Medical device maker ICU Medical Inc. said last week it has achieved a major company goal—becoming less tied to big customer Hospira Inc.
“We are no longer dependent on Hospira,” said Scott Lamb, ICU’s chief financial officer, speaking at Newport Beach-based Roth Capital Partners LLC’s annual stock conference last week in Dana Point.
Hospira still is a major customer, accounting for 44% of ICU’s $285 million in 2010 revenue.
But that’s “down from 75% a few years ago,” Lamb said.
San Clemente-based ICU makes needleless connectors and other devices used to deliver intravenous fluids and drugs to patients in hospitals and other healthcare settings.
It also makes products for administering powerful cancer drugs, a catheter protector used in kidney dialysis and a pump to deliver insulin to diabetics.
Diversifying
The company started to offer other types of devices a few years ago in a bid to reduce its reliance on sales to Hospira, a Chicago-area diversified drug and device maker that has been its dominant customer since Hospira’s days as part of Abbott Laboratories.
ICU’s custom business, where it makes and sells devices to the specifications of clients, now accounts for about 35% of yearly revenue.
Custom products now are on equal footing with Clave, a needleless connector that’s ICU’s biggest seller to Hospira.
Critical care products—including catheters, monitors and devices that can be used in angiography—accounted for 18% of ICU’s business last year.
ICU got deeper into critical care in 2009 when it spent $35 million to buy a product line from Hospira.
The critical care push has been helped by the opening of a $14 million, 100,000-square-foot plant in Slovakia last year. That plant just began shipping devices, Lamb said.
Devices for delivering cancer drugs make up about 4% of ICU’s sales.
The company’s oncology push is an example of what founder and Chief Executive George Lopez has called “empty markets.”
ICU started selling oncology devices to protect healthcare workers from chemotherapy drugs, which can be toxic, in 2008. The idea originated with Lopez’s wife, Diana, who died of breast cancer in 2006. Her nurses complained of a metallic taste in their mouths from handling chemotherapy drugs.
The company expects sales of oncology devices to double this year from 2010’s $7.5 million.
“We’re at the bottom of the S curve for (oncology) product growth,” Lamb said.
ICU gets the rest of its revenue from other sources, including royalties on patents and revenue sharing with other companies.
Lamb reiterated ICU’s previous 2011 financial forecast of $31.2 million to $34 million in profit on revenue of $295 million to $305 million.
Analysts on average expect ICU’s 2011 profit to come in at $33 million on revenue of $305.8 million.
Competitors include B. Braun Medical Inc., a unit of Germany’s B. Braun Melsungen AG with some 1,300 Orange County workers, Franklin Lakes, N.J.-based Becton Dickinson & Co. and Baxter International Inc. of suburban Chicago, which has 300 area workers.
San Clemente
Business: medical devices
Market value: $560 million
2010 revenue: $284.6 million, up 23%
2010 profit: $30.9 million, up 26%
Growth Strategy
Rivals face “high barriers to entry” in ICU’s niches, Lamb said. They include patent protection and proprietary ways of making medical devices, he said.
ICU is likely to follow its strategy of going after markets other companies avoid.
“Empty markets allow you to be a success,” Lopez said in an earlier interview. “Where there’s money, there’s profits.”
ICU, which had $93 million in cash as of Dec. 31 and no debt, plans to look at acquisitions, Lamb said.
The device maker’s “attractive” balance sheet leaves it “well positioned to pursue additional acquisitions,” said Matt Dolan, a Roth analyst who hosted Lamb’s talk.
