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Made In Puerto Rico: Hundred Of Thousands Of Hearts Made Healthier In Caguas

by Lida Estela Ruano

May 4, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

The unpretentious plant of 200 employees in Caguas offers a passerby no evidence of its importance.Yet St. Jude Medical P.R. Inc. manufactures 90% of the Minnesota company’s total production of heart valves used in the U.S. and more than half of those used worldwide.

St. Jude’s local production of some 100,000 heart valves save or improve the quality of life for that many open heart surgery patients of all ages every year.

St. Jude, named after the patron saint of desperate cases, enjoys total annual heart valve sales of $270 million. The company’s mechanical heart valves have more than 80% market share in the states and more than 50% worldwide.

Miguel A. Rodriguez, the 41-year-old St. Jude president and general manager in Puerto Rico, said 70% of production workers are women, mainly because of the dexterity required to hand sew the product. The perfection achieved is such that each product is shipped directly to clients in 55 countries the same day they are manufactured. "Our workers are very aware that there is no room for error. The product must be perfect because it will regulate the flow of blood in the heart," Rodriguez said.

He added the company keeps track of each of its valves, knowing exactly who has one and where the person lives. Each valve is guaranteed for 100 years and varies in size from 19 millimeters to 33 millimeters at an average cost of $3,600, according to a local distributor. The company also makes mechanical valves using pig or bovine membrane in Brazil and Canada. While St. Jude is market leader, competitors include Baxter, Medtronics and Cartomedics, all stateside companies.

St. Jude’s Caguas plant was certified as an ISO 9001 (International Standard Organization) in 1994 and is therefore allowed to sell its products in the European Union.

The local plant, under Rodriguez’ leadership for the past two years, has been so successful that it is undergoing a $7 million expansion with the construction of a new building across the street and a 15,000-square-foot expansion of the existing facility. Personnel will be increased by another 50, for a total of 250, within two years.

Last year, the local plant also won production for a new device, the tailor annuloplasty ring for human heart valve repair which, at 3,000 a year, is the lion’s share of the company’s production. Production of the aortic valve graft is expected by the end of the year. Once the new building is ready, a third new product will also be manufactured in Puerto Rico, the hemostatic closure device.

Rodriguez is enthusiastic about the production of the aortic valve graft. This valve includes several inches of material to substitute for damaged aorta tissue. The third new product, the hemostatic closure device, works to prevent hemorrhaging after surgery or when a catheter has been introduced in the body. Rodriguez anticipates manufacturing between 250,000 to 500,000 of this product annually. Total production was performed at the Minnesota headquarters and now a portion will be transferred to Puerto Rico.

"What we strive for is that each time a new product comes out, headquarters will immediately think that Puerto Rico is the place to manufacture it. We take great pains to have impeccable quality, cost competitiveness and service. Sometimes our name pops up immediately but other times we have to work at it until we get the product," Rodriguez said.

He encouraged local plant managers to be more aggressive in pursuing new products for manufacturing production in Puerto Rico even after Section 936’ hefty federal tax credits end in 2006. St. Jude’s corporate policy calls for replicating production in different places to ensure availability. Rodriguez said this proved to be very wise when Hurricane Georges’ damage kept the local plant closed for a month.

St. Jude Medical P.R. Inc. was established 12 years ago as a 936 corporation (Section 936 of the U.S. Internal Revenue Code). In 1998, it changed its corporate and tax structure to become a controlled foreign corporation (CFC), as a subsidiary of a holding company in The Netherlands.

The company occupies a 23,000-square-foot building belonging to the Puerto Rico Industrial Development Company (Pridco) in the Caguas Oeste Industrial Park. The new building will be operational by the end of the summer, adding another 25,000 square feet. Personnel are already working in the new facilities producing sample materials. The 15,000-square-foot expansion of the current facilities will be ready by January 2001.

To keep employees focused on the importance of the perfection of the products, management sponsors one or two annual activities inviting valve recipients talk to the workers about how these medical devices have either saved their lives or given them new strength to live a normal life. Last year, a 13-year-old local girl explained how the valve implanted when she was one has allowed her to live a full, active, normal life.

"For employees, these testimonials are so important because they renew their commitment to excellence in their work," Rodriguez explained.

The group’s motivation is highlighted by one incident six months ago, when Rodriguez received a stateside call at 3:00 p.m. requesting the manufacture of a valve that was needed for an emergency operation the next day in a mainland hospital. When Rodriguez addressed his production employees, they immediately volunteered to stay overtime to manufacture the valve. "The valve was finished at 7:00 p.m. and was on an airplane an hour later," he said with great pride.

St. Jude’s Founder:
Villafaña, Always Looking To Build It Better

Manuel (Manny) Angel Villafaña is the epitome of an entrepreneur. Born in the Bronx of Puerto Rican parents 59 years ago, with no more than a high school diploma he has managed to establish a company in Minnesota known for its market-leading mechanical heart valve, which he helped design.

Villafaña, whose father was born in Morovis and whose mother was born in Santurce, founded St. Jude Medical Inc. 24 years ago in St. Paul. He had been international and Latin America sales manager for Medtronic Inc., a medical device manufacturer, when he decided he wanted to design a better pacemaker. His first company was Cardiac Pacemakers Inc., established in 1972 in Minnesota. He then founded St. Jude in 1976. Dr. Richard Lillehei, whose brother Dr. C. Walton Lillehei was medical director of St. Jude’s heart valve division until his death last year, designed the device.

Villafaña was at St. Jude for six years as chairman and CEO. When he left,

St. Jude had annual sales of close to $25 million. Last year’s sales reached $1.1 billion.

Villafaña left to establish another company, GV Medical, which developed a laser enhanced angioplasty caghegy. The tool is used to open vessels via a laser mounted on the end of a tube which is inserted. He stayed at GV Medical for four years.

"I always start my companies, take them public immediately, continue with them until a certain point and then I leave to start another one," Villafaña said. "I’m like a professional runner who, rather than continue around the track after a race, goes on to something else."

In fact, he was selected national Entrepreneur of the Year by both Ernst & Young and Inc. magazine. "All it takes is hard work and to be focused. " He added that he is asked to give lectures on entrepreneurship all over the world and although there are many suggestions, the very basics are these two qualities.

In 1990, he established Advancing The Standard (ATS) also in Minnesota. The company is developing the next generation heart valve. "We hope to replace the St. Jude valve," he said. The public company has $20 million annual sales worldwide, except in the U.S. where it is awaiting the U.S.. Food & Drug Administration (FDA) approval.

This is not the end of the line for Villafaña. "This [ATS] won’t be my last company but I still have to take it further before I leave. My advice to future entrepreneurs is not to do it (go on your own and establish a company) if you’re afraid. There are a lot of risks. But remember it’s better to try even if you fail than not to try at all."

These Caribbean Business articles appears courtesy of Casiano Communications.
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