Spinoff cycle: STD Med builds devices, startups
Reprinted from Mass High Tech: The Journal of New England Technology
March 9, 2007
by Ryan McBride
For more than a decade, Steven Tallarida has kept his family's business, STD Med Inc., fed with a steady diet of contracts to develop and manufacture medical devices for such companies as Natick-based Boston Scientific Corp.
Yet in recent years, Tallarida has steered the Stoughton firm on a course to produce a different product: spinoff companies.
"Our vision (at STD Med) is to put out a deal and launch another company every 12 to 14 months," said Tallarida, president and CEO of the family business.
STD's latest spinoff, Cardiosolutions Inc., is in the middle of a $7 million first venture round, closing on half the round from angel investors last month.
The financing is to fund development of a system to repair heart valves with a catheter, without having to cut open a patient's chest. Cardiosolutions is the fourth medical devices spinoff from STD Med. It follows Angiolink Corp. (acquired by Medtronic Inc. for $45 million in 2004), Arthrosurface Inc. and Spirus Medical Inc. Each company features products conceived at STD Med, where initial product development takes place before the company raises funding to birth the new ventures.
"Their 'secret sauce' is their ability to discern between what is really interesting (technology) and what isn't," said Marc Goldberg, general partner of BioVentures Investors, a Cambridge venture capital firm that has backed Angiolink and Spirus Medical. "The second part of that 'secret sauce' is their ability to take an idea and develop it into a product that works."
Take Cardiosolutions. STD Med engineers had proposed the idea for the startup's system of repairing mitral valves in the heart during a flight to Paraguay in 2005. Early last year they began to design the technology, completing initial product development by the summer, when the company began recruiting from a network of 350 angel investors to back Cardiosolutions, according to Ronald Murphy, a vice president for both STD Med and Cardiosolutions.
Tallarida is serving as an unpaid president of Cardiosolutions, a role he played for the previous three startups to spin off from his contract manufacturing firm. He has hired a chief operating officer, Jon Wilson, to run day-to-day operations of the four-person company.
What's more, STD Med is developing hemodialysis technology for a fifth venture -- expected to be launched early next year with an initial round of venture capital of $6 million, he added.
Secrets to their success
The company's spinoffs each have achieved certain levels of success.
Launched in 1999, Angiolink won approval from the U.S. Food and Drug Administration in 2004 for its system to close femoral arteries after surgeries. Indianapolis-based Medtronic purchased the Taunton startup for $45 million just weeks later.
Franklin-based Arthrosurface, founded in 2002, doubled year-over-year revenue last year due to sales of its "HemiCap" devices, which are used to restore damaged surfaces in major joints, and has attracted interest from acquisition-minded concerns in the medical devices business, according to A. Dana Callow, managing general partner of Boston Millennia Partners, the primary venture backer of the company.
"I would be very surprised if there is not a billion-dollar (offer) for Arthrosurface if it is held long enough," said Callow. He declined to provide specifics about a potential acquisition.
Spirus Medical has garnered approval in the United States and Europe to market its Endo-Ease system, which involves the use of a flexible-cover tube that features spirals that help advance endoscopes and colonoscopes in the body.
STD Med also helps its startups control costs. Spirus Medical and Cardiosolutions remain housed at the company's headquarters in Stoughton, where the young ventures have been able to build prototypes -- and in the case of Spirus, begin commercial production of its devices.
Tallarida said there are five employees among his total of 250 workers at STD Med that work exclusively on evaluating new technology. In the meantime, the company's core business of manufacturing and developing medical devices continues to grow, with a list of about 15 major clients that include Fortune 500 companies such as Johnson & Johnson, Medtronic and Becton, Dickinson and Co.
The spinoff business is the latest innovation in the 54-year history of STD Med, which was founded by Tallarida's father, Primo Tallarida, as Stoughton Tool & Die Inc. The company manufactured parts for the aerospace industry and changed its focus to medical devices in the early 1990s, when the close of the Cold War caused a slowdown in the aerospace business.
After taking the name STD Manufacturing Inc. in 1985, the company was renamed STD Med two years ago to reflect its focus on medical devices.