If the Little Engine that Could was a polyurethane company, it would be CardioTech International Inc.
What was launched as a small research and development subsidiary of PolyMedica Corp. in March 1993, and spun off in June 1996 as CardioTech International, has grown in seven years into a global medical product manufacturer with annual revenues of about $3.5 million. It's on the verge of boosting that figure more than fivefold.
Headquartered in Woburn, CardioTech initially concentrated on developing a family of polyurethane-based grafts for use in coronary artery bypass surgery.
It also featured a biomaterials division that made various types of polyurethane raw materials for use in stents, artificial hearts, vascular parts and other medical devices.
Both continue to be key elements in the company's success. However, in the last few years, CardioTech has developed an assortment of other goods-including hydrogel wound and burn dressing-to significantly broaden that base.
Organic growth is only part of Chairman and CEO Michael Szycher's development plan. He has made several acquisitions since 1999 to change the firm from a specialist in R&D and raw material production to a manufacturer with three plants.
CardioTech most recently bought Gish Biomedical Inc. for about $7.6 million in stock. The deal closed April 7 and includes Gish's factory in Rancho Santa Margarita, Calif., which has a Class 10,000 clean room that's much larger than CardioTech's other clean rooms.
That will enable CardioTech to expand its medical device production base and give it a leadership presence in the open-heart surgery goods market, Szycher said.
Setting the stage
CardioTech was a small polyurethane producer with some unique concepts in vascular graft devices in the works when it acquired the assets of Tyndale-Plains Hunter Ltd., a maker of hydrophilic polyurethanes, in July 1999. Tyndale-Plains' urethane production was moved to the 11,000-sq.-ft. Woburn facility from Lawrenceville, N.J., by October 2000.
The deal significantly broadened CardioTech's polyurethane-tailored compound base and gave it materials that provide lubricity to the surfaces of medical devices, serve as drug delivery systems or improve blood compatibility. The materials also can be used for some personal care products.
The firm followed that acquisition by selling a small subsidiary and the rights to two access grafts to a newly formed United Kingdom company, Nervation P.L.C., for about $7 million and the release of some financial obligations.
Money from the sale provided CardioTech with additional working capital to develop other products, including its CardioPass Coronary Artery Bypass Graft, according to Szycher.
His goal was to expand into product manufacturing in the U.S. as the company developed a global presence.
That happened in August 2001 when the company bought Catheter and Disposables Technology Inc. and its 8,000-sq.-ft. Plymouth, Minn., factory from Colorado MedTech Inc. for an undisclosed amount. CardioTech picked up almost 40 pieces of specialized equipment and retained a work force of about 20.
Szycher made that deal for five reasons: the vertical integration of biomaterials with finished medical devices; the addition of Food and Drug Administration-registered production capabilities at an FDA-registered company; increased market share in a lucrative market; enhanced cash flow and a stronger product base that moved CardioTech closer to eventual operational profitability; and the addition of biomedical engineering, sales and marketing, quality control, assembly, and manufacturing personnel.
With sales in the $2 million range, CDT is now a subsidiary of CardioTech and serves as a full-service product design, development and production company focusing on polyurethane catheters and disposable medical products. It primarily functions as an outsource manufacturer.
Each of those moves helped set the stage for the Gish transaction, CardioTech's biggest to date. Gish has an established sales force that gives CardioTech access to hospitals it didn't have in the past and a worldwide distribution network.
``We anticipate our revenues (will) increase at least 500 percent in the first full year of operations of the combined companies,'' according to David Volpe, CardioTech chief financial officer.
Gish had revenues of more than $16 million in the year ended June 30.
CardioTech is close to entering human trials with its coronary artery bypass graft. Once those are successfully completed, Szycher wants to produce the artificial arteries at Gish's large clean room facility because of its strong infrastructure and quality control.
In addition, CardioTech gains a strong presence in the open-heart surgery products industry.
The purchase adds about 115 to CardioTech's small work force of more than 30 at its plants in Woburn and Plymouth. No management changes at Gish are expected, Szycher said, and he doesn't plan to reduce the work force.
Some companies typically overpay for acquisitions and begin letting people go, he said.
``We do the reverse of that,'' he said. ``We're doing everything we can to make sure everyone stays. It's a good way to do business because it doesn't disrupt anything and we gain experienced employees.''
About 65 workers are involved in manufacturing at Gish, Szycher said, with a tenure average of about 15 years. ``It's a very stable group.''
From a sales organization standpoint, Gish has an international base with about 20 representatives handling major accounts.
``Let's say we start to do clinical tests in the U.S. on the vascular graft,'' the executive said. ``They're already calling on places we want to be to conduct the trials. Everything's at our fingertips now.''
From the company's beginning, Szycher has been the man who had the vision and fortitude to make CardioTech blossom.
He co-founded PolyMedica Corp. in 1988 and served as chairman from 1989-1996. During that span he made four purchases, increasing the company's sales to $15 million from $300,000. He was part of a team that developed an artificial heart and a family of advanced wound dressings.
PolyMedica was launched to produce polyurethane wound dressings and it expanded into the development of a polyurethane bypass graph. However, when the firm moved into pharmaceuticals, Szycher opted to branch out with the subsidiary and start a separate company focused on polyurethane medical goods.
He always has been confident CardioTech would make it as a product innovator and a manufacturer.
``We have experienced organic growth, and we've expanded through acquisitions,'' he said. ``Hopefully now we have everything in place to do more...although we're not looking to buy more companies. But we will be opportunistic. It has to be related to our business and it must be attractive from a financial standpoint.''