Medtronic Inc. is consolidating and expanding its Orange County heart valve operations at its existing local center in Santa Ana.
The Minneapolis-based medical device maker, which has 700 workers here, has started work on a new facility for research and development and manufacturing of its replacement heart valves from various types of animal tissue.
Medtronic is a competitor of Irvine-based Edwards Lifesciences Corp. It’s spending an undisclosed amount of money on its local consolidation, which will include new construction and the renovations of existing buildings.
The device maker expects the project to be finished in 2013, when it plans to shift operations now in Irvine and Lake Forest to Santa Ana.
Medtronic spent $11.1 million earlier this year for a 106,524-square-foot industrial and warehouse building on Pullman Street, around the corner from its current Deere Avenue address in Santa Ana. The current plan follows a couple of acquisitions that boosted Medtronic’s presence in Orange County.
Lake Forest, Irvine
Medtronic got its facility in Lake Forest when it bought ATS Medical Inc. last year. It added a manufacturing building in Irvine when it acquired CoreValve Inc. in 2009.
“When we acquired ATS Medical and CoreValve, we realized that we had a great opportunity to continue to invest in our tissue heart valve franchise,” said John Liddicoat, president of Medtronic’s structural heart business. “Part of this investment was creating an Orange County ‘center of excellence’ for tissue heart valves,” he said.
Some jobs will eventually be added, but Liddicoat didn’t say how many.
“We anticipate adding to the labor force as demands (for) our products increase over time,” he said.
Medtronic, which had a market value of about $37 billion last week, also makes cardiac rhythm management, spinal, ear, nose and throat devices as well as surgical navigation products and treatments for vessel diseases.
Medtronic’s replacement heart valves—derived from cow, pig and horse tissue— will all be made in Santa Ana after the consolidation is complete.
Its valve portfolio includes traditional ones inserted with open-heart surgery, such as its Hancock II, Contegra and Mosaic products. It also makes less-invasive valves such as Medtronic CoreValve and Melody, which is approved for a limited number of pediatric patients.
The CoreValve, which is in U.S. clinical trials, is expected to become available domestically around 2014.
Medtronic faces stiff competition in that line of valves.
Edwards
Edwards recently got Food and Drug Administration approval for its Edwards Sapien less-invasive heart valve. Boston Scientific Corp. of Natick, Mass., and Little Canada, Minn.-based St. Jude Medical Inc. are both working on less-invasive valves.
Liddicoat has said that being second to market domestically in transcatheter valves won’t necessarily put Medtronic at a disadvantage.
Market development “done by others will be a benefit to us,” he said.
Medtronic sees less-invasive valves as a big growth market.
“In the U.S. (CoreValve) will be a much bigger opportunity,” said Phil Nalbone, an analyst who covers Medtronic for Wedbush Securities in Los Angeles, earlier this year. “It will be a meaningful contributor to Medtronic someday, and it had better be. This is a company that is desperately in need of growth drivers.”
Medtronic’s revenue for the three months ended Oct. 28 was $4.1 billion, up 6% from a year earlier.
The new Santa Ana center also will have a “customer experience center” where doctors will receive training and education on how to use the company’s heart valves, including introductions to new technologies.
Local History
Medtronic’s heart valve unit grew out of Hancock Laboratories, an early OC device company that was started by engineer and device pioneer Warren Hancock in 1969. Hancock, like many of the county’s other seminal device entrepreneurs, emerged from the original Edwards, which as started by Santa Ana electrical engineer Miles “Lowell” Edwards.
New Brunswick, N.J.-based Johnson & Johnson bought Hancock Laboratories in 1979. Medtronic picked up the Hancock valve portfolio from Johnson & Johnson in the mid-1980s.
Separately, Medtronic said it agreed to pay $23.5 million to the federal government to resolve allegations that it paid illegal kickbacks to doctors who participated in its post-market studies and device registries to entice doctors to implant its pacemakers and defibrillators.
Regulators alleged that Medtronic “caused false claims” to be submitted to Medicare and Medicaid by using a pair of post-market studies and two device registries as a vehicle to pay the kickbacks, according to a Dow Jones Newswires story.
Medtronic didn’t make an admission that any studies were improper or unlawful as part of the settlement.
Investigation Over
Medtronic “is happy to have this investigation behind us, so we can continue designing and executing clinical trials that generate evidence to improve patient care, outcomes and cost-effectiveness,” Marshall Stanton, vice president of clinical research and reimbursement for the company’s cardiac and vascular group, told Dow Jones.
