Latrobe's Ci Medical Technologies transforms to medical device business
With a new name and private equity backing, Ci Medical Technologies Inc. is eyeing acquisitions to fuel its growth and solidify its transformation from consumer products to the medical device business.
The Latrobe company was founded in 1971 as Classic Industries Inc., a manufacturer of plastic consumer products such as bowls, pitchers and cases for cosmetics. Today, it makes plastic components for medical devices, such as tubes for insulin pumps and handles for surgical tools.
Ci Medical changed its name in June to reflect that “over the past decade we have been using 100 percent of our expertise to service customers in the medical and pharmaceutical device markets,” CEO Robert Subasic Jr. said.
The medical industry offers more stability and opportunity for expansion, said Subasic, who joined the company in 2010 and was named chief executive in 2011. Previously, he was chief financial officer of Pittsburgh Brewing Co., the brewer of Iron City beer.
“That's the next phase of our business,” he said, referring to the company's interest in buying competitors. “Our industry is ripe for consolidation.”
Subasic declined to name targets, but said the company is well capitalized thanks to its owner, Altaris Capital Partners, a New York private equity firm with $1.3 billion in assets. Altaris acquired the company from its founders, the Policastro family, eight years ago.
The company isn't new to acquisitions. In 2009, Ci Medical bought United Kingdom-based RW Injection Molding, giving it a European manufacturing presence. It also has factories in Puerto Rico, Mexico and Texas.
The United States remains the world's largest market for medical devices, valued at about $110 billion a year, and expected to reach $133 billion by 2016, according to the Commerce Department.
Ci Medical's sales were $65 million last year, and Subasic said he expects to hit $70 million this year, which would be an 8 percent increase.
He declined to name customers, but Western Pennsylvania is home to several large medical companies, including Bayer Corp. and Philips Respironics.
Even with steady demand for health care products, the industry and Ci Medical have challenges. For one, runaway health care spending has led to efforts to control costs.
While the company's customers are “always looking for cost savings,” Subasic said Ci Medical's growth has allowed it to take on contracts for larger volumes, “which helps to alleviate the pain” of tighter margins.
Also putting pressure on medical manufacturers is the scrutiny of the Food and Drug Administration, the federal agency tasked with ensuring the safety of medical devices.
“Certainly, health care is a growing industry,” said John Manzetti, CEO of the Pittsburgh Life Sciences Greenhouse, a South Side incubator for health care companies. But not every manufacturing company can meet the standards for “clean-room” production, sterility of medical devices and other FDA requirements, he said.
That creates a high bar to enter the market, Manzetti said. “You have to be a very high-quality manufacturer.”
Medical device makers are being squeezed by a 2.3 percent excise tax levied by the Affordable Care Act.
On a recent tour of Ci Medical's plant in Latrobe, visitors were required to don protective booties, hair nets and overcoats before entering the shop floor, where towering machines extrude plastic into hundreds of forms, such as tiny clips used in brain surgery and large tubes that go into insulin pumps.
Jeff MacKenzie, general manager of the plant, said the company replaced all its machinery over the past several years in favor of more-efficient, electric-powered presses that cut costs and are cleaner to operate.
“Our energy costs are down 30 percent, even with more business,” he said.
The brightly lit space was highly automated — if parts aren't touched by humans, there's less chance of contamination — with robotic arms lifting plastic pieces from molds and dropping them into collection bins.
The company has about 550 employees worldwide, with 225 in Latrobe.
There may be pressures to reduce prices, become more efficient and meet regulations. But the company's future is bright because “we have an aging population, so the need for medical components is growing,” Subasic said.
“Our industry is a growing industry.”
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.