Orange County’s largest biomedical employers got smaller in the past year as companies shuttered or scaled back local operations in a bid to stay one step ahead of competitors and falling prices.
The 25 largest medical device and instrument makers operating here saw local employment drop 7%, or by 739 jobs, to 9,138 OC workers, according to this week’s Business Journal list. The decline came as several of the biggest biomedical employers relocated operations, shut down plants or streamlined operations.
Nearly half of the job losses came at No. 5 Medtronic Inc., the Minneapolis-based maker of heart surgery products, which closed an Anaheim plant in July and shifted work to Minnesota and Mexico. Medtronic, which dropped from the No. 4 spot on last year’s list, still employs 400 people in Santa Ana.
“The Anaheim closure was part of a planned consolidation,” said Medtronic spokeswoman Chris Campbell-Loth.
Another big decliner was No. 3 B. Braun McGaw Inc., which shed 390 jobs in Irvine after shifting some administrative operations to its U.S. headquarters in Bethlehem, Pa. B. Braun McGaw, part of Germany’s B. Braun Melsungen AG, counts 1,325 OC employees and also slipped a notch in this year’s rankings.
OC’s other big biomedical employers fared slightly better. Taking Medtronic and B. Braun out of the mix, the other 23 companies were flat in terms of local employment, down1% to 7,413 OC employees. Comparing the 25 companies on this year’s list vs. those on last year’s, employment was down 5%. The list ranks local medical device and instrument makers, including OC-based units of firms headquartered elsewhere, by current employment.
Even with local job losses, the biomedical industry is in the best shape in years, said Ben Andrew, an analyst with Chicago-based William Blair & Co., who follows Medtronic, Irvine-based Edwards Lifesciences Corp. and other industry players. He calls the downsizing “according to plan” for an industry under constant pressure from hospitals and doctors to contain costs.
“It’s entirely logical,” Andrew said. “There are consistent price declines in the market. If you’re not growing as fast, you’ve got to contract headcounts to retain the margins you need to show investors.”
As big global players such as Medtronic and B. Braun look to consolidate operations, Orange County’s relatively high cost of doing business and tight labor market are factors, he said.
“The cost of living is so high and the unemployment rate is so low, it is extremely difficult for these companies to get qualified engineering talent when they are competing against dot-coms and other early-stage companies,” he said. “Those companies aren’t as prevalent as in Memphis or Minneapolis.”
Other decliners on the list include: No. 4 Alcon Laboratories Inc., an Irvine-based unit of Nestle Corp. that makes surgical products, down 143 jobs, or 42%, to 400 OC employees; No. 14 Gish Biomedical Inc., an Irvine-based maker of surgical devices, down 23 people, or 13%, to 160; and No. 6 Mallinckrodt Medical Inc. of St. Louis, down eight, or 2%, to 331 employees in Irvine.
Other medical device makers and fledgling start-ups have been quick to snatch up laid-off biomedical workers, industry executives and observers said.
“It’s the constant life cycle of medical product manufacturing companies,” said David Anast, publisher of the Costa Mesa-based Biomedical Market Newsletter.
When Sorin Biomedical Inc. closed its 250-person plant in Irvine late last year, many workers there soon found jobs at other companies, according to Wayne Krachun, Sorin’s former chief financial officer. Sorin, which ranked No. 9 on last year’s list and is part of Italy’s Sorin Biomedica SPA, moved operations to Colorado.
“I’ve got to believe that with the economy being the way it is, anybody who wanted to work found a job,” Krachun said.
A host of other big local biomedical players managed to hold steady, reporting no change in local employment. They include No. 8 Toshiba America Medical Systems Inc., a Tustin-based unit of Japan’s Toshiba Corp., at 260 OC employees; No. 9 3M Dental Products at 225 employees in Irvine; and No. 12 Advanced Sterilization Products, an Irvine-based Johnson & Johnson unit with 196 local employees.
In all, 11 of the 25 companies cut jobs while six stayed flat. Eight added workers locally. Topping the list is Fullerton-based Beckman Coulter Inc., with 2,191 OC employees, up 1%
Among the gainers is No. 2 Edwards Lifesciences, which was spun off from Baxter International Inc. in April. The heart-valve maker, which last month received regulatory approval for its mitral valve, added 36 jobs for a 3% gain to 1,325 OC employees. New products and a focus on the growing tissue-valve segment are fueling growth, according to Chief Executive Michael Mussallem.
“There are real differences among the various segments of healthcare,” he said. “The mature products are under the greatest pressure. For a business like ours to be successful, it’s a byproduct of innovation.”
The biggest gainer on the list is No. 11 Horizon Medical Inc., which added 50 people for a 33% gain to 200 employees. As medical device makers have cut costs and shed manufacturing, the Santa Ana-based provider of contract design and manufacturing services has benefited.
“There used to be a trend toward outsourcing in the medical products industry,” said William Goolsbee, Horizon Medical’s chief executive. “It’s no longer a trend. It’s a reality.”
Goolsbee declined to name Horizon’s customers, but he said half of the company’s business comes from top industry names. About a third comes from mid-size companies and the rest from start-ups, he said.
In a year’s time, Goolsbee expects Horizon to expand to around 300 employees in Santa Ana. Like other local companies, Horizon has picked up workers after downsizing at some of OC’s big biomedical employers.
“We’ve got people on the payroll who used to work for Medtronic,” he said.
In February, the company consolidated operations into a new 60,000-square-foot facility that includes two cleanrooms as well as research and development faculties.
Even with a downturn in local employment, the list illustrates OC’s role as a hub for the biomedical industry. Big home-grown players such as Beckman Coulter and Edwards Lifesciences dominate, while many of the industry’s top players are represented among the list’s top 10 companies.
A March report from La Jolla-based industry group California Healthcare Institute found Orange County is home to 337 biomedical companies with more than 33,000 employees, or about 8% of OC’s high-tech jobs. n
