Steris to Close Plant, Lay Off 150

Citing declining demand for its System 1E liquid-chemical sterilization system, Steris Corp. has announced a restructuring plan that includes closing its Hopkins Production Facility, the plant where the System 1E and its chemical sterilant are made.

The Mentor, OH-based company said that the Hopkins plant will be closed by the end of October, 2015, and that production of these products will be relocated to other existing facilities. Steris says they anticipate about $10 million in annual savings from the plan.

The closure will result in the layoff of about 100 people in Ohio, with another 50 layoffs under the restructuring plan to take place at other Steris locations.

The System 1E is the descendant of Steris' original product, the System 1. While this event will not close the book on the System 1E, at this juncture it appears to begin the final chapter of a story that began with the invention and patenting of the System 1 in 1985. The sterilizer gained FDA approval in 1988 and the company was off and running.

It was business as usual for Steris until May 2008, when FDA issued a Warning Letter saying that the company had made so many changes to the System 1 that FDA no longer considered the device to be safe and effective.

By December 2009, the controversy had escalated and FDA issued a safety alert concerning the System 1. Although an unnamed FDA official reportedly acknowledged at the time that "we're not aware of any confirmed cases of infection directly attributable to inadequate processing" by Steris' System 1, the regulator recommended that hospitals replace their System 1s with approved sterilizers.

Steris got FDA approval for its new, improved version, the System 1E, in April 2010. Though Steris offered incentives for owners of its old machines, competitors were able to exploit the opening and once the FDA-imposed deadline for hospitals to replace their System 1s had passed, demand for the System 1E softened.

Steris, which by the time of its fiscal 2009 had become a $1.3-billion-a-year company, only saw its revenues drop to $1.26 billion in its fiscal 2010. At the time of the FDA alert, sales of System 1 supplies and service accounted for only 10 percent of revenue, and the company no longer sold the system itself.

In the release announcing the restructuring Walt Rosebrough, Steris President and CEO, said, "As a result of the reduced demand for our System 1E product family following the completion of the System 1 transition, the Hopkins Facility is now running significantly below full capacity. While we have not made final decisions on the locations of all of the Hopkins production, this closure enables us to more efficiently utilize our existing North American manufacturing network."

The company says that the vast majority of the people who will be impacted have already been notified.

Stephen Levy is a contributor to Qmed and MPMN.