The arrival of WuXi STA in Middletown is a big deal in two big ways.

It’ll be a big operation. The $510 million pharmaceutical manufacturing campus will include multiple buildings with 600,000 square feet of space 189 acres. Plans are to start with 479 jobs – with the average pay of $65,000 – and the possibility of doubling employment and space in buildings.

And it involved a big package to get them there: $19,050,365 in state tax dollars going out in capital, training and hiring grants.

“This is an investment in good jobs that will drive economic growth in southern New Castle County and across Delaware,” Gov. John Carney said about the grants from the Delaware Strategic Fund, authorized in June by the Council on Development Finance.

The fund is the “primary funding source to support business retention and expansion through grants and low-interest loans to projects that grow the state’s economy in a significant way,” according to the state’s Division of Small Business.

WuXi STA is anything but small business. It’s big business.

What WuXi STA does

WuXi STA is pronounced Woo-She S-T-A, said Davy Wu, senior director of its parent, WuXi AppTec, which was founded in Shanghai in 2000. STA shortens the rest of its formal name: Shanghai SynTheAll Pharmaceutical Co., Ltd.

WuXi AppTec has a market capitalization of about $70 billon and in 2020 earned about $2.5 billion, with a profit of almost $1 billion.

WuXi STA is a contract development and manufacturing organization, making pills, sterile products (like medicines that would be injected) and active pharmaceutical ingredients for other companies in the pharmaceuticals and life sciences sectors, some of the hottest around.

Health care represents almost 18% of the U.S. gross domestic product ($3.8 trillion or $11,582 per person). The research and production of pharmaceuticals is expensive but potentially lucrative.

“WuXi STA’s standout specialties amongst its peers include oligonucleotides process [research and development] and manufacturing; peptide API process R&D and manufacturing; and high-potency API (antibody drug conjugates) manufacturing,” it wrote in its application for the state grants.

WuXi STA works with 470 partners worldwide, and another speciality is small-molecule inhibitors.

“Delaware has a growing field of companies focusing on small-molecule inhibitors, a developing therapy that is more targeted in approach with fewer side effects than traditional cancer therapies like chemotherapy or radiation,” Delaware Business Times wrote.

Location, location, location

Richard Connell, chief operating officer for WuXi AppTec in the U.S., told the paper that they wanted a massive site on the East Coast with a skilled staff nearby.

The Middletown Business Center will be WuXi STA’s second American site, following a plant in San Diego, and its eighth worldwide. At buildout, the site here would be 1.74 million square feet – dwarfing its 46,000-square-foot San Diego facility.

Many companies like to be next to suppliers and clients, which essentially means that they also locate next to competitors. Proximity reduces transportation costs and builds that trained workforce that Connell referred to.

In 2019, greater Philadelphia was ranked as No. 8 of the nation’s life sciences hubs, according to CBRE, a real estate services company. “That distinction is vitally important for the city and its future,” Philadelphia Magazine wrote. “This relatively newfound status as a leading life sciences hub means the innovations that are born here – and the economic impact they spur – stay here.”

Greater Philadelphia, which sprawls across several states, accounts for as many as 45,000 area jobs in life sciences, the magazine continued.

Delaware BioScience Association membership includes 130 companies and organizations, “representing 8,000 innovation-based jobs vital to Delaware’s economic future.”

All those well-paid workers buy local houses, dine locally and shop locally (and, of course, online).

More details on the plans

“WuXi STA is excited to join Delaware’s growing healthcare community and establish Middletown as the home of our new state-of-the-art pharmaceutical clinical and commercial manufacturing complex,” Minzhang Chen, CEO of WuXi STA, said in a statement. “Delaware’s highly trained pharmaceutical manufacturing workforce and proximity to many of our customers provide tremendous opportunities to support the region’s economic growth and efforts to advance pharmaceutical development and manufacturing.”

The site is expected to open in 2024 and reach 479 jobs by 2026. One grant sets up a three-year hiring schedule. Subsequent phases could involve more than 1,100 employees. That’s roughly the same workforce as Siemens Healthineers and Agilent Technologies, Delaware’s two largest biotech firms.

Negotiation among the stakeholders were secret and labeled “Project Dragonfly” until they hit the council that approves the state grants.

“Dragonfly will likely relocate a small number of existing employees to the state and may need to have several new hires relocate to the state for specific positions that are normally recruited on a national basis and/or positions for which Dragonfly has not found an acceptable local candidate,” the grant application said.

The application “anticipates that the facilities will be designed and constructed with a focus on sustainability.”

The application gives a total cost of $510 million, including $258.5 million for construction, $173 million for equipment and $4 million for furniture and fixtures. Two costs are redacted – land and expenses to meet federal and utility qualifications – and total $126 million.

Haunted by two grants

Jurisdictions across the United States offer companies many incentives to relocate and expand. Some of Delaware’s past allocations to boost development have not gone well, and Delaware Business Times editor Jacob Owens editorialized that comparing WuXi to the past is not fair.

Delaware signed on to two deals that have been the subject of a lot of later debate: Fisker Automotive and Bloom Energy.

Fisker got a $9 million grant and a $12 million loan in 2010 to make electric cars at the old Boxwood Road GM plant, but it went bankrupt in 2013. The Council on Development Finance, the agency that signs off on the grants, in 2020 authorized $4.5 million for Amazon to create a fulfillment center on the Boxwood Road site.

The 2011-12 deal with Bloom to make fuel cells in Newark involved at least $12 million from the fund and at least $200 million collected from Delawareans as surcharges in their power bills, The News Journal reported.

“Bloom didn’t create 900 jobs [as promised]. The real number is 277 positions, meaning each one, to date, has cost ratepayers almost $470,000.” That calculation was made in 2016, and the surcharges run until 2033.

WuXi STA joins numerous other companies choosing Middletown for massive operations. Its facility will be near a million-square-foot Amazon fulfillment center, Sealing Solutions’ 200,000-square-foot manufacturing plant and Breakthru Beverage’s 285,000-square-foot headquarters.

“We win the future by attracting global leading healthcare firms like WuXi STA to New Castle County,” New Castle County Executive Matt Meyer said in a statement. “This project will bring hundreds of good-paying jobs to the area and will advance New Castle County’s goal of growing our biotech industry.”