Astellas Pharma U.S., the U.S. arm of Tokyo-based Astellas Pharma Inc., has two major construction projects under way in Illinois and California as it consolidates some operations and prepares for future growth.

Astellas Pharma is about at the construction midpoint of its new corporate headquarters for the Americas in Glenview, Ill., a US$150-million project that will consolidate some of the company’s Illinois operations. It will also eventually create 150 new jobs, bringing the total headcount at the headquarters to about 1,400. Astellas expects to complete construction in the spring of 2012. The company’s current headquarters is in Deerfield, Ill.

“We expect to move in next spring, and everything is on track for that,” says Jenny Keeney, an Astellas Pharma spokesperson.

The company is also growing via acquisitions. It acquired OSI Pharmaceuticals in 2010.

Kenney says the company will maintain some of its current research facilities in Skokie, Ill. The new headquarters campus will consist of two six-story buildings totaling 425,000 sq. ft. (39,482 sq. m.). The company says the buildings and site will emphasize sustainability, and the complex is designed to achieve LEED Gold certification. The site has space for a possible future third building, which would expand the complex to 600,000 sq. ft. (55,740 sq. m.) among the three buildings.

The State of Illinois offered Astellas Pharma a $4-million incentive package, administered by the Department of Commerce and Economic Opportunity (DCEO). It consists of Economic Development for a Growing Economy (EDGE) corporate income tax credits, which are based on job creation, and Employer Training Investment Program (ETIP) job training.

Astellas Pharma Inc. was formed in 2005 through the merger of two of Japan’s largest pharmaceutical manufacturers. In the U.S., Astellas markets products in the areas of anti-infectives, cardiology, dermatology, neuroscience, transplant, and urology.

Acquired, But Staying Put

Astellas Pharma acquired California biotech firm Agensys in 2007. A new research and manufacturing facility is planned for the Santa Monica-based company, which specializes in oncology products. Agensys, which was founded by an oncologist at UCLA in 2007, currently employs 211.

Astellas is investing $90 million in equipment and facilities for the 160,000-sq.-ft. (14,864-sq.-m.) project, according to Keeney. The building will be ready for occupancy by 2013, and employment at the site will reach 300 by 2015, she says.

The transaction included the purchase of the existing ground lease from The Lionstone Group, as well as the extension of the ground lease and the execution of a development agreement with the City of Santa Monica to expand the site’s total allowable square footage. The two buildings currently sitting on the site will be demolished.

Agensys was represented by global tenant advisory firm Studley.

“Clearly, Agensys has a significant presence in Santa Monica and is a highly sought after tenant,” said Matthew Brainard, corporate managing director in Studley’s Los Angeles office. “We proactively and creatively pursued all viable opportunities, including evaluating the entire Westside and South Bay markets, before recommitting to the City of Santa Monica.”

Studley also negotiated interim expansion space to accommodate Agensys’ growth prior to the project’s completion.

The new building, designed by HLW, incorporates sustainable architecture and will be LEED certified. Features include a full commissary, open green area, manufacturing facility, laboratories, clean rooms and corporate offices.

“It’s been a challenge to find adequate space in Santa Monica to accommodate this new facility which is essential for our continued growth,” said Paul Kanan, executive vice president, finance and operations, for Agensys. “We were founded in Santa Monica 14 years ago, and it is great to be able to stay here and build the special facilities we need for our cancer research and manufacturing of antibody products.”

Latin America is poised to grow, with Brazil — the 9th largest economy in the world — leading the way. After the economic downturn, Latin America seems to be recovering faster than more developed countries. The region’s GDP grew more than 5 percent on average in the last year, quite above the rate of most mature economies.

Favored by exchange-rate devaluations, which corroborated to improve the commercial balance, the largest countries have achieved economic stability and seem prepared to grow at a sustained pace. Important capital flows to the region also support the idea that on a global scale, good results in the region became more than ever fundamental. Companies and funds are eager to invest in Latin America.

The healthcare sector mirrors the same tendency. What are the opportunities for pharmaceutical companies in this context? Companies are opening new production sites in Brazil and Mexico to transform these countries into an export platform for the whole region. Mergers and acquisitions have also gained importance as an alternative to organic growth strategies to expand portfolios and to enter high-potential markets in the short term.

Other factors, too, have favored the shift of investments toward the region. The emergence of middle classes and government health plans, such as PAC in Brazil, Remedial in Argentina, Saguaro Popular in Mexico and Ague in Chile, among others, have improved access to health services in these countries, especially for lower classes, increasing significantly the potential of healthcare markets in the region.

Furthermore, the aging phenomena in Latin America has caused an increase in the prevalence of chronic conditions, creating new growth opportunities in age- and disease-related areas. Improved regulatory and intellectual property protection in some of the countries has also contributed to greater innovation, competition and increased access to safe medication, encouraging multinational companies to expand their regional footprints.

What’s on Pharmaceutical Companies’ Agenda?

The healthcare sector in Latin America has expanded significantly, and above all markets, the pharmaceutical industry still contributes the largest share of total revenues to GDPs. What has been changing in this industry, and where would be the best growth opportunities?

Big pharmaceutical companies have been moving from a blockbuster drug model to a specialty business model, where companies are coming from a fragmented approach focused on multiple diseases to therapeutic niches. By focusing on specific areas, companies have been able to develop expertise, thus promoting brand recognition and saving money by allowing the consolidation of sales teams and R&D.

Moreover, the combination of expiring patents and a lack of novel drug lines is highlighting the importance of research into cutting-edge therapeutics. Although pipelines are less strong than they used to be, investment in R&D continues to be a fundamental driver of companies’ growth. In Latin America, research productivity is developing at a fast pace due to higher levels of public and private investment.

In the wake of blockbuster drugs going off patent, large pharmaceutical companies are turning to biologics and vaccines for a steady revenue stream. Innovation in the vaccines industry is increasing rapidly to target diseases that were previously not considered attractive. Now companies are developing innovative vaccines to treat such lifestyle disorders as nicotine addiction, for example.

Another area of considerable growth potential is oncology. Cancer-related drugs constitute half of the current biotech pipeline, with oral oncology drugs making up 35 percent of the oncology pipeline. Such drugs offer targeted therapy for patients with no treatment options, increasing patients’ convenience, while reducing healthcare costs and increasing compliance to therapy and eventually improving the quality of life.

The industry has also been looking towards synergies to lessen overall R&D costs, which are continuing to increase. Clinical research outsourcing is an opportunity to optimize resources, and the region is competing with Asia to receive trials. Latin America is seen as a good environment to carry out clinical trials for many reasons. Lower costs (30 percent of the cost of clinical trials carried out in Europe and the U.S.) and a good supply of qualified professionals are among the most important.

Generics seem to constitute one of the biggest drivers of revenues in the pharmaceutical sector, especially in countries where the segment is not that developed as it is in Brazil, Mexico and Argentina, for example.

Another important trend is the greater incorporation of biotech assets and technology portfolio diversification. New therapeutic areas, such as antibody therapies, are prompting pharma companies to develop partnerships and licensing agreements aimed at maximizing their opportunities. This could allow for synergies such as broader sales force efficiency, larger contracts and increased product presence.

The Dawn of the ‘Power Patient’

Last but not least, healthcare companies have been migrating to personalized healthcare solutions, where diagnostics and drug development work provide patients more personalized medicine. Biomolecular tests can identify the phenotype of patients, allowing physicians to prescribe personal, unique dosages to their patients, for example.

The main challenge of the industry is to deal with budget constraints in the region. These increase the need to demonstrate the efficacy of new drugs to governments that may constitute a significant part of their revenues.

Competition is increasing, and companies have to be prepared to innovate not only on the product side, but also by developing sophisticated distribution systems, such as dispensing kiosks and mail order. Mail-order firms have gained high usage among large employers due to cost savings and convenience associated with it. Additionally, the emergence of drug dispensing kiosks, like ScriptCenter in the U.S, is allowing patients to pick up pre-packaged refills by swiping a card for identification and payment purposes.

Patient centricity is fundamental to pharma firms succeeding in the future. Patients have become kings and queens. The power-patient generation is arising. Patient programs and customer services are likely to gain high importance as a competitive advantage. Similarly, price wars due to the entrance of generics in new therapeutic classes will reinforce the need to differentiate to survive in Latin America and worldwide.

Luisa Woge is Senior Consultant in Frost & Sullivan’s Latin American Healthcare Practice. She focuses on monitoring and analyzing emerging trends, technologies and market behavior in the pharmaceutical, clinical diagnostics and medical devices markets in Latin America.