Phillips-Medisize Expands; Provides Insight Into Market Trends

At a recent medical device conference in southern California, Phillips-Medisize Corporation announced further real estate expansion, building on significant growth from last year. Last year saw the company expand its facilities in the Czech Republic, open a design center in Mountain View, Calif., add cold chain storage capabilities, and of course re-brand itself following the merger of Phillips Plastics Corporation and Medisize Inc.

Now, the company has expanded its Kontiolahti, Finland, operations. The site focuses on the production of complex drug delivery devices such as inhalers, injection pens and safety syringes. The 60,000-square-foot addition is aimed to be complete by August this year, and will increase molding and assembly capabilities. According to the company, the growth will include a 15 percent increase in staff over the next two years.

“The wind is behind our back,” said company President and CEO Matt Jennings. The company’s global growth strategy has its sights set on the growing marketplaces outside the United States, especially Asia—which, as Jennings pointed out, is often code for China. Jennings suggested that though the opportunity in China is known throughout the industry, many may not realize just how big the marketplace has the potential to become. “The middle class in china is 350 million [people]—the size of the U.S.—that’s their definition of middle class. It’s got a boom to it too and is aging. It’s the largest growth market in the world today.”

Indeed, as Jennings noted, industry leaders such as Medtronic and Stryker have acquired device manufacturers in China recently. These big-ticket purchases are setting the stage for others to follow. As soon as the Medtronic/Kanghui acquisition closed, Stryker CEO Kevin Lobo began hinting about its own purchase—and now Phillips-Medisize is doing the same.

“The North American and European markets are slowing,” Jennings said. “We would go to China to take advantage of its growth.”

A key in Asia, too, is the notion of manufacturing in Asia for Asia—or in China for China, as the case may be. This, Jennings noted, would accelerate top-line growth by keeping costs down while at the same time accessing vast market space.

One of the reasons it’s more difficult to gain rapid top-line growth now, explained Jennings, is the diversification of the market place. “In the [19]80s and 90s, there were plenty of areas that were very large, that drove top-line revenue,” said Jennings. “Big therapy areas are getting smaller and smaller. As a blockbuster comes off patent, they may extend it by putting it in different delivery mechanism, a different platform. Epipen is a good example. Epinephrine hasn’t been on patent for years, but the device has lot of patents in and around it.”

According to Phillips-Medisize, some of the key factors affecting the medical device market landscape now (besides the ever-present issue of aging populations) are the need for a one-stop vendor base; increasing challenges to develop global “blockbuster” drugs; developing emerging markets (including the BRIC bloc of Brazil, Russia, India and China); tighter regulatory oversight; and the management of a global manufacturing scale with intermittent blockbuster wins.

A key trend lately has been the increased focus on exploiting attractive high-growth market segments including diabetes, personalized diagnostics consumables and improved single-use devices. Unfortunately, this trend is leaving niche devices and technologies in the dust. Treatments for “orphan” conditions (conditions that affect a very small minority of the population, or conditions traditionally largely ignored by research and medicine, including Fabry’s disease, alveolar echinococcosis, variant renal cancer and high myopia) are increasingly neglected in such an environment.

The U.S. Food and Drug Administration (FDA) also has been placing an increasing emphasis on supplier controls and human factors engineering. As a result, stretched internal OEM resources have increased the propensity to outsource all stages of design through production to fewer global contract manufacturing organizations (CMOs) with broader capabilities. This is a major driver for CMOs to expand in every way they can and for OEMs to gain CMO capabilities as well. “It’s difficult to get into CMOs because of the high level of expertise and regulation,” explained Jennings. “The way to do it is get in via an acquisition.”

So, applying the knowledge of these market trends, will Phillips-Medisize be expanding into China in the near future? “We see 2013 as being robust growth year,” said Jennings noncommittally. “We have visibility into 2014 and 15 too—but facilities usually come last, people and expertise first.”

Phillips-Medisize is headquartered in Hudson, Wis. The company provides design and manufacturing services to the medical device and diagnostics, drug delivery and commercial markets.