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R&D Medical Bucks Business Trends

Dave Sheraton has a ready quip for why he never implemented just in time manufacturing.
“I never went to business school,” Sheraton said.

Instead, Sheraton built up to two years of inventories at R&D Medical Products Inc., a contract manufacturer of hydrogels and related products.

“It seemed to me common sense to keep materials on the floor.”

That common sense paid off in a big way when the pandemic and related shipping problems caused competitors to scramble.

Sales at his Lake Forest-based company grew 49% in the past two years to $11.1 million for the 12 months ended June 30. Automation’s also helped reduce its workforce in the past year to 45 from 53 a year ago.

His company ranks No. 28 on this year’s list of fastest growers for midsize companies with sales between $10 million and $99.9 million (see list, page 32).

R&D operates out of a 23,000-square-foot building, shipping one to two container loads a week to more than 100 countries. The company, which is registered with the Food and Drug Administration, is ready to expand, he said.

“I never planned on having my own company and running my own show,” Sheraton said. “I went with the cards that were dealt. It’s all by accident.”

Hottest Bartender

Sheraton, a native of Long Beach who moved to Orange County when he was 9 years old, didn’t plan to be in the medical device business.

Rather, he was a highly paid “happy bartender” at what he said was “the hottest bar” in the 1970s—Garden Grove’s Playgirl.

Then serious health issues popped up, including a stroke and Type 2 diabetes.

He stopped taking courses in TV and radio broadcasting to focus on becoming a doctor, first by earning a biology degree at the University of California, Irvine, and then studying at a university in Italy.

After he ran out of money for medical school, he returned to Orange County where he got a job at medical device maker Sentry Medical Products Inc., a world leader in the neonatal ECG electrode market.

“I was going to go back to medical school, but they kept giving me a new project,” said Sheraton, who rose to become its director of research and development.

R&D Birth

After Sentry was acquired by Tyco in 1996, Sheraton was laid off at the age of 45. Several of his clients asked him to form his own company.

“I didn’t have to think too hard,” he recalled. “I was stuck with a degree in biology, only two years in medicine and I hadn’t bartended in a long time—what was I going to do?”

He picked the name R&D Medical because he didn’t have time to research a name and had to move quickly.

Sheraton was asked to design a small electrode to monitor the hearts of premature newborns that weighed as little as 1 pound. He said the electrodes are “the smallest in the world.”

As a privately held company that he owned, it didn’t matter to him how much money could be made on such a product.

“We develop that product thinking it’d be a couple thousand dollars a year in business. I was fine with that,” he said. “It turned out that particular product works on all the babies. A lot of hospitals decided to use it on bigger babies. To date, we’ve done over 30 million of these devices.”

Other Products

The company makes a wide variety of products, such as a “prenatal music speaker” where an adhesive holds a speaker to a pregnant woman’s stomach so a baby can hear music.

R&D Medical is into the wearables trends, making patches that can pick up signals from the body and transmit them to devices like smartphone applications.

The company says it’s the world’s biggest supplier of eyelash patches to protect the skin during extensions. It makes the patches for 3D-Beauty International, an Orange County-based company that says its Biogel Pads are sold in more than 52 countries worldwide.

When the pandemic hit in 2020, Sheraton was ready and even produced hand sanitizers for a while.

“A lot of people in our industry who buy from our clients were caught off guard by not having their supply chains in very good form. They were overseas dependent on raw materials.

“I typically keep raw materials in my warehouse to run product for two years without have to do another purchase. It makes sense.”

He’s proud of the logo, “Made in America.”

“We’re made in America. We didn’t realize what a strong marketing tool that was until we started exhibiting in foreign countries. It’s all made here. We even ship a lot of products” to China.

What he’s not proud of is how difficult it is to manufacture in California, where the workers compensation issue is “getting really bad.

“I cannot believe the racket that’s going on in workers’ comp between the workers, the lawyers and the doctors,” Sheraton said, adding that he’s considering countersuing attorneys.

The Patches

R&D Medical has become one of the world’s leaders in “transdermals,” short for transferable deliveries where medication is delivered slowly through a patch rather than digested. The company’s three key patches are for sleep, energy and pain.

“These are the top three sellers because everybody has insomnia, everybody wants energy and everybody has pain,” said Chief Technology Officer Joana Prunean.

Last year, investment bankers came every week to discuss IPO or private equity deals.

“They all think I want to sell,” the 71-year-old Sheraton said. “I feel like the company’s only on Chapter 2 right now.

“I love playing this game. I’ve been playing this game for 45 years. You never know when the next project is going to come through the door. Why would I want to stop that?

“It’s so much fun. It’s been a great ride. The one really sad thing is it went so damn fast.”

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