The pharmaceutical segment generated $23.2 billion revenue in 2006, which would make it one of the top pharmaceutical companies in the world, says Mert Livingstone, vice president for global pharmaceutical R&D operations.

Managing the pharmaceutical R&D arm alone is a monumental task, given its 6.1 million sf of space housing 11,000 employees in 30 locations. Johnson & Johnson Pharmaceutical Research & Development LLC (J&JPRD) uses three sets of data to shape strategic facilities decisions for pharmaceutical R&D—business forecasts, portfolio analysis, and total cost of ownership—and other branches of the company are starting to follow suit. It is an approach endorsed by high-level corporate executives.

Capital efficient profitable growth is the focus of the global pharmaceutical R&D operations group, says Livingstone. “We don’t typically build in over-capacity, and nothing is gold-plated. This helps guide our program and design.”

Know Your Business and Your Buildings

Asset managers can’t know their facilities needs unless they fully understand the company’s core business. Business forecasts help to predict facilities investments.

“When evaluating facility investments, we ask questions like, ‘What will the pipeline look like over the next five years?’” says Paul Gioioso, director of global strategic facilities planning. “Those of us in the pharma industry know that is a difficult question to answer. We look at things like compound attrition, compound progression, licensing, and acquisition activities, and make assumptions for discovery productivity.”

For example, J&JPRD plans to break ground in January 2008 on a 90,000-sf, $201-million active pharmaceutical ingredient (API) facility in Geel, Belgium, to replace an existing aging facility. The new facility will support clinical supply production, so the company needed to determine what the clinical requirements would be in the next five years and beyond.

“We were able to take initial projections, validate them, and reduce the proposal for this investment by about $10 million,” says Gioioso. “That’s only the first-cost savings; a smaller facility also will incur fewer operating expenses over its lifetime.  It’s a perfect example of ‘capital efficient profitable growth.’”

In addition to understanding the business, it is imperative to have an accurate, up-to-date inventory of the company’s assets. That’s where portfolio analysis comes in. It provides an in-depth analysis of not only what the company owns, but how is it used, leading to an understanding of how the company can increase the utilization of assets to meet ongoing business requirements.

Johnson & Johnson R&D in the pharma segment goes beyond the standard CAFM application to gather facilities data on three levels. Level 1 takes the broadest view and provides regional/global information on gross square footage and total utilization. Level 2 looks at building utilization and space by category on a building or site scale. For example, it might show the mix of lab, office, and specialty space, and how it is used. Level 3 provides details of the space literally at floor level, by cataloging, among other details, room-by-room capacity and occupancy by space type.

This analysis proved very beneficial on a current project. The company just broke ground on a $180-million, 270,000-gsf discovery facility project in Eastern Pennsylvania that will unite its East Coast Discovery and Early Development operations into one site. Somewhere between the Level 2 and Level 3 analysis of East coast assets, facilities managers discovered that they had some excess lab capacity. That allowed them to take 50 scientists who were going to be moved into the new Pennsylvania discovery facility and relocate them to a nearby existing New Jersey lab, thus optimizing the asset. The cascading effect was that the new building, now housing 50 fewer researchers, could be reduced in size by approximately $10 million. Again, that is only the upfront cost savings. In the long run, a smaller building will be less costly to operate.

“This investment proposal was moving through the sponsorship process very fast, and we were able to quickly assess and validate whether those scientists could move to New Jersey,” says Gioioso. “The speed at which we were able to do that was enabled by the data we had amassed through this global portfolio database.”

Clearly, the decision was made not just on a financial basis but with consideration for the functional adjacencies of the business and the scientists themselves.

“We did not just randomly select 50 scientists,” says Livingstone. “We identified a specific slice of the organization that shared adjacency requirements with the site they moved to. We believe that this strategic move will enhance collaboration for these scientists and contribute to the success of that group.”

The third set of data looks at total cost of ownership, which means it takes a look at how a building will be used. For example, the initial plans for the discovery center in Pennsylvania assumed that 90 percent of the fume hoods would be in use at any given time. In fact, according to benchmarking data from Europe and West coast labs, the actual fume hood diversity is closer to 60 or 70 percent. That decision alone reduced the air-handling and electrical distribution systems enough to cut $3 million from the construction cost, and to reduce operating costs by $170,000 per year.

Company-wide Benefits

Applying these three principles reduced the discovery facility in Pennsylvania by a total of 60,000 sf and avoided up-front capital of about $23 million. The API facility in Belgium was reduced by more than 20,000 sf. Facility throughput capability was maintained, while equipment was streamlined to narrow the breadth of equipment types, reducing maintenance costs for spare parts and training. Those decisions combined also provided significant cost savings.

The resulting facility features a more sustainable and environmentally-conscience design, which lowers operating costs and may lead to a higher LEED rating.

These same methods are being incorporated into the manufacturing side of the organization, mostly in the form of upgraded portfolio management.

“We’ve had a lot of exchanges with the worldwide engineering organization and the worldwide operations group, which run the manufacturing facilities, about their portfolios,” says Livingstone. “Their database of manufacturing sites is at Level 1 in many cases. They are seeing the value of moving to Level 2, and possibly to Level 3. Level 3 requires a commitment to maintaining and updating the information, or it will be stale in a year.”

All three key aspects of analysis were beneficial in the planning stages around portfolio utilization, business forecasts, and life cycle costs, with a different set of stakeholders involved in each, says Gioioso. Stakeholder buy-in early in the process is critical to quantify and assess the impact on these programs moving forward, he says.

By Lisa Wesel