Spending More or Less, and on What? - Pharmaceutical Technology

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Spending More or Less, and on What?
Pharmaceutical Technology's annual survey on equipment and machinery reveals the spending levels and types of spending made in 2009 and planned for 2010.


Pharmaceutical Technology
Volume 34, Issue 4, pp. 48-56

Pharmaceutical Technology's annual survey on purchasing and innovation trends for equipment and machinery shows a slight uptick in spending in 2010. Overall economic conditions curtailed spending in 2009, but there is some improvement in 2010 as financial conditions improve. Purchasing relating to equipment for biologics manufacturing—both drug-substance and finished-drug product—was a strong area of investment in 2009 and is again for planned expenditures in 2010. Respondents were also fairly upbeat about the level of product innovation, although spending for newer initiatives such as quality by design (QbD) and process analytical technology (PAT) is not having a strong influence on purchasing decisions.

Spending trends


IMAGE: JULES FRAZIER/GETTY IMAGES
Spending levels for 2009. The survey results showed that 44.1% of respondents increased spending on machinery and equipment in 2009 compared with 2008 levels, and 31.4% kept it the same. Nearly a quarter of respondents (24.5%) decreased spending in 2009 compared with 2008.

For those companies that spent more, 12.5% increased spending between 0 and 2%, 23.6% between2 and 4%, and 16.6% between 4 and 6%. Surprisingly, almost half of the respondents increased their purchases by more than 6%. The survey showed that 18.1% raised their expenditures between 6 and 8%, and 29.2% increased spending by more than 8%.

Although spending increases were robust in 2009 for those companies spending more, the declines for those decreasing spending in 2009 were more pronounced. For those companies reducing spending in 2009, 65.7% decreased spending by more than 8%, and approximately 17% reduced their expenditures between 4 and 8%.

For all respondents, purchasing decisions were delayed in 2009. The survey showed that 42.1% of respondents postponed purchases for equipment and machinery in 2009. Nearly a quarter of respondents (23.7%) reduced production because of customers' financial difficulties, and 18.4% had difficulty securing financing for capital investments. Also, 12.6% of respondents increased outsourcing to reduce capital costs.

Planned expenditures for 2010. The survey results showed similar purchasing trends for planned spending in 2010, with only slightly more respondents expecting to decrease spending on equipment and machinery in 2010. More than one-quarter (26.7%) of respondents plan to decrease spending in 2010, which is slightly up from the 24.5% of respondents that reduced their spending in 2009. The number of respondents planning to purchase more equipment and machinery in 2010 is 44.8%, which is on par with the 44.1% of respondents that increased spending in 2009. Nearly one-third of respondents (28.5%) plan to keep expenditures flat for 2010.

So to what degree will companies be increasing spending in 2010? More than half of respondents plan moderate spending. Almost one-quarter (23.1%) will increase their expenditures by up to 2%, and 19.2% will raise their purchasing between 2 and 4%. At the other end of the spectrum, fewer respondents plan to make large increases in spending in 2010 compared with 2009. For 2010, 19.2% of respondents plan to increase spending by more than 8%. In 2009, almost 30% of respondents increased spending by more than 8%.

Although the level of higher purchases is less in 2010 than 2009, the good news is that the extent of decline for those companies decreasing spending is not as great as it was in 2009. Of those respondents that plan to decrease spending in 2010, more than half (46.4%) plan to decrease spending by 8%. Although still a significant percentage, it is an improvement compared with 2009, when 66% of the respondents decreased spending by more than 8%.

Moreover, the survey showed fewer adverse effects on purchasing in 2010 compared with 2009. More than one-third (36.5%) of respondents plan to postpone purchasing equipment and machinery in 2010, which is less than the 42.1% that postponed purchasing in 2009. Roughly 15% of respondents, however, are experiencing some adverse financial effects. The survey showed that 16.4% of respondents are having difficulty in securing financing for capital investments in 2010, and 16.4% are facing reduced production because of customers' financial difficulties. Nearly 16% of respondents (15.7%) do not plan to purchase equipment and machinery in 2010, which is almost double the amount of respondents (7.9%) that did not buy equipment and machinery in 2009.


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