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.
The survey (see sidebar, "Respondents' profile") was targeted at individuals who operate, work with, process products through,
supervise, suggest, purchase, or review expenditures for pharmaceutical machinery and equipment.
Spending levels in 2007
The results of the survey showed that nearly half (47.4%) of respondents increased spending on machinery and equipment over
spending levels in 2006 (see Figure 1). Almost a quarter (21.2%) said spending stayed the same, and 14.3% of respondents said
spending at their companies decreased compared with 2006 levels.
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%.
Almost one-third (29.9%) spent less than 2% of their sales on machinery and equipment in 2007, 21.2% between 2.1–4%, and 18.2%
between 4.1–6% (see Figure 2). Surprisingly, roughly 20% spent more than 8% of their sales on equipment and machinery in 2007.
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.