Costa Rica’s President Talks Medtech and Plans for Industry Growth – St. Jude Opens Heart Valve Facility in the Country

Costa Rica’s President Talks Medtech and Plans for Industry Growth; St. Jude Opens Heart Valve Facility in the Country

CINDE, Costa Rica’s economic development arm, uses the slogan, “the place, the people, the opportunities.” It certainly seems as if all those variables have come together, translating into growth for the tiny isthmus nation in Central America. But don’t let the country’s size fool you. What it lacks in area, it seems to be making up for in various international rankings.

Take, for example, the country’s recent ranking as the biggest high-tech exporter in Latin America and fourth-largest in the world, according to a study conducted by the World Bank. It also is the third-largest recipient of foreign direct investment (FDI) per capita, ahead of countries such as Mexico and Brazil. For 2010-2014, the country hopes to attract $9 billion in FDI, a 34 percent increase compared to 2006-2010.
During a recent press event in New York, N.Y., Costa Rica’s President Laura Chinchilla discussed her administration’s plans for continuing growth and attracting new business. Her visit coincided with a meeting of the United Nation’s General Assembly, which she addressed. Over the course of two days, Chinchilla met with business leaders and toured the city’s financial district (including ringing the opening bell on the New York Stock Exchange) to discuss Costa Rica’s “value proposition” as a manufacturing hub.

She acknowledged the medical device industry’s role as part of what she termed Costa Rica’s “success story.”

“When we talk to medical technology companies in Costa Rica about their future plans, the good news is that all these enterprises plan expansion,” Chinchilla told Medical Product Outsourcing. “That doesn’t just mean expansion of facilities, it means production of more sophisticated devices and operations, research and development, and training facilities. We have some continue to support these types of operations and foster cooperation. It has been an example of growth for us—not just in continuing to attract new medtech, but also high-tech companies in other industries.”

There are more than 200 multinational companies doing business in Costa Rica. In 2000, there were only eight medical device companies. This year there are 32 firms, and that number continues to grow, officials said, with more to come (a few more companies are set to announce plans to open plants in Costa Rica in the near future, though officials would not elaborate).

Part of the growth strategy Chinchilla outlined was to continue to invest in Costa Rica’s human capital.
“Costa Rica is very well positioned in a global market, and that’s not by chance,” she said. “We’ve done the right things. We’ve created an educational system that was free and mandatory for every child. The quality of our resources and education is an important part of out development and in our business environment—flexible, adaptable human resources. This is attractive to medtech. Being at the top is very hard, but you have to keep the pace up.”

Anabel Gonzalez, Costa Rica’s minister of foreign trade, said that growth in the country’s medtech sector wasn’t just about attracting more OEMs, but that the challenge is to create a “robust supply base” for those companies.

“We have moved from producing very simple products, such as IV sets, to more sophisticated products like heart valves. This is a great responsibility for us,” Gonzalez told MPO.“We’re committed to continuing to focus on this sector—to grow the base of contract manufactures, sterilization providers, and suppliers that are so important to this industry, and we think there’s still a lot of room to grow.”
Both Chinchilla and Gonzalez emphasized that new markets and trading partners will help to provide new avenues for companies doing business in Costa Rica.

Last year, Costa Rica signed on to the Central America Free Trade Agreement, or CAFTA, and officials currently are negotiating free trade deals with China, Singapore and the European Union. Talks with Korea also just got underway, Gonzalez said.

Part of the president’s domestic agenda includes a focus on infrastructure—roads and ports, particularly ports that border the Caribbean, Chinchilla said “We also need to cut down on the red tape for the business community,” she added.

Gonzales told reporters that Costa Rica’s gross domestic product grew 4.2 percent in 2010 after a negative growth in 2009. She expects GDP to increase 4.7 percent in the coming year.
Costa Rica exports more than 4,000 products to 135 countries, with a net worth of $8.7 billion, officials said—mostly computer chips, parts and medical devices. Total exports have increased more than 60 percent in the last 10 years. In 1994, 36 percent of Costa Rica’s exports were related to the country’s natural resources. By 2008, 38 percent of exports had a “scientific base,” Chinchilla said.

One example of recent medtech expansion is St. Jude Medical. The St. Paul, Minn.-based cardiovascular giant held a ribbon-cutting ceremony in early September for a new facility for manufacturing heart valves. The plant is located in the El Coyol Free Zone in the city of Alajuela. Construction began in December 2008. According to Gonzalez, the company plans to invest nearly $700 million in Costa Rica and employ up to 2,000 people in the next five years.

“St. Jude Medical has chosen Costa Rica as an expansion site because of its robust business environment, talented workforce and its strategic location in an area where we see strong growth potential,” Michael T. Rousseau, group president of St. Jude Medical, said when the project was announced. “We appreciate the opportunity to do business in Costa Rica and look forward to a mutually
beneficial relationship.”

(Editor’s note: For more information on Costa Rica and other international markets, see this month’s feature on global manufacturing opportunities on page 68.)

BD Divests its Blood Pressure Monitoring and Catheter Units

Privately held Argon Medical Devices Inc. has acquired the pressure monitoring and catheter product lines from Franklin Lake, N.J.-based Becton, Dickinson & Co. (BD).

The purchase included BD’s blood pressure monitoring devices and central venous, pulmonary artery and extended dwell catheters. For Athens, Texas-based Argon, the deal expands its interventional radiology, critical care and cardiac catheterization product lines. As part of the deal, Argon also acquired one of BD’s manufacturing facilities in Singapore. Argon manufactures its other products in Athens.
According to Argon executives, the acquisition of the critical care and extended dwell catheter product platforms helps to strengthen its line of vascular access devices by joining Argon’s other products, including its Cleaner Rotational Thrombectomy System, JAWZ Endomyocardial Biopsy Forceps, pressure transducers, high-pressure manifolds and vascular introducer kits.

The company’s products are sold through a combination of direct sales representatives and specialty distributors in the United States and a network of international distributors.

“The BD pressure monitoring and catheter products are well recognized by hospitals and physicians worldwide,” said Michael J. Hudson, CEO of Argon. “The acquisition of these well-recognized products rounds out the Argon portfolio giving us a significant global presence in these important markets.”

Cardinal Says Goodbye to its Hold on CareFusion

In a move that nearly coincided with its first anniversary, Cardinal Health Inc. sold its remaining stake in CareFusion Corp., the clinical and medical products firm spun off last year. Cardinal sold the remaining 30.5 million shares it held in CareFusion stock in a block trade to global financial services firm Morgan Stanley. The shares—which represent about 13.7 percent of outstanding CareFusion stock—sold for $706 million, according to a brief filing with the U.S. Securities and Exchange Commission (SEC). Based on the figures in its SEC filing, Cardinal Health gave Morgan Stanley a discount for taking the shares off its hands.

“It’s not uncommon to see a discount on a large block trade like this,” Cardinal Health spokesman Troy Kilpatrick told MedCity News.

The end of Cardinal Health’s relationship with CareFusion has been in the making since the spinoff in August 2009. In its 2010 fiscal year (ended June 30), Cardinal Health sold 10.9 million shares of CareFusion stock for $270.7 million, according to its SEC filing.

CareFusion, however, has had some growing pains since gradually being granted its independence. Last month, the San Diego, Calif.-based firm announced that it would lay off 700 workers, or nearly 5 percent of its workforce, as it attempts to generate $100 million in annual savings. The company experienced a 66 percent drop in profits during the fourth quarter of fiscal 2010, posting $52 million in net income or 23 cents per diluted share on sales of $1.04 billion during the three months ended June 30. Those figures compare with a net income of $96 million, or 44 cents per diluted share during the fourth quarter of fiscal 2009.

The decline is prompting the company to look for ways to save up to $95 million during fiscal 2011 and an additional $120 million in fiscal 2012. One of those ways is by eliminating layers of management and reducing its supporting infrastructure, according to the company. The moves will cost up to $50 million in fiscal 2011.

“During fiscal 2010, we evaluated our cost structure and the strategic fit of certain businesses and are now taking the necessary steps to ‘right-size’ our company,” CareFusion Chairman and CEO David Schlotterbeck said in a prepared statement. “Our goal is to improve our competitive position, accelerate our previously announced efforts to improve our operating margins and enhance our focus on the core opportunities we have for growth.”

Schlotterbeck added: “We are expecting revenue growth of mid-single-digits on a reported basis over fiscal 2010 results and adjusted diluted earnings per share of $1.58 to $1.68, an 11 percent to 18 percent increase.”

U.S. Spine Now Part of Amedica Corp.

Amedica Corporation has purchased US Spine in a move to expand market share in spine and orthopedic reconstruction.

Amedica is a spinal and orthopedic implant and instrument company focused on unique silicon nitride (SiN) ceramic technologies.Boca Raton, Fla.-based US Spine is a privately held firm that develops spinal implant systems for minimally invasive procedures, allograft, and deformity correction procedures, which Amedica executives claim complement their existing spinal implant and device product lines.
Terms of the deal were not disclosed.

According to officials for Salt Lake City, Utah-based Amedica, in addition to spinal implants, SiN materials have “market changing characteristics” for hip, knee and extremity implant applications as well. Among the benefits they noted are fracture resistance and bearing/articulating surfaces that don’t produce wear debris causing the breakdown of bone (called osteolysis), which can lead to additional operations. Additionally, the implants employ a hydrophilic and conductive micro-structure surface to enhance bone in-growth and solid attachment.

“This acquisition will clearly enable Amedica to establish itself as a complete and full-line spinal implant concern with leading edge technologies including, and further integrating, the very unique silicon nitride advantage,” said Ben Shappley, president and CEO of Amedica. “As a result of this transaction, Amedica has doubled its distribution network and sales and marketing management and enhanced its international presence.”

Amedica certainly seems to be exhausting multiple avenues for growth and product development. Earlier this year, the company signed a joint-venture development agreement with Orthopaedic Synergy Inc. (OSI), a hip and knee implant firm. OSI’s corporate headquarters are in East Taunton, Mass., and its design, development and manufacturing center is based in Christchurch, New Zealand. Amedica also recently received four new patents—one for ceramic-on-ceramic bearings, another for a hip implant using mono-block silicon nitride technology, a third for silicon nitride knee components, and a fourth for motion-preserving total disc replacement technology. In addition, Amedica partnered with SUNY Upstate Medical University in Syracuse, N.Y., to measure and clinically support the fusion performance of silicon nitride implant devices.

In September, to help fund the US Spine and other purchases, Amedica completed a $30 million financing consisting of $15 million in private equity and a debt facility of $15 million. Zions First National Bank, also based in Salt Lake City, provided the debt facility, and Creation Capital of New York, N.Y., and Austin, Texas, acted as the placement agent for the private equity piece. Creation Capital is an established banking concern that specializes in high-growth emerging healthcare technologies.

In addition to mergers and acquisitions, the proceeds from the financing will be used for other expansion activities and sales and marketing support, Shappley said. He added that Amedica has shown “solid growth” with a growth rate of 24 percent over the last six quarters in its spinal implant business.

Zoll Gets 510(k) Nod for Device with Military Applications

The U.S. Food and Drug Administration (FDA) has given its OK to the Propaq M Monitor from Zoll Medical Corp. The device monitors vital signs and is intended for use as part of deployable military medicine and air medical operations.

Designed specifically for the tough demands of battlefield medicine (air transport and evacuation, as well as highly mobile ground, sea and air deployments of medical treatment), the Propaq M, according to the company, meets military and international standards related to durability, environmental operation and storage extremes, radio frequency emissions, and susceptibility to spurious electrical and radio frequency noise.

The development of the product—which was facilitated by grants from the U.S. Army Medical Research and Development Command—was a joint project among the U.S. Department of Defense and a cooperative agreement between Zoll and Welch Allyn Inc. (Skaneateles Falls, N.Y.). Development was facilitated with grants from the U.S. Army Medical Research and Development Command. In October 2008, Welch Allyn and Zoll entered a strategic alliance related to research and development, manufacturing, sales, service, and distribution relating to Welch Allyn’s defibrillation and monitoring products. For example, Zoll Medical distributes the Propaq line for Welch Allyn.

According to Chelmsford, Mass.-based Zoll, Propaq M is a lightweight, compact device that combines advanced capabilities with the proven features of the existing line of Propaq monitors. New features of the Propaq M include 12-lead monitoring, a third invasive pressure channel, extensive trending and data collection, a large high-contrast color display with 4-waveform capability, a night vision goggle mode for military and air medical night operations, and a user-removable battery that will operate all the physiological parameters for more than 7.5 hours. The entire package is nearly 5 lbs. lighter than currently deployed technology.

The Propaq M is a companion monitor version of the recently FDA-cleared Propaq MD transport monitor/defibrillator and has been developed to have a completely identical and common interface for operation, batteries, power supplies, blood pressure cuffs, cables, accessories and data.
Zoll Medical develops devices for defibrillation and monitoring, circulation and CPR feedback, data management, fluid resuscitation and therapeutic temperature management. The company also provides technology for clinicians and rescuers who treat victims needing resuscitation and critical care.