Two months into 2010, medical-device makers and contract manufacturers are even more optimistic that their earlier strong forecasts, with pockets of double-digit growth, will materialize. They also are still being cautious but starting to see encouraging signs that pocketbooks are opening.
They also expect original equipment makers to continue to push more quality, engineering, product development and design, and government certification work down to contract manufacturers.
We find that 2010 is shaping up nicely, said Larry Bell, vice president of business development and marketing for GW Plastics Inc. The Bethel, Vt.-based firm derives 75 percent of its sales from the medical market.
We are seeing some encouraging signs that confidence is starting to come back, Bell said in an interview at Medical Design & Manufacturing West, held Feb. 9-11 in Anaheim. We are starting to see companies start new projects. There are more requests for quotes. There are a lot of new business opportunities. We think that there was a lot of pent-up demand.
Larry Johnson, health-care marketing director for materials supplier PolyOne Corp. of Avon Lake, Ohio, agreed.
We are starting out pretty optimistic about 2010, even though this is still uncharted territory, he said. No one knows whether 2009 was an anomaly or whether the changes were permanent. If there is a successful first quarter, there is a good chance it will carry on. We expect a better year in 2010. We are just not sure how much better.
That also is the perspective of Tom O'Brien, product marketing manager for health care at another materials company.
There is more activity, more orders, said O'Brien, who works at Sabic Innovative Plastics US LLC in Pittsfield, Mass. The Pacific region seems to be doing very well; Europe is flat and lagging behind the U.S. It appears that companies are refilling their inventories. The question is whether they are just replacing inventory or will it be sustained. It feels good, but we will see how it turns out.
Scott Hanson of Eastman Chemical Co. said the Kingsport, Tenn.-based firm had expected a down year in 2009 for its medical plastics business.
But it was slightly up, and we had a good year, despite strong tradewinds, because of the products we deliver, said Hanson, global industry leader for the medical market of Eastman's specialty plastics business. We foresee an even better year in 2010, he added. We will continue to grow faster than the industry grows because we are satisfying needs that others can't.
Similarly, contract manufacturers UPG International Inc. in Oak Brook, Ill., and Mack Molding Co. in Arlington, Vt., both said 2010 will be a solid year for their medical businesses because of new customers added in 2009.
2010 is off to a much faster start than 2009, said UPG sales and marketing Vice President Matt Langton. We expect to surpass where we were at the end of 2008.
UPG can trace much of that to new medical customers and business it picked up in 2009, which will reap benefits for the firm in the years to come, said CEO Larry Wilton. We will increase our volume and our profitability because we increased our volume considerably last year with new customers. Our upgrade of our white rooms and clean rooms the past three years is really paying dividends now.
Medical business accounts for nearly 40 percent of UPG sales. It will be 50 percent of our business in about a year and a half, Wilton said.
He said UPG will launch medical manufacturing at its plants in Minneapolis and Wales this quarter, and that all of its global sites, except Monterrey, Mexico, have white rooms or clean rooms.
Mack Molding which derives more than a third of its overall business from medical sales echoed similar sentiments.
2009 was a good year for us and we got new customers on board. But 2010 is shaping up to be a really good year, said Jeff Somple, president of Mack's Northern Division.
A lot of medical customers are pushing tasks down to contract manufacturers because of their budget restraints and we have been asked to do and take on more quality and product engineering tasks, he said.
Still, some medical contract manufacturers, such as MedTech Group Inc. which had a good 2009 and expects an even better 2010 caution that there still is much uncertainty because of the economy and some potential implications of health-care reform.
2009 will be a better year, and many companies in the industry are projecting strong growth, said MedTech President and CEO George Blank. But don't expect it to be like the year before the recession, because there still is a lot of [economic] uncertainty in the market.
Eastman's Hanson agreed. There is still a high unemployment rate, so that could be a drag on growth. But we still feel like the wind is at our back. The question is whether it is going to blow hard or soft.
Potential federal measures to reform health care could lead to taxes on medical-device firms, he said: That is not helping business development in health care.
The proposal to tax corporations with foreign subsidiaries, as outlined in the president's budget proposal, also would hinder growth, he said.
Foreign businesses generate a lot of jobs in the U.S., contrary to what political leaders think, Blank said. Taxes on overseas activities will be a deterrent to the economy and to growth. Until those uncertainties are resolved, it must be a careful growth for all companies in the medical industry.
But a careful growth scenario doesn't mean firms aren't moving ahead with investments or expansions to capitalize on market trends.
GW Plastics added a product development division, PolyOne acquired a custom compounder and broadened its portfolio, Mack is buying three new all-electric injection presses and purchased equipment to enhance engineering, and MedTech has expanded in Costa Rica and plans to add tool-making there.
We looked at the economy last year and make a conscious decision to not just let things happen to us, said PolyOne's Johnson.
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