Send to printer »

Feature Articles : Feb 15, 2012 (Vol. 32, No. 4)

Bioinstrument Manufacturers Go Global

  • John Sterling

During President Obama’s State of the Union speech last month, he called for revitalizing the U.S. manufacturing industry:

“We have a huge opportunity, at this moment, to bring manufacturing back,” he said. “But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.”

After interviews with several biotech instrument manufacturers, it seems that at least for the bioindustry the President was posing the wrong question (i.e., “Ask yourselves what you can do to bring jobs back to your country…”). In fact, a range of biotech equipment is already being made in the U.S.

Regarding the possibility of more manufacturing jobs actually coming back to the U.S., talks with biotech officials might lead one to conclude that the President just might be whistling in the dark and either does not understand or is ignoring the main reasons behind the establishment of regional manufacturing operations.

The key drivers to setting up a manufacturing facility are manufacturing costs and proximity to important and growing markets, according to the biotech specialists.

National Pride Not an Issue

“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, formerly chief economist at the Labor Department, in a recent interview with The New York Times. “That’s disappeared. Profits and efficiency have trumped generosity.”

Calls for patriotism or nationalistic pride don’t enter into the manufacturing equation and, from the business point of view, they shouldn’t, as discussions with biotech manufacturers revealed.

Terry Jones, a reporter for Investors Business Daily, during an appearance on the “Front Page” program on PJTV.com, succinctly summed up the cost issue. “You go where you can make your product at the cheapest rate,” he said.

This was the rationale also echoed to a degree by Jerold Martin, senior vp, global scientific affairs at Pall Life Sciences, and chairman of the BioProcess Systems Alliance.

“Biotechnology is a global business, and it’s very competitive,” he told GEN. “If manufacturing costs are too high, neither drug manufacturers nor equipment suppliers will be able to compete. Since manufacturing costs tend to be higher in the U.S., both drugs and equipment are also manufactured in other countries which, in turn, allows them to compete globally.”

He added that while many Americans say they would prefer to buy items made in the U.S., most, in reality, are not willing to pay the premium prices that many U.S.-made products command due to higher labor costs. Hence, there is a plethora of lower cost goods made elsewhere that Americans buy.

Martin also cited the need for biotech equipment manufacturers to ultimately establish manufacturing operations in rapidly expanding markets, such as Asia and Latin America, to be closer to those customers and better serve local and global markets. Pall Life Sciences has manufacturing facilities in the U.S. and Puerto Rico, England and France, and India and China for redundancy, regional supply, and cost efficiencies.

Martin also wonders how President Obama’s message is being taken by the U.S. drug manufacturers who have closed down a significant number of domestic research and manufacturing facilities and are moving those jobs to Asia where they can research, develop, and produce new drugs for the U.S. market at lower cost. That’s what already happened in the computer, cell phone, and tablet industries.

“In our case, it’s in response to the U.S. Government’s initiative to lower the cost of drugs to the U.S. consumer by encouraging both generics and, in the future, biosimilars.”

U.S. and foreign drug manufacturers are setting up facilities in Asia not just for the expanding Asian market, but also to export back into the U.S. with lower cost drugs. Correspondingly, U.S.-based equipment manufacturers ultimately will be pulled there to be close to their customers, said Martin.

“The key to creating new jobs in the U.S. is to encourage investment in education and in the development of novel products and technologies that create new manufacturing jobs here,” he explained.

“It will not be possible to bring back existing manufacturing jobs once they have moved to lower cost regions without a shift in foreign exchange rates or the government imposing high import tariffs or offering large tax-cut incentives that ultimately make domestic manufacturing more profitable. Businesses are not going to do that on their own otherwise.”

ATMI

ATMI has two main manufacturing facilities where single-use film, bioprocess vessels, powder transfer vessels, and bioreactor vessels are produced. One is located in America—Bloomington, MN—and the other in Hoegaarden, Belgium. A third facility in Brussels, Belgium, focuses on application studies and continued development of bioprocess and cell culture technologies.

The bulk of the manufacturing for ATMI is done in the Hoegaarden facility, with the Minnesota plant acting as a process copy to provide local manufacturing for North America and to guarantee the availability of a back-up facility for global support.

“We feel that it is imperative to have redundant and strategically located manufacturing facilities for multiple reasons,” said Jeffery Lee Craig, global director of business development and marketing.

“The two most compelling reasons are: the need for local service in key markets to be competitive (e.g., shipping costs, delivery timing) and the necessity for redundancy as a key factor to ensure supply chain security and risk reduction for all customers globally.”

Should one manufacturing facility ever have an issue, the other will still be able to generate identical materials for customers and partners, noted Craig.

“These factors are exceptionally important given the nature of products that we sell and our customers’ requirement to have secure access to bags for processing, storage, and transportation in order to keep their own manufacturing processes running on time,” he added.

“This is a global economy and our customer base is everywhere; not just in the U.S. We are all familiar with the emerging Eastern markets ready for Western innovation, but it is interesting these days to see Eastern innovation targeting U.S. and European markets.

“As ATMI continues to grow globally, we will work to create new manufacturing processes that will include the addition of facilities and partnerships for production in different markets.”

Although ATMI does manufacture some of its products in the U.S., a key point that is once again being driven home is that manufacturing operations are established to satisfy “the need for local service in key markets to be competitive.”

Sartorius Stedim Biotech

Although headquartered in Aubagne, France, Sartorius Stedim Biotech has a well-developed international network of production facilities. For example, the company’s membrane filters are made in a U.S. territory—Yauco, Puerto Rico—as well as in Goettingen, Germany. In addition to Goettingen, Aubagne, and Yauco, other major manufacturing sites include Melsungen, Germany; Bangalore, India; and Mahdia, Tunisia.

“To be close to our customers and to minimize turnaround and processing times, we mostly supply our markets directly from our production facilities,” explained company spokesperson Dominic Grone. “This gives us advantages both in logistics and in compensating for currency risks by natural hedging.”

To ensure security of supply, which is especially important for pharmaceutical companies that use the company’s products, Sartorius Stedim Biotech manufactures its key products not at a single site, but rather at several locations. For instance, single-use bags for its pharmaceutical customers are manufactured in Au­bagne, Yauco, and Mahdia.

“By building a new and advanced facility for final assembly and packaging of disposable filters, single-use bags, and selected laboratory products, we are currently expanding our Puerto Rico plant as our central manufacturing and logistics site to serve the North American market,” added Grone.

Waters

The fact that biotech instrument manufacturing takes place where companies believe it is most needed, including in the U.S., was pointed out during an interview with Waters.

Headquartered in Milford, MA, Waters makes its liquid chromatography (LC) columns at its facilities in Taunton, MA, and Wexford, Ireland. The Wexford facility also manufactures and distributes certain data, instruments, and software components for the company’s LC, mass spec (MS), and thermal analysis product lines.

Waters makes most of its MS products in Wexford, Manchester, U.K., and Cheshire, U.K. Certain components or modules of the company’s MS instruments are manufactured by long-standing outside contractors.

Waters has established a manufacturing Center of Excellence in Singapore for routine production. Tom Wesley, director, strategy and operations excellence, noted that this was part of a larger strategy to upgrade the U.S. location in Milford as a Center of Innovation for new product development.

“While certain products have been transferred for manufacture in Asia, it is a common misconception that jobs have been outsourced,” said Wesley. “In fact, the workload in Milford has shifted to these higher value added activities. The workforce in Milford has been stable for the last five years.”