Covidien PLC is striking a nerve in Irvine.
The diversified, multinational medical device maker—which has a tax-friendly headquarters in Ireland and operates from Massachusetts—last week opened a research and development facility for its neurovascular unit in the Irvine Spectrum.
The new center opened with 70 workers, and the company plans to add another 100 within a year, said Brett Wall, president of Covidien’s neurovascular unit.
“The vast, vast majority of these people will be new hires to Covidien,” Wall said.
The 30,000-square-foot operation, located at 9 Parker in the Irvine Spectrum, handles design of Covidien devices that are used to treat conditions such as hemorrhagic and ischemic strokes, said Tom Whalen, vice president of operations for the unit. It also handles production of various other neurovascular devices such as embolic coils and liquid embolics to treat aneurysms and arteriovenous malformations; the Pipeline embolization device, which restores natural blood flow past wide-neck brain aneurysms; and the new Solitaire, which combines the ability to immediately restore blood flow and retrieve blood clots in acute ischemic stroke patients.
Devices are made at another building nearby.
Covidien’s decision to put more research and development in Irvine came about two years ago, according to Wall.
“As we grew, and the business grew, we discussed this internally and made a decision to expand here in Orange County, expand the R&D footprint,” Wall said. “The whole environment in Orange County is very well adapted” because of the quality of the local labor pool, he added.
Covidien spent $2 million on things such as getting the building appropriately wired, as well as some $3 million to $4 million on equipment for the new center, Wall noted.
“When you’re manufacturing medical devices, much of this equipment is not available on the shelf … you have to design and build that equipment,” he said.
Covidien had its own engineers and workers to custom-build the equipment at the new center.
Features of the center include a designated space where Covidien’s doctor customers can have product demonstrations and meet with the company’s engineers and technicians.
Ev3 Deal
Covidien makes a range of other healthcare products at sites around the country and world. It boosted its Orange County presence in 2010, when it spent $2.6 billion to buy Ev3 Inc., a Minnesota company that had some 300 local workers at the time.
Covidien now has some 500 workers in the county, including the 70 at the new research and development center, which is down the street from its primary local facility on Toledo Way. Covidien occupies about 100,000 square feet in the building on Toledo Way, which once housed Ev3’s local operations.
Covidien has companywide sales of more than $11 billion annually, with 41,000 workers and a recent market value of $26.8 billion.
It’s been getting a boost from its vascular device unit, which accounted for $390 million in sales in the first quarter, up 7% from the same period a year ago and above analysts’ consensus of $370 million.
Neurovascular device sales grew 40% in the quarter, according to Covidien.
Covidien Chief Executive Jose Almeida mentioned some products with an Orange County connection in the company’s most recent earnings call.
“The Pipeline continues to perform ahead of expectations, and the launch of Solitaire in the U.S. is on track,” Almeida told analysts and investors.
Covidien is “making significant investments in selling, marketing and clinical trials” in the vascular category, Almeida said.
The launch of the Solitaire and other “compelling new products position Covidien to accelerate its organic growth rate. … We expect Covidien’s high-margin devices to grow faster than the rest of the company,” Sean Lavin, an analyst for New York-based Lazard Capital Markets, said in a research note.
Neurovascular isn’t Covidien’s only business in Orange County.
Newport Medical Buy
The conglomerate just completed its $108 million buy of privately held ventilator maker Newport Medical Inc. in Costa Mesa. Covidien plans to continue manufacturing, research and development and technical service operations in Costa Mesa, according to spokesperson Rhonda Luniak.
Covidien’s new research and development center is near a spirited rival—Irvine-based patient monitoring maker Masimo Corp. Covidien and its predecessors have traded more than a few patent lawsuits with Masimo over the years, along with jabs at each other in the press.
Covidien and Masimo last year struck a settlement in which Covidien will pay a 7.75% royalty on U.S. sales of pulse oximeters. That three-year deal, which is in progress, extended a lawsuit settlement reached in 2006 that saw Covidien pay Masimo about $300 million.
