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Manufacturing Industry Faces Transformation In 2002


January 24, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Puerto Rico’s manufacturing sector, in all its complex diversity, faces a year of transformation, of adaptation to new global trends, and the challenge to create thousands of jobs to make up for those that were lost in the manufacturing sector during 2001’s economic downturn.

Last year, the island’s manufacturers surfed through what is hoped was the worst of the recession. They bought insurance to compensate for escalating oil prices and otherwise patiently waited for the incoming government administration to implement its much-touted economic platform.

Towards the end of the year, the impact of the worst terrorist attack in history and the start of the 21st century’s first war tested everyone’s coping skills as never before.

"It has been a year full of challenges for the manufacturing sector," said Harry Rodriguez, general manager of Abbott Laboratories in Barceloneta. "But we look forward to the expansion of our pharmaceutical manufacturing sector with the advent of biotechnology.

"While this area is in a stage of growth right now, it is time for our industry, in conjunction with academia and government, to begin mapping out this sector’s future. We must develop human resources, who in the end will become biotechnology’s prime matter," said Rodriguez.

Abbott’s $100 million expansion, which began in 2001, is a continuing project. The fermentation plant’s extension is now 80% finished, and Abbott’s additional infrastructure improvement will end by November.

Meanwhile, the company is bidding against Ireland and Singapore for the manufacture of a new pharmaceutical product. "The government’s pioneer enterprise law is a very important element of this project. All things considered, a project’s economic terms are still important. But we have as good as chance as Ireland and Singapore to succeed at this point," said Rodriguez.

Other companies have already begun the construction of new facilities or expansions, taking advantage of the government’s economic development laws. Eli Lilly & Co.’s $250 million expansion may turn into a $450 million project, doubling capacity and adding more than 400 new jobs.

Amgen Puerto Rico Inc. announced recently that it would invest more than $200 million to expand its bulk manufacturing plant in Juncos. With groundbreaking taking place mid-year, the new facility will increase by 50% the plant’s 400 workforce and may be operational by 2006.

One concern for the pharmaceutical drug companies as a whole is the expiration of successful drugs’ patents. While the companies continue to conduct research and development (R&D) for new products, the process is still rare in Puerto Rico.

The government’s economic development law on the establishment of R&D in Puerto Rico exempts the expenses incurred for up to three years and may serve to sway corporate R&D decisions in favor of Puerto Rico.

Meanwhile, pharmaceutical companies are taking the pulse of the emerging biotechnology industry that has resulted in mergers and acquisitions that will impact Puerto Rico in the long-term. Analysts estimate that there are more than 400 biotechnology drugs in clinical development, about one-third of those in late stages of human testing.

Some of Puerto Rico’s key players in the pharmaceutical drug industry represent companies who are competing for the rights to be the first marketers of biotechnology products. In 2001, Abbott purchased BASF’s Knoll Pharmaceutical unit for $6.9 billion in order to bolster its R&D division.

Bristol-Myers Squibb recently bought the marketing rights of ImClone Systems’ cancer drug Erbitux, which could reach the market this year. AstraZeneca is working on the approval of Iressa, a pill that blocks cancer’s epidermal growth factor. And Amgen’s $16 billion purchase of Immunex Corp. created the biggest merger yet of two biotechnology companies.

With nine of the top ten pharmaceutical drugs sold in the U.S. manufactured in Puerto Rico and the industry’s $60 billion plus contribution to the island’s gross domestic product, drug manufacturing appears healthy, although still looking for ways to reduce high operational costs (such as energy) and remain globally competitive.

But is there more to Puerto Rico’s manufacturing industry than pharmaceutical drug manufacturing? Of course there is.

Electrical and electronics manufacturers had a hard time last year, what with the crash and rising costs of oil. Aguadilla’s Hewlett-Packard (HP) complex fought the hard battle with long-term strategizing, starting with the creation of a cluster of companies that provide services and complement each other, part of the Puerto Rico TechnoEconomic Corridor (PR-TEC).

Hewlett-Packard’s Operating Manager-Manufacturing Organization Lucy Crespo said, "We are now in a recovery period, where we are starting to see a slight improvement. HP’s fourth quarter 2001 results were much better, showing profits, as did Compaq (HP management is trying to convince shareholders to approve a $24.2 billion acquisition of Compaq). We will continue to be an attractive company, thanks to our technology."

On the other hand, other electronics sector companies have undergone financial struggle. Corning Inc., the biggest telecommunications’ optical fiber manufacturer and a company operating in Caguas, reported losses when demand for its products decreased as the economy slowed.

And Aguadilla’s Sensormatic, a Florida-based security equipment manufacturer who was acquired by Bermuda-based conglomerate Tyco International Ltd., is restructuring its operations to integrate its parent company’s security, healthcare, and telecommunications concerns. But last week, Tyco’s share price decreased 8.5% as concerns grew for its growth rate.

Medical devices manufacturers had a year of growth and maintain a positive outlook in 2002. Añasco’s Allergan Medical Optics Inc. may have taken the lead last year when, also as part of the PR-TEC program, it established a cluster of companies, service suppliers and academia working together.

In November 2001, the company announced a $3.5 million plant improvement program, after having invested $22 million in the past four years. The Añasco plant, which manufactures silicone and acrylic intraocular lenses and phaco tubes used in cataract operations, will expand add about 100 jobs this year and remains the company’s second largest facility.

Medtronic, which made national news last year when one of its pacemakers was implanted in U.S. Vice President Dick Cheney, continues submitting new products for Food and Drug Administration approval. The company’s plan is to expand pacemaker leads’ production (wires connecting the pacemaker with its external power source) from 740,000 units to 3.5 million by 2010. This has Medtronic’s Villalba complex looking for additional manpower and space, which could become the town’s first industrial park.

A more pessimistic fate shadows Puerto Rico’s biometrics industry. While Sept. 11 events seemed to create an obvious interest in the development of technologically advanced security equipment, four months after the terrorists’ attacks local companies such as Biometrics Imagineering remain disappointed.

"In Puerto Rico there is no support for high technology innovation companies and the island is too far out of the mainstream for U.S. mainland or foreign investors to look at a local technology corporation. This is one of the reasons why we are considering moving operations to the stateside, as other companies have previously done," said Hector Hoyos, president of Biometrics Imagineering, a high technology producer and marketer of proprietary products for the banking, retail, and electronics industries.

While Hoyos is concerned about a U.S. court’s dismissal last week of partial fingerprints in a legal case, he still believes that the industry will "explode" at some point in the near future. So Biometrics will continue to develop high technology security products, such as self contained, intelligent threshold equipment that does not need human interaction (fingerprints, iris or retina scanning) to produce results.


Nine of the top 10 selling prescription drugs are produced in P.R.

Rank Brand Name Drug Pharmaceutical Co.
1 Prilosec AstraZeneca-IPR Pharmaceutical
2 Lipitor Pfizer Corp.
3 Prevacid* Tap Pharmaceutical Products
4 Prozac Lilly del Caribe
5 Zocor Merck & Co.
6 Celebrex Pharmacia & UpJohn
7 Zoloft Pfizer
8 Paxil GlaxoSmithKline
9 Claritin Schering-Plough
10 Glucophage Bristol-Myers Squibb

*Not produced in Puerto Rico

Source: Drug Topics, March 19, 2001

This Caribbean Business article appears courtesy of Casiano Communications.
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