The fast track to being No. 2

Fresh out of Stanford Medical School in 1987, young Eric Fain went to work at a small California medical technology start-up called Ventritex Inc. that was dabbling with a promising medical device.

The product, an implantable cardioverter defibrillator (ICD), involves a pacemaker-like device that uses electrical current to shock an erratically beating heart back into rhythm, warding off sudden cardiac arrest.

The technology had fascinated Fain since medical school. Even before that, majoring in applied math and biology at Brown University, he was captivated by probing the ways that technology could interact with the heart.

"The whole algorithm development side really appealed to me," he said recently. He thought he'd give Ventritex a year, then resume his career track to become a practicing physician.

That was 20 years ago. Ventritex now is part of Little Canada-based St. Jude Medical Inc., and Fain, 47 and graying slightly at his temples, heads the $3.3 billion company's cardiac rhythm management division, which makes pacemakers and heart defibrillators.

The affable Fain has held several management positions with St. Jude, and his promotion in July -- replacing Michael Coyle, who retired -- comes at a critical time for the company. St. Jude is historically the No. 3 player in a three-horse ICD market.

Fain and his ultra-competitive boss, St. Jude CEO Daniel Starks, want to change that. St. Jude could become the No. 2 player in the ICD market next year --something that was unthinkable three years ago.

Defibrillators are high-margin, $30,000 devices, part of a $5.7 billion worldwide market. The industry considers the market underpenetrated -- less than 35 percent of those who need the devices get one. That represents a scintillating financial opportunity -- and a daunting challenge for Fain and his competitors.

Industry leader Medtronic Inc. of Fridley this month named Pat Mackin president of its $4.9 billion cardiac rhythm disease management division, replacing Stephen Mahle, who now is executive vice president and senior health care adviser.

Recalls put the skids on

They, along with No. 2 player Boston Scientific Corp., must grow a business that has stalled behind a series of safety-related recalls in the past two years by all three major manufacturers, particularly Guidant Corp., now part of Boston Scientific.

The recalls spooked patients and doctors alike, causing sales of the device to lag. While ICD makers predict that the market will rebound, industry analysts had hoped a recovery would have happened by now. Before the recalls, it was not uncommon to see annual ICD growth rates of 20 percent or more.

"It is increasingly difficult to differentiate your products in the [pacemaker and ICD] marketplace," said Tim Nelson, an analyst with Piper Jaffray & Co. Now, manufacturers compete largely by promoting different product features.

"The challenges are significant," Nelson added, "primarily because the market isn't growing, so that makes the [market] share battles pretty intense."

As of the most-recent quarter, Medtronic holds 50 percent of the U.S. ICD market, with Boston Scientific at 25 percent, and St. Jude 22 percent, according to Nelson.

Rising career trajectory

Growing up in Barrington, R.I., Fain often would accompany his mother, a hospital administrator, to work. "In junior high, I spent a summer working in shock and trauma," he said with a chuckle.

He followed his passion for medicine to Stanford, thinking he'd move back to the East Coast after medical school. But the Ventritex opportunity and California's weather appealed to him. Today, Fain lives in Northern California, commuting weekly to St. Jude's manufacturing facility in the Sylmar area of Los Angeles, and making quarterly trips to Minnesota.

"I can remember the day Eric came in my office," said Dr. Roger Winkle, a former professor at Stanford's School of Medicine and now director of electrophysiology at Sequoia Hospital in Redwood City, Calif. "He said he was very interested in defibrillators and did an enormous amount of research on the topic. I taught hundreds of students, but I remember Eric clearly."

Fain holds more than 35 U.S. patents, most related to defibrillator technology, and his career has followed the trajectory of the device. "He was a jack of all trades in the early days," said Winkle, one of Ventritex's founders. "He understood engineering, science, patients and the clinical side. He was obviously a very smart guy."

Fain never turned back. "There are some folks who get true satisfaction being a doctor and interacting with patients," said Frank Fischer, CEO of Neuropace, a Mountain View, Calif., med-tech company, and a former CEO of Ventritex.

"But if you have a hand in developing a product, you could have a significant impact on possibly tens of thousands of patients. I think that's how Eric sees it," said Fischer, who said he considers Fain a close friend.

Ventritex went public in 1992 and received regulatory approval of its first ICD in 1993, but eventually ran out of steam. St. Jude announced the acquisition in 1996. Several months earlier, St. Jude bought Daig Corp., a local specialty catheter company, where Starks was CEO.

Both Fain and Starks stayed on with St. Jude.

First impressions

"My first impression of Eric was, 'OK, this is a really smart clinical person, but I don't know what kind of business person he is,'" Starks said in a recent interview. "My first impression was one of caution, of wait-and-see."

As regulators train a critical eye on medical devices, demanding more clinical research before product approvals and surveillance of patients post-implant, Starks said he has come to value Fain's medical background. "He has really overachieved in everything we have asked him to do," he said.

Starks has set a badly battered Boston Scientific squarely in his sights, and will depend upon Fain to help propel St. Jude. Fain says he'll do that by making existing devices better, backing up ICD treatment with strong clinical evidence and becoming an innovation leader.

"Years ago, 80 percent of our [research and development] resources was spent on products to catch up to competitors, and 20 percent on truly innovative features," he says. "Now, we've really turned that around."

Janet Moore • 612-673-7752

Janet Moore • jmmoore@startribune.com