Sepracor joins ranks of growing Mass. firms
By Todd Wallack, Globe Staff | September 20, 2007
Sepracor Inc., the Marlborough drug maker behind the Lunesta sleep aid, plans to nearly double the size of its headquarters, the latest in a wave of expansion by Massachusetts life sciences companies.
Sepracor executives said the company will build a 150,000-square-foot brick and glass building next to its existing 192,600-square-foot headquarters in a Marlborough office park. Sepracor has about 2,500 employees, including more than 500 in Massachusetts.
The project is just the latest evidence that the state's life sciences industry is continuing to flourish, despite the slowdown in some other sectors of the economy.
On Tuesday, Genzyme Corp., the Cambridge biotech firm, launched a $150 million expansion of its flagship manufacturing plant in Boston, near the Charles River. The French drug maker Sanofi-Aventis SA is planning to unveil its new 75,000-square-foot research center on Albany Street in Cambridge today, a facility that is double the size of its old research center two blocks away. And Charles River Laboratories Inc., which provides products and services for drug discovery, is building a 58,000-square-foot headquarters in Wilmington, set to open next spring, in addition to a 450,000-square-foot building it recently opened in Shrewsbury.
"This is yet another great demonstration of the Commonwealth's growing strength in the life sciences sector," said Kofi Jones, a spokeswoman for the state Executive Office of Housing and Economic Development. The agency is working with Sepracor and the City of Marlborough on the expansion project.
But the move also comes at a surprising time for Sepracor. The company's stock has fallen 52 percent this year as revenue has fallen short of expectations for its two key drugs, Lunesta and its Xopenex asthma treatment. Starting in July, the Centers for Medicare and Medicaid Services refused to reimburse certain customers for the additional price of Xopenex over competing drugs, reducing orders for Xopenex. Meanwhile, Lunesta's growth has slowed because of competition from generic insomnia drugs.
Still, chief executive Adrian Adams said Sepracor has a promising pipeline of drugs in development, as well as other opportunities for growth. In April, the company launched Brovana, a treatment for emphysema and chronic bronchitis. This month, Sepracor signed a deal with GlaxoSmithKline PLC to distribute Lunesta in other parts of the world, which could be worth $155 million plus royalties.
"We are focused on the future," said Adams, a British transplant who joined Sepracor six months ago. "Inevitably, you are going to have some movement in the stock price. But we are trying to build a business for the long term."
Morningstar Inc. analyst Jeff Viksjo agreed that Sepracor has significant potential, despite recent setbacks.
"If you look at the next year or two, it is going to be tough," Viksjo said. "But if you look in the long term, the company's development has been solid. We think growth can resume in 2010."
Sepracor is also sitting on cash, giving it flexibility to invest in research. As of June 30, it had $861 million in cash and investments.
Adams said the new building will provide "breathing room" for employees working in the existing building, create space for dozens of other employees now based several miles away, and add room for more employees in the future.
He said Sepracor hopes to break ground in late October and finish construction by late next year. Sepracor officials said they weren't sure yet of the cost.
Sepracor bought its current headquarters, including the building and 58 acres, from Waterford Development Corp. in Needham for $37 million in 2002.
Waterford executive vice president Robert Shapiro said the building cost roughly $40 million to build, and he guessed Sepracor's new building could cost about $30 million. Adams said the building will be nearly a mirror image of the existing one.
Separately, the company leases another 126,000 square feet of space on Locke Drive in Marlborough.
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