From the inbox, a very interesting little blurb from the Boston Business Journal (post by Julie M. Donnelly):
Vertex Pharmaceuticals says it will pay back all the incentives it has received so far from the state through the quasi-public Massachusetts Life Sciences Center, totaling $4.4 million. The repayment follows Vertex's announcement today that it would lay off 175 workers in the state.
The Cambridge, Mass.-based biotechnology company was offered a total of $72M in state and city incentives contingent upon the creation of 500 net new jobs from 2011 through 2015. Some of the money was tied to the company’s planned move to Boston's Seaport next year, where the company is set to occupy 1 million square feet in two newly built towers on Fan Pier...
...Vertex announced it would lay off a total of 370 workers, or 15 percent of its workforce, after sales of its treatment for hepatitis C, Incivek, took a nosedive. Incivek sales declined sharply to $85.6 million in the most recent quarter, from $254.3 million during the same quarter last year...
...After the layoffs the company will have headcount of 1,800 with 1,300 of those in Massachusetts.
Correction: It's not yet clear whether the incentives Vertex received took the form of tax credits or other benefits. We're awaiting response from Massachusetts Life Sciences Center.I think this is significant because I think these incentives (not this specific deal, mind you) are just pretty terrible. While I think it's perfectly cromulent for muncipalities to compete on workforces and services offered to new corporations, paying large companies for creating jobs hasn't really gotten the taxpayer anywhere, I think, other than getting companies accustomed to this sort of giveaway and shopping around for the best deal.
I hope that the state of Massachusetts has some lawyers to make sure that whatever deal was struck with Vertex sticks.
The problem with those kinds of incentives is it's a race to the bottom. What location can provide the most goodies to entice companies? It would be interesting to see how often those sorts of 'investments' have a positive yield.
ReplyDeleteWhat I find interesting is that I had a meeting with two business types at Vertex about outreach activities and relations with area universities over the summer. One of the comments made was how proud and unique Vertex was as a company for avoiding the slamming that other pharma and biotech companies have been taking ( which they attributed to their different ideology). Less than four months later, and they've turned to layoffs just like everyone else.
ReplyDeleteI get the sense that the drop in revenue that precipitated this move was a surprise.
DeleteI agree that this caught them by surprise. I was more pointing out that how the person phrased it,at least to my ears, almost made it sound like they thought they would always be immune to these problems. This was beyond their control really, but having a "that could never happen to me" mentality leads to some rude awakenings in life.
ReplyDeleteIn Germany during the recession most firms just told employees to come in for four day weeks (after an agreement with the government). People loved it since it was an extra day off and for many was worth the cut in salary. And when business picked up again, they had loyal workers whose jobs weren't cut and they didn't have to waste time on hiring new people. It seems like American business has learned nothing from something that happened not too long ago. Once again...
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