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ORANGE COUNTY AT WORK: CAREERS, COMPANIES, CORPORATE LIFE : COMPANIES FIND NOURISHMENT : Medical-Technology Firms in County Turn in Annual Sales of $1 Billion

May 03, 1987|ROBERT HANLEY | Times Staff Writer

Laboring inside one of those nondescript buildings that make Irvine's Skypark business complex a study in architectural conformity, scientists and technicians at Interpore International are turning coral from the South Pacific into bone replacement material.

A few miles away, at UC Irvine, a researcher peers into a microscope, studying the tiny white dots that manufacture insulin. Floating in a Petrie dish, those dots, taken from the pancreas, may bring new hope to thousands of diabetics--and profits to Dr. Art Charles, a UCI scientist-turned-entrepreneur.

And in nearby Santa Ana, fledgling Tokos Medical Corp. has gone from just four employees to nearly 400 in less than four years because of a unique device that helps expectant mothers avoid premature births.

From heart valves to contraceptives, Orange County's medical-technology industry today generates an estimated $1 billion a year in revenue. And, experts say, this one-time agricultural and resort community is becoming a world leader in this all-important field.

"Probably the biggest concentration of medical companies anywhere in the world is right here in Orange County," said Chuck Martin, one of the founders of Enterprise Partners, a Newport Beach venture capital firm. "It's been said that Orange County is the Silicon Valley of the medical business."

Excluding hospital management companies, health maintainence organizations and other service-related concerns, the local med-tech industry numbers nearly 100 companies and generates close to $1 billion a year in sales, estimates Pieter Halter, editor of Biomedical Business International, a Tustin industry journal.

Though a handful of large companies--all units of national conglomerates--account for about 80% of those sales, Halter said, the majority of the county's med-tech firms are tiny operations with fewer than a dozen employees each and sales of less than $1 million each annually.

To be sure, Orange County has plenty going for it. A Mediterranean climate, a laid-back atmosphere and proximity to Los Angeles have helped make the county a desirable place to do business.

But for the entrepreneurs and managers who make up Orange County's growing med-tech industry, the reasons are much more fundamental.

"If you want to start a medical company here you will find everything you need," Halter said. "You have the engineers, managers and marketing people necessary to do just about anything in the medical devices and diagnostics arenas."

For instance, when Tokos Medical Corp. sought to relocate from the Silicon Valley area two years ago, Orange County was the logical place to go, said Robert Byrnes, the Santa Ana company's president and chief executive.

"I wouldn't have been able to recruit in San Jose the marketing staff with health-care experience that I was able to here," said Byrnes, who has held senior positions with American Hospital Supply Corp., Genentech Inc. and Caremark Inc. "I guess San Jose would be better than Chicago, but if I had to choose, I'd take Orange County."

Like so many Orange County med-tech companies, Tokos has been on the fast track to growth. Tokos is turning a profit on annual revenue of about $24 million, said Chuck Martin of Enterprise Partners. Enterprise supplied $750,000 of the $15 million in venture capital funding that Tokos has received.

Similarly, Interpore International's decision to set up shop in Orange County was influenced largely by the presence of other med-tech firms, said George Smyth, the Irvine company's president and chief executive.

"When I came on board, I decided to move down here, because of Irvine's involvement in the medical world," said Smyth, who before joining Interpore in 1983 was executive vice president of marketing for American Edwards Laboratories Inc.

Venture Capitalists

Another important ingredient found here is financing. Venture capitalists increasingly are moving to Orange County to be closer to the companies in which they invest. Halter, of Biomedical Business International, said there currently are about 30 active venture capital firms operating in Orange County, in contrast with just a handful five years ago.

According to a recently completed study by Arthur Young & Co., there were 32 separate venture capital investments totaling $88 million in Orange County med-tech companies between 1981 and 1986.

During 1986, an estimated $19 million in venture capital was poured into the med-tech industry, in contrast with $7 million in 1985 and $18 million in 1984, said Gregory Ross, a partner with Arthur Young's Costa Mesa office.

The development of Orange County's med-tech infrastructure, as local observers call it, can be credited in large measure to the late Lowell Edwards, who more than a quarter-century ago developed the world's first mass-produced heart valve.

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