Thriving in a Competitive Field

Today’s medical device contract manufacturers are facing a number of challenges as they strive to retain customers who are shrinking the number of suppliers and service providers with which they do business. As such, the industry is seeing more full service providers emerging to fulfill all the needs of an OEM. Many of these companies are adding capabilities through strategic acquisition, but not all of them are tied tightly to this model. A select few are following more of an organic growth model that is proving fruitful for them.

Tegra Medical is one such organization. Under the leadership of J. Mark King, president and CEO, the company has experienced significant strides in growing both capacity and capabilities by developing offerings he knew would benefit the company’s customers. “By anticipating and understanding our customers’ growth and needs along with our internal investments to meet those expectations, we ensure success for both Tegra Medical and our customers,” explained King.

Prior to meeting with King for the following Medtech Exchange interview, Lee T. Crowe, Tegra Medical’s vice president of sales and marketing, shared some thoughts on King’s experience with the company. “Mark has found the right recipe for Tegra Medical in serving the medical device market. That recipe has produced substantial results and will continue to do so well into the future.” When

asked about King’s leadership style, Crowe said, “Mark has the unique capacity to translate vision into reality and reality into results.”

Sean Fenske: Can you briefly describe what Tegra Medical does in support of its medical device manufacturing clients?
J. Mark King: We are a complete solution provider, which is why we like to say that Tegra Medical is “where medical devices come to life.” Our customers look to us to manufacture everything from a small simple subcomponent to a finished product including sterilization and design/development inputs for DFM [design for manufacturability]. Over the most recent years, as a complete solutions provider, we offer significant risk mitigation with duplicate capabilities in almost every location across Tegra Medical, and we continue to expand our plastics presence with facilities machining and molding PEEK.

Fenske: In such a crowded field of contract manufacturers serving the medical device industry, what does Tegra Medical do to stand apart?
King: There are several things Tegra Medical does to support and service our customers that separate us firmly from the competition. A few noteworthy items include: The independent and robust quality systems that each location is built upon; our capabilities being broad and comprehensive; and the technical and engineering resources at all of our locations led by our Genesis Tech Center operation in Franklin, Mass.

Although Tegra Medical is just another contract manufacturing organization (CMO) in the crowded field that you mention, our employees also really set us apart. We invest in our people through training and growth opportunities, and we provide ongoing philanthropic and social significance in the communities we work and live in.

Fenske: Tegra Medical had traditionally offered metal solutions, but several years ago, you broadened your offerings to include plastic. Can you provide insight into this decision?
King: For years, we only produced the metal components for our customers. We shipped those parts to a molder, then on to be packaged, and often sterilized by yet another company. Having different suppliers for a single product is extremely costly for our customer base. We saw the opportunity to add to our capabilities and build upon our complete solution provider roadmap to offer our customers a cost effective solution and a significant reduction in time. I might also add we are doing the plastics and the metal in the same locations, so the product is built complete between the same four walls, not shipped between locations within Tegra Medical.

Fenske: You, like other service providers in the industry, want to be a partner to OEMs rather than simply a supplier. How do you go about accomplishing this?
King: Tegra Medical’s goal is not just to be a trusted partner, but the customer’s preferred supplier. We have a group of engineers and project managers who work closely with the customer with DFM and cost-effective solutions. Our Genesis Tech Center (GTC) provides these services as well as quick-turn prototyping and short-run production. In fact, the success of the GTC in our headquarters drove us to expand that concept to all of our locations. We are always very open and candid about our desire to establish strong, collaborative, and trusting relationships, developing a “win-win” situation for all parties.

Fenske: Obviously, quality is critical in this industry, but what specific measures are you taking to ensure it for customers?
King: It is very easy for one to speak of quality and offer the latest industry “buzz” terms, but much more difficult to deliver quality as expected by the customer. As an example, we are providing our customers with daily electronic exchanges of quality process information, allowing complete and full access to the manufacturing record, enabling dock-to-stock deliveries. We have dedicated resources within each of our facilities as well as standalone quality systems to meet that facility’s capabilities and that customer’s market needs. Each of our facilities is ISO 13485 as well as U.S. Food and Drug Administration compliant and registered.

Fenske: While on the topic of quality systems, how are you enabling smoother regulatory reviews of devices with which you are involved?
King: Our quality systems are robust and staffed by highly trained medical device QA/RA professionals. Our facilities can provide each of our customers the needed documentation for their products that any regulatory body may require.

Fenske: Let’s look at international reach. Back in 2010, you announced a facility in Costa Rica. Why do you consider that region an important location for manufacturing facilities outside the U.S.?
King: As you know, many medical device firms have facilities within Costa Rica. At our local facility in that region, we can quickly provide cost-effective solutions for those customers. Over the last several years, we have put together a talented and self-sufficient management team with executives representing all aspects of the business, including design and development. Instead of having a component made in the U.S. and then sent to Costa Rica, those components now can be made in Costa Rica, saving the customers money and time. The fastest growing business segment for our Costa Rican facility is within Latin America. We adopted the “motto” a few years back of saying “make local, sell local,” and that has been well received by our local customer base.

Fenske: Do you see any danger of Costa Rica going the route of Puerto Rico where the incentives for manufacturers dried up?
King: In my opinion, there is still plenty of “runway” left for many years to come in Costa Rica. The support we get from the educational system and the economic development team in Costa Rica is some of the finest the world has to offer. Competition will undoubtedly increase wages to varying degrees, but the overall medical device market and manufacturing environment will remain strong, as will our commitment to Costa Rica.

Fenske: You’re opening a cleanroom molding facility in that Costa Rica location soon. Why was this an important move?
King: This move is consistent with our complete solution provider offering of a self-sufficient model for risk mitigation of all of our plants. Duplication of capabilities can be found across all of Tegra Medical.

Fenske: While the location in Costa Rica was the result of a facility acquisition, Tegra Medical’s growth has primarily been described as being organic rather than resulting from mergers and acquisitions (M&A) with complementary firms. Is this a deliberate decision? Are you opposed to M&A?
King: We are not opposed to M&A and we look at opportunities on a regular basis, but if we were to make an acquisition, it must be a strategic fit that follows our growth roadmap. In other words, any M&A must provide a complementary capability as well as capacity. Also, the culture of any acquired company must align with ours. This is an extremely important component to successful acquisition integration. Culture and philosophical alignment are as vital as the numbers.

Fenske: What value is there in organic growth vs. growth through M&A?
King: Both are solid parts of any planned growth. Both must be strategic in nature, either adding capacity or complementary capabilities. Responsible and controlled growth is critical so we can consistently meet the needs of our customers and exceed their expectations well into the future. Make no mistake; the organic growth with our current customer base is priority number one. We take care of the customers with whom we have cultivated collaborative and intimate relationships first, and we will continue that approach for years to come.

Fenske: Looking at the medical device industry as a whole, where do you see the growth opportunities for CMOs that support it?
King: There are many fast growing markets, such as cardiology and neurology and others that are growing in single digits. There have been several articles showing that the CMO market is growing in double digits due to the increased outsourcing by the OEMs [original equipment manufacturers]. Also, the OEMs are under constant cost pressures, thus passing this down to their suppliers. The greatest opportunity for Tegra Medical is to continue its investments in technology, such as robotics and single-setup machines, as well as broadening its capabilities and capacities, and investing in our people and the communities where we have facilities.

Fenske: Big picture, where is this industry headed? What do you see on the horizon in five years? Ten years?
King: We are seeing (as are most CMOs) a shift by the OEMs to supplier consolidation as well as wanting their suppliers to sign multi-year supply agreements with pricing concessions. This will make CMO profitability in future years a challenging path. The supplier reduction will be with us for the next one to two years.

As for the next 10 years, this is hard to predict but the general consensus will be that the medical device space is still a great place to work and an industry with continuing advancements. It is professionally and personally a pleasure to be a part of it. So, with our broad capabilities, geographically placed locations, and our employees, we are extremely well positioned to take advantage of this.

Fenske: Before we close, do you have any additional thoughts or comments you’d like to share?
King: Several years back, Tegra Medical developed our roadmap for growth with these three simple pillars: operational excellence, customer and quality focus, and employee and community involvement. Those have stood the test of time with our management team and those same three pillars drive our business decisions today. We like our recipe and it has served Tegra Medical well.