There is decidedly different energy and optimism today among contract manufacturers and material companies that supply the medical-device industry.
Device manufacturers are taking the shackles off projects that were held back due to a shaky economy. They are asking for a quick turnaround on new medical devices and applications, launching new tooling programs and looking to consolidate their supply base, which opens up more opportunities for the larger players in the market.
That's in sharp contrast to the past 18 months when manufacturers and material suppliers alike, despite continuing growth, fretted about the economy and where the medical business was headed.
“Companies are freeing up more investment dollars,” said Larry Bell, vice president of business development and marketing for GW Plastics Inc. in Bethel, Vt. “They are doing speculative projects and not just what is necessary,” he said in an interview at Medical Design and Manufacturing West, held Feb. 8-10 in Anaheim.
Jeff Somple, president of the northern operations of Mack Molding Co. Inc. and MackMedical in Arlington, Vt., agreed.
“In the last six to eight months, a lot of projects have been kicked off. We have had the most sales activity going all the way back to the glory days of the '90s,” he said. “They want things fast and they want to get into the market faster. Our customers are approaching the market with more confidence and more of an open checkbook.”
“We have gotten a lot of new work, and a lot of the development work in medical is getting into production,” said Somple. “We grew slightly over 10 percent last year and we are looking at 10-15 percent growth for 2011.”
The number of medical projects under way at Nypro Inc. also is flourishing.
“Our new project list is up around 15 percent,” said Brian Payson, vice president of health care for the Clinton, Mass., firm, which garners 35 percent of its global sales from medical. “We have in excess of 85 projects, vs. 65-75 the last couple of years. Not all these get to manufacturing, but the workload is up even over where it was in pre-2008” — before the economy crashed, he said.
“There is a lot more activity in terms of new program awards and requests for proposals,” Payson said. Also, the medical projects under way are broader in nature, he said, giving Nypro more front-end work to do in product design and validation.
“This year, we will be flat to up a little bit because we had big numbers last [fiscal] year,” because of the H1NI flu scare, Payson said. But the company projects double-digit sales growth for the fiscal year ending June 30, 2012, and believes 2013 and 2014 will be even better, he said.
Another positive sign: Tooling orders are way up, which is usually a good indicator of business in the coming 18 months.
Bell said GW has “a strong backlog of tooling orders.”
“We have gotten through the worst, still had double-digit growth in 2010 and met our business objectives,” he said. “2011 looks to be comparable, but we're very conservative in our planning and it may turn out to be even better.”
Companies that supply and develop materials for the medical industry also have noticed a difference in business.
“We are starting to see projects being released and new tooling getting under way. Our customers seem to be very busy,” said Tom O'Brien, global product marketing director of health care for Sabic Innovative Plastics US LLC in Pittsfield, Mass.
“We are back to the trends in the years before the recession,” he said. “You are also starting to see more private equity come back into play, so we will start to get a little more investment coming back into the market.”
PolyOne Corp. of Avon Lake, Ohio, closed a lot of business deals in the second half of 2010, according to Larry Johnson, marketing director for health care at the compounder and distributor. “We had a very good year with increases in the 30 percent range over 2009, and the majority of that growth was organic,” Johnson said.
Growth also came from the addition 15 months ago of New England Urethane Inc., as well as from new partnerships with Dow Corning Corp. to distribute its silicone elastomers used in angioplasty devices, and with ExxonMobil Chemical Co. to be the primary marketing specialist for its thermoplastic vulcanizate medical products.
“I want to grow in double-digits, at least double the industry average, and go up the technology ladder even more into areas that can make us a better fit for what the top medical-devices companies want,” Johnson said.
The supply chains of large medical-device companies have gotten so complex they need to be tightened, he said, so PolyOne plans to widen its product line.
“[New England Urethane] has been a good pick-up for us, and become a platform for minimally invasive components,” Johnson said. “It was a business we had to be in, not just one that we wanted to be in. … We have got to get into other areas that appeal” to existing customers.
That desire by medical-device OEMs to tighten their supply base also is helping large medical contract manufacturers.
“We have had more opportunities the last six to 12 months at the subassembly and finished-device level,” said GW's Bell. “Customers are trying to find a single source so they don't have to manage 10 components from different manufacturers. Everyone is looking at the total cost and trying to do more with less.”
Mack's Somple has seen more opportunities to pick up work from companies deciding to get out of manufacturing, and from medical-device companies deciding to go with fewer vendors.
Current conditions also are allowing contract manufacturers and material suppliers to take a different approach to business than they have in the past two years.
“It seems to me that during the economic difficulties the past couple of years, that a lot of the focus was on logistical solutions to drive down inventory and help companies save money,” said Daniel Lazas, executive vice president of sales and marketing for PolyMedex Discovery Group of Putnam, Conn. The firm was formed two years ago when Foster Corp. acquired the assets of Putnam Plastics Co. LLC.
“But now it is more a case of where a company comes to us and says, 'I'm trying to do something and can you help me do it?' “ Lazas said.
O'Brien of Sabic IP said, “More companies come to us now with questions about how we can help them reduce cost and be more sustainable.” He added: “So we have to come out with new materials that are cheaper, get them into new space or give them better performance.”
Getting selective
With greater demand in the market, contract manufacturers and material suppliers are becoming more selective about what projects they undertake. They also are strengthening their capabilities to meet that growing demand as well as market changes and trends.
“We are concentrating more on projects that have a high probability of getting to market,” said Nypro's Payson. “It is really a matter of balancing our resources with our workload to make sure we have the appropriate resources to meet the demand.”
Johnson said PolyOne is concentrating on the right opportunities, not just any opportunities. “We are looking for business in markets with sub-segments that are still in their growth phase and have higher-than-average growth rates.”
The following is an inventory of some recent projects under way in response to medical-market demands.
* PolyMedex's Foster compounding business has opened a medical plastics innovation center in Putnam.
* Mack Molding has added a $1 million machining center to make stainless-steel, aluminum and carbon-steel parts for the plastic products it makes. It plans to expand the center within a year.
* GW Plastics, with an initial investment of $1.5 million to $2 million, has redesigned and upgraded its mold-making plant in Royalton, Vt., and added equipment to help the firm become a larger player in higher-cavity mold making.
* PolyOne has invested in newer, more-efficient equipment at its NEU facility in North Haven, Conn.
* Precision molder and contract manufacturer UPG International Inc. will open a fourth plant in Suzhou, China, by March 31, mainly for electronics assembly. That will allow UPG to dedicate another of its Suzhou plants to medical products and to install a Class 100,000 clean room there.
* MedPlast Inc. is adding extrusion blow molding capabilities and a Class 100,000 clean room for Class 8 medical devices that will be up and running in two months at its plant in Tempe, Ariz.
* In January, Nypro completed its acquisition of Schlosser Medizintechnik GmbH of Knittlingen, Germany, a supplier of medical plastic parts for diagnostic devices. Schlosser has a 169,000-square-foot factory with Class 7 and Class 8 clean rooms. Nypro also is expanding its Asheville, N.C., plant that makes insulin injection devices.
* Injection molder Helix Medical LLC is adding a plant in Alajuela, Costa Rica, that will be the its sixth medical plant when it opens late in the first quarter of 2012.
* SMC Ltd. said it will open a 20,000-square-foot plant in San Jose, Costa Rica, by April that will be its fifth medical plant.
