Getting the word out on wires

Article by: JANET MOORE , Star Tribune
Updated: September 28, 2010 - 2:51 PM

Medical device manufacturer Lake Region Medical aims to build better name recognition as it launches new guidewires.

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Chaska, Friday 10/23/09 Lakes Region is a quiet, privately held company that started in 1947 as a maker of fishing lures. Now, it employs 1,500 people locally, and it recently expanded by opening a plant in Ireland, as a manufacturer of different types of guidewires used in medical procedures.

Photo: Richard Sennott, Star Tribune

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On Tuesday, thousands of cardiologists will descend on Washington, D.C., for a big medical meeting to learn about new, cutting-edge ways to treat heart disease.

This year, Chaska-based Lake Region Medical will have a booth, one of hundreds at the Transcatheter Cardiovascular Therapeutics (TCT) meeting -- only the second time in the 63-year-old company's history.

Although a global leader as a manufacturer of medical devices and components for other companies, the privately held company also makes a series of guidewires used mainly in minimally invasive heart and diagnostic procedures. The devices aren't marketed directly to hospitals -- rather, they're sold to Lake Region's customers, including Medtronic Inc., Boston Scientific Corp., St. Jude Medical Inc. and Vascular Solutions Inc.

"Amongst our device company customers and within the industry, we're very well known," said Jim Mellor, who recently joined Lake Region as vice president of sales and marketing with 30 years of med-tech experience, including a long stint at Fridley-based Medtronic. "Amongst physicians, we're not very well known."

The booth might help remedy the lack of name recognition, especially since cardiologists generally like new tools. Lake Region will launch a new slate of guidewires at TCT, several of which were developed by an Irish company called Brivent Medical it acquired last year.

But the stepped-up presence is also a good way for Lake Region to seek out new research-and-development and manufacturing partnerships with med-tech companies preparing for a new federal tax on revenue.

The controversial $2 billion annual tax will be levied on med-tech companies beginning in 2013 as a way to pay for health care reform. Each company will pay a 2.3 percent excise tax on annual sales.

The tax was a hot topic in med-tech circles earlier this year as the debate raged over health care. The industry argued -- with limited success -- that taxing revenue would stifle innovation on new, potentially life-saving products, particularly at cash-starved start-ups.

As big companies financially regroup to pay their share of the tax, they'll likely cut back on research and development for non-core, workhorse products -- like guidewires -- and concentrate instead on higher-end products. Lake Region thinks it can step in and develop new products, and gain regulatory approval for them, as well.

"We're finding that, even now, companies are beginning to shed their research-and-development budgets and they're coming to us with a problem that we can solve. Not many companies have our expertise," said Lake Region CEO Joe Fleischhacker. (Of the company's 1,600 employees, about 100 of them are engineers.)

Thomas Gunderson, a veteran medical technology analyst with Piper Jaffray & Co, said the strategy makes sense.

"Big medical device companies will do everything they can to try to make up for the excise tax," Gunderson said. "If a vendor comes to a company and says, 'Hey, you're going to take a hit, and here's how we can help,' that will resonate."

According to a recent report by Wells Fargo Securities analyst Larry Biegelsen, medical device manufacturers will experience profound changes in the way they do business as health care reform takes effect.

As insurers put pressure on reimbursement, devicemakers will increasingly need to focus on products that can improve productivity and quality of care without increasing cost, and then provide compelling medical evidence proving a product is safe and cost effective. But doing so is often an expensive proposition.

The marketing push is the latest iteration for Lake Region, which was started by Joe's father, Joseph Fleischhacker Sr., as a fishing lure company in the family's chicken coop. "We're hoping that at TCT we'll get better awareness for the Lake Region Medical brand," Mellor said.

Janet Moore • 612-673-7752

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