Changing of the guard: GlaxoSmithKline, an instrumental force in North Carolina's textiles-to-test tube transformation, slims down as cancer expert Stephen Frye and other researchers bulk up.

• Author: Martin, Edward
• Position: Cover story

No heavy machinery rumbles here. At a plant east of Raleigh, down shrubbery-lined Apothecary Drive in Zebulon, stunningly fast production lines fill purple inhalers with talc-like powder that has the remarkable ability to shrink swollen airways that leave asthmatics and others with lung disorders gasping. In near-sterile surroundings, scores of workers, some in white lab coats, primarily monitor quality.

GlaxoSmithKline PLC, the world's eighth-largest pharmaceutical company, touts this plant as one of its most advanced. More than 850 employees work here, and another 130 or more are being hired. A new production line is part of $90 million in upgrades. "In Zebulon," says GSK's Research Triangle Park-based spokeswoman Marti Skold Jordan, "we handle over 30 brands which are sold in over 500 different selling presentations." The company's best-known product, Advair, is both produced and prepared here.

GSK's showplace is 40 miles east of its vast, 500-acre U.S. headquarters in Research Triangle Park. Momentum alone would seem to make it indomitable: Last year, Jordan adds, the Zebulon plant produced more than 200 million capsules and tablets, filled more than 65 million inhalers and put together more than 112 million drug packs.

Instead, this plant is on the front lines of global pharmaceutical warfare. GSK has seen profits plunge and has shed tens of thousands of workers worldwide. Its North Carolina employment has declined to about 4,000--more than 20% lower than peak levels--and it is leasing empty space in its 35-building headquarters complex amid scars inflicted by competitors, a tumultuous health care environment and scandals of its own making. The scars are vivid reminders that in North Carolina, more than the future of a charter member of the global big-pharma club is in play.

For more than four decades, Research Triangle Park has ridden the coattails of GSK and legacy companies such as Burroughs Wellcome & Co. that it has absorbed as the state grew from life-sciences obscurity to global prominence. As economic transitions go, it's a remarkable one, from smokestacks, tobacco and textiles to clean-room manufacturing and labs, such as Burlington's Laboratory Corporation of America, that test blood for diseases, and giant contract-research organizations, like Durham's Quintiles Transnational Inc., that enlist people to test new drugs that might cure them.

Life sciences, a sweeping term encompassing pharmaceuticals and other processes dealing with living organisms, has more than 228,000 employees and an annual economic impact of $73 billion in North Carolina, second only to the $77 billion of agriculture, the N.C. Commerce Department says. The Raleigh-Durham market ranked second to the Boston metropolitan area as a life-sciences hub, according to a recent ranking by Jones Lang LaSalle Inc., a Chicago-based company that analyzes commercial real estate. "We don't want this industry to go the way of textiles, furniture and tobacco," says Doug Edgeton, CEO of the North Carolina Biotechnology Center based in the Research Triangle Park.

SOME LIFE-SCIENCES EXPERTS say the state has reached the critical mass necessary to maintain its commanding role in the industry regardless of GSK. The corporation's vulnerabilities, though, underscore that in the rowdy arena of big pharma in 2015, any cloud over GSK casts a shadow over life sciences in North Carolina as well. Surprisingly, many observers say the state isn't helping its own cause.

The biotechnology center, created in 1984, has been instrumental in attracting the industry to North Carolina and nurturing it. Now, while GSK struggles to find its footing, the center faces an existential threat from lawmakers as the N.C. General Assembly considers cutting its funding, about $13 million of its $18 million budget in 2014. Without state money, "We would probably have to go into a wind-down mode," Edgeton says. The center has 62 employees in six statewide offices, and has offered grants, funding assistance, technical and business advice and other aid to hundreds of existing and startup life-sciences companies.

In addition to global competitors, other proposals threaten to chill the life-sciences climate in North Carolina. The legislature also has declined to extend tax incentives for pharmaceutical research and development activities that amounted to more than $40 million in 2014, along with tax breaks for purchasing laboratory equipment. Many business incentives are being cut and now, life-sciences supporters fear parallels with the state's once-thriving, 30-year-old, $250 million-a-year movie industry. Loss of tax breaks and other incentives has prompted some film and television productions to choose other states.

Thirty-eight other states offer companies such as GSK tax breaks for R&D...