The dramatic expansion of research innovator Ventana Medical Systems in Oro Valley may be the medical technology boost that local leaders have been hoping for to catapult the Tucson region into the international arena as a biosciences powerhouse.
Ventana, a member of Swiss-based Roche Group, announced in October that in the next five years its headquarters in Oro Valley’s Innovation Park will gain 500 new jobs, as well as a capital investment of $184 million for new buildings and equipment. Ventana is the world’s leading tissue-based cancer diagnostics company.
The planned expansion translates into an economic impact of $640 million over 10 years for the region, reflecting the ripple effect of jobs, capital investment and increased productivity.
The Ventana expansion will involve more in-house research, new areas of research and possibly acquisition of other companies, according to Hany Massarany, president and CEO of Ventana. A year ago he told BizTucson, “Our plan is to continue to drive technology innovations and develop new tests that will improve patients’ lives and take the company to over $1 billion in sales by 2014.”
“It’s an amazing coup. We could become the bioscience center of the United States,” said Pima County Board of Supervisor Sharon Bronson.
“Tucson is the buzz in national circles,” said Joe Snell, president of Tucson Regional Economic Opportunities (TREO), whose job it is not only to attract new businesses but also to foster a desire among companies already here to stay and expand.
“Since Ventana was bought by Roche (in 2008), we wanted to ensure that Ventana remains in the region,” Snell said. Ventana had many options and it was his job to demonstrate that Tucson/Oro Valley was the best choice.
“This was a very competitive process. We had to demonstrate that we have the talent to fill those jobs and jobs into the future,” he said.
Neil Simon of Venture West, owner of Innovation Park, said a lot of credit goes to the University of Arizona. “The University is an extremely important part in providing the quality employees for this type of operation,” Simon said. Those employees bring the talent needed to foster the development of a bioscience cluster creation. “The expansion is wonderful for Innovation Park and it’s good for Tucson,” he said. “This has put us on the map.
Securing the Roche expansion in Oro Valley took some nifty negotiations – nearly 11 months of them, Snell said. TREO, the Town of Oro Valley, Pima County and the State of Arizona worked undercover as a team to aggressively land the deal. The team came up with a multi-million dollar package of performance-based incentives.
This short-term investment is expected to yield long-term gains. During the initial 10 years, the capital improvements by Ventana are expected to net nearly $3.5 million in new revenue to the county. After the first decade, Ventana is expected to be paying at least $1.5 million annually in taxes – and into the foreseeable future.
Ventana, which now employees more than 900 local employees, was started and incorporated 25 years ago in the garage of UA professor and pathologist Thomas Grogan. He developed a way to automate the processing of biopsies, resulting in faster and more accurate diagnoses.
In 2001 the company moved to three buildings in Oro Valley. When Roche paid $3.1 billion for Ventana two years ago, its innovative diagnostic systems were in use in 55 countries. Today the company occupies seven buildings providing research and administration facilities across some 345,000 square feet of floor space near the western face of the Santa Catalina Mountains.
In attracting Ventana’s expansion, the State of Arizona and Oro Valley also provided economic development incentives, Pima County Administrator Charles H. Huckelberry told the supervisors in a memo. The state offered an incentives contribution of $3 million paid from federal stimulus funds. Oro Valley offered a rebate of infrastructure impact fees that is subject to company construction performance and is capped at $1 million.
Supervisor Bronson said, “The county had the most skin in the game.” That included $8.2 million over the 10-year life of the agreement. “We wouldn’t have done that if there was not a great payback.”
The agreement includes incentives for over-performance – that is if Ventana exceeds the 500 promised jobs. It also includes a provision that if the total economic incentive of $8.2 million in property tax reduction is not achieved within 10 years, the agreement can be extended for two additional years. The tax relief from the county would be capped at $10 million.
Meanwhile, taxing jurisdictions such as Amphitheater Public Schools, Pima County Joint Technical Education District, Golder Ranch Fire District and Pima Community College would receive payment directly from the company, in lieu of taxes.
Supervisor Ann Day, whose district includes Oro Valley, said, “A prestigious bioscience firm like Ventana Medical Systems is exactly the kind of company we want to see expanding at beautiful Innovation Park. It has tremendous significance for Oro Valley, Pima County and all of Arizona.”
The expansion will provide a huge boost to the job market for all of Pima County. Ventana’s staffing needs range from high-tech research and development, engineering and chemistry to qualified white-collar office and sales positions. With the quality of the Oro Valley area public schools, Pima College and the UA, the talent is now and will continue to be readily available, said Oro Valley Mayor Satish Hiremath.
He also pointed out that the construction industry is ready and able to help Roche with any needed building development. Oro Valley can guarantee a faster turnaround. Where in most parts of the country, construction might take 18 to 24 months, Oro Valley contractors can get the job done in nine to 12 months, Hiremath said.
“It’s my job to get developers to take a look at Oro Valley,” the mayor said. While Oro Valley once had a reputation of not being expeditious in getting construction projects permitted and processed, that has changed. “If there’s going to be a hold up in a project, it would not be Oro Valley that’s the obstacle,” he said. “We cannot make good companies jump through too many hoops. If we make it difficult, they could pick up their ball and play someplace else.”
Hiremath is optimistic that Ventana’s choosing Oro Valley could attract other biosciences companies. He said, “I like their clean businesses and the Tangerine Road corridor is ready for development.” He also anticipates this could lead to small business growth as well – such as restaurants and dry cleaners. That’s good for the town.
Hiremath explained that Oro Valley has no property tax, so a large portion of operating revenues comes from sales tax. Some 28 percent of the town’s revenue comes from state-shared sales tax. Another 22 percent comes from local sales tax. The remaining revenue is derived from various sources including construction permits and hotel bed taxes. With only 14 to 16 percent of the town’s land remaining available for development, sales taxes will continue to grow in importance to the town.
Gov. Janet Brewer said Ventana is an asset to Arizona, both from health care and economic development perspectives. “Modern medical research is dedicated to improving the lives of all patients who have cancer, and the people of Ventana continue to discover, develop and deliver medical diagnostic systems that are shaping the future of health care – and it’s happening right here in Arizona,” Brewer said.
Ventana is dedicated to improving the lives of all patients with cancer by discovering, developing and delivering medical diagnosis systems and slide-based cancer tests that are shaping the future of health care, Brewer added.
Ventana is innovating tissue diagnostics for labs and hospitals worldwide, offering a diverse menu of solutions for patient care. As slide-based tissue diagnostics advance, the opportunity for patients to lead longer, healthier lives improves.
Not only are things bright for Ventana but also for sanofi-aventis, a leading global pharmaceutical company with ties to the University of Arizona and Oro Valley Hospital. All are helping to carry the area’s health care reputation to faraway places.
Other facets attracting increased focus on Tucson as a hub for bioscience research are the Critical Path Institute, a group dedicated to help shorten the critical path for developing new medical products, and the UA Bio5 Institute.
“On behalf of everyone at Ventana and Roche, I would like to thank the state and local supporters for helping our company grow and prosper here, and for their commitment to developing Southern Arizona into one of the premiere bioscience regions in the United States,” said Ventana’s Massarany.
So, if the Tucson Region is to continue to grow and prosper in the bioscience field, where do we go from here?
“We’ve got to feel good about Ventana – and the expansion at Sargent Controls & Aerospace in Marana – but we can’t let up on the gas pedal,” Snell said. “Perceptions are important, and with good things happening in Tucson, perceptions nationally and internationally of this area are positive.
“So now is the time to go out and win. It’s time to go out and get it done,” Snell added. “We are nobody’s little brother.”