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May 22, 2006 02:00 AM

Inhaler giving Tech Group dose of success

Roger Renstrom
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    One year after an ownership change, the Tech Group is exuberant about market opportunities.

    Part of the enthusiasm relates to making inhalers for the Exubera dry-powder formulation of human insulin, due on the market by midyear.

    In December, Tech established a drug-delivery-device division. Mike Treadaway heads the division as general manager. Other Tech divisions deal with health-care devices and consumer products.

    Tech Group's new owner, West Pharmaceutical Services Inc., ``was primarily in consumer products, [and] Tech was primarily in medical products and [drug-delivery] devices,'' Eric Resnick, Tech Group vice president of engineering, said in an interview at the segment's Customer/Engineering Center in Scottsdale.

    The emphasis on these devices is changing Tech Group. ``We are evolving to contract manufacturing from custom molding,'' Resnick said.

    ``We had momentum in the drug-device-delivery market,'' and the connection with West gives Tech more capabilities, Treadaway said in a separate interview at a nearby Tempe, Ariz., facility. The gains include analytical laboratory assets and knowledge about the interaction of drugs between plastics and rubber.

    West of Lionville, Pa., acquired Tech Group Inc. assets in North America and Ireland for $140.5 million in May 2005. Steven Uhlmann and Haltun Tashman were the principal sellers. (A previously affiliated Singapore-based entity, Tech Group Asia Ltd., merged with Sunningdale Precision Industries Ltd. on July 15 and now trades as Sunningdale Tech Ltd. on the Singapore Exchange.)

    In October, West named Robert Hargesheimer as president of its Tech Group segment now incorporating West's device group. Hargesheimer had been device group president since April 2003.

    The entire segment had 2005 sales of $170.1 million and now employs about 1,200 and operates 13 manufacturing facilities and more than 450 injection molding machines.

    Staying at home

    Tech Group remade itself after the 1999-2000 economic dip.

    Tech managers opted to ``not make components for telecom'' but to ``transition into markets that stay'' in the United States, Treadaway said.

    Initially, that led to aggressive investing and establishment of lower-cost Asia, Mexico and Ireland operations that drew away work of Tech's existing operations in the Phoenix area's Valley of the Sun.

    One result: Tech idled two Tempe medical-related manufacturing facilities, now being reborn for drug-delivery-device operations. ``The new entry - Exubera - allowed us to fill those up now,'' Treadaway said.

    In 2000, Tech bid successfully for the Exubera job and positioned the project in one of the empty Tempe buildings. Now the 65,000-square-foot site is dedicated to the single product. Tech invested about $4 million for sophisticated infrastructure improvements, installation of a 45,000-square-foot Class 100,000 molding and assembly clean room and acquisition of 15 Netstal hydraulics of 30-300 tons.

    Each Exubera device consists of several dozen parts, disassembled and on view in a conference room display. Tech molds many, procures others and, using customer-owned automatic high-speed Mikron Flexcell equipment, assembles the device. Dave Kopp is plant manager.

    Another Exubera supplier, publicly traded Bespak plc, has a comparable operation for device production at a Milton Keynes, England, plant.

    Pfizer Inc. plans to load medicine into devices from both suppliers in a Terre Haute, Ind., plant. Nektar Therapeutics of San Carlos, Calif., developed the drug.

    Observers believe an inhaled dose of Exubera may cost three or four times more than a diabetic's traditional insulin injection, but ease of use and encouragement of patient compliance may sway those questioning the drug's value. ``We think [health-care] insurers recognize the problem,'' Treadaway said. Too often, diabetics delay or procrastinate on insulin treatments.

    In Tempe, across the street from the Exubera site, Tech has a 35,000-square-foot facility for which it obtained another 10,000 square feet in April. ``We are looking at more square feet by the end of 2006,'' Treadaway said.

    Between the two facilities, Treadaway's division employs 200, including 100 who work as direct labor. Others are involved in quality, regulatory, supervisory, administrative and engineering functions.

    Workers in the smaller building used Mikron equipment in assembling reusable injection pens for insulin and are preparing to make disposable automated injection pens for the adrenal hormone epinepherin. Two incoming custom programs each involve the complete assembly of a drug-delivery device.

    Use of radio-frequency-identification technology is approaching. ``We expect to utilize [RFID] with customers here,'' Treadaway said. West's proprietary Spectra technology uses RFID and other methods to help pharmaceutical manufacturers protect against drug counterfeiting and tampering.

    Automating

    At the C/EC, Resnick has created an assembly technologies group, focusing on automated processes, mostly injection molding related during development of customer projects. ``There are now eight persons, up from two in 2004,'' Resnick said.

    ``Over two years, we changed the vision for the C/EC,'' Resnick said. ``We made it an incubation site for customer programs, we reduced the size of the tool shop by 2,000 square feet to about 10,000 square feet and we added molding machines'' for prototyping, pre-production and product development.

    The C/EC operates five all-electric Roboshot presses of 17-165 tons and one two-shot Arburg hydraulic of 110 tons and, soon, will add another Roboshot.

    Growth involves management of multiple molds and complex automation systems for electrode manufacturing and electric discharge machines and a revised orientation toward tooling.

    ``The original vision for the Super-Cell involved high-cavitation tooling,'' Resnick said. ``Two years ago, we saw a customer-driven shift to the device side for drug delivery [and the need] to build more lower-cavitation tools.''

    Tech Group's partially abandoned Super-Cell project aimed to make high-cavitation molds at similar automated plants in Scottsdale and Singapore beginning in 2004.

    Additions during 2005 included an Okuma milling center, an Okamoto grinder and a pair of Mitsubishi EDMs - one sinker and one wire.

    In early April, another Okuma center arrived. Deliveries of three surface grinders and a laser-engraving machine are scheduled.

    ``We got rid of older milling machines'' with the intention to ``increase throughput without increasing head count,'' Resnick said.

    ``Every major piece of equipment ... will be replaced over the next five years,'' said Todd Kuhn, director of tooling technology.

    Progress is monitored. ``The mold-making shop is running at 93 percent utilization over the last eight months and is projected at that level for the rest of the year,'' Kuhn said. The C/EC molding presses had a 67.5 percent utilization rate for January through March.

    During 2005, the shop built 40 percent of 160 ordered tools and managed outsourcing of the remainder. Total value: $16 million.

    Within the C/EC, Resnick oversees 49 people in engineering functions and 26 others in tooling disciplines. Designers operate in both areas.

    ``Of the 75, about one half arrived in the past five years and about one third in the last two years,'' Resnick said.

    In addition, he deals with 40 people with engineering skills in Montgomery, Pa., and 22 in a tool shop in Erie, Pa. Both had reported within the West device group.

    In boosting talent, Tech Group hired up to 15 automation, tooling and processing engineers formerly with InteSys Technologies Inc. In 2003-04, InteSys phased out its flagship molding and tool-making operations in nearby Gilbert, Ariz. Textron Inc. owned InteSys from 1999-2005.

    Wendy Hayes joined the C/EC in February as engineering quality director to support development and commercialization of drug-delivery devices, Resnick said. Tech is also hiring expertise in electronics, contract filling, assembly cells, manufacturing systems solutions and Web-enabled project management services.

    Meanwhile, Tech Group operations Vice President Bill Gerard oversees injection molding for health-care and consumer products at nine plants, including three in Arizona and others in Frankfort, Ind.; Grand Rapids, Mich.; Guadalajara, Mexico; Cidra, Puerto Rico; and former West device group locations in Montgomery and Williamsport, Pa.

    Tech leased and revamped the 65,000-square-foot Indiana plant specifically for consumer products and packaging. During 2004, Tech invested about $1.5 million to replace the floor, install injection molding and assembly equipment and create an environmentally controlled atmosphere.

    The original Tech business that West acquired reported total 2005 sales of $53.7 million in health-care devices, $22.3 million in consumer products and $22.9 million in tooling projects. The former West device group had 2005 sales of $22.2 million in health-care devices, $41.6 million in consumer products and $7.4 million in tooling and design services.

    West Pharmaceutical Services reported 2005 profit of $45.6 million on sales of $699.7 million, compared with profit of $19.4 million on sales of $541.6 million for the year before.

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