Puerto Rico pharma chiefs: Investors prefer quality, sustainability over tax breaks
Supply chain also underscored at Puerto Rico Manufacturers Association convention
SAN JUAN — Puerto Rico should stop giving so much importance to the island’s tax advantages to attract investors and instead focus more on sustainability and quality at a time when the supply chain factor also increases in importance.
That is the consensus of industry experts who attended the Puerto Rico Manufacturers Association Convention over the weekend. Newly appointed Islandwide President Esther Cintrón said the supply chain phase, consisting of the network of all the individuals, resources and technology involved in the creation and sale of a product and the delivery from the supplier to the manufacturer and to the end-user, has gained enormous importance as companies in Puerto Rico are more involved in taking care of all the stages of a product themselves.
“Supply chain is now being seen as the integrating element for growth,” she added.
The change is more prevalent in the pharmaceutical sector, which is now moving toward not only manufacturing medications, but also their research and development.
During the convention, it was clear that a new pharmaceutical model is emerging in Puerto Rico as represented by Romark and Isla Pharmaceuticals, which have found a niche for growth in research and development rather than manufacturing. These companies are more focused on quality rather than on tax incentives when it comes to developing products in Puerto Rico.
Isla Pharmaceuticals, whose president is David Foster, is a small, island-based pharmaceutical that is focused on finding medication and cures for mosquito-borne illnesses such as dengue and yellow fever.
“With all these viruses. How do you protect yourself? Do you develop vaccines or antiviral medications,” he said, adding that his firm’s secret is to look for ways in which to tackle and do things differently.
Meanwhile, Mark Ayers, the CEO of Romark, a pharmaceutical company with operations in Puerto Rico, the United States, Europe and Australia, said his firm is conducting clinical research and studies in Puerto Rico, something most pharmaceuticals carry out abroad.
Romark purchased Schering Plough’s plant in Manatí in 2015 and a laboratory in Dorado last year. It expects the approval of a new product in 2020 and is slated to make a further $40 million investment.
Regarding the reasons Romark is conducting research locally, Ayers not only mentioned “exceptional talent” on the island, but also access to global markets. He said tax exemptions under Act 73 were also a factor, as the government offered Romark an $8 million credit to rescue the shuttered Manatí facility.
“We want to do R&D here in Puerto Rico,” he added.
For his part, Franco Negrón, president of Commercial Operations Pharma Services Group, at Thermo Fischer Scientific, described the criteria for site selection by investors. He said quality, performance, regulatory compliance and expertise are the top elements investors are looking for.
“When people come to us, they ask for expertise. We have that and we need to explain what our expertise is,” he said.
However, he noted that investor interest has moved and is giving more importance to the factor of sustainability.
“The stock evaluation has shifted dramatically on how sustainable we are. Investors care about sustainability. If you are not committed to sustainability, investors will question the projections of your company,” he warned.
What about tax advantages? Negrón said most companies have good tax experts that will always find ways to reduce a firm’s tax burden. For that reason, tax credits and incentives should not be the only thing Puerto Rico must focus on offering.
“That cannot be the only thing. Every company has tax experts; they will figure it out. If all the other boxes are there, a good tax person will figure out how to maximize tax advantage. If you have a quality issue, who cares about taxes? We have to stop putting emphasis on tax advantage rather than excellence on everything else,” he stressed.