Merck center would create 600 area jobs

Pharmaceutical giant asks Austin for $856K to build tech hub.

One of the world’s largest pharmaceutical companies has targeted Austin for a major new technology center, citing its “strong interest” in helping reshape health care and develop the new innovation district emerging around the Dell Medical School.

Merck Sharp & Dohme Corp. has asked the city for $856,000 in incentives over a 10-year period to build its fourth global technology hub in downtown Austin, according to details of an economic development proposal released Friday.

In return, Merck would agree to create at least 600 new jobs, paying an average annual salary of $84,586, and it would invest almost $29 million to build and equip the new innovation hub. The center would focus on data collection and the design of technology platforms for “personalized, proactive and preventative health care,” the firm said.

Incentives deals of this type and size often get a sweetener from the Texas Enterprise Fund, which the governor can use to close important corporate relocations or expansions. Local officials suggested there might be such a grant, but calls and emails to a spokesman for Gov. Greg Abbott seeking comment weren’t returned Friday.

If the deal is approved and Merck decides to take the project forward, it appears poised to move quickly.

According to the proposal, the company would aim to create 119 full-time jobs and spend almost $6.4 million to equip a temporary facility by the end of this year.

By the end of 2020, it would target a payroll of 341 full-time jobs and a $20.2 million investment to build and equip a long-term office space, which it ultimately would expand to around 90,000 square feet.

Merck hasn’t determined a final location, and an Austin official said the firm’s search includes more than 50 other cities.

But if it does build here, the company said it would locate the center at the medical school or in the adjoining innovation district.

Its mission, Merck said, “aligns with the (University of Texas), Central Health, People’s Community Clinic and many other groups that could support the transformation of health-care delivery and affordability.”

The location and support of the Merck center would give Austin’s medical innovation district a major private-sector anchor to complement the medical school. Local leaders see the district and the organizations it hosts as the main conduits for spreading the medical school’s health care and economic benefits throughout the broader Central Texas community.

“The work that Merck is proposing to do in Austin would blend seamlessly into what is already planned for the Innovation Zone,” state Sen. Kirk Watson, D-Austin, said in an email. “There’s tremendous potential for all of these entities to work together and find new ways to provide better health care to the people of Travis County.”

While Merck and the medical school haven’t reached any formal agreements, they have discussed a variety of projects that could improve health care and lower costs, according to a statement from Clay Johnston, the UT medical school’s dean.

Johnston said potential initiatives include efforts to eradicate human papillomavirus and cervical cancer in Austin, pilot projects around better uses of health data, and community-based programs that bolster the training pipeline from schools to health care jobs.

“These kinds of initiatives would be difficult to achieve without a relationship with this specific kind of collaborator,” he said.

For its part, Merck said its presence in Austin would help fuel the growth of the innovation zone, noting that its centers host summits, work closely with local health care and high-tech companies and attract additional partners and suppliers.

On any given day, the company said, its tech hub in Branchburg, N.J., hosts 150 to 200 workers from partners such as Cognizant, Accenture and Ernst & Young. (Merck also operates similar facilities in the Czech Republic and Singapore.)

Based on the activity at Branchburg, Merck said it expected suppliers and partners would spend about $70 million a year in Austin.

If approved, the proposals would be the city’s first major corporate incentives deal since 2014, when the council agreed to subsidies for Dropbox ($150 annually per job), Websense ($100 per job) and AthenaHealth ($250 per job).

The city would pay Merck $200 for each full-time job created and retained each year, according to the proposal.

An economic impact analysis estimated the project would directly contribute $1.9 million to the city after subtracting the cost of the incentives.

The city’s economic development staff will present details of the proposal during the City Council meeting April 6. They plan to request a public hearing for council action a week later.

On Friday, the economic development officials touted the ancillary benefits Merck would bring to the area, including its relationship to the innovation zone and its interest in shoring up the region’s workforce-training pipeline.

The 600 jobs Merck plans to create “don’t just appear in the market if the council says yes,” said David Colligan, the city’s global business expansion manager. “Those jobs would be created in the market over a 10-year period of time, so (Merck officials) are focused on seventh- and eighth-graders who could be in their workforce by the end of that term.”