Capital expenditures, specifically spending on machinery and equipment, are one barometer of the health of the pharmaceutical manufacturing sector. To examine the state of this segment, Pharmaceutical Technology conducted a survey of its readers to evaluate spending levels, spending on equipment type, factors influencing spending, and regional spending habits.
For the purposes of the survey, machinery and equipment refers to machinery and equipment for solid-dosage, aseptic, sterile, parenteral, and active pharmaceutical ingredient (API) manufacturing, quality control and assurance (including analytical instrumentation and laboratory equipment), process control and automation, pharmaceutical packaging, and environmental control.
Spending increases were most prevalent among respondents from consumer healthcare companies (81.8% of these companies increased spending), followed by generic-drug companies (61.5%), analytical services companies (60.0%), contract manufacturers (53.1%), and innovator pharmaceutical companies (41.8%).
The survey also asked how much companies spent on machinery and equipment as both a percentage of sales and an absolute level. The mean percentage of overall sales spent on equipment and machinery in 2007 was 5.3%; the median was 2.1–4%.
The mean expenditure on machinery and equipment in 2007 was $59.6 million. The median expenditure was $1–10 million.
Spending trends in 2007
The survey asked companies that increased spending in 2007 whether the percentage increases were greater than in previous years and what type of equipment they purchased.
For those companies that spent more in 2007 than in 2006, 66% said the percentage increase was greater than their 2005–2006 increase, 28% said it was on par, and 2% said it was less.
Generic-drug companies and analytical services companies were the most likely to have increased spending by a greater percentage in 2007 compared with 2006. The survey showed that 83.3% of the respondents from generic-drug companies and 83.3% from analytical service companies said that their percentage increase in spending was greater in 2007 than in 2006. Only 12.5% of generic-drug companies, and 16.7% of analytical service companies said that spending in 2007 was on par with 2006.