covering 70 million square feet of research, manufacturing and commercial space. JLL’s industry leading full-service platform includes: integrated facilities management, engineering and operations, energy and sustainability, transaction advisory services, lease administration, project management and a new platform for integrating laboratory services, Labwell.

A leader in the real estate outsourcing field, Jones Lang LaSalle’s Corporate Solutions business helps corporations improve productivity in the cost, efficiency and performance of their national, regional or global real estate portfolios by creating outsourcing partnerships to manage and execute a range of corporate real estate services. This service delivery capability helps corporations improve business performance, particularly as companies turn to the outsourcing of their real estate activity as a way to manage expenses and enhance profitability.

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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit