BY MIKE SEEMUTH
Kevin W. Smith and his partners split nearly $200 million when they sold Miami-based surgical equipment manufacturer Symbiosis in 1996 to healthcare heavyweight Johnson & Johnson. Smith and other Symbiosis alumni became independently wealthy the day of the sale. But they’re back in the game in a big way.
“The medical device business is an odd business ... A lot of people do it as a vocation,” Smith said. “It’s a thing you do because you love the work and find it very interesting and rewarding. It’s not like a lot of other businesses. It really isn’t.”
With help from many employees who were part of the old Symbiosis crew, Smith now runs a similar Miami company called Syntheon, which develops advanced surgical devices and sells the rights to market them in exchange for royalty payments based on sales. Smith declined to disclose Syntheon’s royalty percentages but said the basis for royalty payments this year from such medical product companies as American Edwards, Boston Scientific and Johnson & Johnson will be about $500 million of sales.
Syntheon is part of a growing community of medical device companies in Florida, although the U.S. economic recession from late 2007 to 2009 stunted its growth for a while. A 2012 study by the independent Battelle Memorial Institute found that the number of jobs in the medical devices and equipment industry increased from 2001 through 2010 by 7.3 percent to 16,237 in Florida. During the same decade, the number declined 0.3 percent nationwide to 343,468 jobs. The Battelle study also found that the number of Florida companies in the medical device and equipment industry increased 50.9 percent to 498 during the last decade, while the number nationwide grew at a slower 11.7 percent pace to 6,957.
More than just an assembly hub, the medical device industry in South Florida has a major focus on research and development. Many of the most important products at South Florida medical device companies are not for sale in the United States and are still in testing. They include, for example, an artificial knee that transmits data after implantation, a tiny tube implanted in the eye that relieves the symptoms of glaucoma, and a medical device that delivers a toxic treatment for liver cancer while protecting the safety of health care professionals who operate it. The delivery device is for “bio-toxic drugs, cell-killing drugs,” said Norman Weldon, an investor in Surefire Medical Inc., the company developing the product. “Our job is to kill liver cancer.”
Weldon is well-known in Miami circles. He is a former chief executive officer of the old Cordis Corp., which Johnson & Johnson acquired in February 1996 for $1.8 billion. Weldon also is the former CEO of a Cordis spinoff called Corvita, a Miami-based developer of artificial arteries that Pfizer Inc. acquired in June 1996 for about $85 million. He resides in Evergreen, Colo. and Amelia Island, and remains active in South Florida through Surefire Medical, which has about 15 employees in Miami.
Indeed, more than a few professionals in South Florida’s medical device industry, including Syntheon CEO Kevin Smith, can trace their professional lineage to Cordis, a one-time leader in the market for cardiac pacemakers before quality issues led the company to exit the pacemaker business and focus on the angiographic catheter market. Cordis had about 3,620 full-time and part-time employees about a year before its 1996 sale to Johnson & Johnson.
“What happened was a lot of spinoffs. A lot engineers like myself went out on their own and started small companies,” said former Cordis employee Frank Avellanet. At Cordis, “my first project was to develop the first lightweight implantable pacemaker.” He is now a Fort Lauderdale-based executive of St. George Medical, a stent developer based in the British Virgin Islands.
Not every investment pays off in the volatile medical device business, of course. Avellanet helped launch a research-intensive business venture, called Miami Cardiovascular Innovations Corp., that tried to develop a cardiac stent made of molecular material. “The company is no longer in business,” Avellanet said. “We basically ran out of funds. We were being funded by the University of Miami and individual investors.”
But Avellanet has kept busy. His employer St. George Medical expects to raise funding to further develop a coronary stent with an unusually flexible design applicable to multiple patient conditions. “I need to start hiring people,” he said. “I need directors, I need engineers, I need managers.”
The Affordable Care Act, the sweeping federal reform of medical care, imposed a 2.3 percent tax on sales of medical devices. Some companies in the device industry see the tax as an obstacle, but its impact is uneven.
“It's concerning. It’s 2.3 percent of your total revenue. It’s not off of your profit, it’s off of your sales. It definitely gets in the way of innovation,” said Jay Pierce, chief executive officer of Dania Beach-based Ortho Sensor, which sells devices that surgeons use to improve placement of artificial knees.
Some manufacturers of medical devices don’t have to pay the tax, however. MSK Precision Inc. in Tamarac, for example, makes private-label surgical devices for other companies to sell.
“We don't pay [the tax] because we don’t market and sell directly to surgeons,” said Scott Betz, general manager of MSK Precision.
Presumably, many development-stage ventures testing medical devices are more concerned about generating sales than paying the excise tax. In any case, Florida has one of the largest statewide collections of medical device manufacturers in the nation. According to Enterprise Florida, the state government's economic development agency, Florida has the second-largest number of medical device companies registered by the Federal Food and Drug Administration. The economic development agency also says the medical device industry employs 19,000 Floridians and that most of the companies are located in the Interstate 4 corridor in Central Florida, the Jacksonville area and South Florida.
Here are five South Florida companies that are major players in the medical device industry: