Sector News

AstraZeneca admits its delay-ridden HQ project will now cost almost $1B

June 14, 2019
Life sciences

AstraZeneca has taken a lot of heat for its massive new headquarters and R&D facility in Cambridge, U.K., which has been beset by everything from cost overruns to a four-year completion delay. So it’s no wonder the drugmaker buried the latest details about the project on page 27 of its 244-page annual report.

AstraZeneca originally planned to spend £330 million on the new building and to start shifting employees there in 2016. Now, the cost has zoomed to £750 million, which translates to roughly $952 million, according to the annual report (PDF).

As for the move-in date, the drugmaker is no longer expecting the site to be “fully operational” in 2020, as it previously promised. Instead it will “start occupation” of the site sometime that year.

So what’s driving the added costs and delays now? AstraZeneca blamed “the complexity of the build” as well as construction cost inflation due to a weakening pound. The company has also upped its investment in complex technologies such as genomics equipment, it said.

“We remain committed to the design principles of the site and making it a great place to work,” the company said in the annual report.

Perhaps, but what should have been a routine upgrading of AstraZeneca’s corporate home seems to have turned into a never-ending soap opera. First the company struggled to recruit enough contractors to keep the project on schedule. Then a high water table at the site required design changes and remedial work.

It all came to a head last summer when AstraZeneca fired its original chief contractor, Skanska, and replaced it with Mace, which started its work at the site in November.

The new headquarters is part of a broader plan at AstraZeneca to upgrade its operational capabilities. It has been updating its manufacturing facility in Macclesfield, U.K., for example, making a $50 million investment on new packaging capabilities and improving the efficiency of the plant. That led to a layoff of 94 employees there in March.

AstraZeneca also cut 210 manufacturing workers in the U.S., after closing two Colorado plants in January and consolidating its efforts at a large facility in Frederick, Maryland.

The company is planning to move employees from an R&D center in Cheshire, U.K., to the new Cambridge site. The long-term plan is to have non-lab employees “co-located” there and “near our key scientific, research and clinical partners,” the annual report says. Toward that end, AstraZeneca is updating the master plan for the Cambridge site.

As for the nearly $1 billion price tag now attached to that site, AstraZeneca plans to fund it “out of operational cash flows.”

By Arlene Weintraub

Source: Fierce Pharma

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