Pharmaceutical & Biotech Industry Coughs Up $400 Million for Scheduled 2010 Plant Maintenance Programs

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Ben Franklin had it right. An ounce of prevention is worth a pound of cure. Like an illness, one small thing off in the production process can escalate into a grave situation. While the economy and current reorganization of the Pharmaceutical-Biotech Industry has delayed a number of plant expansions and upgrades, there are few companies that can afford to neglect old Ben's advice.

Such neglect will spur a visit for drug, medical device and cosmetics manufacturers, but instead of a doctor, the Food and Drug Administration (FDA) will come calling. The risk of incurring the attention and subsequent wrath of the FDA over tainted products as a result of equipment failure or malfunction within the production process is just not worth the money "saved" upfront. In the case of contract manufacturers (CMOs), the quality and reliance of their plant operations are the very foundation of a company's bottom line. For these reasons and a host of others, the majority of traditional manufacturers adhere to a regular maintenance, repair and overhaul (MRO) program, thus ensuring process and supporting equipment and utilities will continue working in optimal condition.

Typically, but by no means always, the industry's plant shutdowns occur once during the summer and then again in late December. Many companies also use the maintenance shutdowns, and sometimes part of the MRO budget itself, to tie in or finish off capital projects. This is especially true now with capital dollars so elusive. A recent analysis of reported 2010 Pharmaceutical & Biotech MRO projects (source: Industrial Info's Pharmaceutical Tracker) has revealed 283 projects with a total investment value (TIV) of $401 million planned for 2010. This figure translates into an MRO average TIV of $1.4 million.

Click on the image at right for a regional breakdown of planned MRO projects for the North American Pharmaceutical-Biotech Industry in 2010.

The 2010 MRO projects are scattered throughout North America, with the Great Lakes region at the top in terms of TIV, with $60 million divided among 42 projects. Next up is the Southeast region, which currently claims $54 million at 40 sites. Rounding out the top three are both the Midwest (30 sites) and Northeast (27 sites), each of which will see $49 million invested in planned MRO shutdowns. These figures are expected to increase as new project schedules are uncovered and reported.

Every region that has a commercial-scale production plant will find itself with at least some MRO activity. Some plants do not "shut down" formally at all, as maintenance is performed throughout the year during lulls in production, often in the evenings or on weekends. A declaration made by plant personnel of "never using outside contractors" is invariably followed by the allowance of "sometimes," or "perhaps" using contractors, depending on the job. So "no," in this case, does not necessarily mean "no." With fiscal accountability tighter than ever before, it would be a rare company indeed that would not at least consider the qualified goods and/or services of a new provider.

These figures only tell part of the story in regard to earnings potential at the plant level. Knowing who, what, when, where and how much is being invested is a great source of potential work for a multitude of vendors, including suppliers and contractors. In addition to performing the maintenance itself, the shutdowns also provide a time that companies can identify equipment that may be nearing the end of its useful life and needs to be replaced. Knowing who the maintenance planners and schedulers are and initiating regular contact with them and others at the plant could lead not only to being included in the maintenance program, but also going on to be a part of a future capital project. In some cases, other vendors so impress the company with work performed during a maintenance shutdown that they land an alliance contract or long-term service agreement (LTSA) with the plant. Upon securing such a contract, the vendor is the designated contractor for in-house maintenance operations. In some cases, an office is opened on-site and staffed by the contractor.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.