Pharmaceutical giant Eli Lilly and Co. has cut in half the size of a proposed insulin plant in Prince William County, a project that relied on millions of dollars in public subsidies but is now two years behind schedule.
The Indianapolis-based company had already delayed the start of construction, citing the rising cost of steel and other materials.
Yesterday, company officials said they now intend to hire only half the approximately 700 workers originally planned and will scale the three-building, 600,000-square-foot complex back to a single building of 300,000 square feet.
Analysts who follow the company said lagging demand for some of Lilly's insulin products, and increasing worldwide competition in the industry, also may have figured into the decision.
Eli Lilly General Manager Rene Bernadac described the changes in a meeting yesterday with the Board of County Supervisors. He also laid out a revised timetable. Construction is slated to begin this winter, and the plant should be fully operational by 2009 -- two years later than the county expected when the project was announced in 2002.
"We're looking forward to seeing that building go up," said Prince William Board Chairman Sean T. Connaughton.
The announcement comes less than a month before the county was set to withdraw $2 million in economic incentives offered to lure Lilly to the Innovation at Prince William industrial park. Despite the reduced number of jobs involved, the company still will receive those benefits, as well as $5.25 million in incentives from the state.
County officials said the size of the project still justified the investment.
Company officials have said that the higher prices for steel, cement and lumber that have plagued builders for the last few years forced them to redesign their plans. Indeed, steel prices were 11.2 percent higher in June than a year earlier, according to the industry publication Engineering News-Record. Lumber and cement prices also are up slightly from a year ago.
However, one analyst pointed to Eli Lilly's decreasing sales of the diabetes drug Humulin as a possible motive for scaling back the plant, where employees will fill a pen-size injector with the Humulin and Humalog diabetes drugs.
"It's really not a surprise. The company's insulin business is waning, losing significant market share to competitors," said David Moskowitz, health care analyst with Friedman, Billings, Ramsey Group Inc. in Arlington.
Humulin sales dipped 4 percent in the first quarter from a year earlier, the company says, while Humalog sales increased 5 percent.
For all of 2004, Humulin sales fell 6 percent, to $997.7 million, compared with 2003, while Humalog sales increased 8 percent, to $1.1 billion.
"The demand for insulin and the occurrence of diabetes is increasing worldwide," said Patty Tracy, an Eli Lilly spokeswoman.
She said that despite the smaller workforce, the Prince William plant's capacity will be the same as originally planned because of new technology and the consolidation of the facility into one building.
Workers at the plant will earn an average of $55,000 a year, and the company will begin hiring in 2006, Tracy said.
The company owns 115 acres in the business park, providing room for possible expansion, Tracy said. Outside of its Indiana headquarters and Puerto Rico, the Prince William facility will be Eli Lilly's only U.S. manufacturing plant.
Eli Lilly is one of the world's largest pharmaceutical companies, with $13.9 billion in sales last year. It employs 46,000 people, mainly at research and development facilities in nine countries.
County officials tried to keep their earlier courtship with Eli Lilly a secret, dubbing it the "sugar" project because, at $425 million, it was considered a sweet deal for the Innovation park, which was struggling for tenants following the telecom and dot-com busts.
Though the investment has been reduced to $325 million, county officials said they are not disappointed.
"A $325 million project does not come along often," said Martin Briley, executive director of the county's department of economic development.