RespirTech has gone from turnaround to growth company

Dr. Jim Ehlen has had quite a business career for a bright kid out of Minneapolis Roosevelt High who once aspired to be a dentist.

Ehlen, 70, an endocrinologist out of the University of Minnesota Medical School, left the ranks of practicing physician in the 1980s to take over then-flailing Medica, and became co-CEO of Allina Health System, parent of Abbott Northwestern Hospital, in the 1990s.

He stepped away at age 55, after being passed over to run the then-consolidating companies to serve as a health care consultant.

And in stepping away from big-corporate work Ehlen inadvertently stepped into a small-company turnaround story that has become a growth company. RespirTech, the company he's turned around is making a buck helping thousands with cystic fibrosis and other chronic-lung disease stay out of the hospital and off antibiotics, and vastly improve their quality of life.

And Ehlen is having the time of his professional life thanks to patients like 10-year old Jordan Smith.

She wears the RespirTech "inCourage" air-pressurized vest for 30 minutes in the morning to loosen and move mucus from her lungs, and then again in the evening.

"When it is inflated it just feels puffy and kind of massages your chest," Jordan said. "It feels just like another shirt."

"Patients tell us they're getting along better," he said. "All of our patients are pretty sick. We're delivering better care at lower cost. We have demonstrated outcomes. Care is improving. Expensive hospitalizations are going down. That's our triple aim. Our value proposition."

Ehlen was asked by lead investor Bill Brown of White Cliff Capital to join the board and, eventually, become CEO in 2007, amid technology and management challenges. The implicit mandate was to polish up the outfit and sell it for the best price.

However, Ehlen and key employees eventually decided they could create a sustainable winner from the patented airway-clearance vest that improves airway secretion clearance by as much as 20 percent better than competitors.

Something's working.

The Roseville firm, which employs 115 people and boasts sales approaching $25 million, has generated 30 percent annualized revenue increases over the last five years and positive cash flow.

RespirTech and two Minnesota competitors are good news in the fight against serious diseases over the last generation.

Chronic obstructive pulmonary disease (COPD), cystic fibrosis and bronchiectasis afflict nearly 500,000 Americans. As recently as a decade ago, patients struggled for breath, used heavy drugs and had to have their chests pounded a couple times a day.

"In my career, in the 1980s, kids were dying in junior high," said Dr. John McNamara of Children's Hospital of Minneapolis. "It was just awful. Now they are living to be 40 years old.

"We strongly encourage people to use a form of chest physical therapy. We are proponents of vests. We put families in touch with the vendors. The families pick. I like the one the families like as long as they use it."

Kevin Smith, Jordan's dad, said: "Since the second month of her life, we started to manually percuss her chest, sides and back to help clear her lungs. When she was about 4 years of age, she was old enough to be fitted for a 'vest machine' that could do as or more effective job of it than her mom or I. This also allowed us to have a bit more freedom, as family or sitters could take Jordan for evenings or an overnight, as often they were uncomfortable or unwilling to provide that [percussive] therapy."

RespirTech's two biggest competitors are Minnesota firms.

The technology was pioneered by American Biosystems of St. Paul, which was acquired by Hill-Rom of Indiana, a medical products maker. The other significant competitor is Electromed of New Prague.

These Minnesota-rooted companies sprang from the work years ago of a University of Minnesota ­physician.

In 1961, Dr. Warren J. Warwick and the U's Department of Pediatrics, and the National Cystic Fibrosis Foundation, established the Minnesota Cystic Fibrosis Care, Research and Teaching Center. The mission was to understand, develop and treat the disease. And therapies were invented and improved. The RespirTech open-airway therapy is the commercial offshoot of some of that research.

Ehlen, 15 years ago, walked away from a $700,000 salary at Allina-Medica after he missed the top job and turned down a subordinate role. He spent a year building a cabin and figuring his role in a better-outcome, more-economical health care system.

"We consider ourselves a 'medical company' not a 'device company,' " Ehlen said. "They are our patients. I go on many visits to doctors and patients with our salespeople. I believe we have created a value-creation cycle here. And we're investing our profits back into the company."

Ehlen said the company is not for sale, but that doesn't mean the owners wouldn't sell for the right price.

Regardless, Ehlen, a fit fellow who smiles often, said he's enjoying the work way too much to consider retirement.

Neal St. Anthony • 612-673-7144 • neal.st.anthony@startribune.com