Smiths Medical grows bigger, bolder with new HQ

Tucked inside a nondescript complex in Arden Hills, Smiths Medical has produced reliable drug pumps and medical devices with stagnant revenue growth that invited years of speculation that the business could be spun off by its London-based owners at any moment.

What a difference 18 months makes.

Smiths Medical has a new CEO, and the company is moving into a shiny world headquarters in Plymouth, where it will spend an enhanced R&D budget. Employees are being encouraged to pursue bolder ideas. And research money is being invested in all four Smiths Medical divisions, instead of mainly in its drug infusion pump business.

Last week, Smiths Medical reported sales of $1.27 billion for the year that ended in July, with 4 percent organic revenue growth — its best showing in nearly a decade.

Smiths Medical was once seen as a prime target to be sold by Smiths Group PLC, the global manufacturing conglomerate that owns it. Two such offers were made public but never executed. Last week, however, analysts noted the revenue growth at Smiths Medical was one of the bright spots in 2015 for Smiths Group, which saw declines in sales of everything from airport security scanners to mechanical seals for oil rigs.

The medical-device division contributed 29 percent of the global conglomerate's revenue.

"This is a very important part of the Smiths portfolio, and we are getting a lot of investment," Smiths Medical CEO Jeff McCaulley said. McCaulley, 49, was hired as CEO of Smiths Medical in March 2014, following executive roles in Medtronic's diabetes business and Zimmer's joint-replacement division.

"This is a great company that I'm sure is attractive to other companies," he said. "That's beyond my control. I certainly intend to continue to build a high-performance company and ultimately be more of a consolidator than consolidated, and I think there are great opportunities for us to grow this business organically and inorganically. And we certainly have the support to do that."

Smiths Medical employs 7,500 people worldwide, including roughly 850 in Minnesota. Its bestselling device is the CADD line of infusion pumps, which are manufactured in Oakdale. But the division makes products under a dozen different brand names, manufactured in Mexico, China and several European nations. Products include precision pumps to meter out fluids and drugs in the hospital and at home, gadgets to manage patients' airways and temperature during and after surgery, and specialty devices for applications like in vitro fertilization.

If it were a stand-alone company, Smiths Medical's billion-plus in revenue would make it the fourth-largest pure-play medical device maker in Minnesota, behind well-known names like Medtronic PLC, Boston Scientific Corp. and St. Jude Medical Inc.

Yet even McCaulley acknowledges "most people don't know us." The company's low profile likely stems from the fact that it was based in the United Kingdom until 2007. Even when it moved its central operations to Arden Hills, it employed a few hundred people in a state that is home to more than 600 med-tech companies.

"In 2007 we made the decision to move our world headquarters here, but even then, it wasn't large," McCaulley said. "We've been, I'd say, quietly growing our presence and our employment over that period of time."

The operations turnaround under McCaulley's tenure is still in early days, and analysts have noted the company has benefited from recent sales disruptions and recalls by competitors that make infusion pumps. With the R&D budget expanded to 6 percent of revenue and a company culture emphasizing innovation, he said he's confident that new ideas can build a pipeline of devices to drive solid growth down the road. The first workers moved into the new Plymouth headquarters last week.

"Employees are passionate about what we do, very committed to the company. And we're just a little frustrated that the company wasn't growing faster," McCaulley said. "We faced head into why weren't we growing faster? What can we do? The answers were a lot about investment, a lot about empowerment, a lot about giving people the incentive and the permission to be more fearless and more bold in the things they we were doing."

Joe Carlson • 612-673-4779

Twitter: @_JoeCarlson